Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934 (Amendment No. __)
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14c-5(d)(2))
[X] Definitive Information Statement
Creative Programming and Technology Ventures, Inc.
-------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
$7,000,000 cash - Rule 0-11(c)(2)
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$7,000,000 cash
---------------------------------------------------------------
(5) Total fee paid:
$1,400
---------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid: _________________________________
(2) Form, Schedule or Registration Statement No.: _____________
(3) Filing Party: ____________________________________________
(4) Date Filed: _____________________________________________
<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14C-5(D)(2))
CREATIVE PROGRAMMING AND TECHNOLOGY VENTURES, INC.
7900 East Union Avenue, Suite 1100
Denver, Colorado 80237
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on November 15, 1996
- --------------------------------------------------------------------------------
October 15, 1996
TO THE SHAREHOLDERS OF CREATIVE PROGRAMMING AND TECHNOLOGY VENTURES, INC.:
A Special Meeting of Shareholders of Creative Programming and Technology
Ventures, Inc., a Colorado corporation ("CPTV" or the "Company"), will be held
at the Hyatt Regency Downtown, 1750 Welton Street, Denver, CO 80202, on November
15, 1996 at 10:00 a.m. Mountain time, to consider and take action on:
1. A proposal to sell the entire interest of KG Squared, Inc. (a wholly
owned subsidiary of CPTV) in Off World Entertainment, Inc. d/b/a/ OddWorld
Inhabitants, Inc., to GT Interactive Software Corp. for $7 million less certain
accrued unpaid expenses.
2. Such other business as may properly come before the meeting, or any
adjournment or adjournments thereof.
The discussion of the proposal set forth above is intended only as a
summary, and is qualified in its entirety by the information contained in the
accompanying Information Statement.
Only holders of record of Common Stock and Series A Convertible Preferred
Stock at the close of business on October 2, 1996 will be entitled to notice of
and to vote at this special meeting, or any postponements or adjournments
thereof. Shareholders representing approximately 50.3% of the vote to be cast at
the Special Meeting have agreed to vote for Proposal One summarized above.
Shareholders will have the right to dissent from the GT Transactions if
Proposal Number One is approved. To do so the shareholder must comply strictly
with the provisions of Colorado law regarding the assertion of dissenter's
rights. A copy of the relevant statute is attached as Exhibit A to the
Information Statement.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
<PAGE>
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON AND THE
MANAGEMENT OF THE COMPANY HOPES THAT YOU WILL FIND IT CONVENIENT TO ATTEND.
By Order of the Board of Directors:
Gary R. Vickers, President
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<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14C-5(D)(2))
CREATIVE PROGRAMMING AND TECHNOLOGY VENTURES, INC.
7900 East Union Avenue, Suite 1100
Denver, Colorado 80237
INFORMATION STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 15, 1996
October 15, 1996
This Information Statement is being furnished to shareholders of Creative
Programming and Technology Ventures, Inc. ("CPTV" or the "Company") in
connection with a Special Meeting of shareholders of the Company (the "Special
Meeting") and at any adjournments or postponements thereof. The Special Meeting
will be held at 10:00 a.m. Mountain Time, at the Hyatt Regency Downtown, 1750
Welton Street, Denver, CO 80202 on November 15, 1996. This information statement
will be first mailed to the shareholders on or about October 15, 1996.
VOTING SECURITIES
Holders of record of the Company's common stock (the "Common Stock") and
the Company's Series A Convertible Preferred Stock (the "Preferred Stock"), at
the close of business on October 2, 1996 (the "Record Date") will be entitled to
vote on all matters. On the Record Date, the Company had 3,210,079 shares of
Common Stock outstanding and 1,000,000 shares of Preferred Stock outstanding.
The holders of shares of Common Stock and Preferred Stock are entitled to one
vote per share. The Company's only classes of voting securities are the Common
Stock and Preferred Stock. A majority of the issued and outstanding shares of
the Common Stock and Preferred Stock entitled to vote, represented in person or
by proxy, constitutes a quorum for the transaction of business at the meeting.
Abstentions will be treated as shares present or represented and entitled
to vote for purposes of determining the presence of a quorum, but will not be
considered as votes cast in determining whether a matter has been approved by
the shareholders.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Set forth below is certain information with respect to ownership of CPTV's
securities by the CPTV's executive officers, directors, and persons or entities
who are known by CPTV to own beneficially more than 5% of the outstanding shares
of the Common Stock and Preferred Stock:
Name and address Number of Shares Percentage of
of Beneficial Owner Common Preferred Class
- ------------------- ------------------------- -------------
Kim Magness (a)(g) 267,200 255,500 15.1
Gary D. Magness (b)(g) 283,750 255,500 15.5
4643 South Ulster
Suite 1520
Englewood, CO 80237
Gary R. Vickers (f)(g) 565,000 489,000 28.5
7900 East Union Avenue
Suite 1100
Denver, CO 80237
A. Richard Berman 33,750(d) 1.0
46 A Bulkley Avenue
Sausalito, CA 94965
William Gladstone (e)(g) 75,250(d) 2.3
2191 San Elijo Avenue
Cardiff-by-the-Sea, CA 92007
Craig K. Tanner 33,750(d) 1.0
1880 Campus Common Drive
Reston, VA 22091
All Directors and 1,258,700 1,000,000 52.3
Executive Officers
as a Group (5 persons)
- ----------
* Less than 1%.
(a) Includes 3,700 shares of Common Stock held in the name of Kim Magness'
wife.
(b) Includes shares of Common Stock held in the names of Gary Magness' wife
(12,000 shares) and minor child (5,000 shares). Also includes 11,250 shares
underlying options exercisable from November 1, 1996 through January 16,
2001, at $1.00 per share. Does not include 11,250 shares underlying similar
options which are not exercisable until November 1, 1997.
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<PAGE>
(c) The shares of Preferred Stock are entitled to convert to Common Stock on a
share-for-share basis upon the holder paying a conversion premium of $5.40
per share through November 17, 1997. Pending conversion, the shares of
Preferred Stock have the right to vote on a share-for-share basis with the
Common Stock. The Preferred Stock also has dividend rights equivalent to
the Common Stock.
(d) Consists of options to acquire 22,500 shares at $4.00 per share exercisable
through October 1, 1998. Also includes 11,250 shares underlying options
exercisable from November 1, 1996 through January 16, 2001, at $1.00 per
share. Does not include 11,250 shares underlying similar options which are
not exercisable until November 1, 1997.
(e) Includes 7,500 shares held in the name of Mr. Gladstone's wife.
(f) Includes 74,000 shares held in the name of a family member as to which Mr.
Vickers holds an irrevocable proxy to vote.
(g) Messrs. Magness, Vickers, and Gladstone have entered into a Voting
Agreement by which they have agreed to vote FOR proposal number 1 with
respect to the shares over which they have direct voting control (not
including shares held in the names of their wives and children).
To the best knowledge of CPTV, there are no arrangements,
understandings or agreements relative to the disposition of any of CPTV's
securities, the operation of which would at a subsequent date result in a change
in control of CPTV.
