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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K/A

(Amendment No. 1)

 

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the fiscal year ended December 31, 2011

 

 

 

or

 

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from              to              

 

Commission file number 001-33982

 

LIBERTY INTERACTIVE CORPORATION

(Exact name of Registrant as specified in its charter)

 

State of Delaware

 

84-1288730

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

12300 Liberty Boulevard
Englewood, Colorado
(Address of principal executive offices)

 

80112
(Zip Code)

 

Registrant’s telephone number, including area code: (720) 875-5300

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of exchange on which registered

Series A Liberty Interactive Common Stock, par value $0.01 per share

 

The Nasdaq Stock Market LLC

Series B Liberty Interactive Common Stock, par value $0.01 per share

 

The Nasdaq Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act: None.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes x No o

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d).  Yes o No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

 

The aggregate market value of the voting stock held by nonaffiliates of Liberty Interactive Corporation computed by reference to the last sales price of such stock, as of the closing of trading on June 30, 2011, was approximately $19.4 billion. At June 30, 2011 Liberty Interactive had three tracking stocks outstanding and the aggregate market value determined above includes the aggregate market value of each of the three outstanding tracking stocks. The aggregate market value of the voting stock held by non-affiliates calculated based on only the Liberty Interactive tracking stock at June 30, 2011 was approximately $9.6 billion.

 

The number of shares outstanding of Liberty Interactive Corporation’s common stock as of January 31, 2012 was:

 

Series A Liberty Interactive Common Stock — 545,894,233

Series B Liberty Interactive Common Stock — 28,989,160

 

 

 



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EXPLANATORY NOTE

 

The Registrant is filing this Amendment No. 1 on Form 10-K/A (this Form 10-K/A) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the Form 10-K) to include all of the Part III information required by applicable SEC rules and regulations. Accordingly, the Registrant hereby amends and replaces in their entirety Items 10, 11, 12, 13 and 14 in the Form 10-K.

 

As required by Rule 12b-15, the Registrant’s principal executive officer and principal financial officer are providing Rule 13a-14(a)/15(d)-14(a) certifications. Accordingly, the Registrant hereby amends Item 15 in the Form 10-K to add such reports as Exhibits.

 

Except as described above, this Form 10-K/A does not amend, update or change any other items or disclosures in the Form 10-K, including any of the financial information disclosed in Parts II and IV of the Form 10-K, and does not purport to reflect any information or events subsequent to the filing thereof.

 

We refer to Liberty Interactive Corporation as “Liberty Interactive,” “us,” “we” and “our” in this report.

 

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LIBERTY INTERACTIVE CORPORATION

2011 ANNUAL REPORT ON FORM 10-K/A

(Amendment No. 1)

 

Table of Contents

 

 

Part III

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

3

Item 11.

Executive Compensation

8

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

43

Item 13.

Certain Relationships and Related Transactions, and Director Independence

49

Item 14.

Principal Accounting Fees and Services

53

 

 

 

 

Part IV

 

 

 

 

Item 15.

Exhibits and Financial Statement Schedules

55

 

 

 

 

Signatures

56

 

 

 

 

Exhibit Index

57

 

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PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance.

 

Directors and Executive Officers

 

The following lists our directors and executive officers, their ages and a description of their business experience, including such person’s professional background and positions held with our company, which includes, where applicable, our predecessors. The following also includes, as to each of our directors, how long such person has been a director of our company, other public company directorships and other factors considered in the determination that such person possesses the requisite qualifications and skills to serve as a member of our board of directors.

 

Name

 

Positions

 

 

 

John C. Malone

Age:  71

 

 

Chairman of the Board and a director of our company.

 

Professional Background: Mr. Malone has served as a director of our company, including its predecessors, since its inception in 1994 and served as our company’s Chief Executive Officer from August 2005 to February 2006. Mr. Malone served as Chairman of the Board of Tele-Communications, Inc. (TCI), a cable television company that was our former parent company, from November 1996 until March 1999, when it was acquired by AT&T Corp. (AT&T), and as Chief Executive Officer of TCI from January 1994 to March 1997.

 

Other Public Company Directorships: Mr. Malone has served as a director of Liberty Media Corporation (Liberty Media) since December 2010, Chairman of the Board of Liberty Media since August 2011 and Chairman of the Board of Liberty Global, Inc. (LGI) since June 2005. Previously, he served as Chairman of the Board of LGI’s predecessor, Liberty Media International, Inc. (LMI), from March 2004 to June 2005, as Chairman of the Board of DIRECTV from November 2009 to June 2010 and as Chairman of the Board of DIRECTV’s predecessor, The DIRECTV Group, Inc. (DTVG), from February 2008 to November 2009. He has served as a director of Discovery Communications, Inc. (Discovery) since September 2008 and served as Chairman of the Board of its predecessor, Discovery Holding Company (DHC), from March 2005 to September 2008, and as a director of DHC from May 2005 to September 2008. Mr. Malone served as a director of UnitedGlobalCom, Inc. (UGC), now a subsidiary of LGI, from January 2002 to June 2005. Mr. Malone has served as a director of (i) Expedia, Inc. (Expedia) since August 2005, (ii) Sirius XM Radio Inc. (Sirius) since April 2009 and (iii) Ascent Capital Group, Inc. since January 2010. Mr. Malone served as a director of (i) Live Nation Entertainment, Inc. (Live Nation) from January 2010 to February 2011, (ii) InterActiveCorp from May 2006 to June 2010, (iii) the Bank of New York Company, Inc. from June 2005 to April 2007 and (iv) Cablevision Systems Corp. from March 2005 to June 2005.

 

Board Membership Qualifications:  Mr. Malone, as President of TCI, co-founded our company and is considered one of the preeminent figures in the media and telecommunications industry.  He is well known for his sophisticated problem solving and risk assessment skills.

 

 

 

Gregory B. Maffei

Age:  51

 

Chief Executive Officer, President and a director of our company.

 

Professional Background: Mr. Maffei has served as a director of our company since November 2005, and as its Chief Executive Officer and President since February 2006.  He also served as our company’s CEO-Elect from November 2005 through

 

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Name

 

Positions

 

 

February 2006.  Mr. Maffei has served as a director and the President and Chief Executive Officer of Liberty Media since May 2007. Prior to joining our company, Mr. Maffei served as President and Chief Financial Officer of Oracle Corporation during 2005 and as Chairman and Chief Executive Officer of 360networks Corporation from 2000 until 2005.  Previously, Mr. Maffei was the Chief Financial Officer of Microsoft Corporation from 1997 to 2000.

 

Other Public Company Directorships: Mr. Maffei has served as a director of (i) Electronic Arts, Inc. since June 2003, (ii) Zillow, Inc. since May 2005, (iii) Liberty Media since May 2007, (iv) Sirius since March 2009, (v) Live Nation since February 2011 and (vi) Barnes & Noble, Inc. since September 2011. Mr. Maffei served as a director of DIRECTV, from November 2009 to June 2010 and as a director of its predecessor, DTVG, from February 2008 to November 2009. Mr. Maffei served as a director of Expedia from 1999 to 2003, and as a director of Starbucks Corporation from 1999 to 2006. Mr. Maffei was also Chairman of the Board of Expedia from 1999 to 2002.

 

Board Membership Qualifications:  Mr. Maffei brings to our board significant financial and operational experience based on his senior policy making positions at our company, Liberty Media, Oracle, 360networks and Microsoft and his public company board experience.  He provides our board with an executive and leadership perspective on the operations and management of large public companies and risk management principles.

 

 

 

Michael A. George
Age:  50

 

 

A director of our company.

 

Professional Background: Mr. George has served as a director of our company since September 2011. He has served as the President of QVC, Inc. (QVC) since November 2005 and as its Chief Executive Officer since April 2006. Mr. George also serves on the board of directors of several non-profit organizations.  Mr. George previously held various positions with Dell, Inc. from March 2001 to November 2005, most notably as the chief marketing officer and general manager of Dell, Inc.’s U.S. consumer business.

 

Other Public Company Directorships: None.

 

Board Membership Qualifications: Mr. George brings to our board significant experience with commerce, retail and technology businesses based on his current executive position with QVC and his prior experience with Dell as well as in his capacity as a senior partner at McKinsey & Co., Inc.  His background and executive experience assist the board in evaluating strategic opportunities in the e-commerce and retail industries.

 

 

 

M. Ian G. Gilchrist

Age:  62

 

A director of our company.

 

Professional Background: Mr. Gilchrist has served as a director of our company since July 2009. Mr. Gilchrist held various officer positions including Managing Director at Citigroup/Salomon Brothers from 1995 to 2008, CS First Boston Corporation from 1988 to 1995, and Blyth Eastman Paine Webber from 1982 to 1988 and served as a Vice President of Warburg Paribas Becker Incorporated from 1976 to 1982. Previously, he worked in the venture capital field and as an investment analyst.

 

Other Public Company Directorships: Mr. Gilchrist has served as a director of Liberty Media since September 2011.

 

Board Membership Qualifications:  Mr. Gilchrist’s field of expertise is in the media and telecommunications sector, having been involved with companies in this industry

 

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Name

 

Positions

 

 

during much of his 32 years as an investment banker.  Mr. Gilchrist brings to our board significant financial expertise and a unique perspective on the company and the media and telecommunications sector.  He is also an important resource with respect to the financial services firms that our company engages from time to time.

 

 

 

Evan D. Malone

Age:  41

 

 

A director of our company.

 

Professional Background: Dr. Malone has served as a director of our company since August 2008. He has served as President of NextFab Studio, LLC, a high-tech workshop offering technical training, consulting, and product design and prototyping services, since June 2009 and has been an engineering consultant for more than the past five years.  Since January 2008, Dr. Malone has served as the owner and manager of a real estate property and management company, 1525 South Street LLC.  During 2008, Dr. Malone also served as a post-doctoral research assistant at Cornell University and an engineering consultant with Rich Food Products, a food processing company.  Dr. Malone has served as co-owner and director of Drive Passion PC Services, CC, an Internet café, telecommunications and document services company, in South Africa since 2007 and served as an applied physics technician for Fermi National Accelerator Laboratory, part of the national laboratory system of the Office of Science, U.S. Department of Energy, from 1999 until 2001. He also is a founding member of Jet Wine Bar, LLC, a start-up company in Philadelphia, which began operations in 2010.

 

Other Public Company Directorships:  Dr. Malone has served as a director of Liberty Media since September 2011.

 

Board Membership Qualifications: Dr. Malone, our company’s youngest director, brings an applied science and engineering perspective to the board. Dr. Malone’s perspectives assist the board in developing business strategies and adapting to technological changes facing the industries in which our company competes. In addition, his entrepreneurial experience assists the board in evaluating strategic opportunities.

 

 

 

David E. Rapley
Age:  70

 

A director of our company.

 

Professional Background: Mr. Rapley has served as a director of our company since July 2002, having previously served as a director during 1994.  Mr. Rapley founded Rapley Engineering Services, Inc. (RESI) and served as its CEO and President from 1985 to 1998. Mr. Rapley also served as Executive Vice President of Engineering of VECO Corp. Alaska (a company that acquired RESI in 1998) from January 1998 to December 2001. Mr. Rapley has served as the President and Chief Executive Officer of Rapley Consulting, Inc. since January 2000.

 

Other Public Company Directorships:  Mr. Rapley has served as a director Liberty Media since September 2011. He has served as a director of LGI since June 2005 and served as a director of its predecessor, LMI, from May 2004 to June 2005.

 

Board Membership Qualifications: Mr. Rapley brings to our board the unique perspective of his lifelong career as an engineer.  The industries in which our company compete are heavily dependent on technology, which continues to change and advance.  Mr. Rapley’s perspectives assist the board in adapting to these changes and developing strategies for our businesses.

 

 

 

M. LaVoy Robison

Age:  76

 

A director of our company.

 

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Name

 

Positions

 

 

Professional Background: Mr. Robison has served as a director of our company since June 2003. Mr. Robison served as the executive director of The Anschutz Foundation, a private foundation, from January 1998 to November 2010, and has served as a board member of this foundation since January 1998.  Prior to joining The Anschutz Foundation, he was a partner for over 25 years with KPMG, having served at one point as that firm’s audit partner for our company’s former parent TCI.

