<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
BET HOLDINGS, INC.
(Name of Issuer)
BET HOLDINGS, INC.
BTV ACQUISITION CORPORATION
ROBERT L. JOHNSON
TELE-COMMUNICATIONS, INC.
(Name of Person(s) Filing Statement)
Class A Common Stock, $.02 Par Value per Share
(Title of Class of Securities)
086585-10-6
(CUSIP Number)
<TABLE>
<S> <C> <C> <C> <C>
Stephen M. Brett, Esq. Frederick H. McGrath, Esq. Howard V. Sinclair, Esq. Stephen W. Hamilton, Esq. Byron F. Marchant, Esq.
Senior Vice President Baker & Botts, L.L.P. Arent, Fox, Kintner, Skadden, Arps, Slate, BET Holdings, Inc.
and General Counsel 599 Lexington Avenue Plotkin & Kahn Meagher & Flom LLP One BET Plaza
Tele-Communications, Inc. New York, NY 10022 1050 Connecticut Avenue, 1440 New York Avenue, 1900 W Place, N.E.
5619 DTC Parkway (212) 705-5000 N.W. N.W. Washington, D.C. 20018
Englewood, CO 80111 Washington, D.C. 20036 Washington, D.C. 20005 (202) 608-2000
(303) 267-5500 (202) 857-6000 (202) 371-7000
</TABLE>
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. [x] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14-C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [_] The filing of a registration statement under the Securities Act
of 1933.
c. [_] A tender offer.
d. [_] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [x]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
--------------------------------------------------------
Transaction Valuation* Amount of Filing Fee
--------------------- --------------------
<S> <C>
--------------------------------------------------------
$471,551,612 $94,310
--------------------------------------------------------
</TABLE>
* Determined by multiplying 6,309,618 (the number of outstanding shares of
the Class A Common Stock of BET Holdings, Inc. not owned by Robert L. Johnson,
Liberty Media Corporation or their respective affiliates) by $63.00 per share
and adding the aggregate amount anticipated to be paid to certain persons
holding options to purchase shares of the Class A Common Stock of BET Holdings,
Inc. in consideration of the cancellation of such options.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
Amount Previously Paid: $94,310
Form or Registration Number: Schedule 14A
Filing Party: BET Holdings, Inc.
Date Filed: May 1, 1998
<PAGE>
This Rule 13E-3 Transaction Statement (this "Statement") relates to an
offer by Robert L. Johnson, Liberty Media Corporation ("Liberty" and, together
with Mr. Johnson, the "Buying Group"), a Delaware corporation and a wholly owned
subsidiary of Tele-Communications, Inc. ("TCI"), and BTV Acquisition
Corporation, a Delaware corporation formed by Mr. Johnson and Liberty for
purposes of this transaction ("BTV Acquisition"), to purchase at a price of
$63.00 per share in cash all outstanding shares of Class A Common Stock, par
value $.02 per share ("Class A Stock"), of BET Holdings, Inc., a Delaware
corporation (the "Company"), which are not already owned by the Buying Group.
The Company, Mr. Johnson, Liberty and BTV Acquisition have entered into an
Agreement and Plan of Merger, dated as of March 15, 1998 (the "Merger
Agreement"), whereby BTV Acquisition would be merged (the "Merger") with and
into the Company with the Company as the surviving corporation in the Merger
(the "Surviving Corporation"). On the terms and subject to the conditions set
forth in the Merger Agreement, if the Merger is consummated, (i) each share of
outstanding Class A Stock (except for shares of Class A Stock (a) which are
owned by BTV Acquisition, Mr. Johnson, Liberty or their respective subsidiaries,
(b) which are held in the treasury of the Company or by any of its wholly owned
subsidiaries and (c) for which the applicable holders have validly exercised
appraisal rights pursuant to Delaware law) will be converted into the right to
receive $63 in cash, without interest (the "Merger Consideration"), (ii) each
share of Class A Stock owned by BTV Acquisition, Mr. Johnson, Liberty and their
respective subsidiaries will be canceled with no consideration paid therefor and
(iii) each share of the stock of BTV Acquisition owned by Mr. Johnson and
Liberty will be converted into one share of the Surviving Corporation. In
addition, if the Merger is consummated, (a) each option to purchase shares of
Class A Stock held by persons other than Mr. Johnson (the "Nonaffiliated
Options") will be canceled and each holder of such canceled Nonaffiliated
Options will be paid by the Surviving Corporation, for each such Nonaffiliated
Option, an amount determined by multiplying (x) the excess, if any, of the
Merger Consideration over the applicable exercise price per share of such
Nonaffiliated Option and (y) the number of shares issuable upon exercise of such
Nonaffiliated Option, and (b) all options to purchase shares of Class A Stock
held by Mr. Johnson (the "Johnson Options") will become options to acquire an
equal number of shares of common stock of the surviving corporation in the
Merger at an aggregate exercise price equal to the aggregate exercise price of
the Johnson Options. BTV Acquisition is currently negotiating with certain
executive officers of the Company with respect to the continuation of their
options in the Surviving Corporation. As of the date of this Statement, no
agreement has been reached as to any such continuation. As a result of the
Merger, Mr. Johnson and Liberty will collectively own 100% of the capital stock
of the Surviving Corporation. Concurrently with the filing of this Statement,
the Company is filing a preliminary Proxy Statement (the "Proxy Statement")
pursuant to which its stockholders will be given notice of the Merger. The cross
- -reference sheet below is being supplied pursuant to Instruction F to Schedule
13E-3 and shows the location in the Proxy Statement of the information required
to be included in response to the items of this Statement. The information in
the Proxy Statement is hereby expressly incorporated herein by reference, and
capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Proxy Statement.
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Schedule 13E-3
Item Number and Caption Location in Proxy Statement
----------------------- ---------------------------
<S> <C>
Item 1. Issuer and Class of Security
Subject to the Transaction
Item 1(a)........................ QUESTIONS AND ANSWERS ABOUT THE
MERGER; THE PARTIES--The Company
Item 1(b)........................ SUMMARY--The Special Meeting--Voting;
INFORMATION CONCERNING THE SPECIAL
MEETING--Record Date; Voting at the
Meeting; Quorum
Item 1(c)........................ MARKET FOR THE CLASS A STOCK--Class A
Stock Market Price Information;
Dividend Information
Item 1(d)........................ MARKET FOR THE CLASS A STOCK--Class A
Stock Market Price Information;
Dividend Information
Item 1(e)........................ Not Applicable
Item 1(f)........................ MARKET FOR THE CLASS A STOCK--Class A
Stock Purchase Information
Item 2. Identity and Background
Item 2(a)-(d).................... THE PARTIES--The Company; --BTV
Acquisition; --Robert L. Johnson;
--Liberty Media Corporation; --Tele-
Communications, Inc.; MANAGEMENT--
Directors and Executive Officers of BTV
Acquisition; --Directors and Executive
Officers of TCI; --Directors and
Executive Officers of Liberty
Item 2(e) and 2(f)............... Not Applicable
Item 2(g)........................ THE PARTIES--The Company; --BTV
Acquisition; --Robert L. Johnson;
--Liberty Media Corporation; --Tele-
Communications, Inc.; MANAGEMENT--
Directors and Executive Officers of BTV
Acquisition; --Directors and Executive
Officers of TCI; --Directors and
Executive Officers of Liberty
</TABLE>
Page 3 of 19
<PAGE>
<TABLE>
<S> <C>
Item 3. Past Contacts, Transactions
or Negotiations
Item 3(a)(1)................. CERTAIN RELATIONSHIPS AND
TRANSACTIONS --Agreements with Cable
Affiliates; --Agreements with Related
Parties; --Transactions with
Management
Items 3(a)(2) and 3(b)....... SUMMARY--Special Factors; SPECIAL
FACTORS--Purpose and Background of
the Merger; --Buying Group Letter
Agreements
Item 4. Terms of the Transaction
Item 4(a).................... QUESTIONS AND ANSWERS ABOUT THE
MERGER; SUMMARY; INFORMATION
CONCERNING THE SPECIAL
MEETING--Purpose of the Special
Meeting; --Required Vote; SPECIAL
FACTORS--Purpose and Background of
the Merger; --Certain Effects of the
Merger; --Interests of Certain
Persons in the Merger; Certain
Relationships; THE MERGER AGREEMENT;
DISSENTERS RIGHTS OF APPRAISAL
Item 4(b).................... SUMMARY--The Special Meeting--Voting;
--Special Factors--Interests of
Certain Persons in the Merger;
INFORMATION CONCERNING THE SPECIAL
MEETING--Purpose of the Special
Meeting; --Required Vote; SPECIAL
FACTORS--Purpose and Background of
the Merger; --Certain Effects of the
Merger; --Buying Group Letter
Agreements;-- Interests of Certain
Persons in the Merger; Certain
Relationships; THE MERGER
AGREEMENT--The Merger; Merger
Consideration; --Treatment of Stock
Options; DISSENTERS RIGHTS OF
APPRAISAL
</TABLE>
Page 4 of 19
<PAGE>
<TABLE>
<S> <C>
Item 5. Plans or Proposals of the
Issuer or Affiliate
Items 5(a) and 5(b).......... SPECIAL FACTORS--Plans for the
Company after the Merger
Item 5(c).................... SPECIAL FACTORS--Certain Effects of
the Merger; --Buying Group Letter
Agreements; --Interests of Certain
Persons in the Merger; Certain
Relationships; THE MERGER
AGREEMENT--Treatment of Stock
Options; --Directors and Officers of
the Company Following the Merger;
Certificate of Incorporation; Bylaws
Items 5(d)-(g)............... SUMMARY--Special Factors--Purpose,
Background and Effects of the Merger;
--Financing of the Merger; SPECIAL
FACTORS--Certain Effects of the
Merger; --Buying Group Letter
Agreements; --Financing of the Merger
Item 6. Source and Amounts of
Funds or Other Consideration
Items 6(a) and 6(c).......... SUMMARY--Special Factors--Financing
of the Merger; SPECIAL
FACTORS--Financing of the Merger
Item 6(b).................... SPECIAL FACTORS--Fees and Expenses
Item 6(d).................... Not Applicable
Item 7. Purpose(s), Alternatives,
Reasons and Effects
Item 7(a).................... SUMMARY--Special Factors--Purpose,
Background and Effects of the Merger;
SPECIAL FACTORS--Purpose and
Background of the Merger; --The
Buying Group's Purpose and Reason for
the Merger
Items 7(b) and 7(c).......... SUMMARY--Special Factors--Purpose,
</TABLE>
Page 5 of 19
<PAGE>
<TABLE>
<S> <C>
Background and Effects of the
Merger; SPECIAL FACTORS--Purpose and
Background of the Merger; --The Buying
Group's Purpose and Reason for the
Merger
Item 7(d).................... QUESTIONS AND ANSWERS ABOUT THE MERGER;
SUMMARY--Special Factors--Purpose,
Background and Effects of the Merger; --
Special Factors--Federal Income Tax
Consequences; --The Merger Agreement--
The Merger Consideration; INFORMATION
CONCERNING THE SPECIAL MEETING--Purpose
of the Special Meeting; SPECIAL
FACTORS-- Certain Effects of the Merger;
--Plans for the Company After the
Merger; --Buying Group Letter
Agreements; --Accounting Treatment;
--Federal Income Tax Consequences of
the Merger; THE MERGER AGREEMENT--
The Merger; Merger Consideration; --The
Exchange Fund; Payment for Shares of
Class A Stock
Item 8. Fairness of the Transaction
Item 8(a).................... QUESTIONS AND ANSWERS ABOUT THE MERGER;
SUMMARY--Special Factors--Recommendation
of the Company's Board of Directors;
INFORMATION CONCERNING THE SPECIAL
MEETING--Purpose of the Special Meeting;
SPECIAL FACTORS--Purpose and Background
of the Merger; --Recommendation of the
Special Independent Committee and Board
of Directors; Fairness of the Merger; --
The Buying Group's Purpose and Reason
for the Merger; --Opinion of Financial
Advisor to the Special Independent
Committee
Item 8(b).................... SUMMARY--Special Factors--Factors
Considered by the Board of Directors and
the Special Independent Committee; --
</TABLE>
Page 6 of 19
<PAGE>
<TABLE>
<S> <C>
Goldman Sachs' Fairness Opinion;
SPECIAL FACTORS--Purpose and
Background of the Merger;
--Recommendation of the Special
Independent Committee and Board of
Directors; Fairness of the Merger;
--The Buying Group's Purpose and
Reason for the Merger; --Opinion of
Financial Advisor to the Special
Independent Committee
Item 8(c).................... QUESTIONS AND ANSWERS ABOUT THE
MERGER; SUMMARY --The Special
Meeting --Voting; --The Merger Agreement
--Conditions to the Merger; INFORMATION
CONCERNING THE SPECIAL MEETING
--Required Vote; THE MERGER
AGREEMENT --Conditions
Item 8(d).................... QUESTIONS AND ANSWERS ABOUT THE
MERGER; SUMMARY--Special
Factors--Recommendation of the Company's
Board of Directors; INFORMATION
CONCERNING THE SPECIAL
MEETING--Purpose of the Special Meeting;
SPECIAL FACTORS--Purpose and Background
of the Merger; --Opinion of Financial
Advisor to the Special Committee.
Item 8(e).................... SPECIAL FACTORS--Purpose and
Background of the Merger; --
Recommendation of the Special
Independent Committee and Board of
Directors; Fairness of the Merger
Item 8(f).................... Not Applicable
Item 9. Reports, Opinions,
Appraisals and Certain
Negotiations
Items 9(a) and 9(b).......... SUMMARY--Special Factors--Factors
Considered by the Board of Directors and
the Special Independent Committee; --
</TABLE>
Page 7 of 19
<PAGE>
<TABLE>
<S> <C>
Goldman Sachs' Fairness Opinion;
SPECIAL FACTORS--Purpose and
Background of the Merger; --
Recommendation of the Special
Independent Committee and Board of
Directors; Fairness of the Merger;
--Opinion of Financial Advisor to the
Special Independent Committee
Item 9(c).................... AVAILABLE INFORMATION
Item 10. Interest in Securities of
the Issuer
Item 10(a)................... SUMMARY--Special Factors--Interests
of Certain Persons in the Merger;
INFORMATION CONCERNING THE SPECIAL
MEETING--Record Date; Voting at the
Meeting; Quorum; SPECIAL FACTORS--
Interests of Certain Persons in the
Merger; Certain Relationships;
SECURITIES OWNERSHIP--Beneficial
Ownership of More than 5% of Class
A Stock; --Beneficial Ownership of
Class A Stock by Certain Parties
Related to the Company or the
Buying Group
Item 10(b)................... MARKET FOR THE CLASS A STOCK--Class A
Stock Purchase Information
Item 11. Contracts, Arrangements or
Understandings with Respect
to the Issuer's Securities
Item 11...................... SUMMARY--Special Factors--Financing
of the Merger; SPECIAL FACTORS--
Purpose and Background of the
Merger; --Buying Group Letter
Agreements; --Interests of Certain
Persons in the Merger; Certain
Relationships;--Financing of the
Merger
Item 12. Present Intention and
Recommendation of Certain
</TABLE>
Page 8 of 19
<PAGE>
<TABLE>
<S> <C>
Persons with Regard to the
Transaction
Item 12(a)................... SPECIAL FACTORS--Buying Group
Letter Agreements; SECURITIES
OWNERSHIP--Beneficial Ownership of
Class A Stock by Certain Parties
Related to the Company or the
Buying Group
Item 12(b)................... SUMMARY--Special Factors--Recommendation
of the Company's Board of Directors;
SPECIAL FACTORS--Purpose and Background
of the Merger;--Recommendation of the
Special Independent Commitee and Board
of Directors; Fairness of the Merger.
Item 13. Other Provisions of the
Transaction
Item 13(a)................... QUESTIONS AND ANSWERS ABOUT THE
MERGER; SUMMARY--Dissenter
Appraisal Rights; DISSENTERS RIGHTS
OF APPRAISAL
Item 13(b)-(c)............... Not Applicable
Item 14. Financial Information
Items 14(a).................. SELECTED CONSOLIDATED FINANCIAL
DATA OF THE COMPANY; DOCUMENTS
INCORPORATED BY REFERENCE
Item 14(b)................... Not Applicable
Item 15. Persons and Assets
Employed, Retained or
Utilized
Item 15(a)................... INFORMATION CONCERNING THE SPECIAL
MEETING--Proxy Solicitation;
SPECIAL FACTORS--Fees and Expenses
Item 15(b)................... INFORMATION CONCERNING THE SPECIAL
MEETING--Proxy Solicitation
</TABLE>
Page 9 of 19
<PAGE>
<TABLE>
<S> <C>
Item 16. Additional Information
Item 16...................... Proxy Statement
Item 17. Material to be Filed as
Exhibits
Item 17(a)(1)................ Letter from The Bank of New York
Company, Inc. and BNY Capital
Markets, Inc. to BTV Acquisition
Corporation and Liberty Media
Corporation, dated March 13, 1998
Item 17(a)(2)................ Financing Commitment Letter,
dated [____________], 1998*
Item 17(b)(1)................ Presentation by Goldman, Sachs &
Co. to the Special Independent
Committee, dated March 15, 1998
Item 17(b)(2)................ Opinion of Goldman, Sachs & Co.,
dated March 15, 1998 (set forth as
Exhibit B the Proxy Statement)*
Item 17(c)(1)................ Joint Filing Agreement between
Robert L. Johnson and Tele-
Communications, Inc., dated as of
September 12, 1997
Item 17(c)(2)................ Letter Agreement between Robert L.
Johnson and Liberty Media
Corporation, dated as of September
11, 1997
Item 17(c)(3)................ Letter Agreement, dated March 15,
1998, between Robert L. Johnson and
Liberty Media Corporation
Item 17(c)(4)................ Agreement and Plan of Merger among
BET Holdings, Inc., BTV Acquisition
Corporation, Robert L. Johnson and
Liberty Media Corporation, dated
March 15, 1998 (set forth as
Exhibit A to the Proxy Statement)**
</TABLE>
Page 10 of 19
<PAGE>
<TABLE>
<S> <C>
Item 17(d)(1)................ Proxy Statement
Item 17(e)(1)................ Section 262 of the Delaware General
Corporation Law (set forth as
Exhibit C to the Proxy Statement)**
</TABLE>
* To be filed by amendment
** Incorporated by reference to the Proxy Statement
Page 11 of 19
<PAGE>
Item 1. Issuer and Class of Security Subject to the Transaction.
-------------------------------------------------------
(a) The information set forth in "QUESTIONS AND ANSWERS ABOUT THE
MERGER" and "THE PARTIES--The Company" of the Proxy Statement is incorporated
herein by reference.
(b) The information set forth in "SUMMARY--The Special Meeting--
Voting" and "INFORMATION CONCERNING THE SPECIAL MEETING--Record Date; Voting at
the Meeting; Quorum" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in "MARKET FOR THE CLASS A STOCK--Class
A Stock Market Price Information; Dividend Information" of the Proxy Statement
is incorporated by reference herein.
(d) The information set forth in "MARKET FOR THE CLASS A STOCK--Class
A Stock Market Price Information; Dividend Information" of the Proxy Statement
is incorporated by reference herein.
(e) Not applicable
(f) The information set forth in "MARKET FOR THE CLASS A STOCK--Class
A Stock Purchase Information" of the Proxy Statement is incorporated herein by
reference.
Item 2. Identity and Background. This Statement is being filed jointly by
-----------------------
the Company (which is the issuer of the class of equity
securities that is the subject of the Rule 13e-3 transaction),
BTV Acquisition, Mr. Johnson and TCI.
(a)-(d) The information set forth in "THE PARTIES--The Company," "--BTV
Acquisition," "--Robert L. Johnson," "--Liberty Media Corporation," "--Tele-
Communications, Inc.," "MANAGEMENT--Directors and Executive Officers of BTV
Acquisition," "--Directors and Executive Officers of TCI," and "--Directors and
Executive Officers of Liberty" of the Proxy Statement is incorporated herein by
reference.
(e) During the last five years, none of the Company, BTV Acquisition,
TCI or Liberty, nor, to the best of their knowledge, any of their directors,
executive officers or controlling persons have been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
(f) During the last five years, none of the Company, BTV Acquisition,
TCI or Liberty, nor, to the best of their knowledge, any of their directors,
executive officers or controlling persons was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violation of such laws.
(g) The information set forth in "THE PARTIES--The Company," "--BTV
Acquisition," "--Robert L. Johnson," "--Liberty Media Corporation," "--Tele-
Communications, Inc.," "MANAGEMENT--Directors and Executive Officers of BTV
Acquisition," "--Directors and Executive Officers of TCI," and "--Directors and
Executive Officers of Liberty" of the Proxy Statement is incorporated herein by
reference.
Page 12 of 19
<PAGE>
Item 3. Past Contacts, Transactions or Negotiations.
-------------------------------------------
(a)(1) The information set forth in "CERTAIN RELATIONSHIPS AND
TRANSACTIONS--Agreements with Cable Affiliates," "--Agreements with Related
Parties" and "--Transactions with Management" of the Proxy Statement is
incorporated herein by reference.
(a)(2) and (b) The information set forth in "SUMMARY--Special Factors,"
"SPECIAL FACTORS--Purpose and Background of the Merger" and "--Buying Group
Letter Agreements" of the Proxy Statement is incorporated herein by reference.
Item 4. Terms of the Transaction.
------------------------
(a) The information set forth in "QUESTIONS AND ANSWERS ABOUT THE
MERGER," "SUMMARY," "INFORMATION CONCERNING THE SPECIAL MEETING--Purpose of the
Special Meeting," "--Required Vote," "SPECIAL FACTORS--Purpose and Background of
the Merger," "--Certain Effects of the Merger," "--Interests of Certain Persons
in the Merger; Certain Relationships," "THE MERGER AGREEMENT" and "DISSENTERS
RIGHTS OF APPRAISAL" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "SUMMARY--The Special Meeting--
Voting," "--Special Factors--Interests of Certain Persons in the Merger,"
"INFORMATION CONCERNING THE SPECIAL MEETING--Purpose of the Special Meeting," "
- --Required Vote," "SPECIAL FACTORS--Purpose and Background of the Merger," "--
Certain Effects of the Merger," "--Buying Group Letter Agreements," "--Interests
of Certain Persons in the Merger; Certain Relationships," "THE MERGER AGREEMENT
- --The Merger; Merger Consideration," "--Treatment of Stock Options" and
"DISSENTERS RIGHTS OF APPRAISAL" of the Proxy Statement is incorporated herein
by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate.
---------------------------------------------
(a) and (b) The information set forth in "SPECIAL FACTORS--Plans for the
Company after the Merger" of the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in "SPECIAL FACTORS--Certain Effects of
the Merger," "--Buying Group Letter Agreements," "--Interests of Certain Persons
in the Merger; Certain Relationships," "THE MERGER AGREEMENT--Treatment of Stock
Options" and "--Directors and Officers of the Company Following the Merger;
Certificate of Incorporation; Bylaws" of the Proxy Statement is incorporated
herein by reference.
(d)-(g) The information set forth in "SUMMARY--Special Factors--Purpose,
Background and Effects of the Merger," "--Financing of the Merger," "SPECIAL
FACTORS--Certain Effects of the Merger," "--Buying Group Letter Agreements" and
"--Financing of the Merger" of the Proxy Statement is incorporated herein by
reference.
Page 13 of 19
<PAGE>
Item 6. Source and Amounts of Funds or Other Consideration.
--------------------------------------------------
(a) and (c) The information set forth in "SUMMARY--Special Factors--
Financing of the Merger" and "SPECIAL FACTORS--Financing of the Merger" of the
Proxy Statement is incorporated herein by reference.
(b) The information set forth in "SPECIAL FACTORS--Fees and Expenses" of
the Proxy Statement is incorporated herein by reference.
(d) Not Applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
---------------------------------------------
(a) The information set forth in "SUMMARY--Special Factors--Purpose,
Background and Effects of the Merger," "SPECIAL FACTORS--Purpose and Background
of the Merger" and "--The Buying Group's Purpose and Reason for the Merger" of
the Proxy Statement is incorporated herein by reference.
(b) and (c) The information set forth in "SUMMARY--Special Factors--
Purpose, Background and Effects of the Merger," "SPECIAL FACTORS--Purpose and
Background of the Merger" and "--The Buying Group's Purpose and Reason for the
Merger" of the Proxy Statement is incorporated herein by reference.
(d) The information set forth in "QUESTIONS AND ANSWERS ABOUT THE MERGER,"
"SUMMARY--Special Factors--Purpose, Background and Effects of the Merger," "--
Special Factors--Federal Income Tax Consequences," "--The Merger Agreement--The
Merger Consideration," "INFORMATION CONCERNING THE SPECIAL MEETING--Purpose of
the Special Meeting," "SPECIAL FACTORS--Certain Effects of the Merger," "--Plans
for the Company After the Merger," "--Buying Group Letter Agreements," "--
Accounting Treatment," "--Federal Income Tax Consequences of the Merger," "THE
MERGER AGREEMENT--The Merger; Merger Consideration" and "--The Exchange Fund;
Payment for Shares of Class A Stock" of the Proxy Statement is incorporated
herein by reference.
Item 8. Fairness of the Transaction.
---------------------------
(a) The information set forth in "QUESTIONS AND ANSWERS ABOUT THE MERGER,"
"SUMMARY--Special Factors--Recommendation of the Company's Board of Directors,"
"INFORMATION CONCERNING THE SPECIAL MEETING--Purpose of the Special Meeting,"
"SPECIAL FACTORS--Purpose and Background of the Merger," "--Recommendation of
the Special Independent Committee and Board of Directors; Fairness of the
Merger," "--The Buying Group's Purpose and Reason for the Merger" and "--Opinion
of Financial Advisor to the Special Independent Committee" of the Proxy
Statement is incorporated herein by reference.
Page 14 of 19
<PAGE>
(b) The information set forth in "SUMMARY--Special Factors--Factors
Considered by the Board of Directors and the Special Independent Committee," "--
Goldman Sachs' Fairness Opinion," "SPECIAL FACTORS--Purpose and Background of
the Merger," "--Recommendation of the Special Independent Committee and Board of
Directors; Fairness of the Merger," "--The Buying Group's Purpose and Reason for
the Merger" and "--Opinion of Financial Advisor to the Special Independent
Committee" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in "QUESTIONS AND ANSWERS ABOUT THE MERGER,"
"SUMMARY--The Special Meeting--Voting," "--The Merger Agreement--Conditions to
the Merger," "INFORMATION CONCERNING THE SPECIAL MEETING--Required Vote" and
"THE MERGER AGREEMENT--Conditions" of the Proxy Statement is incorporated herein
by reference.
(d) The information set forth in "QUESTIONS AND ANSWERS ABOUT THE MERGER,"
"SUMMARY--Special Factors--Recommendation of the Company's Board of Directors,"
"INFORMATION CONCERNING THE SPECIAL MEETING--Purpose of the Special Meeting,"
"SPECIAL FACTORS--Purpose and Background of the Merger" and "--Opinion of
Financial Advisor to the Special Committee" of the Proxy Statement is
incorporated herein by reference.
(e) The information set forth in "SPECIAL FACTORS--Purpose and Background
of the Merger" and "--Recommendation of the Special Independent Committee and
Board of Directors; Fairness of the Merger" of the Proxy Statement is
incorporated herein by reference.
(f) Not Applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
------------------------------------------------------
(a) and (b) The information set forth in "SUMMARY--Special Factors--Factors
Considered by the Board of Directors and the Special Independent Committee," "--
Goldman Sachs' Fairness Opinion," "SPECIAL FACTORS--Purpose and Background of
the Merger," "--Recommendation of the Special Independent Committee and Board of
Directors; Fairness of the Merger" and "--Opinion of Financial Advisor to the
Special Independent Committee" of the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in "AVAILABLE INFORMATION" of the Proxy
Statement is incorporated herein by reference.
Item 10. Interest in Securities of the Issuer.
------------------------------------
(a) The information set forth in "SUMMARY--Special Factors--Interests of
Certain Persons in the Merger," "INFORMATION CONCERNING THE SPECIAL MEETING--
Record Date; Voting at the Meeting; Quorum," "SPECIAL FACTORS--Interests of
Certain Persons in
Page 15 of 19
<PAGE>
the Merger; Certain Relationships," "SECURITIES OWNERSHIP--Beneficial Ownership
of More than 5% of Class A Stock" and "--Beneficial Ownership of Class A Stock
by Certain Parties Related to the Company or the Buying Group" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in "MARKET FOR THE CLASS A STOCK--Class
A Stock Purchase Information" of the Proxy Statement is incorporated herein by
reference.
Item 11. Contracts, Arrangements or Understandings with Respect to the
-------------------------------------------------------------
Issuer's Securities.
-------------------
The information set forth in "SUMMARY--Special Factors--Financing of the
Merger," "SPECIAL FACTORS--Purpose and Background of the Merger," "--Buying
Group Letter Agreements," "--Interests of Certain Persons in the Merger; Certain
Relationships" and "--Financing of the Merger" of the Proxy Statement is
incorporated herein by reference.
Item 12. Present Intention and Recommendation of Certain Persons with
------------------------------------------------------------
Regard to the Transaction.
-------------------------
(a) The information set forth in "SPECIAL FACTORS--Buying Group
Letter Agreements" and "SECURITIES OWNERSHIP--Beneficial Ownership of Class A
Stock by Certain Parties Related to the Company or the Buying Group" of the
Proxy Statement is incorporated herein by reference.
(b) The information set forth in "SUMMARY--Special
Factors--Recommendation of the Company's Board of Directors," "SPECIAL
FACTORS--Purpose and Background of the Merger," and "--Recommendation of the
Special Independent Committee and Board of Directors; Fairness of the Merger" of
the Proxy Statement is incorporated herein by reference.
Item 13. Other Provisions of the Transaction.
-----------------------------------
(a) The information set forth in "QUESTIONS AND ANSWERS ABOUT THE
MERGER," "SUMMARY--Dissenter Appraisal Rights" and "DISSENTERS RIGHTS OF
APPRAISAL" of the Proxy Statement is incorporated by reference herein.
(b)-(c) Not Applicable.
Item 14. Financial Information.
---------------------
(a) The information set forth in "SELECTED CONSOLIDATED FINANCIAL
DATA OF THE COMPANY," and "DOCUMENTS INCORPORATED BY REFERENCE" of the Proxy
Statement is incorporated herein by reference.
(b) Not Applicable.
Page 16 of 19
<PAGE>
Item 15. Persons and Assets Employed, Retained or Utilized.
-------------------------------------------------
(a) The information set forth in "INFORMATION CONCERNING THE SPECIAL
MEETING--Proxy Solicitation" and "SPECIAL FACTORS--Fees and Expenses" of the
Proxy Statement is incorporated herein by reference.
(b) The information set forth in "INFORMATION CONCERNING THE SPECIAL
MEETING--Proxy Solicitation" of the Proxy Statement is incorporated herein by
reference.
Item 16. Additional Information.
----------------------
Proxy Statement
Item 17. Material to be Filed as Exhibits.
--------------------------------
(a)(1) Letter from The Bank of New York Company, Inc. and BNY Capital
Markets, Inc. to BTV Acquisition Corporation and Liberty Media Corporation,
dated March 13, 1998
(a)(2) Financing Commitment Letter, dated [ ], 1998*
(b)(1) Presentation by Goldman, Sachs & Co., to the Special Independent
Committee, dated March 15, 1998
(b)(2) Opinion of Goldman, Sachs & Co., dated March 15, 1998 (set
forth as Exhibit B to the Proxy Statement)*
(c)(1) Joint Filing Agreement between Robert L. Johnson and Tele-
Communications, Inc., dated as of September 12, 1997
(c)(2) Letter Agreement between Robert L. Johnson and Liberty Media
Corporation, dated as of September 11, 1997
(c)(3) Letter Agreement, dated March 15, 1998, between Robert L. Johnson
and Liberty Media Corporation
(c)(4) Agreement and Plan of Merger among BET Holdings, Inc., BTV
Acquisition Corporation, Robert L. Johnson and Liberty Media Corporation, dated
March 15, 1998 (set forth as Exhibit A to the Proxy Statement)**
(e)(1) Section 262 of the Delaware General Corporation Law (set forth as
Exhibit C to the Proxy Statement)**
(f) As of the date of this Statement, no written instruction, form or other
material has been furnished to any person making the actual oral solicitation or
other recommendation (including the proxy solicitor referred to in "INFORMATION
CONCERNING THE SPECIAL MEETING--Proxy Solicitation" of the Proxy Statement) for
such person's use, directly or indirectly in connection with the Rule 13e-3
transaction.
* To be filed by amendment
** Incorporated by reference to the Proxy Statement
Page 17 of 19
<PAGE>
SIGNATURE
After due inquiry and to the best of our knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated:
BET HOLDINGS, INC.
By: /s/ Debra L. Lee
----------------------------------
Debra L. Lee
President
BTV ACQUISITION CORPORATION
By: /s/ Robert L. Johnson
----------------------------------
Robert L. Johnson
President
/s/ Robert L. Johnson
----------------------------------
Robert L. Johnson
TELE-COMMUNICATIONS, INC.
By: /s/ Robert R. Bennett
----------------------------------
Robert R. Bennett
Page 18 of 19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
Exhibit 99.17(a)(1) Letter from The Bank of New York Company,
Inc. and BNY Capital Markets, Inc. to BTV
Acquisition Corporation and Liberty Media
Corporation, dated March 13, 1998
Exhibit 99.17(a)(2) Financing Commitment Letter, dated
[____________], 1998*
Exhibit 99.17(b)(1) Presentation by Goldman, Sachs & Co. to the
Special Independent Committee, dated March
15, 1998.
Exhibit 99.17(b)(2) Opinion of Goldman, Sachs & Co., dated March
15, 1998 (set forth as Exhibit B the Proxy
Statement).*
Exhibit 99.17(c)(1) Joint Filing Agreement between Robert L.
Johnson and Tele- Communications, Inc., dated
as of September 12, 1997
Exhibit 99.17(c)(2) Letter Agreement between Robert L. Johnson
and Liberty Media Corporation, dated as of
September 11, 1997
Exhibit 99.17(c)(3) Letter Agreement, dated March 15, 1998,
between Robert L. Johnson and Liberty Media
Corporation
Exhibit 99.17(c)(4) Agreement and Plan of Merger among BET
Holdings, Inc., BTV Acquisition Corporation,
Robert L. Johnson and Liberty Media
Corporation, dated March 15, 1998 (set forth
as Exhibit A to the Proxy Statement)**
Exhibit 99.17(d)(1) Proxy Statement
Exhibit 99.17(e)(1) Section 262 of the Delaware General
Corporation Law (set forth as Exhibit C to
the Proxy Statement)**
</TABLE>
* To be filed by amendment
** Incorporated by reference to the Proxy Statement
Page 19 of 19
<PAGE>
EXHIBIT 99.17(a)(1)
BANK OF NEW YORK COMPANY, INC.
ONE WALL STREET
NEW YORK, NEW YORK 10286
BNY CAPITAL MARKETS, INC.
ONE WALL STREET
NEW YORK, NEW YORK 10286
March 13, 1997
BTV Acquisition Corporation
1900 W Place, N.E.
Washington D.C. 20018
Attention: Robert L. Johnson
Liberty Media Corporation
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Robert R. Bennett
Gentlemen:
You have discussed with us your intention to seek a $600 million senior
secured credit facility (the "Facility") to be made available to BTV Acquisition
--------
Corporation, a Delaware corporation (the "Borrower"), for the purpose of (i)
--------
financing the potential acquisition, through a merger (the "Acquisition"), of
-----------
the Borrower into BET Holdings, Inc. a Delaware corporation ("Holdings"), (ii)
--------
paying all fees, expenses and costs in connection with the Acquisition, (iii)
refinancing the existing revolving credit facility of Black Entertainment
Television, Inc., a District of Columbia corporation ("BET"), and
---
(iv) general corporate purposes. Holdings is a holding company which owns a
number of subsidiaries, including, without limitation, all of the issued and
outstanding capital stock of BET. Subject to the qualifications and conditions
set forth below, The Bank of New York Company, Inc. and BNY Capital Markets,
Inc. are highly confident as of the date of this letter that they, directly or
through any of their affiliates, could successfully arrange and fully syndicate
the Facility.
<PAGE>
Our expression of confidence is subject to the following qualifications
and conditions. First, the Facility would have to be on terms and conditions,
including, without limitation, pricing and fees and covenants, including maximum
leverage and coverage ratios, that in our view are appropriate for a Facility of
this size, type and purpose and that are satisfactory to us. Second, the
Acquisition would have to be structured on terms and conditions satisfactory to
us, including, without limitation, the purchase price on both a per share and
aggregate basis. Third, the results of our due diligence with respect to the
Acquisition, the Facility, the Borrower, Holdings and all of its subsidiaries,
including, without limitation, BET, which due diligence has not yet commenced,
would have to be satisfactory to us. Fourth the capital structure of the
Borrower, Holdings and BET would have to be on terms and conditions satisfactory
to us. Fifth, the documentation for the Facility and the Acquisition would have
to be satisfactory to us. Sixth, no material adverse change shall have occurred
in the market for senior-debt financings. Seventh, no material adverse change
(including, without limitation, arising from any litigation or other proceeding,
now existing or hereafter commenced) shall have occurred in the financial
condition, business, operations, property or prospects of the Borrower, Holdings
or any subsidiaries of Holdings, including, without limitation, BET. Eighth, no
competing financing to the Borrower, Holdings or any subsidiaries or Holdings,
including, without limitation, BET, will be offered or arranged. Ninth, no
change or proposed change in law shall have occurred that could materially and
adversely affect the Facility, the Acquisition or the economic consequences
thereof.
Without in any way limiting the foregoing, we should emphasize to you
that this is not, and should not be construed as, a commitment. Any commitment
that we or any of our affiliates might provide in connection with the Facility
or the Acquisition would only be provided after internal credit approval is
obtained in respect thereof and would be provided pursuant to a written
agreement separate from this letter.
We shall have the right to review and approve all public announcements
and filings relating to the transactions contemplated hereby that refer,
directly or indirectly, to us or to this letter before they are made (such
approval not to be unreasonably withheld), provided that you and BET may name us
and make reference to factual matters concerning us in a press release and
filings made by you in connection with the Acquisition.
You should be aware that other companies with interests that may conflict
with yours may be or become customers of us or our affiliates, and we or our
affiliates may be providing, or in the future may provide, financing or other
services to them.
Except as required by law or unless we otherwise consent in writing, you
are not authorized to show or circulate this letter, or disclose any of the
contents hereof, to any other person or entity other than your legal and
financial advisors and the board of directors of Holdings and their legal and
financial advisors, in each case solely in connection with the Facility and the
Acquisition, each of whom shall be similarly restricted.
2
<PAGE>
This letter shall not become effective until it has been accepted by you,
such acceptance to be effected by your countersigning and returning this letter,
accompanied by your payment of the fee referred to in the fee letter of even
date herewith accompanying this letter, to the undersigned no later than
Wednesday, March 18, 1998.
Very truly yours,
THE BANK OF NEW YORK COMPANY, INC.
By: /s/ Kalpana Raina
---------------------------------
BNY CAPITAL MARKETS, INC.
By: /s/ Torry Berntsen
---------------------------------
ACCEPTED AND AGREED:
BTV ACQUISITION CORPORATION
By: /s/ Robert L. Johnson
-------------------------------
Name: Robert L. Johnson
Title: President
LIBERTY MEDIA CORPORATION
By: /s/ Robert R. Bennett
-------------------------------
Name: Robert R. Bennett
Title: President
Date: March 15, 1998
3
<PAGE>
Exhibit 99.17(b)(1)
CONFIDENTIAL
============
[Goldman Sachs Logo]
PRESENTATION TO THE BOARD OF DIRECTORS OF
BET HOLDINGS, INCORPORATED
The following pages contain material that was provided to the Special
Committee of the Board of Directors of BET Holdings, Incorporated in the context
of a meeting of the Special Committee to evaluate the transactions described in
this Schedule 13E-3 and the Proxy Statement filed by BET Holdings, Incorporated
on the date hereof. Certain information contained in this material was obtained
from BET Holdings, Incorporated, Mr. Robert L. Johnson, Liberty Media
Corporation, and from other sources. Any estimates and projections contained
herein have been prepared by the management of BET Holdings, Incorporated and/or
Mr. Robert L. Johnson and Liberty Media Corporation and involve numerous and
significant subjective determinations, which may or may not be correct. Neither
BET Holdings, Incorporated, nor Mr. Johnson, nor Liberty Media Corporation, nor
Goldman, Sachs & Co. expects to update or otherwise revise the accompanying
materials.
GOLDMAN, SACHS & CO.
MARCH 15, 1998
<PAGE>
TABLE OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
<S> <C>
Executive Summary 1
Summary of Offer 2
Summary Financial Information 3
Overview of Market Perceptions of BET 4
Overview of Valuation
Analysis of BET Cable Network - Implied Discount Rates and AVP 5
Review of Selected Publicly Traded Companies 6
Analysis of Selected Merger Transactions 7
Discounted Cash Flow Analysis 8
Recapitalization Analysis 9
Salomon Smith Barney February 9, 1998 Presentation 10
Comparison of Selected Minority Buyouts 11
Comparison of Ratings 12
</TABLE>
[Goldman Sachs Logo]
<PAGE>
SUMMARY OF RECENT DEVELOPMENTS
- - Meeting with Salomon Smith Barney on February 9, 1998 to discuss valuation
methodologies behind their $48.00 per share offer
- - Call from Salomon Smith Barney on February 27, 1998 with new $63.00 per
share offer
- - Meeting with Special Committee of the Board of Directors of BET Holdings on
March 5, 1998 to review $63.00 per share offer
- - Delano Lewis, the Special Committee, met with Robert Johnson, member of the
buying group, to discuss possibility of raising offer price to $69.00 per
share
- - Robert Johnson indicated that the buying group was not willing to do a
transaction above the $63.00 per share price
- - Delano Lewis indicated that he will approve the $63.00 per share price,
subject to Goldman Sachs' Fairness Committee approval and a negotiated
merger agreement which includes neutralized voting
- - A full BET Holdings Board of Directors meeting scheduled for March 15
[Goldman Sachs Logo]
1
<PAGE>
EXECUTIVE SUMMARY
- - BET shares appear to trade based on a multiple of consolidated
------------
profitability
- - Profitability and valuation of BET Holdings is depressed by operating
losses for the Company's other ventures which detract from the value of the
core cable network
- - Furthermore, valuation is impacted by concern as to Management's growth
strategy
- Little evidence that the cable brand meaningfully reduces the risks
inherent to the start ups of multiple new businesses
- - Given turnaround of losses and big pick up in 1998 EBITDA for the core
network, there is a potential in the short to medium term for a step
function change in valuation over the coming twelve months
- - The fundamental drivers of valuation will be Management's ability to
capitalize on key strengths of the business
- "Brand Equity"
- Loyal customer base with attractive demographics
- Strong distribution
- Inexpensive access to programming
- Strong cash flow margins
- - Key concerns by investors currently affect valuation
- Brand extension growth strategy dilutes the Company's core cable
network story
- Small public float
- Large concentration of voting between Johnson and Liberty (over 90%)
- High concentration of voting prevents stock from trading with a "take-
out premium"
- Growth perspectives given highly penetrated customer base
- Arrival of digital cable systems could threaten "scarcity" value
attributed to BET's current widespread distribution
[Goldman Sachs Logo]
2
<PAGE>
SUMMARY OF THE PROPOSAL
- - $63 per share for those shares not now owned by Purchasing Group
- - Purchasing Group consisting of Robert Johnson and Liberty Media Corporation
- Johnson and Liberty to maintain proportionate ownership
- If successful Johnson would own 67% of BET Holdings and Liberty would
own 33%
- Management options to be cashed out
- - Share purchase would be financed in bank loan market by Bank of New York
- - Structure of transaction will take the form of a "long form merger"
- Shareholder vote with neutralized voting
[Goldman Sachs Logo]
3
<PAGE>
[Goldman Sachs Logo]
ANALYSIS OF THE PROPOSAL
Based on Management Financials
Snapshot of Current Proposals
-----------------------------
<TABLE>
<CAPTION>
Offer Price per share $63
Johnson Liberty Public
- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares Outstanding 6,733,073 3,663,200 6,316,075
Basic Equity Value $ 1,053 Offer Price: $ 63.00
Option Value 53 Avg. Strike Price 15.67
-----------
Fully Diluted Equity 1,106 Spread 47.33
Value # of Option 1.8
Plus Net Debt 51 ----------
----------- Total 85.19
Levered Consideration 1,157 38% Tax 32.37
=========== ----------
52.82
Multiples
- ---------
Sales 1997A $ 154 7.5x
1998E 181 6.4
EBITDA 1997A $ 62 18.7x
1998E 92 12.6
EBIT 1997A $ 54 21.4x
1998E 82 14.1
EPS 1997A $ 1.36 46.3x
1998E 2.69 23.4
</TABLE>
Apparent Versus Implied Valuation Multiples
-------------------------------------------
[Bar graph reflecting the following information:
<TABLE>
<CAPTION>
EBITDA Multiple
---------------
<S> <C>
Public Mkt. 11.5x(a)
Merger Market 18.3x(d)
Value Attributed to Non-Core Current Offer
200 13.9x(b)
150 14.6x(b)
100 15.3x(b)
0 16.7x(b)
Apparent 18.7x(c)]
</TABLE>
(a) Average of 1997 EBITDA multiples of publicly traded comparables including
Disney, EMI, News Corp, Polygram, Seagram, Time Warner, Viacom, Gaylord
Entertainment and King World.
(b) Based on core BET network EBITDA.
(c) Based on core and non core EBITDA.
(d) LTM EBITDA average of IFE, Rainbow Programming, Westinghouse CBS/TNN and E!
transactions.
4
<PAGE>
[Continued from previous page]
Apparent Versus Implied Valuation Multiples
-------------------------------------------
[Bar graph reflecting the following information:
Levered Consideration $1,157 at $63.00 per share]
1,157 = 18.7x Overall Implied Multiples Assuming that the
- ----- =====
62 EBITDA Value of Non-Core Business is
$0 $50 $100
--------------------------
16.7x 16.0x 15.3x
Note: Core 1997 EBITDA of $69mm
Gap Between Apparent and Core EBITDA
------------------------------------
[Bar graph reflecting the following information:
<TABLE>
<CAPTION>
Gap
---
<S> <C>
1995 $3
1996 $5
1997 $14(a)
1998 $4
1999 ($3)]
</TABLE>
(a) Gap is reduced to $7 million if you include $7 million loss from BET Direct
into consolidated EBITDA
<PAGE>
[Goldman Sachs Logo]
OVERVIEW OF BET HOLDINGS, INC.
[Organizational Chart]
BET Holdings
<TABLE>
<CAPTION>
Non-Core Businesses Core Cable Network Equity Affiliates
<S> <C> <C>
- - BET on Jazz - Represents 88.3% of 1997 - BET Movies / Starz! 3
Revenue
- - Action Pay-Per-View - UrbanCityFoods
- Represents 98% of 1997 positive
- - Publishing operating cash flow - Cybersonic Records
- - BET Soundstage Restaurants - EBITDA margins of 51% in 1997, - Soundstage Hotel/Casino
projected to increase to 72% in
2002 - BET Financial Services
- 1998-2002 Revenue and EBITDA - BET Design Studio
CAGR of 15% and 21%
respectively
</TABLE>
5
<PAGE>
BET HOLDINGS, INC.
Management December 1997 Projections
Consolidated Statement of Operations
($ in thousands, July 31 FYE)
<TABLE>
<CAPTION>
Historical Projected
---------------------------- --------------------------------------------------
1995 1996 1997 1998 1999 2000 2001 2002
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues 111,783 128,694 154,226 180,898 222,419 264,082 307,483 342,103
Growth 15% 20% 17% 23% 19% 16% 11%
Expenses 72,136 83,995 100,451 99,643 106,089 112,820 119,873 125,440
EBITDA 44,213 49,858 62,435 92,113 128,720 170,947 217,903 247,320
EBITDA Margin 40% 39% 40% 51% 58% 65% 71% 72%
EBIT 37,517 41,812 53,775 82,120 117,341 157,656 201,660 230,713
Nonoperating Income/Expense
Equity Investments (1,203) (1,725) (3,399) (1,191) 4,953 17,852 22,511 23,033
Interest Income 1,325 1,504 1,554 182 92 1,322 4,711 9,970
Interest Expense 2,227 4,162 4,197 4,269 2,815 1,390 717 596
Other Expenses 275 58 1,141 250 250 250 250 250
-------- -------- -------- -------- -------- -------- -------- --------
Total Nonoperating Income/Expense (2,380) (4,441) (7,183) (4,693) 3,499 18,801 27,436 33,368
Income Before Taxes 35,137 37,371 46,592 76,592 119,321 175,190 227,915 262,870
Provision for Income Taxes 15,226 15,307 18,571 29,488 44,149 64,820 84,329 97,262
-------- -------- -------- -------- -------- -------- -------- --------
Loss from Discontinued Operations (4,235)
Net Income 19,911 22,064 23,786 47,104 75,172 110,370 143,586 165,608
Weighted Average Shares Outstanding
Weighted Average Shares Outstanding 19,867 18,454 16,703 16,700 16,700 16,700 16,700 16,700
Estimated common stock equivalents 812 800 800 800 800 800
-------- -------- -------- -------- -------- -------- -------- --------
19,867 18,454 17,515 17,500 17,500 17,500 17,500 17,500
Per Share
Net Income $1.00 $1.20 $1.36 $2.72 $4.35 $6.35 $8.25 $9.51
EBITDA - Consolidated $2.23 $2.70 3.56 5.26 7.36 9.77 12.45 14.13
</TABLE>
6
<PAGE>
[Goldman Sachs Logo]
[Chart continued from previous page]
<TABLE>
<CAPTION>
CAGR
------------------
1995-1997 1998-
2002
------------------
<S> <C> <C>
Revenues 17% 17%
Growth -- --
Expenses 18 6
EBITDA 19 28
EBITDA Margin -- --
EBIT 20 29
Nonoperating Income/Expense
Equity Investments NM NM
Interest Income 8% 172%
Interest Expense 37 -39
Other Expenses 104 0
Total Nonoperating Income/Expense NM NM
Income Before Taxes 15% 36%
Provision for Income Taxes 10 35
Loss from Discontinued Operations
Net Income 9 37
Weighted Average Shares Outstanding -- --
Weighted Average Shares Outstanding -- --
Estimated common stock equivalents -- --
Per Share
Net Income 16% 37%
EBITDA - Consolidated 27 28
</TABLE>
<PAGE>
SUMMARY OF OPERATING PERFORMANCE
Management December 1997 Projections
BET Holdings, Inc. ($ in millions, July 31 FYE)
Revenues Operating Expenses
-------- ------------------
[Bar graph reflecting the following [Bar graph reflecting the following
information: information:
<TABLE>
<CAPTION>
$ millions CAGR $ millions CAGR
---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C>
1995 111.8 --- 1995 72.1 ---
1996 128.7 15% 1996 84.0 16%
1997 154.2 20% 1997 100.5 20%
1998 180.1 17% 1998 99.6 (1)%
1999 222.4 23% 1999 106.1 6%
2000 264.1 19% 2000 112.8 6%
2001 307.5 16% 2001 119.9 6%
2002 342.1 11% 2002 125.4 5%
95-97 CAGR 17% 95-97 CAGR 18%
98-02 CAGR 17%] 97-02 CAGR 5%]
</TABLE>
EBITDA/ EBIT EBIT After Equity in Unconsolidated
------------ -----------------------------------
Affiliates
----------
[Bar graph reflecting the following [Bar graph reflecting the following
information: information:
<TABLE>
<CAPTION>
EBITDA EBIT EBITDA
$ millions $ millions CAGR $ millions CAGR
---------- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
1995 44.2 37.5 --- 1995 36.3 --
1996 49.9 41.8 13% 1996 40.1 10%
1997 62.4 53.8 25% 1997 50.4 26%
1998 92.1 82.1 48% 1998 80.9 61%
1999 128.7 117.3 40% 1999 122.3 51%
2000 170.9 157.7 33% 2000 175.5 44%
2001 217.9 201.7 27% 2001 224.2 28%
2002 247.3 230.7 14% 2002 253.7 13%
95-97 CAGR 19% 95-97 CAGR 18%
97-02 CAGR 28%] 97-02 CAGR 33%]
</TABLE>
Note: Growth rates are shown for EBITDA only
7
<PAGE>
BET HOLDINGS, INC.
Management December 1997 Projections
Profile of Estimated Performance by Unit
($ in thousands, July 31 FYE)
<TABLE>
<CAPTION>
1995 1996 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
- -- BET Network 100,470 116,148 136,162 160,550
- -- Action Pay-per-view 8,470 8,775 9,327 11,030
- -- BET on Jazz -- 405 1,125 2,225
- -- Publishing 2,843 3,366 4,233 7,093
- -- SoundStage Restaurants -- -- 3,379 --
------- ------- ------- -------
Total Revenues 111,783 128,694 154,226 180,898
EBITDA
- -- BET Network 46,877 54,473 68,938 96,397
- -- Action Pay-per-view 692 1,076 1,236 2,368
- -- BET on Jazz -- (1,862) (4,300) (7,383)
- -- Publishing (1,226) (942) (2,733) (592)
- -- SoundStage Restaurants -- (34) (706) 1,323
- -- BET Direct 42 (931) -- --
- -- YSB Magazine (2,172) (1,922) -- --
------- ------- ------- -------
Total EBITDA 44,213 49,858 62,435 92,113
Margins
- -- BET Network 47% 47% 51% 60%
- -- Action Pay-per-view 8 12 13 21
- -- BET on Jazz NM NM NM NM
- -- Publishing NA NA NA NA
- -- SoundStage Restaurants NA NA NA NA
</TABLE>
8
<PAGE>
[Goldman Sachs Logo]
[Chart continued from previous page]
<TABLE>
<CAPTION>
CAGR
-------------------
1999 2000 2001 2002 1995-97 1998-02
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
- -- BET Network 193,513 223,162 254,197 281,332 16% 15%
- -- Action Pay-per-view 12,133 13,346 14,681 16,149 5 10
- -- BET on Jazz 8,279 17,832 27,409 33,426 NM 97
- -- Publishing 8,494 9,742 11,196 11,196 22 12
- -- SoundStage Restaurants -- -- -- -- NM NM
------- ------- ------- -------
Total Revenues 222,419 264,082 307,483 342,103 17% 17%
EBITDA
- -- BET Network 126,329 152,659 180,002 203,290 21% 21%
- -- Action Pay-per-view 2,795 3,275 3,812 4,414 34 17
- -- BET on Jazz (2,752) 5,356 13,466 18,993 NM NM
- -- Publishing 112 638 1,323 1,323 NM NM
- -- SoundStage Restaurants 2,236 9,019 19,300 19,300 NM 95
- -- BET Direct -- -- -- -- NM NA
- -- YSB Magazine -- -- -- -- NM NA
------- ------- ------- -------
Total EBITDA 128,720 170,947 217,903 247,320 19% 28%
Margins
- -- BET Network 65% 68% 71% 72%
- -- Action Pay-per-view 23 25 26 27
- -- BET on Jazz NM 30 49 57
- -- Publishing 1% 7 12 12
- -- SoundStage Restaurants NA NA NA NA
</TABLE>
<PAGE>
SUMMARY OF OPERATING PERFORMANCE
Management December 1997 Projections
BET Cable Network ($ in millions, July 31 FYE)
Revenues Operating Expenses
-------- ------------------
[Bar graph reflecting the following information: [Bar graph reflecting the
following information:
<TABLE>
<CAPTION>
$ millions CAGR $ millions CAGR
---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C>
1995 100.5 --- 1995 58.0 ---
1996 116.1 16% 1996 66.6 15%
1997 136.2 17% 1997 72.4 9%
1998 160.6 18% 1998 70.4 (3%)
1999 193.5 21% 1999 73.9 5%
2000 223.2 15% 2000 77.6 5%
2001 254.2 14% 2001 81.5 5%
2002 281.3 11% 2002 85.5 5%
</TABLE>
95-97 CAGR 16% 95-97 CAGR 12%
98-02 CAGR 15%] 98-02 CAGR 5%]
EBITDA EBIT
------ ----
[Bar graph reflecting the following information: [Bar graph reflecting the
following information:
<TABLE>
<CAPTION>
$ millions CAGR $ millions CAGR
---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C>
1995 46.9 --- 1995 42.5 ---
1996 54.5 16% 1996 49.5 17%
1997 68.9 27% 1997 63.7 29%
1998 96.4 40% 1998 90.2 42%
1999 126.3 31% 1999 119.6 33%
2000 152.7 21% 2000 145.6 22%
2001 180.0 18% 2001 172.7 19%
2002 203.3 13% 2002 195.8 13%
</TABLE>
95-97 CAGR 21% 95-97 CAGR 22%
98-02 CAGR 21%] 98-02 CAGR 21%]
9
<PAGE>
SUMMARY OF MANAGEMENT DECEMBER PROJECTIONS
BET Core Cable Network (a)
While EBITDA attributed to
subscriber growth is more
predictable, EBITDA from
advertising revenue increases
and EBITDA margin expansion
may seem less certain
[Bar graph reflecting the following information:
<TABLE>
<CAPTION>
EBITDA ($ millions)
-------------------
<S> <C>
1995 46.9
1996 54.4
1997 68.9
1998 96.4
1999 126.3
2000 152.7
2001 180.0
2002 203.3
</TABLE>
21% EBITDA CAGR from 1998 - 2002
<TABLE>
<CAPTION>
1998 2001
- ---- ----
<S> <C>
- -- 19% advertising revenue growth -- Incremental $6.8mm in DBS revenues
- -- 3% decrease in operating expenses -- Incremental $0.9mm in Canadian subscriber revenues
- -- EBITDA margin expansion from 51% to 60% -- 12% advertising revenue growth
-- 5% increase in operating expenses
-- EBITDA margin expansion from 68% to 71%
1999 2002
- ---- ----
- -- Incremental $5.5mm in DBS revenues as -- Incremental $2.3mm in DBS revenues
carrier contract payment terms kick in -- Incremental $1.0mm in Canadian subscriber revenues
- -- Incremental $6.3mm in revenues from -- 10% advertising revenue growth
Canadian subscribers as carrier contract -- 5% increase in operating expenses
payment terms kick in -- EBITDA margin expansion from 71% to 72%
- -- 16% advertising revenue growth
- -- 5% increase in operating expenses
- -- EBITDA margin expansion from 60% to 65%
2000
- ----
- -- Incremental $5.3mm in DBS revenues
- -- Incremental $0.8mm in Canadian subscriber revenues
- -- 15% advertising revenue growth
- -- 5% increase in operating expenses
- -- EBITDA margin expansion from 65% to 68%]
</TABLE>
(A) $ in millions, July 31 FYE.
[Goldman Sachs Logo]
10
<PAGE>
[Goldman Sachs Logo]
CORE NETWORK SUBSCRIBER AND ADVERTISING ANALYSIS
Core Network Historical Subscriber Core Network Projected Subscriber
----------------------------------- ---------------------------------
[Bar graph reflecting the following [Bar graph reflecting the following
information: information :
<TABLE>
<CAPTION>
Average
annual subscribers
--------------------
<S> <C> <C> <C> <C>
Q1 95 35.5 1998 56.0
Q2 95 36.1 36.6 1999 60.7
Q3 95 37.1 2000 65.1
Q4 95-7/31 37.5 2001 69.2
Q1 96 38.8 2002 73.3
Q2 96 39.9 40.2
Q3 96 40.7 BET 1998 - 2002 CAGR 7%
Q4 96-7/31 41.4 INDUSTRY 1998 - 2002 CAGR 2%]
Q1 97 42.4
Q2 97 43.9 44.9
Q3 97 46.1
Q4 97-7/31 47.1
Q1 98 49.6
</TABLE>
1995 - 1997 CAGR 15.1% ]
Current CPM Advertising Rate Analysis BET CPM Advertising Rate Forecast
------------------------------------- ---------------------------------
[Bar graph reflecting the following [Bar graph reflecting the
information: following information:
<TABLE>
<S> <C> <C> <C>
CMT $ 4.50 1997 $4.93
MTV $11.69 1998 $5.32
TNN $ 5.13 1999 $5.75
VH1 $ 5.10 2000 $6.21
E!TV $ 6.38 2001 $6.70
Family $ 5.88 2002 $7.24
Fx $ 5.13
Lifetime $ 8.08 1998 - 2002 cagr 8%]
Average $ 6.48
BET $ 4.93 BET Current Discount 24%]
</TABLE>
11
<PAGE>
COMPARISON OF OPERATING PROJECTIONS FOR CORE CABLE NETWORK
($ in millions)
<TABLE>
<S> <C> <C> <C> <C> <C>
Current September 1997
management Management
projections, which Projections
have been revised February 1998 Reviewed by
downward by Salomon December 1997 October 1997 Salomon Prior
management from Sensitized Management Management tO Original
those projections Projections Projections Projections $48 Offer
dated October 1997,
reflect (among other 2001 Revenues $217.1 $254.2 $283.2 $241.2
changes) decreases 2001 Operating Expenses 76.9 81.5 81.5 81.5
in advertising 2001 EBITDA 140.3 180.0 209.0 167.1
revenue growth 2001 EBITDA Margin 65% 71% 74% 69%
rates 1998-2001 Revenue CAGR 12 17 21 15
1998-2001 Advertising Revenue 8 14 22 N.A.
CAGR
1998-2001 Subscribe Revenue CARG 17 19 19 N.A.
1998-2001 Operating Expense CARG 6 5 5 3
1998-2001 Marketing Expense CARG 8 6 8 N.A.
1998-2001 G & A Expense CAGR 4 4 3 N.A.
1998-2001 EBITDA CAGR 16 23 29 25
</TABLE>
[Goldman Sachs Logo]
12
<PAGE>
QUARTERLY EBITDA COMPARISON (a)
CONSOLIDATED VS. CORE CABLE NETWORK
($ in millions)
<TABLE>
<CAPTION>
1997 1998
---------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Core Network Q1 Q2 Q3 Q4 Year(c) Six Months Annualized(d) Budget
Revenue $32.6 $32.7 $35.0 $35.8 $136.2 $74.7 $151.4 $160.6
EBITDA 16.2 16.4 18.8 17.6 68.9 41.0 84.0 96.4
Margin 49.7% 50.0% 53.7% 49.1% 50.6% 54.9% 55.5% 60.0%
Growth(b) 21.4% 16.7% 46.3% 19.8% 25.6% 26.2% 21.8% 40.0%
</TABLE>
<TABLE>
<CAPTION>
1997 1998
--------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Q1 Q2 Q3 Q4 Year(c) Six Months Annualized(d) Budget
Revenue $36.1 $36.6 $40.9 $40.7 $154.2 $84.9 $171.8 $180.9
EBITDA 13.6 13.7 15.3 19.9 62.4 35.4 72.8 92.1
Margin 37.7% 37.3% 37.3% 49.0% 40.5% 41.7% 42.4% 50.9%
Growth(b) 4.5% 6.3% 31.8% 47.6% 22.6% 26.3% 16.6% 47.5%
</TABLE>
(a) Financial data based on publicly available relevant 10-K and 10-Q filings.
Six month financial information provided by management.
(b) Growth is based on comparison to same time period in fiscal year 1996.
(c) Fiscal year ended July 31, 1997.
(d) Annualized EBITDA includes $3.0 million of EBITDA due to subscriber rate
card increase effective July 1, 1998.
13
<PAGE>
FIVE MONTH ACTUAL VS. BUDGET(A)
YTD Ended December 31, 1997
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Variance
Five Month Actual Budget $ %
Revenue
- -------
<S> <C> <C> <C> <C>
Core Cable Network
Advertising $36.8 $37.5 ($0.7) (2.0%)
Subscriber 25.2 26.5 ($1.3) (5.0%)
Other 0.1 0 $ 0.1 N.M.
----- ----- ------ -----
Total Cable Revenue $62.0 $64.0 ($2.0) ($3.1%)
BET on Jazz 0.2 0.9 ($0.7) (79.6%)
Action Pay Per View 3.5 4.4 ($0.9) (20.7%)
Emerge Magazine 1.6 1.3 $ 0.3 21.5%
BET Weekend Magazine 1.2 1.4 ($0.2) (13.9%)
----- ----- ------ -----
Total Revenue(b) $68.4 $72.0 ($3.6) (5.0%)
EBITDA(c)
- ---------
Core Cable Network $33.1 $34.6 ($1.5) (4.3%)
BET on Jazz (4.0) (4.1) $ 0.1 1.7%
Emerge Magazine (0.8) (0.7) ($0.2) (28.9%)
BET Weekend Magazine (0.2) 0.3 ($0.5) N.M.
Restaurants (0.9) 0.2 ($1.1) N.M.
</TABLE>
(a) Five month actual and budget provided by management.
(b) Five month revenue contributions from restaurants, BET Satellite, BET
Development, acquisitions and MSBET not provided by mgmt.
(c) Five month EBITDA not provided by management for Action Pay Per View, BET
Satellite, BET Development, acquisitions and MSBET.
