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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, 2015

 

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 QVC Group Common Stock, par value $.01 per share

 

The Nasdaq Stock Market LLC

Series B QVC Group Common Stock, par value $.01 per share

 

The Nasdaq Stock Market LLC

Series A Liberty Ventures Common Stock, par value $.01 per share

 

The Nasdaq Stock Market LLC

Series B Liberty Ventures Common Stock, par value $.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 Liberty Interactive Corporation common stock, as of the closing of trading on the last trading day prior to June 30, 2015, was approximately $17.1 billion.

 

The number of outstanding shares of Liberty Interactive Corporation’s common stock as of January 31, 2016 was:

 

 

 

Series A

 

Series B

 

 

 

 

 

 

 

QVC Group common stock

 

458,219,342

 

29,218,527

 

 

 

 

 

 

 

Liberty Ventures common stock

 

135,023,356

 

7,092,111

 

 

 

 



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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, 2015 (the 2015 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 2015 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 2015 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 2015 Form 10-K, including any of the financial information disclosed in Parts II and IV of the 2015 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

2015 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

9

Item 12.

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

48

Item 13.

Certain Relationships and Related Transactions, and Director Independence

55

Item 14.

Principal Accountant Fees and Services

56

 

 

 

 

Part IV

 

 

 

 

Item 15.

Exhibits and Financial Statement Schedules

58

 

 

 

 

Signatures

59

 

 

 

 

Exhibit Index

60

 

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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.

 

Our board of directors currently consists of ten directors, divided among three classes. Our Class III directors, whose term will expire at the 2016 annual meeting, are John C. Malone, M. Ian G. Gilchrist, Mark C. Vadon and Andrea L. Wong. Our Class I directors, whose term will expire at the annual meeting of stockholders in the year 2017, are Evan D. Malone, David E. Rapley and Larry E. Romrell. Our Class II directors, whose term will expire at the annual meeting of stockholders in the year 2018, are Michael A. George, Gregory B. Maffei and M. LaVoy Robison.

 

Name

 

Positions

 

 

 

John C. Malone
Age: 75

 

Chairman of the Board and a director of our company.

 

Professional Background: Mr. Malone has served as the Chairman of the Board 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) 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 (i) Chairman of the Board of Liberty Media Corporation (including its predecessor) since August 2011 and as a director since December 2010, (ii) Chairman of the Board of Liberty Broadband Corporation (Liberty Broadband) since November 2014, (iii) Chairman of the Board of Liberty Global plc (LGP) since June 2013, having previously served as Chairman of the Board of Liberty Global, Inc. (LGI), LGP’s predecessor, from June 2005 to June 2013 and LGI’s predecessor, Liberty Media International, Inc. (LMI), from March 2004 to June 2005 and a director of UnitedGlobalCom, Inc., now a subsidiary of LGP, from January 2002 to June 2005, (iv) a director of Discovery Communications, Inc. (Discovery) since September 2008 and a director of Discovery’s predecessor, Discovery Holding Company (DHC), from May 2005 to September 2008 and as Chairman of the Board from March 2005 to September 2008, (v) a director of Expedia, Inc. since December 2012, having previously served as a director from August 2005 to November 2012, (vi) a director of Charter Communications Inc. (Charter) since May 2013 and (vii) a director of Lions Gate Entertainment Corp. since March 2015. Previously, he served as (i) the Chairman of the Board of Liberty TripAdvisor Holdings, Inc. (Liberty TripAdvisor) from August 2014 to June 2015, (ii) a director of Sirius XM Holdings Inc. (Sirius XM) from April 2009 to May 2013, (iii) a director of Ascent Capital Group, Inc. from January 2010 to September 2012, (iv) a director of Live Nation Entertainment, Inc. (Live Nation) from January 2010 to February 2011, (v) a director of DIRECTV and its predecessors from February 2008 to June 2010 and (vi) a director of IAC/InterActiveCorp from May 2006 to June 2010.

 

Board Membership Qualifications: Mr. Malone, as President of TCI, co-founded Liberty Interactive’s former parent 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.

 

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Name

 

Positions

 

 

 

Gregory B. Maffei
Age: 55

 

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 the President and Chief Executive Officer of our company since February 2006. He also served as our company’s CEO-Elect from November 2005 through February 2006. Mr. Maffei has served as the President and Chief Executive Officer of Liberty Media Corporation (including its predecessor) since May 2007, Liberty TripAdvisor since July 2013 and Liberty Broadband since June 2014. Prior thereto, Mr. Maffei served as President and Chief Financial Officer of Oracle Corporation, Chairman, President and Chief Executive Officer of 360networks Corporation, and Chief Financial Officer of Microsoft Corporation.

 

Other Public Company Directorships: Mr. Maffei has served as (i) a director of Liberty Media Corporation (including its predecessor) since May 2007, (ii) a director of Liberty TripAdvisor since July 2013 and as its Chairman of the Board since June 2015, (iii) a director of Liberty Broadband since June 2014 and (iv) the Chairman of the Board of Starz since January 2013. He has served as (i) the Chairman of the Board of Sirius XM since April 2013 and as a director since March 2009, (ii) the Chairman of the Board of Live Nation since March 2013 and as a director since February 2011, (iii) the Chairman of the Board of TripAdvisor, Inc. (TripAdvisor) since February 2013, (iv) a director of Charter since May 2013 and (v) a director of Zillow Group, Inc. since February 2015, having previously served as a director of its predecessor, Zillow, Inc., from May 2005 to February 2015. Mr. Maffei served as a director of (i) DIRECTV and its predecessors from February 2008 to June 2010, (ii) Electronic Arts, Inc. from June 2003 to July 2013 and (iii) Barnes & Noble, Inc. from September 2011 to April 2014.

 

Board Membership Qualifications: Mr. Maffei brings to our board significant financial and operational experience based on his current senior policy making positions at our company, Liberty Media Corporation, Liberty TripAdvisor, and Liberty Broadband and his previous executive positions at Oracle Corporation, 360networks Corporation and Microsoft Corporation. In addition, Mr. Maffei has extensive public company board experience. He provides our board with an executive leadership perspective on the strategic planning for, and operations and management of, large public companies.

 

 

 

Michael A. George
Age: 54

 

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. (Dell) from March 2001 to November 2005, most notably as the chief marketing officer and general manager of Dell’s U.S. consumer business.

 

Other Public Company Directorships: Mr. George has served as a director of Brinker International, Inc. since March 2013.

 

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 & Company, 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: 66

 

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

 

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Name

 

Positions

 

 

 

 

 

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 Corporation (including its predecessor) 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 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: 45

 

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, 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, a wine bar, and Rex 1516, a restaurant, both in Philadelphia.

 

Other Public Company Directorships: Dr. Malone has served as a director of Liberty Media Corporation (including its predecessor) since September 2011 and Sirius XM since May 2013.

 

Board Membership Qualifications: Dr. Malone 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: 74

 

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 Chief Executive Officer 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 served as the President and Chief Executive Officer of Rapley Consulting, Inc. from January 2000 to December 2014. From 2003 to 2013, Mr. Rapley was a director of Merrick & Co., a private firm providing engineering and other services to domestic and international clients. From 2008 to 2011, Mr. Rapley was chairman of the board of Merrick Canada ULC.

 

Other Public Company Directorships: Mr. Rapley has served as a director of Liberty Media Corporation (including its predecessor) since September 2011. He has served as a director of LGP since June 2013, having previously served as a director of LGI, LGP’s predecessor, from June 2005 to June 2013 and as a director of LGI’s 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 competes are heavily

 

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Name

 

Positions

 

 

 

 

 

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: 80

 

A director of our company.

 

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 that foundation since January 1998. He has also served as a deputy director of the American Museum of Western Art—The Anschutz Collection since February 2011. Prior to joining The Anschutz Foundation, he was a partner for over 25 years with KPMG LLP, having served at one point as that firm’s audit partner for our 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 Member 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 LLP and its predecessor Peat, Marwick, Mitchell & Co., including serving as an SEC reviewing partner. He provides our board with executive and leadership perspective on financial reporting and accounting oversight of large public companies.

 

 

 

Larry E. Romrell
Age: 76

 

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 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 Corporation (including its predecessor) since September 2011. He has served as a director of LGP since June 2013, having previously served as a director of LGI from June 2005 to June 2013 and as a director of LMI from May 2004 to June 2005. Mr. Romrell has served as a director of Liberty TripAdvisor since August 2014.

 

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.

 

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Name

 

Positions

 

 

 

Mark C. Vadon
Age: 46

 

A director of our company.