 

Other Public Company Directorships:  Mr. Robison has served as a director of Discovery since September 2008 and served as a director of its predecessor, DHC, from May 2005 to September 2008.  Mr. Robison served as a director of LMI from June 2004 to June 2005.

 

Board Membership Qualifications: Mr. Robison brings to our board extensive experience in public accounting and auditing, having spent more than two decades as a partner with KPMG and its predecessor Peat, Marwick, Mitchell & Co., including serving as an SEC reviewing partner.  He provides our board with an executive and leadership perspective on financial reporting and accounting oversight of large public companies. 

 

 

 

Larry E. Romrell
Age:  72

 

A director of our company.

 

Professional Background: Mr. Romrell has served as a director of our company since December 2011, having previously served as a director from March 1999 to September 2011. Mr. Romrell held numerous executive positions with our former parent company, TCI, from 1991 to 1999.  Previously, Mr. Romrell held various executive positions with Westmarc Communications, Inc.

 

Other Public Company Directorships: Mr. Romrell has served as a director of Liberty Media since September 2011. He has served as a director of LGI since June 2005 and served as a director of its predecessor, LMI, from May 2004 to June 2005.

 

Board Membership Qualifications: Mr. Romrell brings extensive experience, including venture capital experience, in the telecommunications industry to our board and is an important resource with respect to the management and operations of companies in the media and telecommunications sector.

 

 

 

Andrea L. Wong
Age45

 

 

A director of our company.

 

Professional Background: Ms. Wong has served as a director of our company since April 2010. Ms. Wong has served as President, International Production for Sony Pictures Television and President, International for Sony Pictures Entertainment since September 2011.  She previously served as President and CEO of Lifetime Entertainment Services from 2007 to April 2010.  Ms. Wong also served as an Executive Vice President with ABC, Inc., a subsidiary of The Walt Disney Company, from 2003 to 2007.  Ms. Wong serves on the advisory boards of several media and entertainment societies and organizations.

 

Other Public Company Directorships: Ms. Wong has served as a director of Liberty Media since September 2011.

 

Board Membership Qualifications:  Ms. Wong brings to our board significant experience in the media and entertainment industry, having an extensive background in media programming across a variety of platforms, as well as executive and leadership experience with the management and operation of companies in the entertainment sector. Her experience with programming development, brand enhancement and marketing brings a pragmatic and unique perspective to our board. Her professional expertise, combined with her continued involvement in the media

 

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Name

 

Positions

 

 

and entertainment industry, makes her a valuable member of our board.

 

 

 

Charles Y. Tanabe
Age:  60


 

Executive Vice President of our company since January 2007 and the General Counsel of our company since January 1999.  A Senior Vice President of our company from January 1999 to December 2006, and the Secretary of our company from April 2001 to December 2007.

 

 

 

Albert E. Rosenthaler
Age:  52


 

A Senior Vice President of our company since April 2002.

 

 

 

Christopher W. Shean
Age:  46


 

A Senior Vice President of our company since January 2002 and the Chief Financial Officer since November 2011. The Controller of our company from October 2000 to October 2011 and a Vice President of our company from October 2000 to January 2002.

 

There is no family relationship between any of our executive officers or directors, by blood, marriage or adoption other than Evan D. Malone, who is the son of John C. Malone. During the past ten years, none of the above persons has had any involvement in any legal proceedings that would be material to an evaluation of his or her ability or integrity.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten-percent stockholders are required by SEC regulation to furnish us with copies of all Section 16 forms they file.

 

Based solely on a review of the copies of the Forms 3, 4 and 5 and amendments to those forms furnished to us during our most recent fiscal year, or written representations that no Forms 5 were required, we believe that, during the year ended December 31, 2011, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten-percent beneficial owners were met.

 

Code of Ethics

 

We have adopted a code of ethics that applies to all of our employees, directors and officers, which constitutes our “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act.  Our code of ethics is available on our website at www.libertyinteractive.com.

 

Audit Committee and Audit Committee Financial Expert

 

Our board of directors has established an audit committee, whose chairman is M. LaVoy Robison and whose other members are M. Ian G. Gilchrist, David E. Rapley and Larry E. Romrell. Each of the members of the audit committee meets the applicable independence rules and regulations of The Nasdaq Stock Market and the SEC, as such rules and regulations exist on the date of this report.  Our board of directors has determined that Mr. Robison is an “audit committee financial expert” under applicable SEC rules and regulations.

 

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Item 11.   Executive Compensation

 

This section sets forth information relating to, and an analysis and discussion of, compensation paid by our company to:

 

·                  Gregory B. Maffei, our Chief Executive Officer and President;

 

·                  David J.A. Flowers, our principal financial officer through October 2011;

 

·                  Christopher W. Shean, our principal financial officer beginning November 2011; and

 

·                  Michael A. George, Charles Y. Tanabe and Albert E. Rosenthaler, our other three executive officers.

 

We collectively refer to these persons as our named executive officers.

 

Compensation Discussion and Analysis

 

Compensation Overview; Philosophy

 

The compensation committee of our board of directors has responsibility for establishing, implementing and regularly monitoring adherence to our compensation philosophy.  That philosophy seeks to align the interests of the named executive officers with those of our stockholders, with the ultimate goal of appropriately motivating and rewarding our executives in an effort to increase stockholder value. To that end, the compensation packages provided to the named executive officers include both cash and stock-based incentive compensation, with an emphasis placed on performance-based compensation.

 

The compensation committee seeks to approve a compensation package for each named executive officer that is commensurate with the responsibilities and proven performance of that executive, and that is competitive relative to the compensation packages paid to similarly situated executives in other companies, including, as to the named executive officers other than Mr. George, companies in our reference group (as listed below). The compensation committee does not engage in any benchmarking analysis; rather, it is familiar with the range of total compensation paid by other companies and uses this range as a guide to ensure that the named executive officers receive attractive compensation packages. The compensation committee believes that our compensation packages should assist our company in attracting key executives critical to our long-term success. Taking into account the general industry knowledge of the members of the compensation committee, including its knowledge of the executive compensation paid by the reference group companies, and the input of our Chief Executive Officer (with respect to the compensation packages paid to our other named executive officers), the compensation committee determined to provide each named executive officer (other than Mr. George) with a 2011 compensation package comprised primarily of a base salary and a performance-based bonus.  No equity awards were made to these named executive officers in 2011 as they all received grants of multi-year equity incentive awards in one of the preceding two years.

 

Mr. George is party to an employment agreement with QVC, which governs his compensation arrangements.  This employment agreement is premised on the same compensation philosophy described above.  Mr. George receives a base salary and a performance-based bonus that is based upon the bonus programs in place at QVC.  Our Chief Executive Officer is responsible for reviewing and approving the executive compensation programs of our operating subsidiaries, including QVC. In addition, the compensation committee reviews and makes recommendations regarding the compensation package of the CEOs of our operating subsidiaries, including the compensation paid to Mr. George. The compensation committee generally applies the same standards as outlined herein when reviewing and making recommendations concerning executive compensation for our operating subsidiaries, including that of Mr. George. In 2011, Mr. George received a grant of multi-year equity incentive awards similar to those made to the other named executive officers in prior years.  See “—Elements of 2011 Executive Compensation—Equity Incentive Compensation.”

 

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In the case of all our named executive officers, the compensation committee believes that performance-based bonuses and equity incentive awards should represent a substantial portion of each named executive officer’s compensation package.  At our 2011 annual stockholders meeting, our stockholders’ representing 96.6% of our aggregate voting power present and entitled to vote on our say-on-pay proposal approved, on an advisory basis, our executive compensation, as disclosed in our proxy statement for our 2011 annual meeting of stockholders.  The compensation committee did not implement any material changes to our executive compensation program as a result of this vote.

 

Services Agreement

 

In connection with the split-off of Liberty Media from our company (the LMC Split-Off), we entered into a services agreement with Liberty Media pursuant to which we compensate Liberty Media for the portion of the salary and other cash compensation Liberty Media pays to our employees, including the named executive officers (except Mr. George), that is allocable to our company for time spent by each such employee on matters related to our company.  The allocable percentages of time spent performing services for Liberty Media, on the one hand, and our company, on the other hand, are evaluated semi-annually for reasonableness. The compensation information included in the “Summary Compensation Table” below (other than with respect to Mr. George, whose cash compensation is paid directly by QVC) includes the portion of the compensation paid by Liberty Media to the named executive officers that is allocable to our company and for which we have reimbursed Liberty Media and does not include the portion of any compensation allocable to Liberty Media under the services agreement. For the period between September 24, 2011 (the day after the LMC Split-Off) through December 31, 2011, the percentage of each such named executive officer’s time that was allocated to our company was: 30% as to Messrs. Maffei and Tanabe; 40% as to Messrs. Rosenthaler and Shean; and 10% as to Mr. Flowers. Notwithstanding the services agreement, each of Liberty Media and Liberty Interactive directly paid its allocable portion of each such named executive officers’ performance-based bonus to its respective named executive officers.  See “—Elements of 2011 Executive Compensation—2011 Performance-based Bonuses” below.

 

Composition of our Named Executive Officers

 

In connection with the LMC Split-Off, our board determined to include Michael A. George, President and Chief Executive Officer of QVC, as an executive officer of our company.  As a result, Mr. George became a named executive officer of our company for the year ended December 31, 2011.

 

Also, in the last quarter of 2011, David J.A. Flowers ceased to serve as our principal financial officer and treasurer, even though he remains with our company as a Senior Vice President.  At that time, Christopher W. Shean, a Senior Vice President of our company and our then-controller, became our principal financial officer, and another officer of our company became our treasurer.  As a result of these changes, Messrs. Flowers and Shean are both treated as named executive officers for the year ended December 31, 2011.

 

In connection with the foregoing changes, our Chairman John C. Malone is no longer a named executive officer of our company; however, information relating to his compensation is included elsewhere herein.  See “—Director Compensation—John C. Malone” and “—Director Compensation—Director Compensation Table.”

 

Role of Chief Executive Officer in Compensation Decisions

 

Recommendations with respect to our executive compensation are obtained from our Chief Executive Officer as to all elements of each other named executive officer’s compensation package, and, in the case of Mr. George, our Chief Executive Officer reviews and approves Mr. George’s compensation package before it is submitted to the compensation committee for consideration.  In taking these actions, our Chief Executive Officer evaluates the performance and contributions of each other named executive officers, given their respective areas of responsibility, and, in doing so, considers various qualitative factors such as:

 

·                  the named executive officer’s experience and overall effectiveness;

 

·                  the responsibilities of the named executive officer, including any changes to those responsibilities over the year;

 

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·                  the named executive officer’s demonstrated leadership and management ability;

 

·                  the named executive officer’s compensation relative to other executives at our company with similar, greater or lesser responsibilities;

 

·                  the named executive officer’s compensation relative to compensation paid to similarly situated executives at companies within our reference group;

 

·                  the named executive officer’s years of service with us; and

 

·                  the performance of any group for which the named executive officer is primarily responsible.

 

Setting Executive Compensation

 

In making its compensation decision for each named executive officer, the compensation committee considers the following:

 

·                  each element of the named executive officer’s historical compensation, including salary, bonus, equity compensation, perquisites and other personal benefits;

 

·                  the financial performance of our company compared to internal forecasts and budgets;

 

·                  the scope of the named executive officer’s responsibilities;

 

·                  the performance of the group reporting to the named executive officer; and

 

·                  the performance evaluations and compensation recommendations given by our Chief Executive Officer as to each other named executive officer.

 

As mentioned above, the compensation committee also considers the range of total compensation paid by members of our reference or peer group of companies and uses this range as a guide to ensuring that our named executive officers (other than Mr. George whose compensation is not guided by this reference group of companies) receive attractive compensation packages. This group of companies consists of publicly-traded media, telecommunications and entertainment companies and includes companies with which we may compete for executive talent and stockholder investment. This reference group also includes companies in those industries that are similar to our company in size and complexity of operations. Companies included in our reference group are:

 

Cablevision Systems Corporation

News Corporation

CBS Corporation

priceline.com Incorporated

Comcast Corporation

Scripps Networks Interactive, Inc.