PROPOSAL NUMBER ONE
SALE OF ODDWORLD
The Board of Directors of CPTV (the "Board") has determined that it is in
CPTV's best interest to sell 100% of the interest held by KG Squared, Inc., a
wholly owned subsidiary of CPTV ("KG"), in Off World Entertainment, Inc. d/b/a/
OddWorld Inhabitants, Inc. ("OddWorld") to GT Interactive Software Corp., a
Delaware corporation, ("GT") for $7 million less certain unpaid expenses
(approximately $175,000). (The purchase of KG's interest in OddWorld and the
obligation to finance the continuing development of OddWorld by GT described
below are collectively referred to as the "GT Transactions.") The completion of
the GT Transactions will result in a significant gain to CPTV on its approximate
$3.7 million investment in OddWorld. (When used herein, the term "CPTV" or the
"Company" includes KG.)
General Discussion
As was publicly reported in September 1994, CPTV embarked on a speculative
strategy in the interactive entertainment business when CPTV co-founded OddWorld
with Sherry McKenna (who became chief executive officer) and Lorne Lanning (who
became creative director of OddWorld). The decision to launch OddWorld was part
of a plan to diversify CPTV from the lower margin "work for hire" services then
being performed by CPTV's Alexandria, Inc., subsidiary into the production of
proprietary games designed for advanced (32-bit and beyond) platforms. Under the
"work for hire" model, Alexandria built products around intellectual property
owned by major third party entertainment publishers in exchange for certain
development fees and a royalty from retail sales after development costs had
been recouped.
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<PAGE>
The investment in OddWorld was intended to be an alternative strategy for
CPTV centered around creating its own products and the underlying intellectual
property. However, significant cost overruns and time delays in OddWorld's
operations required CPTV to dedicate its remaining resources to OddWorld to
mature its investment therein. This eliminated some of the diversification that
CPTV originally had sought. CPTV has invested substantially all of its 1996
capital budget into OddWorld, and has borrowed an additional $500,000 from
affiliates to protect its investment in OddWorld resulting in total expenditures
by CPTV of approximately $3.7 million. The game, known as "SoulStorm(TM)," the
first product of the proposed "StoryDwelling Adventure" series, is still in
development and will not be completed until 1997. Several leading publishers
reviewed SoulStorm(TM) and expressed a significant degree of interest in it. In
order to ensure that there will be funding for the completion and marketing of
SoulStorm(TM), to provide CPTV with a substantial return on its investment, and
to allow CPTV to divert its resources into other areas, CPTV has agreed to sell
its entire interest in OddWorld to GT Interactive Software Corp. ("GT"), a
NASDAQ-listed, leading global publisher of interactive entertainment,
edutainment, and value-priced software.
OddWorld
OddWorld was formed in 1994 as a Delaware corporation and is located in San
Luis Obispo, California. The principal officers of OddWorld include Sherry
McKenna, Chief Executive Officer and Lorne Lanning, Vice President and
Secretary. Ms. McKenna, Mr. Lanning, Gary Vickers and William Gladstone are the
Directors of OddWorld. OddWorld was funded for the express purpose of creating
and publishing a new genre of games for advanced game consoles and Windows 95
MPC platforms, with an emphasis on adventure, action and problem solving games.
The interactive game that OddWorld has been developing since inception is known
as "SoulStorm(TM)."
CPTV, through KG, co-founded and acquired its interest in OddWorld in
September 1994 under several agreements (the "September 1994 Agreements") which,
in general, required that:
CPTV invest $2,252,450 to acquire shares of OddWorld Series A Preferred
Stock at $100 per share, all of which was used for project financing;
CPTV would be given a right to redeem its entire principal investment prior
to any significant distribution of profits to the equity owners.
Ms. McKenna and Mr. Lanning would perform services for OddWorld leading to
the development of SoulStorm(TM) under employment agreements; and
Shares of OddWorld Class A Common Stock to be owned by them would vest only
when the development of SoulStorm(TM) had been completed.
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<PAGE>
When CPTV acquired its interest in OddWorld, the parties had agreed on a
budget of approximately $2.3 million for development of SoulStorm(TM), the major
asset of OddWorld. At that time, the parties anticipated that SoulStorm(TM)
would be marketable in late 1996. Significant delays occurred, and development
of SoulStorm(TM) has cost approximately $3.7 million to date, is expected to
cost an additional approximate $1 million, and release is not expected until
1997.
Ownership of OddWorld
In the September 1994 Agreements, CPTV, through KG, purchased 19,600 shares
of Class A Common Stock for nominal consideration and purchased 22,524.5 shares
of Series A Preferred Stock for a total investment of $2,252,450. It was
expected that this investment would be sufficient to complete the development of
SoulStorm(TM). (CPTV's other subsidiary, Alexandria, Inc., acquired 5,000 shares
of non-voting Class B Common Stock at about the same time.) Following the
completion of the investment for the Series A Preferred Stock in approximately
February 1996, CPTV made two loans to OddWorld for $769,000 and $500,000
pursuant to a Loan and Security Agreement (described below). The Loan and
Security Agreement gives CPTV the right to convert the full amount advanced into
shares of OddWorld Class A Common Stock at the rate of $230 per share.
Ms. McKenna and Mr. Lanning each own 10,200 shares of Class A Common Stock.
These shares do not vest until the SoulStorm(TM) game has been completed. An
OddWorld employee owns 1,200 shares of Class B Common Stock.
Financing of SoulStorm(TM)
CPTV and its affiliates have been called upon to provide 100% of the
financing for the development of SoulStorm(TM). CPTV completed its purchase of
the Series A Preferred Stock in or about February 1996, and continued to loan
additional funds to OddWorld necessary for OddWorld to continue the development
of SoulStorm(TM). In May and June 1996, OddWorld did not have sufficient funds
to pay its employees or its expenses. Even though CPTV had no obligation to
advance additional working capital at that time, no other source of financing
was available to OddWorld and CPTV felt it was imperative to protect its
investment in OddWorld. In July 1996, OddWorld entered into a Loan and Security
Agreement whereby it acknowledged that CPTV had loaned $769,000 in addition to
the Series A Preferred investment, and in which CPTV agreed to advance an
additional $500,000 by September 1, 1996. On August 30, 1996, CPTV advanced
$64,300 (which amount was entirely in excess of the required $500,000). In
addition, CPTV has provided OddWorld with a guarantee allowing OddWorld to
purchase approximately $275,000 worth of equipment and CPTV, through its
Alexandria, Inc., subsidiary, has leased OddWorld extensive additional
equipment. Consequently, CPTV believes that it has provided OddWorld with
approximately $3.7 million in financing, an amount which has been insufficient
to complete the development of SoulStorm(TM) after a two year period.
In the Loan and Security Agreement, OddWorld granted CPTV a security
interest in all of OddWorld's tangible and intangible assets to collateralize
the repayment obligation for both the $769,000 and the $500,000 loans. In
addition, the loans are convertible into OddWorld Class A common stock at the
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<PAGE>
rate of $230 per share. The Loan and Security Agreement requires interest at 12%
per annum, and repayment on demand at any time on or after the earlier of
September 1, 1996 or such time as a third party acquires CPTV's entire interest
in OddWorld. At the time that OddWorld and KG entered into the Loan and Security
Agreement, OddWorld and KG were engaged in negotiations with GT relating to the
GT Transactions. CPTV has agreed not to exercise its conversion right pending
the closing of the GT Transactions. The repayment obligation under the Loan and
Security Agreement has been deferred, pending CPTV shareholder approval and the
release from escrow of the documents and funds necessary to complete the GT
Transactions, as described below.