 

Professional Background: Mr. Vadon has served as a director of our company since October 2015. Mr. Vadon co-founded zulily, inc. (zulily) and previously served as Chairman of zulily’s board of directors from October 2009 until October 2015 when we completed the acquisition of zulily. In addition, since August 2014, Mr. Vadon has served as Chairman of the Board of chewy.com, an internet retailer of pet food. Since 2013, Mr. Vadon also has served as a board member of the Vadon Foundation.

 

Other Public Company Directorships: Mr. Vadon has served on the board of directors of The Home Depot, Inc. since August 2012. From May 1999 to February 2008, Mr. Vadon was Chief Executive Officer of Blue Nile, Inc., which he founded in 1999 and also served as its Chairman of the board of directors from May 1999 to December 2013.

 

Board Membership Qualifications: Mr. Vadon brings extensive experience and in-depth knowledge of commerce, retail and technology businesses to our board based on his prior public company experience in senior policy-making positions at zulily and at Blue Nile, Inc. as its Chief Executive Officer. His background and executive experience assist the board in evaluating strategic opportunities in the e-commerce and retail industries.

 

 

 

Andrea L. Wong
Age: 49

 

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 Chief Executive Officer 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.

 

Other Public Company Directorships: Ms. Wong has served as a director of Liberty Media Corporation (including its predecessor) since September 2011 and as a director of Hudson’s Bay Company since September 2014.

 

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 leadership experience with the management and operation of companies in the entertainment sector. Her experience with programming development and production, brand enhancement and marketing brings a pragmatic and unique perspective to our board. Her professional expertise, combined with her continued involvement in the media and entertainment industry, makes her a valuable member of our board.

 

 

 

Richard N. Baer
Age: 59

 

Mr. Baer has served as Chief Legal Officer of our company, Liberty Media Corporation, Liberty TripAdvisor and Liberty Broadband since January 2016. He previously served as Senior Vice President and General Counsel of our company and Liberty Media Corporation from January 2013 to December 2015, Liberty TripAdvisor from July 2013 to December 2015 and Liberty Broadband from June 2014 to December 2015. Previously, Mr. Baer served as Executive Vice President and Chief Legal Officer of UnitedHealth Group Incorporated from May 2011 to December 2012. He served as Executive Vice President and General Counsel of Qwest Communications International Inc. from December 2002 to April 2011 and Chief Administrative Officer from August 2008 to April 2011.

 

 

 

Albert E. Rosenthaler
Age: 56

 

Mr. Rosenthaler has served as Chief Tax Officer of our company, Liberty Media Corporation, Liberty TripAdvisor and Liberty Broadband since January 2016. He previously served as a Senior Vice President of our company from April 2002 to December 2015, Liberty Media Corporation (including its predecessor) from May 2007 to December 2015, Liberty

 

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Name

 

Positions

 

 

 

 

 

TripAdvisor from July 2013 to December 2015 and Liberty Broadband from June 2014 to December 2015.

 

 

 

Christopher W. Shean
Age: 50

 

Mr. Shean has served as the Chief Financial Officer of our company and Liberty Media Corporation since November 2011 and Liberty Broadband since June 2014. Mr. Shean previously served as a Senior Vice President of our company from January 2002 to December 2015, the Controller from October 2000 to October 2011 and a Vice President from October 2000 to January 2002. He served as a Senior Vice President of Liberty Media Corporation (including its predecessor) from May 2007 to December 2015 and the Controller from May 2007 to December 2015. Mr. Shean also served as Senior Vice President and Chief Financial Officer of Liberty TripAdvisor from July 2013 through December 2015.

 

Our executive officers will serve in such capacities until their respective successors have been duly elected and have been qualified, or until their earlier death, resignation, disqualification or removal from office. 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, 2015, 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 the following persons (who we collectively refer to as our named executive officers):

 

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

 

·                  Christopher W. Shean, our Chief Financial Officer; and

 

·                  Michael A. George, Richard N. Baer and Albert E. Rosenthaler, our other three most highly compensated executive officers at the end of 2015.

 

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

 

Compensation Discussion and Analysis

 

Compensation Overview

 

Our 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 our executives to increase long-term stockholder value. To that end, the compensation packages provided to the named executive officers include significant performance-based bonuses and equity incentive awards.

 

Our 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. Our compensation committee does not engage in any regular 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. Our compensation committee believes that our compensation packages should assist our company in attracting and retaining key executives critical to our long-term success.

 

Our feedback from stockholders on this pay philosophy has been positive. At our 2014 annual stockholder meeting, stockholders representing 98.8% of the aggregate voting power of Liberty Interactive 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 the 2014 annual meeting of stockholders. No material changes were implemented to our executive compensation program as a result of this vote. At our 2011 annual stockholder meeting, stockholders elected to hold a say-on-pay vote every three years and our board of directors adopted this as the frequency at which future say-on-pay votes would be held.

 

Services Agreement

 

In September 2011, we completed the split-off (the LMC Split-Off) of our former subsidiary then-known as Liberty Media Corporation (currently known as Starz, Old LMC). In January 2013, Old LMC completed the spin-off (the LMC Spin-Off) of its former subsidiary then-known as Liberty Spinco, Inc. (currently known as Liberty Media Corporation, Liberty Media). In connection with the LMC Split-Off, we entered into a services agreement with Old LMC, which was assumed by Liberty Media in the LMC Spin-Off (the services agreement). Pursuant to the services agreement, in 2015, we reimbursed Liberty Media for the portion of the base salary and certain other compensation Liberty Media paid to our employees that was allocable to us for time spent by each such employee related to our company. We do not reimburse Liberty Media for time spent by Mr. Maffei on Liberty Interactive matters. Rather, we pay Mr. Maffei directly pursuant to his employment agreement with our company. All of Mr. George’s compensation was paid by QVC and none of his time was allocated to Liberty Media because Mr. George did not provide any services to Liberty Media in 2015. The 2015 performance-based bonuses earned by the named executive officers of our company were paid directly by our company. During 2015, the allocable percentages of time spent performing services for Liberty Media, on the one hand, and our company, on the other hand, were reviewed quarterly by our audit committee for appropriateness. The salaries and certain perquisite information included in the “Summary Compensation Table” below (other than with respect to Mr. George, whose cash compensation is paid directly by QVC) include the portion of the compensation allocable to our company and for which we reimbursed Liberty Media and do not include the portion of the compensation allocable to Liberty Media. During the year ended December 31, 2015, the weighted average percentage of each such named executive officer’s time that was allocated to our company was: Mr. Baer — 50%; Mr. Rosenthaler — 55%; and Mr. Shean — 62%.

 

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Setting Executive Compensation

 

In making its compensation decision for each named executive officer, our 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, and weights equity compensation most heavily;

 

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

 

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

 

·                  the competitive nature of the compensation packages offered based on general industry knowledge of the media, telecommunications and entertainment industries and use of survey information provided by Mercer (US) Inc. (Mercer) and others; and

 

·                  the performance of the group reporting to the named executive officer.

 

In addition, when setting compensation, our compensation committee considers the recommendations obtained from our Chief Executive Officer as to all elements of the compensation packages of Mr. Baer, Mr. George, Mr. Rosenthaler and Mr. Shean. To make these recommendations, our Chief Executive Officer evaluates the performance and contributions of each such named executive officer. He also considers whether the pay packages afforded to such named executive officers are competitive and are aligned internally.  He also evaluates the named executive officer’s performance against individual, department and corporate goals.

 

In December 2014, our compensation committee approved a new five-year employment agreement with Mr. Maffei (the 2015 Maffei Employment Agreement), which sets his compensation for the term of the agreement. See “—Executive Compensation Arrangements—Gregory B. Maffei” below. Prior to entering into the 2015 Maffei Employment Agreement, our compensation committee obtained information from Mercer with respect to chief executive officer compensation packages at e-commerce and brick and mortar retailers, television shopping networks, and entertainment and travel companies and discussed this comparative information and alternative equity award structures with Mercer.

 

In September 2015, our compensation committee approved a new five-year employment agreement with Mr. George (the 2015 George Employment Agreement) and granted equity awards in connection with the execution of the 2015 George Employment Agreement. See “—Changes for 2016—2015 George Employment Agreement” below. Prior to entering into the 2015 George Employment Agreement, our compensation committee considered the recommendation of Mr. Maffei with respect to Mr. George’s compensation package. When considering Mr. Maffei’s recommendations concerning Mr. George’s compensation, our compensation committee reviewed compensation data from companies similar to QVC, which was compiled by Mercer, as a reference point for the proposed new compensation arrangement. Based on this review, our compensation committee determined to confirm and approve the proposed arrangement.