14
<PAGE>
COMPARISON OF EBITDA MARGINS
Basic Cable Programming(a)
<TABLE>
<CAPTION>
1995A 1996A 1997A 1998E 1999E 2000E 2001E 2002E
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BET Core Cable EBITDA Margins 46.7% 46.9% 50.6% 60.0% 65.3% 68.4% 70.8% 72.3%
BET Consolidated EBITDA Margins 40.0% 39.0% 40.0% 51.0% 58.0% 65.0% 71.0% 72.0%
</TABLE>
Other Selected 1998 FYE EBITDA Margins
<TABLE>
<CAPTION>
1998E
-----
<S> <C>
Rainbow Programming 16.4%
USA Networks 18.5%
International Family Entertainment 25.8%
E! Network 31.8%
MTV 42.6%
</TABLE>
(a) Based on December projections provided by BET management.
15
<PAGE>
OBSERVATIONS FROM DUE DILIGENCE
Review of Management Projections for Non-Core Operations
Consolidated Non-Core Operations
- --------------------------------
- -- BET on Jazz has the most significant effect on valuation of all BET
Holding's non core network ventures
-- 97% Revenue CAGR from 1998 to 2002 growing from $2.2 million to $33.4
million
-- Turns EBITDA positive in 2000 and grows at 88% EBITDA CAGR from 2000 to
2002
-- Strong EBITDA margin expansion from 30% in 2000 to 57% in 2002
- -- SoundStage Restaurants also have a moderate effect on valuation
-- 95% EBITDA CAGR from 1998 to 2002 from $1.3 million to $19.3 million
- -- Action Pay-Per-View and Publishing Group do not generate meaningful EBITDA
over the projected period
Equity in Unconsolidated Affiliates
- -----------------------------------
- -- Unconsolidated Affiliates dilute earnings through 1998
- -- EPS contribution does not occur until 1999
-- $0.17 incremental EPS in 1999
-- $0.62 incremental EPS in 2000
- -- SoundStage Hotel / Casino in main generator of this EPS pick up
16
<PAGE>
SUMMARY OF OPERATING PERFORMANCE
Management December 1997 Projections
Consolidated Non-Core Operations ($ in millions, July 31 FYE)
<TABLE>
<CAPTION>
Revenues Operating Expenses
-------- ------------------
[Bar graph reflecting the following information: [Bar graph reflecting the following information:
$ millions CAGR $ millions CAGR
---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C>
1995 11.3 --- 1995 14.2 --
1996 12.5 11% 1996 17.4 23%
1997 18.1 44% 1997 23.7 37%
1998 20.3 13% 1998 29.3 23%
1999 28.9 42% 1999 32.2 10%
2000 40.9 42% 2000 35.2 9%
2001 53.3 30% 2001 38.4 9%
2002 60.8 14% 2002 39.9 4%
95-97 CAGR 26% 95-97 CAGR 26%
98-02 CAGR 32%] 98-02 CAGR 8%]
</TABLE>
EBITDA EBIT
------ ----
<TABLE>
<CAPTION>
[Bar graph reflecting the following information: [Bar graph reflecting the following information:
$ millions CAGR $ millions CAGR
---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C>
1995 (2.7) --- 1995 (5.0) ---
1996 (4.6) --- 1996 (7.7) ---
1997 (13.6) --- 1997 (17.0) ---
1998 (4.3) --- 1998 (8.1) ---
1999 2.4 --- 1999 (2.3) ---
2000 18.3 665% 2000 12.1 ---
2001 37.9 107% 2001 28.9 140%
2002 44.0 16%] 2002 34.9 21%]
Note: CAGR not measurable Note: CAGR not measurable
</TABLE>
17
<PAGE>
SUMMARY OF OPERATING PERFORMANCE
Management DEcember 1997 Projections
Equity in Unconsolidated Affiliates ($ in millions, July 31 FYE)
[BAR GRAPH REFLECTING THE FOLLOWING INFORMATION:
<TABLE>
<CAPTION>
BET FILMS/BET BET BET FINANCIAL BET SOUNDSTAGE
TOTAL OTHER PICTURES/UIE MOVIES/STARZ!3 SERVICES STUDIO HOTEL/CASINO
----- ----- ------------ -------------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
($ MILLIONS)
1995 (1.2) (0.6) (0.6) --- --- --- ---
1996 (1.7) (0.2) (1.5) --- --- --- ---
1997 (3.4) --- --- (3.4) --- --- ---
1998 (1.2) --- --- (0.8) 0.2 (0.6) ---
1999 5.0 --- --- --- 3.9 1.0 ---
2000 17.9 --- --- 2.0 3.2 2.8 9.9
2001 22.5 --- --- 4.0 3.6 4.5 10.4
2002 23.0 --- --- 4.0 3.6 4.5 11.0]
</TABLE>
18
<PAGE>
SUMMARY OBSERVATIONS OF MARKET PERCEPTION
Stock Price Performance
- -- For the PAST three years, BET is up 244%; for the past year, up
approximately 78%
- -- FOR the one year and three year periods, BET performed relative to its peer
groups follow
<TABLE>
<CAPTION>
Annualized Returns
---------------------------------------
BET S&P Medium Cap Large Cap
<S> <C> <C> <C> <C>
-----------------------------------------------------
One Year 78.42% 34.87% 25.43% 26.03%
Three Year 51.02 28.35 7.14 10.74
-----------------------------------------------------
</TABLE>
Valuation
- -- BET appears to be trading at a steep discount based on a discounted cash
flow analysis of management projections
Analyst Perspective
- -- Wall Street Analysts, most providing an outperform rating, believe in BET's
long-term asset value and hae attached a significant private market
premium to the public market
19
<PAGE>
BET HOLDINGS
Daily Common Stock Price and Trading Volume History
[Bar graph reflecting the following information:
<TABLE>
<CAPTION>
Closing Market
Price (USD) Volume (000)
-------------- ------------
Daily from
3/12/97
to 3/12/98
<S> <C> <C>
12-Mar-97 30.250 6200
13-Mar-97 30.125 1900
14-Mar-97 30.000 4900
17-Mar-97 30.125 5500
18-Mar-97 29.875 2200
19-Mar-97 30.250 3600
20-Mar-97 29.875 5400
21-Mar-97 28.250 30600
24-Mar-97 27.875 13500
25-Mar-97 28.000 53000
26-Mar-97 28.750 8300
27-Mar-97 29.875 10700
28-Mar-97 29.875
31-Mar-97 29.625 14800
01-Apr-97 30.625 11000
02-Apr-97 30.625 7100
03-Apr-97 30.500 3800
04-Apr-97 30.250 2000
07-Apr-97 30.375 3500
08-Apr-97 30.000 2200
09-Apr-97 29.750 1200
10-Apr-97 29.750 200
11-Apr-97 29.500 1400
14-Apr-97 29.250 2500
15-Apr-97 28.625 6600
16-Apr-97 28.875 29900
17-Apr-97 28.875 2200
</TABLE>
[Goldman Sachs Logo]
20
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C>
18-Apr-97 29.000 500
21-Apr-97 28.875 2800
22-Apr-97 28.625 12900
23-Apr-97 29.125 1100
24-Apr-97 29.000 6400
25-Apr-97 28.625 9000
28-Apr-97 28.750 9500
29-Apr-97 28.750 7000
30-Apr-97 28.875 12800
01-May-97 29.000 12100
02-May-97 29.000 8100
05-May-97 29.000 11400
06-May-97 28.625 11200
07-May-97 28.250 9800
08-May-97 27.500 9800
09-May-97 28.000 22400
12-May-97 28.875 10300
13-May-97 28.500 8700
14-May-97 28.250 14600
15-May-97 28.125 12900
16-May-97 28.625 58500
19-May-97 29.125 2900
20-May-97 29.125 3900
21-May-97 30.000 5400
22-May-97 30.625 7600
23-May-97 30.875 4400
26-May-97 30.875
27-May-97 31.250 5200
28-May-97 31.750 58300
29-May-97 32.125 9900
30-May-97 32.125 16500
02-Jun-97 33.125 11500
03-Jun-97 33.125 8000
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C>
04-Jun-97 33.125 3000
05-Jun-97 33.250 19000
06-Jun-97 33.375 4400
09-Jun-97 33.250 17500
10-Jun-97 33.500 9300
11-Jun-97 34.500 34500
12-Jun-97 34.000 12700
13-Jun-97 33.750 45100
16-Jun-97 33.625 2900
17-Jun-97 33.625 4300
18-Jun-97 33.250 7800
19-Jun-97 33.375 29000
20-Jun-97 33.250 59500
23-Jun-97 33.750 25900
24-Jun-97 33.750 24800
25-Jun-97 33.875 9400
26-Jun-97 33.500 3800
27-Jun-97 33.000 23800
30-Jun-97 32.750 25500
01-Jul-97 32.750 16800
02-Jul-97 32.875 11300
03-Jul-97 33.250 3900
04-Jul-97 33.250
07-Jul-97 32.938 29900
08-Jul-97 32.938 2800
09-Jul-97 32.813 7700
10-Jul-97 33.375 20900
11-Jul-97 33.063 40800
14-Jul-97 32.813 40800
15-Jul-97 32.500 31200
16-Jul-97 32.125 39400
17-Jul-97 33.250 68000
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C>
18-Jul-97 34.938 27000
21-Jul-97 34.938 10000
22-Jul-97 35.250 12100
23-Jul-97 35.875 12800
24-Jul-97 35.875 2200
25-Jul-97 36.500 11000
28-Jul-97 36.625 4800
29-Jul-97 36.875 4300
30-Jul-97 37.438 9700
31-Jul-97 40.000 25500
01-Aug-97 39.000 40800
04-Aug-97 38.750 4400
05-Aug-97 38.938 2900
06-Aug-97 39.250 3500
07-Aug-97 39.250 2300
08-Aug-97 39.250 3300
11-Aug-97 39.375 1600
12-Aug-97 39.250 300
13-Aug-97 39.563 4500
14-Aug-97 39.813 6100
15-Aug-97 39.750 3600
18-Aug-97 39.625 4800
19-Aug-97 39.938 4800
20-Aug-97 40.250 9400
21-Aug-97 39.750 4200
22-Aug-97 39.625 3800
25-Aug-97 39.563 900
26-Aug-97 39.500 9300
27-Aug-97 39.563 5200
28-Aug-97 39.500 5200
29-Aug-97 39.375 7600
01-Sep-97 39.375
02-Sep-97 39.875 3600
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C>
03-Sep-97 39.750 6900
04-Sep-97 39.750 1000
05-Sep-97 39.750 3500
08-Sep-97 41.313 22200
09-Sep-97 41.875 3100
10-Sep-97 41.000 7900
11-Sep-97 51.500 49300
12-Sep-97 52.563 171500
15-Sep-97 52.563 18200
16-Sep-97 53.000 33300
17-Sep-97 53.125 214700
18-Sep-97 53.438 8100
19-Sep-97 52.875 7600
22-Sep-97 53.000 14200
23-Sep-97 52.875 38400
24-Sep-97 53.125 26700
25-Sep-97 53.063 18600
26-Sep-97 52.938 5000
29-Sep-97 52.813 88300
30-Sep-97 52.875 14700
01-Oct-97 53.000 18000
02-Oct-97 53.000 6000
03-Oct-97 53.000 26000
06-Oct-97 53.125 3100
07-Oct-97 54.563 191900
08-Oct-97 54.625 14000
09-Oct-97 53.625 5100
10-Oct-97 55.125 14800
13-Oct-97 54.375 12600
14-Oct-97 53.875 1400
15-Oct-97 53.938 12400
16-Oct-97 54.000 3200
17-Oct-97 53.938 8900
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C>
20-Oct-97 54.125 2800
21-Oct-97 54.063 4200
22-Oct-97 54.000 11000
23-Oct-97 53.125 13200
24-Oct-97 53.438 11500
27-Oct-97 52.000 9900
28-Oct-97 51.250 19100
29-Oct-97 51.750 19500
30-Oct-97 50.938 6100
31-Oct-97 50.938 15900
03-Nov-97 50.938
04-Nov-97 52.063 3500
05-Nov-97 52.000 3700
06-Nov-97 52.000 5700
07-Nov-97 51.250 12700
10-Nov-97 51.750 62200
11-Nov-97 52.125 9200
12-Nov-97 51.500 12900
13-Nov-97 51.875 52200
14-Nov-97 51.750 40800
17-Nov-97 52.125 73700
18-Nov-97 52.250 12000
19-Nov-97 52.000 35600
20-Nov-97 52.531 98800
21-Nov-97 52.625 22200
24-Nov-97 52.563 17500
25-Nov-97 52.188 42500
26-Nov-97 52.688 3900
27-Nov-97 52.688
28-Nov-97 53.313 10200
01-Dec-97 53.000 14200
02-Dec-97 52.688 3400
03-Dec-97 52.000 9000
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C>
04-Dec-97 52.313 50800
05-Dec-97 52.375 51400
08-Dec-97 52.438 32600
09-Dec-97 53.625 28600
10-Dec-97 52.750 7100
11-Dec-97 52.375 16000
12-Dec-97 52.875 13000
15-Dec-97 52.875 19100
16-Dec-97 53.250 18200
17-Dec-97 53.500 18600
18-Dec-97 53.250 14800
19-Dec-97 53.625 11800
22-Dec-97 54.000 3800
23-Dec-97 54.063 5100
24-Dec-97 54.000 2700
25-Dec-97 54.000
26-Dec-97 53.875 1000
29-Dec-97 53.875 1900
30-Dec-97 53.938 5100
31-Dec-97 54.625 12100
01-Jan-98 54.625
02-Jan-98 54.813 3100
05-Jan-98 55.000 1400
06-Jan-98 55.000 100
07-Jan-98 54.438 6700
08-Jan-98 54.188 8100
09-Jan-98 54.250 8300
12-Jan-98 54.063 1500
13-Jan-98 53.813 9100
14-Jan-98 53.500 11400
15-Jan-98 53.000 1600
16-Jan-98 53.375 3600
19-Jan-98 53.375
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C>
20-Jan-98 53.375
21-Jan-98 53.000 7500
22-Jan-98 53.375 3000
23-Jan-98 53.000 18300
26-Jan-98 54.750 5200
27-Jan-98 55.125 54000
28-Jan-98 54.938 8000
29-Jan-98 54.938 3000
30-Jan-98 55.125 3800
02-Feb-98 55.375 2900
03-Feb-98 55.625 6300
04-Feb-98 55.250 7000
05-Feb-98 53.500 9600
06-Feb-98 54.500 9700
09-Feb-98 54.938 7900
10-Feb-98 55.125 9200
11-Feb-98 55.313 5500
12-Feb-98 54.125 22300
13-Feb-98 53.438 24700
16-Feb-98 53.438
17-Feb-98 53.625 4800
18-Feb-98 53.625 2500
19-Feb-98 53.813 3600
20-Feb-98 55.250 12200
23-Feb-98 55.125 9200
24-Feb-98 55.000 2400
25-Feb-98 55.000 1600
26-Feb-98 54.563 27700
27-Feb-98 54.563 16700
02-Mar-98 55.250 6300
03-Mar-98 54.875 13600
04-Mar-98 54.625 10000
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C>
05-Mar-98 54.500 9900
06-Mar-98 54.688 2800
09-Mar-98 54.000 6800
10-Mar-98 55.125 8000
11-Mar-98 54.750 5000
12-Mar-98 53.750 13000]
</TABLE>
<TABLE>
6/11/97 10/6/97
- ------- -------
<S> <C> <C> <C>
Market Cap 616 Market Cap 951
1997 EBITDA Multiple 9.9x 1997 EBITDA Multiple 15.2X
7/31/97 12/31/97
- ------- --------
Market Cap 716 Market Cap 1,032
1997 EBITDA Multiple 11.5X 1997 EBITDA 16.5X
9/10/97
- -------
Market Cap 734
1997 EBITDA Multiple 11.8X]
</TABLE>
Source: Muller
<PAGE>
PRICE AND VOLUME HISTORY
BET Holdings, Inc.
<TABLE>
<CAPTION>
One Year Three Year
-------- ----------
[Bar graph reflecting the following information: [Bar graph reflecting the following information:
Closing Market Closing Market
Price (USD) Volume (000) Price (USD) Volume (000)
----------- ------------ ----------- -----------
Daily from Weekly from
3/12/97 to 3/10/95 to
3/12/98 3/6/98
<S> <C> <C> <C> <C> <C>
12-Mar-97 30.250 6200 10-Mar-95 15.750 11800
13-Mar-97 30.125 1900 17-Mar-95 16.125 6900
14-Mar-97 30.000 4900 24-Mar-95 16.875 79400
17-Mar-97 30.125 5500 31-Mar-95 17.375 31300
18-Mar-97 29.875 2200 07-Apr-95 17.250 114800
19-Mar-97 30.250 3600 14-Apr-95 17.000 123500
20-Mar-97 29.875 5400 21-Apr-95 18.000 58400
21-Mar-97 28.250 30600 28-Apr-95 17.000 5400
24-Mar-97 27.875 13500 05-May-95 17.250 20300
25-Mar-97 28.000 53000 12-May-95 17.250 21000
26-Mar-97 28.750 8300 19-May-95 17.125 35000
27-Mar-97 29.875 10700 26-May-95 17.500 22000
28-Mar-97 29.875 02-Jun-95 17.375 9000
31-Mar-97 29.625 14800 09-Jun-95 17.375 157200
01-Apr-97 30.625 11000 16-Jun-95 17.625 15100
02-Apr-97 30.625 7100 23-Jun-95 18.625 13800
03-Apr-97 30.500 3800 30-Jun-95 18.250 8200
04-Apr-97 30.250 2000 07-Jul-95 18.750 26800
07-Apr-97 30.375 3500 14-Jul-95 18.625 2800
08-Apr-97 30.000 2200 21-Jul-95 16.750 67000
09-Apr-97 29.750 1200 28-Jul-95 17.625 32500
10-Apr-97 29.750 200 04-Aug-95 18.125 14400
11-Apr-97 29.500 1400 11-Aug-95 18.250 35100
14-Apr-97 29.250 2500 18-Aug-95 18.375 21600
15-Apr-97 28.625 6600 25-Aug-95 18.375 19500
16-Apr-97 28.875 29900 01-Sep-95 18.875 32600
17-Apr-97 28.875 2200 08-Sep-95 19.125 24300
</TABLE>
21
<PAGE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
18-Apr-97 29.000 500 15-Sep-95 19.625 10700
21-Apr-97 28.875 2800 22-Sep-95 19.000 31700
22-Apr-97 28.625 12900 29-Sep-95 20.000 49400
23-Apr-97 29.125 1100 06-Oct-95 19.000 63000
24-Apr-97 29.000 6400 13-Oct-95 19.625 41500
25-Apr-97 28.625 9000 20-Oct-95 21.750 52800
28-Apr-97 28.750 9500 27-Oct-95 21.000 13200
29-Apr-97 28.750 7000 03-Nov-95 22.250 155800
30-Apr-97 28.875 12800 10-Nov-95 20.875 17800
01-May-97 29.000 12100 17-Nov-95 21.625 120200
02-May-97 29.000 8100 24-Nov-95 23.000 19400
05-May-97 29.000 11400 01-Dec-95 23.500 32100
06-May-97 28.625 11200 08-Dec-95 23.625 14600
07-May-97 28.250 9800 15-Dec-95 23.000 28700
08-May-97 27.500 9800 22-Dec-95 22.250 16600
09-May-97 28.000 22400 29-Dec-95 22.875 129000
12-May-97 28.875 10300 05-Jan-96 23.500 81500
13-May-97 28.500 8700 12-Jan-96 23.000 39100
14-May-97 28.250 14600 19-Jan-96 25.000 64200
15-May-97 28.125 12900 26-Jan-96 23.500 63300
16-May-97 28.625 58500 02-Feb-96 25.750 118300
19-May-97 29.125 2900 09-Feb-96 28.750 116300
20-May-97 29.125 3900 16-Feb-96 30.250 246700
21-May-97 30.000 5400 23-Feb-96 30.750 240400
22-May-97 30.625 7600 01-Mar-96 30.875 104900
23-May-97 30.875 4400 08-Mar-96 31.250 104100
26-May-97 30.875 15-Mar-96 31.500 46800
27-May-97 31.250 5200 22-Mar-96 29.375 70900
28-May-97 31.750 58300 29-Mar-96 27.875 103200
29-May-97 32.125 9900 05-Apr-96 27.750 80200
30-May-97 32.125 16500 12-Apr-96 26.625 93500
02-Jun-97 33.125 11500 19-Apr-96 28.625 48600
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C> <C> <C> <C>
03-Jun-97 33.125 8000 26-Apr-96 29.250 29000
04-Jun-97 33.125 3000 03-May-96 29.625 40500
05-Jun-97 33.250 19000 10-May-96 29.500 49400
06-Jun-97 33.375 4400 17-May-96 27.500 119000
09-Jun-97 33.250 17500 24-May-96 27.000 43300
10-Jun-97 33.500 9300 31-May-96 26.625 118800
11-Jun-97 34.500 34500 07-Jun-96 28.250 98600
12-Jun-97 34.000 12700 14-Jun-96 27.500 64500
13-Jun-97 33.750 45100 21-Jun-96 26.500 112300
16-Jun-97 33.625 2900 28-Jun-96 26.375 58100
17-Jun-97 33.625 4300 05-Jul-96 24.750 128900
18-Jun-97 33.250 7800 12-Jul-96 25.750 58800
19-Jun-97 33.375 29000 19-Jul-96 26.375 32100
20-Jun-97 33.250 59500 26-Jul-96 25.188 33300
23-Jun-97 33.750 25900 02-Aug-96 23.500 59200
24-Jun-97 33.750 24800 09-Aug-96 24.375 60500
25-Jun-97 33.875 9400 16-Aug-96 25.625 22000
26-Jun-97 33.500 3800 23-Aug-96 25.750 11700
27-Jun-97 33.000 23800 30-Aug-96 25.625 11300
30-Jun-97 32.750 25500 06-Sep-96 25.500 8900
01-Jul-97 32.750 16800 13-Sep-96 26.875 21000
02-Jul-97 32.875 11300 20-Sep-96 26.750 49000
03-Jul-97 33.250 3900 27-Sep-96 29.000 47200
04-Jul-97 33.250 04-Oct-96 29.250 30200
07-Jul-97 32.938 29900 11-Oct-96 28.875 19400
08-Jul-97 32.938 2800 18-Oct-96 29.000 38000
09-Jul-97 32.813 7700 25-Oct-96 29.875 52100
10-Jul-97 33.375 20900 01-Nov-96 29.000 23400
11-Jul-97 33.063 40800 08-Nov-96 27.250 43700
14-Jul-97 32.813 40800 15-Nov-96 27.500 63100
15-Jul-97 32.500 31200 22-Nov-96 27.750 15800
16-Jul-97 32.125 39400 29-Nov-96 27.750 17600
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C> <C> <C> <C>
17-Jul-97 33.250 68000 06-Dec-96 28.375 23800
18-Jul-97 34.938 27000 13-Dec-96 26.750 41100
21-Jul-97 34.938 10000 20-Dec-96 26.750 131600
22-Jul-97 35.250 12100 27-Dec-96 27.625 88700
23-Jul-97 35.875 12800 03-Jan-97 29.313 38600
24-Jul-97 35.875 2200 10-Jan-97 27.875 49900
25-Jul-97 36.500 11000 17-Jan-97 27.875 89000
28-Jul-97 36.625 4800 24-Jan-97 25.250 85600
29-Jul-97 36.875 4300 31-Jan-97 26.250 96000
30-Jul-97 37.438 9700 07-Feb-97 26.500 50000
31-Jul-97 40.000 25500 14-Feb-97 29.375 27100
01-Aug-97 39.000 40800 21-Feb-97 30.250 48900
04-Aug-97 38.750 4400 28-Feb-97 29.375 23100
05-Aug-97 38.938 2900 07-Mar-97 28.250 33300
06-Aug-97 39.250 3500 14-Mar-97 30.000 23500
07-Aug-97 39.250 2300 21-Mar-97 28.250 47300
08-Aug-97 39.250 3300 28-Mar-97 29.875 116100
11-Aug-97 39.375 1600 04-Apr-97 30.250 38700
12-Aug-97 39.250 300 11-Apr-97 29.500 8500
13-Aug-97 39.563 4500 18-Apr-97 29.000 41700
14-Aug-97 39.813 6100 25-Apr-97 28.625 32200
15-Aug-97 39.750 3600 02-May-97 29.000 49500
18-Aug-97 39.625 4800 09-May-97 28.000 64600
19-Aug-97 39.938 4800 16-May-97 28.625 105000
20-Aug-97 40.250 9400 23-May-97 30.875 24200
21-Aug-97 39.750 4200 30-May-97 32.125 94300
22-Aug-97 39.625 3800 06-Jun-97 33.375 45900
25-Aug-97 39.563 900 13-Jun-97 33.750 119100
26-Aug-97 39.500 9300 20-Jun-97 33.250 103500
27-Aug-97 39.563 5200 27-Jun-97 33.000 87700
28-Aug-97 39.500 5200 04-Jul-97 33.250 81300
29-Aug-97 39.375 7600 11-Jul-97 33.063 102100
</TABLE>
<PAGE>
[Bar graph continued from previous page]
<TABLE>
<S> <C> <C> <C> <C> <C>
01-Sep-97 39.375 18-Jul-97 34.938 206400
02-Sep-97 39.875 3600 25-Jul-97 36.500 48100
03-Sep-97 39.750 6900 01-Aug-97 39.000 85100
04-Sep-97 39.750 1000 08-Aug-97 39.250 16400
05-Sep-97 39.750 3500 15-Aug-97 39.750 16100
08-Sep-97 41.313 22200 22-Aug-97 39.625 27000
09-Sep-97 41.875 3100 29-Aug-97 39.375 28200
10-Sep-97 41.000 7900 05-Sep-97 39.750 22600
11-Sep-97 51.500 49300 12-Sep-97 52.563 254000
12-Sep-97 52.563 171500 19-Sep-97 52.875 281900
15-Sep-97 52.563 18200 26-Sep-97 52.938 102900
16-Sep-97 53.000 33300 03-Oct-97 53.000 153000
17-Sep-97 53.125 214700 10-Oct-97 55.125 228900
18-Sep-97 53.438 8100 17-Oct-97 53.938 38500
19-Sep-97 52.875 7600 24-Oct-97 53.438 42700
22-Sep-97 53.000 14200 31-Oct-97 50.938 70500
23-Sep-97 52.875 38400 07-Nov-97 51.250 56500
24-Sep-97 53.125 26700 14-Nov-97 51.750 177300
25-Sep-97 53.063 18600 21-Nov-97 52.625 242300
26-Sep-97 52.938 5000 28-Nov-97 53.313 96300
29-Sep-97 52.813 88300 05-Dec-97 52.375 128800
30-Sep-97 52.875 14700 12-Dec-97 52.875 97300
01-Oct-97 53.000 18000 19-Dec-97 53.625 82500
02-Oct-97 53.000 6000 26-Dec-97 53.875 24400
03-Oct-97 53.000 26000 02-Jan-98 54.813 23200
06-Oct-97 53.125 3100 09-Jan-98 54.250 24600
07-Oct-97 54.563 191900 16-Jan-98 53.375 27200
08-Oct-97 54.625 14000 23-Jan-98 53.000 32400
09-Oct-97 53.625 5100 30-Jan-98 55.125 74000
10-Oct-97 55.125 14800 06-Feb-98 54.500 35500
13-Oct-97 54.375 12600 13-Feb-98 53.438 69600
14-Oct-97 53.875 1400 20-Feb-98 55.250 47800
15-Oct-97 53.938 12400 27-Feb-98 54.563 57600
16-Oct-97 54.000 3200 06-Mar-98 54.688 42600
</TABLE>
<PAGE>
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<TABLE>
<S> <C> <C>
17-Oct-97 53.938 8900
20-Oct-97 54.125 2800
21-Oct-97 54.063 4200
22-Oct-97 54.000 11000
23-Oct-97 53.125 13200
24-Oct-97 53.438 11500
27-Oct-97 52.000 9900
28-Oct-97 51.250 19100
29-Oct-97 51.750 19500
30-Oct-97 50.938 6100
31-Oct-97 50.938 15900
03-Nov-97 50.938
04-Nov-97 52.063 3500
05-Nov-97 52.000 3700
06-Nov-97 52.000 5700
07-Nov-97 51.250 12700
10-Nov-97 51.750 62200
11-Nov-97 52.125 9200
12-Nov-97 51.500 12900
13-Nov-97 51.875 52200
14-Nov-97 51.750 40800
17-Nov-97 52.125 73700
18-Nov-97 52.250 12000
19-Nov-97 52.000 35600
20-Nov-97 52.531 98800
21-Nov-97 52.625 22200
24-Nov-97 52.563 17500
25-Nov-97 52.188 42500
26-Nov-97 52.688 3900
27-Nov-97 52.688
28-Nov-97 53.313 10200
01-Dec-97 53.000 14200
</TABLE>
<PAGE>
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<TABLE>
<S> <C> <C>
02-Dec-97 52.688 3400
03-Dec-97 52.000 9000
04-Dec-97 52.313 50800
05-Dec-97 52.375 51400
08-Dec-97 52.438 32600
09-Dec-97 53.625 28600
10-Dec-97 52.750 7100
11-Dec-97 52.375 16000
12-Dec-97 52.875 13000
15-Dec-97 52.875 19100
16-Dec-97 53.250 18200
17-Dec-97 53.500 18600
18-Dec-97 53.250 14800
19-Dec-97 53.625 11800
22-Dec-97 54.000 3800
23-Dec-97 54.063 5100
24-Dec-97 54.000 2700
25-Dec-97 54.000
26-Dec-97 53.875 1000
29-Dec-97 53.875 1900
30-Dec-97 53.938 5100
31-Dec-97 54.625 12100
01-Jan-98 54.625
02-Jan-98 54.813 3100
05-Jan-98 55.000 1400
06-Jan-98 55.000 100
07-Jan-98 54.438 6700
08-Jan-98 54.188 8100
09-Jan-98 54.250 8300
12-Jan-98 54.063 1500
13-Jan-98 53.813 9100
</TABLE>
<PAGE>
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<TABLE>
<S> <C> <C>
14-Jan-98 53.500 11400
15-Jan-98 53.000 1600
16-Jan-98 53.375 3600
19-Jan-98 53.375
20-Jan-98 53.375
21-Jan-98 53.000 7500
22-Jan-98 53.375 3000
23-Jan-98 53.000 18300
26-Jan-98 54.750 5200
27-Jan-98 55.125 54000
28-Jan-98 54.938 8000
29-Jan-98 54.938 3000
30-Jan-98 55.125 3800
02-Feb-98 55.375 2900
03-Feb-98 55.625 6300
04-Feb-98 55.250 7000
05-Feb-98 53.500 9600
06-Feb-98 54.500 9700
09-Feb-98 54.938 7900
10-Feb-98 55.125 9200
11-Feb-98 55.313 5500
12-Feb-98 54.125 22300
13-Feb-98 53.438 24700
16-Feb-98 53.438
17-Feb-98 53.625 4800
18-Feb-98 53.625 2500
19-Feb-98 53.813 3600
20-Feb-98 55.250 12200
23-Feb-98 55.125 9200
24-Feb-98 55.000 2400
25-Feb-98 55.000 1600
</TABLE>
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<TABLE>
<S> <C> <C>
26-Feb-98 54.563 27700
27-Feb-98 54.563 16700
02-Mar-98 55.250 6300
03-Mar-98 54.875 13600
04-Mar-98 54.625 10000
05-Mar-98 54.500 9900
06-Mar-98 54.688 2800
09-Mar-98 54.000 6800
10-Mar-98 55.125 8000
11-Mar-98 54.750 5000
12-Mar-98 53.750 13000]
</TABLE>
<PAGE>
ANALYSIS OF BET HOLDINGS
Public Trading History
<TABLE>
<CAPTION>
Shares Traded at Various Prices - Three Years Shares Traded at Various Prices - One Year
- --------------------------------------------- ------------------------------------------
<S> <C>
[Bar graph reflecting the following information: [Bar graph reflecting the following information:
</TABLE>
<TABLE>
<CAPTION>
Daily from Daily from
3/13/95 to 3/12/98 Volume (000) 3/13/97 to 3/13/98 Volume (000)
- ------------------ ------------ ------------------ ------------
<S> <C> <C> <C>
15.00 to 17.99 653100.00 27.00 to 28.99 356300.00
18.00 643100.00 29.00 147700.00
21.00 562200.00 31.00 295300.00
24.00 1289200.00 33.00 526800.00
27.00 2033700.00 35.00 47200.00
30.00 1150600.00 37.00 17000.00
33.00 553900.00 39.00 161700.00
36.00 37100.00 41.00 33200.00
39.00 194900.00 43.00 0.00
42.00 0.00 45.00 0.00
45.00 0.00 47.00 0.00
48.00 22000.00 49.00 22000.00
51.00 1842200.00 51.00 1183900.00
54.00 to 56.99 584400.00 53.00 1119700.00
55.00 to 56.99 144700.00
</TABLE>
<TABLE>
<S> <C>
Weighted Average Price: 33.49 Weighted Average Price: 45.04
Total Shares Traded as Percent Total Shares Traded as Percent
of Shares Outstanding: 95.4%] of Shares Outstanding: 40.0%]
</TABLE>
22
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<TABLE>
<CAPTION>
Shares Traded at Various Prices - Six Months Shares Traded at Various Prices - Three Months
- -------------------------------------------- ----------------------------------------------
<S> <C>
[Bar graph reflecting the following information: [Bar graph reflecting the following information:
</TABLE>
<TABLE>
<CAPTION>
Daily from Daily from
9/15/97 to 3/13/98 Volume (000) 12/15/97 to 3/13/98 Volume (000)
- -------------------- ------------ ------------------- ------------
<S> <C> <C> <C>
50.70 to 51.19 22000.00 52.70 to 52.89 19100.00
51.20 44700.00 52.90 27400.00
51.70 398400.00 53.10 33000.00
52.20 326800.00 53.30 31300.00
52.70 608600.00 53.50 58700.00
53.20 186500.00 53.70 28600.00
53.70 127900.00 53.90 25000.00
54.20 344100.00 54.10 38700.00
54.70 150300.00 54.30 6700.00
55.20 to 55.69 40200.00 54.50 110600.00
54.70 26900.00
54.90 24400.00
55.10 109700.00
55.30 8400.00
55.50 to 55.69 6300.00
</TABLE>
<TABLE>
<S> <C>
Weighted Average Price: 53.20 Weighted Average Price: 54.24
Total Shares Traded as Percent Total Shares Traded as Percent
of Shares Outstanding: 22.0%] of Shares Outstanding: 5.3%]
</TABLE>
<PAGE>
RELATIVE STOCK PERORMANCE
For the past year, BET is up approximately 78%
Large Cap Index includes: Disney, EMI Group, News Corp, Polygram, Seagram, Time
- ---------
Warner, Viacom
Medium Cap Index includes: Gaylords Entertainment, Int'l Family, KingWorld,
- ----------
Spelling Entertainment
3 Year Weekly
-------------
[Chart reflecting the following information:
<TABLE>
<CAPTION>
Indexed Price
-------------
Weekly from Large Medium
3/10/95 to 3/6/98 BET Holdings Inc. Capitalization Capitalization S&P 400 Industrials
- ----------------- ----------------- -------------- -------------- -------------------
<S> <C> <C> <C> <C>
10-Mar-95 100.0 100.0 100.0 100.0
17-Mar-95 101.6 101.2 105.6 101.3
24-Mar-95 106.3 101.8 103.3 102.6
31-Mar-95 109.4 101.0 106.1 102.6
07-Apr-95 108.7 99.3 104.3 103.2
14-Apr-95 107.1 100.5 102.1 104.0
21-Apr-95 113.4 97.9 103.3 104.0
28-Apr-95 107.1 99.5 104.1 105.3
05-May-95 108.7 101.9 107.6 106.3
12-May-95 108.7 103.2 109.7 107.4
19-May-95 107.9 102.7 106.6 106.2
26-May-95 110.2 105.4 105.6 107.0
02-Jun-95 109.4 105.2 109.9 108.4
09-Jun-95 109.4 105.7 111.2 108.1
16-Jun-95 111.0 107.3 111.6 110.6
23-Jun-95 117.3 109.6 110.6 112.5
30-Jun-95 115.0 109.6 106.7 111.7
07-Jul-95 118.1 111.5 108.5 114.1
14-Jul-95 117.3 112.3 107.5 115.1
</TABLE>
Note: IFE stock stopped trading effective 9/5/97 due to merger with News Corp.
23
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<TABLE>
<S> <C> <C> <C> <C>
21-Jul-95 105.5 115.2 107.1 113.7
28-Jul-95 111.0 114.3 106.7 115.5
04-Aug-95 114.2 116.0 108.0 114.4
11-Aug-95 115.0 114.2 112.7 113.7
18-Aug-95 115.7 116.4 117.3 114.3
25-Aug-95 115.7 113.5 118.7 114.0
01-Sep-95 118.9 112.8 120.0 114.5
08-Sep-95 120.5 112.6 120.8 116.4
15-Sep-95 123.6 113.5 124.5 118.1
22-Sep-95 119.7 113.5 122.0 118.0
29-Sep-95 126.0 112.7 120.4 118.0
06-Oct-95 119.7 112.1 117.0 117.3
13-Oct-95 123.6 110.6 118.8 117.3
20-Oct-95 137.0 110.5 117.9 118.3
27-Oct-95 132.3 106.1 113.7 117.0
03-Nov-95 140.2 107.9 115.2 119.2
10-Nov-95 131.5 108.4 117.3 119.8
17-Nov-95 136.2 108.7 118.8 121.4
24-Nov-95 144.9 112.6 118.2 121.4
01-Dec-95 148.0 111.1 119.5 122.4
08-Dec-95 148.8 110.0 118.2 124.9
15-Dec-95 144.9 109.4 116.6 124.5
22-Dec-95 140.2 105.9 114.8 123.5
29-Dec-95 144.1 105.6 115.8 124.0
05-Jan-96 148.0 106.1 115.4 124.3
12-Jan-96 144.9 105.9 112.7 121.2
19-Jan-96 157.5 105.3 114.0 123.1
26-Jan-96 148.0 107.2 115.7 125.5
02-Feb-96 162.2 108.1 119.4 128.4
09-Feb-96 181.1 109.6 122.1 132.2
16-Feb-96 190.6 110.3 121.0 130.9
</TABLE>
<PAGE>
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<TABLE>
<S> <C> <C> <C> <C>
23-Feb-96 193.7 112.6 121.8 133.4
01-Mar-96 194.5 110.7 119.9 130.1
08-Mar-96 196.9 110.1 115.0 128.6
15-Mar-96 198.4 111.6 115.0 131.0
22-Mar-96 185.0 111.3 119.1 132.1
29-Mar-96 175.6 109.4 119.7 131.0
05-Apr-96 174.8 109.4 116.9 133.2
12-Apr-96 167.7 106.6 114.7 129.8
19-Apr-96 180.3 109.4 117.1 131.4
26-Apr-96 184.3 109.3 117.4 133.4
03-May-96 186.6 107.8 116.1 131.4
10-May-96 185.8 107.2 117.6 132.9
17-May-96 173.2 109.7 117.2 136.9
24-May-96 170.1 111.0 120.2 138.8
31-May-96 167.7 108.4 118.4 137.2
07-Jun-96 178.0 108.1 116.5 138.1
14-Jun-96 173.2 106.8 117.6 136.6
21-Jun-96 166.9 107.5 114.7 136.9
28-Jun-96 166.1 108.0 116.6 136.9
05-Jul-96 155.9 105.2 116.0 134.4
12-Jul-96 162.2 100.3 112.2 131.8
19-Jul-96 166.1 98.0 109.3 130.1
26-Jul-96 159.1 96.5 106.6 129.4
02-Aug-96 148.0 101.5 112.7 134.6
09-Aug-96 153.5 100.9 110.6 134.6
16-Aug-96 161.4 100.4 111.5 135.0
23-Aug-96 162.2 100.1 110.9 135.4
30-Aug-96 161.4 99.1 109.4 132.4
06-Sep-96 160.6 99.1 114.6 133.3
13-Sep-96 169.3 103.2 111.5 138.2
20-Sep-96 168.5 102.7 108.9 140.1
</TABLE>
<PAGE>
[Chart continued from previous page]
<TABLE>
<S> <C> <C> <C> <C>
27-Sep-96 182.7 104.4 105.9 139.4
04-Oct-96 184.3 106.6 110.9 142.3
11-Oct-96 181.9 106.9 108.6 142.4
18-Oct-96 182.7 105.9 105.7 144.3
25-Oct-96 188.2 103.1 106.7 141.9
01-Nov-96 182.7 104.2 104.9 141.9
08-Nov-96 171.7 107.2 103.0 147.5
15-Nov-96 173.2 108.8 106.3 149.0
22-Nov-96 174.8 110.3 106.2 151.0
29-Nov-96 174.8 110.4 103.6 152.4
06-Dec-96 178.7 106.7 104.0 149.3
13-Dec-96 168.5 105.3 102.8 147.4
20-Dec-96 168.5 107.9 103.5 151.0
27-Dec-96 174.0 106.7 104.5 152.7
03-Jan-97 184.6 105.8 109.2 151.3
10-Jan-97 175.6 105.9 106.6 153.9
17-Jan-97 175.6 105.9 109.9 157.0
24-Jan-97 159.1 105.1 114.5 155.5
31-Jan-97 165.4 105.2 114.9 158.7
07-Feb-97 166.9 106.3 119.2 158.7
14-Feb-97 185.0 109.4 113.4 162.0
21-Feb-97 190.6 108.4 109.9 160.7
28-Feb-97 185.0 107.7 107.3 158.8
07-Mar-97 178.0 111.7 113.8 160.7
14-Mar-97 189.0 109.4 110.1 159.2
21-Mar-97 178.0 108.4 106.3 157.4
28-Mar-97 188.2 106.7 110.1 156.0
04-Apr-97 190.6 105.3 111.6 153.0
11-Apr-97 185.8 102.2 109.0 148.8
18-Apr-97 182.7 107.1 110.0 155.2
25-Apr-97 180.3 104.0 108.0 155.2
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
02-May-97 182.7 108.3 115.8 164.1
09-May-97 176.4 108.4 113.3 166.8
16-May-97 180.3 109.1 122.1 168.0
23-May-97 194.5 110.9 125.8 171.8
30-May-97 202.4 108.9 131.5 172.0
06-Jun-97 210.2 110.0 140.9 173.4
13-Jun-97 212.6 114.3 145.9 180.6
20-Jun-97 209.4 114.4 143.6 181.3
27-Jun-97 207.9 111.8 145.6 179.4
04-Jul-97 209.4 111.8 147.1 185.2
11-Jul-97 208.3 109.9 148.4 185.6
18-Jul-97 220.1 108.5 148.4 185.9
25-Jul-97 229.9 111.1 150.0 190.3
01-Aug-97 245.7 113.0 152.6 191.2
08-Aug-97 247.2 111.4 153.2 189.4
15-Aug-97 250.4 108.1 155.1 182.0
22-Aug-97 249.6 109.4 151.9 186.9
29-Aug-97 248.0 108.6 153.2 181.8
05-Sep-97 250.4 111.1 154.4 187.7
12-Sep-97 331.1 111.1 97.3 186.3
19-Sep-97 333.1 114.5 100.2 191.2
26-Sep-97 333.5 114.6 102.6 190.0
03-Oct-97 333.9 117.0 109.2 193.6
10-Oct-97 347.2 115.5 114.2 194.4
17-Oct-97 339.8 114.3 113.0 189.1
24-Oct-97 336.6 116.0 115.8 188.3
31-Oct-97 320.9 111.7 111.9 183.2
07-Nov-97 322.8 113.7 113.5 185.8
14-Nov-97 326.0 115.3 119.5 186.9
21-Nov-97 331.5 118.4 124.8 193.2
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
28-Nov-97 335.8 115.7 120.3 190.9
05-Dec-97 329.9 115.6 120.5 196.0
12-Dec-97 333.1 115.8 120.1 189.5
19-Dec-97 337.8 116.3 119.8 188.0
26-Dec-97 339.4 116.3 119.7 186.1
02-Jan-98 345.3 120.2 93.1 193.9
09-Jan-98 341.7 116.9 92.0 185.2
16-Jan-98 336.2 120.2 95.6 192.3
23-Jan-98 333.9 122.0 94.2 192.5
30-Jan-98 347.2 124.4 98.5 197.0
06-Feb-98 343.3 127.6 97.2 203.0
13-Feb-98 336.6 131.8 95.7 204.4
20-Feb-98 348.0 133.8 95.8 207.1
27-Feb-98 343.7 135.0 100.6 210.4
06-Mar-98 344.5 135.8 100.2 211.4]
</TABLE>
<PAGE>
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One Year Daily
--------------
[Chart reflecting the following information:
<TABLE>
<CAPTION>
Indexed Price
--------------
Daily from Large Medium
3/13/97 to 3/12/98 BET Holdings Inc. Capitalization Capitalization S&P 400 Industrials
- -------------------- ----------------- -------------- -------------- -------------------
<S> <C> <C> <C> <C>
13-Mar-97 100.00 100.0 100.0 100.0
14-Mar-97 99.59 100.8 100.9 100.5
17-Mar-97 100.00 101.3 99.3 100.9
18-Mar-97 99.17 100.6 99.1 100.2
19-Mar-97 100.41 100.8 99.2 99.6
20-Mar-97 99.17 100.3 98.4 99.2
21-Mar-97 93.78 100.2 98.2 99.3
24-Mar-97 92.53 101.8 99.4 100.0
25-Mar-97 92.95 100.4 100.6 99.8
26-Mar-97 95.44 98.7 102.1 100.4
27-Mar-97 99.17 98.2 99.9 98.4
28-Mar-97 99.17 98.2 99.9 98.4
31-Mar-97 98.34 97.0 99.1 96.5
01-Apr-97 101.66 97.6 100.2 96.6
02-Apr-97 101.66 96.2 98.6 95.5
03-Apr-97 101.24 96.1 98.3 95.4
04-Apr-97 100.41 96.8 100.7 96.5
07-Apr-97 100.83 96.9 102.7 97.0
08-Apr-97 99.59 96.1 101.5 97.4
09-Apr-97 98.76 96.6 100.8 96.7
10-Apr-97 98.76 96.1 100.0 96.4
11-Apr-97 97.93 94.0 98.4 93.9
14-Apr-97 97.10 93.4 99.7 94.7
15-Apr-97 95.02 94.6 99.6 96.2
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
16-Apr-97 95.85 97.0 100.9 97.5
17-Apr-97 95.85 97.1 99.7 97.1
18-Apr-97 96.27 98.3 100.3 97.9
21-Apr-97 95.85 97.3 98.9 97.3
22-Apr-97 95.02 97.0 99.7 99.1
23-Apr-97 96.68 96.2 97.3 99.1
24-Apr-97 96.27 95.0 98.3 98.8
25-Apr-97 95.02 94.6 97.4 97.9
28-Apr-97 95.44 94.7 96.9 98.7
29-Apr-97 95.44 96.5 96.7 101.2
30-Apr-97 95.85 97.3 97.6 102.2
01-May-97 96.27 98.4 99.5 101.8
02-May-97 96.27 98.9 104.6 103.5
05-May-97 96.27 99.6 102.7 105.9
06-May-97 95.02 99.7 102.4 105.4
07-May-97 93.78 98.6 100.9 104.1
08-May-97 91.29 98.5 101.9 104.7
09-May-97 92.95 99.0 103.0 105.2
12-May-97 95.85 100.2 104.1 106.9
13-May-97 94.61 100.1 103.8 106.4
14-May-97 93.78 99.7 106.4 106.6
15-May-97 93.36 99.4 106.9 107.6
16-May-97 95.02 99.8 108.6 106.0
19-May-97 96.68 100.7 106.5 106.6
20-May-97 96.68 100.9 107.6 107.5
21-May-97 99.59 100.1 108.1 107.5
22-May-97 101.66 100.4 107.5 107.0
23-May-97 102.49 101.3 110.7 108.4
26-May-97 102.49 101.3 110.7 108.4
27-May-97 103.73 100.4 112.5 109.2
28-May-97 105.39 99.8 112.3 108.8
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
29-May-97 106.64 100.0 113.4 108.4
30-May-97 106.64 99.3 114.1 108.5
02-Jun-97 109.96 98.7 118.4 108.4
03-Jun-97 109.96 98.9 117.9 108.0
04-Jun-97 109.96 99.2 117.6 107.2
05-Jun-97 110.37 99.8 116.5 107.6
06-Jun-97 110.79 100.5 119.7 109.4
09-Jun-97 110.37 101.6 119.3 110.2
10-Jun-97 111.20 103.2 117.3 110.4
11-Jun-97 114.52 103.4 119.9 110.9
12-Jun-97 112.86 104.3 121.7 112.7
13-Jun-97 112.03 104.9 122.1 114.0
16-Jun-97 111.62 105.3 120.7 114.0
17-Jun-97 111.62 104.7 120.1 114.1
18-Jun-97 110.37 103.8 119.7 113.1
19-Jun-97 110.79 105.4 120.1 114.3
20-Jun-97 110.37 104.9 119.5 114.4
23-Jun-97 112.03 103.1 118.9 111.9
24-Jun-97 112.03 104.4 119.3 114.2
25-Jun-97 112.45 104.5 119.7 113.4
26-Jun-97 111.20 103.1 120.3 112.7
27-Jun-97 109.54 102.3 121.4 113.2
30-Jun-97 108.71 102.6 122.1 113.1
01-Jul-97 108.71 102.1 121.7 113.7
02-Jul-97 109.13 102.4 122.8 115.3
03-Jul-97 110.37 102.4 122.8 116.8
04-Jul-97 110.37 102.4 122.8 116.8
07-Jul-97 109.34 101.5 123.3 116.4
08-Jul-97 109.34 101.5 123.6 117.4
09-Jul-97 108.92 100.6 124.1 116.0
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
10-Jul-97 110.79 101.1 123.9 116.7
11-Jul-97 109.75 100.8 123.9 117.1
14-Jul-97 108.92 99.6 124.7 117.5
15-Jul-97 107.88 99.7 124.3 118.6
16-Jul-97 106.64 100.8 124.0 120.0
17-Jul-97 110.37 100.4 124.4 119.4
18-Jul-97 115.98 99.2 123.7 117.3
21-Jul-97 115.98 99.3 123.2 116.9
22-Jul-97 117.01 101.0 124.5 119.7
23-Jul-97 119.09 101.3 124.9 120.0
24-Jul-97 119.09 102.0 125.4 120.3
25-Jul-97 121.16 101.5 125.8 120.1
28-Jul-97 121.58 102.4 124.7 119.7
29-Jul-97 122.41 102.9 125.0 120.2
30-Jul-97 124.28 104.8 125.6 121.3
31-Jul-97 132.78 104.8 125.9 121.4
01-Aug-97 129.46 104.1 129.7 120.7
04-Aug-97 128.63 104.5 128.9 121.2
05-Aug-97 129.25 104.2 127.9 121.7
06-Aug-97 130.29 104.6 128.1 122.7
07-Aug-97 130.29 104.8 129.7 121.7
08-Aug-97 130.29 103.1 130.7 119.5
11-Aug-97 130.71 103.1 131.0 119.7
12-Aug-97 130.29 102.4 131.7 118.4
13-Aug-97 131.33 100.9 132.0 117.7
14-Aug-97 132.16 101.6 133.3 118.0
15-Aug-97 131.95 99.9 133.0 114.8
18-Aug-97 131.54 100.7 131.1 116.4
19-Aug-97 132.57 102.5 131.1 118.2
20-Aug-97 133.61 102.5 130.7 119.9
21-Aug-97 131.95 101.7 130.1 118.1
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
22-Aug-97 131.54 101.1 128.1 117.9
25-Aug-97 131.33 101.6 129.1 117.5
26-Aug-97 131.12 100.5 129.3 116.5
27-Aug-97 131.33 102.1 129.0 116.7
28-Aug-97 131.12 101.1 129.0 115.3
29-Aug-97 130.71 100.3 129.8 114.7
01-Sep-97 130.71 100.3 129.8 114.7
02-Sep-97 132.37 102.0 129.2 118.3
03-Sep-97 131.95 102.2 130.6 118.3
04-Sep-97 131.95 101.5 130.1 118.7
05-Sep-97 131.95 103.0 115.8 118.4
08-Sep-97 137.14 102.7 117.4 118.4
09-Sep-97 139.00 102.7 117.8 118.7
10-Sep-97 136.10 102.7 116.9 116.9
11-Sep-97 170.95 101.3 118.0 116.2
12-Sep-97 174.48 103.1 117.9 117.6
15-Sep-97 174.48 104.9 120.4 116.9
16-Sep-97 175.93 107.1 122.5 120.0
17-Sep-97 176.35 106.9 122.5 119.6
18-Sep-97 177.39 106.8 122.1 120.1
19-Sep-97 175.52 106.3 121.1 120.6
22-Sep-97 175.93 106.7 122.3 121.2
23-Sep-97 175.52 105.8 123.3 120.9
24-Sep-97 176.35 105.9 124.7 119.8
25-Sep-97 176.14 105.9 125.3 119.1
26-Sep-97 175.73 106.0 123.9 119.9
29-Sep-97 175.31 106.8 125.4 121.1
30-Sep-97 175.52 106.9 128.1 120.2
01-Oct-97 175.93 107.6 127.8 121.2
02-Oct-97 175.93 107.7 134.7 121.8
03-Oct-97 175.93 108.3 134.7 122.2
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
06-Oct-97 176.35 108.7 137.9 123.0
07-Oct-97 181.12 108.7 139.9 124.4
08-Oct-97 181.33 107.8 138.6 123.4
09-Oct-97 178.01 107.3 138.4 123.0
10-Oct-97 182.99 106.9 137.4 122.7
13-Oct-97 180.50 108.0 138.1 122.7
14-Oct-97 178.84 108.9 137.1 122.8
15-Oct-97 179.05 109.9 137.3 122.3
16-Oct-97 179.25 108.5 135.7 120.7
17-Oct-97 179.05 105.7 136.0 119.3
20-Oct-97 179.67 107.5 137.5 120.9
21-Oct-97 179.46 108.2 137.8 122.9
22-Oct-97 179.25 109.0 140.4 122.4
23-Oct-97 176.35 107.5 138.1 120.1
24-Oct-97 177.39 107.0 138.8 118.8
27-Oct-97 172.61 102.4 132.9 110.5
28-Oct-97 170.12 104.7 132.3 116.6
29-Oct-97 171.78 105.2 135.5 115.9
30-Oct-97 169.09 101.4 135.5 114.2
31-Oct-97 169.09 103.1 133.9 115.6
03-Nov-97 169.09 103.1 133.9 115.6
04-Nov-97 172.82 105.5 139.4 119.1
05-Nov-97 172.61 105.5 139.4 119.1
06-Nov-97 172.61 106.0 139.0 118.5
07-Nov-97 170.12 104.8 135.4 117.2
10-Nov-97 171.78 105.0 136.3 116.5
11-Nov-97 173.03 105.7 139.0 117.0
12-Nov-97 170.95 104.0 140.2 114.8
13-Nov-97 172.20 104.9 139.8 116.3
14-Nov-97 171.78 106.6 140.9 117.9
17-Nov-97 173.03 107.9 144.4 120.0
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
18-Nov-97 173.44 107.6 146.4 119.0
19-Nov-97 172.61 107.9 146.6 119.6
20-Nov-97 174.38 108.5 146.3 121.3
21-Nov-97 174.69 109.3 147.6 121.9
24-Nov-97 174.48 108.7 143.0 119.8
25-Nov-97 173.24 107.6 140.9 120.3
26-Nov-97 174.90 106.5 141.5 120.4
27-Nov-97 174.90 106.5 141.5 120.4
28-Nov-97 176.97 106.5 142.3 120.5
01-Dec-97 175.93 108.1 142.0 122.8
02-Dec-97 174.90 107.6 143.0 122.3
03-Dec-97 172.61 107.6 144.7 122.9
04-Dec-97 173.65 107.0 142.8 122.2
05-Dec-97 173.86 107.4 142.8 123.7
08-Dec-97 174.07 107.3 143.0 123.4
09-Dec-97 178.01 108.0 142.9 122.5
10-Dec-97 175.10 107.5 142.5 121.8
11-Dec-97 173.86 106.8 141.1 119.9
12-Dec-97 175.52 107.0 141.4 119.6
15-Dec-97 175.52 108.8 142.2 120.7
16-Dec-97 176.76 108.4 141.2 121.5
17-Dec-97 177.59 108.8 142.5 121.0
18-Dec-97 176.76 107.5 140.6 119.6
19-Dec-97 178.01 107.4 139.9 118.6
22-Dec-97 179.25 108.3 137.5 119.6
23-Dec-97 179.46 107.7 137.8 117.6
24-Dec-97 179.25 107.3 140.3 117.0
25-Dec-97 179.25 107.3 140.3 117.0
26-Dec-97 178.84 107.5 139.5 117.4
29-Dec-97 178.84 109.3 140.0 119.6
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
30-Dec-97 179.05 111.2 140.1 121.9
31-Dec-97 181.33 111.1 140.4 121.6
01-Jan-98 181.33 111.1 140.4 121.6
02-Jan-98 181.95 111.0 113.7 122.4
05-Jan-98 182.57 111.4 115.4 122.6
06-Jan-98 182.57 111.0 113.6 121.4
07-Jan-98 180.71 111.5 117.2 121.3
08-Jan-98 179.88 110.2 117.5 120.5
09-Jan-98 180.08 107.8 113.9 116.9
12-Jan-98 179.46 108.5 114.7 118.6
13-Jan-98 178.63 110.2 116.6 120.3
14-Jan-98 177.59 110.3 117.6 120.9
15-Jan-98 175.93 109.4 119.2 120.0
16-Jan-98 177.18 111.1 118.7 121.3
19-Jan-98 177.18 111.1 118.7 121.3
20-Jan-98 177.18 115.0 118.6 123.7
21-Jan-98 175.93 113.2 116.7 122.9
22-Jan-98 177.18 112.5 115.0 121.6
23-Jan-98 175.93 112.5 116.5 121.5
26-Jan-98 181.74 112.0 119.5 121.3
27-Jan-98 182.99 114.6 121.3 122.8
28-Jan-98 182.37 114.4 122.3 123.9
29-Jan-98 182.37 114.7 123.1 125.0
30-Jan-98 182.99 114.2 121.9 124.3
02-Feb-98 183.82 114.8 122.1 126.9
03-Feb-98 184.65 113.9 120.1 127.3
04-Feb-98 183.40 114.8 121.1 127.6
05-Feb-98 177.59 116.2 121.7 127.1
06-Feb-98 180.91 116.9 120.3 128.1
09-Feb-98 182.37 118.1 121.1 127.7
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
10-Feb-98 182.99 119.0 120.8 128.9
11-Feb-98 183.61 119.6 120.4 128.9
12-Feb-98 179.67 119.9 120.2 129.4
13-Feb-98 177.39 121.1 118.7 129.0
16-Feb-98 177.39 121.1 118.7 129.0
17-Feb-98 178.01 122.7 118.4 129.1
18-Feb-98 178.01 122.4 118.0 130.3
19-Feb-98 178.63 122.1 117.7 129.9
20-Feb-98 183.40 123.0 118.7 130.7
23-Feb-98 182.99 122.3 119.4 131.2
24-Feb-98 182.57 121.7 120.0 130.2
25-Feb-98 182.57 121.8 123.7 131.8
26-Feb-98 181.12 122.4 123.9 132.6
27-Feb-98 181.12 124.6 125.4 132.8
02-Mar-98 183.40 124.9 124.6 132.6
03-Mar-98 182.16 125.6 124.4 133.0
04-Mar-98 181.33 125.6 123.0 132.5
05-Mar-98 180.91 124.0 123.0 130.8
06-Mar-98 181.54 125.8 124.3 133.4
09-Mar-98 179.25 125.8 123.0 132.8
10-Mar-98 182.99 126.7 123.4 134.3
11-Mar-98 181.74 126.8 124.6 134.8
12-Mar-98 178.42 126.0 125.4 134.9]
</TABLE>
<PAGE>
[Goldman Sachs Logo]
PUBLIC MARKET VALUATION
Summary of Recent Research Analyst Commentary
<TABLE>
<CAPTION>
Stock
Company/Analyst Report Date Price Recommendation Commentary
- --------------- ----------- ----- -------------- ----------
<S> <C> <C> <C> <C>
Donaldson, Lufkin & Jenrette/ July 2, 1997 $32.75 Buy - Fiscal third quarter
Dennis Leibowitz showed clear evidence
Karim Zia of improving operating
Erica Skala trends at the core cable
network
- BET's core programming
asset - the BET Cable
Network - is increasingly
attractive in the face of an
ever-shrinking pool of
independent cable
networks that can offer
broadscale coverage
- Upward revisions to the
core business operations
are slightly offset by start-
up losses related to new
businesses
Smith Barney/ May 14, 1997 $29.00 Outperform - Expansion is likely to
John Reidy have a slight negative
Spencer Grimes effect on fiscal 1998
earnings
- Strategy to more firmly
entrench well-known BET
name could be substantial
for shareholders
- Challenge for BET is in
the execution to repeat the
success of its cable
network
</TABLE>
24
<PAGE>
OWNERSHIP ANALYSIS
BET HOLDINGS, INC.
<TABLE>
<CAPTION>
Class A % Class B % Class C %
------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Directors and Executive Officers (a)
- -------------------------------------
Robert L. Johnson (b) 1,913,073 16.2% 0 0.0% 4,820,000 100.0%
William Gordon 135,000 1.1%
James A. Ebron 136,800 1.2%
Debra L. Lee 167,100 1.4%
Janis P. Thomas 167,000 1.4%
Other Directors and Executive Officers 672,542 5.7%
---------- ---------
Total Directors and Executive Officers 3,191,515 27.0% 4,820,000 100.0%
5% Holders (a)
- ---------------
Telecommunications, Inc. (c) 1,831,600 15.5% 1,831,600 100.0% 0 0.0%
Institutional Ownership (d)
- ----------------------------
GAMCO INVESTORS INC 1,134,450 9.6%
FW STRATEGIC PARTNERSHIP LP (e) 842,105 7.1%
CAPITAL RESEARCH & MGMT 662,100 5.6%
GABELLI FUNDS INC 527,500 4.5%
WANGER ASSET MGMT LP 440,000 3.7%
SANDLER, HARVEY 280,450 2.4%
FURMAN SELZ LLC 191,200 1.6%
MELLON BANK CORPORATION 172,200 1.5%
FIDELITY MGMT & RES CORP 151,300 1.3%
WESTPORT ASSET MGMT INC 116,700 1.0%
---------- ---------
Total Top 10 Institutional Owners 4,518,005 38.2%
Other Institutional Owners 848,633 7.2%
---------- ---------
Total Institutional Owners 5,366,638 45.4%
Total Shares Outstanding (f) 10,060,748 85.1% 1,831,600 100.0% 4,820,000.0 100.0%
Options (g) 1,761,595 14.9%
---------- ---------
Fully Diluted (F.D.) Shares Outstanding 11,822,343 100.0%
Total F.D. Shares Outstanding (All Classes) 18,473,943
</TABLE>
(a) Based on proxy dated November 11, 1996.
(b) Based on most recent 13-D, dated September 10, 1997.
(c) The record holder of these shares is LMC BET, Inc., a wholly-owned
subsidiary of Liberty Media Corporation.
(d) Based on Spectrum Ownership Report, dated March 5, 1998, data as of December
31, 1997.
(e) Represents the 842,105 shares of Class A stock that Johnson transferred into
this entity on August 26, 1996.
(f) Based on 10-Q dated October 31, 1997.
(g) Based on 10-K dated July 31, 1997.
25
<PAGE>
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Total %
-------
36.4%
0.7%
0.7%
0.9%
0.9%
3.6%
----
43.4%
19.8%
6.1%
4.6%
3.6%
2.9%
2.4%
1.5%
1.0%
0.9%
0.8%
0.6%
----
24.5%
4.6%
----
29.0%
9.5%
64.0%
<PAGE>
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
Name and Description Age Director Since
- ------------------------------------------------------------------------------- --- --------------
<S> <C> <C>
Robert R. Bennett 39 1997
Mr. Bennett serves as President and Chief Executive Officer of Liberty Media
Corporation. Mr. Bennett also serves as Executive Vice President of Tele-
Communications, Inc.
Robert L. Johnson 50 1991
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 Board of Directors. Since 1991, Mr. Johnson also served as Chief Executive
Officer of the Company and has served as its President from 1991 until March
1996. Mr. Johnson is also Chairman of District Cablevision, Inc., a Washington,
D.C. cable system operating company which he founded in 1980, and has served as
a director of Liberty Media Corporation since December 1991. Since January 1994,
Mr. Johnson has served as a director of Hilton Hotels Corporation.
Sheila Crump Johnson 47 1994
Since September 1992, Mrs. Johnson has served as Executive Vice President,
Corporate Affairs of the Company. From September 1991 to September 1992, she
served as Vice President, Corporate Affairs of the Company. Since 1979 she has
served as director of BET and since 1990, as Vice President, Corporate Affairs
of BET. Prior to 1990, Mrs. Johnson was a lecturer and author in the area of
early childhood music education. Robert L. Johnson and Sheila Crump Johnson are
married to one another.
Delano E. Lewis* 58 1994
Mr. Lewis 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, GEICO
Insurance Company, Apple Computer, Inc. and Halliburton Company.