Discovery Communications, Inc.

Sirius XM Radio Inc.

DIRECTV (f/k/a The DIRECTV Group, Inc.)

Time Warner Inc.

Dreamworks Animation SKG, Inc.

Time Warner Cable Inc.

Expedia, Inc.

Viacom Inc.

IAC/InterActiveCorp

The Walt Disney Company

Liberty Global, Inc.

 

 

Given our company’s focus on video and online commerce following the completion of the LMC Split-Off, the compensation committee may develop a new reference group of companies for future periods, which group may include some of the foregoing companies.

 

Although the compensation committee considers the compensation packages awarded by these companies, the compensation committee makes adjustments to these packages based on qualitative factors, such as:

 

·                  the size, scope and complexity of the businesses of the companies in our reference group;

 

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·                  the cost of living and other factors related to the geographic location of these companies; and

 

·                  the compensation philosophy of the particular company, including any policies relating to compensation of founders or others with substantial personal wealth.

 

In addition, the compensation committee recognizes that comparisons based on the roles performed by the named executive officers of companies in our reference group and roles performed by our named executive officers (other than Mr. George) may be difficult to draw. That difficulty is attributable, at least in part, to the fact that none of the named executive officers has the title of chief operating officer or, until the fourth quarter of 2011, chief financial officer, two positions commonly held by named executive officers of other companies. That difficulty is further pronounced when considering those companies in our reference group whose management has direct responsibility for operating businesses, because their named executive officers have responsibilities different from those of the named executive officers (other than Mr. George who has direct responsibility for QVC). As a result, the compensation committee does not seek to compare each element of our named executive officers’ compensation packages to those provided by our peer group. Rather, the peer group data is merely used as a guide for industry practice on the basis of total compensation paid. At times, total compensation, or any specific element thereof, payable to our named executive officers may exceed that of our peer group or may be less than that of our peer group. For example, the multi-year equity incentive awards discussed below are not comparable to the incentive awards generally paid by the members of our peer group. See “—Elements of 2011 Executive Compensation—Equity Incentive Compensation” below for a discussion of these awards.

 

Our Chief Executive Officer, Mr. Maffei, had primary responsibility for negotiating and approving Mr. George’s employment agreement and continues to have primary responsibility for approving all elements of Mr. George’s compensation because Mr. George is the chief executive officer of one of our operating subsidiaries, QVC.  Mr. Maffei draws upon his industry knowledge of compensation paid to similarly situated executives at other video and online commerce companies and other consumer goods retailers in designing the performance-based bonus program for QVC executives, in which Mr. George participates, as well as the other components of Mr. George’s compensation.  Once Mr. Maffei approves a compensation package for Mr. George, the compensation committee considers and separately approves the package.  The compensation committee applies similar standards to those outlined above in approving Mr. George’s compensation arrangements.

 

With respect to all named executive officers, the compensation committee believes in weighing equity incentive compensation more heavily than cash compensation, which is a practice that may not be consistently followed by our peer group or other companies that operate in the same industry as our company.

 

Elements of 2011 Executive Compensation

 

For 2011 the principal components of compensation for the named executive officers were:

 

·                  base salary;

 

·                  a performance-based bonus, payable in cash;

 

·                  in the case of Mr. George, a grant of multi-year equity incentive awards; and

 

·                  perquisites and other limited personal benefits.

 

Base Salary. The compensation committee reviews the base salaries of the named executive officers on an annual basis (other than Messrs. Maffei and George, who are compensated pursuant to their respective employment agreements), as well as at the time of any change in responsibilities. Historically, after establishing a named executive officer’s base salary, the compensation committee has limited increases to cost-of-living adjustments and adjustments based on an evaluation of a named executive officer’s job performance, any changes in the scope of the named executive officer’s responsibilities, and the named executive officer’s salary level compared to other named executive officers. The compensation committee believes base salary should be a relatively smaller portion of each named executive officer’s overall compensation package, thereby aligning the interests of our executives more closely with

 

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those of our stockholders. The compensation committee considered these factors when setting or approving, as applicable, the base salary and annual increases to be paid to Messrs. Maffei and George under their respective employment agreements.  After completion of the annual review described above, the named executive officers (other than Messrs. Maffei and George) received cost of living adjustments to their base salaries for 2011.

 

2011 Performance-based Bonuses

 

Liberty Interactive Awards. For 2011, our compensation committee adopted an annual, performance-based bonus program for each of the named executive officers (other than Mr. George who participated in a separate performance-based bonus program, described below), which was similar in structure to the program adopted for 2010. This bonus program, which is structured to comply with Section 162(m) of the Internal Revenue Code (the Code), based each participant’s bonus on the achievement of an increase in the market capitalization of Liberty Media (assuming the LMC Split-Off occurred), which was subject to negative adjustment depending on a combination of corporate and personal performance measures. Pursuant to the 2011 bonus program, the aggregate market capitalization of Liberty Media’s common stock would need to exceed $5 billion (the 2011 Market Capitalization Threshold) before any participant would be entitled to receive any bonus. Liberty Media’s market capitalization was calculated using the average closing sales prices of Liberty Media’s two series of common stock for the 50 trading days ending on December 15, 2011. The market capitalization calculation was subject to adjustment to reflect stock repurchases, extraordinary dividends, recapitalizations or similar events that could affect market capitalization. If the prescribed 2011 Market Capitalization Threshold were exceeded, 0.5% of the excess would be used to establish the available notional bonus pool from which performance-based bonuses would be payable under this program. Upon establishing the final award amounts, the compensation committee determined that the actual bonus amounts would be payable in cash. That determination was made after consideration of the named executive officers’ holdings in Liberty Interactive common stock and options. In addition, the compensation committee determined to pay the bonuses in cash to better align the bonus payment structure with the bonus payment terms of Mr. Maffei’s employment agreement. Finally, our compensation committee, with the concurrence of the Liberty Media compensation committee, allocated the final bonus amounts payable between our company and Liberty Media as discussed below.

 

Each participant was assigned a maximum bonus amount, expressed as a multiple of his 2011 base salary (without giving effect to the allocation of such salary between our company and Liberty Media). The maximum bonus amounts were 400%, 200% and 150% for our Chief Executive Officer, executive vice president and each senior vice president, respectively. If the bonus pool was insufficient to cover the aggregate maximum bonus amounts of all participants, each participant’s maximum bonus amount would be reduced pro rata, for all purposes under the program, based upon his respective maximum bonus amount. Assuming the bonus pool was sufficient to cover the aggregate maximum bonus amounts:

 

·                  The compensation committee then considered reducing the maximum bonus payable to each participant based on a subjective assessment of our and Liberty Media’s financial performance. No more than 30% of a participant’s maximum bonus amount (the Corporate Performance Component) would be affected by this measure. Any reduction would be based on the rating scale below, after review of the adjusted OIBDA (as defined in our and Liberty Media’s public filings), revenue and cash flow performance of our company and Liberty Media.

 

Corporate Performance 
Component Rating

 

Portion of Maximum
Bonus Payable

10

 

Full 30%

9

 

27%

8

 

24%

7

 

21%

6

 

18%

5

 

15%

4

 

12%

3

 

9%

2

 

6%

1

 

3%

 

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·                  Each participant would be entitled to receive the remaining 70% of his maximum bonus amount (the Individual Performance Component or IPC) subject to the right of the compensation committee to reduce the amount payable based upon its assessment of that participant’s individual performance, as follows:

 

Individual
Performance Rating (IPR)

 

Portion of Maximum
Bonus Payable (IPC)

10

 

Full 70%

9

 

61.25%

8

 

52.50%

7

 

35.00%

6

 

17.50%

5 and below

 

0%

 

In December 2011, after calculating the Liberty Media market capitalization using the formula described above, the compensation committee determined that the 2011 Market Capitalization Threshold was sufficiently exceeded, thereby creating a notional bonus pool large enough to cover the aggregate maximum bonus amounts of all the participants and enabling each participant to receive a bonus of up to his maximum bonus amount. The compensation committee then, in agreement with the Liberty Media compensation committee, made a subjective determination as to the corporate performance rating that would be ascribed for purposes of determining the Corporate Performance Component of each participating named executive officer’s bonus. In making this determination, the compensation committee considered the adjusted OIBDA, revenue and cash flow results for each of our company’s and Liberty Media’s business groups in comparison to preliminary forecasts and took into account general economic conditions and industry developments during the year. A consensus rating for the Corporate Performance Component was then agreed upon.

 

The compensation committee then reviewed the individual performance of each participant to determine, in agreement with the Liberty Media compensation committee, his IPR and corresponding IPC. The compensation committee took into account a variety of factors, without assigning a numerical weight to any single performance measure. This determination was based on reports of our board, the observations of committee members throughout the year, executive self-evaluations and, with respect to the participants other than Mr. Maffei, the observations and input of Mr. Maffei. In evaluating the performance of each of the participating named executive officers, the compensation committee considered the various performance objectives related to Liberty Interactive which had been assigned to each named executive officer for 2011, including:

 

Individual

 

Performance Objectives

 

 

 

Gregory B. Maffei

 

·   Completion of split-off of the Liberty Capital and Liberty Starz tracking stock groups

·   Rationalization of non-core assets

·   Outperformance of peer and stock market indices

·   Development of strategy for cash deployment by the company

·   Refinement of business development plan, including developing international expansion plans

·   Continuation of development of company-wide mobile and social media plan

·   Oversight of executive management team and continuation of long-term succession planning

 

 

 

Charles Y. Tanabe

 

·   Leadership of legal staff in structuring, negotiating and completing various transactions, including the split-off of the Liberty Capital and Liberty Starz tracking stock groups

 

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Individual

 

Performance Objectives

 

 

 

 

 

·       Efficient management of legal costs and compliance costs

·       Oversight of legal issues handled by outside and in-house counsel

·       Provision of legal support to subsidiaries and equity affiliates

 

 

 

David J.A. Flowers

 

·       Negotiation and structuring of complex investments and transactions, including alternative energy transactions

·       Management of investment portfolio, including rationalization of non-core assets

·       Evaluation of potential acquisition and divestiture transactions, including completion of the sale of certain assets

 

 

 

Albert E. Rosenthaler

 

·       Completion of closing agreements with IRS on various tax matters

·       Analysis of tax implications of various asset and liability restructurings

·       Analysis of tax implications of potential business opportunities

 

 

 

Christopher W. Shean

 

·       Maintenance of timely and accurate SEC reporting

·       Broadening of responsibilities of controller role

·       Evaluation of financial control processes at operating companies, including completion of a risk assessment at those companies

·       Development of transactional and structural initiatives to improve quality of internal procedures and reporting

 

The following table presents information concerning the aggregate 2011 performance-based bonus payable to each named executive officer and the amount allocated to and paid by Liberty Interactive (as described below), including the Corporate Performance Component and IPC assigned to each participant.

 

Name

 

Total Cash
Bonus

 

Cash Bonus Paid
By Liberty

Interactive

 

Corporate
Performance
Component (of

possible 30%)

 

IPC
(of possible 70%)

 

Gregory B. Maffei

 

$

4,441,500

 

$

1,587,600

 

18.00

%

52.50

%

Charles Y. Tanabe

 

$

1,271,489

 

$

454,490

 

18.00

%

52.50

%

David J.A. Flowers

 

$

707,996

 

$

147,625

 

18.00

%

52.50

%

Albert E. Rosenthaler

 

$

883,740

 

$

376,092

 

18.00

%

70.00

%

Christopher W. Shean

 

$

751,932

 

$

323,369

 

18.00

%

56.91

%

 

After determining the total cash bonus for each participant, our compensation committee, in agreement with the Liberty Media compensation committee, allocated the final total bonus amounts between Liberty Interactive and Liberty Media, and we paid each of the named executive officers the amount allocated to our company. The allocation of the Individual Performance Component was determined by reference to the amount of time spent by a named executive officer on matters for each company as well as results produced by that executive officer for each company. The Corporate Performance Component was allocated according to the amount of such measure attributable to the revenue, adjusted OIBDA and cash flow performance of the Liberty Interactive business group as compared to the revenue, adjusted OIBDA and cash flow performance of the Liberty Capital and the Liberty Starz business groups.