 

Elements of 2015 Executive Compensation

 

For 2015, the principal components of compensation for the named executive officers were:

 

·                  base salary;

 

·                  a performance-based bonus, payable in cash;

 

·                  performance-based stock option and restricted stock unit awards granted to Mr. Maffei;

 

·                  stock option awards granted to Messrs. Rosenthaler and Shean consisting of (i) multi-year stock option awards to purchase 255,199 shares of Series A QVC Group common stock (QVCA) and 70,850 shares of Series A Liberty Ventures common stock (LVNTA) that vest in equal increments on each of December 31, 2019 and 2020 and (ii)

 

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stock option awards to purchase 112,875 shares of QVCA and 31,933 shares of LVNTA that vest in equal installments on each of March 4, 2016, March 4, 2017 and March 4, 2018;

 

·                  with respect to Mr. George, a multi-year stock option award in connection with the signing of the 2015 George Employment Agreement of options to purchase 1,680,065 shares of QVCA that vest in equal increments on each of December 31, 2019 and December 31, 2020 (collectively, the 2015 Term Options); and

 

·                  perquisites and other limited personal benefits.

 

Base Salary

 

The base salaries of the named executive officers are reviewed on an annual basis (other than Messrs. Maffei and George, whose salaries are governed by their respective employment agreements), as well as at the time of any change in responsibilities. Typically, after establishing a named executive officer’s base salary, salary increases are limited to cost-of-living adjustments, adjustments based on changes in the scope of the named executive officer’s responsibilities, and adjustments to align the named executive officer’s salary level with those of our other named executive officers. Our 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 those of our stockholders. After completion of the annual review in December 2014, the 2015 base salaries of Messrs. Baer, Rosenthaler and Shean were increased by 3%, reflecting a cost-of-living adjustment. Additionally, in February 2015, the base salaries for Messrs. Rosenthaler and Shean were further increased by 3% and 1%, respectively, to better align the base salaries of our company’s senior officers with the salaries of other senior officers with similar levels of responsibility. In 2015, Messrs. Maffei and George received the base salary increases prescribed by the 2015 Maffei Employment Agreement and Mr. George’s prior employment agreement, respectively. Effective December 16, 2015, Mr. George received the increase prescribed by the 2015 George Employment Agreement.

 

2015 Performance-based Bonuses

 

Liberty Awards—Overview. For 2015, 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 under “—QVC Bonus Award” below), which was structured to comply with Section 162(m) of the Internal Revenue Code (the Code). The 2015 bonus program was comprised of two components: a bonus amount payable based on each participant’s individual performance (the Individual Performance Bonus) and a bonus amount payable based on the corporate performance of our company (the Corporate Performance Bonus). No amounts would be payable under our 2015 bonus program unless a minimum corporate performance was achieved: the combined Adjusted OIBDA of (i) QVC and (ii) Backcountry.com, Inc. (Backcountry.com), Bodybuilding.com, LLC, Evite, Inc., Commerce Technologies, Inc. and LMC Right Start, Inc. (collectively, the Digital Commerce Companies) for the year ended December 31, 2015 was required to exceed $750 million (the Threshold). If the Threshold was met, the notional bonus pool for our company would be funded with 1.0% of the amount by which such combined Adjusted OIBDA exceeded $750 million (the bonus pool). If the bonus pool were insufficient to cover the aggregate maximum bonus amounts of all participants (as described in more detail below), each participant’s maximum bonus amount would be reduced pro rata, for all purposes under the program, based upon his respective maximum bonus amount. For purposes of the bonus program, Adjusted OIBDA is defined as revenue less cost of sales, operating expense and selling, general and administrative (SG&A) expense (excluding stock compensation).

 

Each participant was assigned a maximum bonus for each of Liberty Media and Liberty Interactive.  The maximum bonuses for our participants were as follows: Mr. Maffei - $4,803,750; Mr. Baer - $875,243; and Messrs. Rosenthaler and Shean - $850,000 (each participant’s LIC Maximum Bonus). Liberty Media established maximum bonuses for our participants in the same amounts (the LMC Maximum Bonus). The total of the LIC Maximum Bonus and the LMC Maximum Bonus will be referred to as the Combined Maximum Bonus.

 

To determine the LIC Maximum Bonus for each of Messrs. Baer, Rosenthaler, and Shean, our compensation committee divided the base salary paid by our company in half, recognizing that the other half would be subject to Liberty Media’s bonus program. Our compensation committee then set the LIC Maximum Bonus at two times the quotient above. In February 2015, the LIC Maximum Bonus amount for each of Messrs. Rosenthaler and Shean was increased from 1.5 times to two times to align the compensation of our company’s senior officers more closely. Mr. Baer’s LIC Maximum Bonus amount is consistent with the

 

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percentage applied to him with respect to our previous performance-based bonus programs. Mr. Maffei’s maximum bonus was set at five times the base salary paid by our company, which is consistent with the terms of the 2015 Maffei Employment Agreement.

 

Assuming the Threshold was met (and after taking into account any reductions associated with a shortfall in the bonus pool), each participant was entitled to receive from our company an amount (the LIC Maximum Individual Bonus) equal to the LIC Allocable Time Percentage (as defined below) multiplied by 60% of the Combined Maximum Bonus for that participant (the Combined Maximum Individual Bonus). The LIC Maximum Individual Bonus was subject to reduction based on a subjective determination of the participant’s achievement of qualitative criteria established with respect to the services to be performed by the participant on behalf of our company. The LIC Allocable Time Percentage for each participant is equal to the percentage of such participant’s time that was spent performing services for our company under the services agreement, as determined by our compensation committee for purposes of the payment of bonuses: 45% as to Mr. Maffei; 50% as to Mr. Baer; 55% as to Mr. Rosenthaler; and 62% as to Mr. Shean. Under Liberty Media’s corollary program, each participant was entitled to receive from Liberty Media an amount (the LMC Maximum Individual Bonus) equal to the remaining portion of the Combined Maximum Individual Bonus, subject to reduction based on a subjective determination of the participant’s achievement of qualitative criteria established with respect to the services to be performed by the participant on behalf of Liberty Media. Our compensation committee believes this construct was appropriate in light of the services agreement and the fact that each participant splits his professional time and duties.

 

Also, assuming the Threshold was met (and after taking into account any reductions associated with a shortfall in the bonus pool), each participant was entitled to receive from our company an amount (the LIC Maximum Corporate Bonus) equal to the LIC Corporate Percentage (as defined below) multiplied by 40% of his Combined Maximum Bonus (the Combined Maximum Corporate Bonus), subject to reduction based on a subjective determination of the corporate performance of our company. The LIC Corporate Percentage was determined by reference to the historical relative market capitalizations of our company and Liberty Media. Under Liberty Media’s corollary program, each participant was entitled to receive from Liberty Media an amount (the LMC Maximum Corporate Bonus) equal to the remaining portion of the Combined Maximum Corporate Bonus, subject to reduction based on a subjective determination of the corporate performance of Liberty Media.

 

In December 2015, our compensation committee and the Liberty Media compensation committee collaborated in their review of our respective named executive officers’ individual performance criteria and their review of each company’s corporate performance metrics. Notwithstanding this collaborative effort, our compensation committee retained sole and exclusive discretion with respect to the approval of award terms and amounts payable under our bonus program.

 

Also, in December 2015, our compensation committee determined that the combined Adjusted OIBDA for QVC and the Digital Commerce Companies was approximately $1,966.1 million using the formula described above, exceeding the Threshold by approximately $1,246.1 million, thereby creating a notional bonus pool of approximately $12.46 million, which exceeded the amount necessary 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. These calculations were done on a constant currency basis.