Ms. McKenna and Mr. Lanning have indicated that they expect to contest the
repayment requirements of the Loan and Security Agreement, if CPTV shareholders
approval is not obtained. However, CPTV believes that the Loan and Security
Agreement is clear as to its terms, and that the full amount of the claimed
indebtedness is outstanding. However, despite CPTV's position, there can be no
assurance that Ms. McKenna and Mr. Lanning will not attempt to challenge CPTV's
financial position and rights. If such a dispute were to arise, arbitration or
litigation of any claims could further hinder the economic viability of
OddWorld, and the timing, or even the ultimate completion of the SoulStorm(TM)
title.
The cost overruns in developing SoulStorm(TM) have resulted in CPTV
demanding redemption of its Series A Preferred Stock as of June 6, 1996 in
accordance with its rights as outlined in the September 1994 Agreements. CPTV
also claimed that unless the SoulStorm(TM) game were finished by September 1996,
the employment contracts for Ms. McKenna and Mr. Lanning would expire according
to their terms and, unless they continued to finish SoulStorm(TM), their equity
interest in OddWorld would fail to vest. Ms. McKenna and Mr. Lanning have
indicated that they expect to dispute these assertions if the GT Transactions
are not completed. However, resolution of these issues has been deferred pending
completion of the GT Transactions.
Relationship with Alexandria
OddWorld contracted for services, personnel and equipment provided by
Alexandria, Inc., a wholly-owned subsidiary of CPTV ("Alexandria") to perform
software development services with funds provided by CPTV. OddWorld paid
Alexandria these costs (including overhead and a profit margin) on a fixed
contract basis. In addition, OddWorld paid Alexandria for the use of certain
software development tools which had been developed and were owned by
Alexandria. OddWorld also subleases space from Alexandria at Alexandria's
offices in San Luis Obispo. Alexandria continues to lease equipment and sublease
office space to OddWorld. As a result of agreements entered into with GT on
September 13, 1996, OddWorld (with funds being provided by GT) is now paying
100% of the office lease rental and will continue to pay Alexandria for the
equipment rental through the completion of the GT Transactions. If shareholder
approval of the GT Transactions is not obtained, however, CPTV must repay to GT
all funds provided by GT to OddWorld for these and other operating expenses up
to $625,000. In addition, certain shareholders of CPTV have agreed to indemnify
GT if CPTV is unable to make these payments when due. See "Related Party
Transactions" and "If Shareholder Approval Is Not Obtained", below.
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<PAGE>
GT Interactive Software Corp.
Since before May 1996 management of OddWorld, including Ms. McKenna and Mr.
Lanning, with the support of Mr. Vickers, have sought third-party financing
sources for the completion of the development of SoulStorm(TM). While a number
of publishers expressed interest in SoulStorm(TM), commencing in late May 1996
OddWorld management chose to focus exclusively on negotiations with GT.
On September 13, 1996, the parties executed agreements for the completion
of the GT Transactions. The transactions contemplated by these agreements (the
"GT Agreements") involve OddWorld, Ms. McKenna and Mr. Lanning, CPTV and KG:
In a complex series of transactions, CPTV agreed to sell its interest in
OddWorld by exchanging its Class A and B Common Stock and Series A
Preferred Stock for a newly-created voting Series B Preferred Stock of
OddWorld, and then to sell to GT all of this Series B Preferred Stock and
assign all "Affiliate Indebtedness" to GT for $7 million less accrued,
unpaid expenses as of August 16, 1996 (approximately $175,000). "Affiliate
Indebtedness" includes all amounts owing under the Loan and Security
Agreement, including the $769,000 and the $500,000 loans described under
"Financing of SoulStorm(TM)," amounts owed to Alexandria for rental and
other payments, and other amounts owing by OddWorld to CPTV, Alexandria, or
any other affiliate of CPTV, including the $64,300 advance made on August
30, 1996. In addition, Alexandria conveyed all of its assignable assets
(including software, hardware, fixtures, and contract rights associated
therewith) to OddWorld.
OddWorld also agreed to sell to GT, for approximately $285,000, 80
additional shares of new Series B Preferred Stock the result of which will
give GT voting parity with Ms. McKenna and Mr. Lanning after the GT
Transaction is completed following shareholder approval. OddWorld also
entered into a publishing agreement with GT by which GT obtained exclusive
rights to SoulStorm(TM), and OddWorld provided GT with certain credits
against funds advanced by GT.
Ms. McKenna and Mr. Lanning entered into employment agreements with
OddWorld by which they committed to complete the development of
SoulStorm(TM).
GT agreed to advance up to $625,000, and, in its discretion, may make
further advances up to an aggregate of $825,000, to OddWorld for working
capital purposes, to enable OddWorld to pay necessary expenses such as
payroll, equipment rental, lease expenses, and other general expenses. As a
condition of the advances, GT required that CPTV indemnify GT up to
$625,000 if the advances were not repaid if CPTV shareholder approval of
the GT Transactions was not timely obtained; GT also required that two
shareholders of CPTV, Kim and Gary Magness, personally act as sureties to
ensure CPTV's indemnification obligation. See "Related Party Transactions"
and "If Shareholder Approval Is Not Obtained", below.
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<PAGE>
The GT Transactions were closed on September 13, 1996. However, because the
GT Transactions require approval of the shareholders of CPTV, all agreements and
funds were placed in escrow pending CPTV shareholder approval. Consequently,
except for GT's obligation to advance funds to OddWorld, CPTV's indemnification
obligation, and Messrs. Magness' surety obligation, none of the agreements are
currently effective. Upon shareholder approval, however, the agreements will be
released from escrow and will be deemed to have been effective as of September
13, 1996. The purpose of the Special Meeting is to seek the approval by the
shareholders of CPTV to the sale to GT of CPTV's entire interest in OddWorld.
Even after shareholder approval and the completion of the GT Transactions,
the escrow agent (Republic National Bank of New York) will retain 10% of the
purchase price ($700,000) in escrow for an additional two years. The purpose of
this holdback escrow is to provide GT with potential recourse against any valid
future claims should any of the representations and warranties made to it by
CPTV or KG in the Purchase Agreement lead to any valid claims against CPTV's
interest. Under the agreement, GT may make no claim unless the total of all
claims results in damages to GT exceeding $100,000. Thereafter, GT may claim all
damages suffered as a result of breaches of representations and warranties in
excess of $100,000, but all potential future claims and liabilities will be
capped at $2,000,000 of the original $7,000,000 purchase price (such cap
including the $700,000 holdback). In the agreements with GT, CPTV made numerous
representations and warranties, including a representation that the intellectual
property included in SoulStorm(TM) is owned by OddWorld. Based on its knowledge,
CPTV believes that the representations and warranties were true and correct in
all material respects when made. CPTV does not anticipate that any substantial
claims will arise therefrom. It must be recognized, however, that no assurances
can be given in this regard, and that if any claim does arise and is found to be
valid, CPTV could incur total liabilities of up to $2,000,000 (including defense
costs) over the next two years.