</TABLE>
*Member of the Special Committee
[Goldman Sachs Logo]
26 Continued
<PAGE>
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
Name and Description Age Director Since
- -------------------------------------------------------------------------------- --- --------------
<S> <C> <C>
John C. Malone 55 1991
Since 1973, Dr. Malone has served as President and Chief Executive Officer of
TCI the largest owner/operator of cable television systems in the United States.
Dr. Malone has also served as the Chairman and a director of Liberty Media
Corporation since 1991, and is a director of a variety of other affiliates of
TCI, the Bank of New York and Discovery Communications, Inc. Dr. Malone has
served as a director of BET since 1979 and as its Chairman from 1979 to 1991.
Denzel Washington 41 1996
In September 1996, Mr. Washington was elected by the Company's Board to fill a
vacancy created by the resignation of Mr. Jeffrey L. Bewkes, who resigned from
the Board in December 1995 following the Company's repurchase of all of the
Class A and Class B Common Stock beneficially owned by Time Warner Inc. Mr.
Washington is an Academy Award winning and critically acclaimed feature film
actor. Mr. Washington also serves as director of the Sundance Institute.
Herbert P. Wilkins, Sr. 54 1993
Since 1990, Mr. Wilkins has been the President of W&J Management Company, Inc.,
which manages a group of minority oriented venture capital funds, including
Syndicated Communications Inc., Syncom Capital Corporation, and Syndicated
Communications Venture Partners II, L.P. From 1977 to 1989, Mr. Wilkins served
as President of Syndicated Communications, Inc. He has also been director of
District Cablevision Inc. since 1982. Of the funds managed by W&J Management
Company, Inc., Syndicated Communications Inc. is a shareholder of District
Cablevision, Inc., ("DCT").
</TABLE>
[Goldman Sachs Logo]
27 Continued
<PAGE>
ANALYSIS AT VARIOUS PRICES
BET Holdings, Inc.
($ in thousands except per share data)
<TABLE>
<S> <C> <C>
Price Per Share $ 63.00
----------
Fully Diluted Shares Outstanding 18,031
Equity Consideration (a) 1,135,936
Net Debt 50,868
Levered Consideration 1,186,804
Value per Subscriber 50,000 $ 23.74
Levered Multiple of Sales
1997A 154,226 7.7x
LTM (b) 160,608 7.4x
1998E 180,898 6.6x
Levered Multiple of EBITDA - Consolidated
1997A 62,435 19.0x
LTM (b) 66,159 17.9x
1998E 92,113 12.9x
Levered Multiple of EBITDA - Cable Network
1997A 68,938 17.2x
LTM (b) 73,317 16.2x
1998E 96,397 12.3x
1998 6 Months Annualized (c) 84,008 14.1x
Levered Multiple of EBIT - Consolidated
1997A 53,775 22.1x
LTM (b) 57,107 20.8x
1998E 82,120 14.5x
Levered Multiple of EBIT - Cable Network
1997A 63,719 18.6x
LTM (b) 67,706 17.5x
1998E 90,187 13.2x
Premium to Unaffected Price $ 40.00 58%
Premium to Original Offer Price $ 48.00 31%
Premium/(Discount) to 3/12/98 Price $ 53.75 17%
Premium/(Discount) to Latest Peak $ 55.88 13%
</TABLE>
(a) Does not tax effect options
(b) Latest twelve months as of October 31, 1997
(c) Annualized EBITDA includes $3.0 million of EBITDA due to subscriber rate
card increase effective January 1, 1998
28
<PAGE>
ANALYSIS OF BET CABLE NETWORK
Implied Discount Rates
<TABLE>
<S> <C>
Price per Share $63.00
Fully Diluted Shares Outstanding 18 mm
------
Equity Value $1,136 mm
Value of Non-Core 70 mm
------
Cable Network Value $1,066 mm
</TABLE>
<TABLE>
<CAPTION>
Exit Multiple of 2002 EBITDA
------------------------------------
Projections 2002 EBITDA (mm) 9x 9.5x 10x 10.5x 11x
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management $203.3 21.4% 22.9% 24.2% 25.6% 26.8%
Management-Adjusted (a) 163.2 14.6 15.9 17.2 18.5 19.7
Salomon Smith Barney 153.1 12.8 14.2 15.5 16.7 17.9
- --------------------------------------------------------------------------------
</TABLE>
(a) EBITDA margin kept constant at 58%.
[Goldman Sachs Logo]
29
<PAGE>
ANALYSIS OF BET CABLE NETWORK
Implied Discount Rates at Varying EBITDA Growth RAtes
<TABLE>
<CAPTION>
EBITDA Implied 2002 Exit Multiple of 2002 EBITDA
--------------------------------------------------------
Growth EBITDA (mm) 9x 9.5x 10x 10.5x 11x
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12% $121.5 5.6% 6.9% 8.1% 9.3% 10.4%
14 132.7 8.1 9.4 10.6 11.8 13.0
16 144.8 10.6 11.9 13.1 14.4 15.6
18 157.7 13.0 14.4 15.7 16.9 18.1
20 171.5 15.5 16.9 18.2 19.5 20.7
22 186.3 18.0 19.4 20.7 22.1 23.3
24 202.1 20.5 21.9 23.3 24.6 25.9
- --------------------------------------------------------------------------------
</TABLE>
Note: Assuming share price of $63.00 and 18mm shares outstanding. Non-core
businesses assumed to be worth $70mm.
[Goldman Sachs Logo]
30
<PAGE>
MARKET VALUATION OF SELECTED ENTERTAINMENT COMPANIES
($ in millions except per share amounts) [Goldman Sachs Logo]
<TABLE>
<CAPTION>
Company Price % 52 Wk Market Capitalization P / E Ratio (b) Sales Multiple (c)
-----------------------------------------------------------------------------
Name 03/12/98 High Equity Levered Adjusted (a) LTM 1998E 1999E LTM 1998E 199E
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Large Capitalization
- --------------------
Disney $ 105.94 92.2% $74,991 $85,742 $84,542 36.5x 32.7x 28.0x 3.9x 3.6x 3.2x
EMI Group 16.38 70.6% 7,514 8,109 8,109 18.8 18.2 16.2 1.5 1.4 1.2
News Corp (e) 26.63 96.2% 25,565 31,568 20,052 22.6 19.7 15.5 2.0 1.9 1.8
Polygram 51.81 82.4% 9,377 9,581 9,435 19.2 21.0 18.4 2.0 1.7 1.6
Seagram 39.05 93.2% 13,877 18,583 14,489 49.4 42.5 34.9 1.2 1.1 1.1
Time Warner (d) 70.31 98.8% 44,420 66,363 63,803 NM NM NM 2.6 2.4 2.2
Viacom 48.13 99.2% 17,150 28,124 25,824 NM NM NM 2.0 1.8 1.6
Mean 90.4% 29.3x 26.8x 22.6x 2.2x 2.0x 1.8x
Median 93.2% 22.6 21.0 18.4 2.0 1.8 1.6
Medium Capitalization
- -----------------------
BET Holdings $ 53.75 96.6% $ 965 $ 1,016 $ 1,016 33.2x 25.8x 21.9x 6.3x 5.4x 4.6x
Gaylord
Entertainment 31.00 93.2% 1,056 1,431 1,431 33.3 25.8 23.8 1.6 1.4 1.2
King World 28.06 94.8% 1,037 485 485 7.3 7.2 6.4 0.7 0.7 0.6
Spelling
Entertainment 8.44 91.8% 776 1,063 1,063 NM NM NM 1.8 NA NA
Mean 94.1% 24.6x 19.6x 17.4x 2.6x 2.5x 2.1x
Median 94.0% 33.2 25.8 21.9 1.7 1.4 1.2
</TABLE>
Notes
(a) Defined as Levered Market Cap - Estimated Non-EBITDA Assets (Source:
Goldman Sachs Research)
(b) EPS estimates are from IBES and are calendarized except EMI Group
(c) Using Adjusted Market Capitalization as a Multiple of Sales and EBITDA
(d) Time Warner numbers include Time Warner Entertainment
(e) Non-EBITDAA Assets include BSkyB, Seven Network Ltd., Independent
Newspapers, Primestar, StarTV, Liberty/Fox Sports Venture, Fox Kids Worldwide,
Ansett Airlines, etc.
31
<PAGE>
[Chart continued from previous page]
<TABLE>
<CAPTION>
EBITDA Multiple(c) IBES 5 Yr 98 P/E to
------------------
LTM 1998E 1999E Growth Growth
--------------------------------------------
<S> <C> <C> <C> <C>
17.2x 14.4x 12.8x 18.0% 1.6x
10.3 9.4 8.3 NA NA
13.9 12.2 10.7 13.8% 1.1
15.4 12.4 11.0 10.0% 1.8
9.6 9.4 9.2 15.0% 2.3
12.8 11.5 10.4 12.0% NM
15.7 11.7 10.1 16.5% NM
13.6x 11.6x 10.4x 14.2% 1.7x
13.9 11.7 10.4 14.4% 1.7
15.4x 13.3x 9.7x 20.0% 1.1x
7.7 6.2 5.5 NA NA
2.5 2.4 2.2 8.0% 0.8
NM NA NA NA NA
8.5x 7.3x 5.8x 14.0% 1.0x
7.7 6.2 5.5 14.0% 1.0
</TABLE>
<PAGE>
SELECTED BASIC CABLE PROGRAMMING TRANSACTIONS SINCE 1990
<TABLE>
<CAPTION>
Percent Impl. Value FTE Subs LTM
Date Acquiror/Target Sold (mil.) (a)(mil.) EBITDA Mutiple
<S> <C> <C> <C> <C> <C>
Mature Networks
10/97 Home Shopping Network/USA Network 100.0% $4,100.0 119.0 22.9(m)
9/97 Seagram's Universal/USA Networks 50.0% $3,400.0 119.0 N.A.
6/97 Fox & Liberty/Rainbow Programming 40.0% $2,125.0 55.0 21.3x(m)
4/97 Fox Kids/Intl. Family Entertainment 100.0 1,866.0 68.6 24.9(d)
3/97 Cablevision/MSG (from ITT)(e) 50.0 690.1 5.4(e) N.A.
2/97 Westinghouse CBS/TNN and CMT(f) 100 & 67% 1,485.0 107.0(f) 16.6
2/97 Comcast-Disney/E! (from TWE) 58.4 550.0 42.7 19.3
10/96 Time Warner/TBS 80.4 9,900.0 N.M. N.A.
1996-1997 Mean 21.0
1996-1997 Median 21.3
3/94 Cap Cities-Hearst/Lifetime 33.3 952.8 58.8 14.2
9/93 Cablevision/American Movie Classics 50.0 390.0 46.0 15.5
6/93 Cap Cities-Hearst/H&E 12.5 400.0 56.3 N.A.
5/91 CNBC/FNN 100.0 150.5 37.0(g) N.A.
11/90 Hearst/ESPN 20.0 875.0 57.1 N.A.
1/90 Intl. Family Entertainment/Family 100.0 294.0 48.0 N.A.
Channel 1990-1995 Mean 14.9
1990-1995 Median 14.9
Mean 19.2
Median 19.3
Development Networks
12/97 TCI Music/The Box Worldwide 100.0% $ 38.3 40.0 12.2x
8/97 Disney/Classic Sports 100.0 175.0 11.0 N.A.
6/97 Paxson Communications/Travel Channel 100.0 75.0 22.9(i) N.A.
7/96 News Corp/The Golf Channel 33.0 150.0 3.8(j) N.A.
5/96 TV Food Network 100.0 117.5 16.5 N.A.
3/96 Flextech/The Family Channel (UK) 61.0 83.0 4.0 N.A.
10/95 Liberty/fX 50.0 400.0 25.0 N.A.
7/95 Liberty/Faith & Values 49.0 61.2 24.2 N.A.
7/95 NBC/Court TV 16.7 120.0 22.2 N.A.
10/93 Concept Communications/Nostalgia
Network 32.0 35.9 14.7 N.A.
10/92 Liberty Sports/SportChannel Chicago 25.0 63.6 2.2 N.A.
1/92 Landmark/Travel Channel 100.0 50.0 11.5 N.A.
8/91 Viacom/MTV Europe (Maxwell) 50.0 130.0 29.5 N.A.
5/91 Discovery Channel/The Learning
Channel 100.0 31.0 14.9 N.A.
11/90 Flextech/Children's Channel(k) 25.0 12.8 2.3 N.A.
8/90 TCI/Video Juke Box 9.6 52.1 9.5 N.A.
7/90 Gaylord/Country Music TV 100.0 36.0 11.5 N.A.
1/90 Nostalgia Television (target) 24.0 42.6 8.2 N.A.
Mean N.A.
Median N.A.
Home Shopping Networks
12/96 Silver King/Home Shopping Network 80.1 1,270.0 51.4 N.A.
2/95 Comcast-Liberty/QVC 65.7 1,960.0 50.0 11.3
Mean 11.3
Median 11.3
</TABLE>
32
<PAGE>
[Chart continued from previous page]
<TABLE>
<CAPTION>
FYE EBITDA Revenue FYE EBITDA Value/
Multiple (b) Multiple (b) Margin Sub
<S> <C> <C> <C>
18.4x (m) 3.4x (m) 18.9% $34.45
19.0x (m) 4.7x (m) N.A. 28.57
15.6x (c) 2.6x 16.4% $38.64
22.9 (d) 5.9 (d) 25.8% 24.30
15.1 (e) N.A. N.A. N.M.
12.3 (f) 3.2 (f) 26.0% 13.88
15.2 4.8 31.8% 12.88
16.4 3.4 20.7% N.M.
16.6 3.9 25.45
15.6 3.4 26.44
11.6 4.2 36.2% 16.20
13.9 4.3 30.9% 8.48
11.8 2.3 19.5% 7.10
16.7 (h) 1.9 (h) 11.4% 4.07
10.3 1.5 14.6% 15.32
10.6 3.0 28.3% 6.13
12.5 2.9 9.55
11.7 2.7 7.79
14.7 3.4 17.50
15.1 3.3 14.60
N.A. 1.8x N.A. $ 0.96
N.A. N.A. N.A. 15.91
N.A. 4.0 N.A. 3.28
N.A. 4.1 N.A. 40.00
N.A. 4.1 N.A. 7.12
N.A. 5.4 N.A. 20.75
N.A. N.A. N.A. 16.00
N.A. 1.9 N.A. 2.53
24.0 2.3 9.6% 5.41
N.M. 3.0 N.A. 2.44
5.7 N.A. N.A. 28.91
N.A. 7.9 N.A. 4.35
N.A. N.A. N.A. 4.41
6.9 1.5 21.7% 2.08
N.A. N.A. N.A. 5.57
N.M. N.A. N.A. 5.48
N.M. 7.2 N.A. 3.13
N.A. 5.5 N.A. 5.20
12.2 4.1 9.64
6.9 4.1 5.30
9.6 1.0 10.4% 24.69
7.6 (l) 1.7 22.4% 35.86
8.6 1.4 30.27
8.6 1.4 30.27
</TABLE>
<PAGE>
[Chart continued from previous page]
Source: Kagan, news articles, and public documents.
(a) Full-time equivalent subscribers.
(b) Multiples of projected year-ahead cash flow, revenues.
(c) Includes any related D&A.
(d) Not adjusted to exclude EBITDA and estimated values for all non-Family
Channel businesses, including MTM and FitTV. With adjustments, transaction
represents 15.8x LTM and 15.2x 1997E EBITDA.
(e) Multiples represent Kagan estimates for value of MSG network and exclude
facilities and sports teams. Kagan shows value per sub at $128.
(f) Westinghouse agreed to purchase TNN and the reamining 67% domestic unit of
CMT for a total of $1.55 billion, including $65 mn of working capital. Values
split between TNN and CMT per Kagan estimates.
(g) FTE subs at time of FNN/CNBC merger 5/91.
(h) Multiples of CNBC 1992 cash flow and revenues.
(i) 1996 estimate. Company lost money on an operating basis.
(j) Subscriber figure is an estimate for year end 1996.
(k) Asumes an exchange rate of 1.96 dollars to the pound sterling.
(l) Excludes estimated $25 million cash flow loss, attributed to start-up
losses.
(m) Wall Street Estimates
(n) Based on 1997 $12 million projected cash flow, $25 million advertising
revenue and $33 million subscriber revenue estimates from Paul Kagan Associates
33
<PAGE>
SELECT COMPARABLE TRANSACTIONS ANALYSIS
($000 except per share data)
<TABLE>
<CAPTION>
December Management 6 Month FYE 98
Implied value of Projections for FYE 98 Projections Annualized(a)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
BET Holdings,
applying multiplies CMT/TNN Forward Multiple 12.3x 12.3x
from the IFE and 1998 EBITDA (Management Projections) 96,397 N.A.
CMT/TNN 1998 EBITDA (6 Month Annualized (a)) N.A. 84,008
transactions to Core Cable Network Value 1,185,683 1,033,298
BET's core cable Other Business 70,000 70,000
network and valuing Option Proceeds 29,000 29,000
BET's other Net Debt (50,868) (50,868)
businesses at $70 Total Equity Value 1,233,815 1,081,430
million. Fully Diluted Shares 18,500 18,500
Equity Value Per Share 66.69 58.46
IFE LTM Multiple 15.8x 15.8x
LTM Core EBITDA(Q1 98) 73,100 73,100
Core Cable Network Value 1,154,980 1,154,980
Other Business 70,000 70,000
Option Proceeds 29,000 29,000
Net Debt (50,868) (50,868)
Total Equity Value 1,203,112 1,203,112
Fully Diluted Shares 18,500 18,500
Equity Value Per Share 65.03 65.03
</TABLE>
(a) Annualized EBITDA includes 3.0 million of EBITDA due to
subscriber rate card increases effective January 1, 1998.
[Goldman Sachs Logo]
34
<PAGE>
COMPARISON OF SELECTED BASIC CABLE
PROGRAMMING TRANSACTIONS
1997 YTD
[GOLDMAN SACHS LOGO]
MULTIPLE OF FYE EBITDA (A)
--------------------------
[BAR GRAPH REFLECTING THE FOLLOWING INFORMATION:
FOX & LIBERTY/RAINBOW 15.6X
SEAGRAM/USA NETWORK 19.0X (C)
FOX KIDS/IFE 15.2X (B)
HSN/USA NETWORK 18.4X (C)
CABLEVISION/MSG (FROM ITT) 15.1X
WESTINGHOUSE CBS/TNN AND CMT 12.3X
COMCAST-DISNEY/E! (FROM TWE)
MEDIAN = 15.8X]
MULTIPLE OF REVENUE (A) VALUE PER SUBSCRIBER
----------------------- --------------------
[BAR GRAPH REFLECTING THE FOLLOWING [BAR GRAPH REFLECTING THE
INFORMATION: FOLLOWING INFORMATION:
FOX & LIBERTY/RAINBOW 2.6X FOX & LIBERTY/RAINBOW $38.64
SEAGRAM/USA NETWORK 4.7X (C) HSN/USA $34.45
HSN/USA 3.4X (C) SEAGRAM/USA NETWORK $28.60
FOX/IFE 5.9X FOX/IFE $24.30
WESTINGHOUSE CBS/TNN AND CMT 3.2X WESTINGHOUSE CBS/TNN AND CMT $13.90
COMCAST-DISNEY/E! (FROM TWE) 4.8X COMCAST-DISNEY/E! (FROM TWE) $12.90
MEDIAN = 4.1X] MEDIAN = 26.44]
(a) Multiplt of projected year-ahead cash flow, revenues.
(b) Adjusted to exclude EBITDA and estimated values for all non-Family Channel
businesses. Without adjustments, transaction represents 22.9x 1997e EBITDA.
(c) Wall Street Estimates.
35
<PAGE>
WESTINGHOUSE'S ACQUISITION OF GAYLORD'S INTEREST IN TNN AND THE DOMESTIC PORTION
OF CMT ($ AND SUBSCRIBERS IN MILLIONS)
Description of Transaction
--------------------------
Westinghouse Electric Corp/CBS signed a definitive agreement to acquire, through
merger, Gaylord Entertainment Co.'s The Nashville Network (TNN) and the
remaining 67% of Country Music Television (CMT) (domestic only) that they did
not already own, as well as about $50 million in working capital.
<TABLE>
<CAPTION>
Transaction Details Revenues(a)
------------------- -----------
<S> <C>
[Bar graph reflecting the following
information:
Announcement Date: February 10, 1997
Purchase Price: $1.55 billion CMT TNN
--- ---
Form of Consideration: All stock 1994 $27.7 $195.8
Method of Financing: NA 1995 $34.6 $216.5
1996E $54.1 $258.5
1997E $67.0 $292.1
3-YEAR CAGR
-----------
CMT=34.2%
TNN=14.3%]
Subscribers
-----------
[Bar graph reflecting the following
Multiple of Enterprise Value (a) information:
- --------------------------------
LTM 97E 97E
EBITDA SUBSCRIBERS EBITDA REVENUES CMT TNN
------ ----------- ------ -------- --- ---
Kagan 13.5X $13.93 12.3X 3.2X 1994 $24.9 $58.7
Public Filing / 16.6X N.A. N.A. N.A. 1995 $31.7 $64.4
Merrill Lynch 1996E $36.9 $68.9
Fairness opinion 1997E $42.5 $72.4
3-YEAR CAGR
-----------
CMT=20.9%
TNN=7.8%]
</TABLE>
CONTEXT OF TRANSACTION
- ----------------------
- -- Historically, CBS's previous management was bearish on cable, viewing it as
a trend that would eventually disappear. As their predictions proved wrong
going forward, Westinghouse was determined to get back into the cable
business (it ran Group W Cable until 1985) in order to successfully compete
with the likes of Disney/ABC/Cap Cities' ESPN and GE/NBC's MSNBC and CNBC.
- -- Although TNN and CMT has experienced significant growth during the boom of
the country-western theme, current market conditions show much slower growth
in country album sales. CBS's response to this is that the networks do not
only depend on music sales; the networks glorify a country-western
lifestyle.
- -- CMT International was not part of the sale. Westinghouse, however, did
transfer to Gaylord its 33% interest in CMT International as additional
consideration.
- -- Prior to transaction Westinghouse received royalties from TNN and CMT for
distribution, marketing and sales services
- -- 33% of net revenues for TNN
- -- 10% of net revenues for CMT
(a) Multiples and projections based on Morgan Stanley research, June 1996.
Subscribers include total domestic subscribers.
36
<PAGE>
[Goldman Sachs Logo]
SUMMARY OF FOX KIDS WORLDWIDE'S ACQUISITION OF INTERNATIONAL FAMILY
ENTERTAINMENT
Transaction Description
- -----------------------
- -- Fox Kids Worldwide ("Fox Kids") acquired the Class A and B Shares of
International Family Entertainment, Inc. ("IFE" or the "Company") at a price
of $35 per share in cash. Liberty Media, the holder of all C Shares,
received newly-issued preferred stock issued by Fox Kids, and also based on
a price of $35 per share.
- -- The acquisition included all the assets of IFE including The Family Channel,
the MTM Studio and Library ("MTM"), the FiT TV Channel, and Calvin Gilmore.
The transaction represents an equity value of approximately $1.7 billion and
an enterprise value of $1.9 billion.
- -- The price of $35 per share represents a premium of approximately 9% over the
previous day closing price and a premium of approximately 60% to the 90-day
average stock price.
Stock Price History
- -------------------
[Chart reflecting the following information:
<TABLE>
<CAPTION>
Indexed Price
-------------
International
Daily from BET Time Family Liberty
6/10/96 to Holdings Disney News Corp. Warner Viacom Entertainment Media S&P 500
- ------------ -------- ------ ---------- ------------- ------ -------------------- -------
6/10/97
- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10-Jun-96 28.250 62.375 22.125 41.375 37.375 18.125 18.917 672.160
11-Jun-96 28.000 62.375 22.125 40.875 37.875 18.625 18.833 670.970
12-Jun-96 27.875 62.375 21.875 40.375 37.750 18.250 18.667 669.040
13-Jun-96 28.000 61.750 22.000 40.375 37.875 18.625 18.417 667.920
14-Jun-96 27.500 61.500 22.000 40.750 37.375 18.125 18.833 665.850
17-Jun-96 27.125 62.000 22.625 40.250 36.875 18.375 18.833 665.160
18-Jun-96 27.000 61.000 23.125 40.125 37.875 18.500 18.167 662.060
19-Jun-96 26.750 61.125 23.250 39.625 38.000 17.875 18.750 661.960
20-Jun-96 26.375 61.750 23.250 39.125 38.250 18.250 18.667 662.100
21-Jun-96 26.500 63.000 23.125 39.375 38.750 18.625 18.500 666.840
24-Jun-96 28.500 62.250 23.250 39.125 38.250 18.750 18.583 668.850
25-Jun-96 27.875 63.250 23.500 39.000 38.000 19.125 18.750 668.480
26-Jun-96 27.500 62.375 23.125 38.750 37.625 18.625 18.500 664.390
27-Jun-96 26.625 63.125 22.875 39.000 37.875 18.500 18.000 668.550
28-Jun-96 26.375 62.875 23.500 39.250 38.125 18.500 17.667 670.630
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1-Jul-96 26.125 62.250 23.500 39.500 38.250 18.375 17.583 675.880
2-Jul-96 25.750 61.250 23.250 39.625 38.125 18.375 18.000 673.610
3-Jul-96 24.750 61.000 23.125 39.750 37.750 18.500 17.833 672.400
4-Jul-96 24.750 61.000 23.125 39.750 37.750 18.500 17.833 672.400
5-Jul-96 24.750 59.375 23.375 38.875 37.000 18.250 17.333 657.440
8-Jul-96 24.750 59.000 23.125 38.125 36.500 18.250 16.917 652.540
9-Jul-96 24.875 57.500 23.250 38.000 35.750 18.250 16.917 654.750
10-Jul-96 25.000 58.125 23.125 37.375 34.750 17.375 16.500 656.060
11-Jul-96 25.750 56.125 22.250 36.125 33.500 17.500 16.083 645.670
12-Jul-96 25.750 56.875 22.625 35.625 34.000 17.250 16.667 646.190
15-Jul-96 25.500 54.875 22.125 33.875 32.375 17.250 15.833 629.800
16-Jul-96 25.875 56.000 22.000 33.250 31.625 15.875 14.500 628.370
17-Jul-96 26.500 56.000 20.625 36.625 33.750 16.750 15.583 634.070
18-Jul-96 26.625 57.250 20.500 37.125 35.500 16.625 16.583 643.560
19-Jul-96 26.375 57.375 20.375 35.750 34.750 16.375 16.583 638.730
22-Jul-96 25.875 56.000 19.875 34.250 35.000 16.000 15.667 633.770
23-Jul-96 25.000 55.500 19.250 33.875 35.375 15.750 14.917 626.870
24-Jul-96 24.625 54.750 18.875 34.000 33.500 15.375 14.250 626.650
25-Jul-96 25.250 54.375 19.375 34.250 33.875 15.750 14.500 631.170
26-Jul-96 25.250 54.125 19.625 35.250 34.500 16.125 14.750 635.900
29-Jul-96 24.875 53.375 19.375 34.750 34.125 15.500 14.750 630.910
30-Jul-96 24.875 55.250 19.625 35.000 34.250 16.125 14.750 635.260
31-Jul-96 24.500 55.625 19.875 34.875 34.250 16.125 14.667 639.950
1-Aug-96 23.875 57.375 20.500 35.750 34.125 17.000 15.417 650.020
2-Aug-96 23.500 58.000 20.625 36.500 34.375 17.750 16.042 662.490
5-Aug-96 24.125 58.375 20.250 36.375 34.750 18.500 15.750 660.230
6-Aug-96 24.375 59.000 20.250 36.500 35.000 17.500 15.667 662.380
7-Aug-96 24.000 58.375 20.250 35.875 35.375 17.375 15.833 664.160
8-Aug-96 24.000 57.500 20.500 35.500 35.250 17.500 15.833 662.590
9-Aug-96 24.375 57.125 20.375 35.375 34.000 17.500 16.375 662.100
12-Aug-96 24.375 58.500 20.250 35.625 34.125 17.375 16.417 665.770
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
13-Aug-96 25.375 58.000 20.125 35.500 33.375 17.500 16.417 660.200
14-Aug-96 25.750 58.125 20.125 35.000 33.125 18.250 16.459 662.050
15-Aug-96 25.750 57.875 20.250 34.625 32.375 18.500 17.083 662.280
16-Aug-96 25.625 58.125 20.250 34.500 33.125 18.000 17.500 665.210
19-Aug-96 25.625 58.000 20.500 34.500 33.625 18.375 18.333 666.580
20-Aug-96 25.500 57.250 20.250 34.250 33.750 18.125 18.000 665.690
21-Aug-96 25.625 57.875 20.250 33.875 33.125 18.000 18.250 665.070
22-Aug-96 25.750 58.125 20.063 34.250 33.125 17.875 18.167 670.680
23-Aug-96 25.750 58.375 20.875 34.000 33.000 18.000 17.917 667.030
26-Aug-96 26.000 59.375 20.750 34.125 33.000 18.125 17.667 663.880
27-Aug-96 26.000 59.000 20.875 34.250 32.625 18.250 17.750 666.310
28-Aug-96 25.875 58.250 21.125 34.500 31.875 18.000 17.583 664.810
29-Aug-96 25.750 57.750 21.000 33.750 31.500 18.125 17.417 657.400
30-Aug-96 25.625 57.000 21.250 33.375 31.250 18.000 17.583 651.990
2-Sep-96 25.625 57.000 21.250 33.375 31.250 18.000 17.583 651.990
3-Sep-96 25.500 57.000 21.250 33.000 30.750 17.875 17.500 654.720
4-Sep-96 25.375 56.750 21.250 32.750 30.375 17.750 17.500 655.610
5-Sep-96 25.250 55.625 21.000 32.125 32.375 18.000 17.417 649.440
6-Sep-96 25.500 57.000 21.250 33.500 33.000 18.625 17.583 655.680
9-Sep-96 26.000 58.250 21.500 33.625 33.250 18.500 17.500 663.760
10-Sep-96 26.500 57.875 21.250 34.625 34.250 18.250 17.667 663.810
11-Sep-96 26.625 58.625 21.125 35.125 34.125 18.000 17.833 667.280
12-Sep-96 26.625 60.500 21.000 37.000 33.625 17.875 18.167 671.150
13-Sep-96 26.875 60.750 21.125 37.750 35.000 17.625 18.709 680.540
16-Sep-96 26.750 60.250 21.250 37.375 35.750 17.500 18.333 683.980
17-Sep-96 26.625 61.125 21.125 37.625 35.125 17.500 18.500 682.940
18-Sep-96 26.250 61.250 20.875 37.375 34.750 17.375 18.500 681.470
19-Sep-96 26.250 63.500 21.125 37.375 34.375 17.250 18.500 683.000
20-Sep-96 26.750 63.125 20.750 37.125 34.250 17.250 18.792 687.030
23-Sep-96 27.500 63.625 20.500 36.750 33.875 17.000 18.750 686.480
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
24-Sep-96 27.750 62.750 20.500 36.750 33.375 16.875 18.500 685.610
25-Sep-96 29.750 62.625 20.875 37.000 34.125 15.750 18.250 685.830
26-Sep-96 29.000 62.000 20.875 37.250 34.250 16.250 18.667 685.860
27-Sep-96 29.000 63.000 20.875 37.625 34.375 16.375 18.833 686.190
30-Sep-96 28.750 63.250 20.875 38.500 35.250 16.375 19.083 687.310
1-Oct-96 28.625 62.500 21.000 37.750 34.375 16.375 19.500 689.080
2-Oct-96 28.875 62.875 21.125 38.375 34.500 16.875 19.250 694.010
3-Oct-96 28.750 63.125 21.125 38.750 34.625 17.125 18.667 692.780
4-Oct-96 29.250 64.125 21.875 39.500 36.625 18.125 18.833 701.460
7-Oct-96 28.625 64.125 22.125 40.375 36.750 17.375 19.000 703.340
8-Oct-96 28.875 63.625 22.250 40.125 37.125 17.500 18.833 700.640
9-Oct-96 28.750 63.500 21.875 41.125 36.625 17.625 18.917 696.740
10-Oct-96 28.625 63.625 22.000 41.375 36.250 17.625 19.000 694.610
11-Oct-96 28.875 64.000 22.750 41.750 35.750 17.875 19.000 700.660
14-Oct-96 29.125 64.125 23.000 41.250 35.250 17.875 18.833 703.540
15-Oct-96 29.125 64.375 22.625 40.875 33.750 17.750 18.750 702.570
16-Oct-96 28.875 65.500 22.875 41.875 34.375 17.375 18.583 704.410
17-Oct-96 29.125 64.875 23.000 41.125 34.500 17.375 18.333 706.990
18-Oct-96 29.000 65.000 23.375 40.000 34.250 17.625 18.333 710.820
21-Oct-96 28.875 65.625 23.000 40.125 33.625 17.750 18.000 709.850
22-Oct-96 29.625 66.625 22.250 40.000 33.125 17.750 17.667 706.570
23-Oct-96 29.750 66.125 22.875 38.750 32.250 17.875 17.583 707.270
24-Oct-96 30.000 65.375 22.750 38.250 32.125 17.625 17.417 702.290
25-Oct-96 29.875 66.250 22.750 37.625 31.500 17.875 17.333 700.920
28-Oct-96 29.500 66.375 22.500 37.625 30.875 17.875 17.333 697.260
29-Oct-96 29.250 65.750 22.375 37.000 31.750 18.000 17.250 701.500
30-Oct-96 29.000 65.625 22.375 37.375 32.000 18.125 17.250 700.900
31-Oct-96 29.250 65.875 22.625 37.250 32.625 17.875 17.167 705.270
1-Nov-96 29.000 65.500 22.500 38.125 35.000 17.750 17.917 703.770
4-Nov-96 29.375 66.875 22.625 38.000 34.500 17.625 18.417 706.730
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5-Nov-96 29.000 67.625 22.984 39.625 35.000 17.000 18.750 714.140
6-Nov-96 28.750 67.750 22.750 39.875 35.750 16.875 18.750 724.590
7-Nov-96 28.125 69.000 22.375 39.125 36.250 16.750 17.917 727.650
8-Nov-96 27.250 68.500 22.500 39.500 36.125 16.500 17.750 730.820
11-Nov-96 26.625 70.375 22.500 39.875 36.750 16.875 18.083 731.870
12-Nov-96 26.125 70.875 21.500 39.375 37.375 17.000 18.250 729.560
13-Nov-96 26.125 70.625 21.125 39.750 38.000 17.125 18.459 731.130
14-Nov-96 26.125 70.625 21.375 39.875 37.750 17.000 18.250 735.880
15-Nov-96 27.500 72.250 21.500 40.875 37.875 16.750 18.083 737.620
18-Nov-96 27.875 71.375 21.250 40.750 38.000 16.500 17.917 737.020
19-Nov-96 27.750 71.000 21.250 41.000 37.250 16.875 17.667 742.160
20-Nov-96 28.000 71.750 21.625 39.750 37.500 17.000 17.709 743.950
21-Nov-96 28.125 72.250 21.625 40.375 37.500 16.875 16.750 742.750
22-Nov-96 27.750 72.125 21.625 40.875 37.375 16.500 15.667 748.730
25-Nov-96 27.750 73.500 21.750 40.500 36.375 16.125 15.917 757.030
26-Nov-96 27.625 76.000 21.500 40.250 36.375 15.875 16.333 755.960
27-Nov-96 27.625 73.875 21.250 40.625 36.750 15.000 16.667 755.000
28-Nov-96 27.625 73.875 21.250 40.625 36.750 15.000 16.667 755.000
29-Nov-96 27.750 73.875 21.250 40.750 37.375 15.375 16.667 757.020
2-Dec-96 27.750 73.875 20.875 40.750 37.125 15.625 16.167 756.560
3-Dec-96 27.750 71.875 20.125 40.500 36.875 15.625 16.167 748.280
4-Dec-96 28.375 72.000 20.250 39.859 36.625 15.625 17.125 745.100
5-Dec-96 28.375 71.875 20.625 40.000 36.750 15.625 17.833 744.380
6-Dec-96 28.375 71.500 20.500 39.750 36.500 15.375 18.542 739.600
9-Dec-96 28.375 73.125 20.750 40.000 37.500 15.625 18.667 749.760
10-Dec-96 28.500 73.250 21.125 40.125 38.000 15.625 18.000 747.540
11-Dec-96 28.500 72.125 20.625 39.750 37.500 15.625 18.250 740.730
12-Dec-96 27.500 70.250 20.375 38.875 37.000 15.250 17.917 729.330
13-Dec-96 26.750 70.250 20.375 39.000 36.875 15.000 18.500 728.640
16-Dec-96 26.625 69.375 20.250 38.250 36.125 15.375 18.250 720.980
17-Dec-96 25.750 70.875 20.625 38.125 35.625 14.875 18.542 726.040
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
18-Dec-96 24.750 71.500 20.500 37.750 36.375 15.000 18.083 731.540
19-Dec-96 26.375 72.375 20.875 37.875 36.125 15.000 17.917 745.760
20-Dec-96 26.750 72.375 20.875 37.750 36.250 15.375 17.667 748.870
23-Dec-96 26.375 72.125 20.500 37.500 36.000 15.125 18.000 746.920
24-Dec-96 26.500 71.500 20.625 37.000 35.750 15.250 17.917 751.030
25-Dec-96 26.500 71.500 20.625 37.000 35.750 15.250 17.917 751.030
26-Dec-96 27.125 71.375 20.750 37.375 36.000 15.000 18.000 755.820
27-Dec-96 27.625 71.250 20.500 37.125 35.000 16.125 18.417 756.790
30-Dec-96 28.000 70.000 20.750 37.250 35.125 15.750 18.750 753.850
31-Dec-96 28.750 69.750 20.875 37.500 34.500 15.500 19.042 740.740
1-Jan-97 28.750 69.750 20.875 37.500 34.500 15.500 19.042 740.740
2-Jan-97 29.250 67.375 20.875 36.750 34.250 15.625 19.000 737.010
3-Jan-97 29.313 69.250 21.000 37.375 34.750 17.000 19.333 748.030
6-Jan-97 29.500 69.000 21.000 37.250 34.000 16.625 18.917 747.650
7-Jan-97 29.125 68.875 21.375 37.750 34.625 16.625 18.500 753.230
8-Jan-97 28.000 67.875 21.000 37.750 35.000 16.875 18.542 748.410
9-Jan-97 27.875 67.500 21.375 37.625 35.375 16.750 18.333 754.850
10-Jan-97 27.875 67.875 21.125 37.500 36.000 16.625 18.333 759.500
13-Jan-97 27.625 68.000 21.000 37.750 36.000 16.500 18.959 759.510
14-Jan-97 27.875 69.250 21.375 37.750 35.375 16.750 19.125 768.860
15-Jan-97 28.500 69.125 21.250 37.375 34.500 17.375 19.125 767.200
16-Jan-97 28.125 68.875 21.500 37.125 34.000 16.875 18.125 769.750
17-Jan-97 27.875 70.000 21.250 36.750 33.875 16.875 18.500 776.170
20-Jan-97 27.750 70.500 21.250 36.500 33.875 17.125 18.750 776.700
21-Jan-97 27.375 69.750 21.250 37.750 33.625 17.125 19.125 782.720
22-Jan-97 26.750 70.750 21.250 39.125 34.250 17.000 18.875 786.230
23-Jan-97 25.250 70.375 21.250 38.750 33.625 17.500 19.125 777.560
24-Jan-97 25.250 71.250 20.750 38.875 34.375 18.250 18.875 770.520
27-Jan-97 25.500 71.625 20.750 38.375 34.125 17.625 19.000 765.020
28-Jan-97 25.500 72.625 20.500 38.000 34.000 17.875 19.000 765.020
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
29-Jan-97 25.250 73.750 20.250 38.750 34.000 17.875 19.125 772.500
30-Jan-97 25.250 72.375 20.125 38.625 34.250 18.000 19.313 784.170
31-Jan-97 26.250 72.875 20.500 38.500 34.000 17.750 19.000 786.160
3-Feb-97 27.125 72.875 20.625 38.750 33.625 18.125 18.875 786.730
4-Feb-97 27.250 72.625 20.750 38.250 33.125 18.000 18.875 789.260
5-Feb-97 27.000 72.750 21.125 38.250 32.250 19.500 19.375 778.280
6-Feb-97 27.125 74.000 20.875 38.875 32.250 20.875 19.563 780.150
7-Feb-97 26.500 75.000 20.750 39.375 33.125 20.125 19.125 789.560
10-Feb-97 26.750 75.625 20.375 39.625 34.000 19.250 19.875 785.430
11-Feb-97 27.750 75.000 20.500 41.500 34.625 19.375 20.125 789.590
12-Feb-97 28.000 76.625 20.750 42.750 34.250 19.625 21.375 802.770
13-Feb-97 29.000 77.375 20.625 42.875 34.125 19.500 21.625 811.820
14-Feb-97 29.375 78.125 20.500 42.625 33.375 20.125 21.188 808.480
17-Feb-97 29.375 78.125 20.500 42.625 33.375 20.125 21.188 808.480
18-Feb-97 30.375 77.500 20.625 42.375 35.000 19.875 21.000 816.290
19-Feb-97 31.125 76.125 20.750 43.125 35.375 20.000 22.625 812.490
20-Feb-97 31.000 74.750 20.500 42.625 35.375 19.375 22.938 802.800
21-Feb-97 30.250 75.375 20.625 42.000 34.625 19.000 22.250 801.770
24-Feb-97 30.000 75.625 21.250 42.125 34.625 19.625 22.750 810.280
25-Feb-97 30.000 76.125 21.875 42.250 34.625 19.500 22.500 812.100
26-Feb-97 29.375 75.500 21.750 41.625 34.625 19.250 22.625 805.680
27-Feb-97 29.500 75.875 21.375 41.000 34.125 19.250 22.125 795.070
28-Feb-97 29.375 74.250 21.250 41.000 34.875 19.125 21.000 790.820
3-Mar-97 29.375 73.375 21.125 42.375 35.875 19.625 21.250 795.310
4-Mar-97 29.250 72.750 21.250 42.875 36.500 19.625 22.000 790.950
5-Mar-97 29.250 73.500 21.125 43.375 36.875 19.750 22.500 801.990
6-Mar-97 27.750 75.125 21.125 43.625 36.750 19.875 23.000 798.560
7-Mar-97 28.250 76.000 21.250 44.250 36.875 21.250 22.750 804.970
10-Mar-97 29.375 76.750 21.250 44.000 36.500 20.750 22.250 813.650
11-Mar-97 30.500 77.125 21.625 43.375 36.375 20.750 22.250 811.340
12-Mar-97 30.250 75.375 21.375 43.250 36.375 20.125 22.375 804.260
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
13-Mar-97 30.125 73.250 21.375 41.750 36.125 19.625 21.500 789.560
14-Mar-97 30.000 74.750 20.875 42.750 36.375 19.875 21.875 793.170
17-Mar-97 30.125 76.000 20.500 43.000 36.375 19.250 22.000 795.710
18-Mar-97 29.875 75.500 19.875 43.500 36.500 19.125 22.000 789.660
19-Mar-97 30.250 75.000 19.250 43.625 36.500 19.125 22.125 785.770
20-Mar-97 29.875 74.500 19.125 44.000 36.500 19.125 21.625 782.650
21-Mar-97 28.250 74.000 18.750 43.375 36.500 18.375 21.625 784.100
24-Mar-97 27.875 75.000 19.125 44.875 36.500 18.750 21.750 790.890
25-Mar-97 28.000 74.750 18.875 44.000 35.875 19.500 21.375 789.070
26-Mar-97 28.750 75.250 18.625 44.250 32.500 20.750 21.063 790.500
27-Mar-97 29.875 75.000 18.375 44.000 33.000 20.125 20.375 773.880
28-Mar-97 29.875 75.000 18.375 44.000 33.000 20.125 20.375 773.880
31-Mar-97 29.625 72.875 18.000 43.250 32.625 20.375 19.938 757.120
1-Apr-97 30.625 72.375 18.250 43.500 32.500 20.375 20.000 759.640
2-Apr-97 30.625 72.375 17.875 42.625 32.000 20.250 19.500 750.110
3-Apr-97 30.500 72.625 18.000 42.500 31.500 20.250 19.875 750.320
4-Apr-97 30.250 73.750 18.000 43.000 30.750 21.000 20.750 757.900
7-Apr-97 30.375 73.750 18.125 43.375 31.250 21.250 20.500 762.130
8-Apr-97 30.000 73.875 18.000 42.625 31.125 20.750 21.500 766.120
9-Apr-97 29.750 73.750 18.250 42.500 31.750 21.125 21.000 760.600
10-Apr-97 29.750 74.000 18.125 42.250 31.750 20.875 19.625 758.340
11-Apr-97 29.500 72.375 17.875 41.000 31.375 20.375 19.938 737.650
14-Apr-97 29.250 71.125 17.875 40.750 30.625 20.625 19.750 743.730
15-Apr-97 28.625 73.875 18.250 40.750 30.875 20.500 20.063 754.720
16-Apr-97 28.875 75.625 18.250 43.875 31.250 20.250 21.000 763.530
17-Apr-97 28.875 75.750 18.250 44.250 31.125 20.250 20.625 761.770
18-Apr-97 29.000 76.750 18.750 44.125 31.625 20.000 19.875 766.340
21-Apr-97 28.875 76.875 18.625 44.000 30.375 19.750 19.125 760.370
22-Apr-97 28.625 78.250 19.000 44.750 27.375 20.500 19.000 774.610
23-Apr-97 29.125 79.125 18.875 45.000 25.875 19.875 19.250 773.640
24-Apr-97 29.000 78.250 18.125 44.500 26.000 19.875 19.750 771.180
25-Apr-97 28.625 77.375 18.375 44.375 25.750 20.000 18.750 765.370
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
28-Apr-97 28.750 77.625 18.375 44.500 25.500 19.875 19.875 772.960
29-Apr-97 28.750 80.750 18.750 44.875 25.750 20.000 19.563 794.050
30-Apr-97 28.875 81.750 18.500 45.000 26.625 20.250 18.813 801.340
1-May-97 29.000 81.000 18.625 44.875 28.750 20.500 19.375 798.530
2-May-97 29.000 80.375 18.500 45.000 29.500 21.750 20.250 812.970
5-May-97 29.000 82.125 18.625 45.250 29.000 21.125 21.063 830.240
6-May-97 28.625 82.250 18.500 45.000 28.250 21.000 20.016 827.760
7-May-97 28.625 80.500 18.500 44.000 28.938 20.875 19.750 815.620
8-May-97 27.500 81.250 18.625 44.000 28.250 20.625 19.250 820.260
9-May-97 28.000 82.250 18.750 43.875 28.813 20.875 19.875 824.780
12-May-97 28.875 84.500 18.625 45.375 28.938 20.938 20.250 837.660
13-May-97 28.500 83.625 18.250 46.875 28.813 21.500 20.500 833.130
14-May-97 28.250 83.625 17.875 47.625 29.000 22.750 20.375 836.040
15-May-97 28.125 82.875 17.750 47.250 29.000 22.625 20.750 841.880
16-May-97 28.625 80.875 17.875 47.750 30.063 24.125 20.000 829.750
19-May-97 29.125 83.250 17.875 48.625 30.125 23.875 21.000 833.270
20-May-97 29.125 83.500 18.000 48.625 29.875 24.125 21.125 841.660
21-May-97 30.000 82.125 18.000 48.375 29.375 24.750 21.875 839.350
22-May-97 30.625 82.125 18.000 47.750 29.563 24.250 22.125 835.660
23-May-97 30.875 83.250 17.875 48.500 29.938 25.625 22.250 847.030
26-May-97 30.875 83.250 17.875 48.500 29.938 25.625 22.250 847.030
27-May-97 31.250 83.750 17.250 48.875 29.750 27.000 23.000 849.710
28-May-97 31.750 83.875 17.500 47.250 30.438 27.000 22.250 847.210
29-May-97 32.125 82.875 17.625 46.875 30.250 27.875 21.250 844.080
30-May-97 32.125 81.875 17.750 46.500 30.125 27.875 21.813 848.280
2-Jun-97 33.125 80.875 17.625 46.250 29.563 31.875 23.125 846.360
3-Jun-97 33.125 80.625 17.750 46.125 30.000 30.875 22.750 845.480
4-Jun-97 33.125 79.875 17.500 46.125 30.500 31.000 23.125 840.110
5-Jun-97 33.250 80.750 17.625 46.500 30.625 31.000 23.250 843.430
6-Jun-97 33.375 81.375 17.625 46.750 30.875 31.750 23.250 858.010
9-Jun-97 33.250 81.000 17.625 47.750 32.688 32.000 23.500 862.910
10-Jun-97 33.500 81.875 17.750 49.625 33.500 30.875 23.813 865.270]
</TABLE>
Entertainment Composite: News Corp., Time Warner, Disney and Viacom.
Cable Composite: BET Holdings, Liberty Media.
<PAGE>
[Continued from previous page]
Transaction Multiples
- ---------------------
Price per Share $35.00
Enterprise Value (EV) $1,866mm
Adjusted Enterprise Value (AEV) (a) $1,667mm
EV / LTM EBITDA 24.9x
AEV / LTM EBITDA (a) 15.8x
EV / 1997E EBITDA 22.9x
AEV / 1997E EBITDA (a) 15.2x
AEV / Subscribers (b) $24.30
(a) AEV=EV minus Flextech stake value of $49mm; estimated MTM value of $100mm,
estimated FiT TV value of $36mm and estimated value of other assets of
$15mm. Multiples exclude EBITDA contribution from those assets
(b) Includes 68.6 million Family Channel subscribers.
Transaction Comments
- --------------------
- -- The transaction will involve the merger of Fox Kids, a fully integrated
global children's television entertainment company owned by News Corp. and
Saban Entertainment, and IFE.
- -- The acquisitions of The Family Channel, one of the last remaining
independent cable channels, will provide Fox Kids with an established widely
distributed outlet for its programming.
- -- The transaction was announced a day after News Corp.'s announcement of the
exchange of its U.S. Satellite-TV business for a 31% nonvoting stake in
Primestar Partners LP in the form of convertible securities.
<PAGE>
SELECT COMPARABLE TRANSACTIONS
Implied Value Adjusted for Ratings
<TABLE>
<CAPTION>
Implied Levered
Value ($ millions) Subscribers Value per Value per
Transaction of Cable Network Rating (a) (millions) Viewers (a) Subscriber Viewer (a)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BET at $63 per Share $1,157 0.50 50.0 245,000 $23.14 $4,722
Comcast - Disney / E 550 0.34 42.7 153,000 12.88 3,595
Seagram's Universal /
USA Networks & Sci Fi 3,400 1.50 119.0 1,782,000 28.57 2,316
Westinghouse CBS /
TNN and CMT 1,485 0.65 107.0 697,000 13.88 2,131
Fox / IFE 1,667 1.22 68.6 864,000 24.30 1,929
</TABLE>
________________________________________________________________________________
(a) Based on Prime Time ratings as of October 1997.
[Goldman Sachs Logo]
38
<PAGE>
DCF BASED VALUATION
Core Cable Network
[Bar graph reflecting the following information:
<TABLE>
<CAPTION>
Sensitivity Analysis Sensitivity Analysis
Management Management Adjusted EBTDA Adjusted EBTDA
Projections- Projections Margin Margin
----------- ----------- ------ ------
<S> <C> <C> <C> <C>
11-14% Discount 11-14% Discount 11-14% Discount 12.5% Discount
Rates Rates Rates Rates
9-11x 2002 for Current 9-11x 2002 9-11x 2002 EBITDA
EBITDA Exit Margin EBITDA Exit Exit Multiple
Multiple 20-24% for Premium Multiple EBITDA margin @
Margin EBITDA margin 54%
9-11x 2002 EBITDA @ 58%
Exit Multiple
$ Per Share $72 - $95 $65 - 87 $58 - $76 $56 - $67
- -----------
Multiple of EBITDA Multiple of EBITDA Multiple of EBITDA Multiple of EBITDA
FY 1997 20.3x - 26.2x FY 1997 18.5x - 24.1x FY 1997 16.5x - 21.3x FY 1997 14.6 - 17.4x
FY 1998 14.5x - 18.8x FY 1998 13.2x - 17.3x FY 1998 12.2x - 15.7x FY 1998 12.2x - 14.4x
</TABLE>
New Offer $63
Current Price $54
Original Offer $48
Valuation ranges on July 31, 1998
[Goldman Sachs Logo]
39
<PAGE>
[Goldman Sachs Logo]
DISCOUNTED CASH FLOW VALUATION
Analysis of BET Cable Network
Valuation at July 31, 1998
<TABLE>
<CAPTION>
Using Management December Projections
-------------------------------------
Exit Multiple of 2002 EBITDA
---------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
11.0% 1,436,244 1,503,201 1,570,158 1,637,115 1,704,071
Discount 12.0% 1,387,343 1,451,940 1,516,537 1,581,135 1,645,732
Rate 12.5% 1,363,680 1,427,136 1,490,593 1,554,049 1,617,506
13.0% 1,340,524 1,402,865 1,465,206 1,527,546 1,589,887
14.0% 1,295,681 1,355,863 1,416,045 1,476,227 1,536,409
Using Constant EBITDA Margins
-----------------------------
Exit Multiple of 2002 EBITDA
- --------------------------------------------------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- --------------------------------------------------------------------------------------
11.0% 1,147,698 1,201,441 1,255,185 1,308,928 1,362,672
Discount 12.0% 1,108,425 1,160,275 1,212,124 1,263,974 1,315,823
Rate 12.5% 1,089,421 1,140,355 1,191,288 1,242,222 1,293,156
13.0% 1,070,823 1,120,861 1,170,900 1,220,938 1,270,977
14.0% 1,034,806 1,083,112 1,131,418 1,179,723 1,228,029
Note: EBITDA margin constant at 58%.
Using Management December Projections at Adjusted Rates
-------------------------------------------------------
Exit Multiple of 2002 EBITDA
----------------------------------------------
9.0 x 9.5x 10.0 x 10. x 11.0 x
- --------------------------------------------------------------------------------------
11%/20% 1,311,912 1,375,328 1,438,745 1,502,162 1,565,579
Discount 12%/21% 1,266,050 1,327,257 1,388,464 1,449,671 1,510,878
Rate 12.5%/22% 1,240,717 1,300,705 1,360,694 1,420,682 1,480,671
13%/23% 1,216,039 1,274,841 1,333,643 1,392,445 1,451,247
14%/24% 1,174,178 1,230,968 1,287,758 1,344,548 1,401,338
Note: Using discount rates of 11-14% for current EBITDA margin
and 20-24% for premium margin.
Using Fixed Discount Rate and Various EBITDA Margins
----------------------------------------------------
Exit Multiple of 2002 EBITDA
----------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- --------------------------------------------------------------------------------------
46% 847,469 887,865 928,261 968,657 1,009,053
EBITDA 50% 928,120 972,028 1,015,937 1,059,846 1,103,754
Margin 54% 1,008,770 1,056,191 1,103,613 1,151,034 1,198,455
58% 1,089,421 1,140,355 1,191,288 1,242,222 1,293,156
62% 1,170,071 1,224,518 1,278,964 1,333,411 1,387,857
Note: Discount rate constant at 12.5%.
</TABLE>
40
<PAGE>
[Goldman Sachs Logo]
DISCOUNTED CASH FLOW VALUATION
Analysis of BET Cable Network
Valuation Per Share at July 31, 1998
<TABLE>
<CAPTION>
Using Management December Projections
-------------------------------------
Exit Multiple of 2002 EBITDA
--------------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
11.0% 79.99 83.72 87.45 91.18 94.91
Discount 12.0% 77.27 80.86 84.46 88.06 91.66
Rate 12.5% 75.95 79.48 83.02 86.55 90.08
13.0% 74.66 78.13 81.60 85.07 88.55
14.0% 72.16 75.51 78.86 82.22 85.57
Using Constant EBITDA Margins
-----------------------------
Exit Multiple of 2002 EBITDA
--------------------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- ------------------------------------------------------------------------------
11.0% 63.92 66.91 69.91 72.90 75.89
12.0% 61.73 64.62 67.51 70.40 73.28
Discount 12.5% 60.68 63.51 66.35 69.19 72.028%.
Rate 13.0% 59.64 62.43 65.21 68.00 70.79
14.0% 57.63 60.32 63.01 65.70 68.39
Note: EBITDA margin constant at 58%
Using Management December Projections at Adjusted Rates
-------------------------------------------------------
Exit Multiple of 2002 EBITDA
- ------------------------------------------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- ------------------------------------------------------------------------------
11% / 20 73.07 76.60 80.13 83.66 87.19
Discount 12% / 21 70.51 73.92 77.33 80.74 84.15
Rate 12.5%/22 69,10 72.44 75.78 79.12 82.47
13% / 23 67.73 71.00 74.28 77.55 80.83
14% / 24 65.40 68.56 71.72 74.88 78.05
Note: Using discount rates of 11-14% for current margin and 20-24% for premium
margin.
Using Fixed Discount Rate and Various EBITDA Margins
----------------------------------------------------
Exit Multiple of 2002 EBITDA
----------------------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- ---------------------------------------------------------------------------
46% 47.20 49.45 51.70 53.95 56.20
EBITDA 50% 51.69 54.14 56.58 59.03 61.47
Margin 54% 56.18 58.82 61.47 64.11 66.75
58% 60.68 63.51 66.35 69.19 72.02
62% 65.17 68.20 71.23 74.26 77.30
Note: Discount rate constant at 12.5%.
</TABLE>
41
<PAGE>
[Goldman Sachs Logo]
DISCOUNTED CASH FLOW VALUATION
Analysis of BET Cable Network
Levered Multiple of 1998 EBITDA
<TABLE>
<CAPTION>
Using Management December Projections
-------------------------------------
Exit Multiple of 2002 EBITDA
---------------------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
11.0% 15.4 x 16.1 x 16.8 x 17.5 x 18.2 x
Discount 12.0% 14.9 x 15.6 x 16.3 x 16.9 x 17.6 x
Rate 12.5% 14.7 x 15.3 x 16.0 x 16.6 x 17.3 x
13.0% 14.4 x 15.1 x 15.7 x 16.4 x 17.0 x
14.0% 14.0 x 14.6 x 15.2 x 15.8 x 16.5 x
Using Constant EBITDA Margins
-----------------------------
Exit Multiple of 2002 EBITDA
------------------------------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- ------------------------------------------------------------------------------
11.0% 12.9 x 13.4 x 14.0 x 14.6 x 15.2 x
Discount 12.0% 12.4 x 13.0 x 13.6 x 14.1 x 14.7 x
Rate 12.5% 12.2 x 12.8 x 13.3 x 13.9 x 14.4 x
13.0% 12.0 x 12.6 x 13.1 x 13.7 x 14.2 x
14.0% 11.7 x 12.2 x 12.7 x 13.2 x 13.7 x
Note: EBITDA margin constant at 58%.
Using Management December Projections at Adjusted Rates
-------------------------------------------------------
Exit Multiple of 2002 EBITDA
---------------------------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
- -----------------------------------------------------------------------------
11% / 20% 14.1 x 14.8 x 15.5 x 16.1 x 16.8 x
Discount 12% / 21% 13.7 x 14.3% 14.9 x 15.6 x 16.2 x
Rate 12.5%/22% 13.4 x 14.0 x 14.6 x 15.3 x 15.9 x
13% / 23% 13.1 x 13.8 x 14.4 x 15.0 x 15.6 x
14% / 24% 12.7 x 13.3 x 13.9 x 14.5 x 15.1 x
Note: Using discount rates of 11-14% for current margin and 20-24% for premium
margin.
Using Fixed Discount Rate and Various EBITDA Margins
----------------------------------------------------
Exit Multiple of 2002 EBITDA
- -----------------------------------------------------------------------------
9.0 x 9.5x 10.0 x 10.5 x 11.0 x
------ ------ ------ ------ ------
46% 12.2 x 12.7 x 13.3 x 13.8 x 14.4 x
EBITDA 50% 12.2 x 12.7 x 13.3 x 13.8 x 14.4 x
Margin 54% 12.2 x 12.8 x 13.3 x 13.9 x 14.4 x
58% 12.2 x 12.8 x 13.3 x 13.9 x 14.4 x
62% 12.3 x 12.8 x 13.4 x 13.9 x 14.5 x
Note: Discount rate constant at 12.5%.
</TABLE>
42
<PAGE>
[Goldman Sachs Logo]
VALUATION SUMMARY OF OTHER UNITS
<TABLE>
<CAPTION>
Potential Current Market Value
- --------------------------------------------------------
Business Unit Value ($mm) Key Assumptions
- --------------------------------------------------------------
<S> <C> <C>
BET on Jazz $20 - 30 -- 2 million current subscribers
-- $10 - $15 per subscriber
(consistent with high quality
niche, start-up channels)
Action Pay-Per-View $20 - $25 -- 15 - 20x LTM EBITDA
Publishing $5 - 10 -- 1 - 2x LTM Sales
SoundStage $15 - 25 -- 8 - 12x 1999 EBITDA
Restaurants
Unconsolidated Affiliates $10 BET Movies/Starz! 3, LaVan
Hawkins Urban City Foods
and Cybersonic Records
valued at cost
Total $70 - 100
Per Share $4.00 - 6.00
</TABLE>
43
<PAGE>
[Chart continued from previous page]
<TABLE>
<CAPTION>
DCF of Management Projections
- -----------------------------
Value ($mm) Key Assumptions Other Comments
- -------------------------------------------------------------------------------------
<S> <C> <C>
$60 - 65 -- $33mm Revenue, -- Logical extension of brand equity
$19mm EBITDA by 2002 -- Little competition in niche market
-- 10X 2002 EBITDA -- Value of programming library
-- 30% discount rate over time
-- Growth currently constrained by
scarcity of analog spectrum
$30 - 32 -- $16mm Revenue, -- Growth has been slow due to
$4mm EBITDA by 2002 shortage of analog channel
-- 9 - 11x 2002 EBITDA capacity
-- 16 - 20% discount rate -- Limited access to high-profile
programming
-- Competitive segment
$8 - 10 -- $11mm Revenue, -- Low growth / low margin
$1mm EBITDA by 2002 business
-- 8 - 12x 2002 EBITDA -- Have already terminated YSB
-- 11 - 15% discount rate
$35 - 40 -- $19.3mm EBITDA by 2002 -- Successful restaurant launch in
-- 8 - 9x 2002 EBITDA Largo
-- 30% discount rate -- Attractive arrangement with
Disney
-- Cash flow associated with
restaurants are risky relative to
core
$10 -- BET Movies/Starz! 3, LaVan -- Little effect on valuation
Hawkins Urban City Foods
and Cybersonic Records
valued at cost
$145 - 160
$8.00 - 9.00
</TABLE>
<PAGE>
RECAPITALIZATION ANALYSIS SUMMARY
<TABLE>
<S> <C>
Price to the Public Shareholders $63.00
- -------------------------------- ------
Consolidated (Core) 1998 EBITDA/Interest:
Management 2.3x(2.4x)
Management Adjusted 2.1x(2.2x)
Salomon (a) 2.0x(2.2x)
2001 Equity Returns to Johnson Liberty (b):
9x EBITDA
Management 24.7%
Management Adjusted 17.7%
Salomon (a) 10.1%
10x EBITDA
Management 28.4%
Management Adjusted 21.4%
Salomon (a) 13.9%
11x EBITDA
Management 31.7%
Management Adjusted 24.8%
Salomon (a) 17.3%
</TABLE>
(a) Salomon projections for cable network, BET on Jazz and restaurants. BET
management projections for remaining BET units.
(b) Returns based upon $63.00 value per share.
44
<PAGE>
PROJECT BRETT
Goldman Meeting
February 9, 1998
Confidential
Salomon Smith Barney
A Member of TravelersGroup
45
<PAGE>
AGENDA
1. SUMMARY 1
2. PRECEDENT TRANSACTION ANALYSIS 3
3. FINANCIAL PROJECTIONS 7
Salomon Smith Barney
A Member of TravelersGroup
46
<PAGE>
SUMMARY
Salomon Smith Barney
A Member of TravelersGroup
47
<PAGE>
SUMMARY VALUATION
<TABLE>
<CAPTION>
Multiple Implied Value DCF Value
---------------------- ---------
Operating Segment Low High Low High
- ----------------- --- ---- --- ----
<S> <C> <C> <C> <C>
Cable Network $ 750 $ 900 $1,050 $1,200
Jazz 15 20 16 20
Action PPV (a) 30 40 30 40
Publishing (a) 8 10 8 10
Restaurants (b) 6 6 13 17
------ ------ ------ ------
Total Firm Value $ 809 $ 976 $1,117 $1,287
Less:
Net Debt 51 51 51 51
Plus:
Option Proceeds 29 29 29 29
Book Value of Equity Investments: 13 13 13 13
------ ------ ------ ------
Implied Equity Value $ 800 $ 967 $1,108 $1,278
Fully Diluted Shares
Outstanding (c) 18.5 18.5 18.5 18.5
Implied Equity Value
Per Share $43.00 $52.00 $60.00 $69.00
Premium/(Discount)
to MArket (d) 8.2% 30.8% 50.9% 73.6%
</TABLE>
(a) The DCF methodology is utilized in both scenarios since it more accurately
reflects the prospects associated with these limited growth entities.
(b) Value of invested capital.
