Charter 2013 Annual Report Download - page 116

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013, 2012 AND 2011
(dollars in millions, except share or per share data or where indicated)
F- 34
connection with the closing. Liberty Media designated John Malone, Chairman of Liberty Media, Gregory Maffei, president and
chief executive officer of Liberty Media, Balan Nair, executive vice president and chief technology officer of Liberty Global plc,
and Michael Huseby, chief executive officer of Barnes & Noble, Inc. Charter’s board of directors appointed these directors effective
upon the resignations of Stan Parker, Darren Glatt, Bruce Karsh and Edgar Lee in connection with the closing of the Liberty Media
Transaction on May 1, 2013. Subject to Liberty Media’s continued ownership level in Charter, the stockholders agreement also
provides that Liberty Media can designate up to four directors as nominees for election to Charter’s board of directors at least
through Charter’s 2015 annual meeting of stockholders, and that up to one of these individuals may serve on each of the Audit
Committee, the Nominating and Corporate Governance Committee, and Compensation and Benefits Committee of Charter’s board
of directors. Consistent with these provisions, the board appointed Dr. Malone to serve on the Nominating and Corporate
Governance Committee, Mr. Maffei to serve on the Finance Committee and the Compensation and Benefits Committee and Mr.
Huseby to serve on the Audit Committee.
In addition, Liberty Media agreed to not increase its beneficial ownership in Charter above 35% until January 2016, at which point
such limit increases to 39.99%. Liberty Media is also, subject to certain exceptions, subject to certain customary standstill provisions
that prohibit Liberty Media from, among other things, engaging in proxy or consent solicitations relating to the election of directors.
The standstill limitations apply through the 2015 shareholder meeting and continue to apply as long as Liberty Media's designees
are nominated to the Charter board, unless the agreement is earlier terminated. Charter approved Liberty Media as an interested
stockholder under the business combination provisions of the Delaware General Corporation Law.
The Company is aware that Dr. Malone may be deemed to have a 34.5% voting interest in Liberty Interactive Corp. (“Liberty
Interactive”) and is Chairman of the board of directors, an executive officer position, of Liberty Interactive. Liberty Interactive
owns 36.9% of the common stock of HSN, Inc. (“HSN”) and has the right to elect 20% of the board members of HSN. Liberty
Interactive wholly owns QVC, Inc (“QVC”). The Company has programming relationships with HSN and QVC which pre-date
the Liberty Media Transaction. For the nine months ended December 31, 2013, the Company received payments in aggregate of
approximately $10 million from HSN and QVC as part of channel carriage fees and revenue sharing arrangements for home
shopping sales made to customers in Charter's footprint.
Dr. Malone also serves on the board of directors of Discovery Communications, Inc., (“Discovery”) and the Company is aware
that Dr. Malone owns 4.3% in the aggregate of the common stock of Discovery and has a 29.2% voting interest in Discovery for
the election of directors. In addition, Dr. Malone owns 9.2% in the aggregate of the common stock of Starz and has 42.8% of the
voting power. Mr. Maffei is a non-executive Chairman of the board of Starz. The Company purchases programming from both
Discovery and Starz pursuant to agreements entered into prior to the Liberty Media Transaction and Dr. Malone and Mr. Maffei
joining Charter's board of directors. Based on publicly available information, the Company does not believe that either Discovery
or Starz would currently be considered related parties. The amounts paid in aggregate to Discovery and Starz represent less than
3% of total operating costs and expenses for the nine months ended December 31, 2013.
Registration Rights Agreement
As part of the emergence from Chapter 11 bankruptcy in 2009, the Company agreed to a Registration Rights Agreement with
certain holders of the Company's Class A common stock which required the Company to file a shelf-registration statement with
the SEC to provide for a continuous secondary offering of the stock. The registration statement became effective in November
2010. The Registration Rights Agreement provided that any holder of securities that wished to sell stock under the existing shelf-
registration statement must give the Company five business days notice that such holder wishes to sell and that the Company
notify the other holders which were party to the Registration Rights Agreement.
In August 2012, the Company and the Company's then three largest holders, Apollo, Oaktree and Crestview amended the
Registration Rights Agreement to provide for sales of shares of the Company's Class A common stock in a block trade through an
underwriter and the related mechanics for block trades. Because the amendment involved the Company and affiliates, it was
deemed a related party transaction. The amendment was considered and approved by the Audit Committee. Charter received no
compensation from entering into the amendment nor from any subsequent sales of shares.