Charter 2015 Annual Report Download - page 50

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In connection with the Bright House Transaction, Charter and New Charter entered into the Bright House/Liberty stockholders
agreement with A/N and Liberty Broadband, which will supersede the existing stockholders agreement in its entirety upon the
earlier to occur of the closing of the TWC Transaction and the closing of the Bright House Transaction, unless the Bright House
contribution agreement is terminated prior to the closing of the Bright House Transaction. Following the closing of the TWC
Transaction and the Bright House Transaction, Charter expects that Liberty Broadband will have an equity interest of between
approximately 19% and 17% and A/N will have an equity interest of between approximately 14% and 13%, in each case on an
as-converted, as-exchanged basis, in New Charter. In connection with the TWC Transaction, Liberty Broadband and Liberty
Interactive entered into a proxy and right of first refusal agreement, pursuant to which, in connection with the closing of the
transactions contemplated by the Merger Agreement, Liberty Interactive will grant Liberty Broadband an irrevocable proxy to
vote all New Charter Class A common stock owned beneficially or of record by Liberty Interactive following such closing, with
certain exceptions. In addition, at the closing of the Bright House Transaction, A/N and Liberty Broadband will enter into a proxy
agreement pursuant to which A/N will grant to Liberty Broadband a 5-year irrevocable proxy (which we refer to as the “A/N
proxy”) to vote, subject to certain exceptions, that number of shares of New Charter Class A common stock and New Charter Class
B common stock, in each case held by A/N (such shares are referred to as the “proxy shares”), that will result in Liberty Broadband
having voting power in New Charter equal to 25.01% of the outstanding voting power of New Charter, provided, that the voting
power of the proxy shares will be capped at 7.0% of the outstanding voting power of New Charter. Therefore, giving effect to the
Liberty Interactive proxy and the A/N proxy and the voting cap contained in the Bright House/Liberty stockholders agreement,
Liberty Broadband is expected to have 25.01% of the outstanding voting power in New Charter following the consummation of
the TWC Transaction and Bright House Transaction. The Bright House/Liberty stockholders agreement and New Charter’s amended
and restated certificate of incorporation will fix the size of the board at 13 directors, and three designees selected by Liberty
Broadband and two designees selected by A/N will become members of the New Charter board of directors. Thereafter, Liberty
Broadband will be entitled to designate three nominees to be elected as directors and A/N will be entitled to designate two nominees
to be elected as directors, in each case provided that each maintains certain specified voting or equity ownership thresholds and
each nominee meets certain applicable requirements or qualifications. Liberty Broadband and A/N are required to vote (subject
to the applicable voting cap) their respective shares of New Charter Class A common stock and New Charter Class B common
stock for the director nominees nominated by the nominating and corporate governance committee of the board of directors,
including the respective designees of Liberty Broadband and A/N, and against any other nominees, except that, with respect to
the unaffiliated directors, Liberty Broadband and A/N must instead vote in the same proportion as the voting securities are voted
by stockholders other than A/N and Liberty Broadband or any group which includes any of them are voted, if doing so would
cause a different outcome with respect to the unaffiliated directors. As a result of their rights under the Bright House/Liberty
stockholders agreement and their significant equity and voting stakes in New Charter, Liberty Broadband and/or A/N, who may
have interests different from those of other stockholders, will be able to exercise substantial influence over certain matters relating
to the governance of New Charter, including the approval of significant corporate actions, such as mergers and other business
combination transactions.
The Bright House/Liberty stockholders agreement will provide A/N and Liberty Broadband with preemptive rights with respect
to issuances of New Charter equity in connection with certain transactions, and in the event that A/N or Liberty Broadband
exercises these rights, holders of Charter Class A common stock may experience further dilution.
The Bright House/Liberty stockholders agreement provides that A/N and Liberty Broadband will have certain contractual
preemptive rights over issuances of New Charter equity securities in connection with capital raising transactions, merger and
acquisition transactions, and in certain other circumstances. Holders of New Charter Class A common stock will not be entitled
to similar preemptive rights with respect to such transactions. As a result, if Liberty Broadband and/or A/N elect to exercise their
preemptive rights, (i) these parties would not experience the dilution experienced by the other holders of New Charter Class A
common stock, and (ii) such other holders of New Charter Class A common stock may experience further dilution of their interest
in New Charter upon such exercise.
Completion of the Bright House Transaction is subject to a number of conditions and if these conditions are not satisfied or
waived, the Bright House Transaction will not be completed.
The obligation of Charter and New Charter and the obligation of A/N to complete the Bright House Transaction is subject to
satisfaction or waiver of a number of conditions, including, among others:
• the consummation of the TWC Transaction, except in certain circumstances;
• expiration or termination of the HSR Act waiting period and receipt of certain regulatory approvals for the Bright House
Transaction (and with respect to Charter’s obligations, without the imposition of a Bright House contribution burdensome
condition);