(c) Primary shares outstanding of 16.7 million and options of 1.8 million with a
weighted average strike price of $15.95.
(d) Closing market price of $39.75 as of September 5, 1997.
Salomon Smith Barney
A Member of TravelersGroup
48 2
<PAGE>
PRECEDENT TRANSACTION ANALYSIS
Salomon Smith Barney
A Member of TravelersGroup
49 3
<PAGE>
PRECEDENT CABLE PROGRAMMING TRANSACTIONS
LARGE CATV NETWORKS - - GREATER THAN 50MM SUBSCRIBERS
(Dollars in Millions, except per Subscriber Multiples)
<TABLE>
<CAPTION>
Date
Announced Seller Acquiror Network
- --------- ------ -------- -------
<S> <C> <C>
Oct-97 Seagram HSN USA Networks
Sep-97 Viacom Seagram USA Networks
Jun-97 International Family Ent. Fox Kids Worldwide Family Channel
Feb-97 Gaylord Westinghouse CMT & TNN
Aug-96 Public Investors Silver King Home Shopping Network
Sep-95 Turner Broadcasting Time Warner Implied Network Value
Sep-94 Public Investors TCI & Comcast QVC
Mar-94 Viacom Hearst / Capital Cities ABC Lifetime Network
Jun-93 Rockefeller Group Hearst / Capital Cities ABC Arts & Entertainment
Sep-93 Liberty Media Cablevision Systems American Movie Classics
Nov-90 RJR Nabisco Hearst ESPN
</TABLE>
[Table continued from above]
<TABLE>
<CAPTION>
Total Implied Multiples of Firm Value
-----------------------
Stake Subs Firm Value Revenue EBITDA Subscriber
- ----- ----- --------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
100.0% 120.8 $3,285.0 NA 14.8X(A) $27.19
50.0 120.8 3,400.0 NA 15.3 28.15
100.0 69.0 1,428.0 3.8X 12.8 20.70
100.0 105.6 1,485.0 NA 11.2(A) 14.06
30.1 72.6 1,270.0 1.2 NM 17.49
100.0 387.8 7,114.0 4.0 13.4 18.34
65.0 56.6 2,182.2 1.7 10.8 38.55
33.3 59.1 952.8 3.9 11.6 16.12
12.5 56.9 400.0 2.3 11.8 7.03
50.0 52.0 390.0 4.4 12.2 6.70
20.0 57.3 850.0 1.7 11.8 14.83
Maximum 4.4x 15.3x $38.55
Median 3.0 12.0 17.49
Mean 2.9 12.6 19.02
Minimum 1.2 10.8 6.70
</TABLE>
(a) Based on forward EBITDA multiple.
Salomon Smith Barney
A Member of TravelersGroup
50 4
<PAGE>
[Table continued from previous page]
SMALL/START UP CATV NETWORKS - - LESS THAN 50MM SUBSCRIBERS
(Dollars in Millions, except per Sub Multiples)
<TABLE>
<CAPTION>
Date
Announced Seller Acquiror Network
- --------- ------ ------- -------
<S> <C> <C> <C>
Sep-97 A.H. Belo E.W. Scripps Television Food Network
Jun-97 Landmark Comm. Paxson Communications Travel Channel
Jan-97 Time Warner Inc. Comcast / Disney E! Entertainment
Jul-95 Cablevision Systems NBC Court TV
Apr-95 Adam & Eve Comm. Graff Pay-Per-View Adam & Eve
Dec-94 Home Video Channel Graff Pay-Per-View Pay-per-view operation
Oct-94 Video Jukebox Interntl. Ticketmaster The Box
May-94 Bill Daniels Tele-Communications Inc. Prime Ticket
Oct-93 Tele-Communications Flextech plc United Artists European
Jan-92 TWA Landmark Communications Travel Channel
May-91 Financial News Network General Electric Financial News Network
May-91 Financial News Network Discovery Communications Learning Channel
Jul-90 Country Music TV Gaylord Entertainment Country Music TV
Jan-90 Christian Best. Network International Family Ent. Family Channel
Jan-90 Company Directors Gold'N M Television Nostalgia Network
Feb-89 Investor Groups Investor Groups Discovery Channel
</TABLE>
[Table continued from previous page]
<TABLE>
<CAPTION>
Total Implied Multiples of Firm Value
-----------------------
Stake Subs Firm Value Revenue Ebitda Subscriber
- ----- ----- --------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
100.0% 26.5 $223.2 8.9x NM $ 8.42
100.0 18.7 75.0 4.2 NM 4.01
58.4 42.2 550.0 5.7 15.3 13.03
16.7 22.2 119.8 2.3 24.0 5.39
100.0 NA 7.2 1.8 NM NA
49.0 0.1 11.0 1.4 4.2 NM
50.0 NA 4.0 2.9 NA NA
100.0 NA 200.0 NA 14.0 NA
100.0 NA 297.4 NA NA NA
97.0 11.5 51.5 8.1 NM 4.48
100.0 26.0 154.3 NA NM 5.93
51.0 14.9 35.0 NA NM 2.35
100.0 11.5 35.0 7.0 NM 3.04
100.0 44.3 250.0 2.7 9.3 5.64
50.1 8.0 33.1 4.1 NM 4.14
40.0 39.6 300.0 4.8 30.0 7.58
Maximum 8.1x 30.0x $13.03
Median 4.1 14.6 4.94
Mean 4.1 16.1 5.56
Minimum 1.4 4.2 2.35
</TABLE>
<PAGE>
IMPLIED CABLE NETWORK VALUATION
<TABLE>
<CAPTION>
Operating Firm Value Multiples Implied Firm Value
-------------------- ------------------
(Dollars and subs in millions) Data(c) Low High Low High
------- --- ---- --- ----
<S> <C> <C> <C> <C> <C>
EBITDA
Fiscal 1997 - Company $68.9 10.0x 12.0x $689 $ 827
Fiscal 1998 - Company 96.4 10.0 12.0 964 1,157
Fiscal 1998 - Sensitivity 90.7 10.0 12.0 907 1,088
Subscribers
First Quarter 1998 (a) 51.6 $13.00 $15.00 671 774
Fiscal EOY Billable 1998 - Company 49.4 13.00 15.00 642 740
Fiscal EOY 1998 - Company (b) 56.0 13.00 15.00 728 840
Fiscal EOY Billable 1998 - Sensitivity 43.3 13.00 15.00 563 649
Fiscal EOY 1998 - Sensitivity 48.0 13.00 15.00 624 720
Salomon Smith Barney's Preliminary Value Estimate $750 $900
</TABLE>
(a) Source: December 15, 1997 Company press release as of October 31, 1997.
(b) Includes DBS on free carriage.
Salomon Smith Barney
A Member of TravelersGroup
51 5
<PAGE>
IMPLIED BET ON JAZZ VALUATION
<TABLE>
<CAPTION>
OPERATING FIRM VALUE MULTIPLES IMPLIED FIRM VALUE
-------------------- ------------------
DATA LOW HIGH LOW HIGH
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
EOY Subscribers
December 31, 1997 (a) 2.3 $4.00 $5.00 $ 9 $11
EOY 1998 - Company 5.7 4.00 5.00 23 28
F1998 EOY Billable - Company 1.9 4.00 5.00 8 10
EOY 1998 - Sensitivity 3.4 4.00 5.00 14 17
F1998 EOY - Billable - Sensitivity 0.8 4.00 5.00 3 4
Salomon Smith Barney's
Preliminary Value Estimate $15 $20
</TABLE>
(A) Actual reported subscribers from Company schedule.
Salomon Smith Barney
A Member of TravelersGroup
52 6
<PAGE>
FINANCIAL PROJECTIONS
Salomon Smith Barney
A Member of TravelersGroup
53 7
<PAGE>
MANAGEMENT PROJECTION ISSUES: CABLE NETWORK
CABLE NETWORK
Available units
Mix of economic and promotional/ADU units
Spot rates
Infomercial contract expiration
Subscriber growth
Domestic
DBS
Canadian
Production and programming expense
Marketing expense
Capital expenditures (timing and amount)
Salomon Smith Barney
A Member of TravelersGroup
54 8
<PAGE>
SENSITIZED CABLE NETWORK PROJECTIONS
<TABLE>
<CAPTION>
Summary Financial Data Projected fiscal year ended July 31,
(Dollars in Millions, except where noted) 1998 1999 2000 2001 2002
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Advertising Revenue $ 89.1 $ 97.0 $ 104.4 $ 112.5 $ 121.3
Subscriber Revenue 65.2 79.3 90.8 104.0 113.1
Other Revenue 0.5 0.6 0.6 0.7 0.7
Total Revenue $ 154.7 $ 176.8 $ 195.9 $ 217.1 $ 235.1
Production and Programming $ 24.2 $ 26.0 $ 28.0 $ 30.1 $ 32.3
Marketing 16.9 18.1 19.6 21.1 22.7
General and Administrative 23.0 23.7 24.5 25.7 27.0
EBITDA $ 90.7 $ 109.0 $ 123.8 $ 140.3 $ 153.1
Depreciation & Amortization 6.2 6.7 7.1 7.3 7.5
EBIT $ 84.5 $ 102.3 $ 116.7 $ 133.0 $ 145.6
Underlying Operating Assumptions
National Spots 126,000 126,000 126,000 126,000 126,000
Direct Response Spots 17,000 17,000 17,000 17,000 17,000
Total Economic Spots 143,000 143,000 143,000 143,000 143,000
ADU's and Promotions 43,000 43,000 43,000 43,000 43,000
Total Spots 186,000 186,000 186,000 186,000 186,000
National Spot Rate ($) $ 485.0 $ 530.0 $ 583.0 $ 641.0 $ 704.8
Direct Response Spot Rate ($) $ 300.0 $ 300.0 $ 300.0 $ 300.0 $ 300.0
Total Average Billable Subscribers (millions) 43,284.3 50,183.5 55,392.9 61,162.9 64,265.4
Annual Domestic per Subscriber Rate ($) $ 1.51 $ 1.60 $ 1.66 $ 1.72 $ 1.78
Annual Canadian per Subscriber Rate ($) $ 1.18 $ 1.23 $ 1.27 $ 1.31 $ 1.35
Capital Expenditures $ 12.0 $ 0.5 $ 0.5 $ 0.5 $ 0.5
</TABLE>
Salomon Smith Barney
A Member of TravelersGroup
55 9
<PAGE>
COMPARISON OF KEY RATIOS
<TABLE>
<CAPTION>
Summary Financial Data Projected fiscal year ended July 31,
(Dollars in Millions, except where noted) 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue Growth
Management Case 17.9% 20.5% 15.3% 13.9% 10.7%
Sensitivity Model 13.6% 14.3% 10.8% 10.9% 8.3%
--------------------------------------------------------------------------------------------------
EBITDA Margin
Management Case 60.0% 65.3% 68.4% 70.8% 72.3%
Sensitivity Model 58.6% 61.6% 63.2% 64.6% 65.1%
--------------------------------------------------------------------------------------------------
EBIT Margin
Management Case 56.2% 61.8% 65.2% 68.0% 69.6%
Sensitivity Model 54.6% 57.8% 59.6% 61.3% 61.9%
--------------------------------------------------------------------------------------------------
Underlying Operating Assumptions
--------------------------------------------------------------------------------------------------
National Spot Rate Growth
Management Case 16.9% 7.7% 11.2% 9.9% 10.0%
Sensitivity Model 8.2% 9.3% 10.0% 9.9% 9.9%
--------------------------------------------------------------------------------------------------
Direct Response Rate Growth
Management Case 6.1% 0.0% 0.0% 5.8% 6.8%
Sensitivity Model 10.3% 0.0% 0.0% 0.0% 0.0%
--------------------------------------------------------------------------------------------------
Total Average Billable Subscribers Growth
Management Case 8.2% 21.3% 11.2% 11.2% 6.1%
Sensitivity Model 6.6% 15.9% 10.4% 10.4% 5.1%
--------------------------------------------------------------------------------------------------
</TABLE>
Salmon Smith Barney
A Member of TravelersGroup
56 10
<PAGE>
MANAGEMENT PROJECTION ISSUES: BET ON JAZZ
BET ON JAZZ
Start-up business
Low barriers to entry
Pricing strategy evolving
Dependence on success of digital cable and DBS
Domestic subscriber growth
International subscriber growth
Rate per subscriber growth
Domestic
International
Production and programming expense
Marketing expense
Salomon Smith Barney
A Member of TravelersGroup
57 11
<PAGE>
BET ON JAZZ PROJECTIONS
<TABLE>
<CAPTION>
Summary Financial Data Projected fiscal year ended July 31,
(Dollars in Millions, except where noted) 1998 1999 2000 2001 2002
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Advertising Revenue $ 0.5 $ 1.5 $ 3.3 $ 5.6 $ 7.5
Subscriber Revenue 0.6 3.0 6.6 9.7 13.3
Other Revenue 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------------------------------------
Total Revenue $ 1.1 $ 4.5 $ 9.8 $ 15.3 $ 20.8
Production and Programming $ 9.3 $ 9.9 $ 10.6 $ 11.3 $ 12.1
Launch Support Amortization 0.7 1.3 1.9 2.5 2.8
General and Administrative 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------------------------------------
EBITDA ($8.9) ($6.7) ($2.7) $ 1.4 $ 5.9
Depreciation & Amortization 1.4 1.5 1.6 1.7 1.8
-------------------------------------------------------------------------------------------------------------
EBIT ($10.3) ($8.3) ($.4.3) ($0.3) $ 4.0
Underlying Operating Assumptions
-------------------------------------------------------------------------------------------------------------
Average Billable Domestic Subscribers (000s) 0.0 3,279.1 4,779.1 6,279.1 7,779.1
Average Billable International Subscribers (000s) 575.7 1,075.7 1,575.7 2,075.7 2,575.7
-------------------------------------------------------------------------------------------------------------
Total Average Billable Subscribers (000s) 575.7 4,354.8 6,354.8 8,354.8 10,354.8
-------------------------------------------------------------------------------------------------------------
Annual Domestic per Subscriber Rate ($) $ 0.000 $ 0.560 $ 1.030 $ 1.150 $ 1.270
Annual International per Subscriber Rate ($) $ 0.995 $ 1.290 $ 1.363 $ 1.527 $ 1.701
-------------------------------------------------------------------------------------------------------------
Domestic Advertising Revenue per Subscriber ($) $ 0.289 $ 0.435 $ 0.674 $ 0.882 $ 0.960
International Advertising Revenue per Subscriber ($) $ 0.000 $ 0.000 $ 0.000 $ 0.000 $ 0.000
-------------------------------------------------------------------------------------------------------------
Capital Expenditures $ 0.5 $ 0.5 $ 0.5 $ 0.5 $ 0.5
Launch Support Payments $ 3.0 $ 3.0 $ 3.0 $ 3.0 $ 3.0
</TABLE>
Salomon Smith Barney
A Member of TravelersGroup
58 12
<PAGE>
COMPARISON OF KEY RATIOS
<TABLE>
<CAPTION>
Summary Financial Data Projected fiscal year ended July 31,
(Dollars in Millions, except where noted) 1998 1999 2000 2001 2002
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue Growth
Management Case 97.8% 272.1% 115.4% 53.7% 22.0%
Sensitivity Model 49.4% 306.7% 118.9% 55.1% 36.3%
-------------------------------------------------------------------------------------------------------------
EBITDA Margin
Management Case (331.8%) (33.2%) 30.0% 49.1% 56.8%
Sensitivity Model (802.9%) (149.5%) (27.0%) 9.4% 28.2%
-------------------------------------------------------------------------------------------------------------
EBIT Margin
Management Case (396.6%) (51.9%) 20.8% 42.8% 51.3%
Sensitivity Model (933.3%) (183.8%) (43.7%) (2.1%) 19.3%
-------------------------------------------------------------------------------------------------------------
Underlying Operating Assumptions
-------------------------------------------------------------------------------------------------------------
Annual Domestic Subscriber Rate Growth
Management Case NM NM 83.9% 11.7% 10.4%
Sensitivity Model NM NM 83.9% 11.7% 10.4%
-------------------------------------------------------------------------------------------------------------
Annual International Subscriber Rate Growth
Management Case (31.3%) 29.7% 5.6% 12.0% 11.4%
Sensitivity Model (31.3%) 29.7% 5.6% 12.0% 11.4%
-------------------------------------------------------------------------------------------------------------
Domestic Advertising Revenue per Subscriber Growth
Management Case (19.1%) 50.5% 54.9% 30.8% 8.8%
Sensitivity Model (19.1%) 50.5% 54.9% 30.8% 8.8%
-------------------------------------------------------------------------------------------------------------
International Advertising Revenue per Subscriber
Management Case NM NM NM NM NM
Sensitivity Model NM NM NM NM NM
-------------------------------------------------------------------------------------------------------------
Total Average Billable Subscribers
Management Case 163.4% 424.0% 45.1% 28.8% 11.1%
Sensitivity Model 147.9% 75.0% 42.9% 30.0% 23.1%
-------------------------------------------------------------------------------------------------------------
</TABLE>
Salomon Smith Barney
A Member of TravelersGroup
59 13
<PAGE>
MANAGEMENT PROJECTION ISSUES: RESTAURANTS
Restaurants
Start-up business
Format of developments (club vs. restaurant)
Targeted number of sites.
Expected margins
Timing to break-even profitability
Management of business
Required capital investment
Salomon Smith Barney
A Member of TravelersGroup
60 14
<PAGE>
RESTAURANT PROJECTIONS
<TABLE>
<CAPTION>
Summary Financial Data Projected fiscal year ended July 31,
(Dollars in Millions, except where noted) 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Food Sales $ 5.6 $ 17.0 $32.4 $45.5 $48.9
Beverage Sales 2.8 8.4 16.0 22.5 24.2
Retail Sales 0.5 1.6 3.1 4.3 4.6
--------------------------------------------------------------------------------------------------
Total Revenue $ 8.8 $ 27.0 $51.5 $72.2 $77.7
Cost of Sales $ 2.3 $ 7.1 $13.5 $19.0 $20.4
Variable Expense 5.8 17.6 33.1 45.3 46.8
--------------------------------------------------------------------------------------------------
EBITDA $ 0.7 $ 2.4 $ 4.8 $ 8.0 $10.5
Management Fee $ 0.4 $ 1.4 $ 2.6 $ 3.6 $ 3.9
--------------------------------------------------------------------------------------------------
Adj. EBITDA $ 0.3 $ 1.0 $ 2.3 $ 4.4 $ 6.6
Depreciation & Amortization $ 0.5 $ 1.1 $ 2.0 $ 2.7 $ 2.7
--------------------------------------------------------------------------------------------------
EBIT ($0.2) ($0.1) $ 0.3 $ 1.7 $ 3.9
Underlying Operating Assumptions
--------------------------------------------------------------------------------------------------
New Restaurants 2 2 5 0 0
End of Year Restaurants 3 5 10 10 10
Capital Expenditures $ 8.0 $ 8.1 $20.1 $ 0.3 $ 0.3
--------------------------------------------------------------------------------------------------
Year of Operation 1 2 3 4 5 6
--------------------------------------------------------------------------------------------------
Total Revenue per Store (a) $6.28 $ 6.75 $ 7.26 $7.80 $8.39 $9.01
Total Variable Expense per Store (a) $4.20 $ 4.39 $ 4.59 $4.68 $4.78 $4.88
--------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents start-up curve associated with opening of restaurants.
Salomon Smith Barney
A Member of TravelersGroup
61 15
<PAGE>
COMPARISON OF SELECTED MINORITY BUYOUTS
Percent Increase in Final Bid vs. Initial Bid
While the average increase in minority buyout offers is 7.2%, the range is 0% to
51.2%
The BET transaction at $63 per share represents a 57.5% premium over the market
price prior to the original offer and a 31% premium over the initial offer
[Bar graph reflecting the following information:
<TABLE>
<CAPTION>
% Increase
in Offer Frequency
---------- ---------
<S> <C>
0 21
0.1-5.0 18
5.1-10 12 Mean
10.1-15 14
15.1-20 3
20.1-25 0
25.1+ 4 BET]
</TABLE>
[Goldman Sachs Logo]
62
<PAGE>
COMPARISON OF SELECTED MINORITY BUYOUTS
Percent Increase in Offer vs. Initial Premium Over Market Price
Descriptive Statistics
- ----------------------
Percent Increase in Offer:
Mean: 7.2
Range: 51.2
St. Dev.: 9.9
Initial Premium:
Mean 16.4
Range: 58.3
St. Dev.: 13.9
[Scatter chart reflecting the following information:
<TABLE>
<CAPTION>
Initial Premium Percent
Over Market Increase
Price in Offer
- ----- --------
<S> <C>
42.9 0.0
9.3 1.3
14.3 11.1
2.1 11.0
16.0 1.9
15.5 7.1
2.1 11.0
16.0 21.9
26.8 13.3
22.5 6.7
20.4 12.5
(2.5) 13.5
32.2 0.0
(1.3) 7.7
9.3 3.4
10.4 15.0
(3.1) 0.0
30.9 0.0
9.2 51.2
5.5 1.8
0.1 0.0
3.6 0.1
(5.9) 0.0
13.5 2.5
0.0 4.9
13.8 15.2
</TABLE>
[Goldman Sachs Logo]
63
<PAGE>
[Chart continued from previous page]
<TABLE>
<S> <C>
9.5 8.0
26.2 2.2
44.0 0.0
28.5 5.6
22.3 0.0
(2.7) 6.5
30.1 2.9
0.0 0.1
34.1 2.7
18.5 0.0
0.0 26.7
52.4 10.6
37.1 0.0
31.2 4.8
28.7 6.7
14.3 4.2
9.8 13.2
17.1 41.7
34.8 9.7
0.1 12.7
0.2 0.0
4.0 10.5
18.9 0.0
15.2 4.4
20.6 0.0
9.5 2.6
19.0 16.7
11.1 4.1
17.5 1.6
11.7 19.4
36.2 5.1
(2.1) 13.0
30.6 31.3
23.3 8.5
32.2 0.1
41.0 11.4
6.0 10.6
20.0 31.0]
</TABLE>
<PAGE>
SUMMARY OF OFFER PRICE CHANGES FOR SELECTED
MINORITY INTEREST BUYOUT TRANSACTIONS
<TABLE>
<CAPTION>
Company Initial Price Final Offer % Change
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
BIC Corporation $36.50 per share $40.50 per share 11%
Rhone Poulenc Rorer $92.00 per share $97.00 per share 5
La Petite Academy $9.50 per share $10.00 per share 5
Ocean Drilling & Exploration 0.5 share of Murphy 0.55 share of Murphy 10
($17.63 value) ($19.39 value)
Mean Change 8%
BET Holdings $48.00 per share $63.00 per share 31
</TABLE>
[Goldman Sachs Logo]
64
<PAGE>
SUMMARY OF OFFER PRICE CHANGES FOR SELECTED [Goldman Sachs Logo]
MINORITY INTEREST BUYOUT TRANSACTIONS
<TABLE>
<CAPTION>
Initial Offer Market Price Premium Market Price Premium
Company Price Per Share Previous Day to Market Final Offer Previous Day to Market
- --------------------- --------------- ------------ ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
BIC Corporation $36.50 $35.75 2% $40.50 $39.38 3%
Rhone Poulenc Rorer 92.00 79.44 16 97.00 94.56 3
La Petite Academy 9.50 8.25 15 10.00 8.88 13
Ocean Drilling 17.63 value 17.00 4 19.39 value 16.38 18
& Exploration
Mean Premiums 9 9
BET Holdings 48.00 40.00 20 63.00 54.69 15
</TABLE>
65
<PAGE>
COMPARISON OF SELECTED BUYOUTS BY [Goldman Sachs Logo]
SIGNIFICANT EXISTING SHAREHOLDERS
<TABLE>
<CAPTION>
Stock Price Initial Inside
One Day 52 Week Premium Ownership
Acquiring Company/ Prior to Date of High Prior Over 52 Before the
Date Acquired Company Ann. Ann. to Ann. Week High Transaction
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Median of Buyouts With >85% Existing Ownership (5.9)% 86.9%
Pending Petrofina S.A. $ 62.25 2/28/97 $ 62.50 (4.0)% 85.4%
Fina Inc.
8/97 Rhone-Poulenc/ 79.44 6/26/97 80.88 13.7 68.0
Rhone-Poulenc Rorer Inc.
4/97 Zeneca Group PLC/ 42.00 3/27/97 29.25 40.7 50.0
Salick Health Care
3/97 Tembec Inc./ 7.00 1/23/97 7.00 42.9 51.0
Spruce Falls
2/97 Hoechst AG/ 266.21 12/10/96 273.78 7.6 56.5
Roussel-Uclaf
10/96 Time Warner/ 23.70 8/29/95 23.70 25.8 19.0
Turner Broadcasting
9/96 Chemed Corp./ 36.50 8/9/96 41.50 (1.2) 58.1
Roto-Rooter Inc. (Chemed Corp.)
8/96 Investor Group/ 2.90 7/1/96 3.40 (30.0) 51.0
Macallan-Glenlivet
4/96 BHP/ 2.80 12/18/95 2.81 8.9 49.5
Tubemakers
1/96 Berkshire Hathaway Inc./ 55.75 8/25/95 68.63 2.0 52.4
GEICO Corp (Berkshire Hathaway)
12/95 COBE Laboratories/ 15.75 7/14/95 19.38 (7.1) 53.0
REN-Corp-USA (COBE Labs)
12/95 BIC SA/ 35.75 5/19/95 38.88 (6.1) 78.0
Bic Corp (BIC SA)
10/95 McCaw Cellular/ 109.88 4/7/95 140.50 (9.3) 52.0
LIN Bdcstg (McCaw Cellular)
9/95 PacifiCorp/ 24.25 11/2/94 29.50 (5.1) 86.6
Pacific Telecom (PacifiCorp)
6/95 Club Mediterranee SA/ 22.63 4/5/95 26.00 1.0 70.8
Club Med
</TABLE>
66
<PAGE>
[Chart continued from previous page]
<TABLE>
<CAPTION>
Aggregate Initial Final
Consideration Initial Premium Final Bid Premium Percent
for Amount Bid Per Over Market Per Over Market Increase
Acquired (000's) Share Price Share Price in Offer
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0.0% 18.3% 7.1%
$257,000 $60.00 (3.6)% N.A. N.A. N.A.
434,000 92.00 15.8 $ 97.00 22.1% 5.4%
234,000 N.A. N.A. 41.15 N.A. 0.0
175,000 N.A. N.A. 10.00 42.9 0.0
3,500,000 N.A. N.A. 294.53 10.6 0.0
6,880,700 N.A. N.A. 29.81 25.8 0.0
88,250 N.A. N.A. 41.00 12.3 0.0
137,200 N.A. N.A. 2.38 (13.0) 0.0
446,900 3.06 9.3 3.10 10.7 1.3
2,347,000 N.A. N.A. 70.00 25.6 0.0
177,700 18.00 14.3 20.00 27.0 11.1
212,600 36.50 2.1 40.50 13.3 11.0
3,323,400 127.50 16.0 129.90 18.2 1.9
159,000 28.00 15.5 30.00 23.7 7.1
135,600 26.50 1.6 32.00 41.4 21.9
</TABLE>
<PAGE>
COMPARISON OF SELECTED BUYOUTS BY [Goldman Sachs Logo]
SIGNIFICANT EXISTING SHAREHOLDERS
<TABLE>
<CAPTION>
Stock Price Initial Inside
One Day 52 Week Premium Ownership
Acquiring Company/ Prior to Date of High Prior Over 52 Before the
Date Acquired Company Ann. Ann. to Ann. Week High Transaction
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5/95 GTE Corp/ $17.75 9/8/94 $ 21.25 5.9% 90.0%
Contel Cellular Inc.
3/95 Siemens AG/ 12.25 1/9/95 16.00 (6.3) 14.2
Pyramid Technology
3/95 Proventus AB/ 3.70 12/15/94 4.29 N.A. 78.2
Aritmos AB
3/95 Dole Food Co. Inc./
Castle & Cooke Homes, Inc. 11.63 8/24/94 15.38 (8.9) 82.8
1/95 WMX Technologies Inc./ 8.00 7/28/94 10.88 (28.3) 78.5
Chemical Waste Management
1/95 Adia SA/ 26.50 3/23/94 33.25 5.3 81.0
Adia Services Inc.
12/94 Ogden Corp./ 17.38 6/6/94 24.25 (29.2) 83.2
Ogden Services
10/94 National Intergroup Inc./ 13.50 3/1/94 13.75 7.3 80.5
FoxMeyer
9/94 EW Scripps Co./ 78.50 2/17/94 86.00 0.7 86.0
Scripps Howard Broadcasting
7/94 Burlington Resources/ 4.63 4/26/94 6.75 (33.6) 87.1
Diamond Shamrock Offshore
6/94 Colonia Konzern AG/ 1,309.00 2/28/94 1,335.00 28.3 57.9(e)
Nordstern Allgemeine
4/94 Triarc Cos/ 15.50 4/26/93 16.50 2.6 71.0
Southeastern Public Service Co.
4/94 Medco Containment Services/ 25.75 10/13/93 36.50 (25.3) 54.2
Medical Marketing Group
4/94 Quartex Corp/CMS/ 1.63 7/1/93 2.13 30.8 65.0
Data Corp
</TABLE>
67
<PAGE>
[Chart continued from previous page]
<TABLE>
<CAPTION>
Aggregate Initial Final
Consideration Initial Premium Final Bid Premium Percent
for Amount Bid Per Over Market Per Over Market Increase
Acquired (000's) Share Price Share Price in Offer
- ----------------- ------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$254,300 $22.50 26.8% $25.50 43.7% 13.3%
261,700 15.00 22.5 16.00 30.6 6.7
141,300 N.A. N.A. 4.38 18.4 0.0
81,500 14.00 20.4 15.75 35.4 12.5
397,400 7.80 (2.5) 8.85 10.6 13.5
83,639 35.02(a) 32.2 N.A. N.A. 0.0
119,000 17.16 (1.3) 18.48 6.3 7.7
84,028 14.75(b) 9.3 0.90 13.0 3.4
shares(c)
125,386(d) 3 shares 10.4(d) 3.45 shares 26.9(d) 15.0
42,600 4.49 (3.1) N.A. N.A. 0.0
520,969(f) 1,713.00 30.9 1,713.00 30.9 0.0
86,140 0.55 9.2 .80 shares 65.2 51.2
shares and
122,510 27.25 5.5 27.75 7.8 1.8
26,740 6.52 400.0 7.00 328.6 7.4
</TABLE>
<PAGE>
COMPARISON OF SELECTED BUYOUTS BY [Goldman Sachs Logo]
SIGNIFICANT EXISTING SHAREHOLDERS
<TABLE>
<CAPTION>
Stock Price Initial Inside
One Day 52 Week Premium Ownership
Acquiring Company/ Prior to Date of High Prior Over 52 Before the
Date Acquired Company Ann. Ann. to Ann. Week High Transaction
- ----------- ----------------------------- --------------- -------- ------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
2/94 Holderbank Financiere Glaros/ $ 6.75 1/7/94 $ 7.75 (0.0)% 95.0%
Holham Inc.
1/94 Standard Industries Inc./ 7.00 5/19/93 9.75 (25.6) 8.8
Wellington Leisure Products,
Inc.
12/93 Valley Fashions Corp./ 48.88 9/20/93 51.13 (10.0) 95.0
West Point-Pepperell
Inc.
10/93 Torchmark/ 26.88 2/22/93 30.25 0.8 83.0
United Investors Management
5/93 Rust International Inc./ 17.88 11/13/92 23.88 (25.1) 56.0
Brand Cos Inc.
7/92 W.R. Grace & Company/ 15.25 3/2/92 19.00 (13.2) 83.4
Grace Energy Corporation
5/92 Unocal Corp./ 9.88 2/24/92 12.00 (9.8) 95.3
Unocal Exploration Corp.
5/92 Envirosource Inc./ 9.00 8/2/91 15.00(g) (24.3) 62.5
Envirosafe Services Inc.
Partially BLV Acquisition Corp./ 4.38 3/20/92 5.38 17.1 54.8
Completed Belvedere Corp.
1/92 Arkla Inc./ 14.25 9/18/91 20.88 (12.3) 82.0
Arkla Exploration Co.
12/91 Siemens AG/ 120.62 10/21/91 N.A. N.A. 78.0(h)
Siemens Nixdorf Information
Systems
12/91 Tele-Communications Inc./ 13.50 5/1/91 16.50 (20.4) 57.2
United Artists Entertainment Co.
10/91 LAC Minerals/ N.A. 2/8/91 6.25 N.A. 64.7
Bond International
10/91 Air & Water Technologies/ 15.25 3/1/91 31.50 (37.0) 82.0
Metcalf & Eddy Cos.
4/91 Murphy Oil Corp/ 16.63 4/6/89 22.63 (0.2) 61.0
Ocean Drilling & Exploration
</TABLE>
68
<PAGE>
[Chart continued from previous page]
<TABLE>
<CAPTION>
Aggregate Initial Final
Consideration Initial Premium Final Bid Premium Percent
for Amount Bid Per Over Market Per Over Market Increase
Acquired (000's) Share Price Share Price in Offer
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$51,700 $7.65 0.0% N.A. N.A. 0.0
3,683 7.25 3.6 $7.63 0.0% 0.0%
66,300 46.00 (5.9) N.A. N.A. 0.0
216,591 30.50 13.5 31.25 16.3 2.5
185,000 17.88 0.0 18.75 4.9 4.9
77,501 16.50 13.8 19.00 31.0 15.2
120,418 0.50 9.5 0.54 18.3 8.0
shares shares
14,400 2.70 26.2 5.00 29.0 2.2
shares shares
16,900 6.30 44.0 N.A. N.A. N.A.
92,640 0.90 28.5 0.95 35.6 5.6
shares shares
1,302,423(i) 147.52 22.3 147.52 22.3 0.0
1,189,000 .95(j) (2.7) 1.02(k) 3.6 6.5
shares shares
85,000 0.53(l) N.A. N.A. N.A. 0.0
shares
42,000 0.85 30.1 0.88 33.9 2.9
shares shares
366,242 0.50 0.0 0.55 0.1 0.1
shares shares
</TABLE>
<PAGE>
COMPARISON OF SELECTED BUYOUTS BY [Goldman Sachs Logo]
SIGNIFICANT EXISTING SHAREHOLDERS
<TABLE>
<CAPTION>
Stock Price Initial Inside
One Day 52 Week Premium Ownership
Acquiring Company/ Prior to Date of High Prior Over 52 Before the
Date Acquired Company Ann. Ann. to Ann. Week High Transaction
- ------- ------------------------------ ----------- -------- ------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
4/91 Ogden Corp./ $11.00 10/23/90 $14.75 0.0% 68.3%
ERC Environmental &
Energy Services
3/91 BHP Holdings/ 33.75 2/6/91 44.50 (10.1) 50.1
Hamilton Oil Corp.
2/91 Paramount Comm./ N.A. 7/12/90 N.A. N.A. 74.8
TVX Broadcast Group
11/90 National Intergroup Inc./ 2.62 12/20/89 6.75 0.4 44.1(m)
Permian Partners L.P.
11/90 Pier 1 Imports Inc. 8.75 9/25/90 N.A. N.A. 50.4
(of Intermarke Inc.)/
Sunbelt Nursery Group Inc.
11/90 Freeport-McMoRan Inc./ 8.00 7/31/90 11.13(o) (5.7) 81.5
Freeport-McMoRan Oil & Gas
10/90 Primerica Corp./ 9.75 4/18/89 11.38(r) 10.3 82.6
American Capital Mgmt.
& Research
10/90 Renault Vehicules Industrial/ 5.25 7/6/90 21.13 (71.6) 44.5(u)
Mack Trucks Inc.
9/90 Kansas City Southern 12.75 5/17/90 15.00 (6.7) 87.1
Industries, Inc./
DST Systems Inc.
9/90 Fuji Heavy Industries/ 5.13 1/16/90 8.50 (29.4) 49.5
Subaru of America
8/90 Imetal S.A./ 11.50 1/24/90 16.00 (3.1) 55.6
Copperweld Corp. Steel
8/90 American Express Company/ 14.50 3/2/90 N.A. N.A. 68.4(v)
Shearson Lehman Brothers
6/90 DeGeorges/ 11.50 3/19/90 27.25 (0.1) 51.0
LPL Technologies, Inc.
6/90 Esselte A.B./ 41.83 10/3/89 38.00 14.5 78.5
Esselte Business Systems, Inc.
5/90 Montedison S.p.A./ 31.12 N.A. 32.13 15.2 71.3
Erbamont
</TABLE>
69
<PAGE>
[Chart continued from previous page]
<TABLE>
<CAPTION>
Aggregate Initial Final
Consideration Initial Premium Final Bid Premium Percent
for Amount Bid Per Over Market Per Over Market Increase
Acquired (000's) Share Price Share Price in Offer
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 38,000 $14.75 34.1% $15.13 37.5% 2.7%
530,000 40.00 18.5 40.00 18.5 0.0
46,576 7.50 N.A. 9.50 N.A. 26.7
59,063 4.00 52.4 4.425(n) 68.6 10.6
20,704 12.00 37.1 12.00 37.1 0.0
239,161 0.27-0.329 31.2 0.283-0.345 37.5 4.8
shares(p) shares(q)
48,752 0.30 28.7 0.32 37.3 6.7
shares(s) shares(t)
or 11.50
103,145 6.00 14.3 6.25 19.1 4.2
35,000 14.00 9.8 15.85 24.3 13.2
208,414 6.00 17.1 8.50 65.9 41.7
781,571 15.50 34.8 17.00 47.8 9.7
393,515 0.43 0.1 0.48 12.8 12.7
shares(w) shares(x)
37,500 24.00 0.2 25.00 0.3 0.0
219,298 43.50 4.0 48.06 14.9 10.5
465,904 35.00 18.9 37.00 18.9 0.0
2.00(y)
</TABLE>
<PAGE>
COMPARISON OF SELECTED BUYOUTS BY [Goldman Sachs Logo]
SIGNIFICANT EXISTING SHAREHOLDERS
<TABLE>
<CAPTION>
Stock Price Initial Inside
One Day 52 Week Premium Ownership
Acquiring Company/ Prior to Date of High Prior Over 52 Before the
Date Acquired Company Ann. Ann. to Ann. Week High Transaction
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4/90 Anderson Group PLC/ $ 7.38 2/16/90 $ 8.38 1.5% 51.2%
National Mine Service Co.
3/90 Heritage Media Corp./ 17.00 12/1/88 9.50 115.8 57.0
Pop Radio Corp.
2/90 Carlson Companies, Inc./ 13.25 5/19/89 13.75 5.5 68.0
TGI Friday's Inc.
1/90 Dow Jones & Co. Inc./ 15.13 9/21/89 16.38 9.8 66.2
Telerate, Inc.
1/90 Montedison S.p.A./ 44.13 7/31/89 46.00 6.5 81.0
HIMONT Inc.
1/90 Tele-Communications Inc./ 27.00 5/24/89 24.00 32.3 75.0
WestMarc Communications
12/89 General Accident Fire & Life/ 0.28 6/16/89 1.38 N.A. 51.0
NZI Corp. Ltd.
11/89 Primerica Corporation/ 17.88 6/9/89 21.25(z) (5.9) 69.8
The A.L. Williams Corporation
11/89 Mayfair Acquisition Corp/ 17.25 4/3/89 25.25 (6.9) 71.0
Mayfair Super Markets, Inc.
10/89 ENSERCH Corp./ 11.25 2/15/89 12.75 (13.6) 87.4
ENSERCH Exploration Partners
9/89 United Meridian Corporation/ 6.13 1/27/89 9.00 (11.1) 60.1
Ensource Inc.
8/89 The Henley Group, Inc./ 19.25 6/8/89 21.38 (4.1) 80.2
Fisher Scientific Group, Inc.
6/89 Zayre Corp./ 26.38 12/5/88 27.13 0.3 83.0
The TJX Companies, Inc.
6/89 Allied Irish Banks plc/ 25.00 9/12/88 27.68 27.3 49.7
First Maryland Bancorp.
5/89 Investors (Private-USA)/ 5.25 12/6/88 8.50 (30.9) 69.0
Sage Energy Co.
</TABLE>
70
<PAGE>
[Chart continued from previous page]
<TABLE>
<CAPTION>
Aggregate Initial Final
Consideration Initial Premium Final Bid Premium Percent
for Amount Bid Per Over Market Per Over Market Increase
Acquired (000's) Share Price Share Price in Offer
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$21,000 $8.50 15.2% $8.88 20.3% 4.4%
32,243 20.50 20.6 20.50 20.6 0.0
53,525 14.50 9.5 14.88 12.3 2.6
657,394 18.00 19.0 21.00 38.8 16.7
653,811 47.00 11.1 51.00 15.6 4.1
2.00(y)
209,625 31.75 17.5 32.25 19.4 1.6
175,000 N.A. N.A. 0.37 32.1 0.0
532,795 0.80 11.7 0.82-0.85 33.4 19.4
shares(1) shares(2)
193,600 23.50 36.2 24.70 43.2 5.1
151,194 0.50 (2.1) 0.50 10.7 13.0
shares shares and
26,341 8.00 30.6 10.50 71.4 31.3
119,801 20.50 23.3 22.25 33.8 8.5
314,081 1.35 32.2 1.45 0.4 0.1
shares(4) shares(4)
365,000 35.25 41.0 39.25 57.0 11.4
22,083 5.88 6.0 6.50 17.3 10.6
</TABLE>
<PAGE>
PRIME TIME RATINGS TREND
QUARTERLY, 1991 - 1997
<TABLE>
<CAPTION>
USA Sci Fi A&E BET CMT CNN DSC E! ESPN FAM LIFE TBS TNN TNT
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1Q 91 2.40 0.70 0.60 1.00 1.40 0.90 1.20 2.50 1.20 1.60
2Q 91 1.80 0.70 0.50 1.10 0.90 1.70 0.80 1.20 1.80 1.20 1.90
3Q 91 2.30 1.30 0.50 0.40 1.20 0.90 2.20 0.70 1.20 2.20 1.10 1.90
4Q 91 2.20 0.70 0.50 0.30 1.40 1.00 2.40 0.90 1.20 2.50 1.40 1.70
1Q 92 2.60 0.80 0.40 0.30 1.30 1.30 1.80 1.50 1.30 2.50 1.40 1.50
2Q 92 2.10 0.70 0.40 0.40 1.20 0.90 1.60 0.80 1.10 2.00 1.10 2.00
3Q 92 2.30 0.80 0.50 0.50 1.50 0.90 1.70 0.80 1.20 2.40 1.10 1.90
4Q 92 2.20 0.90 0.70 0.50 1.90 1.00 2.30 1.00 0.90 2.20 1.20 1.70
1Q 93 2.30 0.90 0.70 0.40 1.20 1.10 0.10 1.70 1.10 1.10 2.10 1.10 1.50
2Q 93 2.30 0.90 0.60 0.40 0.90 0.90 0.20 1.50 0.90 1.00 2.20 0.90 1.90
3Q 93 2.30 0.70 0.90 0.50 0.40 0.90 1.00 0.20 1.80 0.60 1.20 2.50 0.90 1.80
4Q 93 2.20 0.60 0.90 0.60 0.40 0.90 0.90 0.30 2.00 0.90 1.00 2.30 0.90 1.80
1Q 94 2.40 0.60 1.00 0.60 0.30 0.90 1.00 0.30 1.30 1.00 1.00 2.00 0.90 1.40
2Q 94 2.30 0.50 1.00 0.60 0.30 0.90 1.00 0.30 1.60 1.00 1.10 2.20 1.00 2.00
3Q 94 2.30 0.50 1.10 0.60 0.30 1.20 0.90 0.20 1.60 0.90 1.30 1.80 1.00 1.90
4Q 94 2.30 0.60 1.10 0.70 0.40 1.00 1.00 0.20 2.60 1.10 1.20 1.80 1.20 1.80
1Q 95 2.60 0.80 1.14 0.60 0.40 1.33 1.18 0.42 1.40 1.10 1.32 1.98 1.10 1.61
2Q 95 2.20 0.60 1.02 0.60 0.40 1.20 1.13 0.40 1.30 0.90 1.46 1.90 1.00 2.40
3Q 95 2.20 0.60 0.92 0.60 0.30 1.51 1.19 0.39 1.19 1.22 1.51 1.78 0.80 2.35
4Q 95 2.30 0.60 1.02 0.60 0.30 1.00 1.19 0.33 2.35 1.29 1.62 2.01 1.00 1.84
1Q 96 2.20 0.50 1.37 0.70 0.30 0.86 1.29 0.36 1.36 1.46 1.68 2.12 0.90 1.98
2Q 96 1.90 0.50 1.25 0.60 0.30 0.75 1.11 0.32 1.50 1.15 1.42 1.87 0.90 2.12
3Q 96 1.80 0.80 1.14 0.50 0.30 0.90 1.16 0.28 1.19 1.25 1.34 1.92 0.80 2.45
4Q 96 1.90 0.70 1.24 0.40 0.40 0.87 1.17 0.30 2.15 1.20 1.35 1.99 0.90 2.09
1Q 97 2.00 0.70 1.35 0.40 0.30 0.94 1.21 0.38 1.28 1.19 1.46 1.80 1.00 1.99
2Q 97 1.80 0.70 1.33 0.40 0.30 0.78 1.25 0.30 1.28 1.06 1.53 1.85 0.90 2.41
3Q 97 (a) 2.00 0.70 1.38 0.50 0.30 0.75 1.07 0.34 1.10 1.22 1.43 1.44 0.80 2.53
</TABLE>
(a) Based on October ratings from Paul Kagan and Associates.
71
<PAGE>
EXHIBIT 99.17(c)(1)
JOINT FILING AGREEMENT
JOINT FILING AGREEMENT, dated as of September 12, 1997, by and between
Tele-Communications, Inc., a Delaware corporation, and Robert L. Johnson.
WHEREAS, each of the parties hereto beneficially owns shares, or options
to purchase shares, of Class A Common Stock, Class B Common Stock or Class C
Common Stock (collectively, the "Company Securities") of BET Holdings, Inc., a
Delaware corporation;
WHEREAS, the parties hereto constitute a "group" with respect to the
beneficial ownership of the Company Securities for purposes of Rule 13d-1 and
Schedule 13D promulgated by the Securities and Exchange Commission; and
NOW, THEREFORE, the parties hereto agree as follows:
1. The parties hereto shall prepare a single statement containing the
information required by Schedule 13D with respect to their respective interests
in the Company Securities (the "Reporting Group Schedule 13D"), and the
Reporting Group Schedule 13D shall be filed on behalf of each of them.
2. Each party hereto shall be responsible for the timely filing of the
Reporting Group Schedule 13D and any necessary amendments thereto, and for the
completeness and accuracy of the information concerning him or it contained
therein, but shall not be responsible for the completeness and accuracy of the
information concerning any other party contained therein, except to the extent
that he or it knows or has reason to believe that such information is
inaccurate.
3. This Agreement shall continue unless terminated by any party hereto.
4. Stephen M. Brett, Esq. and Frederick H. McGrath, Esq. shall be
designated as the persons authorized to receive notices and communications with
respect to the Reporting Group Schedule 13D and any amendments thereto.
5. This Agreement may be executed in counterparts, each of which taken
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
/s/ Robert L. Johnson
-------------------------
Robert L. Johnson
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
----------------------
Name: Stephen M. Brett
Title: Executive Vice President and General
Counsel
-2-
<PAGE>
Exhibit 99.17(c)(2)
LIBERTY MEDIA CORPORATION
8101 East Prentice Avenue, Suite 500
Englewood, CO 80111
September 11, 1997
Robert L. Johnson
2915 Audubon Terrace, N.W.
Washington, D.C. 20018
Dear Mr. Johnson:
This letter agreement (this "Agreement") confirms the agreement between
Robert L. Johnson ("Johnson", which term shall include any entity formed by Mr.
Johnson to hold the Company Securities (as defined below) beneficially owned by
him) and Liberty Media Corporation ("Liberty") with respect to the proposed
joint acquisition (the "Acquisition") of BET Holdings, Inc. (the "Company").
This Agreement sets forth the general terms and conditions under which Liberty
and Johnson will act together in respect of the Acquisition, together with the
rights and obligations of Johnson and Liberty in respect of each other in
connection with the Acquisition.
1. The Acquisition. Johnson and Liberty agree to proceed with the
---------------
Acquisition jointly and, subject to the terms and conditions contained herein,
to use their respective commercially reasonable efforts to cause the Acquisition
to be consummated as promptly as practicable. Until the Acquisition is
consummated, all material decisions with respect to the Acquisition (including,
without limitation, decisions relating to the price to be offered to
<PAGE>
acquire the outstanding capital stock of the Company, the treatment of
outstanding options, warrants or other rights to acquire securities of the
Company, the structure of the Acquisition, and the settlement of any legal
actions relating to the Acquisition) shall be as Johnson and Liberty may
mutually agree. Johnson and Liberty agree to use their respective commercially
reasonable efforts, acting in good faith, to resolve, on a mutually acceptable
basis, any disagreements they may have with respect to such material decisions.
The date of the consummation of the acquisition of all Company Securities (as
defined below) (other than Company Securities owned by Johnson and Liberty) is
hereinafter referred to as the "Acquisition Date."
2. Formation of Newco; Equity Interests. (a) In order to facilitate
------------------------------------
the Acquisition, Johnson and Liberty intend to form an acquisition entity
("Newco," which term shall include the entity surviving any merger or business
combination between the Company and Newco). The parties presently contemplate
that Newco will be a Delaware corporation. Each of Johnson and Liberty agree,
subject to both parties and any applicable lenders agreeing as to the treatment
of any indebtedness secured by any party's Company Securities, (i) to contribute
to Newco contemporaneously with and contingent upon the consummation of the
Acquisition all Company Securities owned by such party as of the date hereof and
(ii) that upon such contribution, such Company Securities will be free of any
liens, claims, charges, security interests, pledges or encumbrances of any kind
(other than any of the foregoing created by or pursuant to this Agreement or as
a result of applicable state and federal securities laws). Schedule I hereto
contains a list of all Company Securities owned by each of Johnson and Liberty
as of the date hereof, which list is true and correct in all material respects.
To the extent that the parties are
<PAGE>
required prior to the Acquisition Date to advance funds to Newco in connection
with the Acquisition, each party will enter into margin or other loan agreements
on terms reasonably acceptable to such party (which terms may require such party
to pledge all of the Company Securities owned by such party to such lender in
connection with such loan) and to borrow such amounts (subject to margin rules)
as may be required to satisfy such party's obligation to advance funds
hereunder, and contribute or, if the parties so mutually agree, lend, the
proceeds of such borrowings to Newco. The term "Company Securities" shall mean
all shares of capital stock of the Company and all options, warrants and other
rights to acquire capital stock of the Company.
(b) The parties' equity interests in Newco shall be based upon the value
of their respective contributions to Newco. For purposes of the foregoing, (i)
all contributions of shares of Class A Common Stock, Class B Common Stock and
Class C Common Stock shall be valued at the price per share of Class A Common
Stock to be paid to unaffiliated stockholders of the Company in the Acquisition
(the "Offer Price") and (ii) all contributions of options, warrants or other
rights to acquire Company Securities will be valued at the spread between the
Offer Price and the exercise price of such option, warrant or other right. Upon
their contribution of Company Securities or cash to Newco in connection with the
Acquisition, each of Johnson and Liberty will be issued equity interests in
Newco which will be in proportion to the aggregate value of his or its
contribution to Newco.
(c) As soon as is reasonably practicable, the parties will negotiate in
good faith the terms of a stockholders' agreement or similar arrangement which
should include, among other
<PAGE>
things, provisions (i) relating to the governance of Newco and the Company
following the Acquisition Date and (ii) providing for reasonable liquidity for
each of the parties.
3. Financing. The parties agree to work together to arrange appropriate
---------
financing for the Acquisition and matters related thereto as previously
discussed by the parties, and the parties' obligations hereunder are conditioned
upon the obtaining of such financing on terms and conditions reasonably
acceptable to each party. In the event the parties are required to obtain
financing prior to the Acquisition, the parties agree to cooperate with respect
to the obtaining of such financing and to coordinate such interim financing with
the permanent financing for the Acquisition.
4. Representations and Warranties of Johnson. Johnson represents and
-----------------------------------------
warrants to Liberty that: this Agreement has been duly executed and delivered
by Johnson and, assuming the due execution and delivery thereof by Liberty, is a
valid and binding obligation of Johnson, enforceable against him in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and by general principles of equity; the
execution and delivery of this Agreement and the performance of Johnson's
obligations hereunder will not conflict with or result in a material breach or
violation of (i) any material agreement to which Johnson is a party or by which
he or his property are bound, or (ii) assuming expiration of all applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), without objection to the transactions contemplated
hereby by the Department of
<PAGE>
Justice (the "DOJ") or the Federal Trade Commission (the "FTC"), any applicable
law or regulation; except for certain Delaware stockholder suits, there is no
action, suit, proceeding or investigation pending or, to the best of Johnson's
knowledge, threatened against Johnson, Liberty, Newco, the Company or their
respective affiliates relating to the transactions contemplated by this
Agreement, including, without limitation, the Acquisition; except for filings
under the HSR Act, no consent, approval or authorization of, or any
registration, qualification or filing with, any governmental agency or authority
or any other person is required in order for Johnson to execute, deliver and
perform his obligations under this Agreement; except as set forth on Schedule
II, Johnson is the record and beneficial owner of the Company Securities listed
below his name on Schedule I hereto, such Company Securities have been validly
issued, are fully paid and non-assessable, and such Company Securities are free
of any liens, claims, charges, security interests, pledges or encumbrances of
any kind (other than any of the foregoing created herein or hereby or as a
result of applicable state and federal securities laws); and other than as set
forth in Schedule I, Johnson does not beneficially own any Company Securities.
5. Representations and Warranties of Liberty. Liberty represents and
-----------------------------------------
warrants to Johnson that: (a) Liberty is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full power and authority to execute, deliver and perform this Agreement, and
the performance of Liberty's obligations hereunder have been duly authorized by
all necessary action (corporate or other) on the part of Liberty; (b) this
Agreement has been duly executed and delivered by Liberty and, assuming the due
execution and delivery hereof by Johnson, is a valid and binding obligation of
Liberty, enforceable in accordance
<PAGE>
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and by general principles of equity; (c) the
execution and delivery of this Agreement and the performance of Liberty's
obligations hereunder will not conflict with or result in a material breach or
violation of (i) any material agreement to which Liberty is a party or by which
Liberty or its property is bound, or (ii) assuming expiration of all applicable
waiting periods under the HSR Act without objection to the transactions
contemplated hereby by the DOJ or the FTC, any applicable law or regulation; (d)
except for certain Delaware stockholder suits, there is no action, suit,
proceeding or investigation pending or, to the best of Liberty's knowledge,
threatened against Liberty, Johnson, Newco, the Company or their respective
affiliates relating to the transactions contemplated by this Agreement,
including, without limitation, the Acquisition; (e) except for filings under the
HSR Act, no consent, approval or authorization of, or any registration,
qualification or filing with, any governmental agency or authority or any other
person is required in order for Liberty to execute, deliver and perform its
obligations under this Agreement; (f) except as set forth on Schedule III
Liberty is the record and beneficial owner of the Company Securities listed
below its name on Schedule I hereto, such Company Securities have been validly
issued, are fully paid and non-assessable, and such Company Securities are free
of any liens, claim charges, security interests, pledges, or encumbrances of any
kind (other than any of the foregoing created herein or hereby or as a result of
applicable state and federal securities laws); and (g) other than as set forth
in Schedule I, neither Liberty nor Tele-Communications, Inc. ("TCI")
beneficially owns any Company Securities.
<PAGE>
6. Covenants of Liberty and Johnson. (a) Each of Liberty and Johnson
--------------------------------
agree that it or he will (i) vote all shares of Company Common Stock in respect
of which it or he has, directly or indirectly, the power to vote or control the
voting of, in favor of the Acquisition; (ii) vote all shares of Company Common
Stock in respect of which it or he has, directly or indirectly, the power to
vote or control the voting of, against any Alternative Transaction (as defined
below); (iii) except for the contribution contemplated by Section 2 hereof, not
sell or dispose of any Company Securities owned (now or at any time prior to the
Acquisition), directly or indirectly, by it or him, (iv) not enter into any
agreement, arrangement or understanding with any other person the effect of
which is to limit or restrict its or his right to vote any shares of Company
Common Stock in accordance with the terms of this Agreement; (v) not enter into
any agreement, arrangement or understanding with any other person with respect
to the purchase, sale or voting of shares of Company Common Stock; and (vi) not
solicit any Alternative Transaction; provided, however, that the parties
-------- -------
acknowledge and agree that the matters referred to in clauses (v) and (vi) above
shall not restrict or limit actions taken by Johnson or any officer or director
of Liberty or TCI serving on the Board of Directors of the Company, provided
that such actions are taken in such person's capacity as a director of the
Company pursuant to such person's fiduciary duties.
(b) For purposes of this Agreement, an "Alternative Transaction" means a
transaction or series of related transactions (other than the Acquisition)
resulting in (a) any change of control of the Company, (b) any merger or
consolidation of the Company in which another person acquires 25% or more of the
aggregate voting power of all voting securities of
<PAGE>
it or the surviving corporation, as the case may be, (c) any tender offer or
exchange offer for, or any acquisitions of, any securities of the Company which,
if consummated, would result in another person owning 25% or more of the
aggregate voting power of all voting securities of the Company or (d) 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 taken as a whole before giving
effect to such sale or other disposition.
7. Regulatory Approvals. The obligations of the parties under
--------------------
Sections 1 and 2 of this Agreement are conditioned upon the receipt of all
necessary governmental and agency approvals required for the consummation of the
transactions contemplated hereby, including but not limited to, compliance with
all securities laws and the expiration or termination of all applicable waiting
periods under the HSR Act.
8. Fees and Expenses. All costs and expenses incurred in connection
-----------------
with this Agreement and the transactions contemplated hereby shall be paid or
reimbursed by Newco following the Acquisition, or if the Acquisition is not
consummated, then paid by the parties in proportion to their respective equity
interests in Newco (assuming for such purpose that each party had contributed
all Company Securities beneficially owned by it in accordance with Section 2).
In the event that the Acquisition is not consummated and the Company makes any
payment to Newco pursuant to the terms of a definitive Acquisition Agreement,
then the proceeds of such
<PAGE>
payment will be allocated first to the payment of the foregoing costs and
expenses, and thereafter to Johnson and Liberty in accordance with their
respective equity interests in Newco.
9. Indemnification. If, after Newco and the Company enter into a
---------------
definitive acquisition agreement (the "Acquisition Agreement"), either party
(the "Acting Party") breaches or causes Newco to breach such Acquisition
Agreement (including, but not limited to, as a result of any breach of any
representation, warranty or covenant in this Agreement) and the Company
thereafter (x) terminates such Acquisition Agreement and (y) asserts a claim or
cause of action against Newco or the parties, then the Acting Party shall
indemnify the other party for any loss, damage, or expense (including reasonable
legal fees and expenses) arising out of or relating to such claim or cause of
action. This right of indemnification shall apply notwithstanding the status of
the parties as joint and several obligors under the Acquisition Agreement. If
both parties have contributed to cause the events described in the first
sentence of this Section, then liability will be allocated between the parties
in proportion to their relative fault.
10. Salomon Engagement Letter. (a) Johnson and Liberty intend to enter
-------------------------
into an engagement letter (the "Engagement Letter", which term shall include for
purposes of this Agreement any related indemnification letter or agreement) with
Salomon Brothers Inc ("Salomon") retaining Salomon as the financial advisor for
Johnson and Liberty in connection with the Acquisition. Johnson and Liberty
agree that (i) any amounts payable to Salomon under the Engagement Letter prior
to the consummation of the Acquisition shall be paid by the parties in
proportion to their respective equity interests in Newco (assuming for such
purpose that each
<PAGE>
party had contributed all Company Securities beneficially owned by it in
accordance with Section 2 and (ii) any amounts payable to Salomon under the
Engagement Letter upon the consummation of the Acquisition shall be paid or
reimbursed by the Company, or the entity succeeding to the Company's business,
following the Acquisition.
(b) The parties anticipate that the Engagement Letter will contain
certain joint and several obligations of Johnson and Liberty to indemnify
Salomon and/or certain other persons specified in the Engagement Letter (the
"Indemnified Persons") against certain liabilities. Johnson and Liberty agree
that if any act or omission of a party gives rise to an obligation to indemnify
any Indemnified Person (including, but not limited to, as a result of any breach
of a representation or warranty of such party contained in the Engagement Letter
or the failure by such party to perform any obligations undertaken by it in the
Engagement Letter) or gives rise to a cause of action by Salomon against the
parties pursuant to the Engagement Letter, then, notwithstanding that the
parties may be jointly and severally liable for such loss, damage or expense
pursuant to the Engagement Letter, such breaching or defaulting party shall
indemnify the other party for any loss, damage or expense such other party may
incur or suffer as a result of such act or omission. If the acts or omissions
of both parties cause or contribute to such loss, damage or expense, then such
loss, damage or expense shall be allocated between Johnson and Liberty in
proportion to the relative fault of each party. In the event that (i) the
Acquisition is not consummated and this Agreement is terminated and (ii) either
Johnson or Liberty (or an affiliate thereof) subsequently seeks or proposes to
acquire all or a significant portion of the Company's equity securities or
assets, without the participation of the other party (a "Subsequent Attempt"),
then the party
<PAGE>
engaging in the Subsequent Attempt shall indemnify and hold harmless the other
party (the "Non-Acquiring Party") from any loss, damage or reasonable expense
incurred in connection with (x) claims which arise out of or relate to the
Subsequent Attempt and which assert that the Non-Acquiring Party is engaged in
or responsible for the Subsequent Attempt in the capacity of a bidder or
acquiror, or (y) claims made against the Non-Acquiring Party pursuant to
paragraph 5 of the Engagement Letter.
11. Governing Law. This letter shall be governed by and construed in
-------------
accordance with the substantive law of the State of New York without regard to
conflict of law principles thereof.
12. Termination. This Agreement may be terminated (a) by the mutual
-----------
agreement of the parties or (b) by either party if the Acquisition has not been
consummated on or before June 30, 1998. In the event this Agreement is
terminated, the parties agree to take such actions as may be necessary in order
to terminate the Engagement Letter simultaneous with the termination of this
Agreement.
13. Binding Obligation. It is understood that this Agreement
------------------
constitutes alegally binding obligation of the parties hereto.
14. Severability. If one or more provisions of this Agreement are held
------------
to be invalid or unenforceable under applicable law, portions of such
provisions, or such provisions in
<PAGE>
their entirety, to the extent necessary, shall be severed from this Agreement,
and the balance of this Agreement shall be enforceable in accordance with its
terms; provided, however, that to the extent either party considers such invalid
-------- -------
or unenforceable provision to be an essential or material provision of this
Agreement, the parties shall negotiate in good faith to include a replacement
provision for such invalid or unenforceable provision, which provision maintains
for the parties the relative benefits and obligations attributable to such
invalid or unenforceable provision.
15. Counterparts. This Agreement may be executed in multiple identical
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
16. No Third-Party Beneficiaries. No provision of this Agreement is
----------------------------
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
17. Disputes. The parties shall use their reasonable best efforts to
--------
resolve any dispute or controversy arising under this Agreement (a "Dispute,"
which term shall not include any failure to agree or disagreement of the type
referred to in the penultimate sentence of Section 1 hereof). Before
instituting any formal proceedings with regard to any Dispute, Johnson and the
Chief Executive Officer of Liberty shall meet personally to discuss and attempt
to resolve the Dispute. If Johnson and the Chief Executive Officer of Liberty
are unable to resolve such Dispute within a reasonable period of time after the
commencement of such informal discussions, then upon notice from one party to
the other the Dispute shall be resolved by arbitration by a panel of
<PAGE>
three arbitrators in accordance with the rules of the American Arbitration
Association (the "AAA"), whose decision shall be final, binding and non-
appealable. The venue for such arbitration shall be the Washington D.C.
metropolitan area. The expenses of both parties in the arbitration, including
reasonable attorneys' fees and arbitration expenses, shall be paid by the party
that does not prevail in such arbitration. If each party prevails in part, the
arbitrators will determine the appropriate allocation of expenses among the
parties. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. Each party agrees to be bound by the
decision of the arbitrators and not to initiate legal proceedings in any court
to have such decision overturned or reversed on any grounds.
<PAGE>
If the foregoing terms are acceptable to you, please indicate your
agreement by executing and returning the enclosed copy of this letter as
indicated.
Very truly yours,
LIBERTY MEDIA CORPORATION
By: /s/ Robert R. Bennett
-------------------------------------
Name: Robert R. Bennett
Title: President and
Chief Executive Officer
Accepted and Agreed to:
/s/ Robert L. Johnson
- ------------------------------
Robert L. Johnson
<PAGE>
EXHIBIT 99.17(c)(3)
LIBERTY MEDIA CORPORATION
8101 EAST PRENTICE AVENUE, SUITE 500
ENGLEWOOD, COLORADO 80111
March 15, 1998
Mr. Robert L. Johnson
2915 Audubon Terrace, NW
Washington, D.C. 20018
Dear Sir:
This Letter and the attached Term Sheet relate to the prospective management
and ownership of the business of BET Holdings, Inc. (BET) following our joint
acquisition of BET pursuant to the Agreement and Plan of Merger, dated as of
March 15, 1998, among BET, BTV Acquisition Corporation, Robert L. Johnson
(JOHNSON) and Liberty Media Corporation (LIBERTY). Subject to the following
paragraph, the agreements contained in this letter and in the attached Term
Sheet (collectively, this LETTER AGREEMENT) shall become effective upon the
effective date of the Merger (as defined in the Agreement and Plan of Merger).
