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Agreement will be superseded by a definitive stockholders' agreement and other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
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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
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Robert L. Johnson
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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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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);
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(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.
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(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
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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,
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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
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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.
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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
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appropriate, after the Merger to account for any stock splits or
recapitalization).
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