 

Individual Performance Bonus.  Our compensation committee then reviewed the individual performance of each participant to determine the reductions that would apply to each participant’s LIC Maximum Individual Bonus. Our 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 participants for determining the reduction that would apply to the LIC Maximum Individual Bonus, our compensation committee considered the various performance objectives related to our company which had been assigned to each participant for 2015, including:

 

Individual

 

Performance Objectives

 

 

 

Gregory B. Maffei

 

·                  Develop strategic initiatives for our company, including pursuit of advantageous investments, acquisitions and divestitures, including the acquisition of zulily, the successful sale of Backcountry.com and the execution of proposed spin-off transactions

·                  Assist QVC with global reorganization and refinancing of debt

·                  Support development and goals of management team

·                  Achieve company financial goals

 

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Individual

 

Performance Objectives

 

 

 

Richard N. Baer

 

·                  Provide sound and timely advice to senior management and board on key issues

·                  Provide effective legal support in connection with mergers, acquisitions, investments and other transactional matters

·                  Facilitate, along with other members of senior management team, sound approach to governance and compliance

·                  Provide legal support to, and assess and appropriately manage significant legal matters of, subsidiaries and controlled companies

 

 

 

Albert E. Rosenthaler

 

·                  Continue legislative efforts

·                  Provide effective tax counsel and advice on strategic initiatives

·                  Obtain full or partial acceptance letter from IRS for 2014 Compliance Assurance Process

·                  Train and develop internal tax staff

 

 

 

Christopher W. Shean

 

·                  Support corporate restructurings

·                  Explore opportunities to maximize value of investments in FTD Companies, Inc. and Digital Commerce Companies

·                  Assess and optimize functionality of financial reporting team

·                  Train and develop internal finance staff

 

Following a review of the participants’ performance, our compensation committee determined to pay each participant the following portion of his LIC Maximum Individual Bonus:

 

Name

 

LIC Maximum
Individual Bonus

 

Percentage
Payable

 

Aggregate
Dollar Amount

 

Gregory B. Maffei

 

$

2,594,025

 

81.3

%

$

2,107,646

 

Richard N. Baer

 

$

525,146

 

81.3

%

$

426,681

 

Albert E. Rosenthaler

 

$

561,000

 

87.5

%

$

490,875

 

Christopher W. Shean

 

$

632,400

 

81.3

%

$

513,825

 

 

Corporate Performance Bonus.  Our compensation committee then made a subjective determination as to the reductions that would apply to each participant’s LIC Maximum Corporate Bonus. In making this determination, our compensation committee reviewed forecasts of 2015 Adjusted OIBDA, revenue and free cash flow (as defined below) for QVC and the Digital Commerce Companies, all of which forecasts were prepared in December 2015 and are set forth in the table below. Also set forth in the table below are the corresponding actual financial measures achieved for 2015, which were within one percent of our forecasts except that actual free cash flow was 92.1% of the forecast. In determining whether any reductions would be made to the LIC Maximum Corporate Bonus payable to each participant, our compensation committee weighted the corporate performance metrics as follows: 25% attributable to revenue growth, 50% attributable to Adjusted OIBDA growth and 25% attributable to growth in free cash flow.

 

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(dollar amounts in millions)

 

2015 Forecast

 

2015 Actual

 

Actual /
Forecast

 

Revenue(1)

 

$

9,949.9

 

$

9,921.5

 

99.7

%

Adjusted OIBDA(1)

 

$

2,053.3

 

$

2,034.0

 

99.1

%

Free Cash Flow(1)(2)

 

$

964.9

 

$

888.8

 

92.1

%

 


(1)         Revenue, Adjusted OIBDA and Free Cash Flow information represent the summation for QVC and the Digital Commerce Companies. Backcountry.com was sold effective June 30, 2015 and results for Backcountry.com have been included for the first six months of 2015.

 

(2)         Defined for purposes of the bonus program as Adjusted OIBDA less all other operating and investing items. Free cash flow information is excluded for Backcountry.com completely as the measurement was a year-end comparison to budget and the business was sold mid-year.

 

Based on a review of these forecasts, our compensation committee determined that the growth metrics were achieved to the extent described below:

 

Growth Factor

 

Liberty Interactive Corporation

Revenue

 

19.5% of a possible 25%

Adjusted OIBDA

 

46% of a possible 50%

Free Cash Flow

 

16.95% of a possible 25%

 

Our compensation committee then used its subjective discretion to translate the achievement of these growth metrics into a percentage payable to each participant of his LIC Maximum Corporate Bonus, as follows:

 

Name

 

LIC Maximum
Corporate Bonus

 

Percentage
Payable

 

Aggregate
Dollar Amount

 

Gregory B. Maffei

 

$

2,091,343

 

89.6

%

$

1,874,240

 

Richard N. Baer

 

$

381,042

 

89.6

%

$

341,486

 

Albert E. Rosenthaler

 

$

370,053

 

89.6

%

$

331,638

 

Christopher W. Shean

 

$

370,053

 

89.6

%

$

331,638

 

 

Aggregate Results. The following table presents information concerning the aggregate 2015 performance-based bonus amounts payable to each named executive officer by our company (other than Mr. George), after giving effect to the determinations described above.

 

Name

 

Individual
Performance Bonus

 

Corporate
Performance Bonus

 

Total Bonus

 

Gregory B. Maffei

 

$

2,107,646

 

$

1,874,240

 

$

3,981,886

 

Richard N. Baer

 

$

426,681

 

$

341,486

 

$

768,167

 

Albert E. Rosenthaler

 

$

490,875

 

$

331,638

 

$

822,513

 

Christopher W. Shean

 

$

513,825

 

$

331,638

 

$

845,463

 

 

Our compensation committee then noted that, when combined with the total 2015 performance-based bonus amounts paid by Liberty Media to the overlapping named executive officers, each of our named executive officers received the following portion of his respective Combined Maximum Bonus:

 

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Name

 

Combined
Maximum Bonus

 

Combined
Percentage Paid

 

Gregory B. Maffei

 

$

9,607,502

 

84.6

%

Richard N. Baer

 

$

1,750,486

 

84.6

%

Albert E. Rosenthaler

 

$

1,700,000

 

88.3

%

Christopher W. Shean

 

$

1,700,000

 

84.6

%

 

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

 

QVC Bonus Award.  Mr. George’s 2015 performance-based bonus was structured to align with the 2015 performance-based bonus program established at QVC for QVC senior global officers and to comply with Section 162(m) of the Code. Pursuant to the program, Mr. George would be paid a bonus based upon 2015 QVC Global EBITDA performance (including QVC’s CNR joint venture, but excluding results from QVC France), with a target bonus amount of 100% of his base salary as required by the terms of his employment agreement and a maximum bonus amount of 260% of his base salary. For this purpose, QVC Global EBITDA was defined as earnings before interest, taxes, depreciation and amortization of QVC (consolidated, on a constant currency basis).

 

For any bonus to be paid, 2015 QVC Global EBITDA would need to equal or exceed $1,969.9 million. If 2015 QVC Global EBITDA equaled or exceeded $1,969.9 million, then Mr. George would be eligible to receive a maximum bonus of 260% of his base salary, subject to reduction in the discretion of our compensation committee based on QVC Global EBITDA performance and individual performance, among other things. QVC Global EBITDA for 2015 was $1,969.9 million, which translated to a payout at 94% of target, which would have been $1,187.5 million. Our compensation committee then approved a bonus payment of $1,000,000, which was 80% of Mr. George’s base salary at December 31, 2015, based on the committee’s subjective review of Mr. George’s and QVC’s performance during 2015. Mr. George’s payout was also in line with the payout percentages approved for QVC’s other senior global officers.

 

Equity Incentive Compensation

 

The Liberty Interactive Corporation 2012 Incentive Plan (As Amended and Restated as of March 31, 2015) (the 2012 Incentive Plan) provides, and prior to its expiration, the Liberty Interactive Corporation 2010 Incentive Plan (As Amended and Restated Effective November 7, 2011), as amended (the 2010 Incentive Plan), provided, for the grant of a variety of incentive awards, including stock options, restricted shares, restricted stock units, stock appreciation rights and performance awards. Our compensation committee has a preference for grants of stock-based incentive awards (restricted stock units, restricted stock and options) as compared with cash incentive awards based on the belief that they better promote retention of key employees through the continuing, long-term nature of an equity investment. It is the policy of our compensation committee that stock options be awarded with an exercise price equal to fair market value on the date of grant, typically measured by reference to the closing price on the grant date.

 

Maffei Performance-based Equity Awards.  In December 2014, we entered into the 2015 Maffei Employment Agreement which provides Mr. Maffei with the opportunity to earn annual equity incentive awards during the employment term. See “¾Executive Compensation Arrangements¾Gregory B. Maffei” for additional information about the annual awards to be provided under the 2015 Maffei Employment Agreement.

 

For 2015, our compensation committee adopted an annual, performance-based equity award program for Mr. Maffei pursuant to the 2015 Maffei Employment Agreement. That program was intended to comply with Section 162(m) of the Code so that the annual awards would be determined to be performance-based compensation. In accordance with the 2015 Maffei Employment Agreement, our compensation committee granted performance equity awards in March 2015 in the grant values specified by the 2015 Maffei Employment Agreement (the LIC Target Equity Awards), which awards would be vested by our compensation committee by March 15, 2016, if and to the extent earned by Mr. Maffei. Consistent with the 2015 Maffei Employment Agreement, after reviewing the relative market capitalizations of our company and Liberty Interactive, our compensation committee determined that $9,489,600 in initial grant value would be issued as LIC Target Equity Awards. Liberty Media’s compensation committee likewise determined that $6,510,400 in initial grant value would be issued as Liberty Media target performance equity awards, for a combined initial target grant value from the two companies of $16 million. Under the 2015 Maffei Employment Agreement, Mr. Maffei has the right, with certain limitations, to designate the percentage of such award value he will receive in the form of restricted stock units and stock

 

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options. Mr. Maffei elected to receive 80% of his Series B Liberty Ventures common stock (LVNTB) LIC Target Equity Awards in the form of stock options and elected to receive the balance in the form of restricted stock units. He elected to receive 20% of his Series B QVC Group common stock (QVCB) LIC Target Equity Awards in the form of restricted stock units and elected to receive the balance in the form of stock options.