Except as otherwise expressly provided in this Letter Agreement, this Letter
Agreement shall not affect the obligations of the parties under the letter
agreement dated September 11, 1997, which letter agreement is hereby ratified
and confirmed.
The parties intend that the covenants and agreements set forth in this Letter
Agreement will be superseded by a definitive stockholders' agreement and other
agreements and instruments (collectively, the DEFINITIVE AGREEMENTS) that will
contain provisions incorporating and expanding upon the terms, conditions and
agreements set forth in this Letter Agreement, together with other provisions
which may be customary in the case of transactions of the type described in this
Letter Agreement, and such other provisions as are reasonable or appropriate in
the context of the transactions contemplated by this Letter Agreement.
Notwithstanding the foregoing, the parties expressly acknowledge and agree that
this Letter Agreement constitutes a binding agreement among them, until the
Definitive Agreements are executed and delivered. If the Definitive Agreements
are not executed and delivered prior to the effective time of the Merger, then
this Letter Agreement shall be deemed to constitute the Definitive Agreements.
Each party represents to the other party that this Letter Agreement has been
duly authorized, executed and delivered by such party and constitutes the legal,
valid and binding obligation of such party, and is enforceable against such
party in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights of creditors generally and by general principles of equity.
This Letter Agreement may be executed in counterparts, each of which shall be
deemed
1
<PAGE>
an original and all of which shall constitute one and the same instrument. This
Letter Agreement will be governed by, and construed in accordance with, the laws
of the State of Delaware, without regard to its conflicts of law rules. The
parties agree that irreparable damage will occur if any provision of this Letter
Agreement is not performed in accordance with its terms, and that the parties
shall be entitled to specific performance of the terms of this Letter Agreement
in addition to any other remedy at law or in equity.
If this Letter Agreement is in accordance with your understanding please
indicate your agreement by signing below, at which time this letter will
constitute a binding agreement among us.
Very truly yours,
Liberty Media Corporation
By: /s/ Robert R. Bennett
------------------------
Name: Robert R. Bennett
Title: President
Accepted And Agreed
March 15, 1998
/s/ Robert L Johnson
- ---------------------------
Robert L. Johnson
2
<PAGE>
STOCKHOLDERS' AGREEMENT TERM SHEET
The following constitute the terms of the stockholders' agreement to be
entered into by Liberty Media Corporation, a Delaware corporation (LIBERTY), and
Robert L. Johnson and/or a corporation, partnership, limited liability company,
trust, or other business entity at least 90% of which is owned and controlled by
him, with respect to the equity securities of the surviving corporation
following the merger of BTV Acquisition Corp. (or an affiliate thereof) with and
into BET Holdings, Inc. (the MERGER) pursuant to the Agreement and Plan of
Merger among Johnson, Liberty, BTV Acquisition Corp. and BET Holdings, Inc. (the
MERGER AGREEMENT). As used in this Letter Agreement, the term COMPANY shall mean
the surviving corporation in the Merger, and the term JOHNSON shall mean Robert
L. Johnson or, if the context requires, shall mean such corporation,
partnership, limited liability company, trust, or other business entity at least
90% of which is owned and controlled by him.
1. SCOPE. The purpose of this Letter Agreement or any Definitive Agreements
that supersede this Letter Agreement (collectively, this AGREEMENT) is to set
forth the relationship of the parties with respect to, among other matters, (i)
all equity securities of the Company, including any securities exchangeable for
or convertible into equity securities of the Company and any securities which
upon exercise entitle the holder to acquire any other equity securities
(collectively, the COMPANY SECURITIES) held by Liberty and Johnson (each, a
STOCKHOLDER) and their respective Affiliates (as defined below), and (ii) the
management of the Company. For purposes of this Agreement:
(a) In the case of Johnson, his Affiliates comprise all entities at least
90% of whose voting securities he owns directly or indirectly. Johnson and his
Affiliates together will be referred to as the JOHNSON STOCKHOLDER GROUP.
(b) In the case of Liberty, its Affiliates comprise all entities at least
90% of whose voting securities its owns directly or indirectly and all entities
at least 90% of whose voting securities are owned directly or indirectly by
Tele-Communications, Inc. (TCI). Liberty and its Affiliates together will be
referred to as the LIBERTY STOCKHOLDER GROUP.
2. MANAGEMENT RIGHTS. Each Stockholder shall be entitled to vote its
Company Securities as it determines in its sole discretion except as follows:
(a) Each Stockholder agrees to take or cause to be taken all reasonable
actions required for the election of a slate of directors of the Company
containing a minimum of two directors designated by Liberty and a minimum of two
directors designated by Johnson.
(b) If the Company's board of directors includes more than four directors,
the Stockholders shall be free to exercise their voting rights with respect to
the additional directors as
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<PAGE>
they see fit. As of the consummation of the Merger, the Company's board of
directors will comprise seven directors.
3. FUNDAMENTAL MATTERS. If Robert L. Johnson ceases to act as Chairman of
the Board and Chief Executive Officer of the Company on a full time basis
(including as a result of Johnson's death or disability (where disability shall
mean his inability to perform the duties of Chairman and CEO on a full time
basis for any period of 180 consecutive days due to mental or physical illness
or injury) the Company will not approve, disapprove or effectuate any of the
following matters (the FUNDAMENTAL MATTERS) without the consent of Liberty:
(a) any material amendments to the Company's Certificate of Incorporation or
Bylaws;
(b) any merger or other business combination involving the Company which
results in the creation or issuance of any new class of securities or any change
in the characteristics of its already-outstanding capital stock;
(c) any sale, transfer or other disposition, in one transaction or a series
of related transactions, of all or substantially all of the Company's
consolidated assets or business;
(d) any transaction (other than those contemplated by this Letter Agreement)
between the Company and its affiliates, on the one hand, and the members of the
Johnson Stockholder Group and their respective Affiliates, on the other hand;
(e) any transaction not in the ordinary course of business, launching new or
additional channels or engaging in any new field of business, in any case, which
will result in, or will have a reasonable likelihood of resulting in, Liberty or
any member of its Stockholder Group being required under law to divest itself of
all or any part of its Company Securities, or interests therein, or any other
material assets of such entity, or which will render such entity's continued
ownership of such stock or assets illegal or subject to the imposition of a fine
or penalty or which will impose material additional restrictions or limitations
on such entity's full rights of ownership (including, without limitation,
voting) thereof or therein;
(f) the commencement or settlement of any litigation or arbitration other
than in the ordinary course of the Company's business or that is likely to have
a material adverse effect upon the Company;
(g) the acquisition or disposition, directly or indirectly (by merger,
consolidation or otherwise), by the Company or any of its subsidiaries, of a
material portion of the Company's consolidated assets or business, in one
transaction or a series of related transactions (where material shall mean
assets or businesses having a value of 10% or more of the Company's consolidated
assets before such acquisition or disposition);
4
<PAGE>
(i) the incurrence, assumption or guarantee by the Company or any of its
subsidiaries of any indebtedness or other liability (including suretyship and
contingent liabilities) or obligation for borrowed money (or any refinancings of
outstanding indebtedness), in one transaction or a series of related
transactions, if the amount of such borrowed money exceeds 10% of the Company's
consolidated assets determined prior to such incurrence, assumption or
guarantee;
(j) any liquidation or dissolution of the Company;
(k) the issuance, grant, offer, sale, acquisition or disposition of any
Company Securities or the equity securities of any of the Company's subsidiaries
(other than pursuant to Company stock option and similar plans, either pre-
existing or as approved by Liberty);
(l) the declaration or payment of any dividend or the making of any
distribution on the capital stock of the Company; or the declaration or payment
of any dividend or the making of any distribution on the capital stock of any of
the Company's subsidiaries that are not wholly owned by the Company;
(m) the approval of the annual budget for the Company and any material
changes thereto; or
(n) the entering into by the Company or any of its subsidiaries of material
contracts, licenses or leases, except in the ordinary course of their respective
businesses .
4. TRANSFERS OF COMPANY SECURITIES.
(a) No Stockholder (the TRANSFEROR) shall sell, transfer, assign, give,
pledge, hypothecate or otherwise dispose of, directly or indirectly (a
TRANSFER), any Company Securities other than in a Permitted Transfer. As a
condition to the completion of each Permitted Transfer, with the exception of
the Permitted Transfers pursuant to Sections 4 (b)(6), and 4(b)(8), or to a
designee under 4 (b)(2)(A), the person or entity to whom the Company Securities
are Transferred (the TRANSFEREE) shall be required to execute a written
instrument, reasonably satisfactory to the other Stockholder (the NON-
TRANSFERRING STOCKHOLDER), agreeing to become subject to the terms and
conditions of this Agreement. Upon the execution of such written instrument the
Transferee shall become a Stockholder for purposes of this Agreement, and shall
become a member of the same Stockholder Group as his or its Transferor with
respect to the Transferred Company Securities.
(b) A PERMITTED TRANSFER shall mean any of the following Transfers:
(1) A Transfer of Company Securities by Liberty to members of the
Liberty Stockholder Group or a Transfer of Company Securities by Johnson to
members of the Johnson Stockholder Group.
5
<PAGE>
(2) A pledge or other grant of a security interest in vested Company
Securities in connection with the incurrence of bona fide indebtedness by the
Transferor, but only if the pledgee or other secured party of the applicable
Company Securities agrees as follows:
(A) Upon any default or exercise of its rights under such pledge or
security arrangement, before taking any other action to foreclose upon the
pledged Company Securities, it will offer to sell to the Stockholders in the
other (that is, other than the Transferor's) Stockholder Group (or their
designees) a portion of the pledged Company Securities, valued at the appraised
fair market value thereof, equal to the applicable amount required to cure such
default.
(B) If such portion of the pledged Company Securities is purchased
by the other Stockholder Group (or their designees), so that the secured debt
has been completely discharged, the pledgee or other secured party will
thereupon return to the Transferor the remainder of the pledged Company
Securities, free and clear of the pledge or other security interest.
(3) A Transfer by Johnson (or his estate) of Company Securities, without
consideration, in any of the following situations:
(A) A Transfer to, or in trust for the benefit of, members of his
immediate family (consisting of his parents, spouse, siblings, children, and
grandchildren) or an entity wholly-owned by Johnson and/or members of Johnson's
immediate family.
(B) A Transfer to a legal representative in the event Johnson is
adjudicated mentally incompetent.
(4) A Transfer by members of Johnson's immediate family (or the estate
of such member of Johnson's family) of Company Securities, without
consideration, in any of the following situations:
(A) A Transfer to, or in trust for the benefit of, other members of
Johnson's immediate family.
(B) A Transfer to a legal representative of such member of Johnson's
immediate family in the event that such member of Johnson's immediate family is
adjudicated mentally incompetent.
(5) A Transfer by a trustee of Company Securities owned by a trust to
the grantor or settlor of the trust or any beneficiary of the trust pursuant to
the terms of the trust.
(6) An indirect Transfer of Company Securities, provided that any such
6
<PAGE>
indirect Transfer which results in the person or entity which receives the
Company Securities ceasing to be a member of the transferor's Stockholder Group
shall be a Permitted Transfer only if such Transfer is made in compliance with
the right of first refusal procedures set forth below. For purposes of this
Agreement, an INDIRECT TRANSFER includes a transfer of a controlling interest in
any entity that owns Company Securities, and the right of first refusal shall
instead apply to such controlling interest rather than to the Company Securities
held by such entity.
(7) A Transfer of Company Securities to an employee stock option plan
(ESOP), if any, established by the Company.
(8) A Transfer as to which the Non-Transferring Stockholder has failed
to exercise its right of first refusal as set forth in Section 5.
(9) A Transfer of Company Securities consented to in writing by the Non-
Transferring Stockholder.
5. RIGHT OF FIRST REFUSAL.
(a) If a Stockholder has received a bona fide offer from an unaffiliated
third party (a THIRD PARTY OFFER) to purchase all or any portion of its Company
Securities, which offer the Stockholder desires to accept, such Stockholder (the
OFFERING STOCKHOLDER) shall notify the other Stockholder (the OFFEREE
STOCKHOLDER) of such Third Party Offer and the material terms thereof. Such
notice (the OFFER NOTICE) shall constitute an offer (the OFFER) by the Offering
Stockholder to the Offeree Stockholder to purchase all, but not less than all,
Company Securities which the Offering Stockholder desires to sell upon the same
terms (including net economic terms) and conditions as such Third Party Offer.
If all or part of the consideration in such Third Party Offer consists of non-
cash consideration, such non-cash consideration shall be valued at the fair
market value thereof, as mutually agreed by the parties, or if the parties
cannot agree, by a customary appraisal procedure to be performed by unaffiliated
investment banking firms having experience in the valuation of cable television
networks; provided, however, that to the extent the consideration to be paid by
the Offeree Stockholder differs from that to be paid in the Third Party Offer,
such Offeree Stockholder shall not be entitled to accept such Offer unless the
terms and conditions upon which it is to purchase such Company Securities, in
the aggregate, are no less favorable to the Offering Stockholder than those
receivable by it in the Third Party Offer.
(b) If the Offeree Stockholder desires to accept such Offer, it shall notify
the Offering Stockholder within 30 days of the date of delivery of the Offer
Notice. Such notice shall constitute the Offeree Stockholder's acceptance of the
Offer and agreement to purchase such Company Securities upon the terms and
conditions contained in the Offer Notice and in this Agreement. The Offeree
Stockholder shall be entitled to assign its right to purchase the offered
Company Securities to a third party. The purchase and sale of such Company
Securities shall be pursuant to an agreement containing representations and
warranties, conditions to closing and other terms and conditions customary in
transactions of such type, including, but not limited to,
7
<PAGE>
receipt of any required governmental consents and approvals.
(c) If the Offeree Stockholder fails to accept such Offer, the Offering
Stockholder shall be entitled to sell such offered Company Securities pursuant
to such Third Party Offer, provided that (i) the closing of such transaction
occurs within 120 days of the date of delivery of the Offer Notice and (ii) the
terms and conditions of such sale (including price) are no less favorable to the
Offering Stockholder than the terms and conditions set forth in the Offer
Notice. An unaffiliated third party purchaser acquiring Company Securities in
accordance with the foregoing procedures shall acquire such securities free and
clear of any obligations, and shall have no rights under, this Letter Agreement
or the Stockholders Agreement.
(d) After an initial public offering of the Company's equity securities,
each Stockholder shall also have a right of first refusal upon a proposed
Transfer by a Stockholder pursuant to registered offerings and open market
sales, provided, however, that (i) the price at which the Offering Stockholder
shall offer shares to the Offeree Stockholder shall not exceed the average
market price of such shares over the three trading days preceding such Offer
Notice, in the case of open market sales, or the three trading days preceding
the effectiveness of any such registered offering, in the case of a registered
sale, and (ii) the Offeree Stockholder shall be required to accept such offer
within one day of such notice in the case of open market sales and registered
offerings.
(e) The right of first refusal provided for in this Section shall apply to
any proposed Transfers to a Company ESOP.
6. TERMINATION OF RIGHTS. A Stockholder shall cease to be entitled to
exercise the rights under Sections 2,3, 4, 5 and 9 of this Agreement (but shall
continue to be obligated to perform its obligations hereunder) as of the date
that its Stockholder Group collectively ceases to own at least 1,601,145 shares
of Company common stock (or the equivalent, adjusted, as appropriate, after the
Merger to account for any stock splits or recapitalization). In addition, as of
the date referred to in the preceding sentence, in the case of Liberty, if
applicable, it shall cease to have the rights provided for in Section 7, except
that Libery shall continue to have the rights provided for in the last sentence
in Section 7(a).
7. EXIT RIGHTS.
(a) If the Company's Common Stock is not registered under the Securities
Exchange Act of 1934, as amended (the EXCHANGE ACT), and listed on a national
securities exchange not later than the fifth anniversary of the Effective Time
of the Merger, then Liberty will have the right, for ten years, exercisable each
year only during the 90 day period starting with the anniversary of the
effective date of the Merger, to require that the Company take such actions as
may be necessary to cause the Company to (i) register its Common Stock under the
Exchange Act and (ii) list its Common Stock on a national securities exchange.
Johnson agrees to use his reasonable best efforts to cause the Company to take
such actions. Alternatively, upon notice
8
<PAGE>
from Liberty of its election to require the Company to take the actions provided
for in the first sentence of this subsection, Johnson may elect to purchase, or
cause the Company to purchase, all of Liberty's Company Securities at fair
market value, to be determined by appraisal. The parties agree that in
connection with an initial public offering of the Company's Common Stock, they
shall each have piggy-back registration rights, subject to requirements imposed
by the underwriters. After such initial public offering, the parties shall have
registration rights providing each party with not less than three demand
registrations; provided, however, that each party shall bear all costs and
expenses of their respective demand registrations after the first such demand
registration.
(b) Upon the death of (i) Johnson, if his spouse has predeceased him (or if
he and his spouse are deemed to have died simultaneously); or (ii) Johnson's
spouse, if Johnson has predeceased his spouse and she is the owner of Company
Securities formerly owned by him, the estate of Johnson or his spouse, as
appropriate, may, at its election, require the purchase of Company Securities
from the estate, in one or more transactions, in an amount sufficient to enable
the legal representative of such Stockholder to pay estate and other taxes,
funeral, and expenses incident to the transfer of the estate. The Company
Securities shall be purchased at their fair market value, to be determined by
appraisal, as provided under this Agreement. Liberty shall be given the first
opportunity by the Estate or spouse to purchase such Company Securities, using
the procedures set forth in Section 5. If Liberty declines, then the Company
must: (i) arrange for the sale of such Company Securities to a third party; or
(ii) purchase such Company Securities; or (3) arrange for the sale of all or a
part of the Company sufficient, through appropriate corporate means, to provide
to the Estate such amounts as are required by the Estate for the purposes stated
in this subsection.
8. COMPENSATION TO THE PARTIES. The parties acknowledge that so long as
Robert L. Johnson is serving as the Chairman of the Board and Chief Executive
Officer of the Company on a full time basis, it is their mutual goal to provide
for aggregate annual compensation to Johnson of $6 million per year and to
Liberty of $2 million per year, adjusted upward annually at the greater of (i) 5
percent; or (ii) 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 Company, in each case subject to
compliance with the Company's credit facilities (and, to the extent such credit
facilities will not permit the full payment of such amounts, the parties agree
that such compensation payable to each of them shall be deferred pro rata and
the amount of such reduction carried over and added to the compensation to be
paid in the following year (or years, as appropriate)). Such compensation shall
be structured in a manner which provides the greatest tax benefits to the
Company.
9. STOCK REPURCHASES. The parties agree that, except as otherwise provided
in Section 7 above, without the consent of both Stockholders the Company (and
any Company ESOP) will not be permitted to repurchase Company Securities from
one Stockholder without offering to repurchase a pro rata amount of Company
Securities from the other Stockholder on the same terms and conditions.
9
<PAGE>
10. COMPANY LOAN TO JOHNSON. The parties acknowledge and agree that Johnson
and BTV Acquisition Corporation, or the Company, or both as appropriate will
enter into a loan agreement providing for a loan to Johnson up to an aggregate
of $35 million (the JOHNSON LOAN), to be used for matters previously discussed
between the parties. This obligation will be fully binding on the Company after
the consummation of the Merger. The Johnson Loan shall be for a term of not less
than five, but no more than ten, years and shall bear interest at a rate equal
to the applicable rate (which may vary over time depending on the final
structure of the financing obtained) at which the Company has borrowed the funds
to finance the Merger. Johnson shall have the option to pay interest currently
or to allow interest to accrue and be paid at maturity. Johnson may sell shares
of Company Securities to a Company ESOP, if applicable, from time to time, and
use the proceeds to pay interest.
11. PCS LICENSE. At the appropriate time to be reasonably determined,
Johnson and any entities controlled by him intend to take actions as will result
in the Company owning such rights to certain PCS licenses which may be now held
by R & S PCS, Inc., and which results in the release of the pledge of shares of
BET Holdings, Inc., currently owned by Johnson. Such actions may include, but
not be limited to the sale, transfer or assignment of all of Johnson's (or R & S
PCS Inc.'s) right, title and interest in and to such licenses, or a merger of R
& S PCS, Inc., on a tax free basis, with or into BTV or the Company, or another
entity, as reasonably determined. The final form of this transaction will be
subject to Liberty's approval, not to be unreasonably withheld or delayed.
12. OTHER PROVISIONS.
(a) Notwithstanding anything in the September 11, 1997, letter agreement,
all options held by Johnson in the Company shall vest and automatically become
options to acquire an equal number of shares of common stock of the surviving
Company (adjusted, if necessary, depending on the final capital structure of BTV
and the Company) at the same aggregate price as if all of his options vested and
were exercised prior to the Merger.
(b) Notwithstanding anything in this Agreement to the contrary, for a period
of 5 years following the effective time of the Merger, provided that the Liberty
Stockholder Group owns at least 533,715 shares of Company common stock (or the
equivalent, adjusted, as
10
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appropriate, after the Merger to account for any stock splits or
recapitalization).
11
<PAGE>
EXHIBIT 99.17(d)(1)
BET HOLDINGS, INC.
ONE BET PLAZA, 1900 W PLACE, N.E.
WASHINGTON, D.C. 20018-1211
(202) 608-2000
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of
BET Holdings, Inc. to be held at [
] on [ , 1998], at [ ] a.m., local time.
At this meeting, you will be asked to vote on the merger of BTV Acquisition
Corporation with and into BET Holdings with BET Holdings as the surviving
corporation. BTV Acquisition was formed in connection with the proposed merger
by Robert L. Johnson, BET Holdings' Chairman of the Board, Chief Executive
Officer and largest stockholder, and by Liberty Media Corporation, BET Holdings'
next largest stockholder and a wholly owned subsidiary of Tele-Communications,
Inc. ("TCI"). Together, Mr. Johnson and Liberty Media currently own
approximately 63% of BET Holdings' outstanding capital stock, representing
approximately 92% of the voting power of the stockholders. Mr. Johnson and
Liberty Media have proposed the merger in order to buy out the remaining
stockholders. After the merger, BET Holdings will be wholly owned by Mr.
Johnson and Liberty Media.
If the merger is approved and consummated, you will be entitled to receive
$63 in cash for each share of Class A common stock you own. The $63 per share
price represents a 58% premium over the $40 average closing per share price
during the 30-day period preceding September 10, 1997, which was the last full
trading day before Mr. Johnson and Liberty Media first announced that they
wanted to purchase all of the shares of BET Holdings they do not already own. A
Special Independent Committee formed by the Board of Directors of BET Holdings
negotiated this price with Mr. Johnson and Liberty Media.
Since a majority of the members of the Board of Directors are affiliated
with Mr. Johnson, Liberty Media or TCI and have a conflict of interest regarding
the merger, the Board formed the Special Independent Committee to avoid any
conflicts of interests in evaluating the fairness of the merger to the
stockholders of BET Holdings not associated with Mr. Johnson, Liberty Media or
TCI. The Special Independent Committee is composed of Mr. Delano Lewis, a
director of BET Holdings. Mr. Lewis is not an employee of BET Holdings, Liberty
Media or TCI, is not a director of Liberty Media or TCI, and does not have any
commercial relationship with Mr. Johnson, Liberty Media or TCI.
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The Special Independent Committee received a written opinion from Goldman,
Sachs & Co., its financial advisor, that as of March 15, 1998, the $63 per share
merger price was fair from a financial point of view to BET Holdings'
stockholders, other than Mr. Johnson, Liberty Media and Liberty Media's
affiliates. The Goldman, Sachs & Co. fairness opinion is subject to various
considerations and assumptions described in such opinion, a copy of which
accompanies this Proxy Statement.
The Board of Directors of BET Holdings, acting on the recommendation of the
Special Independent Committee, has approved a merger agreement with BTV
Acquisition, Mr. Johnson and Liberty Media. The Special Independent Committee
and the full Board of Directors believe that the terms and provisions of the
merger agreement and the merger are fair to and in the best interest of BET
Holdings and its stockholders other than BTV Acquisition, Mr. Johnson, Liberty
Media and any of their respective subsidiaries. Therefore, the Board of
Directors recommends that you vote in favor of the merger agreement and approve
the merger.
This document explains the proposed merger and provides specific
information concern ing the Special Meeting. Please read these materials
carefully. In addition, you may obtain information about BET Holdings from
documents that BET Holdings has filed with the Securities and Exchange
Commission.
If you do not vote in favor of the merger agreement, you will have the
right to dissent and to seek appraisal of the fair market value of your shares
if the merger is consummated and you comply with the Delaware law procedures
explained on pages 57 to 61 of this document.
Whether or not you plan to attend the Special Meeting, I urge you to
complete, sign and promptly return the enclosed proxy card to ensure that your
shares will be voted at the meeting. If you sign, date and return your proxy
card without indicating how you want to vote, your proxy will be counted as a
vote in favor of the merger agreement. Your proxy may be revoked at any time
before it is voted by submitting to the Secretary of BET Holdings a written
revocation or a proxy bearing a later date, or by attending and voting in person
at the meeting. Even if you plan to attend the meeting, please complete and
return your proxy.
The merger is an important decision for BET Holdings and its stockholders.
Among other things, the merger cannot occur unless the merger agreement is
approved by an affirmative vote of the holders of a majority of the voting power
of the shares other than shares held by Mr. Johnson, Liberty Media or any of
their respective affiliates.
On behalf of the Board of Directors, I thank you for your support and urge
you to vote FOR adoption of the merger agreement.
Sincerely,
Debra L. Lee
President and Chief Operating Officer
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<PAGE>
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
TRANSAC TION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Proxy Statement dated [ ], 1998 and first mailed tostockholders on [ ],
1998.
iii
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BET HOLDINGS, INC.
ONE BET PLAZA, 1900 W PLACE, N.E.
WASHINGTON, D.C. 20018-1211
(202) 608-2000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Dear Stockholder:
Notice is hereby given that a Special Meeting of Stockholders of BET
Holdings, Inc., a Delaware corporation, will be held at [
] on [JULY , 1998] at [ ] a.m., local time, for the following
purposes:
1. To consider and vote upon the approval and adoption of an Agreement
and Plan of Merger, dated as of March 15, 1998. The Agreement and
Plan of Merger provides for, among other things, the merger of BTV
Acquisition Corporation with and into BET Holdings, with BET Holdings
as the surviving corporation. BTV Acquisition was formed by the two
largest stockholders of BET Holdings, Mr. Robert L. Johnson, the
Chairman and Chief Executive Officer of BET Holdings, and Liberty
Media Corporation, for the purpose of buying out the other
stockholders of BET Holdings through the merger. The Agreement and
Plan of Merger is more fully described in this document and is
attached to this document as an exhibit.
2. To transact any other business which may properly come before the
special meeting or any adjournment or postponement thereof.
Stockholders of BET Holdings who do not vote in favor of the Agreement and
Plan of Merger will have the right to dissent and to seek appraisal of the fair
market value of their shares if the merger is consummated and they comply with
the Delaware law procedures explained in the accompanying proxy statement.
Only holders of record at the close of business on [ ], [
], 1998 are entitled to notice of and to vote at the Special Meeting or any
adjournment or postponement thereof. Any stockholder will be able to examine a
list of the holders of record, for any purpose related to the Special Meeting,
during ordinary business hours during the 10-day period before the meeting. The
list will be available at [ ].
Stockholders may vote in person or by proxy. This document explains the
merger in detail and is accompanied by a proxy card. In order to assure that
your vote will be counted, please complete, date, sign and return the enclosed
proxy promptly in the enclosed prepaid envelope whether or not you plan to
attend the Special Meeting. Your proxy may be revoked at any time before it is
voted, by submitting to the Secretary of BET Holdings a written revocation or a
proxy bearing a later date, or by attending and voting in person at the Special
Meeting.
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THE BOARD OF DIRECTORS OF BET HOLDINGS HAS APPROVED THE AGREEMENT AND PLAN
OF MERGER AND THE MERGER AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER.
By Order of the Board of Directors
Debra L. Lee
President and Chief Operating Officer
Washington, D.C.
[ , 1998]
YOUR VOTE IS IMPORTANT. PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY,
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING. PLEASE DO NOT
SEND IN ANY CERTIFI CATES FOR YOUR SHARES AT THIS TIME.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER............................................................... 1
SUMMARY.............................................................................................. 3
INFORMATION CONCERNING THE SPECIAL MEETING..........................................................10
Time, Place, Date...........................................................................10
Purpose of the Special Meeting..............................................................10
Record Date; Voting at the Meeting; Quorum..................................................11
Required Vote...............................................................................12
Action to be Taken Under the Proxy..........................................................12
Proxy Solicitation..........................................................................13
THE PARTIES..........................................................................................14
The Company.................................................................................14
BTV Acquisition.............................................................................14
Robert L. Johnson...........................................................................14
Liberty Media Corporation...................................................................15
Tele-Communications, Inc....................................................................15
SPECIAL FACTORS......................................................................................16
Purpose and Background of the Merger........................................................16
Recommendation of the Special Independent Committee and Board of Directors;
Fairness of the Merger.................................................................25
The Buying Group's Purpose and Reason for the Merger........................................30
Opinion of Financial Advisor to the Special Independent Committee...........................31
Certain Effects of the Merger...............................................................38
Plans for the Company After the Merger......................................................39
Conduct of the Business of the Company if the Merger is not Consummated.....................39
Buying Group Letter Agreements..............................................................39
Interests of Certain Persons in the Merger; Certain Relationships...........................41
Accounting Treatment........................................................................43
Financing of the Merger.....................................................................44
Regulatory Requirements.....................................................................44
Federal Income Tax Consequences of the Merger...............................................45
Fees and Expenses...........................................................................46
THE MERGER AGREEMENT.................................................................................48
The Merger; Merger Consideration............................................................48
The Exchange Fund; Payment for Shares of Class A Stock......................................49
Transfers of Class A Stock..................................................................50
Treatment of Stock Options..................................................................50
Conditions..................................................................................51
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
Representations and Warranties............................................................. 51
Covenants.................................................................................. 52
Indemnification and Insurance.............................................................. 52
No Solicitation; Fiduciary Obligations of Directors........................................ 52
Directors and Officers of the Company Following the Merger; Certificate of
Incorporation; Bylaws................................................................ 53
Termination................................................................................ 53
Amendment/Waiver........................................................................... 54
LITIGATION.......................................................................................... 55
DISSENTERS RIGHTS OF APPRAISAL...................................................................... 57
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY................................................. 62
CERTAIN RELATIONSHIPS AND TRANSACTIONS.............................................................. 64
Agreements with Cable Affiliates........................................................... 64
Agreements with Related Parties............................................................ 64
Transactions with Management............................................................... 65
MARKET FOR THE CLASS A STOCK........................................................................ 66
Class A Stock Market Price Information; Dividend Information............................... 66
Class A Stock Purchase Information......................................................... 67
SECURITIES OWNERSHIP................................................................................ 68
Beneficial Ownership of More Than 5% of Class A Stock...................................... 68
Beneficial Ownership of Class A Stock by Certain Parties Related to
the Company or the Buying Group....................................................... 70
Ownership of BTV Acquisition Common Stock by Directors and
Executive Officers of the Company..................................................... 74
MANAGEMENT.......................................................................................... 75
Directors and Executive Officers of the Company............................................ 75
Directors and Executive Officers of BTV Acquisition........................................ 79
Directors and Executive Officers of TCI.................................................... 79
Directors and Executive Officers of Liberty................................................ 83
INDEPENDENT ACCOUNTANTS............................................................................. 85
STOCKHOLDER PROPOSALS............................................................................... 85
DOCUMENTS INCORPORATED BY REFERENCE................................................................. 85
OTHER BUSINESS...................................................................................... 86
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
AVAILABLE INFORMATION.................................................... 87
EXHIBIT A AGREEMENT AND PLAN OF MERGER..............................A - 1
EXHIBIT B OPINION OF GOLDMAN, SACHS & CO............................B - 1
EXHIBIT C SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW.......C - 1
</TABLE>
(iii)
<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 Media or any of their respective subsidiaries) will be entitled to
receive $63 in cash in exchange for each share of Class A common stock
acquired in the merger. The Special Independ ent Committee formed by the
Board of Directors of BET Holdings negotiated this price with BTV
Acquisition, Mr. Johnson and Liberty Media.
Q: WHY IS THE BOARD OF DIRECTORS RECOMMENDING THAT I VOTE FOR THE MERGER
AGREEMENT?
A: In the opinion of your Board, based upon the recommendation of the Special
Independent Committee, the terms and provisions of the merger agreement and
the merger are fair to and in the best interest of BET Holdings and its
stockholders who are not affiliated with BTV Acquisition, Mr. Johnson or
Liberty Media. For the merger to occur, the holders of a majority of the
voting power of BET Holdings' shares not held by Mr. Johnson, Liberty Media
and their respective affiliates must approve the merger. To review the
background and reasons for the merger in greater detail, see pages 16 to
24.
Q: WHAT DO I NEED TO DO NOW?
A: Please mail your signed proxy card in the enclosed return envelope as soon
as possible, so that your shares may be represented at the Special Meeting.
Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?
A: Stockholders who wish to dissent from the merger may seek appraisal of the
fair market value of their shares, but only if they comply with all of the
Delaware law procedures explained on pages 57 to 61.
Q: WHO CAN VOTE ON THE MERGER?
A: All stockholders of record as of the close of business on [ , 1998] will
be entitled to notice of and to vote at the Special Meeting to approve the
proposed merger and the merger agreement.
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Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send you written instructions
for exchanging your share certificates.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how
to vote. You should follow the directions provided by your broker regarding
how to instruct your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. Just send in a written revocation or a later dated, signed proxy card
before the Special Meeting or attend the Special Meeting and vote.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible. If the
merger agreement is approved and the other conditions to the merger are
satisfied, we expect to complete the merger promptly following the Special
Meeting.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The merger generally will be taxable to you for U.S. federal income tax
purposes. To review the federal income tax consequences to stockholders in
greater detail, see pages 45 to 46.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A: We do not expect to ask you to vote on any other matters at the Special
Meeting.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the merger or would like additional copies
of this Proxy Statement, you should contact Morrow & Co., Inc., a
professional soliciting organization retained by BET Holdings, at 800-566-
9061 or Byron F. Marchant, General Counsel, BET Holdings, Inc., One BET
Plaza, 1900 W Place, N.E., Washington, D.C. 20018-1211; telephone number
(202) 608-2000.
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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 Corpora tion with and into BET Holdings, Inc.
with BET Holdings as the surviving corporation. BTV Acquisition Corporation is
owned by the two largest stockholders of BET Holdings, Robert L. Johnson and
Liberty Media Corporation, a wholly owned subsidiary of Tele-Communications,
Inc. For ease of reference, we sometimes refer in this document to BTV
Acquisition Corporation as "BTV Acquisition," to BET Holdings, Inc. as the
"Company," to Robert L. Johnson as "Mr. Johnson," to Liberty Media Corporation
as "Liberty," to Tele-Communications, Inc. as "TCI" and to Mr. Johnson and
Liberty collectively as the "Buying Group." We are also using the phrase
"holders of Nonaffiliated Stock" to mean all holders of Class A common stock of
the Company other than BTV Acquisition, Mr. Johnson, Liberty and their
respective subsidiaries.
THE SPECIAL MEETING
VOTING
At the Special Meeting of stockholders of the Company, the holders of the
Company's outstanding capital stock (including the holders of the Class A common
stock) will vote on a proposal to adopt the Merger Agreement. Each share of
the Company's Class A common stock is entitled to one vote per share and each
share of Class B and Class C common stock is entitled to ten votes per share.
Delaware law requires that the holders of a majority of all outstanding shares
of capital stock vote to approve the Merger. Mr. Johnson and Liberty hold
enough shares to assure that majority. However, in order to ensure that the
stockholders not affiliated with Mr. Johnson or Liberty, as a group, are in
favor of the Merger, Mr. Johnson, Liberty and the Company have agreed that the
holders of a majority of the voting power of the shares not affiliated with the
Buying Group must approve the Merger Agreement for the Merger to occur.
Acting under authority granted to it by the Board of Directors, the Special
Independent Committee of the Board of Directors of the Company has set the close
of business on [ ], 1998 as the record date for determining who is entitled to
vote at the Special Meeting. On the record date, there were [ ]
shares of Class A common stock outstanding and entitled to vote held by
approximately [ ] stockholders of record.
3
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SPECIAL FACTORS
PURPOSE, BACKGROUND AND EFFECTS OF THE MERGER
The Buying Group's purpose for the Merger is to acquire all of the
remaining Class A common stock in the Company that they do not already own. Mr.
Johnson and Liberty sought to structure the transaction as a merger because it
would enable them to obtain financing on the best terms possible and reduce
transaction costs. If the Merger is completed, the Company's stock would cease
to be publicly traded and holders of Nonaffiliated Stock (other than
stockholders who dissent from the Merger and seek appraisal of their shares in
accordance with the Delaware law requirements explained in this document) would
receive $63 per share in cash. Following the Merger, all of the outstanding
capital stock of the Company, as the surviving corporation in the Merger, would
be owned by Mr. Johnson and Liberty.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
In September 1997, the Buying Group initially offered to acquire all the
remaining Class A common stock of the Company at a purchase price of $48 per
share. Because four of the seven members of the Board of Directors are
affiliated with the Buying Group (Mr. Johnson, his wife, Mrs. Sheila Crump
Johnson, Dr. John C. Malone, the Chairman and Chief Executive Officer of TCI,
and Mr. Robert R. Bennett, the President of Liberty), the Board sought to avoid
the potential conflicts of interest involved by forming a special committee of
independent directors (the "Special Independent Committee") to review the Buying
Group's proposal, make a recom mendation 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 associ
ated with the Buying Group.
The Company's Board of Directors, acting on the recommendation of its
Special Independent Committee, has approved the Merger and the Merger Agreement
and recommends that you vote to adopt the Merger Agreement. The Company's Board
of Directors believes that the Merger and the terms and provisions of the Merger
Agreement (including the $63 per share purchase price) are fair to and in the
best interest of the Company and the holders of Nonaffiliated Stock.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS AND THE SPECIAL INDEPENDENT
COMMITTEE
In reaching their decision to recommend adoption of the Merger Agreement,
the Special Independent Committee and the Board considered a number of factors.
These include the following:
. 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
4
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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. addressed to the Special
Independent Committee that, as of March 15, 1998, the $63 per share to
be received by the holders of Common Stock (other than Mr. Johnson,
Liberty and Liberty's affili ates) 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 stockhold ers vote in favor of the Merger if the
exercise of the Board's fiduciary duties requires the Board to do so
because there is a reasonably likely alternative proposal more
favorable to the holders of Class A common stock.
GOLDMAN SACHS' FAIRNESS OPINION
Goldman Sachs delivered to the Special Independent Committee a written
opinion, dated March 15, 1998, that as of such date, based upon and subject to
the various considerations and assumptions stated therein, the $63 per share to
be received by the holders of Common Stock (other than Mr. Johnson, Liberty and
Liberty's affiliates) is fair from a financial point of view to such
stockholders. The Goldman Sachs opinion is included as Exhibit B at the end of
this Proxy Statement. Please read this opinion carefully.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
BTV Acquisition was formed by Mr. Johnson and Liberty for the purpose of
acquiring the Company in the Merger. Mr. Johnson and Liberty own approximately
65% and 35%, respectively, of BTV Acquisition. Following the effectiveness of
the Merger, on a fully diluted basis, Mr. Johnson will own [ %] of the common
stock of the Company (as the surviving corporation in the Merger), and Liberty
will own [ %]. Such ownership will arise from the conversion, upon the
consummation of the Merger, of all of the outstanding common stock of BTV
Acquisition into all of the outstanding common stock of the Company, and the
conversion of Mr. Johnson's options to acquire shares of Class A common stock of
the Company into options to acquire an equivalent amount of common stock of the
surviving corporation.
In addition, almost all of the Company's officers and directors own the
Company's Class A common stock or hold options to purchase Class A common stock
and, to that extent, their interest in the Merger is the same as yours.
However, some of the officers and directors of the Company have relationships,
or interests in the Merger, that are different from your interests as a
stockholder or that may present a conflict of interest. For a description of
these interests see pages 41 to 43. The Special Independent Committee and the
Board were aware of these interests and considered them in recommending and
approving the Merger.
5
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ACCOUNTING TREATMENT
The cost of repurchasing the Company's outstanding Class A common stock
will be accounted for as a treasury stock transaction, since the Merger will not
constitute a change of control within the context of generally accepted
accounting principles. This means that the historical cost basis of the
Company's assets and liabilities will be carried forward to the surviving
corporation in the Merger, with the aggregate cost of such repurchase being
accounted for as a charge to stockholders' equity. The cost of repurchasing and
cancelling outstanding common stock options will be accounted for as
compensation expense.
FINANCING OF THE MERGER
At the closing of the Merger, BTV Acquisition expects to pay an aggregate
purchase price of $471.5 million to the holders of Nonaffiliated Stock and the
holders of options to acquire the Company's Class A common stock (other than
options held by Mr. Johnson), assuming no stockholders exercise the dissenter
appraisal rights explained in this document. In addition, the parties
anticipate that BTV Acquisition will require approximately $42 million to pay
all other expenses and costs relating to the Merger, to refinance or finance
certain indebtedness of the Company, BTV Acquisition, certain principals of BTV
Acquisition, and Black Entertainment Television, Inc., the Company's primary
operating subsidiary, and to finance other general corporate purposes. It is a
condition to BTV Acquisition's obligation to consummate the Merger that it has
obtained, on terms reasonably acceptable to it, sufficient funds for the
foregoing purposes. BTV Acquisition expects to finance such payments by
entering into a senior secured loan facility of approximately $600 million with
a syndicate of financial institutions to be arranged by The Bank of New York
Company, Inc. and BNY Capital Markets, Inc.
REGULATORY REQUIREMENTS
The Hart-Scott-Rodino Act prohibits the completion of the Merger until
Liberty and the Company have furnished certain information to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and a
required waiting period has expired. The required notification and report forms
have been filed with the Antitrust Division and the Federal Trade Commission,
and the required waiting period is scheduled to expire at 11:59 p.m. on May 27,
1998 (unless terminated earlier or a request for additional information is
received).
FEDERAL INCOME TAX CONSEQUENCES
You will be taxed on your receipt of the $63 per share to the extent that
the amount you receive exceeds your tax basis in your Class A common stock.
Because determining the tax consequences of the Merger can be complicated,
especially in light of recent changes in the federal tax laws governing capital
gains, you should consult your tax advisor in order to understand fully how the
Merger will affect you.
6
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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.
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;
. 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
Agree ment 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:
7
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. 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.
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 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
8
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agreement-in-principle regarding the terms of a settlement, subject
to court approval, third-party consents and other conditions. The parties to
the MOU agreed, among other things, to cooperate in seeking the dismissal of the
complaint pending in the District of Columbia court. The litigation and the MOU
are discussed in the section of this document entitled "LITIGATION." The
consummation of the Merger is conditioned upon there being no pending or
threatened litigation concerning the Merger.
DISSENTER APPRAISAL RIGHTS
Any stockholder who does not wish to accept $63 per share in the Merger has
the right under Delaware law to have the "fair value" of his or her shares
determined by the Delaware Chancery Court. This "right of appraisal" is subject
to a number of restrictions and technical requirements. Generally, in order to
exercise appraisal rights:
. 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."
9
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<PAGE>
INFORMATION CONCERNING
THE SPECIAL MEETING
TIME, PLACE, DATE
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of the Company of proxies from the holders of shares of
the Company's Class A Common Stock, par value $.02 per share (the "Class A
Stock") for use at a Special Meeting of stockholders of the Company to be held
at [ ] local time, on [ ], [JULY ], 1998, at the [
], or at any adjournment(s) or postponement(s) thereof (the "Special Meeting"),
pursuant to the enclosed Notice of Special Meeting of Stockholders.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the stockholders of the Company will be asked to
consider and vote upon the approval and adoption of the Merger Agreement, a copy
of which is attached to this Proxy Statement as Exhibit A. The Merger Agreement
provides for the merger of BTV Acquisition with and into the Company, with the
Company as the surviving corporation (the "Surviving Corporation"). Pursuant to
the Merger Agreement, each outstanding share of Class A Stock (other than Class
A Stock (i) held in the treasury of the Company or by any of its wholly owned
subsidiaries, (ii) held by BTV Acquisition, Mr. Johnson or Liberty, or any of
their respective subsidiaries, or (iii) held by stockholders who perfect their
rights under Delaware law to dissent from the Merger and seek an appraisal of
the fair market value of their shares (the "Dissenting Stockholders")), will be
converted into the right to receive $63 per share in cash, without interest (the
"Merger Consideration"). All Class A Stock of the Company not owned by BTV
Acquisition, Mr. Johnson, Liberty or any of their respective subsidiaries is
referred to in this document as the "Nonaffiliated Stock."
The Special Independent Committee consisting of one director, Mr. Delano
Lewis, was appointed by the Board of Directors to review and evaluate the terms
of the Merger and to report to the Board of Directors of the Company regarding
the fairness of the Merger to the holders of Nonaffiliated Stock. Mr. Lewis is
not an employee of the Company, Liberty or TCI, is not a director of Liberty or
TCI and does not have any commercial relationship with any of the members of the
Buying Group. The Special Independent Committee concluded that the terms and
provisions of the Merger Agreement and the Merger are fair to and in the best
interest of the Company and the holders of Nonaffiliated Stock, and recommended
that the Board approve the Merger Agreement and the transactions contemplated
thereby. At a meeting held on March 15, 1998, acting on the recommendation of
the Special Independent Committee, and after the unanimous approval of Messrs.
Lewis, Washington and Wilkins, the directors who are not (i) officers or
employees of the Company, (ii) officers, directors or employees of TCI or
Liberty or (iii) affiliates of Mr. Johnson, Liberty or TCI (although Mr. Wilkins
is a director and stockholder of two TCI-affiliated Companies), the Board
concluded that the terms and provisions of the Merger Agreement and the Merger
are fair to and in the best interest of the Company and the holders of
Nonaffiliated Stock, approved the Merger Agreement, and recommended that the
stockholders approve and adopt the Merger Agreement. The Special Independent
Committee and the Board, in reaching their
10
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respective decisions, considered a number of factors, including the opinion of
Goldman, Sachs & Co. ("Goldman Sachs"), an investment banking firm engaged by
the Special Independent Committee as its exclusive financial advisor, that, as
of the date of such opinion and based upon and subject to various considerations
and assumptions stated therein, the Merger Consideration is fair from a
financial point of view to the holders of Common Stock other than Mr. Johnson,
Liberty and Liberty's affiliates. A copy of Goldman Sachs' opinion is attached
hereto as Exhibit B. See "SPECIAL FACTORS -- Recommendation of the Special
Independent Committee and Board of Directors; Fairness of the Merger" and "--
Opinion of Financial Advisor to the Special Independent Committee."
BASED ON THE RECOMMENDATION OF ITS SPECIAL INDEPENDENT COMMITTEE, THE BOARD
OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
RECORD DATE; VOTING AT THE MEETING; QUORUM
Acting under authority granted to it by the Board of Directors, the Special
Independent Committee has fixed the close of business on [ , 1998] as the
record date for the Special Meeting (the "Record Date"). Only stockholders of
record as of the close of business on [ , 1998] will be entitled to
notice of and to vote at the Special Meeting.
As of the close of business on April 28, 1998, the Company had outstanding
10,070,321 shares of Class A Stock, held of record by 624 registered holders,
1,831,600 shares of Class B Common Stock, par value $.02 per share (the "Class B
Stock"), and 4,820,000 shares of Class C Common Stock, par value $.02 per share
(the "Class C Stock" together with the Class A Stock and Class B Stock the
"Common Stock"). Mr. Johnson beneficially owns 2,186,103 shares of the Company's
Class A Stock (representing approximately 21.2% of the outstanding shares of
Class A Stock) and 4,820,000 shares of the Class C Stock, representing 100% of
the outstanding shares of Class C Stock. Liberty beneficially owns 1,831,600
shares of the Company's Class A Stock (representing approximately 18.2% of the
outstanding shares of Class A Stock) and 1,831,600 shares of the Company's Class
B Stock representing 100% of the outstanding shares of the Class B Stock. As of
April 28, 1998, Mr. Johnson and Liberty collectively held 39.4% of the
outstanding Class A Stock. However, Mr. Johnson owns 100% of the outstanding
Class C Stock and Liberty owns 100% of the outstanding Class B Stock. Mr.
Johnson's shares of Class C Stock and Liberty's shares of Class B Stock are
convertible into Class A Stock on a one-for-one basis. If such Class B Stock and
Class C Stock were converted into Class A Stock, Mr. Johnson and Liberty would
beneficially own approximately 62.8% of the Company's outstanding shares of
Class A Stock.
Except as to the election of members of the Board of Directors and as
otherwise required by Delaware law, shares of Class A Stock, Class B Stock and
Class C Stock vote together as a single class, with holders of the Class A Stock
entitled to one vote per share and holders of the Class B Stock and Class C
Stock entitled to ten votes per share. By virtue of Mr. Johnson's current
ownership of Class
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A Stock and Class C Stock and Liberty's current ownership of Class A Stock and
Class B Stock, Mr. Johnson and Liberty are entitled to approximately 65.6% and
26.3%, respectively, of the vote of all classes of the Company's Common Stock
and combined, Mr. Johnson and Liberty hold approximately 92% of the voting power
of all classes of the Company's Common Stock. The presence in person or by proxy
of the holders of at least a majority of the combined voting power of the
outstanding Class A Stock, Class B Stock and Class C Stock entitled to vote at
the Special Meeting constitutes a quorum. Broker non-votes and shares as to
which a stockholder abstains will be included in determining whether there is a
quorum at the Special Meeting. Because Mr. Johnson and Liberty together own at
least a majority of the combined voting power of the outstanding Class A Stock,
Class B Stock and Class C Stock, their presence at the Special Meeting will be
sufficient to create a quorum.
REQUIRED VOTE
Under Delaware law, the Merger Agreement must be approved and adopted by
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock of the Company. Because Mr. Johnson and Liberty together own a
majority of the outstanding shares of Common Stock, their agreement to vote in
favor of the Merger Agreement means that the Delaware law vote requirement will
be satisfied. However, the Buying Group and the Company have agreed in the
Merger Agreement that it is also a condition to consummation of the Merger that
the Merger Agreement be approved and adopted by the holders of a majority of the
voting power of the shares of Common Stock not owned by Mr. Johnson, Liberty or
any of their respective affiliates (the "Independent Vote Requirement"). The
affirmative vote of approxi mately 3,154,810 shares of Common Stock not owned
by Mr. Johnson, Liberty or any of their respective affiliates will be necessary
to satisfy the Independent Vote Requirement. The Merger is also subject to
other conditions. See "THE MERGER AGREEMENT -- Conditions."
Failure to return an executed proxy card or to vote in person at the
Special Meeting or voting to abstain will constitute, in effect, a vote against
approval and adoption of the Merger Agreement for purposes of Delaware law and
the Independent Vote Requirement.
ACTION TO BE TAKEN UNDER THE PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any stockholder giving the proxy so desire. Stockholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either by filing with the Company's Secretary at the Company's
principal executive offices a written revocation or a duly executed proxy
bearing a later date or by voting in person at the Special Meeting. Attendance
at the Special Meeting without casting a ballot will not, by itself, constitute
revocation of a proxy. Any written notice revoking a proxy should be sent to BET
Holdings, Inc., One BET Plaza, 1900 W Street, N.E., Washington, D.C. 20018-1211,
Attention: Byron F. Marchant, Secretary.
All shares of Class A Stock represented at the Special Meeting by properly
executed proxies received prior to or at the Special Meeting, unless previously
revoked, will be voted at the Special Meeting in accordance with the
instructions on the proxies. Unless contrary
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<PAGE>
instructions are indicated, proxies will be voted FOR the approval and adoption
of the Merger Agreement. As explained below in the section entitled "DISSENTERS
RIGHTS OF APPRAISAL," a vote in favor of the Merger Agreement means that the
stockholder owning those shares will not have the right to dissent and seek
appraisal of the fair market value of the shares. The Company does not know of
any matters, other than as described in the Notice of Special Meeting of
Stockholders, which are to come before the Special Meeting. If any other matters
are properly presented at the Special Meeting for action, the persons named in
the enclosed form of proxy and acting thereunder will have discretion to vote on
such matters in accordance with their best judgment.
PROXY SOLICITATION
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Special Meeting of Stockholders and the enclosed proxy will be borne
by the Company. The Company is requesting that banks, brokers and other
custodians, nominees and fiduciaries forward copies of the proxy material to
their principals and request authority for the execution of proxies. The Company
may reimburse such persons for their expenses in so doing. In addition to the
solicitation of proxies by mail, the directors, officers and employees of the
Company and its subsidiaries may, without receiving any additional compensation,
solicit proxies by telephone, telefax, telegram or in person.
Morrow & Co., Inc. (the "Proxy Solicitor"), a professional soliciting
organization, will assist in the solicitation of proxies by the Company. The
Proxy Solicitor's fee for solicitation of the proxies is $6,500 plus
disbursements incurred by the Proxy Solicitor on the Company's behalf (for which
the Company has paid an advance of $6,000). The Proxy Solicitor's charge to
solicit holders of record and non-objecting beneficial owners is $5 per holder.
No person is authorized to give any information or make any representation
not contained in this Proxy Statement, and if given or made, such information or
representation should not be relied upon as having been authorized.
COMPANY STOCKHOLDERS SHOULD NOT SEND ANY CERTIFICATES REPRESENTING SHARES
OF COMMON STOCK WITH THEIR PROXY CARD. IF THE MERGER IS CONSUMMATED, THE
PROCEDURE FOR THE EXCHANGE OF CERTIFICATES REPRESENTING SHARES OF CLASS A STOCK
WILL BE AS SET FORTH IN THIS PROXY STATEMENT. SEE "THE MERGER AGREEMENT -- THE
EXCHANGE FUND; PAYMENT FOR SHARES OF CLASS A STOCK" AND " --TRANSFERS OF CLASS A
STOCK."
13
<PAGE>
THE PARTIES
THE COMPANY
The Company was incorporated in Delaware in July 1991 in connection with
the initial public offering of its Class A Stock. As a result of a series of
related transactions completed in September 1991, Black Entertainment
Television, Inc. ("BET"), a District of Columbia corpora tion formed in 1979,
became a wholly owned subsidiary of the Company. In November 1991, the Company
completed its initial public stock offering and became the first black majority-
controlled company listed on the New York Stock Exchange (the "NYSE").
Substantially all of the Company's operations are conducted by BET through its
operation of the Black Entertain ment 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
program ming per week targeted to the interests and concerns of African-
American viewers to affiliated cable system operators serving approximately 3.8
million cable subscribers. In 1984, BET Cable Network began offering cable
television programming 24 hours per day. As of July 31, 1997, BET Cable Network
reached over 50.5 million households, as estimated by Nielsen Media Research,
providing a broad mix of music videos, off-network situation comedies and
original programming.
For additional information concerning the Company, see "DOCUMENTS INCORPO
RATED BY REFERENCE" and "AVAILABLE INFORMATION."
BTV ACQUISITION
BTV Acquisition was incorporated in Delaware in 1998 by Mr. Johnson and
Liberty in connection with the proposed Merger. BTV Acquisition has not been
engaged in any business activities other than those in connection with the
Merger. The principal office and business address of BTV Acquisition is c/o
Liberty Media Corporation, 8101 East Prentice Avenue, Englewood, CO 80111. The
telephone number of BTV Acquisition is (303) 721-5400.
ROBERT L. JOHNSON
Mr. Johnson founded BET, the Company's primary operating subsidiary, in
1979. Mr. Johnson has served as President, Chief Executive Officer and a
director of BET since its creation. Since 1991, Mr. Johnson has served as the
Chairman of the Company's Board of Directors. Since 1991, Mr. Johnson has also
served as Chief Executive Officer of the Company and served as its President
from 1991 until March 1996. Mr. Johnson is also the Chairman of District
Cablevision, Inc. ("DCI"), a Washington, D.C. cable operating company which he
founded in 1980, and served as a director of a predecessor of Liberty from
December 1991 until August 1994. Since January 1994, Mr. Johnson has served as
a director of Hilton Hotels Corporation and has served as a director of US
Airways Group, Inc. since January 1998. Mr. Johnson's
14
<PAGE>
business address is One BET Plaza, 1900 W Place, N.E., Washington, D.C. 20018-
1211 and the telephone number is (202) 608-2000.
LIBERTY MEDIA CORPORATION
Liberty is a Delaware corporation and a wholly owned subsidiary of TCI.
Liberty produces, acquires and distributes entertainment for an international
audience, educational and informational programming, as well as home shopping
via television and other interactive media and marketing services. The
principal office and business address of Liberty is 8101 East Prentice Avenue,
Englewood, CO 80111. The telephone number of Liberty is (303) 721-5400.
TELE-COMMUNICATIONS, INC.
TCI is a Delaware corporation primarily engaged in the operation of cable
television systems and the provision of cable television, telecommunications and
programming services. The principal office and business address of TCI is 5619
DTC Parkway, Englewood, CO 80111. The telephone number of TCI is (303) 267-5500.
15
<PAGE>
SPECIAL FACTORS
PURPOSE AND BACKGROUND OF THE MERGER
At a meeting of the Board of Directors of the Company held on May 20, 1997,
the Board discussed general options for increasing stockholder value. At that
meeting, the Board authorized the retention of a financial advisor to consider
possible value enhancement transactions. In late May 1997, Mr. Johnson, in his
individual capacity, discussed with the Company's senior management the general
concept of enhancement of stockholder value for the Company, including the
possibility of Mr. Johnson making a proposal to acquire the Company. In late May
and early June 1997, Mr. Johnson and representatives of Liberty had general
discussions concerning the feasibility of taking the Company private in a
leveraged buy-out or other business combination transaction. No proposal
regarding the acquisition of the Company was made by Mr. Johnson or Liberty at
that time.
On July 10, 1997, the Board of Directors approved the retention by the
Company of Salomon Brothers Inc ("Salomon") to render certain financial advisory
and investment banking services to the Company, including identifying and/or
evaluating various strategic or financial alternatives that may be available to
the Company to enhance stockholder value, including a public or private sale or
placement of additional equity or debt securities of the Company. Salomon
entered into an engagement letter with the Company dated August 20, 1997.
On or about September 8, 1997 Mr. Johnson contacted representatives of
Liberty and proposed that the parties consider a potential acquisition of the
Company, in the event that the Salomon analysis, which was to be presented to
the Board at the Board's September 10 meeting, did not suggest an alternative
transaction acceptable to Mr. Johnson and Liberty. On September 10, 1997,
Salomon made a presentation to the Board regarding several possible alternative
transactions, but the Board took no action to pursue any of such alternatives at
that time. Following this Board meeting, Mr. Johnson, Dr. Malone and Mr. Bennett
met to consider a potential acquisition of the Company by Mr. Johnson and
Liberty. At this meeting, Liberty and Mr. Johnson determined to proceed with a
potential acquisition and they proceeded to deliver a letter to the Company
proposing that a corporation to be formed by the Buying Group acquire, by merger
or other business combination, all of the outstanding Class A Stock of the
Company not owned by the Buying Group, at a purchase price of $48 per share in
cash (the "$48 Offer"). The letter stated that consummation of the proposed
transaction would be subject to, among other things, the negotiation and
execution of a definitive merger and other related agreements and the receipt of
financing on terms and conditions acceptable to the Buying Group. In addition,
the letter stated that the Buying Group and its advisors were prepared to meet
with the Board of Directors of the Company or any special independent committee
formed by it to consider the $48 Offer. On September 10, 1997, Salomon informed
the Company that it was resigning as financial advisor under the August 20, 1997
engagement letter and would thereafter be acting as financial advisor to the
Buying Group. On September 11, 1997, the Company issued a press release
regarding the $48 Offer. Mr. Johnson and Liberty entered into a letter
agreement dated as of September 11, 1997 setting forth the general terms and
conditions under which Mr. Johnson
16
<PAGE>
and Liberty would act together in respect of the proposed transaction. See " -
Buying Group Letter Agreements."
On September 11, 1997, three class action complaints were filed in the
Court of Chancery in the state of Delaware (the "Court") challenging the $48
Offer: (1) Behrens v. Johnson, C.A. No. 15921-NC (the "Behrens Complaint"), (2)
------------------
Harbor Finance Partners v. Barton, C.A. No. 15923-NC and (3) Friedman v.
- --------------------------------- -----------
Johnson, C.A. No. 15924-NC. On September 12, 1997 a fourth class action
complaint, Tiger Options, L.L.C. v. Johnson, C.A. No. 5936, and on September 13,
--------------------------------
1997 a fifth class action complaint, Ramos v. Johnson, C.A. No. 15941, were
----------------
filed with the Court. The Behrens Complaint was served on the Company and its
directors on September 15, 1997. The Behrens Complaint alleged, among other
things, that $48 per share was an unfair price for the shares of the
Nonaffiliated Stock. On October 14, 1997, the Court executed an order
consolidating these five complaints into one cause of action under the caption
In re BET Holdings, Inc. Shareholders Litigation, C.A. No 15921 (the
- ------------------------------------------------
"Consolidated Action"). Between October 1997 and March 1998, the Court granted
the defendants monthly extensions of time to respond to the Behrens Complaint.
On September 15, 1997, the Board of Directors of the Company appointed the
Special Independent Committee to review and evaluate the $48 Offer. Mr. Delano
E. Lewis was viewed as highly qualified to act as a special committee member
because of his extensive experience as a business executive and his
understanding of business and financial matters. In addition, Mr. Lewis was the
only member of the Board who had neither financial relationships with the Buying
Group which might lead to questions concerning his being "disinterested" or
"independent" nor professional obligations which would preclude his devoting
sufficient time and attention to the work of the Special Independent Committee.
In considering Mr. Lewis's appointment to the Special Independent Committee, the
Board was aware that Mr. Lewis had been nominated originally to serve on the
Board by Mr. Johnson pursuant to the Company Stockholders Agreement (as defined
below), but the Board did not view that fact as creating a potential conflict of
interest, particularly given Mr. Lewis's qualifications and the absence of a
financial relationship between Mr. Lewis and Mr. Johnson. Accordingly, Mr.
Lewis was appointed to serve as the Chairman and sole member of the Special
Independent Committee. As used in this document, the term "Company Stockholders
Agreement" refers to the Agreement Among Stockholders dated November 6, 1991
among the Company, Mr. Johnson, an affiliate of TCI, and TW/BET Holding Co.
(which is no longer a shareholder of the Company), which, among other
provisions, permits Mr. Johnson to nominate one director as long as he holds a
specified number of shares of Class C Stock.
Promptly following his appointment, Mr. Lewis retained the Washington, D.C.
law firm of Freedman, Levy, Kroll & Simonds to serve as counsel to the Special
Independent Committee. The Special Independent Committee retained that law firm
because of its expertise relating to corporation and securities law matters and
because the firm had not previously represented either the Company or the Buying
Group.
On September 19, 1997, the Buying Group transmitted a letter to the Special
Independent Committee clarifying certain issues regarding the $48 Offer and
requesting that the Company
17
<PAGE>
provide it with certain financial and business information, subject to the
Buying Group agreeing to appropriate confidentiality protections. In this
letter, the members of the Buying Group stated that they were not considering
selling any of their shares in the Company to a third party.
On September 29, 1997, the Special Independent Committee conducted its
organizational meeting at the offices of the Company. At that meeting, the
Special Independent Committee and its counsel met with Company officials and the
Company's counsel. The Company provided to the Special Independent Committee
copies of various submissions the Company had received from investment banking
firms expressing an interest in serving as the Special Independent Committee's
financial advisor. The Company also confirmed that it would provide the Special
Independent Committee with information and access to Company personnel upon
request by the Special Independent Committee and its advisors. However, the
Company and the Special Independent Committee also noted that the Company's
officers and counsel could not and would not be privy to the details of the
Special Independent Committee's work, so as to maintain the integrity of the
Special Independent Committee's process. Counsel for the Special Independent
Committee also suggested that Mr. Lewis be compensated by the Company on a
reasonable and fair basis for serving as Chairman and sole member of the Special
Independent Committee, to which the Company agreed.
The Company and the Buying Group entered into a Nondisclosure Agreement
dated as of October 2, 1997 which provided that the Company would make available
to the Buying Group and its representatives certain non-public financial and
other business information concerning the Company and that the Buying Group
would treat non-public information about the Company received by it
confidentially.
On October 2, 1997, the Special Independent Committee met with its counsel
to establish a process for the selection of a financial advisor to the Special
Independent Committee. Mr. Lewis, in consultation with counsel for the Special
Independent Committee, selected three investment banking firms, including
Goldman Sachs, as the candidates to serve as the Special Independent Committee's
financial advisor. The basis for this selection was the quality of written
materials submitted, the prominence and reputation of the firms, the firms'
experience in advising special committees, the firms' background and experience
in the media, cable and telecommunications industries and the potential for
conflicts of interest. Mr. Lewis then contacted representatives of those firms
and, with the assistance of counsel, conducted interviews with the three firms
on October 7 and 8, 1997.