 

QVC Award.  As discussed above, Mr. George was designated as an executive officer of the company in the fourth quarter of 2011. As a result and consistent with the charter of our compensation committee, Mr. George’s 2011 performance-based bonus program, was reviewed and approved by the Chief Executive Officer of our company and

 

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our compensation committee. Mr. George’s 2011 performance-based bonus was structured to align with the 2011 performance-based bonus program established at QVC for QVC senior officers. Pursuant to the program, Mr. George would be paid a bonus based upon QVC EBITDA growth year over year. EBITDA was defined as U.S. EBITDA Growth (earnings before interest, taxes, depreciation and amortization) of QVC for fiscal year 2011. That bonus would then be subject to increase of up to 200% or decrease down to zero based on Mr. George’s individual performance, as determined by a personal modifier grid that was adopted in connection with the program. The EBITDA payout grid ranged from a threshold payout of 70% of target for 5% EBITDA growth to 240% of target for 15% EBITDA growth.

 

Mr. George’s target bonus was established as 100% of his base salary in connection with the signing of his employment agreement in 2011 as described below. QVC achieved a 5% EBITDA target for the year ended December 31, 2011, which resulted in a payout of 70% of target for the EBITDA performance portion of the bonus.  Mr. George’s personal performance modifier was 100%, resulting in no adjustment of his bonus up or down for his personal performance. Because Mr. George is now a named executive officer, pursuant to Mr. George’s employment agreement, his 2012 and subsequent performance-based bonuses will be determined by our compensation committee.

 

For more information regarding these bonus awards, please see the “Grants of Plan-Based Awards” table below.

 

Equity Incentive Compensation. Consistent with our compensation philosophy, the compensation committee seeks to align the interests of the named executive officers with those of our stockholders by awarding stock-based incentive compensation. This ensures that our executives have a continuing stake in our long-term success. The compensation committee weighs stock-based compensation more heavily than cash compensation in determining each named executive officer’s overall compensation mix.

 

The Liberty Interactive Corporation 2007 Incentive Plan (As Amended and Restated Effective November 7, 2011) (the 2007 Incentive Plan) and the Liberty Interactive Corporation 2010 Incentive Plan (As Amended and Restated Effective November 7, 2011) (the 2010 Incentive Plan) provide for the grant of a variety of incentive awards, including stock options, restricted shares, restricted stock units, stock appreciation rights and performance awards. Our executives have historically been granted stock options and awards of restricted stock in preference to other awards because of our company’s belief that options and restricted shares better promote retention of key employees through the continuing, long-term nature of an equity investment. Upon making the determination to grant equity incentive awards to our named executive officers, the compensation committee establishes the value of the awards to be made to each named executive officer, and, prior to the LMC Split-Off, that value had been allocated among our tracking stocks, pro rata, based on then-recent, relative market capitalizations of each tracker.

 

Stock options are awarded with an exercise price equal to fair market value on the date of grant, measured by reference to the closing sale price on the grant date.  Historically, grants had been made to our employees once a year with a term of seven years and vesting over a three to five year period. In late 2009 and early 2010, however, the compensation committee determined to make larger grants (equaling approximately four to five years’ value of the annual grants made in 2009) that vest between four and five and three-quarters years after grant, rather than making annual grants over the same period. These new grants provide for back-end weighted vesting and expire in 10 years rather than 7 years to encourage our executives to remain with our company over the long-term and to better align them with our shareholders.  Mr. Maffei received such a multi-year grant in December 2009 and the other named executive officers (other than Mr. George) received similar multi-year stock option awards in March 2010. The grants to the named executive officers (other than Mr. Maffei and Mr. George) vest one-third of the shares subject to such options in each of June 2013, June 2014 and December 2015. Mr. Maffei’s multi-year grant vests one-half in December 2013 and one-half in December 2014. In keeping with this compensation philosophy, Mr. George received a multi-year stock option award in March 2011.  One-half of the shares subject to Mr. George’s options vest in each of December 2014 and December 2015 and the options expire 7 years from grant.  For more information regarding these equity incentive grants, please see the “Grants of Plan-Based Awards” table below.

 

Perquisites and Other Personal Benefits. The perquisites and other personal benefits available to our executives (that are not otherwise available to all of our salaried employees, such as matching contributions to the Liberty Media 401(k) Savings Plan and the payment of life insurance premiums) consist of:

 

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·                  limited personal use of Liberty Media’s corporate aircraft (pursuant to an aircraft sharing arrangement between our company and Liberty Media);

 

·                  occasional, personal use of Liberty Media’s apartment in New York City (pursuant to a sharing arrangement between our company and Liberty Media), which is primarily used for business purposes, and occasional, personal use of a company car and driver;

 

·                  in the case of the named executive officers other than Mr. George, for periods prior to the LMC Split-Off, a deferred compensation plan that provides above-market preferential returns; and

 

·                  in the case of Mr. George, a tax gross-up relating to certain out of state income taxes to which Mr. George was subject in connection with the performance of his duties outside of QVC’s headquarters.

 

On occasion, and with the approval of our Chairman or Chief Executive Officer, executives may have family members and other guests accompany them on Liberty Media’s corporate aircraft when traveling on business.  Under the terms of the employment arrangements with our Chairman and Chief Executive Officer, those individuals and their guests may use the corporate aircraft we share with Liberty Media for non-business purposes subject to specified limitations.

 

Pursuant to Mr. Maffei’s employment agreement (which was assigned to Liberty Media in the LMC Split-Off), Mr. Maffei is entitled to 120 hours per year of personal flight time through the first to occur of (i) the termination of his employment, except as otherwise provided below, (ii) the cessation of ownership or lease of corporate aircraft or (iii) December 31, 2014. If Mr. Maffei’s employment terminates due to disability, for good reason or without cause, Mr. Maffei will be entitled to continued use of the corporate aircraft for 18 months after termination of his employment.  Mr. Maffei incurs taxable income, calculated in accordance with the Standard Industry Fare Level (SIFL) rates, for all personal use of the corporate aircraft. Pursuant to our services agreement and aircraft sharing arrangement with Liberty Media, we reimburse Liberty Media for any costs, calculated in accordance with SIFL rates, associated with Mr. Maffei using its corporate aircraft that are allocable to our company.

 

For disclosure purposes, we determine the aggregate incremental cost to our company of an executive’s personal use of corporate aircraft using a method that takes into account:

 

·                  landing and parking expenses;

 

·                  crew travel expenses;

 

·                  supplies and catering;

 

·                  aircraft fuel and oil expenses per hour of flight;

 

·                  any customs, foreign permit and similar fees; and

 

·                  passenger ground transportation.

 

Because the company’s aircraft is used primarily for business travel, this methodology excludes fixed costs that do not change based on usage, such as salaries of pilots and crew, purchase or lease costs of aircraft and costs of maintenance and upkeep.

 

For purposes of determining an executive’s taxable income, personal use of corporate aircraft is valued using a method based on SIFL rates, as published by the IRS. The amount determined using the SIFL rates is typically lower than the amount determined using the incremental cost method. Under the American Jobs Creation Act of 2004, the amount we may deduct for a purely personal flight is limited to the amount included in the taxable income of the executives who took the flight. Also, the deductibility of any non-business use will be limited by Section 162(m) of the

 

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Code to the extent that the named executive officer’s compensation that is subject to that limitation exceeds $1 million.  See “—Deductibility of Executive Compensation” below.

 

Deferred Compensation. Prior to the LMC Split-Off, the named executive officers (other than Mr. George who is an employee of our operating subsidiary, not our company), as well as other executives with the title of Senior Vice President and above, were entitled to participate in our former 2006 Deferred Compensation Plan (as amended and restated) to help accommodate their tax and estate planning objectives. This plan was originally adopted by our board of directors and assumed by Liberty Media in the LMC Split-Off. Under the plan, participants were entitled to elect to defer up to 50% of their base salaries and their cash performance bonuses. Compensation deferred under the plan that otherwise would have been received in 2011 prior to the LMC Split-Off will earn interest income at the rate of 9% per annum, compounded quarterly, for the period of the deferral. In the LMC Split-Off, Liberty Media assumed the plan and all outstanding obligations thereunder. Following the LMC Split-Off, our named executive officers may not participate in the plan with respect to any portion of their base salaries or cash performance bonuses allocable to our company, with the exception of the application of the previously made deferral elections to the 2011 performance-based bonuses which were paid by Liberty Interactive. Mr. Shean had a deferral election in place for such bonus, and we will be responsible for the payment of such deferred amount and all interest thereon going forward. For more information on the deferred compensation plan, see “—Executive Compensation Arrangements—2006 Deferred Compensation Plan” and the “—Nonqualified Deferred Compensation Plans” table below.

 

Employment Arrangements with Certain Named Executive Officers

 

In December 2009, the compensation committee approved a new compensation package for Mr. Maffei commencing January 1, 2010, which was later memorialized in his employment agreement. In connection with the LMC Split-Off, Liberty Media assumed his employment agreement but we effectively continue to be subject to the compensatory requirements included therein as we share Mr. Maffei’s services with Liberty Media. In addition, in connection with the assignment of his employment agreement to Liberty Media, we entered into a separate agreement with Mr. Maffei pursuant to which we memorialized our respective rights and obligations with respect to his Liberty Interactive equity incentive awards. For a more detailed description of these arrangements, see “—Executive Compensation Arrangements—Gregory B. Maffei” below.

 

In May 2011, in recognition of Mr. George’s strong performance at our operating subsidiary, QVC, and to induce him to remain with QVC as its chief executive officer, QVC entered into an employment agreement with Mr. George. Consistent with our executive compensation policies, Mr. Maffei was primarily responsible for negotiating and approving the compensatory elements included in Mr. George’s employment agreement (as described in more detail above). For a more detailed description of these arrangements, see “—Executive Compensation Arrangements—Michael A. George” below.

 

Deductibility of Executive Compensation

 

In developing the compensation packages for the named executive officers, the compensation committee considered the deductibility of executive compensation under Section 162(m) of the Code. That provision prohibits the deduction of compensation of more than $1 million paid to certain executives, subject to certain exceptions.  One exception is for performance-based compensation, including stock options granted under the existing incentive plans or to be granted under the 2010 Incentive Plan. The compensation committee has not adopted a policy requiring all compensation to be deductible under Section 162(m) of the Code, in order to maintain flexibility in making compensation decisions. Portions of the compensation we pay to certain of the named executive officers may not be deductible due to the application of Section 162(m) of the Code.

 

Policy on Restatements

 

In those instances where we grant cash or equity-based incentive compensation, we include in the related agreement with the executive a right, in favor of our company, to require the executive to repay or return to the company any cash, stock or other incentive compensation (including proceeds from the disposition of shares received upon exercise of options or stock appreciation rights). That right will arise if (1) a material restatement of any of our financial statements is required and (2) in the reasonable judgment of our compensation committee, (A) such

 

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restatement is due to material noncompliance with any financial reporting requirement under applicable securities laws and (B) such noncompliance is a result of misconduct on the part of the executive. In determining the amount of such repayment or return, our compensation committee may take into account, among other factors it deems relevant, the extent to which the market value of the applicable series of our common stock was affected by the errors giving rise to the restatement. The cash, stock or other compensation that we may require the executive to repay or return must have been received by the executive during the 12-month period beginning on the date of the first public issuance or the filing with the SEC, whichever occurs earlier, of the financial statement requiring restatement. The compensation required to be repaid or returned will include (1) cash or company stock received by the executive (A) upon the exercise during that 12-month period of any stock appreciation right held by the executive or (B) upon the payment during that 12-month period of any incentive compensation, the value of which is determined by reference to the value of company stock, and (2) any proceeds received by the executive from the disposition during that 12-month period of company stock received by the executive upon the exercise, vesting or payment during that 12-month period of any award of equity-based incentive compensation.