Related Party Transactions
Since February 1996, CPTV has reported that its working capital was not
sufficient to fund the development of SoulStorm(TM) to completion. In June 1996
it became apparent that CPTV's available capital was insufficient to continue to
wholly finance the operations of OddWorld and to continue to meet its own
obligations. At that time, however, negotiations with GT were proceeding well
and these negotiations eventually resulted in letters of intent with GT in early
July 1996. Thereafter, CPTV and its affiliates provided bridge financing for
OddWorld's operations based on the prospect of completing the final agreements
with GT. As a means of financing OddWorld and providing CPTV with collateral for
amounts previously advanced, CPTV entered into the Loan and Security Agreement
on July 12, 1996. To obtain the necessary funds to meet its commitments under
the Loan and Security Agreement, CPTV borrowed $500,000 from three shareholders,
Mr. Gary Vickers (also president and a director of CPTV, $100,000), Mr. Gary
Magness (also a director, $200,000), and Mr. Kim Magness ($200,000). A condition
of these advances was that CPTV would pass through to Messrs. Vickers and
Magness and Magness all interest and conversion rights to OddWorld common stock
which were bargained for and included in the Loan and Security Agreement.
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<PAGE>
Once the due diligence period expired, GT's agreement to proceed with the
transactions required GT to begin funding OddWorld's operation up to $625,000,
and, in its discretion, may make further advances up to an aggregate of
$825,000, pending CPTV shareholder approval. GT conditioned its agreement to
provide this working capital financing on the assurance of repayment of up to
$625,000 by CPTV and an agreement from Messrs. Kim and Gary Magness to act as
surety for CPTV's repayment obligation if CPTV does not obtain shareholder
approval of the GT Transactions by December 15, 1996. Messrs. Magness agreed to
provide this assurance of repayment in the form of a surety agreement,
conditional on them obtaining CPTV's commitment to include any amounts paid by
them on this surety as indebtedness of CPTV and OddWorld, convertible into
OddWorld Class A Common Stock should the GT Transactions not be completed.
If CPTV obtains shareholder approval of the GT Transactions by December 15,
1996, these agreements will expire, and neither CPTV, Mr. Vickers, nor Messrs.
Magness will have any remaining direct or indirect interest in OddWorld. CPTV
will, however, continue to have outstanding a demand note in favor of Messrs.
Vickers and Magness under which CPTV will be obligated to repay the $500,000
which they advanced to CPTV, plus interest at the rate of 12% per annum from the
inception of the loan. (The interest rate payable to Messrs. Vickers and Magness
is identical to the interest rate in the Loan and Security Agreement.) CPTV's
repayment obligation to Messrs. Vickers and Magness will be repaid to them from
the proceeds of the GT Transactions when received by CPTV.
As noted, persons holding a sufficient number of shares have agreed to vote
for the approval of the GT Transactions, thus assuring CPTV that approval will
be obtained when the matter is submitted to the shareholders.
If Shareholder Approval Is Not Obtained
Although holders of more than a majority of the votes to be cast at the
Special Meeting have agreed to vote in favor of the GT Transactions, it is
possible that shareholder approval may be abandoned due to a substantial delay
or other impediment preventing the Special Meeting from being held timely. If
shareholder approval has not occurred, but is reasonably likely in the near
future, it is possible that the parties may extend the date and continue funding
OddWorld's operations, although the parties have no obligation to do so.
If the parties do not extend the shareholder approval date, the various
agreements and collateral documents will be returned by the escrow agent
directly back to the respective parties to the transaction. The funds will be
returned to GT and the GT Transactions will be cancelled as though the
transactions never took place. In addition, OddWorld must repay GT all amounts
advanced, and seek new provisions for the continuing operations of OddWorld.
There are no assurances that additional working capital can be secured before a
substantial disruption to OddWorld's operations may occur.
-9-
<PAGE>
Repayment of Amounts Advanced to GT. If shareholder approval is not timely
obtained, OddWorld will be obligated to repay GT all funds advanced by GT up to
$825,000. If OddWorld is unable to repay GT this amount, CPTV will be obligated
to repay the first $625,000 of principal and interest accrued thereon (at 8% per
annum) to GT.
It is anticipated that OddWorld will be unable to make the necessary
payment if due. As noted above, since inception in September 1994, OddWorld has
not been able to secure independent financing, and has chosen to rely solely on
financing provided by CPTV and now GT. OddWorld's obligation to repay (up to
$625,000) will likely become the responsibility of CPTV which will attempt to
raise sufficient new capital to perform its obligations on a timely basis. If it
appears possible that for any reason shareholder approval will not be timely
obtained, CPTV will immediately commence inquiries among potential investors
(including publishers and related parties) for interest in advancing the funds
necessary to repay GT and to provide other financing to OddWorld. If CPTV is
unable to obtain additional financing, GT will rely on the Magness surety
agreement for full payment of amounts advanced (up to $625,000). Any amount
advanced by GT in excess of $625,000 (up to $825,000) will continue to be a
repayment obligation of OddWorld but not of CPTV, and will not be subject to the
Magness surety agreement and will be unsecured debt.
Continuing Operations of OddWorld. In connection with the September 13,
1996, closing of the GT Transactions, CPTV, OddWorld, Ms. McKenna and Mr.
Lanning entered into a "Non-waiver and Consent Agreement" to provide a means of
maintaining their respective rights under the September 1994 Agreements, the
Loan and Security Agreement, and otherwise without, however, asserting those
rights. As discussed above, prior to the closing CPTV exercised certain rights
with respect to its Series A Preferred Stock and was prepared to exercise
certain rights it held under the Loan and Security Agreement.
If the GT Transactions are not completed as scheduled, it is anticipated
that the control of Oddworld's on-going operations will be unsettled and
volatile. Although the parties have expressed a willingness to discuss
arrangements for the continuing operation of OddWorld in such an event, there
can be no assurance that the parties will be able to reach an agreement. If the
parties are not able to reach an agreement, litigation or arbitration will
likely result, and it is the belief of CPTV that the economic opportunity for
the sale of OddWorld or SoulStorm(TM) will be substantially impaired.
CPTV believes that its position vis-a-vis Ms. McKenna and Mr. Lanning based
on the existing contracts, the significant amount of its investment, and their
failure to complete SoulStorm(TM) within the original budget, would allow it to
prevail over any counter arguments asserted by Ms. McKenna and Mr. Lanning. CPTV
believes that the value inherent in the underlying technology of SoulStorm(TM)
and the value of CPTV's investment in OddWorld is dependent upon the timely
introduction of the product to market. If the introduction of SoulStorm(TM) to
the market is delayed due to disputes among the parties, CPTV believes that
technological obsolescence may render the OddWorld investment uneconomical and
this, in turn, would have a severe impact on CPTV's shareholder value.