 

Accordingly, in March 2015, our compensation committee approved a grant of LIC Target Equity Awards of 131,725 stock options to purchase QVCB shares, 135,478 stock options to purchase LVNTB shares, in each case with a term of seven years (collectively, the 2015 Annual Options), and 182,215 restricted stock units with respect to QVCB shares and 13,470 restricted stock units with respect to LVNTB shares (collectively, the 2015 Annual RSUs). Our compensation committee then set a maximum grant value payout of the annual performance awards based on our company’s relative market capitalization of $14,234,400 (the LIC 162(m) Maximum) and Liberty Media’s compensation committee similarly set a maximum grant value payout of $9,765,600, for a combined maximum payout of $24 million. Any payout of an equity award by our company above $9,489,600 would be in our compensation committee’s sole discretion, would be issued in the first quarter of 2016, and would vest immediately after grant (an LIC Above-Target Award).

 

The LIC Target Equity Awards were earned and vested based on achievement of objective metrics that were designed to qualify the payment as performance-based compensation under Section 162(m) (the 162(m) objective metrics). Subject to Mr. Maffei’s right under the 2015 Maffei Employment Agreement to receive a guaranteed portion of the LIC Target Equity Awards upon achievement of the 162(m) objective metrics, our compensation committee considered whether to use its negative discretion to reduce the award earned under the 162(m) objective metrics. For the reasons discussed below, our compensation committee determined in March 2016 that a portion of the LIC Target Equity Awards would vest and that no LIC Above-Target Awards would be granted.

 

162(m) Objective Metrics. Our compensation committee selected the following 162(m) objective metrics for the LIC Target Equity Awards: revenue growth, Adjusted OIBDA growth and free cash flow as compared to budget at QVC and the Ventures Group, which was defined in this program as the Digital Commerce Companies. For purposes of the LIC Target Equity Awards, results at the Ventures Group are measured on a combined basis. For purposes of the LIC Target Equity Awards, Adjusted OIBDA is defined as revenue less cost of sales, operating expense and SG&A (excluding stock compensation).

 

 

 

QVC(1)
(weighted 70%)

 

Ventures Group(2)
(weighted 30%)

 

 

 

Revenue

 

Adjusted
OIBDA

 

Free
Cash
Flow(3)

 

Revenue

 

Adjusted
OIBDA

 

Free Cash
Flow(3)

 

 

 

(dollars in millions)

 

Metric weighting

 

25

%

50

%

25

%

25

%

50

%

25

%

Percentage achieved

 

3.39

%

2.23

%

88.36

%

6.07

%

12.43

%

(231.08

)%

Vesting percentage

 

77.80

%

64.60

%

53.40

%

0.00

%

100.00

%

0.00

%

Weighted average vesting

 

 

 

65.10

%

 

 

 

 

50.00

%

 

 

Total weighted vesting percentage

 

 

 

 

 

60.58%

 

 

 

 

 

 


(1)         Results exclude our recent acquisition of zulily.

(2)         Results include Backcountry.com for the six months ended June 30, 2015 and 2014.

(3)         Defined for purposes of the LIC Target Equity Awards as Adjusted OIBDA less all other operating and investing items. Free cash flow information is excluded for Backcountry.com completely as the measurement was a year-end comparison to budget and the business was sold mid-year.

 

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Based on this financial performance, our compensation committee determined and certified that it could award a maximum number of LIC Target Equity Awards equaling a grant value of $8,622,772, which was 60.58% of the LIC 162(m) Maximum. Our compensation committee then considered whether to reduce such maximum payout of $8,622,772 and determined to do so based on a combination of objective, subjective and discretionary criteria that had been established in March 2015. In March 2016, our compensation committee reviewed Mr. Maffei’s performance to determine the extent to which he would vest in his LIC Target Equity Awards. Our compensation committee took into account a variety of factors, without assigning a numerical weight to any single individual performance metric, to assess Mr. Maffei’s performance in respect of QVC, the Ventures Group and our other investments. Our compensation committee considered in its evaluation reports from our board, the observations of committee members throughout the year and an executive self-evaluation. Our compensation committee also considered the criteria below in evaluating Mr. Maffei’s performance:

 

Individual Performance Metrics

 

·                  Total stockholder return as compared to peer groups and the S&P 500;

 

·                  Leadership ability;

 

·                  Successful pursuit of merger, acquisition and divestiture opportunities, including the successful acquisition of zulily and the sale of Backcountry.com;

 

·                  Successful financial engineering efforts;

 

·                  Management succession planning efforts;

 

·                  Successful accomplishment of annual goals in the performance-based bonus program;

 

·                  Year-over-year improvement in the fair market value of our investments in subsidiary assets; and

 

·                  Return on investment of alternative energy projects, based on projections as to timing, dollar amounts and tax benefits.

 

Following a review of Mr. Maffei’s performance, our compensation committee approved vesting of 85.36% of Mr. Maffei’s 2015 LIC Target Equity Award. Our compensation committee believed it appropriate to vest these awards due to the successful achievement of the above-listed metrics and the financial and operational performance of our significant subsidiaries during 2015. In the aggregate, Mr. Maffei vested in 112,436 stock options to purchase QVCB shares and 115,639 stock options to purchase LVNTB shares. In connection with the vesting of his 2015 Annual RSUs, Mr. Maffei received 155,533 QVCB shares and 11,498 LVNTB shares. The aggregate initial grant value of these awards was $8,100,000. For more information regarding the LIC Target Equity Awards, please see the “Grants of Plan-Based Awards” table below.

 

Other 2015 Stock Option Awards.  Consistent with our previous practices, our compensation committee has made larger grants (equaling approximately four to five years’ value of the annual grants made in years prior to 2009) that vest between four and five and three-quarters years after grant, rather than making annual grants over the same period. These multi-year grants provide for back-end weighted vesting and generally expire seven to ten years after grant to encourage executives to remain with the company over the long-term and to better align their interests with those of the stockholders. Accordingly, in March 2015, our compensation committee granted to each of Messrs. Rosenthaler and Shean (i) multi-year stock option awards to purchase 255,199 shares of QVCA and 70,850 shares of LVNTA that vest in equal increments on each of December 31, 2019 and 2020 and expire on the eighth anniversary of the grant date and (ii) stock option awards to purchase 112,875 shares of QVCA and 31,933 shares of LVNTA that vest in equal increments on each of March 4, 2016, March 4, 2017 and March 4, 2018 and expire on the seventh anniversary of the grant date. Messrs. Rosenthaler and Shean had last received stock option awards in March 2010, which were multi-year awards intended to provide equity value for the period from 2011 to 2014. When structuring the 2015 awards, our compensation committee sought to align the structure of the compensation packages provided to Messrs. Rosenthaler and Shean with the structure of Mr. Maffei’s compensation package. Our compensation committee also sought to align more closely the compensation of the senior officers of the company.

 

As discussed above, Mr. George received the 2015 Term Options in September 2015 in connection with the execution of the 2015 George Employment Agreement.  Similar to the rationale pertaining to the multi-year awards previously granted to the named executive officers, the 2015 Term Options are intended to encourage Mr. George to remain with QVC over the long-term and

 

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are expected to more fully align Mr. George’s interests with those of our other stockholders. The 2015 Term Options vest one-half on December 31, 2019 and the remaining options will vest on December 31, 2020, which is consistent with the multi-year award approach supported by our compensation committee. See “—Executive Compensation Arrangements—Michael A. George” for a description of the 2015 Term Options and performance equity awards provided for under the 2015 George Employment Agreement.

 

Messrs. Maffei and Baer did not receive any multi-year equity grants during the 2015 calendar year.

 

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) consist of:

 

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

 

·                  in the case of Mr. Maffei, reimbursement of legal expenses;

 

·                  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; 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.

 

Taxable income may be incurred by our executives in connection with their receipt of perquisites and personal benefits. Other than with respect to Mr. George, as described below, we have not provided gross-up payments to our executives in connection with any such taxable income incurred during the past three years.