 

Risk Assessment in Compensation Programs

 

Following the completion of a risk assessment of our compensation programs applicable to all employees, we have concluded that the design and operation of our compensation programs do not provide our employees with incentive to engage in business activities or other actions that would threaten the value of our company or the investment of our stockholders.  We have also concluded that any risks associated with our compensation programs are not reasonably likely to have a material adverse effect on our company. In making these determinations, we considered that the 2011 performance-based bonus program for our executive officers included, as a threshold requirement for the payment of any bonuses, a minimum aggregate market capitalization of our former subsidiary Liberty Media, which would have been supported by Liberty Media’s ongoing stock repurchase program.  However, we believe that the inclusion of the separate corporate performance evaluation and the individual performance evaluation to establish the actual bonus amounts payable under this program more than mitigate any perceived risk associated with the use of Liberty Media’s market capitalization in determining executive compensation. See “Compensation Discussion and Analysis—Elements of 2011 Executive Compensation—2011 Performance-based Bonuses”. This assessment also consisted of a review of program policies and practices, determinations as to the sufficiency of risk identification, and determinations as to our ability to manage significant risks arising from such programs.

 

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SUMMARY COMPENSATION TABLE

 

Name and
Principal Position

(as of 12/31/11)

 

Year

 

Salary
($)(1)

 

Bonus
($)

 

Stock
Awards
($) (2)

 

Option
Awards

($) (2)

 

Non-Equity
Incentive Plan
Compensation

($)

 

Change in
Pension Value
and
Nonqualified

Deferred
Compensation
Earnings
($) (3)

 

All Other
Compensation
($)

(4) (5) (6)

 

Total ($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregory B. Maffei

 

2011

 

1,299,375

 

 

 

 

1,587,600

(7)

 

384,718

(8)

3,271,693

 

President and Chief Executive Officer

 

2010

 

1,500,000

 

 

 

 

4,302,000

 

 

593,793

(8)

6,395,793

 

 

 

2009

 

1,000,000

 

 

1,687,503

 

79,345,879

(9)

5,062,500

 

4,096

 

393,587

(8)

87,493,565

(9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charles Y. Tanabe

 

2011

 

743,956

 

 

 

 

454,490

(7)

 

30,288

 

1,228,734

 

Executive Vice President and

 

2010

 

875,500

 

 

 

16,528,958

 

1,332,073

 

 

29,403

 

18,765,934

 

General Counsel

 

2009

 

875,500

 

 

350,233

 

2,292,387

 

1,050,600

 

1,361

 

29,403

 

4,599,484

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David J.A. Flowers

 

2011

 

518,862

 

 

 

 

147,625

(7)

 

28,271

 

694,758

 

Senior Vice President

 

2010

 

650,000

 

177,000

 

 

8,815,417

 

699,075

 

 

29,403

 

10,370,895

 

 

 

2009

 

650,000

 

 

205,686

 

1,222,602

 

616,992

 

763

 

29,403

 

2,725,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael A. George

 

2011

 

1,000,000

 

 

 

27,867,300

(10)

700,000

 

 

52,583

(11)

29,619,883

 

President, QVC, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Albert E. Rosenthaler

 

2011

 

569,075

 

 

 

 

376,092

(7)

 

26,517

 

971,684

 

Senior Vice President

 

2010

 

650,000

 

 

 

8,815,417

 

784,388

 

 

27,122

 

10,276,927

 

 

 

2009

 

650,000

 

 

205,686

 

1,222,602

 

616,992

 

371

 

27,122

 

2,722,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher W. Shean

 

2011

 

569,075

 

 

 

 

323,369

(7)

8,905

 

25,816

 

927,165

 

Senior Vice President and Chief Financial

 

2010

 

650,000

 

 

 

8,815,417

 

699,075

 

8,588

 

26,210

 

10,199,290

 

Officer (principal financial officer)

 

2009

 

650,000

 

 

173,651

 

1,222,602

 

521,016

 

5,282

 

25,640

 

2,598,191

 

 

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(1)                                  With respect to the year ended December 31, 2011, the amounts set forth in this table reflect compensation paid to our named executive officers from January 1, 2011 to September 23, 2011 (the date of the LMC Split-Off) and compensation paid to our named executive officers by Liberty Media, but allocable to our company under the services agreement, for the period September 24, 2011 to December 31, 2011 (except with respect to Mr. George, whose compensation reported below was paid directly by QVC with respect to the entire year and is not covered by the services agreement). With respect to the years ended December 31, 2010 and 2009, the amounts set forth in this table reflect all compensation paid to our named executive officers by our company (other than Mr. George who first became a named executive officer of our company in 2011). See “—Compensation Discussion and Analysis—Services Agreement.”

 

(2)                                  The aggregate grant date fair value of the equity incentive awards has been computed in accordance with FASB ASC Topic 718, but (pursuant to SEC regulations) without reduction for estimated forfeitures. For a description of the assumptions applied in these calculations, see Note 13 to our consolidated financial statements for the year ended December 31, 2011 (which are included in our Annual Report on Form 10-K as filed with the SEC on February 23, 2012).

 

(3)                                  Reflects the above-market earnings credited during 2011, 2010 and 2009 to the deferred compensation accounts of each applicable named executive officer. See “—Compensation Discussion and Analysis—Elements of 2011 Executive Compensation—Deferred Compensation,” and “—Nonqualified Deferred Compensation Plans” below. Additionally, the 2011 amount reflected for Mr. Shean represents the portion of above-market earnings incurred prior to the LMC Split-Off and an additional amount of above-market earnings following the LMC Split-Off on the portion of Mr. Shean’s year-end bonus which was allocated to our company under the services agreement.

 

(4)                                  The Liberty Media 401(k) Savings Plan, which was sponsored and administered by our company prior to the LMC Split-Off, was transferred to and assumed by Liberty Media. The plan provides employees with an opportunity to save for retirement. The Liberty Media 401(k) Savings Plan participants may contribute up to 75% of their eligible compensation on a pre-tax basis to the plan and an additional 10% of their eligible compensation on an after-tax basis (subject to specified maximums and IRS limits), and we contributed a matching contribution based on the participants’ contributions as set forth in the plan. Participant contributions to the Liberty Media 401(k) Savings Plan are fully vested upon contribution.

 

Generally, participants acquire a vested right in our matching contributions as follows:

 

Years of Service

 

Vesting Percentage

 

Less than 1

 

0

%

1-2

 

33

%

2-3

 

66

%

3 or more

 

100

%

 

Included in this column, with respect to each named executive officer, is $24,500 of matching contributions made by our company to the Liberty Media 401(k) Savings Plan in each of 2011, 2010 and 2009, respectively, except with respect to Mr. George, for which a $16,367 matching contribution was made by QVC to its 401(k) savings plan in 2011. With respect to these matching contributions, all of our named executive officers are fully vested.

 

(5)                                  Included in this column are the following life insurance premiums paid by our company (with the exception of Mr. George, whose life insurance premium was paid by QVC), on behalf of each of the named executive officers and, for amounts reflected for 2011 following the LMC Split-Off, paid by Liberty Media and allocated to our company under the services agreement:

 

 

 

Amounts ($)

 

Name

 

2011

 

2010

 

2009

 

Gregory B. Maffei

 

2,017

 

2,622

 

1,710

 

Charles Y. Tanabe

 

5,788

 

4,903

 

4,903

 

David J.A. Flowers

 

3,771

 

4,903

 

4,903

 

Michael A. George

 

1,373

 

 

 

Albert E. Rosenthaler

 

2,017

 

2,622

 

2,622

 

Christopher W. Shean

 

1,316

 

1,710

 

1,140

 

 

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(6)                                  We make available to our personnel, including our named executive officers, tickets to various sporting events with no aggregate incremental cost attributable to any single person.

 

(7)                                  Reflects the portion of the 2011 performance-based bonuses paid by our company. See “—Compensation Discussion and Analysis—Elements of 2011 Executive Compensation—2011 Performance-based Bonuses.”

 

(8)                                   Includes the following:

 

 

 

Amounts ($)

 

 

 

2011

 

2010

 

2009

 

Reimbursement for personal legal services

 

 

118,589

 

 

Compensation related to personal use of corporate aircraft (a)

 

355,201

(b)

445,082

 

364,766

 

 


(a) Calculated based on aggregate incremental cost of such usage to our company.

(b) Includes the amounts allocated to our company under the services agreement following the LMC Split-Off.

 

Prior to the LMC Split-Off, we owned an apartment in New York City which was primarily used for business purposes. The apartment was assigned to Liberty Media in the LMC Split-Off. Mr. Maffei makes use of this apartment and a company car and driver for personal reasons. From time to time, we also pay the cost of miscellaneous shipping and catering expenses for Mr. Maffei.

 

(9)                                   Includes the grant date fair value of Mr. Maffei’s multi-year option award granted in connection with his previous agreement in principle to continue serving as our Chief Executive Officer until 2014.  See “—Compensation Discussion and Analysis—Elements of 2011 Executive Compensation—Equity Incentive Compensation” for information regarding our compensation practices relating to equity incentive awards. Although his amended compensation package, which applies to the period 2010-2014, was assumed by Liberty Media in connection with the LMC Split-Off, these awards were granted in December 2009 by our company and are, accordingly, reflected in his 2009 compensation information above. Mr. Maffei entered into a separate agreement with our company with respect to certain of his equity awards (including his Multi-Year Award) in connection with the LMC Split-Off. See “—Executive Compensation Arrangements—Gregory B. Maffei—Agreement Regarding LINTA Equity Awards.”

 

(10)                             Represents the grant date fair value of Mr. George’s multi-year option award granted in March 2011. See “—Compensation Discussion and Analysis—Elements of 2011 Executive Compensation—Equity Incentive Compensation” and “—Executive Compensation Arrangements—Michael A. George” for more information. Mr. George’s multi-year option award is similar in function to the multi-year awards previously granted to named executive officers, and it is anticipated that Mr. George will not receive any additional equity awards during the term of his employment agreement with QVC.

 

(11)                             Includes a tax gross-up relating to certain out of state income taxes to which Mr. George was subject in connection with the performance of his duties outside of QVC’s headquarters.

 

Executive Compensation Arrangements

 

Gregory B. Maffei

 

Employment Agreement.  On December 17, 2009, the compensation committee approved in principle a new compensation arrangement in favor of Mr. Maffei providing, among other things, for a five year employment term beginning January 1, 2010 and ending December 31, 2014, with an annual base salary of $1.5 million,

 

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increasing annually by 5% of the prior year’s base salary, and an annual target cash bonus equal to 200% of the applicable year’s annual base salary. Also, on December 17, 2009, in connection with the approval in principle of his compensation arrangement, Mr. Maffei received a multi-year grant of options to purchase the following shares of our company with exercise prices equal to the closing sale prices of the applicable series of stock on the grant date: 8,743,000 shares of LINTA, 760,000 shares of our former Series A Liberty Starz common stock and 1,353,000 shares of our former Series A Liberty Capital common stock. One-half of the options will vest on the fourth anniversary of the grant date with the remaining options vesting on the fifth anniversary of the grant date, in each case, subject to Mr. Maffei’s continued employment on the applicable vesting date. The options have a term of 10 years. See “—Agreement Regarding LINTA Equity Awards” below for more information regarding these options.

 

On May 17, 2010, we entered into a definitive employment agreement with Mr. Maffei, memorializing the compensation arrangement that was approved in principle by the compensation committee on December 17, 2009. The employment agreement also included terms related to Liberty Interactive equity awards held by Mr. Maffei, including the multi-year award of options that was granted to him on December 17, 2009 (as described in more detail below).

