Item 1.01 Entry into a Material Definitive Agreement.
On June 13,
2022, Liberty Broadband Corporation (the “Company”) entered into an Exchange Agreement (as defined below) with its
Chairman of the Board, John C. Malone, whereby, among other things, Mr. Malone agreed to an arrangement under which his aggregate voting
power in the Company would not exceed 49% (the “Target Voting Power”) plus 0.5% (under certain circumstances). As of
April 30, 2022, Mr. Malone beneficially owned shares of common stock of the Company constituting approximately 49.4% of the aggregate
outstanding voting power of the Company. The Company has an ongoing stock repurchase program which permits the Company to purchase shares
of its common stock. In light of Mr. Malone’s current ownership interests in the Company,
absent the Exchange Agreement, continued repurchases of the Company’s Series A common stock, par value $0.01 per share (the “Series A Common Stock”), pursuant to this program would be expected to have the effect of increasing
Mr. Malone’s aggregate voting power in the Company to greater than 50%. The Company and its board of directors (the “Board”)
believe it is in the best interests of the Company and its stockholders to not have a single stockholder control greater than 50% of its
aggregate voting power and to maintain flexibility with respect to future share repurchases and other transactions that may have an accretive
voting power effect.
A special committee of independent and disinterested
directors considered a potential exchange arrangement between the Company and Mr. Malone and engaged independent legal counsel to assist
it. The special committee recommended to the Board the approval of an exchange agreement, among the Company, Mr. Malone and a revocable
trust of which Mr. Malone is the sole trustee and beneficiary (the “JM Trust”) (the “Exchange Agreement”).
The Board, upon the unanimous recommendation of the members of the special committee, approved the Exchange Agreement.
Exchange Agreement
The Exchange Agreement provides for exchanges by
the Company and Mr. Malone or the JM Trust of shares of Series B common stock, par value $0.01 per share of the Company (the “Series
B Common Stock”) for shares of Series C common stock, par value $0.01 per share of the Company (“Series C Common Stock”),
in connection with certain events, as described below.
Accretive Event Exchange. In connection
with any event that would result in a reduction in the outstanding votes that may be cast by holders of the Company’s voting securities
or an increase of Mr. Malone’s beneficially-owned voting power in the Company (an “Accretive Event”), in each
case, such that Mr. Malone’s voting power in the Company would exceed the Target Voting Power plus 0.5%, Mr. Malone or the JM Trust
will be required to exchange with the Company shares of Series B Common Stock (as exchanged, the “Exchanged Series B Shares”)
for an equal number of shares of Series C Common Stock (as exchanged, the “Exchanged Series C Shares”) so as to maintain
Mr. Malone’s voting power as close as possible to, without exceeding, the Target Voting Power, on the terms and subject to the conditions
of the Exchange Agreement. For example, repurchases by the Company of shares of its voting capital
stock, conversions of Series B Common Stock into Series A Common Stock, as well as purchases by Mr. Malone of the Company’s voting
capital stock, in each case, having the effect on Mr. Malone’s voting power described above would be Accretive Events.
Dilutive Event Exchange. From and after
the occurrence of any Accretive Event, in connection with any event that would result in an increase in the outstanding votes that may
be cast by holders of the Company’s voting securities or a decrease of Mr. Malone’s beneficially-owned voting power in the
Company (a “Dilutive Event”), in each case, such that Mr. Malone’s voting power in the Company falls below the
Target Voting Power less 0.5%, Mr. Malone and the JM Trust may exchange with the Company Exchanged Series C Shares for an equal number
of shares of Series B Common Stock equal to the lesser of (i) the number of shares of Series B Common Stock which would maintain Mr. Malone’s
voting power as close as possible to, without exceeding, the Target Voting Power and (ii) the number of Exchanged Series B Shares at such
time, on the terms and subject to the conditions of the Exchange Agreement. For example, exercises of stock options for, conversions of
convertible securities into or issuances of new shares of the Company’s voting stock having
the effect on Mr. Malone’s voting power described above would be Dilutive Events.
Fundamental Event Exchange. If
the Company proposes to consummate any combination, consolidation, merger, exchange offer, split-off, spin-off, rights offering or
dividend, in each case, as a result of which holders of Series B Common Stock are entitled to receive securities of the Company,
securities of another person, property or cash, or a combination thereof (a “Fundamental Event”) then, unless the
consideration to be received by holders of Series B Common Stock and Series C Common Stock is identical, either (x) the Company
will provide for Mr. Malone or the JM Trust to receive the same per share amount and form of consideration to be received by
holders of Series B Common Stock in connection with such event for each Exchanged Series C Share or (y) immediately prior to the
consummation of the Fundamental Event, the Company will deliver to Mr. Malone and the JM Trust all Exchanged Series B Shares in
exchange for all Exchanged Series C Shares. In connection with certain Fundamental Events where Mr. Malone would beneficially own
40% or more of the aggregate voting power of the surviving or resulting company and serve as an officer or director, such company
and Mr. Malone will negotiate an agreement to replicate the benefits and obligations of the Exchange Agreement.
Restriction on Transfer. Mr. Malone may
transfer his rights to the Exchanged Series B Shares only in limited circumstances and only to certain related permitted transferees who
sign an agreement replicating the benefits and obligations of the Exchange Agreement.
Termination. The Exchange Agreement will
terminate in its entirety, upon (i) the parties’ mutual consent, (ii) the execution of a successor exchange agreement between the
Company and one or more proposed permitted transferees at a time when Mr. Malone no longer beneficially owns any shares of Series B Common
Stock or (iii) Mr. Malone’s aggregate voting power in the Company falling below 20%.
Expenses. Under the Exchange Agreement,
the Company has agreed to pay (or reimburse) Mr. Malone and the JM Trust for all reasonable out-of-pocket costs and expenses incurred
by Mr. Malone and the JM Trust in connection with the preparation, negotiation, execution and consummation of the transactions contemplated
by the Exchange Agreement.
The foregoing description of the Exchange Agreement
does not purport to be complete and is subject to, and is qualified in its entirety by, the Exchange Agreement, a copy of which is attached
hereto as Exhibit 10.1 and is incorporated herein by reference.