On October 7, 1997 a class action complaint and motion for a preliminary
injunction was filed under the caption Baskerville v. Johnson, Civil No.
----------------------
97ca007778 (the "Baskerville Com plaint"), in the Superior Court for the
District of Columbia (the "D.C. Court"). Like the Behrens Complaint, the
Baskerville Complaint challenged a proposed buyout of holders of the
Nonaffiliated Stock. Between November 1997 and February 1998, the D.C. Court
granted defendants monthly extensions of time to respond to the complaint and
motion for preliminary injunction. On February 6, 1998, the D.C. Court held an
initial conference and orally granted (i) an extension of time to respond to the
Baskerville Complaint until April 30, 1998 and (ii) plaintiff's motion to
withdraw her motion for a preliminary injunction.
18
<PAGE>
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 representa tives to the senior management of the Company and to
develop a process for Goldman Sachs to review the Company's business.
On October 29, 1997, the Special Independent Committee and its legal and
financial advisors met to review a contact Goldman Sachs had received from
Salomon requesting a meeting between Goldman Sachs and Salomon. The Special
Independent Committee authorized Goldman Sachs to participate in such a meeting
with Salomon, which meeting occurred on October 30, 1997.
On November 5, 1997, the Special Independent Committee and its legal and
financial advisors met to review Goldman Sachs' progress in their review of the
Company's business and prospects, as well as to discuss Goldman Sachs' meeting
on October 30, 1997 with Salomon. Goldman Sachs reported to the Special
Independent Committee that it had been advised that if a fair price could be
negotiated, the Buying Group preferred to proceed with a long-form merger (i.e.,
a merger requiring submission to a vote by the Company's stockholders) rather
than a tender offer or other type of acquisition transaction. Goldman Sachs
also outlined, on a preliminary basis, the methodologies to be employed in its
fairness analysis. Goldman Sachs also reviewed with the Special Independent
Committee the Company's efforts to expand its business into areas other than the
core cable network, and the Special Independent Committee considered the
potential risks and rewards associated with these new ventures. After
discussion, the Special Independent Committee authorized Goldman Sachs to
continue its discussions with Salomon, as well as to conduct further due
diligence and analysis of the Company's business and prospects. Additionally,
the Special Independent Committee decided to invite the large public
stockholders who had expressed a desire to communicate directly with the Special
Independent Committee to meet with the Special Independent Committee and its
advisors.
On November 24, 1997, the Special Independent Committee and its legal and
financial advisors met by telephone with representatives of the three
institutional investors holding the largest amounts of the Company's common
stock other than members of the Buying Group. Mr. Lewis explained to such
representatives that the Special Independent Committee wanted to hear
19
<PAGE>
what they had to say, but could not respond or provide any information
concerning the work of the Special Independent Committee that was not publicly
available. Such representatives expressed their views that the $48 Offer was not
adequate, and expressed their views that a substantially higher price would be
appropriate.
Also on November 24, 1997, Goldman Sachs reported to the Special
Independent Committee on the progress of discussions with the Buying Group and
its advisors. Goldman Sachs informed the Special Independent Committee that, at
their meeting on November 20, 1997, Salomon had informed Goldman Sachs that the
Buying Group and its financial advisors believed that, as between the Company's
internal financial forecasts prepared in October 1997 (the "October 1997
Projections") and an earlier set of internal projections, prepared by management
in May 1997 (the "May 1997 Projections"), the May 1997 Projections were more
appropriate for analyzing the Company's business and prospects. The May 1997
Projections forecast for the Company's core cable network in 2001 revenues of
$241.2 million, operating expenses of $81.5 million and earnings before income
taxes, depreciation and amortization ("EBITDA") of $167.1 million, reflecting a
projected EBITDA compounded annual growth rate ("CAGR") for the years 1998
through 2001 of 25%. The October 1997 Projections forecast 2001 core cable
network revenues, operating expenses and EBITDA of $283.2 million, $81.5 million
and $209.0 million, respectively, reflecting a projected EBITDA CAGR for the
years 1998 through 2001 of 29%.
On December 12, 1997, the Special Independent Committee and its legal and
financial advisors met to review developments following the Committee's meeting
on November 24. Mr. Lewis reported that he had spoken with Mr. Johnson on
November 24 and Mr. Johnson had indicated, in substance, that the Special
Independent Committee had not been provided with projections that, in Mr.
Johnson's view, reflected a realistic forecast of the Company's potential
performance. Mr. Johnson stated to Mr. Lewis that he would request senior
management of the Company to review the October 1997 Projections and provide the
Special Independent Committee with projections which management believed were
attainable. In addition, Mr. Johnson indicated to Mr. Lewis that he did not
participate in the preparation of either the October 1997 Projections or the
December 1997 Projections (as defined below). Goldman Sachs met with
representatives of the Company on December 8, 1997 and discussed the variables
and assumptions underlying the Company's internal financial projections. A
discussion was held concerning the general optimism of the Company's projections
and the variables upon which such optimism was based.
Following the Special Independent Committee's December 12, 1997 meeting,
Goldman Sachs received from the Company a revised set of internal financial
projections (the "December 1997 Projections"). Members of the Company's
management represented that they were utilizing the December 1997 Projections to
run the Company and to make budgeting decisions. The December 1997 Projections
forecast 2001 core cable network revenues, operating expenses and EBITDA of
$254.2 million, $81.5 million and $180.0 million, respectively, reflecting a
projected EBITDA CAGR for the years 1998 through 2001 of 23%. The Special
Independent Committee concluded that the December 1997 Projections, like the May
1997 Projections and the October 1997 Projections, were more aggressive than the
Company's historical results. The
20
<PAGE>
Company's historical 1997 core cable network revenues, operating expenses and
EBITDA were $136.2 million, $72.4 million and $68.9 million, respectively,
reflecting an EBITDA CAGR for the years 1995 through 1997 of 21%. The December
1997 Projections forecast for the 1998 fiscal year ending July 31, 1998 core
cable network revenues of approximately $160.6 million and EBITDA of $96.4
million. Based on an annualization of the Company's historical results of
operations for the six months ended January 31, 1998, the Company's core cable
network revenues and EBITDA for the year ending July 31, 1998 would be
approximately $151.4 million and $84.0 million, respectively.
On January 12, 1998, the Special Independent Committee and its legal and
financial advisors met to review a presentation by Goldman Sachs concerning the
$48 Offer. At the January 12, 1998 presentation to the Special Independent
Committee, Goldman Sachs expressed its view to the Special Independent Committee
that the $48 Offer was not adequate. The Special Independent Committee
concluded that the $48 Offer was not adequate and decided to so advise the
Company and the Buying Group, and to issue a press release announcing its views.
The press release was issued on January 23, 1998.
The Special Independent Committee authorized Goldman Sachs to continue its
discussions with Salomon. On February 9, 1998, representatives of Salomon and
Goldman Sachs met and discussed their respective analyses of the Company. During
the February 9, 1998 meeting, Goldman Sachs was furnished with the December 1997
Projections as adjusted in certain respects by the Buying Group and its
financial advisor (the "Modified December 1997 Projections"). The Modified
December 1997 Projections forecast for the Company's core cable network in 2001
revenues of $217.1 million, operating expenses of $76.9 million and EBITDA of
$140.3 million, reflecting a projected EBITDA CAGR for the years 1998 through
2001 of 16%.
Representatives of Salomon and Goldman Sachs met again by telephone on
February 27, 1998 to continue their discussions concerning their respective
analyses of the Company. At this meeting, representatives of Salomon, on behalf
of the Buying Group, indicated to Goldman Sachs that the Buying Group was
concerned that the further continuation of their effort to acquire the Company
was disrupting the day to day operation of the Company and that it was desirable
either to complete or to abandon the transaction. Salomon stated, on behalf of
the Buying Group, that the Buying Group was considering increasing the offer
price and that if it did so it would expect the Special Independent Committee to
consider whether or not such increased offer price was acceptable, and if
acceptable, to proceed to negotiate a definitive merger agreement as promptly as
possible. Based upon its conversation with Salomon, Goldman Sachs reported to
the Special Independent Committee its view that the Buying Group would be
willing to increase its offer to $63.
On March 2, 1998, Mr. Johnson telephoned Mr. Lewis and confirmed that the
Buying Group was considering increasing its offer price. Mr. Johnson told Mr.
Lewis, however, that any such increase in the proposed offer price would only be
made in conjunction with the resolution of all issues concerning a proposed
merger. Mr. Johnson reaffirmed to the Special Independent
21
<PAGE>
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 the $63 offer price. Among
other things, Goldman Sachs explained that an offer at $63 would fall within a
range of reasonableness, based upon comparable transactions. However, Goldman
Sachs also advised the Special Independent Committee that to conclude that such
a price was "fair," one had to believe that there was substantial risk that the
Company's operating performance would not be as successful as management had
projected in the December 1997 Projections furnished to the Special Independent
Committee and reviewed by Goldman Sachs. After discussing the principal
assumptions on which the December 1997 Projections were based, and noting that
the Company's performance during the first five months of the current fiscal
year was below management's projections, the Special Independent Committee
concluded that there were indeed substantial risks and uncertainties associated
with the Company's internal financial projections of future earnings and growth.
The Special Independent Committee also noted that no other potential bidders for
the Company or the publicly held shares of the Company's Class A Stock had
contacted the Special Independent Committee since the Special Independent
Committee had been established, and that a price of $63 per share would
represent a premium of approximately 58% over the market price of the shares
prior to the initial public announcement of the $48 Offer and a premium of
approximately 31% over the $48 Offer. The Special Independent Committee
concluded that an offer from the Buying Group at $63 was in all likelihood the
best alternative for the holders of the Nonaffiliated Stock that was likely to
be reasonably available for the foreseeable future. In addition, the Special
Independent Committee determined that its support of a $63 offer price would be
conditioned upon the Buying Group agreeing to certain structural protections for
the holders of the Nonaffiliated Stock, in particular that the consummation of
the merger would be made contingent on the approval of the holders of a majority
of the Nonaffiliated Stock. Such an approval requirement, which would
effectively neutralize the voting power of the Buying Group, would enable the
holders of the Nonaffiliated Stock to make an independent determination as to
the fairness of an offer price.
At the conclusion of its March 5, 1998 meeting, the Special Independent
Committee decided to ascertain whether a price above $63 per share could be
obtained from the Buying Group. During a meeting with Mr. Johnson on March 6,
1998, Mr. Lewis requested that the Buying Group increase its offer to $69 per
share. Mr. Johnson responded that the Buying Group would not agree to raise the
price above $63 per share. Mr. Johnson said that if the Special Independent
Committee would not recommend an offer of $63 per share, then the Company would
remain a publicly held corporation.
After further discussions between Mr. Johnson and Mr. Lewis, Mr. Johnson
confirmed that, subject to an indication by the Special Independent Committee
that the Special Independent Committee would recommend the transaction and the
resolution of various other issues relating to the proposed merger, the Buying
Group was prepared to increase its offer to $63 per share, that the Buying Group
would not offer more than $63 per share, and that a merger agreement
22
<PAGE>
would have to be completed promptly. Mr. Lewis indicated to Mr. Johnson that the
Special Independent Committee would, on a preliminary basis, be willing to
consider an offer of $63 per share, subject to Goldman Sachs' ability to opine
that such price was fair to the holders of the Nonaffiliated Stock from a
financial point of view, and to the successful negotiation of the terms of a
merger agreement, including the requirement that the holders of the
Nonaffiliated Stock separately approve the merger.
On March 12, 1998, the Special Independent Committee and its legal and
financial advisors met to consider the terms of a draft of a proposed merger
agreement that had been prepared by counsel to the Buying Group and negotiated
with counsel to the Special Independent Committee and to determine the Special
Independent Committee's response to an offer price of $63 per share. The
Special Independent Committee tentatively determined that a $63 price would be
acceptable, subject to the Special Independent Committee's receipt of an opinion
of Goldman Sachs as to the fairness of such price to the holders of the
Nonaffiliated Stock and subject to the Buying Group agreeing in the merger
agreement to certain protections for the benefit of the holders of the
Nonaffiliated Stock. The protections insisted on by the Special Independent
Committee in the merger agreement included a condition to the merger that the
holders of a majority of the Nonaffiliated Stock have approved the merger, a
right for the Company to terminate the merger agreement in the event that the
Buying Group did not deliver to the Company a firm commitment for the financing
of the merger by May 15, 1998, and certain other provisions relating to the
ability of the Board of Directors, acting on the recommendation of the Special
Independent Committee, to withdraw its recommendation of the merger. In
addition, the Special Independent Committee determined to require the Buying
Group to obtain a "highly confident" letter from a financial institution
indicating such institution's confidence in the financeability of the merger
prior to taking any action with respect to the proposed merger.
On the evening of March 13, 1998, Mr. Johnson, informed the Special
Independent Committee that he had requested management of the Company to arrange
for a meeting of the Board to take place on the evening of March 15, 1998. The
Special Independent Committee and the Buying Group and their respective
financial and legal advisors continued to negotiate the terms of a proposed
merger agreement through the evening of March 15, 1998.
On March 15, 1998, the Special Independent Committee reviewed with its
counsel and Goldman Sachs the terms of a proposed merger agreement that had been
negotiated by counsel representing the Special Independent Committee, the
Company and the Buying Group. The Special Independent Committee approved the
$63 price and other terms and provisions of the proposed agreement and found
such price and terms and provisions to be fair to and in the best interest of
the Company and the holders of Nonaffiliated Stock, and determined to recommend
that the Board of Directors approve the proposed merger agreement. At the
Special Independent Committee meeting, Goldman Sachs delivered its oral opinion
that, as of such date, the $63 per share to be received by the holders of Common
Stock (other than Mr. Johnson, Liberty and Liberty's affiliates) pursuant to the
proposed merger agreement is fair to such holders from a financial point of
view.
23
<PAGE>
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 of two TCI-affiliated Companies), unanimously concluded
that the terms and provisions of the Merger Agreement and the Merger are fair to
and in the best interest of the Company and the holders of the Nonaffiliated
Stock, approved the Merger Agreement, and recommended that the stockholders
approve and adopt the Merger Agreement. The other directors then returned to the
meeting and the full Board (except for Dr. Malone who was absent) unanimously
concluded that the terms and provisions of the Merger Agreement and the Merger
are fair to and in the best interest of the Company and the holders of the
Nonaffiliated Stock, approved the Merger Agreement, and recommended that the
stockholders approve and adopt the Merger Agreement.
On March 15, 1998 counsel for plaintiffs and defendants in the Consolidated
Action executed a Memorandum of Understanding (the "MOU") which outlined an
agreement-in-principle regarding the terms of a settlement of the Consolidated
Action. See "LITIGATION." On that same day, Mr. Johnson and Liberty entered
into a letter agreement relating to the prospective management and ownership of
the business of the Company following consummation of the Merger. See "Buying
Group Letter Agreements."
On March 16, 1998, the Company and the Buying Group issued separate press
releases disclosing that they had signed a definitive merger agreement pursuant
to which the Buying Group would acquire all of the Nonaffiliated Stock at a per
share price of $63 in cash.
24
<PAGE>
RECOMMENDATION OF THE SPECIAL INDEPENDENT COMMITTEE AND BOARD OF DIRECTORS;
FAIRNESS OF THE MERGER
On March 15, 1998, the Special Independent Committee determined that the
Merger and the terms and provisions of the Merger Agreement are fair to and in
the best interest of the Company and the holders of the Nonaffiliated Stock, and
recommended to the Board of Directors of the Company that it approve the Merger
Agreement.
At a special meeting held immediately following the Special Independent
Committee's determination, at which all directors of the Company were present,
except for Dr. Malone, the Board of Directors of the Company considered the
recommendation of the Special Independent Committee. After Mrs. Johnson and
Messrs. Johnson and Bennett excused themselves from the meeting, Messrs. Lewis,
Washington and Wilkins unanimously concluded that the terms and provisions of
the Merger Agreement and the Merger are fair to and in the best interest of the
Company and the holders of the Nonaffiliated Stock, approved the Merger
Agreement, and recommended that the stockholders approve and adopt the Merger
Agreement. Mrs. Johnson and Messrs. Johnson and Bennett then returned to the
meeting and all the directors present unanimously concluded that the terms and
provisions of the Merger Agreement and the Merger are fair to and in the best
interest of the Company and the holders of the Nonaffiliated Stock, approved the
Merger Agreement, and recommended that the stockholders approve and adopt the
Merger Agreement.
Special Independent Committee. In reaching its determination to approve
-----------------------------
and recommend that the Board of Directors approve the Merger Agreement, the
Special Independent Committee considered the following factors, each of which,
in the opinion of the Special Independent Committee, supported such
determination:
(1) Market Prices and Merger Price Premium. The Special
--------------------------------------
Independent Committee considered the historical market prices of the
Company's Class A Stock and the premium to be received by the holders
of the Nonaffiliated Stock pursuant to the Merger Agreement. The
average closing price of the Class A Stock on the NYSE during the 30-
day period preceding September 10, 1997, on which date the $48 Offer
was publicly announced, was approximately $40 per share. The $63 price
represents a premium of approximately 58% over such $40 average
closing price per share. Furthermore, the $63 price represents a
premium of approximately 50% over the $41.88 per share closing price
on September 9, 1997, which was the 52-week high closing price for the
shares prior to the September 11, 1997 announcement of the $48 Offer,
and a premium of approximately 155% over the $24.75 per share closing
price on December 18, 1996, which was the 52-week low closing price
prior to the September 11, 1997 announcement.
(2) Increase in Merger Price Over $48 Offer. The Special
---------------------------------------
Independent Committee also considered the fact that following the
negotiations between the
25
<PAGE>
Special Independent Committee and its financial advisor and the Buying
Group and its financial advisor, the Buying Group increased the price
it was willing to pay to the holders of the Nonaffiliated Stock in
connection with the proposed Merger from $48 to $63, an increase of
approximately 31%. The Special Independent Committee also considered
its belief that the Buying Group would not further increase the price
it was willing to pay for the publicly held shares and that the $63
per share price was, in the belief of the Special Independent
Committee, the highest price which the Buying Group was willing to
pay.
(3) Goldman Sachs Opinion. The Special Independent Committee
---------------------
also considered the opinion of Goldman Sachs that, as of the date of
such opinion, based upon and subject to various considerations and
assumptions stated therein, the $63 per share to be received by the
holders of Common Stock (other than Mr. Johnson, Liberty and Liberty's
affiliates) in connection with the Merger is fair, from a financial
point of view, to such stockholders. A copy of such opinion is
included as Exhibit B to this Proxy Statement, and should be read in
its entirety. The Special Independent Committee also considered the
report and analysis presented by Goldman Sachs to the Special
Independent Committee in connection with the $48 Offer and the $63
offer price. (See "SPECIAL FACTORS --Opinion of Financial Advisor to
the Special Independent Committee.")
(4) Terms of the Merger Agreement. The Special Independent
-----------------------------
Committee also considered the terms of the Merger Agreement, including
(a) the "neutralized voting" provision requiring that the Merger
Agreement be approved by the holders of a majority of the voting power
of shares not owned by Mr. Johnson, Liberty or their respective
affiliates (Section 7.01(a)); (b) the provision making the Company's
obligation to call the Special Meeting, recommend adoption of the
Merger Agreement and use best efforts to obtain the approval of
stockholders subject to the Board's fiduciary duties (Section 6.03);
(c) the provisions providing that the terms of the Merger Agreement
may not be amended or waived without the approval of the Special
Independent Committee (Sections 8.03 and 8.04); (d) the absence of any
termination fee other than the payment of the Buying Group's
reasonable costs and expenses in the event the Merger Agreement is
terminated because of an uncured material breach by the Company, a
withdrawal or change in the Board's recommendation to stockholders
favoring the Merger, the Board's recommendation of an alternative
transaction, or the stockholders' failure to approve the Merger
Agreement (Section 8.05); (e) the provision permitting the Board of
Directors of the Company to engage in negotiations or provide
information to a third party in response to an unsolicited written
inquiry subject to receipt of certain advice from the Board's
financial advisor or legal advisor (Section 6.04); and (f) the
provision requiring that the Buying Group deliver to the Company upon
execution of the Merger Agreement a letter from the proposed source of
the Buying Group's financing that such source is highly confident that
such financing will be provided and, furthermore, that the Buying
Group would obtain
26
<PAGE>
by May 15, 1998 a firm commitment from an appropriate financial source
relating to the Buying Group's financing (Section 4.12).
(5) Historical and Projected Financial Performance and Related
----------------------------------------------------------
Risks and Uncertainties. The Special Independent Committee considered
------------------------
the financial projections prepared by management of the Company in the
light of the Company's historical results of operations. It was the
Special Independent Committee's judgment that the projections appeared
aggressive in view of historical performance of the Company. For
example, while the Company's consolidated EBITDA as a percent of
revenues (the "EBITDA Margin") approximated 40% during each of the
fiscal years ended July 31, 1995, 1996 and 1997, the Company's
projected Consolidated EBITDA Margin based on the December 1997
Projections of the Company's management is substantially higher,
reaching levels in excess of 70% in the fiscal years ended July 31,
2001 and 2002. The CAGR of the Company's consolidated EBITDA during
the three-year period ended July 31, 1997 amounted to 19%, while the
projected CAGR of the Company's consolidated EBITDA during the five-
year period ended July 31, 2002, based on the December 1997
Projections, is 28%. In spite of such aggressive revenue and growth
projections, the projected CAGR of the Company's expenses forecast by
the December 1997 Projections during the five-year period ended July
31, 2002 amounts to only 6%, compared to the historical CAGR of the
Company's expenses of 18% during the three-year period ended July 31,
1997. The Special Independent Committee was not able to identify
support for the significant disparity between the projected and
historical performance and, indeed, noted that annualization of the
Company's historical consolidated revenues and EBITDA for the six
months ended January 31, 1998, results in estimated 1998 revenue of
$171.8 million and EBITDA of $72.8 million, respectively, which are
substantially lower than the $180.9 million revenue and $92.1 million
EBITDA forecast for 1998 by the December 1997 Projections.
Furthermore, the Company's internal financial projections generally
assumed continued growth of advertising revenues for the core cable
network, even though the network's ratings were relatively flat during
the period from 1991 through 1997. The Special Independent Committee
therefore concluded that there are substantial risks and uncertainties
associated with the Company's internal financial projections of future
revenues, earnings and growth. The Special Independent Committee also
determined that such risks and uncertainties relate not only to the
Company's core cable network operations, but also to the Company's
non-core operations, including BET on Jazz, publications and
SoundStage Restaurant businesses, which have incurred operating losses
to date, as well as the Company's equity in consolidated affiliates in
non-core, startup enterprises.
(6) Review of Other Cable and Media Industry Transactions. The
-----------------------------------------------------
Special Independent Committee also considered the financial terms of
certain recent business combinations in the cable programming industry
as well as selected
27
<PAGE>
minority buyout transactions generally. While no public cable
programming company transaction was sufficiently similar to the
proposed Merger to be characterized by the Special Independent
Committee as "comparable," the proposed payment of $63 per share for
the publicly held shares of the Company generally is within the range
of terms of other cable programming transactions and, in some
respects, compares favorably when viewed in the light of certain
criteria. With respect to recent selected minority buyout transactions
generally, for example, the premium of almost 60% represented by the
excess of the $63 price over the market value of the shares prior to
the public announcement of the $48 Offer, and the 31% premium
represented by the excess of the $63 price over the $48 price, are in
the Special Independent Committee's view significantly in excess of
premiums in most reported offer price changes. With respect to recent
selected cable programming transactions, the $63 price to be paid to
holders of the Nonaffiliated Stock in the Merger represents a multiple
of 7.7 times the Company's revenues per share for the year ended July
31, 1997 and a multiple of 6.6 times projected fiscal 1998 revenues
per share based on the December 1997 Projections, while the average
revenue multiples in other recent selected cable programming
transactions were less than 4 to 1.
(7) Small Public Float. The Special Independent Committee also
------------------
considered the fact that the public float for the Company's
outstanding Class A Stock, assuming the conversion by the Buying Group
of its shares of Class B Stock and Class C Stock of the Company into
Class A Stock, consists of only approximately 37% of the outstanding
shares of Class A Stock.
(8) Buying Group Control of the Company; Absence of Alternative
-----------------------------------------------------------
Transactions. The Special Independent Committee also considered the
------------
fact that assuming the conversion by the Buying Group of its shares of
Class B Stock and Class C Stock into shares of Class A Stock, the
Buying Group beneficially owns approximately 63% of the Company's
Class A Stock. Furthermore, because each share of Class B Stock and
Class C Stock generally is entitled to 10 votes per share while the
Class A Stock is entitled to one vote per share, the Buying Group
holds equity securities of the Company representing approximately 92%
of the voting power of the Company. The Special Independent Committee
therefore considered the fact that the Buying Group has sufficient
stock ownership and voting power to control a disposition of the
Company. The Special Independent Committee and Goldman Sachs were not
authorized to, and did not, solicit third party indications of
interest for the acquisition of the Company. The Special Independent
Committee also considered its belief that during the period that
transpired between the initial public announcement of the $48 Offer
and the Board of Directors' approval of the Merger Agreement, which
exceeded six months, no third party indications of interest for the
acquisition of the Company were communicated to the Company, the
Special Independent Committee or Goldman Sachs.
28
<PAGE>
(9) Possible Decline in Market Price of Shares. The Special
------------------------------------------
Independent Committee also considered the possibility that if a merger
transaction with the Buying Group were not negotiated and the Company
remained as a publicly owned corporation, it is possible that because
of potentially lower than expected projected Company earnings or a
decline in the market price of the shares of the Company's Class A
Stock or the stock market in general, the price that might be received
by the holders of the Company's publicly held shares upon the sale
thereof in a future transaction might be less than the $63 per share
price to be received by them in connection with the proposed Merger.
(10) Availability of Dissenters Rights. The Special Independent
---------------------------------
Committee also considered the fact that dissenters rights of
appraisal will be available to the holders of the Nonaffiliated Stock
under Delaware law. (See "DISSENTERS RIGHTS OF APPRAISAL.")
Board of Directors of the Company. In reaching its determinations referred
---------------------------------
to above, the Board of Directors of the Company considered the following
factors, each of which, in the view of the Board of Directors, supported such
determinations: (i) the conclusions and recommendations of the Special
Independent Committee; (ii) the considerations referred to above as having been
taken into account by the Special Independent Committee, including the receipt
by the Special Independent Committee of the opinion of Goldman Sachs addressed
to the Special Independent Committee that, as of the date of such opinion, based
upon and subject to various considerations and assumptions stated therein, the
$63 per share to be received by the holders of Common Stock (other than Mr.
Johnson, Liberty and Liberty's affiliates) in the Merger is fair to such holders
from a financial point of view, and the related analysis presented to the Board
of Directors of the Company; and (iii) the fact that the price per share to be
paid in the Merger and the terms and conditions of the Merger Agreement were the
result of arms-length negotiations between the Special Independent Committee and
the Buying Group and their respective advisors.
The members of the Board of Directors of the Company, including the member
of the Special Independent Committee, evaluated the Merger in the light of their
knowledge of the business, financial condition and prospects of the Company, and
based upon the advice of financial and legal advisors. In the light of the
number and variety of factors that the Special Independent Committee and the
Board of Directors of the Company considered in connection with their evaluation
of the Merger, neither the Special Independent Committee nor the Board of
Directors found it practicable to assign relative weights to the foregoing
factors, and, accordingly, neither the Special Independent Committee nor the
Board of Directors did so.
The Board of Directors of the Company believes that the Merger is
procedurally fair because, among other things: (i) the Special Independent
Committee consisted of an independent director appointed to represent the
interests of the stockholders other than the Buying Group; (ii) the Special
Independent Committee retained and was advised by independent legal counsel;
(iii) the Special Independent Committee retained Goldman Sachs as its
independent financial advisor to assist in evaluating the proposed transaction
and received advice from Goldman Sachs; (iv) the
29
<PAGE>
fact that the $63 per share price and the other terms and conditions of the
Merger Agreement resulted from active arms-length bargaining between
representatives of the Special Independent Committee and representatives of the
Buying Group and their respective advisors; and (v) the inclusion in the Merger
Agreement of a neutralized voting provision requiring approval of the Merger
Agreement by the holders of a majority of the shares held by other than the
Buying Group.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER IS FAIR TO AND IN
THE BEST INTEREST OF THE COMPANY AND THE HOLDERS OF NONAFFILIATED STOCK AND,
UPON THE RECOMMENDATION OF THE SPECIAL INDEPENDENT COMMITTEE, UNANIMOUSLY
RECOMMENDS APPROVAL OF THE MERGER AGREEMENT TO ITS STOCKHOLDERS.
THE BUYING GROUP'S PURPOSE AND REASON FOR THE MERGER
The Buying Group's purpose for engaging in the transactions contemplated by
the Merger Agreement is to acquire 100% ownership of the Company in a
transaction in which the holders of the Nonaffiliated Stock would have their
equity interest in the Company extinguished in exchange for cash in the amount
of $63 per share. Each of Mr. Johnson and Liberty believes that such an
acquisition is an attractive investment opportunity at this time based upon,
among other things, the past performance of the Company and its future business
prospects. The determination to proceed with the acquisition at this time would
also, in the view of the Buying Group, afford the Company's stockholders an
opportunity to dispose of their shares at a premium over recent market prices.
In addition, the Buying Group noted that causing the Company to be closely held,
and therefore no longer required to file periodic reports with the Securities
and Exchange Commission (the "SEC"), would enable management to focus on the
creation of long term value, rather than being subject to the pressures
associated with the reporting of quarterly earnings, provide the Buying Group
with flexibility in dealing with the assets of the Company, and reduce costs
associated with the Company's obligations and reporting requirements under the
securities laws. The transactions contemplated by the Merger Agreement,
however, will involve a substantial risk to the Buying Group because of the
large amount of indebtedness to be incurred in connection with the consummation
of the Merger. See "SPECIAL FACTORS -- Financing of the Merger."
The Buying Group did not pursue a liquidation of the Company or a sale of
the Company to a third party because Mr. Johnson wished to continue to operate
the business of the Company on an ongoing basis and Mr. Johnson and Liberty
wanted to acquire the entire equity interest in the Company and neither of them
desired to sell the shares that they owned to a third party.
The acquisition of the entire equity interest in the Company was structured
as a cash merger in order to accomplish the acquisition in a single step,
without the necessity of financing separate purchases of shares in a tender
offer or in open market purchases while at the same time not materially
disrupting the Company's operations.
30
<PAGE>
The Buying Group has concluded that the Merger, including the Merger
Consideration of $63 per share, and the terms and conditions of the Merger
Agreement are fair to the Company and the holders of the Nonaffiliated Stock
based upon the following factors: (i) the conclusions and recommendations of
the Special Independent Committee and the Company's Board of Directors; (ii) the
fact that a group of the Company's directors composed of persons not affiliated
with the members of the Buying Group had unanimously approved the Merger and
recommended that stockholders approve the Merger Agreement; (iii) the fact that
the Merger Consideration and the other terms and conditions of the Merger
Agreement were the result of arm's-length good faith negotiations between the
Special Independent Committee and its advisors and the representatives of the
Buying Group and its advisors; (iv) the fact that Goldman Sachs issued a
fairness opinion to the Special Independent Committee to the effect that, as of
the date of such opinion, based upon and subject to various considerations and
assumptions stated therein, the $63 per share to be received in the Merger is
fair from a financial point of view to the holders of Common Stock other than
Mr. Johnson, Liberty and Liberty's affiliates; (v) the fact that prior to the
execution of the Merger Agreement there had been, and during the substantial
period of time which would elapse between the announcement of the execution of
the Merger Agreement and the consummation of the Merger following the Special
Meeting of Stockholders to be held to vote upon the Merger there would be, more
than sufficient time and opportunity for other persons to propose alternative
transactions to the Merger and that the terms of the Merger Agreement authorize
the Company to furnish information to, participate in negotiations, and
negotiate with third parties in response to unsolicited requests by such parties
concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction involving the Company or any subsidiary or division thereof
if the Special Independent Committee determines such action is required in light
of the Board's fiduciary obligations to the Company's stockholders; and (vi) the
other factors referred to above as having been taken into account by the Special
Independent Committee and the Company's Board of Directors, which the members of
the Buying Group adopt as their own (see "SPECIAL FACTORS -- Purpose and
Background of the Merger" and "SPECIAL FACTORS -- Opinion of Financial Advisor
to the Special Independent Committee").
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL INDEPENDENT COMMITTEE
Pursuant to a letter agreement dated as of October 14, 1997, as amended by
a supplementary letter agreement dated as of October 20, 1997 (the "Engagement
Letter"), the Special Independent Committee, on behalf of the Board of Directors
of the Company, retained Goldman Sachs to act as the Special Committee's
financial advisor in connection with any proposals made by Mr. Johnson and/or
Liberty to acquire shares of the Company's Class A Stock held by stockholders
(excluding Mr. Johnson, Liberty and Liberty's affiliates) and other matters
arising in connection therewith. Goldman Sachs is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
31
<PAGE>
At the meeting of the Special Independent Committee on March 15, 1998,
Goldman Sachs rendered its oral opinion to the Special Independent Committee
that, as of such date, and based upon and subject to various considerations and
assumptions set forth therein, the consideration to be paid to stockholders of
the Company (excluding Mr. Johnson, Liberty and Liberty's affiliates) pursuant
to the Merger Agreement is fair, from a financial point of view, to such
stockholders. Such opinion was subsequently confirmed in writing and is dated
as of March 15, 1998. No limitations were imposed by the Special Independent
Committee upon Goldman Sachs with respect to the investigations made or
procedures followed by it in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED AS OF MARCH 15,
1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON
THE REVIEW UNDERTAKEN, IS ATTACHED AS EXHIBIT B TO THIS PROXY STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ
THE OPINION IN ITS ENTIRETY. GOLDMAN SACHS' WRITTEN OPINION IS ADDRESSED TO THE
SPECIAL INDEPENDENT COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY, IS
DIRECTED ONLY TO THE CONSIDERATION TO BE PAID PURSUANT TO THE MERGER AGREEMENT
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF THE COMPANY AS TO
HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE
OPINION OF GOLDMAN SACHS SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Goldman Sachs reviewed, among other things, the
Merger Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K
of the Company for the three fiscal years ended July 31, 1997; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
certain other communications from the Company to its stockholders; and certain
internal financial analyses and forecasts for the Company prepared by its
management and by the Buying Group. Goldman Sachs also held discussions with
members of the senior management of the Company regarding its past and current
business operations, financial condition and future prospects. In addition,
Goldman Sachs reviewed the reported price and trading activity for the Class A
Stock, compared certain financial and stock market information for the Company
with similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the cable programming industry specifically and other industries
generally and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied upon and assumed, without independent verification,
the accuracy and completeness of all information that was publicly available or
that was furnished to it by the Company or otherwise reviewed by Goldman Sachs,
and Goldman Sachs has not assumed any responsibility or liability therefor.
Goldman Sachs also was furnished with the Modified December 1997 Projections
prepared by the Buying Group and its financial advisors based upon
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the December 1997 Projections, as adjusted by the Buying Group and its advisors
to modify certain of the assumptions used by management in the December 1997
Projections. Neither the Buying Group nor any of its advisors made any
representation to Goldman Sachs concerning such projections.
Goldman Sachs has not conducted any valuation or appraisal of any assets or
liabilities, nor have any valuations or appraisals been provided to Goldman
Sachs. Goldman Sachs was not requested to solicit, and did not solicit,
interest from other parties with respect to an acquisition of or other business
combination with the Company. Goldman Sachs has also assumed that the Merger
will have the tax consequences described in this Proxy Statement, and in
discussions with, and materials furnished to Goldman Sachs by, representatives
of the Company, and that the other transactions contemplated by the Merger
Agreement will be consummated as described in the Merger Agreement and this
Proxy Statement. Goldman Sachs relied, as to certain legal matters relevant to
rendering its opinion, upon the advice of counsel to the Company.
Several projections were furnished to Goldman Sachs as described below.
Goldman Sachs considered, with the approval of the Special Independent
Committee, the Special Independent Committee's assessment of the risks and
uncertainties in achieving such projections. The Company does not publicly
disclose internal management projections of the type provided to Goldman Sachs
in connection with Goldman Sachs' analysis of the Merger, such projections were
not prepared with a view toward public disclosure, and investors are cautioned
not to rely on such projections. These projections were based on numerous
variables and assumptions that are inherently uncertain and may be beyond the
control of management. In particular, the projections may be affected by
pricing pressures and other competitive factors, results of the Company's
strategies to obtain additional subscribership to the Company's cable
programming services, heightened competition (including the entry of new
competitors and the development of new products and services by competitors),
the inability to obtain and produce quality cable programming on a cost-
effective basis or to renew on favorable terms the BET cable affiliate
agreements due to expire on December 31, 2003, the risks inherent in the startup
of multiple new businesses beyond the Company's core cable network,
unanticipated changes in industry trends, the inability to carry out marketing
and sales plans, changes in interest rates, loss of key executives, adverse
state and federal legislation and regulation, and general economic and business
conditions that are less favorable than expected. Accordingly, actual results
could vary significantly from those set forth in such projections. In addition,
these projections were not prepared with a view to compliance with the published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections and forecasts or generally
accepted accounting principles and are included in this Proxy Statement only
because such projections were included in the information submitted to and
received by the Special Independent Committee and Goldman Sachs. None of the
Company, the Buying Group, Goldman Sachs or any other party to whom these
projections were provided makes any representation that the results indicated by
such projections will occur. The prospective financial information included in
this Proxy Statement has been prepared by, and is the responsibility of, the
Company's management. Price Waterhouse LLP does not express an opinion or any
other form of assurance with respect thereto. The Price Waterhouse LLP report
incorporated by
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reference in this Proxy Statement relates to the Company's historical financial
information. It does not extend to the prospective financial information and
should not be read to do so.
Goldman Sachs' opinion is based on economic, market and other conditions as
in effect on, and the information made available to Goldman Sachs as of, the
date of its opinion. Subsequent developments may affect the written opinion of
Goldman Sachs, and Goldman Sachs does not have any obligation to update, revise,
or reaffirm such opinion.
Certain Projections Prepared by Management and the Buying Group
- ---------------------------------------------------------------
Goldman Sachs was furnished with projections for the Company's core cable
network as follows: (i) the May 1997 Projections, (ii) the October 1997
Projections, (iii) the December 1997 Projections and (iv) the Modified December
1997 Projections. A review of the May 1997 Projections, October 1997
Projections and Modified December 1997 Projections showed revenues for 2001
ranged approximately from a low of $217.1 million to a high of $283.2 million,
as compared to December 1997 Projections of $254.2 million; 2001 EBITDA ranged
approximately from a low of $140.3 million to a high of $209.0 million, as
compared to December 1997 Projections of $180.0 million; revenue compound annual
growth rates from 1998 to 2001 ranged approximately from a low of 12% to a high
of 21%, as compared to December 1997 Projections of 17%; and EBITDA compound
annual growth rates ranged approximately from a low of 16% to a high of 29%, as
compared to December 1997 Projections of 23%.
Summary of Analyses
- -------------------
In accordance with customary investment banking practice, Goldman Sachs
employed generally accepted valuation methods in reaching its opinion. The
following is a brief summary of the material financial analyses utilized by
Goldman Sachs in connection with providing its opinion.
Stock Price Performance. Goldman Sachs reviewed the historical stock
-----------------------
prices and trading volume history for the Company's Class A Stock. This review
showed that prices ranged from $15.88 to $54.69 during the three-year period
from March 10, 1995 to March 6, 1998 and from $30.25 to $53.75 during the one-
year period from March 13, 1997 to March 12, 1998. This review also showed that
the Company's Class A Stock was up approximately 78% for the one year ended
March 13, 1998, as compared to 35% for the S&P 400 index and 51% for the three
years ended March 13, 1998, as compared to 28% for the S&P index. Goldman Sachs
also compared the relative indexed stock price performance of the Company's
Class A Stock with an index of certain large capitalization companies (which
includes The Walt Disney Company, EMI Group Plc (UK), The News Corporation
Limited, Polygram N.V., The Seagram Company, Ltd., Time Warner Inc. and Viacom
Inc. (the "Large Selected Companies")) and an index of certain medium
capitalization companies (which includes Gaylord Entertainment Company,
International Family Entertainment, Inc., King World Productions, Inc., and
Spelling Entertainment Group, Inc. (the "Medium Selected Companies")) for the
three-year period from
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March 10, 1995 to March 6, 1998 and the one-year period from March 13, 1997 to
March 12, 1998.
Purchase Price Analysis. Based upon a per share price of $63, fully
-----------------------
diluted shares of Class A Stock and net debt of $50.8 million, Goldman Sachs
analyzed the levered consideration for the Company as a multiple of (i) sales,
(ii) EBITDA both on a consolidated basis and on a core cable network basis, and
(iii) earnings before interest and taxes ("EBIT") both on a consolidated basis
and on a core cable network basis, for fiscal 1997 and the latest twelve months
ended October 31, 1997 ("LTM"). Goldman Sachs' analyses showed multiples of
levered consideration to fiscal 1997 sales of 7.7x, LTM sales of 7.4x, fiscal
1997 consolidated EBITDA of 19.0x, LTM consolidated EBITDA of 17.9x, fiscal 1997
core cable network EBITDA of 17.2x, LTM core cable network EBITDA of 16.2x,
fiscal 1997 consolidated EBIT of 22.1x, LTM consolidated EBIT of 20.8x, fiscal
1997 core cable network EBIT of 18.6x and LTM core cable network EBIT of 17.5x.
In addition, Goldman Sachs analyzed the discount rates of the Company's core
cable network implied by (i) a per share price of $63, (ii) fully diluted shares
of Class A Stock, (iii) a valuation of non-core business units of $70 million,
(iv) a terminal value in 2002 based on multiples ranging from nine times EBITDA
to 11 times EBITDA and (v) (a) the December 1997 Projections, (b) December 1997
Projections assuming a constant EBITDA margin of 58% (the "Adjusted December
1997 Projections") and (c) the Modified December 1997 Projections. This
analysis showed that implied discount rates ranged from a low of 21.4% to a high
of 26.8% for the December 1997 Projections, from a low of 14.6% to a high of
19.7% for the Adjusted December 1997 Projections and from a low of 12.8% to a
high of 17.9% for the Modified December 1997 Projections. Goldman Sachs also
analyzed the discount rates implied by (i) a per share price of $63, (ii) fully
diluted shares of Class A Stock, (iii) a valuation of non-core business units of
$70 million, (iv) a terminal value in 2002 based on multiples ranging from nine
times EBITDA to 11 times EBITDA and (v) EBITDA growth rates from 12% to 24%,
which ranged from a low of 5.6% to a high of 25.9%. For example, under the
above analyses, an exit multiple of ten times EBITDA and an implied discount
rate of 13.1% corresponds to an EBITDA growth rate of 16%.
Review of Selected Publicly Traded Companies. Using publicly available
--------------------------------------------
information, Goldman Sachs compared selected financial data of the Company's
businesses with similar data for selected publicly traded entertainment
companies. The companies selected by Goldman Sachs with a large capitalization
were the Large Selected Companies. The companies selected by Goldman Sachs with
a medium capitalization were the Medium Selected Companies. For each company,
publicly available financial performance through LTM was measured. The
multiples of the Company were calculated using a price of $53.75 per share, the
closing price of such shares on March 12, 1998, and the multiples of the Large
Selected Companies and the Medium Selected Companies were calculated using the
closing prices for such companies on March 12, 1998. Goldman Sachs considered
adjusted market capitalization (i.e. levered market capitalization less
estimated non-EBITDA assets) as a multiple of LTM sales and as a multiple of LTM
EBITDA. Goldman Sachs' analyses of the Large Selected Companies indicated
multiples of adjusted market capitalization to LTM sales with a range from a low
of 1.2x to a high of 3.9x (and a mean of 2.2x and a median of 2.0x) and to LTM
EBITDA with a range from a low of 9.6x
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to a high of 17.2x (and a mean of 13.6x and a median of 13.9x), as compared to
the Company's multiples of adjusted market capitalization to LTM sales of 6.3x
and LTM EBITDA of 15.4x. Goldman Sachs' analyses of the Medium Selected
Companies indicated multiples of adjusted market capitalization to LTM sales
with a range from a low of 0.7x to a high of 6.3x (and a mean of 2.6x and a
median of 1.7x) and to LTM EBITDA with a range from a low of 2.5x to a high of
15.4x (and a mean of 8.5x and a median of 7.7x). Goldman Sachs also considered
the price to earnings ("P/E") ratios for LTM and 1998 and 1999 (based on IBES
calendarized estimates, except for EMI Group, available as of March 12, 1998)
for the Large Selected Companies and the Medium Selected Companies. The P/E
ratios for the Large Selected Companies ranged from a low of 18.8x to a high of
49.4x for LTM P/E ratios (with a mean of 29.3x and a median of 22.6x), a low of
18.2x to a high of 42.5x for calendar 1998 P/E ratios (with a mean of 26.8x and
a median of 21.0x) and a low of 15.5x to a high of 34.9x for calendar 1999 P/E
ratios (with a mean of 22.6x and a median of 18.4x), as compared to a LTM P/E
ratio of 33.2x, a calendar 1998 P/E ratio of 25.8x and a calendar 1999 P/E ratio
of 21.9x for the Company. The P/E ratios for the Medium Selected Companies
ranged from a low of 7.3x to a high of 33.3x for LTM P/E ratios (with a mean of
24.6x and a median of 33.2x), a low of 7.2x to a high of 25.8x for calendar 1998
P/E ratios (with a mean of 19.6x and a median of 25.8x) and a low of 6.4x to a
high of 23.8x for calendar 1999 P/E ratios (with a mean of 17.4x and a median of
21.9x). Five-year EPS growth rates (based on the above referenced IBES
estimates) for the Large Selected Companies ranged from a low of 10.0% to a high
of 18.0% (with a mean of 14.2% and a median of 14.4%), as compared to 20.0% for
the Company. Five-year EPS growth rates for the Medium Selected Companies ranged
from a low of 8.0% to a high of 20.0% (with a mean of 14.0% and a median of
14.0%).
Analysis of Selected Merger Transactions. Using publicly available
----------------------------------------
information, Goldman Sachs examined selected transactions involving mature
networks (the "Mature Networks"), development networks (the "Development
Networks") and Home Shopping networks (the "Home Shopping Networks") in the
basic cable programming industry since January 1990. Such analysis indicated
that for the selected transactions for which transaction pricing and performance
data was available, implied value for the Mature Networks as a multiple of (i)
LTM EBITDA ranged from a low of 14.2x to a high of 24.9x (with a mean of 19.2x
and a median of 19.3x), as compared to 17.9x for the Company based upon a per
share price of $63 and including net debt of the Company, (ii) forward year-end
("FYE") EBITDA (multiple of projected year-ahead cash flow) ranged from a low of
10.3x to a high of 22.9x (with a mean of 14.7x and a median of 15.1x), and (iii)
revenue (multiple of projected revenues) ranged from a low of 1.5x to a high of
5.9x (with a mean of 3.4x and a median of 3.3x) and value per subscriber ranged
from a low of $4.07 to a high of $38.64 (with a mean of $17.50 and a median of
$14.60), as compared to a Company value per subscriber of $23.14 based upon a
per share price of $63 and including net debt of the Company. Implied value for
the Development Networks as a multiple of (i) LTM EBITDA was 12.2x, (ii) FYE
EBITDA ranged from a low of 5.7x to a high of 24.0x (with a mean of 12.2x and a
median of 6.9x) and (iii) revenue ranged from a low of 1.5x to a high of 7.9x
(with a mean of 4.1x and a median of 4.1x) and value per subscriber ranged from
a low of $0.96 to a high of $40.00 (with a mean of $9.64 and a median of $5.30).
Implied value for the Home Shopping Networks as a multiple of (i) LTM EBITDA was
11.3x, (ii) FYE
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EBITDA ranged from a low of 7.6x to a high of 9.6x (with a mean of 8.6x and a
median of 8.6x) and (iii) revenue ranged from a low of 1.0x to a high of 1.7x
(with a mean of 1.4x and a median of 1.4x) and value per subscriber ranged from
a low of $24.69 to a high of $35.86 (with a mean of $30.27 and a median of
$30.27).
Discounted Cash F1ow Analysis. Goldman Sachs performed a discounted cash
-----------------------------
flow analysis of the Company's core cable network valued as of July 31, 1998
utilizing the December 1997 Projections for the years ended July 31, 1998 to
July 31, 2002. Goldman Sachs calculated a net present value of free cash flows
for the years ended July 31, 1998 to July 31, 2002 using discount rates ranging
from 11% to 14%. Goldman Sachs calculated the Company's terminal value in the
year 2002 based on multiples ranging from nine times EBITDA to 11 times EBITDA.
Utilizing this analysis, the implied value per share of the Company's core cable
network ranged approximately from a low of $72.00 to a high of $95.00. In
addition, Goldman Sachs utilized the above analysis using discount rates of 11%
to 14% for current margin and 20% to 24% for premium margin assumed in the
December 1997 Projections, which resulted in an implied value per share of the
Company's core cable network which ranged approximately from a low of $65.00 to
a high of $87.00. Goldman Sachs also analyzed the sensitivity of the implied
value per share of the Company's core cable network to (i) the Adjusted December
1997 Projections and (ii) projections with a range of EBITDA margins (held
constant) and with a constant discount rate of 12.5% (the "Adjusted EBITDA
Margin Projections"). This analysis resulted in an implied value per share of
the Company's core cable network which ranged approximately from a low of
$58.00 to a high of $76.00 for the Adjusted December 1997 Projections and from a
low of $47.00 to a high of $77.00 for the Adjusted EBITDA Margin Projections.
The above analysis does not give effect to the Company's other businesses.
Recapitalization Analysis. Based upon a per share price of $63 to holders
-------------------------
of the Class A Stock (excluding the Buying Group), and (i) the December 1997
Projections (the "Management Case"), (ii) the Adjusted December 1997 Projections
(the "Adjusted Management Case") and (iii) the projections provided by the
Buying Group for the core cable network, BET on Jazz and restaurants and the
December 1997 Projections for the remaining units of the Company (the "Adjusted
Buying Group Case"), Goldman Sachs analyzed equity returns through 2001 to the
Buying Group using a terminal value in the year 2001 based on multiples ranging
from nine times EBITDA to 11 times EBITDA. This analysis assumes the
recapitalization is financed with debt. This analysis showed equity returns to
the Buying Group which ranged from a low of 24.7% to a high of 31.7% for the
Management Case and a low of 17.7% to a high of 24.8% for the Adjusted
Management Case and a low of 10.1% to a high of 17.3% for the Adjusted Buying
Group Case.
Minority Buyout Analysis. Goldman Sachs reviewed the percentage increase
------------------------
from the initial offer to the final offer with respect to certain minority
interest buyout transactions, including BIC Corporation, which increased 11%,
Rhone-Poulenc Rorer Inc., which increased 5%, La Petite Academy, Inc., which
increased 5% and Ocean Drilling & Exploration, which increased 10% (with a mean
of 8%), as compared to a 31% increase for the Company.
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The summary set forth above does not purport to be a complete description
of the analyses or data presented by Goldman Sachs. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. Goldman Sachs believes that the summary
set forth above and its analyses must be considered as a whole and that
selecting portions thereof, without considering all of its analyses, could
create an incomplete view of the processes underlying its analyses and opinion.
Goldman Sachs based its analyses on assumptions that it deemed reasonable,
including assumptions concerning general business and economic conditions and
industry-specific factors. The other principal assumptions upon which Goldman
Sachs based its analyses are set forth above under the description of each such
analysis. Goldman Sachs' analyses are not necessarily indicative of actual
values or actual future results that might be achieved, which values may be
higher or lower than those indicated. No company or transaction used in the
above analyses as a comparison is identical to the Company or the Merger.
Moreover, Goldman Sachs' analyses are not and do not purport to be appraisals or
otherwise reflective of the prices at which the shares of Class A Stock could
actually be bought or sold.
CERTAIN EFFECTS OF THE MERGER
If the Merger is consummated, the holders of the Company's Class A Stock
will no longer have any interest in, and will not be stockholders of, the
Company and, therefore, will not benefit from any future earnings or growth of
the Company or benefit from any increases in the value of the Company and will
no longer bear the risk of any decreases in value of the Company. Instead, each
such stockholder will have the right to receive upon consummation of the Merger
$63 in cash for each share of Class A Stock held (other than Class A Stock (i)
held in the treasury of the Company or by any of its wholly owned subsidiaries
or (ii) held by BTV Acquisition, Mr. Johnson or Liberty, or any of their
respective subsidiaries, and (iii) held by Dissenting Stockholders).
The Class A Stock is currently registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). As a result of the Merger, the Class
A Stock will be delisted from the NYSE, the registration of the Class A Stock
under the Exchange Act will be terminated, the Company will be relieved of the
obligation to comply with the proxy rules of Regulation 14A under Section 14 of
the Exchange Act, and its officers, directors and beneficial owners of more than
10% of the Class A Stock will be relieved of the reporting requirements and
restrictions on insider trading under Section 16 of the Exchange Act. Further,
the Company will no longer be subject to the periodic reporting requirements of
the Exchange Act and will cease filing information with the SEC. Accordingly,
less information will be required to be made publicly available than presently
is the case.
The directors of BTV Acquisition immediately prior to the Effective Time
(as defined below) of the Merger will be the directors of the Surviving
Corporation immediately after the Merger. The Buying Group is presently
considering inviting Messrs. Lewis, Malone, Washington and Wilkins and Mrs.
Johnson to join the Board of Directors of the Surviving Corporation following
the Merger; however, no determination has been made in such regard.
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The officers of the Company immediately prior to the Effective Time of the
Merger will be the officers of the Surviving Corporation immediately after the
Merger. The certificate of incorporation and bylaws of BTV Acquisition
immediately prior to the Effective Time will be the certificate of incorporation
and Bylaws of the Company immediately after the Merger.
PLANS FOR THE COMPANY AFTER THE MERGER
Mr. Johnson and Liberty expect that the business and operations of the
Surviving Corporation will be continued by them substantially as they are
currently being conducted by the Company and its subsidiaries. Mr. Johnson and
Liberty do not currently intend to dispose of any assets of the Surviving
Corporation, other than in the ordinary course of business. It is anticipated,
however, that Mr. Johnson and Liberty will from time to time evaluate and
review their businesses, operations and properties and make such changes as are
deemed appropriate.
Except as described in this Proxy Statement, none of Mr. Johnson, Liberty
or the Company has any present plans or proposals involving the Company or its
subsidiaries which relate to or would result in an extraordinary corporate
transaction such as a merger, reorganization, or liquidation, or a sale or
transfer of a material amount of assets, or any material change in the present
dividend policy, indebtedness or capitalization, or any other material change in
the Company's corporate structure or business. However, Mr. Johnson and
Liberty will review proposals or may propose the acquisition or disposition of
assets or other changes in the Surviving Corporation's business, corporate
structure, capitalization, management or dividend policy which they consider to
be in the best interest of the Surviving Corporation and its stockholders.
CONDUCT OF THE BUSINESS OF THE COMPANY IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, the Board of Directors expects that the
Company's current management will continue to operate the Company's business
substantially as presently operated. No other alternatives are presently being
considered.
BUYING GROUP LETTER AGREEMENTS
Mr. Johnson and Liberty have entered into a letter agreement dated
September 11, 1997 (the "September Buying Group Letter") setting forth the
general terms and conditions under which Mr. Johnson and Liberty agreed to act
together in respect of the potential acquisition of the Company. Subject to
certain terms and conditions set forth therein, the September Buying Group
Letter provides that, among other things, (a) all material decisions with
respect to the proposed acquisition of the Company would be made jointly by
them; (b) they would contribute all of the equity securities of the Company
owned by them to a newly formed acquisition entity contemporaneously with and
contingent upon the consummation of the proposed merger; (c) each party would
enter into margin or other loan agreements on reasonably acceptable terms to
obtain any funds required to be advanced to such newly formed acquisition entity
prior to consummation of the acquisition of the Company; (d) the parties' equity
interests in the newly
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formed acquisition entity would be based on their respective contributions to
it; (e) the parties would negotiate as soon as practicable the terms of a
stockholders agreement relating to the governance of the acquisition entity and
the Company following consummation of the acquisition; (f) their obligations
under the September Buying Group Letter would be conditioned upon the obtaining
of appropriate financing on terms and conditions reasonably acceptable to them;
(g) they would vote all their shares of Common Stock in favor of the proposed
acquisition and would vote against and not solicit any alternative transaction
as specified therein; (h) they would not otherwise sell or dispose of any
capital stock of the Company owned by them, and would not enter into any
agreement, arrangement or understanding with any other person with respect to
the purchase, sale or voting of shares of Common Stock of the Company; (i) all
costs and expenses incurred by them would be paid or reimbursed by the newly
formed acquisition entity following consummation of the proposed acquisition;
(j) Mr. Johnson and Liberty would allocate between them based on relative fault
any obligations incurred by the acquisition entity as a result of any breach of
the provisions of any definitive acquisition agreement regarding the proposed
acquisition; (k) any amounts payable by Mr. Johnson and Liberty to Salomon prior
to consummation of the proposed acquisition would be paid by them in proportion
to their respective equity interests in the acquisition entity, any amounts
payable to Salomon upon consummation of the proposed acquisition would be paid
or reimbursed by the Surviving Corporation, and any indemnification obligations
owed to Salomon and certain other parties by Mr. Johnson and Liberty would be
allocated between them based on their relative fault; and (l) in the event the
September Buying Group Letter is terminated and either Mr. Johnson or Liberty
independently seeks or proposes to acquire all or a significant portion of the
Company's equity securities or assets, it will indemnify the other party for
certain liabilities such party may incur because of that independent action. The
September Buying Group Letter provides that it may be terminated by the mutual
agreement of the parties or by either party if the proposed acquisition has not
occurred on or before June 30, 1998.
On March 15, 1998, Mr. Johnson and Liberty entered into a letter agreement
(the "March Buying Group Letter") setting forth the terms to be provided in a
stockholders agreement to be entered into by Mr. Johnson (or a business entity
controlled by him) and Liberty relating to the prospective management and
ownership of the business of the Company following consummation of the Merger.
The covenants and agreements set forth in the March Buying Group Letter are
intended to be superseded by definitive stockholder agreements, but if such
definitive agreements are not executed prior to consummation of the Merger, the
March Buying Group Letter will be deemed to constitute the definitive
stockholder agreement.
Among other provisions, the March Buying Group Letter specifies terms in
the stockholders agreement for the election of directors, fundamental actions
that the Surviving Corporation may not take without Liberty's consent in the
event that Mr. Johnson ceases to act as Chairman of the Board and Chief
Executive Officer of the Surviving Corporation on a full-time basis,
restrictions on transfers of the Surviving Corporation's equity securities, and
rights of first refusal and certain other exit rights for the Surviving
Corporation's stockholders. The March Buying Group Letter also specifies the
mutual goal of the parties, so long as Mr. Johnson serves as the Chairman of the
Board and Chief Executive Officer of the Surviving Corporation on a full
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time basis, to provide for aggregate annual compensation to Mr. Johnson of $6
million per year and to Liberty of $2 million per year, adjusted upward annually
at the greater of five percent or the increase in the consumer price or similar
index, and subject to annual review and reasonable bonus consideration and
award, in respect of services to be provided by such persons to the Surviving
Corporation.
The parties have also agreed in the March Buying Group Letter that Mr.
Johnson will receive a loan from BTV Acquisition or the Company, or both as
appropriate, up to $35 million to be used for matters previously discussed
between the parties. The loan will be fully binding on the Surviving
Corporation after the consummation of the Merger and will be for a term of
between five and ten years and will bear interest at a rate equal to the
applicable rate at which BTV Acquisition has borrowed the funds to finance the
Merger. Mr. Johnson will also have the option to pay interest currently or to
allow interest to accrue and be paid at maturity, and he may, from time to time,
sell shares of equity securities of the Surviving Corporation to an employee
stock option plan of the Surviving Corporation, if applicable, and use the
proceeds to pay interest. The March Buying Group Letter also permits Mr.
Johnson to take certain actions to transfer to the Surviving Corporation certain
PCS licenses owned by R&S PCS, Inc., an entity controlled by Mr. Johnson. See
"CERTAIN RELATIONSHIPS AND TRANSACTIONS --Agreements with Related Parties."
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CERTAIN RELATIONSHIPS
In considering the recommendation of the Special Independent Committee and
the Board of Directors with respect to the Merger, stockholders should be aware
that certain members of the Board and of the Company's management have interests
that may present them with actual, potential or the appearance of potential
conflicts of interest in connection with the Merger. The Special Independent
Committee and the Board of Directors were aware of these potential or actual
conflicts of interest and considered them along with other matters described
under "SPECIAL FACTORS--Recommendation of the Special Independent Committee and
the Board of Directors; Fairness of the Merger."
At the Effective Time of the Merger, each share of common stock of BTV
Acquisition outstanding immediately prior to the Effective Time of the Merger
will be converted into and become one share of common stock of the Surviving
Corporation and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation. BTV Acquisition was formed by Mr. Johnson, the
Company's Chairman of the Board, Chief Executive Officer and largest stockholder
and by Liberty, the Company's next largest stockholder. Mr. Johnson and Liberty
own approximately 65% and 35%, respectively, of the equity of BTV Acquisition
and, as a result of the Merger, Mr. Johnson will own [ ] shares, or [
%] of the common stock of the Surviving Corporation, and Liberty will own [
] shares, or [ %], of the common stock of the Surviving Corporation on
a fully diluted basis. Sheila Crump Johnson, a director of the Company, is the
spouse of Robert Johnson. Robert R. Bennett is a director of the Company and is
also the President and Chief Executive Officer of Liberty and an Executive Vice
President of TCI. In addition, pursuant to the Company Stockholders Agreement,
Mr. Bennett serves as
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TCI's representative to the Board of Directors of the Company. Dr. Malone is a
director of the Company and serves as Chairman of the Board and Chief Executive
Officer of TCI, as well as a director of Liberty. In addition, FW Strategic
Partners, L.P., an investment partnership in which Mr. Johnson is a limited
partner, beneficially owns 842,105 shares of the Company's Class A Stock.
Among other provisions, the March Buying Group Letter established for the
Surviving Corporation annual compensation goals of $6 million for Mr. Johnson
and $2 million for Liberty, subject to adjustment, for so long as Mr. Johnson is
serving as the Chairman of the Board and the Chief Executive Officer of the
Surviving Corporation on a full-time basis, and provided for a loan of up to $35
million to Mr. Johnson from BTV Acquisition or the Company, or both as
appropriate. See " -- Buying Group Letter Agreements."
The Merger Agreement provides that the current directors of BTV Acquisition
shall be the directors of the Surviving Corporation. Mr. Johnson and Mr.
Bennett currently serve as the only two directors of BTV. Other than Mr.
Johnson and Mr. Bennett, none of the current directors of the Company will be
the initial directors of the Surviving Corporation. The Buying Group is
presently considering inviting Messrs. Lewis, Malone, Washington and Wilkins and
Mrs. Johnson to join the Board of Directors of the Surviving Corporation
following the Merger; however, no determination has been made in such regard.
The Merger Agreement also provides that the current officers of the Company
shall be the officers of the Surviving Corporation.
The Company's executive officers and directors (other than Mr. Johnson)
currently own an aggregate of 13,410 shares of Class A Stock, representing less
than 1% of the total outstanding shares of Class A Stock. In addition, the
Company's executive officers and directors (other than Mr. Johnson) own options
to purchase an aggregate of 1,457,995 shares of Class A Stock at strike prices
ranging from $12.80 to $17.75, each of which is subject to cancellation in the
Merger in exchange for an amount of cash equal to the difference between $63 and
the applicable share strike price. The Buying Group has offered certain
executive officers of the Company the option to continue to have an equity
interest in the Surviving Corporation following the Effective Time by allowing
all or a portion of his or her Options to be converted into an equity interest
in the Surviving Corporation. Any such arrangement shall be pursuant to a
separate agreement between BTV Acquisition and such executive, which agreement
may provide for such executive to receive options to purchase common stock of
the Surviving Corporation or other equity interests or equity-based interests,
such as stock appreciation rights. To the extent that an executive agrees to
such an arrangement rather than cashing out his or her Options, the amount
required to be borrowed to consummate the Merger would be decreased.
Discussions concerning such arrangements are preliminary and it is not yet known
whether any executives will accept such offer and, if accepted, how many
outstanding Options will not be required to be cashed out at the Effective Time.
If all the outstanding Options are cashed out at the Effective Time, it is
anticipated that the following directors or executive officers will receive the
following cash payments for their options: Debra L. Lee, President and Chief
Operating Officer, $11,142,750; James A. Ebron,
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Executive Vice President, Corporate Media Sales, $9,184,300; William T. Gordon
III, Executive Vice President, Chief Financial Officer and Treasurer,
$10,381,298; Sheila Crump Johnson, a director and Executive Vice President,
Corporate Affairs, $6,778,687; Jefferi K. Lee, Executive Vice President, Network
Operations and Programming, $10,145,250; Curtis N. Symonds, Executive Vice
President, Affiliate Sales and Marketing, $8,682,242; Janis P. Thomas, Executive
Vice President, Brand Marketing and Licensing, $11,142,750; Louis Carr, Senior
Vice President, National Media Sales, $814,500; and Maurita Coley, Senior Vice
President, Network Operations and Programming, $1,357,500. See "SECURITIES
OWNERSHIP -Beneficial Ownership of Class A Stock by Certain Parties Related to
the Company or the Buying Group."