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Due to the foregoing, CPTV considers it to be most prudent and important to
complete the GT Transactions timely. CPTV believes that the dispute and
difficulties that are likely to develop if the GT Transactions are not completed
will clearly not be in the best interests of CPTV or its shareholders.
If Shareholder Approval Is Timely Obtained
The agreements with GT require that approval be obtained from the
Securities and Exchange Commission for this Information Statement not later than
December 1, 1996, and that shareholder approval be obtained from the CPTV
shareholders not later than December 15, 1996. As indicated above, CPTV has
obtained a voting agreement from persons holding 50.3% of the outstanding vote
at the shareholders' meeting and, therefore, if the meeting is held shareholder
approval is assured.
If shareholder approval is timely obtained, the agreements and the
collateral documents (including certificates and legal opinions) all will be
released from escrow and delivered to the respective parties. The GT
Transactions then become fully completed and CPTV will no longer have any direct
or indirect interest in OddWorld, SoulStorm(TM), or certain of the Alexandria
assets. CPTV will receive approximately $6,125,000 and $700,000 will be retained
in the holdback escrow. In September 1998 the funds in the holdback escrow will
be released to CPTV unless a valid claim is authorized therein reduces the
holdback provision.
In addition, GT has agreed to cause OddWorld to assume all liabilities with
respect to third party leases of equipment and loans collateralized by equipment
which have been guaranteed by CPTV. This will result in the return of
approximately $350,000 of collateral to CPTV on or about the date of completion
of the GT Transactions, which is in a return of capital in addition to the
purchase price.
Initially, KG and CPTV will use the proceeds to pay all existing debts
(estimated to be approximately $650,000 at August 31, 1996, including $500,000
payable to Messrs. Kim and Gary Magness and Gary Vickers for the loan made in
July 1996 to provide financing to OddWorld). CPTV is continuing to incur
expenses in connection with the completion of the GT Transactions and its
operating expenses; as a result, CPTV estimates that total transaction costs and
liabilities will continue to accumulate through the Special Meeting.
Following the Special Meeting, the CPTV Board of Directors will consider
various alternatives including (without limitation) seeking and considering
other business opportunities that may be presented to CPTV or making a partial
distribution of the net cash proceeds to the shareholders.
Following the completion of the GT Transactions, CPTV will have a
substantial amount of capital which it will invest in certificates of deposit,
short-term obligations of the United States government, or other suitable
short-term investments. At the present time the Company does not intend to
become an investment company under the Investment Company Act of 1940 and,
therefore, may be limited in the temporary investments that it can make with the
net proceeds from the GT Transactions.
THE BOARD HAS MADE NO DETERMINATION WHETHER TO PURSUE ANY OR A COMBINATION OF
THE FOREGOING POSSIBLE COURSES. CPTV AND ITS BOARD OF DIRECTORS HAVE
CONCENTRATED ON COMPLETING THE GT TRANSACTIONS, AND WILL CONSIDER FUTURE
ALTERNATIVES FOLLOWING THE COMPLETION OF THE GT TRANSACTIONS (IF COMPLETED). TO
THE EXTENT ANY MATTER MUST BE SUBMITTED TO SHAREHOLDERS FOR APPROVAL IN
CONNECTION WITH ANY FUTURE ACTION, IT WILL BE SUBMITTED TO THE SHAREHOLDERS AT
ANOTHER MEETING, NOT AT THIS SPECIAL MEETING.
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Following the completion of the GT Transactions, CPTV will be a public
company with a significant amount of liquidity. The Board of Directors believes
that CPTV would be an attractive merger or acquisition target for successful
businesses that may be in need of additional working capital or a public
shareholder base. Such a transaction will possibly give the shareholders of CPTV
an interest in a related or new line of business and the opportunity to grow
with the business combination.
Although it believes that it has developed a specialized knowledge of the
interactive entertainment industry, CPTV does not propose to restrict its search
for investment opportunities to any particular industry. CPTV anticipates that
the selection of a business opportunity will be a complex process and will
involve a number of risks since emerging growth business opportunities are
inherently more volatile than more mature businesses. As a result of rapid
technological advances being made in some industries and shortages of available
capital, management believes that there are numerous firms seeking either the
available capital which CPTV will have or the benefits of a publicly traded
corporation, or both.
CPTV anticipates that business opportunities will be brought to its
attention from various sources, including its officers and directors,
professional advisors such as attorneys and accountants, securities
broker-dealers, venture capitalists, members of the financial community, and
others who may present unsolicited proposals.
To a large extent, a decision to participate in a specific business
opportunity will be made upon management's analysis of the quality of the other
firm's management and personnel, or the ability of CPTV's management to assume
management of the target firm; the anticipated acceptability of new products or
marketing concepts; the merit of technological changes; and numerous other
factors which are difficult, if not impossible, to analyze through the
application of any objective criteria. In many instances, the historical
operations of a specific firm may not necessarily be indicative of future
potential due to proposed remedial measures such as to shift marketing
approaches, expand operations, change product emphasis, change or substantially
augment management or make other changes. CPTV may be dependent upon the owners
of a business opportunity to identify problems. If CPTV participates in a
business opportunity with a newly organized firm or with a firm which is
entering a new phase of growth, CPTV will incur further risk since management of
the target company in many instances will not have proved its abilities or
effectiveness. It can be expected that a market for such firm's products or
services may not be established, and the profitability of the firm will be
unproven and unpredictable.
CPTV's Board of Directors has the authority to effect certain business
combinations without submitting the proposal to the shareholders for their
consideration. In some instances, however, the proposed participation in a
business opportunity may be submitted to the shareholders for their
consideration, either voluntarily by the Board of Directors to seek the
shareholders' advice and consent, or because of a requirement of state law to do
so. Any shareholder vote will be solicited in accordance with the applicable
rules and regulations of the Securities and Exchange Commission and state law.
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The Board of Directors and management of CPTV believe that the shareholders
of CPTV have not been able to enjoy the full value of their holdings as the
price of the CPTV common stock as reflected on the NASDAQ-Small Cap market has
consistently carried a market capitalization reflecting less than one-half of
CPTV's book value per share. Given the current depressed price of CPTV common
stock management of CPTV may at some time recommend that the Board of Directors
consider distributing a portion of the proceeds from the GT Transactions to
shareholders as a dividend. If made, any such distribution may have tax
consequences to the CPTV shareholders receiving the dividend. No distribution is
currently being proposed.
Accounting and Tax Treatment
Based on advice from its accountants, the GT Transactions will be
considered the sale or exchange of a capital asset on CPTV's consolidated
financial statements. At May 31, 1996, CPTV had a basis in its investment in
OddWorld equal to approximately $3.7 million and additional fixed assets being
assigned by Alexandria. Assuming that the net purchase price is $6,850,000, CPTV
expects to recognize a gain on sale of approximately $3 million. It is expected
that CPTV's net operating loss carry-forward at May 31, 1996 exceeds that
amount. CPTV does not expect that the GT Transactions will result in any taxable
gain other than possibly alternative minimum taxation.
Shareholders will recognize no gain or loss as a result of CPTV completing
the GT Transactions.