 

In connection with the LMC Split-Off, Liberty Media assumed this employment agreement, and in February 2012 the agreement was amended and restated effective September 23, 2011 to reflect the change in employer and to specify the equity awards covered by the agreement following the LMC Split-Off. The amended and restated agreement with Liberty Media provides that: (i) in the event Mr. Maffei is terminated for cause (as defined in the agreement) he will be entitled only to his accrued base salary, unpaid expenses and any amounts due under applicable law; (ii) if Mr. Maffei terminates his employment without good reason (as defined in the agreement), he will be entitled only to his accrued base salary, accrued but unpaid bonus for the prior year, unpaid expenses and any amounts due under applicable law (Standard Payments); (iii) if Mr. Maffei is terminated by Liberty Media without cause or if he terminates his employment for good reason, the agreement provides for him to receive the Standard Payments and a severance payment of $7.8 million; and (iv) in the case of Mr. Maffei’s death or his disability, the agreement provides for the right to receive the Standard Payments and a severance payment of $7.8 million. In addition, if Mr. Maffei is terminated without cause or due to disability, or terminates his employment for good reason, Mr. Maffei will be entitled to continuation of certain perquisites for 18 months, including use of our corporate aircraft. Although we are not a party to Mr. Maffei’s amended and restated employment agreement, we are obligated to reimburse Liberty Media for our allocable portion of any payments made to Mr. Maffei thereunder (other than payments relating to equity awards which are not allocable under the services agreement) pursuant to the services agreement.

 

Agreement Regarding LINTA Equity Awards. Following the LMC Split-Off, Mr. Maffei continued to be the President and Chief Executive Officer of our company and we entered into an Agreement Regarding LINTA Equity Awards with Mr. Maffei, effective as of September 23, 2011, pursuant to which we agreed that for so long as Mr. Maffei is employed by us he will be employed as the company’s President and Chief Executive Officer and will be nominated and recommended for election to our board of directors at each annual meeting of shareholders occurring prior to December 31, 2014. The agreement includes provisions, similar to those in Mr. Maffei’s December 2009 employment agreement, regarding his employment as our company’s President and Chief Executive Officer while he is employed by our company and regarding his position on our board of directors, including his membership on the executive committee of the board. The agreement does not include an obligation to pay Mr. Maffei a salary or bonus or to provide him with benefits (other than reimbursement of expenses) or to pay him severance upon termination of his employment with us, but our company bears a portion of the cost to Liberty Media of Mr. Maffei’s salary, bonus, severance and other benefits pursuant to agreements entered into between our company and Liberty Media in connection with the LMC Split-Off (as described above).

 

The Agreement Regarding LINTA Equity Awards also includes terms previously set forth in his 2009 employment agreement with us that relate to Liberty Interactive Corporation equity awards held by Mr. Maffei, including terms that affect the options to now purchase 8,743,000 shares of LINTA stock at an exercise price of $10.27 per share that were granted to Mr. Maffei on December 17, 2009 (the Multi-Year Award). One-half of the options granted in the Multi-Year Award will vest on the fourth anniversary of the grant date with the remaining options vesting on the fifth anniversary of the grant date, in each case, subject to Mr. Maffei being employed by our company on the applicable vesting date and to the early vesting events described below. The options have a term of 10 years.

 

The Agreement Regarding LINTA Equity Awards provides that, in the event Mr. Maffei is terminated for

 

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cause (as defined in the agreement), or if he terminates his employment without good reason (as defined in the agreement), he will forfeit all rights to his unvested restricted shares and unvested options.  However, in both cases, his vested, unexercised options and similar rights as of his termination date will remain exercisable either (1) for 90 days after his termination or until the original expiration date of the applicable award, if sooner, or (2) if any such termination of his employment occurs following December 31, 2014 or following a change in control of our company (as defined in the agreement), until the original expiration date of the applicable award. If Mr. Maffei is terminated by our company without cause or if he terminates his employment for good reason, the agreement provides for his unvested restricted shares and unvested options and similar rights (including his Multi-Year Award) to vest pro rata based on the portion of the vesting period elapsed through the termination date plus 18 months and for all vested and accelerated options and similar rights to remain exercisable until their respective expiration dates; provided, that if Mr. Maffei continues to be employed by Liberty Media following such a termination from our company without cause or for good reason, he may elect to have his unvested equity awards continue to vest in accordance with the terms of the agreement based on his continued service with Liberty Media. If a termination without cause or for good reason occurs within 90 days before or 210 days after members of the Malone Group (as defined in the agreement) cease to meet certain ownership requirements with respect to our company as described in the agreement, then Mr. Maffei’s unvested restricted shares and unvested options and similar rights granted by our company will instead vest in full and will remain exercisable until their respective expiration dates.  In the case of Mr. Maffei’s death or his disability, the agreement provides for his unvested restricted shares and unvested options and similar rights to fully vest and for his vested and accelerated options and similar rights to remain exercisable until their respective expiration dates.  Further, in the event of certain change in control transactions, including spin-off or split-off transactions which exceed a specified threshold of our company’s consolidated assets, Mr. Maffei’s unvested restricted shares and unvested options and similar rights would vest in full unless Mr. Maffei is named the Chief Executive Officer of the spin-off or split-off entity and his equity awards are adjusted in the transaction in such a manner as to preserve the intrinsic value thereof.

 

The Agreement Regarding LINTA Equity Awards further provides that it is intended to meet the requirements of Section 409A of the Internal Revenue Code (the Code) and provides for certain reimbursements to Mr. Maffei in the event the agreement does not so comply. The agreement also contains customary provisions pertaining to confidentiality and limitations on outside activities.

 

Aircraft Usage.  In 2008, we entered into a letter agreement with Mr. Maffei, which was assumed by Liberty Media in connection with the LMC Split-Off, pursuant to which he is entitled to personal use of corporate aircraft not to exceed 120 hours of flight time per year through the first to occur of the termination of his employment agreement with Liberty Media or the cessation of aircraft ownership by Liberty Media. Mr. Maffei will continue to incur taxable income, calculated in accordance with SIFL, for all personal use of Liberty Media’s corporate aircraft. Pursuant to our services agreement and aircraft sharing arrangement with Liberty Media, we reimburse Liberty Media for any costs, calculated in accordance with SIFL, associated with Mr. Maffei using its corporate aircraft that are allocable to our company.

 

Michael A. George

 

On May 3, 2011, QVC entered into an employment agreement with Mr. George. The agreement provides for, among other things, a five year employment term beginning January 1, 2011 and ending December 15, 2015, with an annual base salary of $1 million, increasing annually by 3% of the prior year’s base salary, and an annual target cash bonus equal to 100% of the applicable year’s annual base salary which will be determined by the chief executive officer of our company pursuant to criteria established in QVC’s annual bonus program (which program is approved each year by our company’s chief executive officer) or, in the event Mr. George is considered a “covered employee” for any given year for purposes of Section 162(m) of the Code, his bonus will be determined by our company’s compensation committee based on such criteria as approved in advance by such committee and that are designed in a manner such that the bonus will be treated as “qualified performance-based compensation” within the meaning of Section 162(m). Also pursuant to the agreement, Mr. George is entitled to certain welfare, retirement and fringe benefits available to senior-level executives of QVC.

 

On March 2, 2011, Mr. George was granted 3.8 million options to acquire shares of LINTA (the 2011 LINTA Options) at an exercise price of $16.01 per share, which was the closing price of LINTA on such date. One-half of the 2011 LINTA Options will vest on December 15, 2014 with the remaining options vesting on December 15, 2015. The options have a term of 7 years. It is anticipated that Mr. George will not receive any

 

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additional equity award grants during the term of his employment agreement.

 

The agreement provides that, in the event Mr. George is terminated for cause (as defined in the agreement), he will be entitled to his accrued base salary through the date of termination, unpaid expenses, his vested benefits and any amounts due under applicable law. In addition, all equity awards granted to Mr. George prior to January 1, 2011 that are outstanding and unvested at the time of his termination for cause (the Pre-2011 Unvested Awards) and all 2011 LINTA Options then held by Mr. George that have not become exercisable as of the date of such termination will be forfeited, and all equity awards granted to Mr. George prior to January 1, 2011 that are outstanding and vested but unexercised at the time of such termination (the Pre-2011 Vested Awards) and all 2011 LINTA Options that are outstanding and vested but unexercised as of the date of such termination will remain exercisable for a period of up to 90 days after the date of such termination or until the original expiration date of the options if sooner. If Mr. George terminates his employment without good reason (as defined in the agreement), he will be entitled to his accrued base salary though the date of termination, any declared but unpaid bonus for the calendar year prior to the year of termination, unpaid expenses, his vested benefits and any amounts due under applicable law. He will forfeit all rights to any Pre-2011 Unvested Awards and to any 2011 LINTA Options then held that have not become exercisable as of the date of his termination, any Pre-2011 Vested Awards that are options or similar rights will be treated as specified in the applicable agreement governing such equity award, and any 2011 LINTA Options that are outstanding and vested but unexercised as of the date of termination will be exercisable for a period of 90 days after the date of termination or until the original expiration date of the options if sooner. If, however, Mr. George terminates his employment for good reason or if his employment is terminated by QVC without cause, then he is entitled to receive his base salary for a period of one year and a lump sum payment of $1.5 million, in addition to accrued base salary through the date of termination, unpaid expenses, his vested benefits and any other amounts due under applicable law. In addition, any Pre-2011 Unvested Awards held on the date of termination that would have vested during the 365-day period following the date of such termination had Mr. George continued to be employed by QVC during such period will vest as of the date of termination. Further, a pro rata portion of each tranche of the 2011 LINTA Options that is not vested on the date of termination will vest as of such date, with such pro rata portion based on the portion of time Mr. George was employed by QVC and its affiliates during the vesting period of such tranche plus 365 days. The exercisability of any Pre-2011 Vested Awards, any vested 2011 LINTA Options and any Pre-2011 Unvested Awards that vest pursuant to the foregoing sentence will be extended to the earlier of the original expiration date of the option or two years from the date of the termination. In the case of Mr. George’s death or disability (as defined in the agreement), the agreement provides for the right to receive his base salary for a period of one year, his accrued base salary through the date of termination, unpaid expenses, any declared but unpaid bonus for the calendar year prior to the year in which the termination occurs, his vested benefits and any amounts due under applicable law. In addition, the Pre-2011 Vested Awards, the Pre-2011 Unvested Awards and the 2011 LINTA Options will immediately vest and become exercisable (to the extent not already vested) and will be exercisable throughout the remainder of the full original term of such equity award.

 

Equity Incentive Plans

 

The 2007 Incentive Plan and the 2010 Incentive Plan are administered by the compensation committee of our board of directors. The compensation committee has full power and authority to grant eligible persons the awards described below and to determine the terms and conditions under which any awards are made. The existing incentive plans are designed to provide additional remuneration to certain employees and independent contractors for exceptional service and to encourage their investment in our company. Our compensation committee may grant non-qualified stock options, SARs, restricted shares, restricted stock units, cash awards, performance awards or any combination of the foregoing under the existing incentive plans (collectively, awards).

 

The maximum number of shares of our common stock with respect to which awards may be issued under the 2007 Incentive Plan is 38,185,000 and under the 2010 Incentive Plan is 40,915,000, subject, in each case, to anti-dilution and other adjustment provisions of the respective plans. With limited exceptions, no person may be granted in any calendar year awards covering more than 6,439,698 shares of our common stock under the 2007 Incentive Plan and 6,546,903 shares of our common stock under the 2010 Incentive Plan (subject, in each case, to anti-dilution and other adjustment provisions of the plans) nor may any person receive under each of the existing incentive plans payment for cash awards during any calendar year in excess of $10 million. Shares of our common stock issuable pursuant to awards made under the existing incentive plans are made available from either authorized but unissued shares or shares that have been issued but reacquired by our company. Each of the 2007 Incentive Plan

 

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and the 2010 Incentive Plan has a 5 year term.