The Merger Agreement provides that the Surviving Corporation will, from and
after the Effective Time, indemnify the present and former officers and
directors of the Company to the same extent and upon the terms and conditions
provided in the Company's certificate of incorporation and bylaws, and to the
full extent permitted under the Delaware General Corporation Law (the "DGCL")
against certain losses and expenses in connection with claims based on the fact
that such person was an officer or director of the Company. The Merger
Agreement also provides that the Surviving Corporation will maintain its
existing policies of officers' and directors' liability insurance for a period
of six years after the Effective Time, subject to certain limitations. See "THE
MERGER AGREEMENT -- Indemnification and Insurance."
ACCOUNTING TREATMENT
The cost of repurchasing the Company's outstanding Class A Stock will be
accounted for as a treasury stock transaction, since the Merger will not
constitute a change of control within the context of generally accepted
accounting principles. This means that the historical cost basis of the
Company's assets and liabilities will be carried forward to the Surviving
Corporation rather than using a new basis of accounting to account for the
assets and liabilities of the Surviving Corporation. Consequently, the aggregate
cost of repurchasing the Company's outstanding Class A Common will be accounted
for as a charge to stockholders' equity.
The cost of repurchasing and cancelling outstanding Options will be
accounted for as compensation expense. This means that the excess of the
aggregate Merger Consideration over the aggregate exercise price of outstanding
Options will be accounted for as a charge to operations.
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FINANCING OF THE MERGER
The total amount of funds required by BTV Acquisition to pay the aggregate
Merger Consideration due to stockholders and option holders of the Company at
the closing of the Merger, assuming the Options of all executive officers of the
Company are cashed out in the Merger and there are no Dissenting Stockholders,
is expected to be approximately $471.5 million. In addition, BTV Acquisition
will require approximately $42 million to pay all other expenses and costs
relating to the transactions, to refinance or finance certain indebtedness of
the Company, BET, BTV Acquisition and certain principals of BTV Acquisition, and
for other general corporate purposes.
BTV Acquisition delivered to the Company a letter dated March 13, 1997 from
The Bank of New York Company, Inc. and BNY Capital Markets, Inc. (collectively,
the "Lenders") to the effect that the Lenders are highly confident that they,
directly or through any of their affiliates, can successfully arrange and fully
syndicate a $600 million senior secured credit facility (the "Facility") for the
purpose of financing the Merger, paying all fees, expenses and costs in
connection with the Merger, refinancing the existing revolving credit facility
of BET and for general corporate purposes. The Lenders' expression of
confidence is subject to certain customary qualifications and conditions set
forth in the letter, including, among others, that (i) the Facility be on terms
and conditions satisfactory to them, including, without limitation, pricing and
fees and covenants, including maximum leverage and coverage ratios, that in the
Lenders' view, are appropriate for a credit facility of this size, type and
purpose, and (ii) the Lenders be satisfied with the results of their due
diligence with respect to the Merger, the Facility, BTV Acquisition, the Company
and BET and with the documentation for the Facility and the Merger. It is
anticipated that any borrowings under the Facility would be repaid from
internally generated cash flow from operations of the Surviving Corporation.
The highly confident letter does not constitute a commitment to make
available the Facility, nor does such a commitment now exist. BTV Acquisition
and the Lenders are currently in discussions over the potential terms and
conditions of such a commitment letter, but there can be no assurance that a
final agreement will be reached between them, that the Facility will be made
available, or that BTV Acquisition will be able to obtain a suitable alternative
financing source if the Facility is not made available. The Company may, at
its option, terminate the Merger Agreement at any time prior to the Effective
Time if BTV Acquisition is unable to obtain a commitment for the financing of
the transactions contemplated by the Merger Agreement by May 15, 1998.
REGULATORY REQUIREMENTS
The Company does not believe that any material federal or state regulatory
approvals, filings or notices are required by the Company in connection with the
Merger other than (i) such approvals, filings or notices required pursuant to
federal and state securities laws, (ii) such filings required pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
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(the "HSR Act") and (iii) the filing of the certificate of merger with the
Secretary of State of the State of Delaware.
Under the HSR Act and the rules that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the FTC and certain waiting period requirements have been satisfied. The
consummation of the Merger was conditioned upon the expiration or termination of
all applicable HSR waiting periods.
Pursuant to the HSR Act, on April 17, 1998 and April 27, 1998,
respectively, TCI and Mr. Johnson, as the "ultimate parent entity" of the
Company under the HSR Act, filed Premerger Notification and Report Forms with
the Antitrust Division and the FTC in connection with the acquisition by BTV
Acquisition of the Company's Class A Stock pursuant to the Merger and the Merger
Agreement. Under the applicable provisions of the HSR Act, the Merger may not
be consummated until the expiration of a 30-calender day waiting period
following such filings. Such waiting period is scheduled to expire at 11:59 p.m.
New York city time on May 27, 1998 (unless terminated earlier or a request for
additional information is received).
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of certain material United States federal income
tax considerations relevant to beneficial owners whose shares of Class A Stock
are converted to cash in the Merger. This summary is based upon laws,
regulations, rulings and decisions currently in effect, all of which are subject
to change possibly with retroactive effect, and is not applicable to Mr. Johnson
or Liberty (and certain parties related to Mr. Johnson or Liberty, if any). The
summary applies only to beneficial owners who hold shares of Class A Stock as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"), and may not apply to shares of Class A Stock
received pursuant to the exercise of employee stock options or otherwise as
compensation, or to certain types of beneficial owners of Class A Stock (such as
insurance companies, tax-exempt organizations and broker-dealers) who may be
subject to special rules. This summary does not address the U.S. federal income
tax consequences to a beneficial owner of Class A Stock who, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership, or a foreign estate or trust, nor does it
consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF
SHARES OF CLASS A STOCK SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR
TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL
OWNER AND THE PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
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The receipt of cash for shares of Class A Stock pursuant to the Merger will
be a taxable transaction for U.S. federal income tax purposes. In general, for
U.S. federal income tax purposes, a beneficial owner of shares of Class A Stock
will recognize capital gain or loss equal to the difference between the
beneficial owner's adjusted tax basis in the shares of Class A Stock converted
to cash in the merger and the amount of cash received. A beneficial owner's
adjusted basis in the shares of Class A Stock generally will equal the
beneficial owner's purchase price for such shares of Class A Stock. Gain or
loss must be determined separately for each block of Class A Stock (i.e.,
shares of Class A Stock acquired at the same cost in a single transaction)
converted to cash in the Merger.
Under the Taxpayer Relief Act of 1997, net capital gain (i.e., generally,
capital gain in excess of capital loss) recognized by individuals, estates and
trusts from the sale of property held more than 18 months will generally be
taxed at a rate not to exceed 20% for U.S. federal income tax purposes. Net
capital gain from property held for more than 12 months but not more than 18
months is taxed at a rate not to exceed 28%, and net capital gain from property
held for 12 months or less will continue to be subject to tax at ordinary income
tax rates. In addition, capital gains recognized by a corporate taxpayer will
be subject to tax at the ordinary income tax rates applicable to corporations.
In general, capital losses are deductible only against capital gains and are not
available to offset ordinary income. However, individual taxpayers are allowed
to offset a limited amount of capital losses against ordinary income.
Payments in connection with the Merger may be subject to "backup
withholding" at a rate of 31%, unless a beneficial owner of Class A Stock (i)
is a corporation or comes within certain exempt categories, or (ii) provides a
certified taxpayer identification number on Form W-9 and otherwise complies with
the backup withholding rules. Backup withholding is not an additional tax; any
amounts so withheld may be credited against the U.S. federal income tax
liability of the beneficial holder subject to the withholding.
FEES AND EXPENSES
Whether or not the Merger is consummated and except as otherwise provided
herein, all fees and expenses incurred in connection with the Merger will be
paid by the party incurring such fees and expenses, except that the Company will
pay for all costs and expenses relating to the printing and mailing of this
Proxy Statement. The Company will pay BTV Acquisition its reasonable expenses
incurred in connection with the Merger if the Merger Agreement is terminated by
BTV Acquisition because (i) the Board or any committee thereof withdraws,
modifies or changes its recommendation so that it is not in favor of the Merger
Agreement or the Merger; (ii) the Board decides to recommend an alternative
transaction; (iii) the required stockholder approval has not been obtained by
September 15, 1998; or (iv) there is a material breach by the Company.
Estimated fees and expenses to be incurred by the Company or BTV
Acquisition in connection with the Merger are as follows:
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Financing Fees(1) $[ ]
Financial Advisors Fees 6,000,000
SEC Filing Fees 94,310
Legal Fees and Expenses [ ]
Accounting Fees 50,000
Printing and Mailing Expenses [ ]
Exchange Agent Fees [ ]
Special Independent Committee Fee [ ]
Solicitation Fees 12,500
-----------
Total $[ ]
============
(1) See "SPECIAL FACTORS -- Financing of the Merger."
For services rendered in connection with its engagement the Company has
agreed to pay Goldman Sachs (i) a fee of $150,000 which was paid on October 14,
1997, (ii) a fee of $750,000 which was paid upon completion of Goldman Sachs'
initial report and presentation to the Special Independent Committee and (iii) a
fee contingent upon the acquisition by Mr. Johnson and/or Liberty or a third
party of the Company's Common Stock held by stockholders (excluding Mr. Johnson
and/or Liberty) equal to the product of (a) 2% of the amount by which the price
paid for the Company's Common Stock held by such stockholders, as determined
pursuant to the Engagement Letter (the "Transaction Price") is in excess of $48
per share but less than or equal to $52.00 per share, plus 3% of the amount by
which the Transaction Price is in excess of $52.00 per share but less than or
equal to $60.00 per share, plus 2% of the amount by which the Transaction Price
is in excess of $60.00 per share; and (b) the number of shares of Common Stock
acquired by Mr. Johnson and/or Liberty or such third party, including, without
limitation, shares issuable pursuant to options, warrants and convertible
securities held by persons other than Mr. Johnson and/or Liberty as of October
14, 1997 (not including up to a maximum of 850,000 shares issued by the Company
as a result of the exercise of employee stock options to the extent such options
were outstanding as of October 20, 1997), subject to adjustment. In addition,
the Company has agreed to reimburse Goldman Sachs for its expenses incurred in
connection with its services, including the fees and disbursements of counsel,
and will indemnify Goldman Sachs against certain liabilities, including
liabilities arising under the Federal securities laws.
Goldman Sachs and its affiliates may maintain banking and other business
relationships with Mr. Johnson and/or Liberty and the Company, for which it will
receive customary compensation. Goldman Sachs acted as co-managing underwriter
on a public offering of 7-1/8% Notes due 2028 of TCI, on February 19, 1998, for
which it received compensation of $369,225.
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is attached as Exhibit A to this Proxy Statement. Such summary is
qualified in its entirety by reference to the full text of the Merger Agreement.
THE MERGER; MERGER CONSIDERATION
The Merger Agreement provides that the Merger will become effective at such
time as a certificate of merger is duly filed with the Secretary of State of the
State of Delaware or at such later time as is agreed to by the parties and as is
specified in the certificate of merger (the "Effective Time"). If the Merger is
approved by the holders of a majority of the Nonaffiliated Stock at the Special
Meeting and the other conditions to the Merger are satisfied, it is currently
anticipated that the Merger will become effective as soon as practicable after
the Special Meeting (subject to compliance with or waiver of the other
conditions of the Merger Agreement); however, there can be no assurance as to
the timing of the consummation of the Merger or that the Merger will be
consummated.
At the Effective Time, BTV Acquisition will be merged with and into the
Company, the separate corporate existence of BTV Acquisition will cease, and the
Company will continue as the Surviving Corporation. In the Merger, each share
of Nonaffiliated Stock (other than Class A Stock (i) held in the treasury of the
Company or by any of its wholly owned subsidiaries or (ii) held by Dissenting
Stockholders) will, by virtue of the Merger and without any action on the part
of the holder thereof, be converted solely into the right to receive $63 per
share in cash, without interest (the "Merger Consideration"). Each certificate
representing shares of Nonaffiliated Stock that has been converted under the
terms of the Merger Agreement will, after the Effective Time, evidence only the
right to receive, upon the surrender of such certificate, an amount of cash per
share equal to the Merger Consideration.
Each share of Common Stock (i) held in the treasury of the Company or by
any wholly owned subsidiary of the Company or (ii) owned by BTV Acquisition, Mr.
Johnson, Liberty or any of their respective subsidiaries will automatically be
cancelled, retired and cease to exist and no payment will be made with respect
thereto.
Each share of common stock of BTV Acquisition issued and outstanding
immediately prior to the Effective Time will be converted into and become one
share of common stock of the Surviving Corporation and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
Dissenting Stockholders who do not vote to approve and adopt the Merger
Agreement and who otherwise strictly comply with the provisions of the DGCL
regarding statutory appraisal rights have the right to seek a determination of
the fair value of their shares of Class A Stock and such payment in cash
therefor in lieu of the Merger Consideration. See "DISSENTERS RIGHTS OF
APPRAISAL."
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THE EXCHANGE FUND; PAYMENT FOR SHARES OF CLASS A STOCK
On or before the closing date of the Merger (the "Closing Date"), BTV
Acquisition will enter into an agreement with a bank or trust company selected
by BTV Acquisition and reasonably acceptable to the Company (the "Exchange
Agent"). Prior to the Effective Time, BTV Acquisition will deposit or cause to
be deposited with or for the account of the Exchange Agent, in trust for the
benefit of the Company's holders of Class A Stock (other than Class A Stock held
by Dissenting Stockholders and shares to be cancelled without consideration
pursuant to the Merger Agreement) (such amount being hereinafter referred to as
the "Exchange Fund").
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to each record holder of shares of Class A Stock immediately
prior to the Effective Time a letter of transmittal containing instructions for
use in surrendering certificates formerly representing shares of Class A Stock
(the "Certificates") in exchange for the Merger Consideration. No stockholder
should surrender any Certificates until the stockholder receives the letter of
transmittal and other materials for such surrender. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with a letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to the instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for each share
of Class A Stock formerly represented by such Certificate, without any interest
thereon, less any required withholding of taxes, and the Certificate so
surrendered will be cancelled. The Merger Consideration will be delivered by
the Exchange Agent as promptly as practicable following surrender of a
Certificate and delivery of the Letter of Transmittal and any other related
transmittal documents. Cash payments may be made by check unless otherwise
required by a depositary institution in connection with the book-entry delivery
of securities.
If payment of the Merger Consideration is to be made to a person other than
the person in whose name the Certificate surrendered is registered, it will be a
condition of payment that the Certificate so surrendered will be properly
endorsed or otherwise be in proper form for transfer and that the Exchange Agent
receives evidence that any applicable transfer or other taxes have been paid.
STOCKHOLDERS SHOULD NOT SEND THEIR CERTIFICATES NOW AND SHOULD SEND THEM
ONLY PURSUANT TO INSTRUCTIONS SET FORTH IN LETTERS OF TRANSMITTAL TO BE MAILED
TO STOCKHOLDERS AS SOON AS PRACTICABLE AFTER THE EFFECTIVE TIME. IN ALL CASES,
THE MERGER CONSIDERATION WILL BE PROVIDED ONLY IN ACCORDANCE WITH THE PROCEDURES
SET FORTH IN THIS PROXY STATEMENT AND SUCH LETTERS OF TRANSMITTAL.
Six months after the Effective Time, the Exchange Agent will return to the
Surviving Corporation any portion of the Exchange Fund which remains
undistributed to the holders of the Class A Stock (including the proceeds of any
investments thereof), and any holders of Class A Stock who have not theretofore
complied with the above-described procedures to receive payment of the Merger
Consideration may look only to the Surviving Corporation for payment.
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TRANSFERS OF CLASS A STOCK
At the Effective Time, the stock transfer books of the Company will be
closed, and there will be no further registration of transfers of shares of
Class A Stock thereafter on the records of the Company. If, after the Effective
Time, Certificates are presented to the Exchange Agent or the Surviving
Corporation, they will be cancelled and exchanged for the Merger Consideration
as provided above and pursuant to the terms of the Merger Agreement (subject to
applicable law in the case of Dissenting Stockholders).
TREATMENT OF STOCK OPTIONS
Except as to Mr. Johnson and any other executive officers of the Company
who enter into agreements with BTV Acquisition relating to alternative treatment
of their Options, at the Effective Time each outstanding option to acquire Class
A Stock, whether or not then exercisable (the "Options"), will be cancelled and
the 1991 Executive Stock Option Plan, as amended (the "Company Option Plan"),
will be assumed by the Surviving Corporation. In consideration of such
cancellation, the Surviving Corporation will pay to the holder of each such
cancelled Option, within five days of the Effective Time, an amount determined
by multiplying (i) the excess, if any, of the Merger Consideration over the
applicable exercise price per share of such Option by (ii) the number of shares
of Class A Stock issuable upon exercise of the Option, subject to any required
withholding of taxes (the "Option Consideration"). At the Effective Time, all
Options, other than those with respect to which the holder has agreed with BTV
Acquisition as to the continuation thereof, will be converted into, and will
thereafter only represent the right to receive, the Option Consideration.
At the Effective Time, all Options held by Mr. Johnson will automatically
become options to acquire an equal number of shares of common stock of the
Surviving Corporation at an aggregate exercise price equal to the aggregate
exercise price of the Options, and no payment will be made with respect thereto.
Prior to the Effective Time, the Company will use its best efforts to (i)
obtain any consents from the holders of the Options and (ii) make any amendments
to the terms of the Company Option Plan and any options granted thereunder that
are necessary to consummate the transactions contemplated by the Merger
Agreement and payment in respect of any Options may be withheld until the
necessary consents are obtained.
Instead of the cancellation of such Options, BTV Acquisition may enter into
mutually acceptable arrangements with any holder of Options providing that such
holder's options will be treated in a different manner, provided that in no
event will any such holder be paid at the Effective Time an amount in cash in
excess of the Option Consideration such holder would have received had such
Options been cancelled as described above.
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CONDITIONS
The respective obligations of BTV Acquisition, Mr. Johnson and Liberty on
the one hand, and the Company, on the other, to consummate the Merger are
subject to the following conditions, among others: (i) the approval and adoption
of the Merger Agreement by the affirmative vote of the holders of a majority of
the voting power held by holders of the Nonaffiliated Stock; (ii) the absence of
any governmental action or order which materially restricts, prevents or
prohibits consummation of the Merger; and (iii) the expiration of any waiting
period applicable under the HSR Act.
The obligations of BTV Acquisition to effect the Merger are subject to,
among other things, the following additional conditions: (i) the representations
and warranties of the Company, if qualified by materiality, being true and
correct and if not so qualified, being true and correct in all material
respects, in each case as of the Effective Time as though made on and as of the
Effective Time; (ii) the Company having performed or complied in all material
respects with agreements and covenants required by the Merger Agreement to be
performed or complied with prior to the Effective Time; (iii) all consents
having been obtained by the Company other than those the failure of which to
obtain would not have a material adverse effect; (iv) BTV Acquisition having
obtained sufficient financing to fund the transactions contemplated by the
Merger Agreement; (v) no threatened or pending litigation seeking to restrain or
prohibit the consummation of the transactions contemplated by the Merger
Agreement; and (vi) Dissenting Stockholders not representing more than 10% of
the outstanding shares of Nonaffiliated Stock.
The obligations of the Company to effect the Merger are also subject to the
additional condition that all the covenants in the Merger Agreement to be
complied with or performed by BTV Acquisition, Mr. Johnson and Liberty shall
have been complied with and performed in all material respects prior to the
Effective Time and the representations and warranties of BTV Acquisition, Mr.
Johnson and Liberty shall if qualified by materiality be true and correct and if
not so qualified be true and correct in all material respects, in each case as
of the Effective Time as if made on and as of the Effective Time.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of BTV Acquisition, Mr. Johnson, Liberty and the Company. The
representations of BTV Acquisition, Mr. Johnson and Liberty relate to, among
other things, the organization and qualification to do business of BTV
Acquisition and Liberty, the authority of the parties to enter into the Merger
Agreement, no conflict, required filings and consents, financing and absence of
brokers. The representations of the Company relate to, among other things,
corporate organization and qualification, capitalization, authority to enter
into the Merger Agreement, no conflict, required filings and consents, certain
regulatory consents and approvals, compliance with law, certain Exchange Act
filings with the SEC and financial statements, absence of certain changes or
events, employee benefit plans, taxes, absence of litigation, FCC and copyright
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matters, opinion of Goldman Sachs and the absence of brokers. The Company's
representations are subject to Mr. Johnson not being aware of any inaccuracies
in such representations.
COVENANTS
The Company has agreed to conduct its business in the ordinary and usual
course prior to the Effective Time. In this regard, the Company has agreed that
it will not, without the prior written consent of BTV Acquisition, Mr. Johnson
or Liberty engage in certain types of transactions. In addition, BTV
Acquisition, Mr. Johnson, Liberty and the Company have made further agreements
regarding the access to the Company's records; preparation and filing of this
Proxy Statement and the Schedule 13E-3 with the SEC; indemnification of the
Company's officers and directors; directors' and officers' liability insurance;
reasonable best efforts to fulfill the conditions to the other party's
obligation to consummate the Merger and public announcements.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that from and after the Effective Time, the
Surviving Corporation shall indemnify the present and former officers and
directors of the Company, to the same extent and upon the terms and conditions
provided in the Company's certificate of incorporation and bylaws, and to the
full extent permitted under the DGCL against all losses, expenses, claims,
damages, liabilities or amounts paid in settlement with the approval of the
Surviving Corporation (which approval shall not unreasonably be withheld) in
connection with any claim, action, suit, proceeding or investigation based in
whole or in part on the fact that such person is or was a director or officer of
the Company and arising out of actions or omissions occurring in connection with
the Merger.
The Merger Agreement provides that the Surviving Corporation shall maintain
in effect, for not less than six years from the Effective Time, the policies of
the directors' and officers' liability insurance most recently maintained by the
Company with respect to matters occurring prior to the Effective Time to the
extent available, provided that the Surviving Corporation may substitute
policies of at least the same coverage containing terms and conditions which are
no less advantageous as long as such substitution does not result in gaps or
lapses in coverage. Nonetheless, in no event shall the Surviving Corporation be
required to expend more than 150% of the current annual premiums paid by the
Company (the "Premium Amount") to maintain or procure such insurance coverage
and in the event the Surviving Corporation is unable to obtain the required
insurance, the Surviving Corporation will obtain as much comparable insurance as
is available for the Premium Amount per year.
NO SOLICITATION; FIDUCIARY OBLIGATIONS OF DIRECTORS
The Merger Agreement provides that the Company generally shall not, nor
shall it permit any of its subsidiaries to (i) initiate, solicit, or encourage
the making of any Alternative Transaction (as described below) or (ii) provide
any information regarding the Company to any
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third party, or participate in, facilitate or encourage, any inquiries of the
making of any Alternative Transaction. The Board of Directors of the Company may
engage in negotiations or provide information to a third party in response to an
unsolicited written inquiry, if the Board first determines in good faith (i)
based on the written advice of its financial advisor, that the inquiry, proposal
or offer is reasonably likely to result in a proposal for an Alternative
Transaction which is (A) more favorable to the Company's stockholders than the
Merger and (B) capable of consummation, or (ii) based on the written advice of
outside legal counsel, that it is required to do so in order to comply with its
fiduciary duties. The Merger Agreement defines Alternative Transaction as any
transaction or series of transactions (other than those contemplated by the
Merger Agreement) resulting in (i) any change of control of the Company, (ii)
any merger or consolidation of the Company in which another person acquires
beneficial ownership of 25% or more of the aggregate voting power of all voting
securities of the Company or the Surviving Corporation, (iii) any tender offer
or exchange offer for or any acquisition of any securities of the Company which
would result in another person beneficially owning 25% or more of the voting
securities of the Company or (iv) any sale or other disposition of assets of the
Company or any of its subsidiaries if the fair market value of such assets
exceeds 25% of the aggregate fair market value of the assets of the Company and
its subsidiaries.
DIRECTORS AND OFFICERS OF THE COMPANY FOLLOWING THE MERGER; CERTIFICATE OF
INCORPORATION; BYLAWS
The Merger Agreement provides that the current directors of BTV Acquisition
will be the directors of the Surviving Corporation. Mr. Johnson and Mr. Bennett
will be the initial directors of the Surviving Corporation. The Buying Group is
presently considering inviting Messrs. Lewis, Malone, Washington and Wilkins and
Mrs. Johnson to join the Board of Directors of the Surviving Corporation
following the Merger; however, no determination has been made in such regard.
The Merger Agreement also provides that the current officers of the Company will
be the officers of the Surviving Corporation.
The certificate of incorporation and bylaws of BTV Acquisition will be the
certificate of incorporation and bylaws of the Surviving Corporation, until
thereafter amended, except for appropriate changes to reflect that the name of
the Surviving Corporation will be BET Holdings, Inc.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after the adoption of the agreement by the stockholders
of the Company, by the mutual written consent of the Company and BTV
Acquisition, or by either the Company or BTV Acquisition (i) if any permanent
injunction, order or decree or other action of any Governmental Entity
preventing the consummation of the Merger shall have become final and
nonappealable; or (ii) if the Merger has not been consummated by September 30,
1998 (provided that such termination shall not be available to any party whose
failure to fulfill any obligation under the
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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 to challenge the
proposed buyout of holders of the Nonaffiliated Stock. See "SPECIAL FACTORS --
Purpose and Background of the Merger" for a chronological discussion of the
Consolidated Action and the Baskerville Complaint.
During late 1997 and early 1998, plaintiffs' counsel in the Consolidated
Action discussed with counsel to the Buying Group the plaintiffs' views
regarding the deficiencies of the $48 Offer, including the inadequacy of the
initial price and the absence of a separate vote to approve the proposed merger
by the holders of a majority of the Nonaffiliated Stock. Counsel for plaintiffs
and the Buying Group did not engage in settlement negotiations during these
discussions. In March 1998, counsel for the Buying Group informed counsel for
plaintiffs in the Consolidated Action of the Buying Group's willingness to
consider modifications to the $48 Offer in order to secure the approval of the
Special Independent Committee for the proposed transaction and, if possible, to
establish a basis for the potential settlement of the Consolidated Action. On
March 13-15, 1998, counsel and the financial advisor to plaintiffs in the
Consolidated Action negotiated with counsel to the Buying Group regarding the
terms for an agreement-in-principle to settle the Consolidated Action.
On March 15, 1998 counsel for plaintiffs and defendants in the Consolidated
Action executed the MOU, which outlined an agreement-in-principle regarding the
terms of a settlement of the Consolidated Action. Subject to Court approval,
third-party consents and other conditions, the MOU provided for the termination
of the Consolidated Action and its dismissal with prejudice based upon and
subject to, among other things, (i) a merger in which the holders of the
Nonaffiliated Stock receive $63 cash per share; (ii) the merger being
conditioned upon the favorable vote by the holders of a majority of the
Nonaffiliated Stock; and (iii) plaintiffs' counsel having had the opportunity to
review and comment on preliminary shareholder disclosure materials relating to
the merger, and to negotiate with defendants' counsel to resolve any issues
raised by plaintiffs' counsel concerning the adequacy of these disclosure
materials. The MOU also provided that plaintiffs, through their counsel, would
use their best efforts to pursue the settlement of the Consolidated Action and
would cooperate with the Company and the Buying Group in preparing the papers
necessary to define, pursue and effectuate a dismissal of the Baskerville
Complaint pending in the D.C. Court. At no time have the defendants in either
the Consolidated Action or the Baskerville Complaint admitted any fault,
liability or wrongdoing as to any facts or claims alleged or asserted in any
complaint filed in the Consolidated Action or the Baskerville Complaint.
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The MOU also provides that, subject to the terms and conditions of the MOU
and the terms and conditions of the formal stipulation of settlement, the
Company will pay, on behalf of and for the benefit of those directors of the
Company named as defendants in the Consolidated Action, such fees and expenses
as may be awarded by the Court. Further, the Company has agreed in the MOU to
pay all reasonable costs and expenses incurred in providing notice of the
settlement to the record and beneficial owners of Common Stock of the Company
during the period from and including the close of business on September 9, 1997
through and including the date of consummation of the Merger (other than the
Company, the Buying Group, and those holders of Common Stock named as individual
defendants in the Consolidated Action).
The consummation of the Merger is conditioned upon there being no pending
or threatened litigation. See "THE MERGER AGREEMENT -- Conditions."
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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
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<PAGE>
(C) Such stockholder must continuously hold such shares from the date
of making the demand through the Effective Time. Accordingly, a
stockholder who is the record holder of shares of Class A Stock on the date
the written demand for appraisal is made but who thereafter transfers such
shares prior to the Effective Time will lose any right to appraisal in
respect of such shares.
Neither voting (in person or by proxy) against, abstaining from voting on
or failing to vote on the proposal to approve and adopt the Merger Agreement
will constitute a written demand for appraisal within the meaning of Section
262. The written demand for appraisal must be in addition to and separate from
any such proxy or vote.
Only a holder of record of shares of Class A Stock issued and outstanding
immediately prior to the Effective Time is entitled to assert appraisal rights
for the shares of Class A Stock registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the stockholder of record, fully
and correctly, as such stockholder's name appears on such stock certificates,
should specify the stockholder's name and mailing address, the number of shares
of Class A Stock owned and that such stockholder intends thereby to demand
appraisal of such stockholder's Class A Stock. If the shares are owned of record
in a fiduciary capacity, such as by a trustee, guardian or custodian, execution
of the demand should be made in that capacity, and if the shares are owned of
record by more than one person as in a joint tenancy or tenancy in common, the
demand should be executed by or on behalf of all owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a stockholder; however, the agent must identify the record owner or owners
and expressly disclose the fact that, in executing the demand, the agent is
acting as agent for such owner or owners. A record holder such as a broker who
holds shares as nominee for several beneficial owners may exercise appraisal
rights with respect to the shares held for one or more beneficial owners while
not exercising such rights with respect to the shares held for one or more
beneficial owners; in such case, the written demand should set forth the number
of shares as to which appraisal is sought, and where no number of shares is
expressly mentioned the demand will be presumed to cover all shares held in the
name of the record owner. Stockholders who hold their shares in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such a nominee.
A stockholder who elects to exercise appraisal rights pursuant to Section
262 should mail or deliver a written demand to: BET Holdings, Inc., One BET
Plaza, 1900 W Street, N.E., Washington, D.C. 20018-1211, Attention: Byron F.
Marchant, Secretary.
Within ten days after the Effective Time, the Surviving Corporation must
send a notice as to the effectiveness of the Merger to each former stockholder
of the Company who has made a written demand for appraisal in accordance with
Section 262 and who has not voted in favor of the Merger Agreement. Within 120
days after the Effective Time, but not thereafter, either the Surviving
Corporation or any Dissenting Stockholder who has complied with the requirements
of Section 262 may file a petition in the Delaware Chancery Court demanding a
determination of
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the value of the shares of Class A Stock held by all Dissenting Stockholders.
The Company is under no obligation to and has no present intent to file a
petition for appraisal, and stockholders seeking to exercise appraisal rights
should not assume that the Surviving Corporation will file such a petition or
that the Surviving Corporation will initiate any negotiations with respect to
the fair value of such shares. Accordingly, stockholders who desire to have
their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262. Inasmuch as the Company has no obligation to file
such a petition, the failure of a stockholder to do so within the period
specified could nullify such stockholder's previous written demand for
appraisal. In any event, at any time within 60 days after the Effective Time (or
at any time thereafter with the written consent of the Company), any stockholder
who has demanded appraisal has the right to withdraw the demand and to accept
payment of the Merger Consideration.
Pursuant to the Merger Agreement, the Company has agreed to give BTV
Acquisition prompt notice of any demands for appraisal received by it,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL and received by the Company and relating thereto. BTV Acquisition shall
direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. The Company shall not, except with the prior written consent of
BTV Acquisition, make any payment with respect to any demands for appraisal, or
offer to settle, or settle, any such demands.
Within 120 days after the Effective Time, any stockholder who has complied
with the provisions of Section 262 to that point in time will be entitled to
receive from the Surviving Corporation, upon written request, a statement
setting forth the aggregate number of shares not voted in favor of the Merger
Agreement and with respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. The Surviving Corporation must
mail such statement to the stockholder within 10 days of receipt of such request
or within 10 days after expiration of the period for delivery of demands for
appraisals under Section 262, whichever is later.
A stockholder timely filing a petition for appraisal with the Court of
Chancery must deliver a copy to the Surviving Corporation, which will then be
obligated within 20 days to provide the Delaware Court of Chancery with a duly
verified list containing the names and addresses of all stockholders who have
demanded appraisal of their shares. After notice to such stockholders, the
Delaware Court of Chancery is empowered to conduct a hearing on the petition to
determine which stockholders are entitled to appraisal rights. The Delaware
Court of Chancery may require stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to submit their
certificates to the Register in Chancery for notation thereon of the pendency of
the appraisal proceedings, and if any stockholder fails to comply with the
requirement, the Delaware Court of Chancery may dismiss the proceedings as to
that stockholder.
After determining the stockholders entitled to an appraisal, the Delaware
Court of Chancery will appraise the "fair value" of their shares, exclusive of
any element of value arising
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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
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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.
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SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following table sets forth selected consolidated financial data for the
Company and its subsidiaries (i) as of and for the six months ended January 31,
1998 and 1997 and (ii) as of and for each of the five fiscal years in the period
ended July 31, 1997. No separate financial information is provided for BTV
Acquisition since BTV Acquisition is a special purpose entity formed in
connection with the Merger and has no independent operations. No pro forma data
giving effect to the Merger have been provided because the Company does not
believe such information is material to stockholders in evaluating the proposed
Merger and the Merger Agreement.
The financial information for the Company as of and for each of the five
fiscal years in the period ended July 31, 1997 has been derived from audited
consolidated financial statements of the Company. The financial information as
of and for the six months ended January 31, 1998 and 1997 has been derived from
unaudited consolidated financial statements of the Company and, in the opinion
of management, includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth therein.
Operating results for such unaudited interim periods should not be considered
indicative of results to be expected for the entire year.
The following financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements, accompanying
notes and other financial information included in the Company's Annual Report on
Form 10-K for the fiscal year ended July 31, 1997, as amended, and the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1998, and
incorporated herein by reference.
<TABLE>
<CAPTION>
(Unaudited)
(in thousands, except share data and Six Months Ended
ratios) January 31, Fiscal Year Ended July 31,
------------------- --------------------------------------------------
INCOME STATEMENT DATA 1998 1997 1997 1996 1995 1994 1993
-------- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $ 84,938 $ 72,495 $154,227 $132,275 $115,222 $ 97,510 $ 74,218
Income from operations 30,384 24,962 53,775 42,837 37,517 26,410 23,609
Income from continuing operations 16,858 13,784 28,022 22,678 19,912 14,776 12,640
Discontinued operations - (1,085) (4,235) (615) - - -
Net income 16,858 12,699 23,787 22,063 19,912 14,776 12,640
Ratio of earnings to fixed charges/1/ 11.4:1 9.1:1 9.8:1 8.5:1 N/A N/A N/A
</TABLE>
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<TABLE>
<CAPTION>
(Unaudited)
(in thousands, except share data) Six Months Ended
January 31, Fiscal Year Ended July 31,
----------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA/2/ 1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
Net income per common share:
Basic:
Income from continuing operations $ 1.01 $ 0.82 $ 1.68 $ 1.27 $ 1.00 $ 0.72 $ 0.61
Net income 1.01 0.76 1.42 1.24 1.00 0.72 0.61
Diluted:
Income from continuing operations 0.97 0.80 1.63 1.23 1.00 0.72 0.61
Net income 0.97 0.74 1.38 1.21 1.00 0.72 0.61
Shares used in computing earnings per
share:
Basic 16,709 16,744 16,703 17,834 19,867 20,490 20,844
Diluted 17,450 17,211 17,213 18,221 19,961 20,590 20,887
Cash dividends declared - - - - - - -
</TABLE>
<TABLE>
<CAPTION>
(in thousands, except share data) (Unaudited)
January 31, July 31,
---------------- ------------------------------------------------
BALANCE SHEET DATA 1998 1997 1997 1996 1995 1994 1993
------ ------ -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $183,063 $167,008 $173,511 $150,731 $157,810 $113,868 $104,842
Long term debt 51,124 70,246 62,993 60,560 35,875 12,392 13,207
Shareholders' equity 105,788 80,630 88,418 66,749 96,684 81,378 77,791
Book value per share/3/ 6.33 4.84 5.29 3.98 4.90 4.07 3.75
</TABLE>
/1/ For purposes of the ratio of earnings to fixed charges, earnings
represents income before income taxes from continuing operations, adjusted for
losses incurred with respect to investments accounted for under the equity
method, plus fixed charges. Fixed charges consist of interest costs, both
expensed and capitalized, amortization of debt issuance costs and the interest
portion of operating rents, which is estimated by management to approximate one-
third of aggregate operating rents.
/2/ Effective with the period ended January 31, 1998, the Company was
required to adopt Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("SFAS No. 128"). Accordingly, net income per common share and shares
used in computing earnings per share for the six months ended January 31, 1997
and each of the five years in the period ended July 31, 1997 have been restated
to conform with the requirements of SFAS No. 128.
/3/ Book value per share is calculated based upon the number of shares of
Common Stock outstanding at year end.
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
AGREEMENTS WITH CABLE AFFILIATES
In the normal course of its business, BET enters into agreements with the
operators of cable television systems for the carriage of BET's and Action Pay
Per View's (a subsidiary of the Company) programming. BET has entered into
agreements with a number of cable operators that are affiliates of TCI. The
agreements entered into with affiliates of TCI are on substantially the same
terms and conditions as the agreements entered into with cable operators which
are not affiliated with TCI. In fiscal 1997, BET earned approximately
$16,382,000 in respect of the carriage of BET's programming from TCI-affiliated
cable operators. TCI-affiliated cable operators accounted for approximately 24%
of The BET Cable Network's subscribers and approximately 28% of its subscriber
revenue in fiscal 1997.
AGREEMENTS WITH RELATED PARTIES
In February 1994, BET Films, Inc., a subsidiary of the Company, QE +
Limited, an indirect wholly owned subsidiary of TCI, and Live Entertainment,
Inc., an unrelated third party, entered into a partnership agreement
establishing BET Film Productions, a joint venture which plans to develop,
produce and distribute motion pictures targeted primarily to minority audiences.
Under the joint venture agreement, each of the parties owns a one-third interest
in the joint venture and has agreed to contribute up to $5 million as a capital
contribution to the joint venture. To date, $1,050,000 has been funded by the
Company towards the capital contribution obligation for the joint venture.
In December 1996, the Company and Encore Media Corporation, a wholly owned
subsidiary of Liberty, formed a joint venture, BET Movies/Starz!3, LLC, for the
purposes of the creation, operation, programming, packaging, distribution,
advertising, sales, exhibition and marketing of the BET Movies/Starz!3 cable
television programming service, a pay TV channel within the Starz!-Encore 8
multiplex showcasing Black film artists and targeted to African-American
viewers. To date, $3,840,000 has been funded by the Company towards the capital
contribution obligation for the joint venture. Pursuant to the terms of a term
sheet executed in September 1997, the venturers agreed to modify the venture
such that the Company is not required to make additional equity contributions to
the venture.
During December 1995, the Company entered into a loan agreement with R&S
PCS, Inc. ("R&S"), an entity wholly owned by Mr. Johnson, whereby the Company
agreed to loan R&S up to $10 million on a revolving basis. Loan advances bear
interest at the prime lending rate plus 2% and are secured by 40,000 shares of
the Company's common stock owned by Mr. Johnson (the "Pledged Shares"). The
largest amount outstanding during fiscal 1997 was $8,933,000. At January 31,
1998, advances aggregating $8,893,000 were outstanding. As of January 31, 1998,
$10,405,000 (including accrued and unpaid interest) was outstanding under the
loan. Substantially all loan advances were used by R&S to establish eligibility
to participate in the Broadband PCS C Block Auction in which R&S was a
successful bidder. The March Buying
64
<PAGE>
Group Letter contemplates that, at an appropriate time to be reasonably
determined, Mr. Johnson and any entities controlled by him may take certain
actions that would result in both the Company owning the rights to certain PCS
licenses now held by R&S and the release of the Pledged Shares. Subject to
Liberty's consent, such actions may include, but are not limited to, the sale,
transfer or assignment of all of Mr. Johnson's (or R&S's) right, title and
interest in and to such licenses, or a merger of R&S, on a tax-free basis, with
or into BTV Acquisition or the Company, or another entity, as reasonably
determined.
TRANSACTIONS WITH MANAGEMENT
During May 1996, the Company purchased from Mr. Johnson certain promissory
notes in the aggregate principal amount of $2.2 million that had been issued
originally by a third party to Mr. Johnson. In connection with this
transaction, Mr. Johnson guaranteed repayment of these notes plus certain other
related notes already held by the Company from that same third party. All notes
receivable guaranteed by Mr. Johnson bear interest at the prime lending rate
plus 2%, payable monthly, are secured by certain real property, and mature at
varying dates through the Company's fiscal year ending July 31, 2001. Interest
income earned from notes receivable guaranteed by Mr. Johnson was $400,000
during fiscal year 1997.
65
<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 distributions.
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 (through April 29, 1998) 62 3/16 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 [ ], 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 $[ ].
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<PAGE>
The market price for Class A Stock is subject to fluctuation and
stockholders are urged to obtain current market quotations. No assurance can be
given as to the future price of or market for Class A Stock.
CLASS A STOCK PURCHASE INFORMATION
From March 2, 1998 through May 1, 1998, none of the Company, Mr. Johnson,
Liberty, TCI, BTV Acquisition, any director, executive officer or controlling
person of the Company, Liberty, TCI or BTV Acquisition, no pension, profit-
sharing or similar plan of the Company, Liberty, TCI or BTV Acquisition, or any
associate or majority-owned subsidiary of the Company, Mr. Johnson, Liberty, TCI
or BTV Acquisition has effected any purchases or sales of Class A Stock.
The following table shows for the fiscal year periods indicated the amount
of shares of Class A Stock purchased by the Company, the range of prices paid
and the average purchase price for all such purchases. During the periods set
forth below, Mr. Johnson, BTV Acquisition, TCI and TCI's subsidiaries did not
purchase any Class A Stock.
<TABLE>
<CAPTION>
Shares of Class A Range of Prices
Stock Purchased Paid per Share Average Purchase Price
--------------- --------------- -----------------------
Fiscal Year 1996
- -------------------
<S> <C> <C> <C>
First Quarter 0 -- --
Second Quarter 1,518,300/(1)/ $ 19.39 $ 19.39
Third Quarter 0 -- --
Fourth Quarter 200 $ 25.50 $ 25.50
Fiscal Year 1997
- ----------------
First Quarter 33,400 $ 24.375-$30.00 $28.316
Second Quarter 98,400 $24.875-$27.875 $26.939
Third Quarter 18,000 $ 26.75-$26.25 $27.172
Fourth Quarter 0 - -
Fiscal Year 1998
- ----------------
First Quarter 0 - --
Second Quarter 0 -- --
Third Quarter
</TABLE>
/(1)/ The Company purchased the shares in December 1995, along with 1,518,300
shares of Class B Stock, from Time Warner Entertainment Company, L.P., a
partnership controlled by Time Warner Inc. and the then beneficial owner
of such shares. In connection with the share purchase, the Company
entered into a non-competition agreement with Time Warner Inc. generally
restricting Time Warner Inc. and its affiliates for a limited time from
engaging in the provision of a basic cable television program service
primarily targeted to Black audiences.
67
<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 10,669,303 (a) 62.8%(b)
GAMCO Investors, Inc. and 2,327,350 (c) 23.1%
certain related entities
Capital Group Cos., Inc. and 662,100 (d) 6.6%
certain related entities
</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
2,039,703 shares of Class A Stock, holds Options (currently exercisable or
exercisable within the next 60 days) to acquire 146,400 shares of Class A
Stock, and owns 4,820,000 shares of Class C Stock, and TCI (through
Liberty) owns 1,831,600 shares of Class A Stock and 1,831,600 shares of
Class B Stock. The shares of Class A Stock beneficially owned by Mr.
Johnson (including shares issuable upon exercise of such options)
constitute approximately 21.2% of the outstanding shares of Class A Stock
(without giving effect to the conversion of Class C Stock into Class A
Stock) and the shares of Class A Stock beneficially owned by TCI constitute
approximately 18.2% of the outstanding shares of Class A Stock (without
giving effect to the conversion of Class B Stock into Class A Stock). With
respect to Mr. Johnson, the foregoing shares (i) include 110,600 shares of
Class A Stock owned beneficially by Sheila Crump Johnson, Mr. Johnson's
wife, as to which Mr. Johnson disclaims beneficial ownership and (ii)
exclude Options to acquire 115,600 shares of Class A Stock that are not
exercisable currently or within the next 60 days. See
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<PAGE>
"SECURITIES OWNERSHIP -- Beneficial Ownership of Class A Stock by Certain
Parties Related to the Company or the Buying Group." By virtue of their
status as a "group" for purposes of Rule 13d-5 of the Exchange Act, each of
Mr. Johnson and TCI may be deemed to have shared voting and dispositive
power over the shares owned by the other person. The business addresses for
each of Mr. Johnson and TCI are set forth in "THE PARTIES."
(b) Because each share of Class B Stock and Class C Stock generally is entitled
to ten votes per share while the Class A Stock is entitled to one vote per
share, Mr. Johnson and TCI may be deemed to beneficially own equity
securities of the Company representing approximately 92% of the voting
power of the Company. See "INFORMATION CONCERNING THE SPECIAL MEETING --
Record Date; Voting at the Meeting; Quorum."
(c) Based solely on information contained in Amendment No. 14 dated April 6,
1998 to the report on Schedule 13D filed originally on December 21, 1993 by
Gabelli Funds, Inc. and certain related entities. The shares listed
consist of shares held by Gabelli Funds, Inc. (613,500), GAMCO Investors,
Inc. (1,547,550), Gabelli Foundation, Inc. (5,000), MJG Associates, Inc.
(2,500), Gabelli Associates Limited (22,000), Gabelli Associates Fund
(100,000), Gabelli International Limited (30,800), Gemini Capital
Management Limited (3,000) and Gabelli International II Limited (3,000).
Mr. Mario Gabelli is deemed to have beneficial ownership of all such shares
other than shares beneficially owned by Marc Gabelli and Gemini Capital
Management. Marc Gabelli is deemed to have beneficial ownership of the
shares owned beneficially by Gemini Capital Management and Gabelli
International II Limited. MJG Associates is deemed to have beneficial
ownership of all the shares beneficially owned by Gabelli International
Limited and Gabelli International II Limited. Gabelli Funds, Inc. is
deemed to have beneficial ownership of all such shares, other than shares
beneficially owned by Mario Gabelli, Marc Gabelli, Gemini Capital
Management and Gabelli Foundation, Inc. The business address for such
persons is One Corporate Center, Rye, New York 10580-1434. Of the 2,327,350
shares of Class A Stock reported, each entity has the sole power to vote or
direct the vote and sole power to dispose or to direct the disposition of
the securities reported for it, either for its own benefit or for the
benefit of its investment clients or its partners, as the case may be,
except that: (i) GAMCO Investors, Inc. does not have authority to vote
69,000 of the reported shares; (ii) Gabelli Funds, Inc., which presently
provides discretionary advisory services to various funds which are
registered investment companies (the "Funds"), has sole dispositive and
voting power with respect to the 613,500 shares held by the Funds, so long
as the aggregate voting interest of all joint filers does not exceed 25% of
their total voting interest in the Company and in that event, the Proxy
Voting Committee of each of the Funds shall respectively vote that Fund's
shares; (iii) at any time, the Proxy Voting Committee of each Fund may take
and exercise in its sole discretion the entire voting power with respect to
the shares held by such Fund under special circumstances such as regulatory
considerations; and (iv) the power of Mario Gabelli and Gabelli Funds, Inc.
is indirect with respect to the shares beneficially owned directly by the
other reporting entities.
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<PAGE>
(d) Based solely upon information contained in Amendment No. 3 dated February
10, 1998 to the report on Schedule 13G filed originally on February 12,
1997 by The Capital Group Companies, Inc., Capital Research and Management
Company and SMALL CAP World Fund, Inc. Capital Research and Management
Company, a wholly owned subsidiary of The Capital Group Companies, Inc.,
serves as investment adviser to SMALLCAP World Fund, Inc. The business
address for such person is 333 South Hope Street, Los Angeles, California
90071. The Capital Group Companies, Inc. and Capital Research and
Management Company both have dispositive power over the 662,100 shares and
SMALLCAP World Fund, Inc. has sole voting power over the 662,100 shares.
BENEFICIAL OWNERSHIP OF CLASS A STOCK BY CERTAIN PARTIES RELATED TO THE COMPANY
OR THE BUYING GROUP
This section provides certain information as of April 15, 1998 with respect
to the beneficial ownership of the Company's Class A Stock by the persons or
entities identified below. See "SECURITIES OWNERSHIP -- Beneficial Ownership of
More Than 5% of Class A Stock" for information as to beneficial ownership of the
Company's Class A Stock by the Buying Group.
Under the SEC rules generally, a person is deemed to be a "beneficial
owner" of a security if he has or shares the power to vote or direct the voting
of such security, or the power to dispose or to direct the disposition of such
security. Thus, more than one person may be deemed a beneficial owner of the
same security. Except as otherwise indicated, each person listed below has
informed the Company that such person has (i) sole voting and investment power
with respect to such person's shares of stock, except to the extent that
authority is shared by spouses under applicable law, and (ii) record and
beneficial ownership with respect to such person's shares of stock. Shares
issuable upon exercise of options that are exercisable currently or within the
next 60 days are deemed to be outstanding for the purpose of computing the
percentage ownership and overall voting power of persons beneficially owning
such options, but have not been deemed to be outstanding for the purpose of
computing the percentage ownership or overall voting power of any other person.
The Company, BTV Acquisition, Liberty and TCI believe that the present
intention of their respective directors and executive officers who own Class A
Stock is to vote all Class A Stock as to which they possess voting power for
approval and adoption of the Merger Agreement.
THE COMPANY. The following table set forth information concerning the
-----------
beneficial ownership of the Company's Class A Stock by each director, executive
officer and controlling person of the Company, any pension, profit-sharing or
similar plan of the Company, or any associate or majority-owned subsidiary of
the Company, and by all directors, executive officers and nominees of the
Company as a group:
70
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of Outstanding
Name of Beneficial Owner Shares Owned Class A Stock Owned
- ------------------------ ------------ -------------------
<S> <C> <C>
Robert L. Johnson (1)........... 2,186,103 21.2
Sheila Crump Johnson (2)........ 110,600 1.0
John C. Malone, Ph.D. (3)....... 0 *
Robert R. Bennett (4)........... 0 *
Denzel Washington............... 0 *
Herbert P. Wilkins, Sr. (5)..... 5,113 *
Delano E. Lewis................. 0 *
Debra L. Lee (6)................ 198,550 1.9
James A. Ebron (7).............. 157,800 1.5
William T. Gordon(8)............ 183,842 1.8
Janis P. Thomas (9)............. 198,100 1.9
Jefferi K. Lee(10).............. 178,000 1.7
Curtis N. Symonds(11)........... 146,695 1.4
Louis Carr(12).................. 6,000 *
Maurita Coley(13)............... 18,000 *
Byron Marchant.................. 0 *
Scott Mills..................... 0 *
All directors and executive
officers of the Company as a
group(14)..................... 3,278,203 28.7
</TABLE>
* Less than one percent.
(1) Includes (i) 146,400 shares of Class A Stock which are subject to
purchase upon exercise of Options exercisable currently or within the
next 60 days and (ii) 110,600 shares of Class A Stock owned by Sheila
Crump Johnson, Mr. Johnson's wife, of which 110,500 shares are subject
to purchase upon exercise of Options. Mr. Johnson disclaims beneficial
ownership of all shares owned by his wife. Excludes (i) Class A Stock
issuable upon conversion of Class C Stock and (ii) an additional
115,600 Options owned by Mr. Johnson that are not exercisable currently
or within the next 60 days. For additional information on Mr. Johnson's
beneficial ownership of equity securities of the Company and the voting
powers associated with them, see "INFORMATION CONCERNING THE SPECIAL
MEETING --Record Date; Voting at the Meeting; Quorum" and "SECURITIES
OWNERSHIP --Beneficial Ownership of More Than 5% of Class A Stock."
(2) Excludes shares of Common Stock owned by Robert L. Johnson, Mrs.
Johnson's husband, as to which Mrs. Johnson disclaims beneficial
ownership. Includes 110,500 shares of Class A Common Stock which are
subject to purchase upon exercise of Options. The remaining 100 shares
are directly owned by Mrs. Johnson. Mrs. Johnson owns an additional
34,000 Options not reflected in the table that will become exercisable
and receive the Option Consideration upon
71
<PAGE>
consummation of the Merger. See "SPECIAL FACTORS -Interests of Certain
Persons in the Merger; Certain Relationships."
(3) Dr. Malone is a director and Chairman of the Board of Liberty. Dr.
Malone is also Chairman of the Board and Chief Executive Officer of
TCI. Dr. Malone disclaims beneficial ownership of 1,831,600 shares of
Class A Stock and 1,831,600 shares of Class B Stock owned of record by
LMC BET, Inc. ("LMC BET"), a wholly owned subsidiary of Liberty, and
beneficially owned by TCI, none of which have been attributed to him
in the table.
(4) Mr. Bennett is an Executive Vice President of TCI and the President
and Chief Executive Officer of Liberty. Mr. Bennett disclaims
beneficial ownership of 1,831,600 shares of Class A Stock and
1,831,600 shares of Class B Stock owned of record by LMC BET and
beneficially owned by TCI, none of which have been attributed to him
in the table.
(5) Includes 4,436 shares as to which Mr. Wilkins shares voting and
investment power with two limited partners of Syndicated
Communications Venture Partners II, L.P.
(6) Includes (i) 198,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Ms. Lee that are exercisable currently or
within the next 60 days; (ii) 100 shares of Class A Stock held by her
spouse, with respect to which Ms. Lee disclaims beneficial ownership;
and (iii) 100 shares of Class A Stock held by an investment club in
which Ms. Lee is a member, with respect to which Ms. Lee disclaims
beneficial ownership. The remaining 350 shares are directly owned by
Ms. Lee. Ms. Lee owns an additional 34,000 Options not reflected in
the table that will become exercisable and receive the Option
Consideration upon consummation of the Merger. See "SPECIAL FACTORS -
Interests of Certain Persons in the Merger; Certain Relationships."
(7) Includes 157,800 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Ebron that are exercisable currently
or within the next 60 days. Mr. Ebron owns an additional 34,000
Options not reflected in the table that will become exercisable and
receive the Option Consideration upon consummation of the Merger. See
"SPECIAL FACTORS -Interests of Certain Persons in the Merger; Certain
Relationships."
(8) Includes 183,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Gordon that are exercisable currently
or withing the next 60 days. The remaining 842 shares are directly
owned by Mr. Gordon. Mr. Gordon owns an additional 34,000 Options not
reflected in the table that will become exercisable and receive the
Option Consideration upon consummation of the Merger. See "SPECIAL
FACTORS - Interests of Certain Persons in the Merger; Certain
Relationships."
(9) Includes 198,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Ms. Thomas that are exercisable currently
or within the next 60 days. Ms. Thomas shares voting and investment
power in the remaining 100 shares with her spouse. Ms. Thomas owns an
additional 34,000 Options not reflected in the table that will become
exercisable and receive the Option
72
<PAGE>
Consideration upon consummation of the Merger. See "SPECIAL FACTORS -
Interests of Certain Persons in the Merger; Certain Relationships."
(10) Includes 178,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Lee that are exercisable currently or
within the next 60 days. Mr. Lee owns an additional 34,000 Options not
reflected in the table that will become exercisable and receive the
Option Consideration upon consummation of the Merger. See "SPECIAL
FACTORS -Interests of Certain Persons in the Merger; Certain
Relationships."
(11) Includes 146,695 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Symonds that are exercisable
currently or within the next 60 days. Mr. Symonds owns an additional
34,000 Options not reflected in the table that will become exercisable
and receive the Option Consideration upon consummation of the Merger.
See "SPECIAL FACTORS -Interests of Certain Persons in the Merger;
Certain Relationships."
(12) Includes 6,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Mr. Carr that are exercisable currently
or within the next 60 days. Mr. Carr owns an additional 12,000 Options
not reflected in the table that will become exercisable and receive
the Option Consideration upon consummation of the Merger. See "SPECIAL
FACTORS -Interests of Certain Persons in the Merger; Certain
Relationships."
(13) Includes 18,000 shares of Class A Stock subject to purchase upon
exercise of Options owned by Ms. Coley that are exercisable currently
or within the next 60 days. Ms. Coley owns an additional 12,000
Options not reflected in the table that will become exercisable and
receive the Option Consideration upon consummation of the Merger. See
"SPECIAL FACTORS -Interests of Certain Persons in the Merger; Certain
Relationships."
(14) Excludes Class A Stock issuable upon conversion of Class C Stock.
TCI AND LIBERTY. No director, executive officer or controlling person of
---------------
TCI or Liberty, or any pension, profit-sharing or similar plan of TCI or Liberty
or any associate or majority-owned subsidiary of TCI or Liberty beneficially
owns any Class A Stock of the Company. Dr. John C. Malone, the Chairman of the
Board and Chief Executive Officer of TCI and a director and Chairman of the
Board of Liberty, disclaims beneficial ownership of 1,831,600 shares of Class A
Stock and 1,831,600 shares of Class B Stock owned of record by LMC BET, Inc., a
wholly owned subsidiary of Liberty, and beneficially owned by TCI. Mr. Robert
R. Bennett, an Executive Vice President of TCI and the President and Chief
Executive Officer of Liberty, also disclaims beneficial ownership of the
1,831,600 shares of Class A Stock and 1,831,600 shares of Class B Stock owned of
record by LMC BET, Inc. and beneficially owned by TCI.
BTV ACQUISITION. None of BTV Acquisition, any pension, profit-sharing or
---------------
similar plan of BTV Acquisition or any associate or majority-owned subsidiary of
BTV Acquisition beneficially owns any shares of Class A Stock. No director,
executive officer or controlling person of BTV Acquisition beneficially owns any
shares of Class A Stock other than Mr. Johnson and TCI. The beneficial
ownership information for Mr. Johnson is provided above in
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<PAGE>
this section under the subheading "The Company" and the beneficial ownership
information for TCI is provided above in this section under the subheading
"TCI."
ASSOCIATES OF MR. JOHNSON. FW Strategic Partners, L.P., an investment
-------------------------
partnership in which Mr. Johnson is a limited partner, beneficially owns 842,105
shares of the Company's Class A Stock. No other associate of Mr. Johnson
beneficially owns any of the Company's Class A Stock other than his spouse,
Sheila Crump Johnson. The beneficial ownership information for Sheila Crump
Johnson is provided above in this section under the subheading "The Company."
OWNERSHIP OF BTV ACQUISITION COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY
BTV Acquisition is owned 65% by Mr. Johnson and 35% by Liberty. None of
the officers and directors of the Company (other than Mr. Johnson and, with
respect to the shares owned by Liberty, Messrs. Bennett and Malone) currently
own any shares of common stock of BTV Acquisition; however, the Buying Group has
offered certain executive officers of the Company the opportunity to continue
certain of their Options in the Surviving Corporation following the Merger. The
terms upon which such executive officers would receive an equity interest in the
Surviving Corporation and the form of such equity interest are currently under
discussion.
74
<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
75
<PAGE>
International") since May 1995 and has served as a director
of TCI Pacific Communications, Inc., a subsidiary of TCI
("TCI Pacific"), since July 1996. In addition, Dr. Malone is
President and a director of many of TCI's subsidiaries. Dr.
Malone is a director of The Bank of New York, At Home
Corporation, TCI Satellite Entertainment, Inc. ("TCI
Satellite"), Lenfest Communications, Inc. ("Lenfest") and
Cablevision Systems Corporation ("CSC"). The business
address of Dr. Malone and the address for TCI is 5619 DTC
Parkway, Englewood, CO 80111.
Robert R. Bennett Mr. Bennett has served as a director of the Company since
1997. Since April 1997, Mr. Bennett has served as an
Executive Vice President of TCI and as President and Chief
Executive Officer of Liberty. From June 1995 through March
1997, Mr. Bennett was an Executive Vice President, Chief
Financial Officer, Secretary and Treasurer of Liberty. Mr.
Bennett served as Senior Vice President of Liberty from
September 1991 to June 1995. Mr. Bennett has served as a
director of TCI Music, Inc. since January 1997 and as a
director of Limited Video Satellite Group, Inc. since
February, 1998. The business address of Mr. Bennett and the
address for Liberty is 8101 E. Prentice Avenue, Englewood,
CO 80134.
Herbert P.
Wilkins, Sr. Mr. Wilkins has served as a director of the Company since
1991 and has served as a director of BET since 1983. Since
1990, Mr. Wilkins has been the President of Syncom
Management Company, Inc., formally, W&J Management Company,
Inc., which manages a group of minority oriented venture
capital funds, including Syndicated Communications, Inc.,
Syncom Capital Corporation, Syndicated Communications
Venture Partners II, L.P. and Syndicated Communications
Venture Partners III, L.P. From 1977 to 1989, Mr. Wilkins
served as President of Syndicated Communications, Inc. He
has also been a director of DCI since 1982. Of the funds
managed by Syncom Management Company, Inc., Syndicated
Communications, Inc. is a shareholder of DCI. Mr. Wilkins
has served as a director of Cowles Media Company since 1992.
The business address of Mr. Wilkins and the address for
Syncom Management Company, Inc. is 8401 Colesville Road,
Suite 300, Silver Spring, MD 20910.
Delano E. Lewis Mr. Lewis has served as a director of the Company since
1994. He has been President and Chief Executive Officer of
National Public Radio since January 1994. From January 1990
to January 1994, Mr. Lewis served as Chief Executive Officer
of C&P Telephone Company, a subsidiary of Bell Atlantic.
From July 1988 to
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January 1990, Mr. Lewis was President of C&P Telephone
Company. Mr. Lewis also serves as a director of Colgate
Palmolive, Guest Services and Halliburton Company. The
business address of Mr. Lewis and the address for
National Public Radio is 635 Massachusetts Avenue, N.W.,
Washington, D.C. 20001-3753.
Denzel Washington Mr. Washington has served as a director of the Company
since 1996. He is an Academy Award winning and critically
acclaimed feature film actor. Mr. Washington also serves
as director of the Sundance Institute. Mr. Washington's
business address is c/o Brian Murphy, Murphy & Kress,
2401 Main Street, Santa Monica, California 90405.
Sheila Crump Johnson Mrs. Johnson has served as a director of the Company
since 1991 and a director of BET since 1979. Mrs. Johnson
has also served as Executive Vice President, Corporate
Affairs of the Company since September 1992 and as Vice
President, Corporate Affairs of BET since 1990. From
September 1991 to September 1992, she served as Vice
President, Corporate Affairs of the Company. Prior to
1990, Mrs. Johnson was a lecturer and author in the area
of early childhood music education.
Debra L. Lee Ms. Lee has served as President and Chief Operating
Officer since March 1996. Prior to that time Ms. Lee
served as an Executive Vice President of the Company
since September 1992. From September 1991 until May 1997,
she served as the General Counsel and Secretary of the
Company. From September 1991 to September 1992, she
served as a Vice President of the Company. Ms. Lee has
also served as Vice President and General Counsel of BET
since April 1986. In July 1991, she became the Secretary
of BET.
William T. Gordon, III Mr. Gordon has served as Executive Vice President, Chief
Financial Officer and Treasurer since August 1993. From
1987 to 1993, Mr. Gordon was a partner with the
accounting firm of Price Waterhouse LLP. Mr. Gordon was
BET's audit partner on behalf of Price Waterhouse LLP
between 1989 and early 1992. Mr. Gordon joined Price
Waterhouse LLP in 1975.
James A. Ebron Mr. Ebron has served as Executive Vice President,
Corporate Media Sales since September 1995. He previously
served as Executive Vice President, Media Sales since
1992. Prior to that time, Mr. Ebron served as Vice
President, Network Sales of the
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Company from September 1991 to September 1992 and as Vice
President, Network Sales of BET from August 1983 until
September 1991.
Jefferi K. Lee Mr. Lee has served as Executive Vice President, Network
Operations and Programming since September 1992. Mr. Lee
served as Vice President, Network Operations of the
Company from September 1991 to September 1992 and of BET
since September 1982.
Curtis N. Symonds Mr. Symonds has served as Executive Vice President,
Affiliate Sales and Marketing since September 1992. Mr.
Symonds served as Vice President, Affiliate Marketing of
the Company from September 1991 to September 1992 and of
BET since July 1988.
Janis P. Thomas Ms. Thomas has served as Executive Vice President, Brand
Marketing and Licensing since August 1997. She previously
served as Executive Vice President, Marketing and
Merchandising from May 1996 to August 1997. Ms. Thomas
served as Executive Vice President, Direct Marketing and
Advertising Services from September 1992 to April 1996.