 

Aircraft UsageOn 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 a February 5, 2013 letter agreement between Liberty Media and Mr. Maffei, Mr. Maffei was entitled to 120 hours per year of personal flight time through the first to occur of (i) the termination of his employment, subject to any continued right to use the corporate aircraft as described below or pursuant to the terms of his employment arrangement in effect at the time of the termination or (ii) the cessation of ownership or lease of corporate aircraft. Effective November 11, 2015, pursuant to a letter agreement between Liberty Media and Mr. Maffei of the same date, Mr. Maffei is entitled to 30 additional hours per year of personal flight time if he reimburses Liberty Media for such usage through the first to occur of (i) the termination of his employment or (ii) the cessation of ownership or lease of corporate aircraft. Under the 2015 Maffei Employment Agreement, if Mr. Maffei’s employment had been terminated due to disability, for good reason or without cause, Mr. Maffei would have been entitled to continued use of the corporate aircraft under the terms of the February 5, 2013 letter agreement for 12 months after termination of his employment under the 2015 Maffei Employment Agreement. Mr. Maffei incurs taxable income, calculated in accordance with the Standard Industry Fare Level (SIFL) rates, for all personal use of the corporate aircraft under the February 5, 2013 letter agreement. Mr. Maffei incurs taxable income at the SIFL rates minus amounts paid under time sharing agreements with Liberty Media for travel pursuant to the November 11, 2015 letter agreement. Flights where there are no passengers on company-owned aircraft were not charged against the 120 hours of personal flight time per year allotted to Mr. Maffei if the flight department determines that the use of a NetJets, Inc. supplied aircraft for a proposed personal flight would be disadvantageous to our company due to (i) use of budgeted hours under the then current Liberty Media fractional ownership contract with NetJets, Inc. or (ii) higher flight cost as compared to the cost of using company owned aircraft.

 

For disclosure purposes, we determine incremental cost using a method that takes into account:

 

·                  landing and parking expenses;

 

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·                  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.

 

Pursuant to our aircraft time sharing agreements with Liberty Media, we pay Liberty Media for any costs, calculated in accordance with Part 91 of the Federal Aviation Regulations, associated with Mr. Maffei using Liberty Media’s corporate aircraft that are allocable to our company. Pursuant to aircraft time sharing agreements between Liberty Media and Mr. Maffei, Mr. Maffei reimburses Liberty Media for costs associated with his up to 30 hours of personal use of its corporate aircraft under the November 11, 2015 letter agreement, and such costs include the expenses listed above, insurance obtained for the specific flight and an additional charge equal to 100% of the aircraft fuel and oil expenses for the specific flight.

 

For purposes of determining an executive’s taxable income, personal use of Liberty Media’s aircraft is valued using a method based on SIFL rates, as published by the Treasury Department. 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 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.

 

Gross-Up.  In 2015, Mr. George received a tax gross-up from QVC relating to certain out of state income taxes to which he was subject in connection with the performance of his duties outside of QVC’s headquarters.

 

Changes for 2016

 

2015 George Employment Agreement.  In September 2015, we entered into the 2015 George Employment Agreement pursuant to which Mr. George has agreed to serve as QVC’s Chief Executive Officer and President for a five year period beginning December 16, 2015 and ending December 31, 2020, with an annual base salary of $1.25 million, as may be increased from time to time, and an annual target cash bonus equal to 100% of Mr. George’s annual base salary. The 2015 George Employment Agreement also provides Mr. George with the opportunity to earn annual performance-based equity incentive awards during the employment term. As mentioned above, Mr. George received the multi-year 2015 Term Options in connection with the approval of the 2015 George Employment Agreement.  For a description of the terms of this agreement and the related equity awards, please see “—Executive Compensation Arrangements—Michael A. George—September 2015 Employment Arrangement.”

 

When structuring the 2015 George Employment Agreement, our compensation committee considered a number of factors including the amount and structure of chief executive officer compensation packages provided by companies in QVC’s industry, companies of comparable size and complexity, and companies that may compete with QVC for executive talent. The compensation committee also considered the strategic direction and goals of our company and QVC and considered how best to incent achievement of those objectives. To further align Mr. George’s interests with those of the other stockholders, the compensation committee structured the majority of the equity as performance-based equity with meaningful payout metrics determined annually. See “— Executive Compensation Arrangements—Michael A. George—September 2015 Employment Arrangement” for a description of the 2015 Term Options and performance equity awards provided under the 2015 George Employment Agreement. This structure should provide flexibility to the compensation committee to incent achievement of strategic objectives that may change or evolve over the term of the agreement.

 

Other.  Based on its assessment of Messrs. Rosenthaler and Shean’s performance during 2015 and to further align Messrs. Rosenthaler and Shean’s interests with those of the other stockholders and other senior executives, in March 2016, our

 

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compensation committee determined to grant 22,755 restricted stock units relating to QVCA shares and 6,765 restricted stock units relating to LVNTA shares to each of Messrs. Rosenthaler and Shean that each vested in full on March 21, 2016. It is anticipated that Messrs. Rosenthaler and Shean will continue to be eligible for grants of restricted stock units, which may be performance-based.

 

Deductibility of Executive Compensation

 

In developing the compensation packages for the named executive officers, the deductibility of executive compensation under Section 162(m) of the Code is considered. 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 2012 Incentive Plan. Our 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 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.

 

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SUMMARY COMPENSATION TABLE

 

Name and
Principal Position
(as of 12/31/15)

 

Year

 

Salary
($)(1)

 

Bonus
($)

 

Stock
Awards
($)(2)

 

Option
Awards
($)(2)(3)

 

Non-Equity
Incentive Plan
Compensation
($)

 

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(4)

 

All Other
Compensation
($)
(5)(6)(7)

 

Total ($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregory B. Maffei

 

2015

 

960,750

 

 

5,928,866

 

3,626,072

 

3,981,886

 

 

370,418

(8)(9)

14,867,993

 

President and Chief

 

2014

 

765,769

 

 

 

28,615,359

 

2,768,132

 

 

312,254

(8)(9)

32,461,514

 

Executive Officer

 

2013

 

868,219

 

 

 

 

1,635,725

 

 

203,921

(8)(9)

2,707,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard N. Baer

 

2015

 

437,622

 

 

 

 

768,167

 

 

15,701

 

1,221,490

 

Senior Vice President and

 

2014

 

424,875

 

 

 

 

699,230

 

 

15,451

 

1,139,556

 

General Counsel

 

2013

 

386,862

 

 

 

 

400,950

 

 

2,353

 

790,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael A. George

 

2015

 

1,125,509

 

 

 

17,474,524

 

1,000,000

 

 

100,512

(10)

19,700,545

 

President and Chief Executive

 

2014

 

1,092,727

 

 

 

 

841,400

 

 

54,104

(10)(11)

1,988,231

 

Officer, QVC, Inc.

 

2013

 

1,060,900

 

 

 

 

 

 

160,831

(10)(11)

1,221,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Albert E. Rosenthaler

 

2015

 

464,860

 

 

 

6,302,802

 

822,513

 

 

17,271

 

7,607,447

 

Senior Vice President

 

2014

 

346,444

 

 

 

 

468,070

 

 

13,597

 

828,111

 

 

 

2013

 

312,527

 

 

 

 

286,069

 

 

12,374

 

610,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher W. Shean

 

2015

 

526,016

 

 

 

6,302,802

 

845,463

 

806

 

19,079

(9)

7,694,166

 

Senior Vice President and

 

2014

 

392,109

 

 

 

 

486,224

 

774

 

14,261

(9)

893,368

 

Chief Financial Officer

 

2013

 

396,550

 

 

 

 

235,551

 

777

 

13,605

 

646,483

 

 

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(1)                                 The amounts set forth in the table reflect compensation paid to our named executive officers by Liberty Media but allocable to our company under the services agreement (except with respect to Mr. Maffei’s 2015 base salary, which we paid directly pursuant to the 2015 Maffei Employment Agreement, and Mr. George, whose compensation reported above was paid directly by QVC with respect to the entire year, neither of which is covered by the services agreement). See “—Compensation Discussion and Analysis—Services Agreement.”

 

(2)                                 Reflects the grant date fair value of the 2015 Annual RSUs in the “Stock Awards” column and the 2015 Annual Options in the “Option Awards” column that Mr. Maffei could earn as described in “—Compensation Discussion and Analysis—Elements of 2015 Compensation—Equity Incentive Compensation—Maffei Performance-based Equity Awards.” The 2014 dollar amount shown in the “Option Awards” column reflects the grant date fair value of Mr. Maffei’s Term Options (as defined below) which were granted in connection with the approval of his December 2014 compensation arrangement described below in “—Executive Compensation Arrangements—Gregory B. Maffei.” The grant date fair value of these 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 15 to our consolidated financial statements for the year ended December 31, 2015 (which are included in the 2015 Form 10-K).

 

(3)                                 The grant date fair value of Mr. George, Mr. Rosenthaler and Mr. Shean’s 2015 stock option 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 15 to our consolidated financial statements for the year ended December 31, 2015 (which are included in the 2015 Form 10-K).