 

2006 Deferred Compensation Plan

 

Effective for the year beginning January 1, 2007 and until the time of the LMC Split-Off, officers of our company at the level of Senior Vice President and above were eligible to participate in the Liberty Media Corporation 2006 Deferred Compensation Plan (as amended and restated, the 2006 deferred compensation plan).  In connection with the LMC Split-Off (pursuant to which employees of our company became employees of Liberty Media), Liberty Media assumed this plan and all obligations outstanding thereunder. Prior to the assumption of this plan by Liberty Media, each eligible officer of our company, including our Chief Executive Officer, principal financial officer and principal accounting officer, could elect to defer up to 50% of his annual base salary and the cash portion of his performance bonus under the 2006 deferred compensation plan. Elections were required to be made in advance of certain deadlines and could include (1) the selection of a payment date, which generally could not be later than 30 years from the end of the year in which the applicable compensation is initially deferred, and (2) the form of distribution, such as a lump-sum payment or substantially equal annual installments over two to five years.  Compensation deferred under the 2006 deferred compensation plan earned interest at the rate of 9% per year, compounded quarterly at the end of each calendar quarter.

 

As a result of the assumption by Liberty Media of this plan, an officer of our company is only permitted to defer up to 50% of the portion of such officer’s annual base salary and the portion of such officer’s performance bonus, in each case, allocable to Liberty Media pursuant to the services agreement. Our officers are no longer permitted to elect the deferral of a portion of their base salary and performance bonus allocable to our company, with the exception of the application of the previously made deferral elections to the 2011 performance-based bonuses which were paid by Liberty Interactive. Mr. Shean had a deferral election in place for such bonus, and we will be responsible for the payment of such deferred amount and all interest thereon going forward.

 

The Liberty Media board of directors reserves the right to terminate the 2006 deferred compensation plan at any time.  An optional termination by the Liberty Media board of directors will not result in any distribution acceleration.

 

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Grants of Plan-Based Awards

 

The following table contains information regarding plan-based incentive awards granted during the year ended December 31, 2011 to the named executive officers.

 

 

 

 

 

 

 

 

 

 

 

All other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

stock

 

All other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

awards:

 

option

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

 

awards:

 

Exercise

 

 

 

 

 

 

 

 

 

 

 

 

 

of shares

 

Number of

 

or base

 

Grant date

 

 

 

 

 

Estimated Future Payouts under

 

of stock

 

securities

 

price of

 

 fair value of

 

 

 

 

 

Non-equity Incentive Plan Awards

 

or

 

underlying

 

 option

 

stock and

 

 

 

Grant

 

Threshold

 

Target

 

Maximum

 

units

 

options

 

awards

 

option awards 

 

Name

 

Date (1)

 

($)(2)

 

($) (2)

 

($)(3)

 

(#)

 

(#)

 

($/Sh)

 

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregory B. Maffei

 

3/10/11

 

 

 

6,300,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charles Y. Tanabe

 

3/10/11

 

 

 

1,803,530

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David J.A. Flowers

 

3/10/11

 

 

 

1,004,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael A. George

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3/1/11

 

 

 

4,800,000

 

 

 

 

 

LINTA

 

 

 

 

 

 

3,800,000

(4)

16.01

 

27,867,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Albert E. Rosenthaler

 

3/10/11

 

 

 

1,004,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher W. Shean

 

3/10/11

 

 

 

1,004,250

 

 

 

 

 

 


(1)                              With respect to Messrs. Maffei, Tanabe, Flowers, Rosenthaler and Shean, reflects the date on which our company’s compensation committee established the terms of the 2011 performance-based bonus program, as described under “Compensation Discussion and Analysis—Elements of 2011 Executive Compensation—2011 Performance-based Bonuses—Liberty Interactive Awards.” With respect to Mr. George, reflects the date on which our company’s

 

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compensation committee approved his performance-based bonus, as described under “Compensation Discussion and Analysis—Elements of 2011 Executive Compensation—2011 Performance-based Bonuses—QVC Award.”

 

(2)                                  Our 2011 performance-based bonus programs do not provide for a threshold bonus amount nor do they provide for a target payout amount for any named executive officer. For the actual bonuses paid by our company and QVC, as applicable, see the amounts included for 2011 in the column entitled Non-Equity Incentive Plan Compensation in the “Summary Compensation Table” above.

 

(3)                                  With respect to Messrs. Maffei, Tanabe, Flowers, Rosenthaler and Shean, represents the maximum amount that would have been payable to each named executive officer assuming (x) the 2011 Market CapitalizationThreshold was exceeded by a sufficient amount to permit the maximum bonus amounts to have been payable, (y) the highest corporate performance rating of 10 was ascribed for 2011 and (z) the highest individual performance rating of 10 was ascribed for 2011 to each named executive officer, and does not give effect to the allocation of any portion of such maximum bonus amount to Liberty Media under the services agreement. For more information on this performance bonus program, see “—Compensation Discussion and Analysis—Elements of 2011 Executive Compensation—2011 Performance-based Bonuses—Liberty Interactive Awards.” With respect to Mr. George, represents the maximum amount that would have been payable to Mr. George assuming (x) the highest QVC EBITDA growth target of 15% was achieved and (y) Mr. George’s individual performance warranted the maximum additional increase of his bonus determined based on QVC EBITDA growth. For more information on this performance bonus program, see “—Compensation Discussion and Analysis—Elements of 2011 Executive Compensation—2011 Performance-based Bonuses—QVC Award.”

 

(4)                              Vests one-half on December 15, 2014 and one-half on December 15, 2015.

 

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Outstanding Equity Awards at Fiscal Year-End

 

The following table contains information regarding unexercised options and unvested shares of our common stock which were outstanding as of December 31, 2011 and held by the named executive officers, including those awards granted during 2011 and reflected in the “Grants of Plan-Based Awards” table above.

 

 

 

Option awards

 

Stock awards

 

Name

 

Number of securities
underlying unexercised
options
(#)
Exercisable

 

Number of
securities
underlying
unexercised
options (#)
Unexercisable

 

Option
exercise
price ($)

 

Option
expiration
date

 

Number of
shares or units
of stock that
have not vested
 (#)

 

Market value of shares
or units of stock that
have not vested ($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregory B. Maffei

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

1,375,000

 

 

16.91

 

11/8/12

 

 

 

LINTA

 

78,125

 

 

17.65

 

3/2/13

 

 

 

LINTA

 

453,900

 

 

24.06

 

3/29/14

 

 

 

LINTA

 

462,779

 

 

19.96

 

12/24/14

 

 

 

LINTA

 

1,029,840

 

343,292

(1)

2.91

 

12/16/15

 

 

 

LINTA

 

 

8,743,000

(2)

10.27

 

12/17/19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

 

 

 

 

31,220

(3)

506,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charles Y. Tanabe

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

62,500

 

 

16.97

 

7/31/13

 

 

 

LINTA

 

56,250

 

 

15.46

 

8/6/14

 

 

 

LINTA

 

70,000

 

 

18.54

 

8/2/12

 

 

 

LINTA

 

51,042

 

 

17.52

 

2/28/13

 

 

 

LINTA

 

128,600

 

 

24.06

 

3/29/14

 

 

 

LINTA

 

130,598

 

 

19.96

 

12/24/14

 

 

 

LINTA

 

72,996

 

97,329

(1)

2.91

 

12/16/15

 

 

 

LINTA

 

144,164

 

144,164

(4)

10.27

 

12/17/16

 

 

 

LINTA

 

 

1,247,637

(5)

14.62

 

3/19/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

 

 

 

 

6,480

(3)

105,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David J.A. Flowers

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28



Table of Contents

 

 

 

Option awards

 

Stock awards

 

Name

 

Number of securities
underlying unexercised
options
(#)
Exercisable

 

Number of
securities
underlying
unexercised
options (#)
Unexercisable

 

Option
exercise
price ($)

 

Option
expiration
date

 

Number of
shares or units
of stock that
have not vested
 (#)

 

Market value of shares
or units of stock that
have not vested ($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

50,000

 

 

16.97

 

7/31/13

 

 

 

LINTA

 

62,500

 

 

15.46

 

8/6/14

 

 

 

LINTA

 

75,000

 

 

18.54

 

8/2/12

 

 

 

LINTA

 

45,208

 

 

17.52

 

2/28/13

 

 

 

LINTA

 

68,100

 

 

24.06

 

3/29/14

 

 

 

LINTA

 

69,214

 

 

19.96

 

12/24/14

 

 

 

LINTA

 

155,724

 

51,909

(1)

2.91

 

12/16/15

 

 

 

LINTA

 

76,887

 

76,888

(4)

10.27

 

12/17/16

 

 

 

LINTA

 

 

665,405

(5)

14.62

 

3/19/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

 

 

 

 

3,806

(3)

61,733

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael A. George

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

9,375

 

65,625

(6)

3.24

 

2/27/16

 

 

 

LINTA

 

9,375

 

65,625

(6)

6.00

 

2/27/16

 

 

 

LINTA

 

275,000

 

225,000

(7)

6.00

 

4/6/16

 

 

 

LINTA

 

275,000

 

225,000

(7)

3.41

 

4/6/16

 

 

 

LINTA

 

18,750

 

56,250

(7)

6.00

 

4/6/16

 

 

 

LINTA

 

43,750

 

56,250

(7)

3.41

 

4/6/16

 

 

 

LINTA

 

246,710

 

411,185

(8)

12.97

 

3/1/17

 

 

 

LINTA

 

 

3,800,000

(9)

16.01

 

3/2/18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

 

 

 

 

200,000

(10)

3,244,000

 

LINTA

 

 

 

 

 

80,358

(11)

1,303,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Albert E. Rosenthaler

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

128,200

 

 

19.25

 

3/1/12

 

 

 

LINTA

 

62,500

 

 

16.97

 

7/31/13

 

 

 

LINTA

 

62,500

 

 

15.46

 

8/6/14

 

 

 

LINTA

 

75,000

 

 

18.54

 

8/2/12

 

 

 

LINTA

 

42,208

 

 

17.52

 

2/28/13

 

 

 

LINTA

 

68,100

 

 

24.06

 

3/29/14

 

 

 

 

29



Table of Contents

 

 

 

Option awards

 

Stock awards

 

Name

 

Number of securities
underlying unexercised
options
(#)
Exercisable

 

Number of
securities
underlying
unexercised
options (#)
Unexercisable

 

Option
exercise
price ($)

 

Option
expiration
date

 

Number of
shares or units
of stock that
have not vested
 (#)

 

Market value of shares
or units of stock that
have not vested ($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

69,214

 

 

19.96

 

12/24/14

 

 

 

LINTA

 

64,885

 

51,909

(1)

2.91

 

12/16/15

 

 

 

LINTA

 

76,887

 

76,888

(4)

10.27

 

12/17/16

 

 

 

LINTA

 

 

665,405

(5)

14.62

 

3/19/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

 

 

 

 

 

 

 

 

3,806

(3)

61,733

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher W. Shean

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

62,500

 

 

16.97

 

7/31/13

 

 

 

LINTA

 

62,500

 

 

15.46

 

8/6/14

 

 

 

LINTA

 

65,000

 

 

18.54

 

8/2/12

 

 

 

LINTA

 

51,042

 

 

17.52

 

2/28/13

 

 

 

LINTA

 

68,100

 

 

24.06

 

3/29/14

 

 

 

LINTA

 

69,214

 

 

19.96

 

12/24/14

 

 

 

LINTA

 

129,770

 

51,909

(1)

2.91

 

12/16/15

 

 

 

LINTA

 

76,887

 

76,888

(4)

10.27

 

12/17/16

 

 

 

LINTA

 

 

665,405

(5)

14.62

 

3/19/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

LINTA

 

 

 

 

 

3,214

(3)

52,131

 

 


(1)                                     Vests quarterly (based on original amount of grant) over 4 years from December 16, 2008 grant date.

 

(2)                                     Vests 50% on December 17, 2013 and 50% on December 17, 2014.

 

(3)                                     Vests quarterly (based on original amount of grant) over 3 years from December 17, 2009 grant date.

 

(4)                                     Vests quarterly (based on original amount of grant) over 4 years from December 17, 2009 grant date.

 

(5)                                     Vests one-third on June 30, 2013, one-third on June 30, 2014 and one-third on December 31, 2015.

 

(6)                                     Vests semi-annually (based on original amount of grant) over 4 years from February 27, 2009 grant date.

 

(7)                                     Vests semi-annually (based on original amount of grant) over 4 years from April 6, 2009 grant date.