Ms. Thomas served as Vice President, Advertising Services
of the Company from September 1991 to September 1992 and
of BET since September 1982.
Louis Carr Mr. Carr has served as Senior Vice President, National
Media Sales since January 1995. Prior to that time, Mr.
Carr served as Vice President, Midwest Advertising from
August 1992 to January 1995. From August 1989 to August
1992, he served as Director, Midwest Advertising. He
joined the Company as an account executive in August
1986.
Maurita Coley Ms. Coley has served as Senior Vice President, Network
Operations and Programming, since August 1995. Prior to
that time, Ms. Coley served as Senior Vice President,
Legal Affairs of the Company from February 1993 through
August 1995. Prior to February 1993, Ms. Coley was a
partner with the Washington, D.C. law firm of Cole,
Raywid and Braverman. Ms. Coley joined Cole, Raywid &
Braverman in November 1983.
Byron F. Marchant Mr. Marchant has served as Senior Vice President and
General Counsel since May 1997. Mr. Marchant was a
partner at Patton Boggs, L.L.P. from 1996 to 1997. Prior
to 1996, Mr. Marchant was Senior Vice President and
General Counsel for
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TeleCommunications Systems, Inc. Mr. Marchant has also
held previous positions as senior legal advisor to
Commissioner Andrew Barrett of the Federal Communications
Commission and as an attorney with the law firm of Sidley
& Austin.
Scott Mills Mr. Mills has served as Senior Vice President, Business
Development since September 1997. Prior to that time, Mr.
Mills was a Vice President with the investment banking
firm of Lehman Brothers since 1993.
Robert L. Johnson and Sheila Crump Johnson are married to one another. No
other family relationships exist among any executive officers or directors of
the Company.
DIRECTORS AND EXECUTIVE OFFICERS OF BTV ACQUISITION
Mr. Johnson and Mr. Bennett are the initial directors and executive
officers of BTV Acquisition. Information regarding Mr. Johnson and Mr. Bennett
is set forth above in this section under the subheading "Directors and Executive
Officers of the Company." The Buying Group is presently considering inviting
Messrs. Lewis, Malone, Washington and Wilkins and Mrs. Johnson to join the Board
of Directors of the Surviving Corporation following the Merger; however, no
determination has been made in such regard.
DIRECTORS AND EXECUTIVE OFFICERS OF TCI
Set forth below are the name and business address of each director,
executive officer and controlling person of TCI (other than Dr. John C. Malone
and Mr. Robert R. Bennett), the present principal occupation or employment of
each such person and the name, principal business and address of the corporation
or other organization in which such occupation or employment of each such person
is conducted, and the material occupations, positions, offices and employment
and the name, principal business and address of any corporation or other
organization in which any material occupation, position, office or employment of
each such person was held during the last five years. Information regarding Dr.
Malone, the Chairman of the Board and Chief Executive Officer of TCI, and Mr.
Bennett, an Executive Vice President of TCI and the President and Chief
Executive Officer of Liberty, is set forth above in this section under the
subheading "Directors and Executive Officers of the Company." Each person
listed below is a citizen of the United States. Unless otherwise indicated
below, the business address of each director and executive officer is 5619 DTC
Parkway, Englewood, CO 80111.
Name Business Address and Principal Occupations
- ---- ------------------------------------------
John W. Gallivan Mr. Gallivan has served as a director of TCI since June
1994. Mr. Gallivan served as the Chairman of the Board
and a director of Kearns-Tribune Corporation ("Kearns")
from 1953 until the acquisition of Kearns by TCI in July
1997. In August 1997, Mr.
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Gallivan was appointed as a director of Kearns following
Kearns becoming a subsidiary of TCI. Mr. Gallivan served
as a director of TCIC from 1980 to August 1994, and has
served as a director of TCIC since January 1996. Mr.
Gallivan is a director of the Silver King Mining Company.
Mr. Gallivan's business address and the address for
Kearns is 400 Tribune Building, Salt Lake City, UT 84111.
Paul A. Gould Mr. Gould has served as a director of TCI since December
1996. Mr. Gould has been a Managing Director and an
Executive Vice President of Allen & Company Incorporated,
an investment banking services company, for more than the
last five years. Mr. Gould has served as a director of
TCI International since July 1995. Mr. Gould is a
director of Ascent Entertainment Group, Inc. and Sunburst
Hospitality Corporation. Mr. Gould's business address and
the address for Allen & Company is 711 5th Avenue, New
York, NY 10022
Jerome H. Kern Mr. Kern has served as a director of TCI since June 1994.
Mr. Kern is a consultant and has been Special Counsel
with the law firm of Baker & Botts, L.L.P. since July
1996 and was a senior partner with Baker & Botts, L.L.P.
from September 1992 to July 1996. Mr. Kern served as a
director of TCIC from December 1993 to August 1994, has
served as a director of TCI International since May 1995,
and has served as a director of TCI Pacific, since
February 1998. Mr. Kern's business address and the
address for Baker & Botts, L.L.P. is 599 Lexington
Avenue, New York, NY, 10022.
Leo J. Hindery, Jr. Mr. Hindery has served as a director of TCI since May
1997. Mr. Hindery has served as the President and Chief
Operating Officer of TCI since March 1997. Mr. Hindery
has served as President and Chief Executive Officer of
TCIC since March 1997 and has served as President and
Chief Executive Officer of TCI Pacific since September
1997. Mr. Hindery has served as a director of TCIC since
March 1997, has served as a director of TCI Pacific since
September 1997, and has served as Chairman of the Board
and a director of TCI Music, Inc., a subsidiary of TCI
("TCI Music"), since January 1997. Mr. Hindery was
appointed a director of TCI International in April. In
addition, Mr. Hindery is President, Chief Executive
Officer and/or a director of many of TCI's subsidiaries.
Mr. Hindery was previously founder, Managing General
Partner and Chief Executive Officer of InterMedia
Partners, a cable TV operator, and its affiliated
entities from 1988 to march 1997. Mr.
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Hindery is a director of United Video Satellite Group,
Inc. ("UVSG") and At Home Corporation, both of which are
consolidated subsidiaries of TCI. Mr. Hindery is also a
director of TCI Satellite, Lenfest and CSC.
Robert A. Naify Mr. Naify has served as a director of TCI since June
1994. Mr. Naify is Co-Chairman and a director of The
Todd-AO Corporation. Mr. Naify served as a TCIC director
from June 1987 to August 1994. Mr. Naify's business
address is and the address of The Todd-AO Corporation is
172 Goldengate Avenue, San Fransisco, CA 94102.
Donne F. Fisher Mr. Fisher has served as a director of TCI since June
1994. Mr. Fisher was an Executive Vice President of TCI
from January 1994 through January 1, 1996. On January 1,
1996, Mr. Fisher resigned his position as Executive Vice
President of TCI and has been providing consulting
services to TCI since January 1996. Mr. Fisher served as
an Executive Vice President of TCIC from December 1991 to
October 1994. Mr. Fisher has served as a TCIC director
since 1980, has served as a director of TCI Pacific since
July 1996, and has served as a director of TCI Music
since January 1997. Mr. Fisher is a director of General
Communications, Inc.
Kim Magness Mr. Magness has served as a director of TCI since June
1994. Mr. Magness manages numerous personal and business
investments, and is Chairman and President of a company
developing liners for irrigation canals. Mr. Magness
served as a director of TCIC from 1985 to August 1994 and
from January 1996 to October 1997. Mr. Magness' business
address is 4000 E. Belleview Avenue, Greenwood Village,
CO 81121.
J. C. Sparkman Mr. Sparkman has served as a director of TCI since
December 1996. Mr. Sparkman served as an Executive Vice
President of TCI from January 1994 to March 1995. Mr.
Sparkman retired in March 1995 and has provided
consulting services to TCI since March 1995. Mr. Sparkman
served as an Executive Vice President of TCIC from 1987
to October 1994. Mr. Sparkman is a director of Shaw
Communications, Inc. and TCI Music.
Stephen M. Brett Mr. Brett has served as an Executive Vice President, the
General Counsel, and the Secretary of TCI since January
1994. Mr. Brett has served as an Executive Vice President
of TCIC since October 1997, served as a Senior Vice
President of TCIC from 1991 to October 1997, and has
served as General Counsel of TCIC since
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1991. Mr. Brett is a Vice President and Secretary of
most of TCI's subsidiaries.
Gary K. Bracken Mr. Bracken has served as the Controller of TCIC since
1969. Mr. Bracken has served as an Executive Vice
President of TCIC since December 1997 and has served as
Senior Vice President of TCIC from December 1991 to
December 1997. Mr. Bracken has been a Senior Vice
President of TCI Pacific since July 1996.
Gary S. Howard Mr. Howard has served as an Executive Vice President of
TCI since December 1997. Mr. Howard has served as
President and Chief Executive Officer of TCI Ventures
Group, LLC, a subsidiary of TCI ("Ventures LLC"), since
December 1997. Mr. Howard has served as Chief Executive
Officer of TCI Satellite, a distributor of satellite-
based television services, since December 1996 and also
served as President of TCI Satellite from February 1995
to August 1997. Since June 1997, Mr. Howard also has
served as Chief Executive Officer of UVSG. Mr. Howard
served as President of UVSG from June 1997 to September
1997, a Senior Vice President of TCIC from October 1994
to December 1996 and as a Vice President of TCIC from
December 1991 to October 1994.
Marvin L. Jones Mr. Jones has served as an Executive Vice President of
TCI since April 1998. Mr. Jones has served as an
Executive Vice President and the Chief Operating
Officer of TCIC since March 1997. Mr. Jones was
appointed a director of TCIC in October 1997. From
November 1996 to March 1997, Mr. Jones served as the
President of one of TCIC's three cable units.
Previously, Mr. Jones was a consultant in the cable
television industry from 1991 to November 1996. Mr.
Jones is a Vice President of various TCI subsidiaries.
Larry E. Romrell Mr. Romrell has served as an Executive Vice President
of TCI since January 1994. Mr. Romrell has served as
the Executive Vice President and Chief Executive
Officer of TCI Business Alliance and Technology Co.,
Inc., a subsidiary of TCI, a Senior Vice President of
Ventures LLC since December 1997, and President of TCI
Technology Ventures, Inc., a subsidiary of TCI, from
September 1994 to October 1997. Mr. Romrell served as
Senior Vice President of TCIC from 1991 to October
1994.
Bernard W. Schotters, II Mr. Schotters has served as Senior Vice President and
Treasurer of TCI since October 1997. Mr. Schotters has
served as an Executive Vice President of TCIC since
December 1997 and served as Senior Vice President-
Finance of TCIC from December 1991 to
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December 1997. Mr. Schotters has served as Treasurer of TCIC
since December 1991. Mr. Schotters is a Vice President and
Treasurer of most of TCI's subsidiaries.
DIRECTORS AND EXECUTIVE OFFICERS OF LIBERTY
Set forth below are the name and business address of each director,
executive officer and controlling person of Liberty (other than Dr. John C.
Malone and Mr. Robert R. Bennett), the present principal occupation or
employment of each such person and the name, principal business and address of
the corporation or other organization in which such occupation or employment of
each such person is conducted, and the material occupations, positions, offices
and employment and the name, principal business and address of any corporation
or other organization in which any material occupation, position, office or
employment of each such person was held during the last five years. Information
regarding Dr. Malone, a director of Liberty, and Mr. Bennett, a director and
executive officer of Liberty, is set forth above in this section under the
subheading "Directors and Executive Officers of the Company." Unless otherwise
indicated below, each person listed below is a citizen of the United States and
the business address of each director and executive officer is 8101 East
Prentice Avenue, Englewood, CO 80111.
Name Business Address and Principal Occupations
- ---- ------------------------------------------
Vivian J. Carr Ms. Carr has served as Vice President-Investor Relations for
Liberty since June 1993. Prior to such date, Ms. Carr served
as Director of Investor Relations for Liberty.
David Flowers Mr. Flowers has served as a Vice President-Treasurer of
Liberty since April 1997. From June 1995 to April 1997, Mr.
Flowers served as Vice President-Portfolio Manager of
Liberty. From January 1993 to June 1995, Mr. Flowers was
Managing Director-Communications Finance for Toronto
Dominion Bank. Mr. Flowers is a Canadian citizen.
David A. Jensen Mr. Jensen has served as Vice President of Liberty since May
1997. From November 1993 to May 1997, Mr. Jensen served as
Director and Vice President of Programming for TCI. From
February 1993 to November 1993, Mr. Jensen was a tele-
communications consultant and provided services to TCI. Mr.
Jensen served as Deputy Assistant Secretary for
International Economic Policy (Africa, the Near East and
South Asia) with the United States Department of Commerce
from January 1991 to January 1993.
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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.
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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
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Company's Annual Report on Form 10-K/A for such fiscal year, and by
Amendment No. 2, filed on January 14, 1998, to the Company's Annual
Report on Form 10-K/A for such fiscal year;
(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended January 31, 1998;
(3) The Company's Current Report on Form 8-K filed on March 20, 1998; and
(4) All documents filed by the Company pursuant to Section 13(a) and 15(d)
of the Exchange Act since July 31, 1997.
Any statement contained in a document incorporated by reference shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this Proxy Statement modifies or replaces such statement.
The Company also incorporates by reference the information contained in all
other documents the Company files with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy Statement
and before the Special Meeting. The information contained in any such document
will be considered part of this Proxy Statement from the date the document is
filed and will supplement or amend the information contained in this Proxy
Statement.
The Company undertakes to provide by first class mail, without charge and
within one business day of receipt of any request, to any person to whom a copy
of this Proxy Statement has been delivered, a copy of any or all of the
documents referred to above which have been incorporated by reference in this
Proxy Statement, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference therein). The Company's Annual Report on
Form 10-K for the fiscal year ended July 31, 1997, as amended, is accompanied by
a list briefly describing all the exhibits not contained therein. The Company
will furnish any exhibit upon the payment of a specified reasonable fee, which
fee will be limited to the Company's reasonable expenses in furnishing such
exhibit. Requests for such copies should be directed to Secretary, BET Holding,
Inc., One BET Plaza, 1900 W Place, N.E., Washington, D.C. 20018-1211;
telephone number (202) 608-2000.
OTHER BUSINESS
The Board of Directors does not know of any other matters to be presented
for action at the Special Meeting other than as set forth in this Proxy
Statement. If any other business should properly come before the meeting, the
persons named in the accompanying form of proxy intend to vote thereon in
accordance with their best judgment unless they are directed by a proxy to do
otherwise.
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AVAILABLE INFORMATION
Because the merger is a "going private" transaction, BTV Acquisition, Mr.
Johnson, TCI, and the Company have filed a Rule 13e-3 Transaction Statement on
Schedule 13E-3 under the Exchange Act with respect to the Merger. The Schedule
13E-3 and the reports, proxy statements and other information contain additional
information about the Company. A copy of the written report presented by
Goldman Sachs to the Special Independent Committee, including Goldman Sachs'
opinion as to the fairness of the consideration to be received in the Merger,
was filed as an exhibit to such Schedule 13E-3. Copies of the Schedule 13E-3
are available for inspection and copying at the principal executive offices of
the Company during regular business hours by any interested stockholder of the
Company, or a representative who has been so designated in writing, and may be
inspected and copied, or obtained by mail by written request directed to
Secretary, BET Holdings, Inc., One BET Plaza, 1900 W Place, N.E., Washington,
D.C. 20018-1211; telephone number (202) 608-2000.
The Company is currently subject to the informational requirements of the
Exchange Act and in accordance therewith files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial and other matters. Copies of such reports, proxy statements and other
information, as well as the Schedule 13E-3, may be copied (at prescribed rates)
at the public reference facilities maintained by the SEC at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the following
Regional Offices of the SEC: 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New York 10048.
For further information concerning the SEC's public reference rooms, you may
call the SEC at 1-800-SEC-0330. Some of this information may also be accessed
on the World Wide Web through the SEC's Internet address at
"http://www.sec.gov." The Company's Class A Stock is listed on the NYSE, and
materials may also be inspected at its offices, 20 Broad Street, New York, New
York 10005.
By Order of the Board of Directors
Byron F. Marchant
Secretary
Washington, D.C.
[ , 1998]
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AMONG
ROBERT L. JOHNSON,
LIBERTY MEDIA CORPORATION,
BTV ACQUISITION CORPORATION
AND
BET HOLDINGS, INC.
A-1
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
SECTION 1.01. The Merger..................................................
SECTION 1.02. Effective Time..............................................
SECTION 1.03. Closing.....................................................
SECTION 1.04. Effects of the Merger.......................................
SECTION 1.05. Certificate of Incorporation................................
SECTION 1.06. Bylaws......................................................
SECTION 1.07. Directors and Officers......................................
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities....................................
SECTION 2.02. Exchange of Certificates and Cash...........................
SECTION 2.03. Stock Transfer Books........................................
SECTION 2.04. Stock Options; Payment Rights...............................
SECTION 2.05. Dissenting Shares...........................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualifications; Subsidiaries...............
SECTION 3.02. Certificate of Incorporation and Bylaws.....................
SECTION 3.03. Capitalization..............................................
SECTION 3.04. Authority Relative to This Agreement........................
SECTION 3.05. No Conflict; Required Filings and Consents..................
SECTION 3.06. Compliance; Permits.........................................
SECTION 3.07. SEC Filings; Financial Statements...........................
SECTION 3.08. Absence of Certain Changes and Events.......................
SECTION 3.09. Employee Benefit Plans......................................
SECTION 3.10. Taxes.......................................................
SECTION 3.11. Absence of Litigation.......................................
SECTION 3.12. Franchises, Intellectual Property, Etc......................
SECTION 3.13. FCC and Copyright Matters...................................
SECTION 3.14. Opinion of Financial Advisor................................
SECTION 3.15. Board Approval..............................................
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SECTION 3.16. Brokers.....................................................
SECTION 3.17. No Actual Knowledge.........................................
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF JOHNSON, LIBERTY AND BUYER
SECTION 4.01. Authority Relative to This Agreement........................
SECTION 4.02. No Conflict; Required Filings and Consents..................
SECTION 4.03. Organization and Qualification..............................
SECTION 4.04. Certificate of Incorporation and Bylaws.....................
SECTION 4.05. Authority Relative to This Agreement........................
SECTION 4.06. No Conflict; Required Filings and Consents..................
SECTION 4.07. Organization and Qualification..............................
SECTION 4.08. Certificate of Incorporation and Bylaws.....................
SECTION 4.09. Authority Relative to This Agreement........................
SECTION 4.10. No Conflict; Required Filings and Consents..................
SECTION 4.11. Brokers.....................................................
SECTION 4.12. Financing...................................................
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger.......
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.01. Access to Information; Confidentiality......................
SECTION 6.02. Proxy Statement; Schedule 13E-3.............................
SECTION 6.03. Action by Stockholders......................................
SECTION 6.04. No Solicitation.............................................
SECTION 6.05. Directors' and Officers' Indemnification....................
SECTION 6.06. Notification of Certain Matters.............................
SECTION 6.07. Further Action; Best Efforts................................
SECTION 6.08. Public Announcements........................................
SECTION 6.09. Conveyance Taxes............................................
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party to Effect the
Merger......................................................
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SECTION 7.02. Additional Conditions to Obligations of Buyer...............
SECTION 7.03. Additional Conditions to Obligations of the Company.........
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.................................................
SECTION 8.02. Effect of Termination.......................................
SECTION 8.03. Amendment...................................................
SECTION 8.04. Waiver......................................................
SECTION 8.05. Fees, Expenses and Other Payments...........................
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and Agreements.
SECTION 9.02. Notices.....................................................
SECTION 9.03. Certain Definitions.........................................
SECTION 9.04. Headings....................................................
SECTION 9.05. Severability................................................
SECTION 9.06. Entire Agreement............................................
SECTION 9.07. Assignment..................................................
SECTION 9.08. Parties in Interest.........................................
SECTION 9.09. Governing Law...............................................
SECTION 9.11. Enforcement of this Agreement...............................
SECTION 9.12. Counterparts................................................
EXHIBIT A Certificate of Incorporation of BTV Acquisition Corporation
EXHIBIT B Bylaws of BTV Acquisition Corporation
</TABLE>
A-4
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INDEX OF DEFINED TERMS
Defined Term Page
Agreement
Alternative Transaction
Benefit Plans
Buyer
Buyer Material Adverse Effect
Buyer Representatives
Certificates
Class A Stock
Class B Stock
Class C Stock
Closing
Closing Date
Code
Common Stock
Communications Act
Company
Company Charter
Company Disclosure Schedule
Company Material Adverse Effect
Company Option Plan
Company Permits
Company SEC Reports
Company Stockholder Approval
Company Stockholders' Meeting
Company Subsidiary
Confidentiality Agreement
Copyright Act
DGCL
Dissenting Shares
Effective Time
ERISA
ESPP
Exchange Act
Exchange Agent
Exchange Agent Agreement
Exchange Fund
Expenses
Fair Market Value
FCC
Financing
A-5
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Governmental Entity
HSR Act
Indemnified Parties
IRS
Johnson
Liberty
Liberty Group
Liberty Material Adverse Effect
Merger
Merger Consideration
Options
Preferred Stock
Premium Amount
Proxy Statement
Rights
Schedule 13E-3
Section 203
Securities Act
Special Committee
Surviving Certificate
Surviving Corporation
taxes
TCI
Transmittal Documents
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<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
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<PAGE>
in Article VII, at the offices of the Company, unless another date, time or
place is ag reed to in writing by the parties hereto (such date, the "Closing
-------
Date").
- ----
SECTION 1.04. Effects of the Merger. From and after the Effective Time,
---------------------
the Merger shall have the effects set forth in the DGCL (including, without
limitation, Sections 259, 260 and 261 thereof). Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of the Company and Buyer
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and Buyer shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.05. Certificate of Incorporation. The certificate of
----------------------------
incorporation of the Company shall be amended in the Merger to read in its
entirety as set forth in Exhibit A hereto, and as so amended shall be the
certificate of incorporation of the Surviving Corporation (the "Surviving
---------
Certificate") until thereafter amended in accordance with the DGCL.
- -----------
SECTION 1.06. Bylaws. The bylaws of the Company shall be amended in the
------
Merger to read in its entirety as set forth in Exhibit B hereto, and as so
amended shall be the bylaws of the Surviving Corporation until thereafter
amended in accordance with the Surviving Certificate and the DGCL.
SECTION 1.07. Directors and Officers. From and after the Effective Time,
----------------------
(a) until their respective successors are duly elected or appointed and
qualified in accordance with applicable law, the directors of Buyer at the
Effective Time shall be the directors of the Surviving Corporation and (b) the
officers of the Company at the Effective Time shall be the officers of the
Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time, by virtue
------------------------
of the Merger and without any action on the part of Buyer, the Company or the
holders of any of the following securities:
(a) Each share of the Class A Common Stock, par value $.02 per share (the
"Class A Stock") issued and outstanding immediately prior to the Effective Time
- --------------
(other than any shares of Class A Stock to be canceled pursuant to Section
2.01(b) and any Dissenting Shares (as defined below)) shall be converted into
the right to receive $63.00 in cash, without interest (the "Merger
------
Consideration"). At the Effective Time, each share of Class A Stock shall no
- -------------
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each certificate previously evidencing any such share (other
than shares to be canceled pursuant to Section 2.01(b) and any Dissenting
Shares) shall thereafter represent only the right to receive, upon the surrender
of such certificate in accordance with the provisions of Section 2.02, an amount
in cash per share equal to the Merger Consideration. The holders of such
certificates previously evidencing such
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shares of Class A Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of Class A Stock
except as otherwise provided herein or by law.
(b) Each share of capital stock of the Company (i) held in the treasury of
the Company or by any wholly owned subsidiary of the Company or (ii) owned by
Buyer, Johnson, Liberty or any of their respective subsidiaries (including any
shares of Class A Stock, Class B Common Stock, par value $.02 per share (the
"Class B Stock"), or Class C Common Stock, par value $.02 per share (the "Class
- -------------- -----
C Stock"), owned by any such persons) shall automatically be canceled, retired
- -------
and cease to exist without any conversion thereof and no payment shall be made
with respect thereto.
(c) Each share of common stock of Buyer outstanding immediately prior to
the Effective Time shall be converted into and become one share of common stock
of the Surviving Corporation and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
SECTION 2.02. Exchange of Certificates and Cash. (a) Exchange Agent.
--------------------------------- --------------
On or before the Closing Date, Buyer shall enter into an agreement (the
"Exchange Agent Agreement") with a bank or trust company selected by Buyer and
- -------------------------
reasonably acceptable to the Company (the "Exchange Agent"), authorizing such
--------------
Exchange Agent to act as Exchange Agent in connection with the Merger. Prior to
the Effective Time, Buyer shall deposit or shall cause to be deposited with or
for the account of the Exchange Agent, for the benefit of the holders of shares
of Class A Stock (other than Dissenting Shares and shares to be canceled
pursuant to Section 2.01(b)), an amount in cash equal to the Merger
Consideration payable pursuant to Section 2.01(a) (such cash funds are hereafter
referred to as the "Exchange Fund").
-------------
(b) Exchange Procedures. As soon as reasonably practicable after the
-------------------
Effective Time, Buyer will instruct the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time evidenced outstanding shares of Class A Stock (other than Dissenting Shares
and shares to be canceled pursuant to Section 2.01(b)) (the "Certificates"), (i)
------------
a form letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Buyer may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed by
Buyer, together with a letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such instructions
(collectively, the "Transmittal Documents"), the holder of such Certificate
---------------------
shall be entitled to receive in exchange therefor the Merger Consideration for
each share of Class A Stock formerly represented by such Certificate, without
any interest thereon, less any required withholding of taxes, and the
Certificate so surrendered shall thereupon be canceled. In the event of a
transfer of ownership of shares of Class A Stock which is not registered in the
transfer records of the Company, the Merger Consideration may be issued and paid
in accordance with this Article II to the transferee of such shares if the
Certificate evidencing such shares of Class A Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer, evidence that any applicable stock transfer taxes have been paid and
the related Transmittal Documents. The Merger
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<PAGE>
Consideration will be delivered by the Exchange Agent as promptly as practicable
following surrender of a Certificate and the related Transmittal Documents. Cash
payments may be made by check unless otherwise required by a depositary
institution in connection with the book-entry delivery of securities. No
interest will be payable on such Merger Consideration regardless of any delay in
making payments. Until surrendered in accordance with this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to evidence
only the right to receive, upon such surrender, the Merger Consideration for
each share of Class A Stock formerly represented by such Certificate. The
Exchange Fund shall not be used for any purpose other than as set forth in this
Article II. Any interest, dividends or other income earned on the investment of
cash held in the Exchange Fund shall be for the account of the Surviving
Corporation.
(c) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
(including the proceeds of any investments thereof) which remains undistributed
to the holders of Class A Stock for six months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand. Any holders of Class A
Stock who have not theretofore complied with this Article II shall thereafter
look only to the Surviving Corporation for payment of the Merger Consideration.
(d) No Liability. None of Buyer, Johnson, Liberty, the Surviving
------------
Corporation or the Company shall be liable to any holder of shares of Class A
Stock for any cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If Certificates are not surrendered
prior to the date that is two years after the Effective Time, unclaimed funds
payable with respect to such Certificates shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(e) Withholding Rights. Buyer and the Exchange Agent shall be entitled to
------------------
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Class A Stock such amounts as Buyer or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the United States Internal Revenue Code of 1986, as amended
(the "Code"), or any provision of state, local or foreign tax law. To the
----
extent that amounts are so withheld by Buyer or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Class A Stock in respect of which such
deduction and withholding was made by Buyer or the Exchange Agent.
(f) Lost, Stolen or Destroyed Certificates. In the event any Certificates
--------------------------------------
evidencing shares of Class A Stock shall have been lost, stolen or destroyed,
the holder of such lost, stolen or destroyed Certificate(s) shall execute an
affidavit of that fact upon request. The holder of any such lost, stolen or
destroyed Certificate(s) shall also deliver a reasonable indemnity against any
claim that may be made against Buyer or the Exchange Agent with respect to the
Certificate(s) alleged to have been lost, stolen or destroyed. The affidavit
and any indemnity which may be required hereunder shall be delivered to the
Exchange Agent, who shall be responsible for making payment for such lost,
stolen or destroyed Certificates(s) pursuant to the terms hereof.
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<PAGE>
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
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<PAGE>
appraisal. Such stockholders shall be entitled to receive payment of the
appraised value of such Dissenting Shares in accordance with the provisions of
the DGCL. If, after the Effective Time, any such stockholder fails to perfect,
withdraws or loses its right to appraisal, such shares of Class A Stock shall be
treated as if they had been converted as of the Effective Time into a right to
receive the Merger Consideration, without interest thereon, upon surrender of
the Certificate or Certificates that formerly evidenced such shares of Class A
Stock in the manner set forth in Section 2.02.
(b) The Company shall give Buyer prompt notice of any demands for
appraisal received by it, withdrawals of such demands, and any other instruments
served pursuant to the DGCL and received by the Company and relating thereto.
Buyer shall direct all negotiations and proceedings with respect to demands for
appraisal under the DGCL. The Company shall not, except with the prior written
consent of Buyer, make any payment with respect to any demands for appraisal, or
offer to settle, or settle, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer, Johnson and Liberty,
subject to Section 3.17, that:
SECTION 3.01. Organization and Qualifications; Subsidiaries. The Company
---------------------------------------------
and each subsidiary of the Company (a "Company Subsidiary") is a corporation,
------------------
partnership or other legal entity duly incorporated or organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite power and authority and all
necessary governmental approvals, to own, lease and operate its properties and
to carry on its business as it is now being conducted. The Company and each
Company Subsidiary is duly qualified or licensed and in good standing to do
business in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
material adverse effect on the business, results of operations or financial
condition of the Company and the Company Subsidiaries, taken as a whole (a
"Company Material Adverse Effect").
- --------------------------------
SECTION 3.02. Certificate of Incorporation and Bylaws. The Company has
---------------------------------------
heretofore furnished or made available to Buyer a complete and correct copy of
the certificate of incorporation and the bylaws or equivalent organizational
documents, each as amended to the date hereof, of the Company and each Company
Subsidiary. Such certificates of incorporation, bylaws and equivalent
organizational documents are in full force and effect. Neither the Company nor
any Company Subsidiary is in violation of any provision of its certificate of
incorporation, bylaws or equivalent organizational documents.
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SECTION 3.03. Capitalization. The authorized capital stock of the Company
--------------
consists of 50,000,000 shares of Class A Stock, 15,000,000 shares of Class B
Stock, 15,000,000 shares of Class C Stock, and 15,000,000 shares of preferred
stock, par value of $.01 per share ("Preferred Stock"). As of February 28,
---------------
1998, (a) 10,066,720 shares of Class A Stock, 1,831,600 shares of Class B Stock
and 4,820,000 shares of Class C Stock were outstanding, all of which were
validly issued, fully paid and nonassessable; (b) no shares of Preferred Stock
were issued and outstanding and no action had been taken by the Board of
Directors of the Company with respect to the designation of the rights and
preferences of any series of Preferred Stock; (c) 2,781,595 shares of Class A
Stock were reserved for issuance upon the exercise of outstanding stock options
(the "Options") granted pursuant to the Company's 1991 Executive Stock Option
-------
Plan, as amended and restated as of August 1, 1994 and further amended as of
December 1, 1995 (the "Company Option Plan"); (d) 2,839,600 shares of Class A
-------------------
Stock, 1,518,300 shares of Class B Stock, no shares of Class C Stock and no
shares of Preferred Stock were held in the treasury of the Company; (e) no
Company Subsidiary owns any shares of the Company's capital stock; (f) there are
no securities of any Company Subsidiary outstanding which are convertible into
or exercisable or exchangeable for capital stock of the Company; (g) 6,651,600
shares of Class A Stock were reserved for future issuance upon conversion of
shares of Class B Stock and Class C Stock; and (h) 144,485 shares of Class A
Stock have been reserved for issuance under the Company's 1997 Employee Stock
Purchase Plan (the "ESPP"). Except as set forth above, no shares of capital
----
stock or other voting securities of the Company have been issued, are reserved
for issuance or are outstanding. Except as set forth in this Section 3.03 or in
Section 3.03 of the Company's Disclosure Schedule dated as of the date hereof
and attached hereto and incorporated hereby by reference (the "Company
-------
Disclosure Schedule"), there are no options, stock appreciation rights, warrants
- -------------------
or other rights, agreements, arrangements, understandings or commitments of any
character (collectively, "Rights") relating to the issued or unissued capital
------
stock of the Company or any Company Subsidiary, or obligating the Company or any
Company Subsidiary to issue, grant or sell any shares of capital stock or other
equity interests in (or securities which are convertible into or exercisable or
exchangeable for any such shares or equity interests in) the Company or any
Company Subsidiary. Since February 28, 1998, the Company has not issued any
shares of its capital stock or Rights in respect thereof, other than the
issuance of shares of Class A Stock upon the exercise of the Options referred to
above or in satisfaction of the Company's obligations under the ESPP. All
shares of Class A Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
Except as set forth in Section 3.03 of Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of Class A Stock or any
capital stock of any Company Subsidiary, or make any material investment (in the
form of a loan, capital contribution or otherwise) in, any Company Subsidiary or
any other person. No stock appreciation rights have been issued or granted
under the Company Option Plan. Each outstanding share of capital stock of each
Company Subsidiary has been duly authorized and validly issued, and is fully
paid and nonassessable and is owned by the Company or another Company
Subsidiary, free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on the Company's or
such other Company Subsidiary's voting rights, charges and other encumbrances of
any nature whatsoever.
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<PAGE>
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
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contemplated hereby by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each a
Governmental Entity"), except (i) for (A) any applicable requirements of the
- --------------------
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (B) the pre-
------------
merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder (the "HSR
---
Act"), (C) the filing and recordation of appropriate merger and similar
- ---
documents as required by the DGCL, and (D) filings under the rules and
regulations of the New York Stock Exchange, Inc. and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, (x) would not prevent or delay consummation of the
Merger in any material respect or otherwise prevent the Company from performing
its obligations under this Agreement in any material respect, and (y) would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(c) The representation in this Section 3.05 is being made, with respect to
any consents, approvals, authorizations or permits of, or filings or
notifications to, the Federal Communications Commission (the "FCC"), based upon
---
the assumption that Johnson will, at the Effective Time, own in excess of 50% of
the outstanding capital stock of the Buyer.
SECTION 3.06. Compliance; Permits. (a) Except as set forth in Section
-------------------
3.06 of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary is in conflict with, or in default or violation of (with or without
notice, lapse of time or both) (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any Company Subsidiary or by which any of
their respective properties or assets are bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary or any
of their respective properties or assets is bound or affected, except for any
such conflicts, defaults or violations that would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(b) The Company and the Company Subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities which are
material to operation of the business of the Company and the Company
Subsidiaries taken as a whole (collectively, the "Company Permits"). The
---------------
Company and the Company Subsidiaries are in compliance, and will be in
compliance on the Closing Date, with the terms of the Company Permits, except
where the failure to so comply would not, individually or in the aggregate, have
a Company Material Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a) The Company has
---------------------------------
filed all forms, reports and documents required to be filed by it with the SEC
since July 31, 1995, and has heretofore made available to Buyer, in the form
filed with the SEC (excluding any exhibits thereto), (i) its Annual Reports on
Form 10-K, for the fiscal years ended July 31, 1995, 1996 and 1997, (ii) its
Quarterly Report on Form 10-Q for the quarter ended January 31, 1998, (iii) all
proxy statements relating to the Company's meetings of stockholders (whether
annual or special) held on or after July 31, 1995, and (iv) all other forms,
reports and other registration statements (other than Quarterly Reports on Form
10-Q not referred to in clause (ii) above and preliminary materials), including
any
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and all amendments or supplements to any of the items referred to herein,
filed by the Company with the SEC since July 31, 1995 (the forms, reports and
other documents referred to in clauses (i), (ii), (iii) and (iv) above being
referred to herein, collectively, as the "Company SEC Reports"). The Company
-------------------
SEC Reports and any forms, reports and other documents filed by the Company with
the SEC after the date of this Agreement (x) were or will be prepared in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, as the case may be, and the rules and
--------------
regulations thereunder, and (y) did not at the time they were filed, or will not
at the time they are filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No Company Subsidiary is required
to file any form, report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company SEC Reports was prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto), and each fairly presented the consolidated
financial position, results of operations and cash flows of the Company and its
consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not expected, individually or in the aggregate, to be material in amount). Since
July 31, 1997, there has been no change in any of the significant accounting
(including tax accounting) policies, practices or procedures of the Company or
any Company Subsidiary.
(c) Except (i) as set forth in Section 3.07 of the Company Disclosure
Schedule, (ii) as and to the extent set forth in the Company SEC Reports filed
with the SEC prior to the date of this Agreement, or (iii) since July 31, 1997,
as incurred in the ordinary course of business and not in violation of this
Agreement (assuming this Agreement was in effect as of July 31, 1997), the
Company and the Company Subsidiaries do not have any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise), other than
liabilities and obligations which would not, individually or in the aggregate,
have a Company Material Adverse Effect.
SECTION 3.08. Absence of Certain Changes and Events. Except as set forth
-------------------------------------
in Section 3.08 of the Company Disclosure Schedule or disclosed in any Company
SEC Report filed since October 31, 1997 and prior to the date of this Agreement,
since October 31, 1997, (a) the Company and the Company Subsidiaries have
conducted their respective businesses only in the ordinary course and have not
taken any of the actions set forth in paragraphs (a) through (n) of Section 5.01
and (b) there has not been any material adverse change in the business,
financial condition or results of operations of the Company and the Company
Subsidiaries, taken as a whole.
SECTION 3.09. Employee Benefit Plans. With respect to all the employee
----------------------
benefit plans, programs and arrangements maintained for the benefit of any
current or former employee, officer or director of the Company or any Company
Subsidiary (the "Benefit Plans"), except as set forth in Section 3.09 of the
-------------
Company Disclosure Schedule or in the Company SEC Reports filed prior to the
date of this Agreement: (a) none of the Benefit Plans is a multi-employer plan
within the
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<PAGE>
meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (b) none of the Benefit Plans promises or provides retiree
-----
medical or life insurance benefits to any person; (c) each Benefit Plan intended
to be qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service (the "IRS") that it is so
---
qualified and nothing has occurred since the date of such letter that could
reasonably be expected to affect the qualified status of such Benefit Plan other
than occurrences that would not, individually or in the aggregate, have a
Company Material Adverse Effect; (d) each Benefit Plan has been operated in all
material respects in accordance with its terms and the requirements of
applicable law; (v) neither the Company nor any Company Subsidiary has incurred
any direct or indirect liability under, arising out of or by operation of Title
IV of ERISA in connection with the termination of, or withdrawal from, any
Benefit Plan or other retirement plan or arrangement, and no fact or event
exists that could reasonably be expected to give rise to any such liability,
other than any liability that would not, individually or in the aggregate, have
a Company Material Adverse Effect; and (e) the Company and the Company
Subsidiaries have not incurred any liability under, and have complied in all
material respects with, the Worker Adjustment Retraining Notification Act, and
no fact or event exists that could give rise to liability under such act, other
than any liability that would not, individually or in the aggregate, have a
Company Material Adverse Effect. Except as set forth in Section 3.09 of the
Company Disclosure Schedule or the Company SEC Reports, the aggregate
accumulated benefit obligations of each Benefit Plan subject to Title IV of
ERISA (as of the date of the most recent actuarial valuation prepared for such
Benefit Plan) do not exceed the fair market value of the assets of such Benefit
Plan (as of the date of such valuation). Other than as specifically provided in
Section 5.01(f), the execution and delivery of this Agreement and the
consummation of the Merger will not (i) result in an acceleration of any
participant's rights under the ESPP, (ii) entitle any participant to purchase a
number of shares which exceeds the number of shares he would otherwise be
entitled to purchase if this Agreement had not been entered into or the Merger
were not to be consummated, (iii) result in additional persons becoming entitled
to elect to become participants in the ESPP, or (iv) entitle any participant to
increase the amount of his periodic payroll deduction amounts paid to the ESPP.
SECTION 3.10. Taxes. (a) Except as set forth in Section 3.10 of the
-----
Company Disclosure Schedule, each of the Company and the Company Subsidiaries
has filed all tax returns and reports required to be filed by it or requests for
extensions to file such returns or reports have been timely filed, granted and
have not expired, except to the extent that such failures to file or to have
extensions granted, individually or in the aggregate, would not have a Company
Material Adverse Effect. All returns filed by the Company and each of the
Company Subsidiaries are complete and accurate in all material respects. The
Company and each of the Company Subsidiaries have timely paid (or the Company
has paid on its behalf) all taxes shown as due on such returns, and the most
recent financial statements contained in the Company SEC Reports reflect an
adequate reserve for all taxs 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
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<PAGE>
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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<PAGE>
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
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<PAGE>
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally and by general
principles of equity.
SECTION 4.02. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by Johnson do not, and the performance
of the transactions contemplated hereby by Johnson will not, (i) conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
Johnson or by which any property or asset of Johnson is bound or affected, or
(ii) assuming the release or waiver of certain security interests and other
restrictions encumbering certain shares of Common Stock beneficially owned by
Johnson to be obtained in connection with the receipt of the financing for the
Merger, result in any breach of or constitute a default (or an event which, with
notice, lapse of time or both, would become a default) under, result in the loss
of a material benefit under or give to others any right of termination,
amendment, acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Johnson
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or any other instrument or obligation to which
Johnson is a party or by which his property or assets are bound or affected,
except in the case of clauses (i) and (ii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or delay
consummation of the Merger in any material respect or otherwise prevent Johnson
from performing his obligations under this Agreement in any material respect.
(b) The execution and delivery of this Agreement by Johnson do not, and
the performance of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby by Johnson will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) any applicable requirements of the
Exchange Act, (B) the pre-merger notification requirements of the HSR Act and
(C) the filing and recordation of appropriate merger and similar documents as
required by the DGCL and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Merger in any material respect or
otherwise prevent Johnson from performing his obligations under this Agreement
in any material respect.
Liberty hereby makes to the Company the representations and warranties set
forth below in Sections 4.03 through 4.06:
SECTION 4.03. Organization and Qualification. Liberty is a corporation
------------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted. Liberty is duly qualified or
licensed and in good standing to do business in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a material adverse effect on the
business, results of operations or financial condition of Liberty and its
subsidiaries, taken as a whole (a "Liberty Material Adverse Effect").
-------------------------------
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<PAGE>
SECTION 4.04. Certificate of Incorporation and Bylaws. Liberty has
---------------------------------------
heretofore made available to the Company a complete and correct copy of its
certificate of incorporation and bylaws, each as amended to the date hereof.
Such certificate of incorporation and bylaws are in full force and effect.
SECTION 4.05. Authority Relative to This Agreement. Liberty has all
------------------------------------
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Liberty
and the consummation by Liberty of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Liberty are necessary to authorize this
Agreement or to consummate such transactions (other than the filing and
recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by Liberty and,
assuming the due authorization, execution and delivery by the other parties
hereto, constitutes the legal, valid and binding obligation of Liberty,
enforceable against Liberty in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of
creditors generally and by general principles of equity.
SECTION 4.06. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by Liberty do not, and the performance
of the transactions contemplated hereby by Liberty will not, (i) conflict with
or violate the certificate of incorporation or by-laws of Liberty, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Liberty or by which any property or asset of Liberty is bound or affected, or
(iii) result in any breach of or constitute a default (or an event which, with
notice, lapse of time or both, would become a default) under, result in the loss
of a material benefit under or give to others any right of termination,
amendment, acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Liberty
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or any other instrument or obligation to which
Liberty is a party or by which Liberty or any property or asset of Liberty is
bound or affected, except in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which (x) would
not prevent or delay consummation of the Merger in any material respect or
otherwise prevent Liberty from performing its obligations under this Agreement
in any material respect, and (y) would not, individually or in the aggregate,
have a Liberty Material Adverse Effect.
(b) The execution and delivery of this Agreement by Liberty do not, and
the performance of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby by Liberty will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) any applicable requirements, if any, of
the Exchange Act and state takeover laws, (B) the pre-merger notification
requirements of the HSR Act and (C) filing and recordation of appropriate merger
and similar documents as required by the DGCL and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not (x) prevent or delay consummation of the
Merger
A-21
<PAGE>
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
A-22
<PAGE>
of or constitute a default (or an event which, with notice, lapse of time or
both, would become a default) under, result in the loss of a material benefit
under or give to others any right of termination, amendment, acceleration,
increased payments or cancellation of, or result in the creation of a lien or
other encumbrance on any property or asset of Buyer pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
any other instrument or obligation to which Buyer is a party or by which Buyer
or any property or asset of Buyer is bound or affected, except in the case of
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which (x) would not prevent or delay consummation of the
Merger in any material respect or otherwise prevent Buyer from performing its
obligations under this Agreement in any material respect, and (y) would not,
individually or in the aggregate, have a Buyer Material Adverse Effect.
(b) The execution and delivery of this Agreement by Buyer do not, and the
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby by Buyer will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) any applicable requirements, if any, of
the Exchange Act, (B) the pre-merger notification requirements of the HSR Act,
(C) filing and recordation of appropriate merger and similar documents as
required by the DGCL, and (D) any applicable approvals of the FCC, and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, (x) would not prevent or delay
consummation of the Merger in any material respect or otherwise prevent Buyer
from performing its obligations under this Agreement in any material respect,
and (y) would not, individually or in the aggregate, have a Buyer Material
Adverse Effect.
SECTION 4.11. Brokers. No broker, finder or investment banker (other than
-------
Salomon Brothers Inc) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger and the other transactions contemplated
hereby based upon arrangements made by or on behalf of Buyer, Johnson or
Liberty.
SECTION 4.12. Financing. (a) Buyer has delivered to the Company a true
---------
and complete copy of a letter from The Bank of New York Company, Inc. and BNY
Capital Markets, Inc. to the effect that, based upon their review of certain
information provided by the Company, and subject to the qualifications and
conditions set forth therein, The Bank of New York Company, Inc. and BNY Capital
Markets, Inc. are highly confident, as of the date of such letter, that they,
directly or through any of their affiliates, could successfully arrange and
fully syndicate a secured credit facility which would provide the Buyer at the
Effective Time with the Financing (as defined below).
(b) In addition, Buyer shall use its reasonable efforts to obtain by May
15, 1998 (subject to reasonable extension, consent to which will not be
unreasonably withheld) a firm commitment by an appropriate financial source to
provide the Financing, subject only to customary conditions in transactions of
this type. If any portion of the Financing represented by such commitment
thereafter becomes unavailable, Buyer will promptly notify the Company and will
also use its reasonable efforts to obtain the Financing from another source or
sources, on and subject to the same terms and conditions as the portion of the
Financing that has become unavailable, in order to
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<PAGE>
consummate the transactions contemplated hereby. If Buyer is unable to obtain a
financing commitment by the date specified herein (as such date may be
extended), the Company may, at its option, terminate this Agreement, and neither
Buyer nor the Company shall have any further obligations hereunder.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger. The
-----------------------------------------------------
Company covenants and agrees that, between the date of this Agreement and the
Effective Time, unless Buyer, Johnson or Liberty shall have consented, neither
the Company nor any Company Subsidiary shall, except as set forth in Section
5.01 of the Company Disclosure Schedule:
(a) conduct its business in any manner other than in the ordinary course
of business consistent with past practice;
(b) amend or propose to amend its certificate of incorporation or by-laws;
(c) (i) authorize for issuance, issue, grant, sell, pledge, redeem or
acquire for value any of its or their securities, including options,
warrants, commitments, stock appreciation rights, subscriptions,
rights to purchase or otherwise (other than the issuance of equity
securities upon the conversion of outstanding convertible securities
or in connection with any dividend reinvestment plan or any Benefit
Plan with an employee stock fund or employee stock ownership plan
feature, consistent with applicable securities laws, or the exercise
of options or warrants outstanding as of the date of this Agreement
and in accordance with the terms of such options or warrants in effect
on the date of this Agreement) or (ii) sell, pledge or otherwise
dispose of any material assets, except for sales of assets in the
ordinary course of business;
(d) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property, or otherwise, with respect to any of
its capital stock, except dividends declared and paid by a wholly-
owned Company Subsidiary only to the Company, or subdivide,
reclassify, recapitalize, split, combine or exchange any of its shares
of capital stock;
(e) incur, assume or become obligated with respect to any material amount
of indebtedness for borrowed money or make any loans or advances,
except borrowings under existing bank lines of credit in the ordinary
course of business;
(f) increase the compensation payable or to become payable to its
executive officers or employees, except for increases in the ordinary
course of business in accordance with
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<PAGE>
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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<PAGE>
(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,
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<PAGE>
should be discovered by such party which should be set forth in an amendment or
a supplement to the Proxy Statement, such party shall promptly inform the
Company and Buyer thereof and take appropriate action in respect thereof.
(c) As soon as practicable after the date of this Agreement, Johnson,
Liberty, Buyer and the Company shall file with the SEC a Rule 13E-3 Transaction
Statement on Schedule 13E-3 ("Schedule 13E-3"), with respect to the Merger.
--------------
Each of the parties hereto agrees to use its reasonable best efforts to
cooperate and to provide each other with such information as any of such parties
may reasonably request in connection with the preparation of the Schedule 13E-3.
Each party hereto agrees promptly to supplement, update and correct any
information provided by it for use in the Schedule 13E-3 if and to the extent
that it is or shall have become incomplete, false or misleading.
SECTION 6.03. Action by Stockholders. Except as otherwise required by the
----------------------
fiduciary duties of the Board of Directors of the Company (as determined in good
faith by the Board following the receipt of written advice of the Company's
outside legal counsel to such effect), (a) the Company, acting through its Board
of Directors, shall, in accordance with applicable law, the Company Charter and
the Company's bylaws, duly call, give notice of, convene and hold a special
meeting of stockholders (the "Company Stockholders' Meeting") as soon as
-----------------------------
practicable after the date of this Agreement for the purpose of adopting this
Agreement and (b) the Company will, through the Board of Directors based on the
recommendation of the Special Committee, (i) recommend to its stockholders the
adoption of this Agreement, and (ii) use its best efforts to obtain the Company
Stockholder Approval. Johnson, Liberty and Buyer shall vote all shares of Class
A Stock, Class B Stock and Class C Stock owned by them in favor of the adoption
of this Agreement.
SECTION 6.04. No Solicitation. (a) The Company shall immediately cease
---------------
any existing discussions or negotiations with any parties conducted heretofore
with respect to any acquisition of all or any material portion of the assets of,
or any equity interest in, the Company or any of the Company Subsidiaries, or
any business combination with the Company or any of the Company Subsidiaries.
The Company shall not, nor shall it permit any of the Company Subsidiaries, or
its or their respective officers, directors, employees, agents or
representatives (including, without limitation, any investment banking firm,
attorney or accountant retained by it) to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal with respect
to an Alternative Transaction (as defined below), engage in any discussions or
negotiations concerning, or provide to any other person any information or data
relating to the Company or any of the Company Subsidiaries for the purposes of,
or otherwise cooperate in any way with or assist or participate in, facilitate
or encourage, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to the stockholders of the Company)
which constitutes, or could reasonably be expected to lead to, a proposal or
offer to seek or effect an Alternative Transaction, or agree to or endorse any
Alternative Transaction; provided, however, that, at any time prior to obtaining
-------- -------
the Company Stockholder Approval, the Company may (subject to compliance with
the penultimate sentence of this Section 6.04(a)), in response to a bona fide
unsolicited written inquiry, proposal or offer with respect to an Alternative
Transaction (x) furnish information with respect to the Company and the Company
Subsidiaries to the person making such
A-27
<PAGE>
inquiry, proposal or offer subject to a confidentiality agreement having terms
no less favorable to the Company than those contained in the Confidentiality
Agreement, and (y) participate in negotiations concerning such Alternative
Transaction, if, before furnishing such information or engaging in such
negotiations, the Board of Directors of the Company determines in good faith (i)
following the receipt of written advice of its financial advisor, that the
inquiry, proposal or offer is reasonably likely to result in a proposal for an
Alternative Transaction which is (A) more favorable to the Company's
stockholders than the transaction contemplated hereby and (B) capable of
consummation, or (ii) following the receipt of written advice of outside legal
counsel, that it is required to do so in order to comply with its fiduciary
duties. "Alternative Transaction" means a transaction or series of related
-----------------------
transactions (other than the transactions contemplated by this Agreement)
resulting in (i) any change of control of the Company, (ii) any merger or
consolidation of the Company in which another person acquires beneficial
ownership of 25% or more of the aggregate voting power of all voting securities
of it or the surviving corporation, as the case may be, (iii) any tender offer
or exchange offer for, or any acquisitions of, any securities of the Company
which, if consummated, would result in another person beneficially owning 25% or
more of the aggregate voting power of all voting securities of it, or (iv) any
sale or other disposition of assets of the Company or any of the Company
Subsidiaries if the Fair Market Value (as defined below) of such assets exceeds
25% of the aggregate Fair Market Value of the assets of the Company and the
Company Subsidiaries, taken as a whole before giving effect to such sale or
other disposition. The "Fair Market Value" of any assets or securities shall
-----------------
mean the fair market value of such assets or securities as determined by the
Board of Directors of the Company in good faith. Prior to furnishing any
information or participating in any negotiations with regard to an Alternative
Transaction, the Company shall notify Buyer immediately of such inquiry,
proposal or offer received by, any such information requested from, or any such
discussions or negotiations sought to be initiated or continued with, the
Company, any of its subsidiaries or any of the Company's or any subsidiary's
directors, officers, employees, agents or representatives indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any such inquiry, proposal or offer. The Company agrees that it
will keep Buyer informed, on a current basis, of the status and terms of any
such inquiries, proposals or offers.
(b) Nothing in this Section 6.04 shall (i) permit the Company to enter into
any agreement with respect to an Alternative Transaction during the term of this
Agreement (it being agreed that during the term of this Agreement the Company
shall not enter into any agreement with any person that provides for, or in any
way facilitates, an Alternative Transaction, other than a confidentiality
agreement in customary form upon terms and conditions no more favorable to such
third party than the terms and conditions contained in the Confidentiality
Agreement), or (ii) affect any other obligation of the Company under this
Agreement.
SECTION 6.05. Directors' and Officers' Indemnification. (a) From and
----------------------------------------
after the Effective Time, the Surviving Corporation shall indemnify, defend and
hold harmless, to the same extent and upon the terms and conditions provided in
the Company Charter or the Company's Bylaws, each as in effect on the date
hereof, and in each case to the full extent permitted under the DGCL, the
present and former officers and directors of the Company (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
- --------------------
liabilities or amounts paid in settlement with
A-28
<PAGE>
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.
A-29
<PAGE>
(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
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<PAGE>
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party to Effect the
-----------------------------------------------------
Merger. The respective obligations of each party to effect the Merger and the
other transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable law:
(a) Stockholder Approval. In addition to the obtaining of the Company
--------------------
Stockholder Approval, this Agreement shall have been approved and adopted by the
affirmative vote of a majority of the voting power of the shares owned by
stockholders of the Company other than Johnson, Liberty or any of their
respective controlled affiliates.
(b) No Order. No Governmental Entity or federal or state court of
--------
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the Merger or
the other transactions contemplated by this Agreement; provided, however, that
-------- -------
the parties shall use their reasonable best efforts (subject to Section 6.07) to
cause any such decree, judgment, injunction or other order to be vacated or
lifted.
(c) HSR Act. Any waiting period applicable to the consummation of the
-------
Transactions under the HSR Act shall have expired or been terminated, and no
action shall have been instituted by the Department of Justice or the Federal
Trade Commission challenging or seeking to enjoin the consummation of the
Merger, which action shall not have been withdrawn or terminated.
SECTION 7.02. Additional Conditions to Obligations of Buyer. The
---------------------------------------------
obligation of Buyer to effect the Merger is are also subject to satisfaction or
waiver of the following conditions:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company contained in this Agreement, without giving effect to
any notification to Buyer delivered pursuant to Section 6.06, shall, if
qualified by materiality, be true and correct, and if not so qualified, be true
and correct in all material respects, in each case as of the Effective Time as
though made on and as of the Effective Time, except (i) for changes specifically
permitted by this Agreement and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and correct
as of such date.
(b) Agreement and Covenants. The Company shall have performed or complied
-----------------------
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Effective
Time.
(c) Consents Under Agreements. The Company shall have obtained the consent
-------------------------
or approval of each person whose consent or approval shall be required in
connection with the Merger under all loan or credit agreements, notes,
mortgages, indentures, leases or other agreements or
A-31
<PAGE>
instruments to which it or any of the Company Subsidiaries is a party or is
otherwise bound or obligated, except those for which failure to obtain such
consents and approvals would not have or give rise to a Company Material Adverse
Effect.
(d) Financing. Buyer shall have obtained sufficient funds (i) to pay the
---------
Merger Consideration, refinance or finance certain indebtedness of the Company,
Black Entertainment Television, Inc., a wholly owned subsidiary of the Company,
Buyer, and certain principals of Buyer, and pay all expenses in connection with
the transactions contemplated hereby, and (ii) for general corporate purposes
(the "Financing"), on terms reasonably satisfactory to Buyer, and the proceeds
---------
of such Financing shall have been received by or made immediately available to
Buyer at or immediately prior to the Closing.
(e) No Litigation. There shall not be (x) pending or threatened any suit,
-------------
action or proceeding by any Governmental Entity or (y) pending any suit, action
or proceeding by any other person, in any case, before any court or governmental
authority, agency or tribunal, domestic or foreign (i) seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from the Company, Buyer,
Johnson or Liberty any damages, (ii) seeking to prohibit or limit the ownership
or operation by Buyer, Johnson or Liberty of any material portion of the
business or assets of the Company or any of the Company Subsidiaries, or to
compel the Company or any the Company Subsidiaries to dispose of or hold
separate any material portion of its business or assets as a result of the
Merger or any of the other transactions contemplated by this Agreement, (iii)
seeking to impose limitations on the ability of Johnson or Liberty to acquire or
hold, or exercise full rights of ownership of, any shares of Common Stock,
including, without limitation, the right to vote the Common Stock owned by him
or it on all matters properly presented to the stockholders of the Company, (iv)
seeking material damages, (v) seeking to prohibit Johnson or Liberty from
effectively controlling in any material respect the business or operations of
the Company or the Company Subsidiaries, or (vi) which otherwise is reasonably
likely to have a Company Material Adverse Effect.
(f) Dissenting Shares. On the Closing Date, Dissenting Shares shall
-----------------
aggregate no more than 10% of the then outstanding shares of Class A Stock not
owned by Johnson, Liberty or their respective controlled affiliates.
(g) Officer's Certificate. Buyer shall have received a certificate of an
---------------------
appropriate officer of the Company to the effect that the conditions set forth
in Section 7.02(a), (b), (c), (e) and (f) have been satisfied at the Effective
Time.
SECTION 7.03. Additional Conditions to Obligations of the Company. The
---------------------------------------------------
obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Buyer, Johnson and Liberty contained in this Agreement,
without giving effect to any notification to the Company delivered pursuant to
Section 6.06, shall, if qualified by materiality, be true and correct, and if
not so qualified, be true and
A-32
<PAGE>
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);
A-33
<PAGE>
(f) by Buyer if: (i) the Board of Directors of the Company (or any
committee thereof) shall withdraw, modify or change its recommendation so that
it is not in favor of this Agreement or the Merger or shall have resolved to do
any of the foregoing; (ii) the Board of Directors of the Company shall have
recommended or resolved to recommend to its stockholders an Alternative
Transaction; or (iii) the stockholder approval required pursuant to Section
7.01(a) shall not have been obtained by September 15, 1998.
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
SECTION 8.02. Effect of Termination. Except as provided in Section 8.05
---------------------
or Section 9.01(b), in the event of the termination of this Agreement pursuant
to Section 8.01, this Agreement shall forthwith become void, there shall be no
liability on the part of any party hereto, or any of their respective officers
or directors, to the other and all rights and obligations of any party hereto
shall cease; provided, however, that nothing herein shall relieve any party from
-------- -------
liability for the wilful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 8.03. Amendment. Before or after adoption of this Agreement by
---------
the stockholders of the Company, this Agreement may be amended by the parties
hereto at any time prior to the Effective Time; provided, however, that (a) any
-------- -------
such amendment shall have been approved by the Special Committee and (b) after
adoption of this Agreement by the stockholders of the Company, no amendment
which under applicable law may not be made without the approval of the
stockholders of the Company may be made without such approval. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, either the
------
Company, on the one hand, or Buyer, on the other, may (a) extend the time for
the performance of any of the obligations or other acts of the other party
hereto, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto and
(c) waive compliance by the other party with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party or parties to be bound thereby
and, with respect to extensions or waivers granted by the Company, if the
Special Committee shall have approved such waiver or extension.
SECTION 8.05. Fees, Expenses and Other Payments. (a) Subject to
---------------------------------
paragraph (b) of this Section 8.05, all costs and expenses (including any
expenses related to any claims or litigation in connection with the transactions
contemplated by this Agreement, or any settlement thereof), including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants and other out-of-pocket expenses, incurred or to be incurred by the
parties hereto in connection with the transactions contemplated hereby (with
respect to such party, its "Expenses"), shall be borne solely and entirely by
--------
the party which has incurred such costs and expenses; provided, however, that
-------- -------
A-34
<PAGE>
all costs and expenses related to printing and mailing the Proxy Statement shall
be borne by the Company.
(b) The Company agrees that if this Agreement shall be terminated by Buyer
pursuant to Section 8.01(b) or (f), then the Company will, subject to its
receipt of reasonable supporting documentation, pay to Buyer, Johnson and
Liberty their reasonable Expenses incurred or to be incurred in connection with
the transactions contemplated by this Agreement. Any payment required to be
made pursuant to this paragraph (b) shall be made as promptly as practicable but
not later than two business days after termination of this Agreement and, in any
such case, shall be made by wire transfer of immediately available funds to an
account designated by Buyer.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and Agreements.
-----------------------------------------------------------
(a) Except as set forth in Section 9.01(b), the representations, warranties and
agreements of each party hereto shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any other party
hereto, any person controlling any such party or any of their respective
officers or directors, whether prior to or after the execution of this
Agreement.
(b) The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Articles I, II
and IX and Section 6.05 shall survive the Effective Time and those set forth in
the last sentence of Section 6.01(a) and Sections 8.02 and 8.05 and Article IX
shall survive termination.
SECTION 9.02. Notices. All notices and other communications given or made
-------
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to Buyer or Johnson:
Robert L. Johnson
2915 Audubon Terrace, N.W.
Washington, D.C. 20018
with a copy to:
Arent Fox Kintner Plotkin & Kahn
A-35
<PAGE>
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Attention: H. Van Sinclair
Telecopier No.: (202) 857-6395
(b) If to Buyer or Liberty:
Liberty Media Corporation
8101 East Prentice Avenue, Suite 500
Englewood, Colorado 80111
Attention: Robert R. Bennett
Telecopier No.: (303) 721-5434
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Frederick H. McGrath
Telecopier No.: (212) 705-5125
(c) If to the Company:
BET Holdings, Inc.
One BET Plaza
1900 W Plaza N.E.
Washington, D.C. 20018-1211
Attention: President
Telecopier No.: (202) 608-2595
with separate copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Michael P. Rogan
Stephen W. Hamilton
Telecopier No.: (202) 393-5760
and
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Suite 825
A-36
<PAGE>
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
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agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof.
SECTION 9.07. Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise and any purported assignment shall be null and
void, provided that any of Johnson, Liberty or Buyer may assign his or its
rights, but not his or its obligations, under this Agreement to any subsidiary
of such person.
SECTION 9.08. Parties in Interest. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied (other than the provisions of Section 6.05, which
provisions are intended to benefit and may be enforced by the beneficiaries
thereof), is intended to or shall confer upon any person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 9.09. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, without regard
to the conflict of laws rules thereof.
SECTION 9.10. Submission to Jurisdiction; Waivers. Each party hereto
-----------------------------------
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the Court of Chancery, or other courts, of the State of
Delaware, and each party hereto hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to his or its property,
generally and unconditionally, to the nonexclusive jurisdiction of the aforesaid
courts. Each party hereto hereby irrevocably waives, and agrees not to assert,
by way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) the defense of sovereign
immunity, (b) any claim that he or it is not personally subject to the
jurisdiction of the courts for any reason other than the failure to serve
process in accordance with this Section 9.10, (c) that he or it, or its
property, is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), and (d) to the fullest extent permitted by
applicable law, that (i) the suit, action or proceeding in any such court is
brought in an inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper and (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts.
SECTION 9.11. Enforcement of this Agreement. The parties hereto agree
-----------------------------
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
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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.
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<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.
By: /s/ Debra Lee
---------------------------------------------
Name: Debra Lee
Title: President and Chief Operating Officer
/s/ Robert L. Johnson
--------------------------------------------------
Robert L. Johnson
LIBERTY MEDIA CORPORATION
By: /s/ Robert R. Bennett
---------------------------------------------
Name: Robert R. Bennett
Title: President
BTV ACQUISITION CORPORATION
By: /s/ Robert L. Johnson
----------------------------------------
Name: Robert L. Johnson
Title: President
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<PAGE>
EXHIBIT B
OPINION OF GOLDMAN, SACHS & CO.
[TO BE ADDED]
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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
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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.
(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
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effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given; provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices
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by mail and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section
and who has submitted his certificates of stock to the Register in Chancery, if
such is required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter
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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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