 

(4)                                 Reflects the above-market earnings credited to Mr. Shean’s deferred compensation account. See “—Executive Compensation Arrangements— 2006 Deferred Compensation Plan” and “—Nonqualified Deferred Compensation Plans” below.

 

(5)                                 The Liberty Media 401(k) Savings 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 Liberty Media contributed a matching contribution based on the participants’ own contributions up to the maximum matching contribution set forth in the plan. Our company reimburses Liberty Media under the services agreement for our allocable portion of the matching contribution. 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 (except with respect to Mr. George, to whom matching contributions of $15,900, $15,590 and $15,300 were made by QVC under its 401(k) savings plan in 2015, 2014 and 2013, respectively), are the following matching contributions made by Liberty Media to the Liberty Media 401(k) Savings Plan and allocated to our company under the services agreement in each of 2015, 2014 and 2013, respectively:

 

 

 

Amounts ($)

 

Name

 

2015

 

2014

 

2013

 

Gregory B. Maffei

 

11,925

 

10,920

 

12,750

 

Richard N. Baer

 

13,250

 

13,000

 

 

Albert E. Rosenthaler

 

14,575

 

11,440

 

11,220

 

Christopher W. Shean

 

16,430

 

12,480

 

12,750

 

 

With respect to these matching contributions, the above named executive officers are fully vested.

 

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

 

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Amounts ($)

 

Name

 

2015

 

2014

 

2013

 

Gregory B. Maffei

 

2,206

 

1,101

 

1,311

 

Richard N. Baer

 

2,451

 

2,451

 

2,353

 

Michael A. George

 

1,242

 

1,242

 

1,242

 

Albert E. Rosenthaler

 

2,696

 

2,157

 

1,154

 

Christopher W. Shean

 

1,626

 

821

 

855

 

 

(7)                                 Liberty Media makes available to our personnel, including our named executive officers, tickets to various sporting events with no aggregate incremental cost attributable to any single person.

 

(8)                                 Includes the following:

 

 

 

Amounts ($)

 

 

 

2015

 

2014

 

2013

 

Reimbursement for legal services

 

147,883

 

93,413

 

 

Compensation related to personal use of corporate aircraft (a)

 

204,962

 

205,560

 

189,110

 

 


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

 

(9)                                  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 Old LMC in the LMC Split-Off and later to Liberty Media in the LMC Spin-Off. Messrs. Maffei and Shean occasionally used this apartment for personal reasons. From time to time, we also pay the cost of miscellaneous shipping and catering expenses for Mr. Maffei.

 

(10)                           Includes tax gross-ups in the following amounts relating to certain out of state income taxes to which Mr. George was subject as a result of the performance of his duties outside of QVC’s headquarters:

 

Amounts ($)

 

2015

 

2014

 

2013

 

83,370

 

27,272

 

134,289

 

 

(11)                           Includes $10,000 in each of 2014 and 2013 in charitable contributions made on behalf of Mr. George pursuant to our political action committee matching contribution program.

 

Executive Compensation Arrangements

 

Gregory B. Maffei

 

December 2014 Employment Arrangement.  On December 24, 2014, our compensation committee approved a new compensation arrangement with Mr. Maffei. The arrangement provides for a five year employment term beginning January 1, 2015 and ending December 31, 2019, with an annual base salary of $960,750, increasing annually by 5% of the prior year’s base salary, and an annual target cash bonus equal to 250% of the applicable year’s base salary. The arrangement also provides Mr. Maffei with the opportunity to earn annual performance-based equity incentive awards during the employment term, as described in more detail below. In connection with the approval of his compensation arrangement, Mr. Maffei was granted options with respect to shares of QVCB and LVNTB, also as described in more detail below. Mr. Maffei’s compensation arrangement was memorialized in the 2015 Maffei Employment Agreement executed on December 29, 2014, which, unlike his previous employment arrangement, is directly with our company (while Mr. Maffei has a substantially similar employment agreement with Liberty Media). However, we are still obligated to reimburse Liberty Media for our allocable portion of certain perquisite payments made to Mr. Maffei under his employment agreement with Liberty Media.

 

The arrangement provides that, in the event Mr. Maffei is terminated for cause (as defined in the 2015 Maffei Employment Agreement), he will be entitled to only his accrued base salary and any amounts due under applicable law. If Mr. Maffei is terminated by our company without cause or if Mr. Maffei terminates his employment for good reason (as defined in the 2015 Maffei Employment Agreement), he is entitled to his accrued base salary, his accrued but unpaid bonus and any amounts due under applicable law (the Standard Entitlements), a severance payment of 1.5 times his base salary during the year of his termination to be paid in equal

 

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installments over 18 months, a payment equal to $11,750,000 pro rated based upon the elapsed number of days in the calendar year of termination (including the date of termination), with (subject to certain exceptions) up to 25% of such amount payable in shares of QVCB and LVNTB, at the discretion of our company and with the remainder of such amount paid in cash (the Pro Rated Amount), a payment equal to $17,500,000, with (subject to certain exceptions) up to 25% of such amount payable in shares of QVCB and LVNTB at the discretion of our company and with the remainder of such amount paid in cash (the Un-Pro Rated Amount), and continued use of certain services and perquisites provided by our company, including continued aircraft benefits consistent with those provided to him during the period of his employment (the Services). If Mr. Maffei terminates his employment without good reason, he will be entitled to the Standard Entitlements and a payment of the Pro Rated Amount. Lastly, in the case of Mr. Maffei’s death or disability, he is entitled to the Standard Entitlements, a payment of 1.5 times his base salary during the year of his termination, payments of the Pro Rated Amount and the Un-Pro Rated Amount, and, only in the case of his termination for disability, the Services. The 2015 Maffei Employment Agreement also contains other customary terms and conditions.

 

Term Options.  Also on December 24, 2014, in connection with the approval of his compensation arrangement, Mr. Maffei received a one-time grant of 646,352 options to purchase shares of QVCB at an exercise price of $29.87 per share (the QVCB Term Options), and a one-time grant of 1,406,463 options to purchase shares of LVNTB at an exercise price of $37.63 (the LVNTB Term Options and together with the QVCB Term Options, the Term Options). One-half of each of the QVCB Term Options and the LVNTB Term Options will vest on the fourth anniversary of the grant date with the remaining QVCB Term Options and LVNTB Term Options, respectively, vesting on the fifth anniversary of the grant date, in each case, subject to Mr. Maffei being employed on the applicable vesting date. The QVCB Term Options and LVNTB Term Options each have a term of seven years.

 

Upon a change in control (as defined in the 2015 Maffei Employment Agreement) prior to Mr. Maffei’s termination or in the event of Mr. Maffei’s termination for death or disability, all of his unvested Term Options will become exercisable. If Mr. Maffei is terminated for cause, all of his unvested Term Options will terminate immediately. If Mr. Maffei is terminated by our company without cause or if he terminates his employment for good reason, then each unvested tranche of Term Options will vest pro rata based on the number of days elapsed in the vesting period for such tranche since the grant date plus 548 calendar days; however, in the event (i) all members of the Malone Group (as defined in the 2015 Maffei Employment Agreement) cease to beneficially own securities of our company representing at least 20% of our company’s voting power, (ii) within 90 to 210 days of clause (i) Mr. Maffei’s employment is terminated by our company without cause or by Mr. Maffei for good reason and (iii) at the time of clause (i) Mr. Maffei does not beneficially own securities of our company representing at least 20% of our company’s voting power, then all unvested Term Options will vest in full as of the date of Mr. Maffei’s termination. If Mr. Maffei terminates his employment without good reason, then a portion of each unvested tranche of Term Options will vest pro rata based on the number of days elapsed in the vesting period for such tranche since the grant date. In the event of a change in control prior to Mr. Maffei’s termination, all of the Term Options will remain exercisable until the end of the term. If Mr. Maffei is terminated for cause prior to December 31, 2019 (without a prior change in control occurring), then all vested Term Options will expire on the 90th day following such termination. In all other events of termination or if Mr. Maffei has not been terminated prior to December 31, 2019, all vested Term Options will expire at the end of the term.