 

(8)                                     Vests semi-annually (based on original amount of grant) over 4 years from March 1, 2010 grant date.

 

(9)                                     Vests 50% on December 15, 2014 and 50% on December 15, 2015.

 

(10)                                Vests annually (based on original amount of grant) over 4 years from February 27, 2009 grant date.

 

(11)                                Vests annually (based on original amount of grant) over 4 years from March 1, 2010 grant date.

 

30



Table of Contents

 

Option Exercises and Stock Vested

 

The following table sets forth information regarding the exercise of vested options and the vesting of restricted stock held by our named executive officers, in each case, during the year ended December 31, 2011.

 

 

 

Option Awards

 

Stock Awards

 

 

 

Number of

 

 

 

Number of

 

 

 

 

 

shares

 

Value

 

shares

 

Value

 

 

 

acquired on

 

realized on

 

acquired on

 

realized on

 

Name

 

exercise (#) (1)

 

exercise ($)

 

vesting (#) (1)

 

vesting ($)

 

 

 

 

 

 

 

 

 

 

 

Gregory B. Maffei

 

 

 

 

 

 

 

 

 

LCAPA (2)

 

 

 

48,855

 

3,635,626

 

LINTA

 

 

 

163,479

 

2,593,592

 

LSTZA (3)

 

 

 

10,109

 

749,652

 

 

 

 

 

 

 

 

 

 

 

Charles Y. Tanabe

 

 

 

 

 

 

 

 

 

LCAPA (2)

 

25,739

 

1,802,397

 

11,667

 

868,219

 

LINTA

 

121,660

 

1,793,679

 

38,397

 

609,166

 

LSTZA (3)

 

5,692

 

245,001

 

2,612

 

193,695

 

 

 

 

 

 

 

 

 

 

 

David J.A. Flowers

 

 

 

 

 

 

 

 

 

LCAPA (2)

 

 

 

5,389

 

401,029

 

LINTA

 

 

 

18,277

 

289,961

 

LSTZA (3)

 

 

 

1,369

 

101,522

 

 

 

 

 

 

 

 

 

 

 

Michael A. George

 

 

 

 

 

 

 

 

 

LINTA

 

275,000

 

3,309,168

 

126,785

 

2,063,971

 

 

 

 

 

 

 

 

 

 

 

Albert E. Rosenthaler

 

 

 

 

 

 

 

 

 

LCAPA (2)

 

12,637

 

777,885

 

6,517

 

484,971

 

LINTA

 

 

 

21,580

 

342,364

 

LSTZA (3)

 

8,239

 

355,493

 

1,428

 

105,896

 

 

 

 

 

 

 

 

 

 

 

Christopher W. Shean

 

 

 

 

 

 

 

 

 

LCAPA (2)

 

57,036

 

4,308,836

 

5,884

 

437,865

 

LINTA

 

 

 

19,337

 

306,778

 

LSTZA (3)

 

 

 

1,361

 

100,930

 

 


(1)

Includes shares withheld in payment of withholding taxes at election of holder.

 

 

(2)

Reflects exercises and vesting events with respect to shares of Series A Liberty Capital common stock (LCAPA) occurring prior to the LMC Split-Off on September 23, 2011.

 

 

(3)

Reflects exercises and vesting events with respect to shares of Series A Liberty Starz common stock (LSTZA) occurring prior to the LMC Split-Off on September 23, 2011.

 

31



Table of Contents

 

Nonqualified Deferred Compensation Plans

 

The following table sets forth information regarding the 2006 deferred compensation plan in which Mr. Shean participated during the year ended December 31, 2011. No other named executive officers participated in this plan during such time. In connection with the LMC Split-Off, this plan and the outstanding obligations thereunder were assumed by Liberty Media effective September 23, 2011. See “—Executive Compensation Arrangements—2006 Deferred Compensation” for more information.

 

 

 

Executive

 

Registrant

 

Aggregate

 

Aggregate

 

Responsibility under

 

Aggregate

 

 

 

contributions

 

contributions

 

earnings in

 

withdrawals/

 

Plan transferred to

 

balance at

 

Name

 

in 2011 ($)

 

in 2011 ($)

 

2011 ($) (1)

 

distributions ($)

 

Liberty Media

 

12/31/11 ($) (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher W. Shean

 

82,549

 

 

36,772

 

(57,808

)

(587,354

)

 

(3)

 


(1)                                     Of these amounts, $8,905 was reported in the “Summary Compensation Table” as above-market earnings that were credited to Mr. Shean’s deferred compensation account during 2011.

 

(2)                                     In our prior year proxy statements, we reported the following above-market earnings that were credited as interest to the applicable officer’s deferred compensation accounts during the years reported:

 

 

 

Amount ($)

 

Name

 

2010

 

2009

 

2008

 

Gregory B. Maffei

 

 

4,096

 

41,937

 

Charles Y. Tanabe

 

 

1,361

 

13,860

 

David J.A. Flowers

 

 

763

 

8,331

 

Albert E. Rosenthaler

 

 

371

 

3,337

 

Christopher W. Shean (a)

 

8,588

 

5,282

 

2,681

 

 


(a) Prior year amounts for Mr. Shean have been restated to correct a clerical error.

 

(3)                                     As described above in “—Executive Compensation Arrangements—2006 Deferred Compensation,” Mr. Shean had a deferral election in place under the 2006 deferred compensation plan following the LMC Split-Off with respect to $32,336, which represents 10% of the portion of his 2011 performance-based bonus that was allocable to and paid by our company. While such amount is reflected in the amounts under the plan that were transferred to Liberty Media upon its assumption of the plan and obligations thereunder, Liberty Interactive will be responsible for the payment of the $32,336 of deferred principal amount and for the payment of interest income at the rate of 9% per annum, compounded quarterly, thereon.

 

32



Table of Contents

 

Potential Payments Upon Termination or Change-in-Control

 

The following table sets forth the potential payments to our named executive officers if their employment had terminated or a change in control had occurred, in each case, as of December 31, 2011. In the event of such a termination or change in control, the actual amounts may be different due to various factors. In addition, we may enter into new arrangements or modify these arrangements from time to time.

 

The amounts provided in the tables are based on the closing market prices on December 30, 2011, the last trading day of such year, for each series of our common stock then-outstanding: LINTA - $16.22 and LINTB - $16.25. The value of the options and SARs shown in the table is based on the spread between the exercise or base price of the award and the applicable closing market price.  The value of the restricted stock shown in the table is based on the applicable closing market price and the number of shares vested.

 

Each of our named executive officers has received awards and payments under the existing incentive plans.  Additionally, each of Messrs. Maffei and George is entitled to certain payments upon termination under his respective employment agreement.  See “—Executive Compensation Arrangements” above.

 

Set forth below is a description of the circumstances giving rise to these potential payments and a brief summary of the provisions governing their payout:

 

Voluntary Termination.  Under the existing incentive plans, each named executive officer would only have a right to the equity grants that vested prior to his termination date.

 

Termination for Cause.  All equity grants (whether vested or unvested) under the existing incentive plans would be forfeited by any named executive officer (other than Mr. Maffei and Mr. George) who is terminated for “cause.”  The existing incentive plans define “cause” as insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind and the refusal to perform his duties and responsibilities for any reason other than illness or incapacity; provided that, if such termination is within 12 months after a change in control (as described below), “cause” means a felony conviction for fraud, misappropriation or embezzlement. Pursuant to Mr. Maffei’s Agreement Regarding LINTA Equity Awards, in the event of his termination for cause (as defined in his agreement), Mr. Maffei’s vested stock options and similar rights would remain exercisable for a short period following his termination. Pursuant to Mr. George’s employment agreement, his Pre-2011 Vested Awards and vested 2011 LINTA Options would also remain exercisable for a short period following his termination.

 

Termination Without Cause or for Good Reason.  Pursuant to the existing incentive plans and the related award agreements (and except as described below), if a named executive officer were terminated by our company without cause or by such named executive officer for good reason (as defined in the applicable award agreements), in addition to his vested equity awards, he would be entitled to vesting in full with respect to any outstanding options or SARs that would have vested during the calendar year in which the termination occurs.  Mr. Maffei’s Agreement Regarding LINTA Equity Awards instead provides for an additional 18 months of vesting following a termination without cause or for good reason with respect to his equity incentive awards, including his Multi-Year Award.  Similarly, the award agreements relating to Messrs. Tanabe’s, Shean’s, Flower’s and Rosenthaler’s multi-year awards and Mr. George’s employment agreement with respect to his Pre-2011 Unvested Awards provide for an additional 12 months of vesting. Mr. George’s employment agreement also provides that his 2011 LINTA Options would vest as to the portion of the unvested awards that could have vested during his employment with QVC (without regard to the cliff vesting feature of the 2011 LINTA Options) and an additional 12 months thereafter.

 

Death.  In the event of death, the existing incentive plans provide for vesting in full of any outstanding options or SARs and the lapse of restrictions on any restricted share awards.

 

No amounts are shown for payments pursuant to life insurance policies, which we make available to all our employees.

 

Disability.  In the event of a disability, which is generally the inability to perform gainful activity for at least 12 months, the existing incentive plans provide for vesting in full of any outstanding options or SARs and the lapse of restrictions on any restricted share awards.

 

No amounts are shown for payments pursuant to short-term and long-term disability policies, which we make available to all our employees.

 

33



Table of Contents

 

Change in Control.  In case of a change in control, the incentive plans provide for vesting in full of any outstanding options or SARs and the lapse of restrictions on any restricted share awards. A change in control is generally defined as:

 

·                  The acquisition of beneficial ownership of at least 20% of the combined voting power of the then outstanding shares of our company ordinarily having the right to vote in the election of directors.

 

·                  Any non-exempt person purchases our common stock pursuant to a tender offer or exchange offer, without the prior consent of our board of directors.

 

·                  The individuals constituting our board of directors over any two consecutive years cease to constitute at least a majority of the board, subject to certain exceptions that permit the board to approve new members by approval of at least two-thirds of the remaining directors.

 

·                  Any merger, consolidation or binding share exchange that causes the persons who were common stockholders of our company immediately prior thereto to lose their proportionate interest in the common stock or voting power of the successor or to have less than a majority of the combined voting power of the then outstanding shares ordinarily having the right to vote in the election of directors, the sale of substantially all of the assets of the company or the dissolution of the company.

 

In the case of a change in control described in the last bullet point, our compensation committee may determine not to accelerate the existing equity awards (other than those held by Mr. Maffei, whose awards are more specifically covered by the terms of his Agreement Regarding LINTA Equity Awards, or by Mr. George, whose awards are more specifically covered by the terms of his employment agreement) if equivalent awards will be substituted for the existing awards. For purposes of the tabular presentation below, we have assumed no such determination was made.

 

34



Table of Contents

 

Benefits Payable Upon Termination or Change in Control

 

Name

 

Voluntary
Termination ($)

 

Termination
for Cause ($)

 

Termination
Without
Cause or for
Good Reason
($)

 

Death ($)

 

Disability ($)

 

After a Change
in Control ($)

 

Gregory B. Maffei

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance(1)

 

 

 

2,340,000

 

2,340,000

 

2,340,000

 

2,340,000

 

Options/SARs

 

13,707,170

(2)

13,707,170

(2)

18,276,387

(3)

70,297,237

(4)

70,297,237

(4)

70,297,237

(4)

Restricted Stock

 

 

 

506,388

(3)

506,388

(4)

506,388

(4)

506,388

(4)

Total

 

13,707,170

 

13,707,170

 

21,122,775

 

73,143,625

 

73,143,625

 

73,143,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charles Y. Tanabe

 

 

 

 

 

 

 

 

 

 

 

 

 

Options/SARs

 

1,872,103

(2)

 

1,872,103

(2)(5)

6,021,547

(4)

6,021,547

(4)

6,021,547

(4)

Restricted Stock

 

 

 

 

105,106

(4)

105,106

(4)

105,106

(4)

Total

 

1,872,103

 

 

1,872,103

 

6,126,653

 

6,126,653