Financial Data
Attached as Exhibit "B" to this Information Statement is certain historical
and pro-forma financial information intended to show the pro-forma CPTV Balance
Sheet assuming the GT Transactions occurred on May 31, 1996 and the pro-forma
CPTV Statements of Operations assuming that the GT Transactions had occurred on
September 1, 1994.
Representatives of Gelfond Hochstadt Pangburn & Co. are expected to be at
the Special Meeting, will have an opportunity to make a statement, and will be
available to respond to appropriate questions.
Stock Price
The first public announcement of the GT Transactions occurred on September
13, 1996. The high and low sale prices as of September 12, 1996 (the day
immediately preceding this public announcement) were $0.50 and $0.4375,
respectively.
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Interest of Certain Persons in or Opposition to Matters to be acted Upon
Certain persons affiliated with CPTV have a significant interest in the
matters to be acted upon at the Special Meeting and the completion of the GT
Transactions. The following is a summary of these interests:
A portion of the proceeds from the GT Transactions will be used to repay
Kim Magness, Gary Magness and Gary Vickers $500,000 they advanced to CPTV
in July through September 1996, plus interest at 12% per annum.
If shareholder approval of the GT Transactions is not achieved at the
Special Meeting, Messrs. Kim Magness and Gary Magness have agreed to act as
a surety for up to $625,000 of amounts advanced by GT to OddWorld. If the
GT Transactions are completed following shareholder approval, they will be
relieved of this repayment obligation. CPTV paid Messrs. Magness no
consideration for their acting as a surety.
Messrs. Gary Magness, Kim Magness and Vickers are significant shareholders
of CPTV, having purchased in the aggregate 1,000,000 shares of Common Stock
and 1,000,000 shares of Series A Convertible Preferred Stock for a total
investment of $500,000 in August 1993.
Required Vote
The Board of Directors has voted unanimously to approve the GT
Transactions. As required by the Colorado Business Corporation Act, the
shareholders must approve the GT Transactions by a majority vote of the
outstanding shares entitled to vote. Certain officers, and directors holding
approximately 50.32% of the shares entitled to vote have agreed to vote in favor
of the proposed GT Transactions. Those individuals are as follows:
Gary Magness, Director 12.14%*
Kim Magness, Co-Founder 12.33%*
Gary Vickers, President
and Director 25.04%*+
William Gladstone, Director 0.81%
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* Includes an aggregate of 1,000,000 shares of Series A Preferred Stock which
is entitled to vote on a parity with, and in the same class as, the Common
Stock.
+ Includes an irrevocable proxy granted by a family member to Gary Vickers to
vote 74,000 shares of CPTV Common Stock.
As a result of this voting agreement, approval of the GT Transactions at the
Special Meeting is assured.
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Dissenter's Rights
Shareholders of CPTV have the right to dissent from the action of other
shareholders in the approval of the GT Transactions. Dissenters are entitled to
obtain payment of the fair value of their shares under Colorado law.
STRICT COMPLIANCE WITH COLORADO LAW WILL BE NECESSARY TO RETAIN SUCH
RIGHTS. SEE EXHIBIT A.
REGARDLESS OF THE NUMBER OF SHAREHOLDERS WHO MAY ELECT TO DISSENT FROM THE
TRANSACTION, MANAGEMENT DOES NOT INTEND TO ABANDON THE GT TRANSACTIONS.
A shareholder must dissent as to all of the shares registered in his name
unless the shareholder is holding shares beneficially for other people. In that
case, he must advise CPTV, in writing as to the name address and taxpayer
identification number of the person or persons on whose behalf he dissents, and
must dissent as to all of the shares held for the benefit of such persons. A
beneficial holder of shares who is not a record holder may assert dissenter's
rights with respect to all of the shares held on his behalf if he also submits
to CPTV the consent of the record holder.
To assert the right to dissent, a shareholder must file with CPTV, prior to
the Special Meeting of Shareholders, a written notice of his intention to demand
that he be paid fair compensation for his shares and must refrain from voting
his shares in approval of such action. A shareholder may abstain from voting for
the proposal, and that will not constitute a waiver of his right to dissent. A
vote against the proposal at the meeting does not satisfy the notice
requirement. A shareholder who fails in either respect will not acquire a right
to payment for his shares.
When the proposal is approved by the required vote at the Special Meeting,
CPTV will mail within ten days of such approval, notice to all shareholders who
are entitled to demand payment for their shares. The notice shall state where
and when demand for payment should be sent and the certificates representing the
shareholders' stock should be deposited in order to obtain payment, supply a
form for demanding payment, which shall request the shareholder to state the
address to which payment is to be made, and will also be accompanied by a copy
of the statutes which are attached hereto as Exhibit A. The time set for the
demand and deposit will be not less than 30 days from the mailing of the notice.
A shareholder who fails to properly demand payment or fails to deposit
certificates, as required by the notice mailed to such shareholder, will have no
right to receive payment for his shares.
CPTV expects to pay the dissenting shareholders the fair value of the
shares within 60 days following the time described in the notice for demand
unless CPTV abandons the GT Transactions. "Fair Value" has not yet been
established. This payment will be accompanied by CPTV's closing balance sheet
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and statement of income for the latest fiscal year, and available interim
financial statements, a statement as to CPTV's estimate of the fair value of the
shares, an explanation of how the interest was calculated, and a notice of each
dissenting shareholder's right to demand supplemental payment, together with the
statutes set forth in Exhibit A.
Within 60 days after receiving a demand for payment or supplemental payment
as described in the preceding paragraph, if any such demand for payment remains
unsettled, CPTV will file in a court of competent jurisdiction in Denver,
Colorado, a petition requesting that the fair value of the shares and the
interest thereon be determined by the court. All dissenters, wherever residing,
whose demands have not been settled will be made parties to the proceeding as in
an action against their shares. All dissenters who are made parties are entitled
to judgment for the amount by which the fair value of their shares is found to
exceed the amount previously remitted, with interest.
If CPTV fails to file a petition, each dissenter who has made a demand and
who has not already settled his claim against CPTV will be paid by CPTV the
amount demanded by him with interest and the dissenter may sue for payment in an
appropriate court.
For more detailed information as to the rights of dissenting shareholders
and the procedures to be followed in the event of a dissention, shareholders are
referred to the applicable sections of the Colorado Business Corporation Act, a
copy of which is attached as Exhibit A.
A VOTE AGAINST PROPOSAL ONE AND/OR THE FACT THAT A SHAREHOLDER DOES NOT VOTE
WILL NOT IN ITSELF CONSTITUTE THE WRITTEN DEMAND REQUIRED BY COLORADO LAW TO
ENTITLE A SHAREHOLDER TO PAYMENT FOR HIS SHARES. WRITTEN DEMAND MUST BE
SEPARATELY MADE IN ACCORDANCE WITH THE STATUTORY PROCEDURE.
OTHER MATTERS
Management does not know of any other matters to be brought before the
meeting.
By Order of the Board of Directors:
CREATIVE PROGRAMMING AND
TECHNOLOGY VENTURES, INC.
Gary R. Vickers, President
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EXHIBIT A
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Colorado Business Corporation Act Section 7-113-101, et seq. Dissenters' Rights
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ARTICLE 113
DISSENTERS' RIGHTS
PART 1
RIGHT OF DISSENT
PAYMENT FOR SHARES
7-113-101. Definitions. For purposes of this Article:
(1) "Beneficial shareholder" means the beneficial owner of shares held in a
voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by Part 2 of this article.
(4) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102. Right to Dissent.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event of
any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the Articles of
Incorporation; or
(II) The corporation is a subsidiary that is merged with its
parent corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
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(d) Consummation of a sale, lease, exchange or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote upon
the consent of the corporation to the disposition pursuant to section
7-112-102(2);
(2) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event
of:
(a) An amendment to the Articles of Incorporation that materially and
adversely affects rights in respect of the shares because it:
(I) Alters or abolishes a preferential right of the shares; or
(II) Creates, alters or abolishes a right in respect of
redemption of the shares, including a provision respecting a sinking fund for
their redemption or repurchase; or
(b) An amendment to the Articles of Incorporation that affects rights
in respect of the shares because it:
(I) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(II) Reduces the number of shares owned by the shareholder to a
fraction of a share or to scrip if the fractional share or scrip so created is
to be acquired for cash or the scrip is to be voided under section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the Bylaws or a resolution of the Board of Directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103. Dissent by Nominees and Beneficial Owners.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and the
other shares of the record shareholder were registered in the names of different
shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned
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beneficially by the beneficial shareholder have asserted, or will timely assert,
dissenters' rights as to all such shares as to which there is no limitation on
the ability to exercise dissenters' rights. Any such requirement shall be stated
in the dissenters' notice given pursuant to section 7-113-203.
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
7-113-201. Notice of Dissenters' Rights.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice
of the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
Title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (l).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107- 104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
Title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (2).
7-113-202. Notice of Intent to Demand Payment.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, and if
notice of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201 (l), a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107- 104, and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201 (2), a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1)
or (2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
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7-113-203. Dissenters' Notice.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall
be given no later than ten days after the effective date of the corporate action
creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated shares
must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be less
than thirty days after the date the notice required by subsection (1) of this
section is given;
(f) State the requirement contemplated in section 7-113-103(3), if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204. Procedure to Demand Payment.
(1) A shareholder who is given a dissenters' notice pursuant to section 7-
113-203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be
the payment demand form contemplated in section 7-113-203(2)(d), duly completed,
or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to transfer
the shares, until the effective date of the proposed corporate action giving
rise to the shareholder's exercise of dissenters' rights and has only the right
to receive payment for the shares after the effective date of such corporate
action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the demand
for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificate as required by the date or dates set in the dissenters' notice
is not entitled to payment for the shares under this article.
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7-113-205. Uncertificated Shares.
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206. Payment.
(1) Except as provided in section 7-113-208, upon the effective date of the
corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,
the corporation shall pay each dissenter who complied with section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, the
amount the corporation estimates to be the fair value of the dissenter's shares,
plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet as of
the end of a fiscal year ending not more than sixteen months before the date of
payment, an income statement for that year, and, if the corporation customarily
provides such statements to shareholders, a statement of changes in
shareholders' equity for that year and a statement of cash flow for that year,
which balance sheet and statement shall have been audited if the corporation
customarily provides audited financial statements to shareholders, as well as
the latest available financial statements, if any, for the interim or full-year
period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207. Failure to Take Action.
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections
7-113-204 to 7-113-209 shall again be applicable.
A-6-
<PAGE>
7-113-208. Special Provisions Relating to Shares Acquired After
Announcement of Proposed Corporate Action.
(1) The corporation may, in or with the dissenters' notice given pursuant
to section 7-113-203, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that the dissenter shall
certify in writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the shares
before that date. With respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the dissenter or the person on
whose behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date,the corporation may, in lieu of making
the payment provided in section 7-113-206, offer to make such payment if the
dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).
7-113-209. Procedure if Dissenter is Dissatisfied with Payment or Offer.
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of the
shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the corporation
must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as required
by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
PART 3
JUDICIAL APPRAISAL OF SHARES
7-113-301. Court Action.
(1) If a demand for payment under section 7-113-209 remains unresolved, the
corporation may, within sixty days after receiving the payment demand, commence
a proceeding and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection
(1) of this section in the district court of the county in this state where the
corporation's principal office is located or, if it has no principal office, in
the district court of the county in which its registered office is located. If
the corporation is a foreign corporation without a registered office, it shall
commence the proceeding in the county where the registered office of the
domestic corporation merged into, or whose shares were acquired by, the foreign
corporation was located.
A-7-
<PAGE>
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding commenced
under subsection (2) of this section as in an action against their shares, and
all parties shall be served with a copy of the petition. Service on each
dissenter shall be by registered or certified mail, to the address stated in
such dissenter's payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of shareholders
for the record shareholder holding the dissenter's shares, or as provided by
law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302. Court Costs and Counsel Fees.
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation; except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the requirements
of Part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to said counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefitted.
A-8-
<PAGE>
EXHIBIT B
---------
Historical and Pro Forma Financial Statements
---------------------------------------------
B-1-
<PAGE>
CREATIVE PROGRAMMING AND
TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED AUGUST 31, 1995 AND
NINE MONTHS ENDED MAY 31,1996
On September 13,1996, Creative Programming and Technology Ventures, Inc.
("CPTV", the "Company") sold its ownership interest in OffWorld Entertainment,
Inc. doing business as OddWorld Inhabitants ("OddWorld") to an unrelated third
party for $7,000,000, net of approximately $175,000 in unpaid expenses. In
addition, in August 1996, the Company substantially ceased the operations of
Alexandria, Inc. ("Alexandria") and certain of its assets were transferred to
OddWorld and are included in the sale of OddWorld. Upon approval of these
transactions by the Company's shareholders, the Company is to receive cash of
$6,125,000 with an additional $700,000 to be retained in a holdback escrow
account until September 1998 unless a valid and proven claim by the purchaser
reduces the holdback escrow amount. The accompanying unaudited pro forma
consolidated balance sheet as of May 31, 1996 gives effect to the sale of the
Company's ownership interest in OddWorld and the termination of operations by
Alexandria as if the transactions had been consummated on May 31, 1996. The
accompanying unaudited pro forma consolidated statements of operations for the
year ended August 31, 1995 and the nine months ended May 31,1996 give effect to
the sale of OddWorld and the scaling back of operations by Alexandria as if the
transactions had been consummated on September 1, 1994.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the historical financial statements of the Company. The
unaudited pro forma consolidated financial statements do not purport to be
indicative of the financial position of the Company had the sale occurred on May
31,1996. Nor do the unaudited pro forma financial statements purport to be
indicative of the results of operations that actually would have occurred had
the sale been consummated on September 1, 1994 or to project the Company's
financial position or results of operations for any future period.
1
<PAGE>
CREATIVE PROGRAMMING AND
TECHNOLOGY VENTURES, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
MAY 31, 1996
ASSETS
<TABLE>
<CAPTION>
Creative
Programming
and Technology Pro forma Pro forma
Ventures Inc. adjustments consolidated
--------------- ----------- ------------
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 502,116 (1) $5,760,998 $6,263,114
Accounts receivable 25,520 (1) (25,520)
Prepaid expenses 76,543 76,543
Note receivable under sale
of discontinued operations 79,320 79,320
--------- ---------- ----------
Total current assets 683,499 5,735,478 6,418,977
---------- ---------- ----------
Property and equipment, net 867 202 (1) (855,386) 11,816
---------- ----------- ----------
Other assets:
Certificate of deposit 281,000 281,000
Investment 35,000 35,000
Restricted cash (2) 700,000 700,000
Project costs 1,752,345 (1) (1,484,738)
(1) (267,607)
Note receivable under sale of
discontinued operations, net
of current portion 50,837 50,837
Organization costs and other 106,238 (1) (76,053) 30,185
---------- ---------- ----------
Total other assets 2,225,420 (1,128,398) 1,097,022
---------- ---------- ----------
Total assets $3,776,121 $3,751,694 $7,527,815
========== ========== ==========
</TABLE>
(Continued)
2
<PAGE>
CREATIVE PROGRAMMING AND
TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
MAY 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Creative
Programming
and Technology Pro forma Pro forma
Ventures Inc. adjustments consolidated
--------------- ----------- ------------
Current liabilities:
<S> <C> <C> <C>
Current portion of long-term debt:
Financial institution $ 119,410 (1) $(119,410)
Obligations under capital
leases 19,905 (1) (19,905)
Accounts payable, trade 174,340 (1) (135,273) $ 39,067
Accrued expenses and other 84,193 (1) (84,193)
---------- --------- ---------
Total current liabilities 397,848 (358,781) 39,067
---------- --------- ---------
Notes payable financial institution,
net of current portion 127,901 (1) (127,901)
Obligations under capital leases,
net of current portion 5,495 (1) (5,495)
---------- ---------
Total long-term liabilities 133,396 (133,396)
---------- ---------
Shareholders' equity:
Preferred stock, par value $0.01;
authorized 10,000,000 shares,
issued and outstanding 1,000,000
(aggregate liquidation preference
$10,000) 10,000 10,000
Common stock, par value $0.01;
authorized 50,000,000 shares,
issued 3,321,200 shares 33,212 33,212
Capital in excess of par 8,284,337 8,284,337
Deficit (5,020,161) (1) 3,543,871
(2) 700,000 (776,290)
Less 111,121 shares of common
stock in treasury, at cost (62,511) (62,511)
---------- --------- ---------
Total shareholders' equity 3,244,877 4,243,871 7,488,748
---------- --------- ---------
Total liabilities and
shareholders' equity $3,776,121 $3,751,694 $7,525,815
========== ========== ==========
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
3
<PAGE>
CREATIVE PROGRAMMING AND
TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED MAY 31, 1996
<TABLE>
<CAPTION>
Creative
Programming
and Technology Pro forma Pro forma
Ventures Inc. adjustments consolidated
--------------- ----------- ------------
<S> <C> <C> <C>
Revenues $ 80,560 (3) $ (80,560)
Cost of sales 893,628 (3) (893,628)
--------- ---------
Gross profit (loss) 813,068 813,068
Selling, general and
administrative expenses 1,939,475 (3)(1,169,619) $ 769,856
Impairment loss 73,732 (3) (73,732)
--------- --------- ---------
Loss from operations (2,826,275) 2,056,419 (769,856)
Other credits (charges):
Investment income (4) 321,500
Interest expense 101,489 (3) (3,027) 419,962
Net loss (18,033) (3) 18,033
$(2,742,819) $2,392,925 $(349,894)
=========== ========== =========
Net loss per common share $ (0.83) $ (0.11)
=========== =========
Weighted average
number of common shares 3,307,896 3,307,896
========= =========
See notes to unaudited pro forma consolidated financial statements.
4
</TABLE>
<PAGE>
CREATIVE PROGRAMMING AND
TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1995
<TABLE>
<CAPTION>
Creative
Programming
and Technology Pro forma Pro forma
Ventures Inc. adjustments consolidated
---------------- ----------- ------------
<S> <C> <C>
Revenues $ 412,936 (5) $ (412,936)
Cost of sales 473,473 (5) (473,473)
--------- ----------
Gross profit (loss) (60,537) 60,537
Selling, general and
administrative expenses 2,148,990 (5) (968,476) $1,180,514
---------- ---------- ----------
Loss from operations (2,209,527) 1,029,013 (1,180,514)
Other credits (charges):
Investment income 265,482 (6) 428,750
(5) (11,024) 683,208
Interest expense (17,063) (5) 16,866 (197)
---------- ---------- ----------
Loss from continuing operations
before income tax and minority
interest (1,961,108) 1,463,605 (497,503)
Income tax benefit 124,920 124,920
Minority interest in loss of
consolidated subsidiary 26,720 (5) (26,720)
---------- --------- ----------
Loss from continuing operations (1,809,468) 1,436,885 (372,583)
Discontinued operations:
Income from operations of
divested subsidiary net of
income tax expense of $95,100 294,760 294,760
Gain on disposal of divested
subsidiary net of income tax
expense of $29,820 76,020 76,020
----------- ---------- ----------
Net income (loss) $(1,438,688) $1,436,885 $ (1,803)
=========== ========== ==========
Income (loss) per common share:
Loss from continuing operations $ (0.54) $ (0.11)
Income from discontinued
operations .09 .09
Gain on disposal of divested
subsidiary .02 .02
----------- ----------
Net income (loss) $ (0.43) $ 0
=========== ==========
Weighted average
number of common shares 3,380,499 3,380,449
=========== ==========
See notes to unaudited pro forma consolidated financial statements.
5
</TABLE>
<PAGE>
CREATIVE PROGRAMMING AND
TECHNOLOGY VENTURES, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED AUGUST 31, 1995 AND
NINE MONTHS ENDED MAY 31, 1996
1. To record the cash received, assets and liabilities disposed of,
transaction costs and the gain on sale of OddWorld and fixed assets of
Alexandria.
2. To record the cash required to be retained in a holdback escrow until
September 1998 unless a claim by the purchaser reduces the escrow amount.
3. To eliminate the operations of OddWorld and Alexandria from the
consolidated statement of operations of the Company for the nine months
ended May 31, 1996 assuming the sale had occurred on September 1, 1994.
4. To record investment income on the net proceeds from the sale of OddWorld
at an estimated investment earnings rate of 7%, for nine months, assuming
the sale had occurred at September 1, 1994.
5. To eliminate the operations of OddWorld and Alexandria from the
consolidated statement of operations of the Company for the year ended
August 31, 1995, assuming the sale had occurred on September 1, 1994.
6. To record investment income on the net proceeds from the sale of OddWorld
at an estimated investment earnings rate of 7%, for one year, assuming the
sale had occurred at September 1, 1994.
7. Subsequent to May 31,1996, certain affiliates of the Company loaned the
Company $500,000 which was invested in OddWorld. This loan was granted at
an interest rate of 12% per year and is required to be repaid from the
proceeds of the sale of OddWorld.
6