 

Annual Awards.  Beginning in 2015, Mr. Maffei will receive annual grants of options to purchase shares of QVCB and LVNTB with a term of seven years (the Annual Options) and restricted stock units with respect to QVCB and LVNTB (the Annual RSUs and together with the Annual Options, the Annual Awards). For a description of Mr. Maffei’s LIC Target Equity Awards, see “—Compensation Discussion and Analysis—Elements of 2015 Compensation—Equity Incentive Compensation—Maffei Performance-based Equity Awards.” Pursuant to the 2015 Maffei Employment Agreement, Mr. Maffei will receive upfront grants of the Annual Awards and awards from Liberty Media in the following combined target amounts: $16 million for 2015, $17 million for calendar year 2016, $18 million for calendar year 2017, $19 million for calendar year 2018 and $20 million for calendar year 2019. The combined target amounts will be allocated between Liberty Media and our company based on relative market capitalization. In our compensation committee’s sole discretion, Mr. Maffei is also eligible to receive additional awards each year from Liberty Interactive up to a maximum of 50% of the Liberty Interactive target award grant amount for such year as an above-target award. Subject to certain exceptions, the grants of Annual Awards to be made by our company will then be further allocated between Annual Awards with respect to QVCB and Annual Awards with respect to LVNTB based on the relative market capitalization of all series of our QVC Group common stock on the one hand, and all series of our Liberty Ventures common stock, on the other hand.

 

Upon Mr. Maffei’s termination for any reason, his unvested Annual Awards (including any “dividend equivalents” related to any unvested Annual RSUs) will terminate at the close of business on the day of the separation, except that, if Mr. Maffei remains employed through the end of the relevant grant year but his termination occurs prior to the date as of which any performance criteria has been determined to have been met or not with respect to the Annual Awards relating to such grant year, such Annual Awards will remain outstanding until such determination date and become exercisable to the extent determined by the compensation committee. Upon a change in control prior to Mr. Maffei’s termination, all vested Annual Options (and any Annual Options that vest after such change in

 

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control) will terminate at the expiration of the original term. If Mr. Maffei is terminated by our company for cause (without a prior change in control) prior to December 31, 2019, all vested Annual Options will terminate at the close of business on the 90th day following the termination. In all other events of termination or if Mr. Maffei has not been terminated prior to December 31, 2019, all vested Annual Options will terminate at the expiration of the original term.

 

Aircraft Usage.  Pursuant to a February 5, 2013 letter agreement between Mr. Maffei and Liberty Media, 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, subject to any continued right to use the corporate aircraft as described below or pursuant to the terms of his employment arrangement in effect at the time of the termination or (ii) the cessation of ownership or lease of corporate aircraft. Effective November 11, 2015, pursuant to a letter agreement between Liberty Media and Mr. Maffei of the same date, Mr. Maffei is entitled to 30 additional hours per year of personal flight time if he reimburses Liberty Media for such usage through the first to occur of (i) the termination of his employment or (ii) the cessation of ownership or lease of corporate aircraft. Mr. Maffei will continue to incur taxable income, calculated in accordance with SIFL, for all personal use of Liberty Media’s corporate aircraft under the February 5, 2013 letter agreement. Mr. Maffei incurs taxable income at the SIFL rates minus amounts paid under time sharing agreements with Liberty Media for travel pursuant to the November 11, 2015 letter agreement. Pursuant to aircraft time sharing agreements with Liberty Media, we pay Liberty Media for any costs, calculated in accordance with Part 91 of the Federal Aviation Regulations, associated with Mr. Maffei using its corporate aircraft that are allocable to our company. Pursuant to Liberty Media’s aircraft time sharing agreements with Mr. Maffei, Mr. Maffei reimburses Liberty Media for costs associated with his up to 30 hours of personal use of its corporate aircraft under the November 11, 2015 letter agreement. Flights where there are no passengers on company-owned aircraft are not charged against the 120 hours of personal flight time per year allotted to Mr. Maffei if the flight department determines that the use of a NetJets, Inc. supplied aircraft for a proposed personal flight would be disadvantageous to our company due to (i) use of budgeted hours under the then current Liberty Media fractional ownership contract with NetJets, Inc. or (ii) higher flight cost as compared to the cost of using company owned aircraft.

 

Michael A. George

 

2011 Employment Arrangement.  On May 3, 2011, QVC entered into an employment agreement with Mr. George, which was amended effective December 4, 2012, to reflect the changes to his equity awards that occurred in the December 2012 option modification program (as described below) and to clarify and update certain other information in his employment agreement. The agreement provided 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 would 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 would 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 was entitled to certain welfare, retirement and fringe benefits available to senior-level executives of QVC.

 

September 2015 Employment Arrangement.  On September 27, 2015, the compensation committee approved a new compensation arrangement with Michael A. George, the President and Chief Executive Officer of QVC. The arrangement provides for a five year employment term beginning December 16, 2015 and ending December 31, 2020, with an annual base salary of $1.25 million and an annual target cash bonus equal to 100% of Mr. George’s annual base salary. The arrangement also provides Mr. George with the opportunity to earn annual performance-based equity incentive awards during the employment term, as described in more detail below. In connection with the approval of his compensation arrangement, Mr. George was granted the 2015 Term Options with respect to shares of QVCA, also as described in more detail below. Mr. George’s compensation arrangement was memorialized in the 2015 George Employment Agreement executed on December 16, 2015.

 

The arrangement also provides that, in the event Mr. George is terminated for cause (as defined in the 2015 George Employment Agreement) or he terminates his employment without good reason (as defined in the 2015 George Employment Agreement), he will be entitled only to his accrued base salary and any amounts due under applicable law, and he will forfeit all rights to his unvested performance-based equity incentive awards and unvested 2015 Term Options. Upon a termination for cause, his vested options remain exercisable for 90 days. In addition, if Mr. George terminates his employment without good reason, he will be entitled to any awarded but unpaid annual bonus. If, however, Mr. George is terminated by QVC without cause or if he terminates his employment for good reason, the arrangement provides (i) for him to receive one year of base salary, a $1.5 million lump sum payment, and any awarded but unpaid annual bonus, (ii) for his unvested 2015 Term Options to vest pro rata on a tranche-by-tranche basis based on the portion of the term that has elapsed through the termination date plus 12 months and for all vested and accelerated options to remain

 

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exercisable until the earlier of (x) their original expiration date or (y) two years from the termination (except if Mr. George dies during such two-year period, the later of (a) the end of such two-year period and (b) the end of the one-year period that began on his date of death) and (iii) for any performance-based equity awards that are issued and outstanding but unvested as of the date of termination to remain outstanding until the end of the applicable performance period, for the compensation committee to then determine whether the performance criteria for such performance period were met, and to the extent such criteria were met, for payment of a pro rata portion of such performance-based equity incentive awards based on the number of days employed during the applicable performance period. If Mr. George’s employment is terminated by QVC without cause or if he terminates his employment for good reason within six months after a change in control of QVC then he will receive the same payments as if his termination had occurred absent the change in control, except that Mr. George will also be entitled to full vesting of (i) any unvested 2015 Term Options as of his termination date, which will remain exercisable through the original expiration date, and (ii) any unvested performance-based equity incentive awards that are issued and outstanding as of his termination date. Lastly, in the case of Mr. George’s death or disability, the arrangement provides for (i) a payment of one year of base salary and any awarded but unpaid annual bonus, (ii) full vesting of unvested 2015 Term Options, with such options remaining exercisable through the original expiration date and (iii) full vesting of any then issued and outstanding but unvested performance-based equity incentive awards.

 

As a condition to Mr. George’s receipt of any severance payments as a result of his termination, as well as any acceleration of vesting or extension of exercise periods for his equity grants, Mr. George must execute a severance agreement and release in favor of QVC in accordance with the procedures set forth in the 2015 George Employment Agreement. Mr. George’s receipt of severance benefits is also conditioned on his compliance with the post-termination non-compete restrictions in his employment agreement.

 

2015 Term Options.  Also, on September 27, 2015, in connection with the approval of his compensation arrangement, the compensation committee approved a one-time grant of 1,680,065 stock options to Mr. George to purchase shares of QVCA with an exercise price of $26 per share, which was the closing price of QVCA on September 28, 2015, the grant date for these options. The 2015 Term Options expire on December 31, 2022.  One-half of the options will vest on December 31, 2019, with the remaining options vesting on December 31, 2020, in each case, subject to Mr. George being employed by QVC on the applicable vesting date. The 2015 Term Options were not eligible for accelerated vesting for any reason until January 1, 2016.

 

Annual Performance-Based Awards. Beginning in 2016, Mr. George will receive an annual $4.125 million grant of performance-based restricted stock units with respect to QVCA. The compensation committee will establish performance metrics with respect to each grant of performance-based restricted stock units that will determine, in the compensation committee’s sole discretion, the extent to which such grant will vest.

 

Richard N. Baer

 

Employment Agreement. On November 7, 2012, Old LMC entered into an executive employment agreement (the employment agreement), effective October 31, 2012, with Richard Baer. Mr. Baer served as an independent contractor providing consulting services to Old LMC and Liberty Interactive from October 31, 2012 until the start of his employment as Senior Vice President and General Counsel with the companies on January 1, 2013. The employment agreement was assigned to Liberty Media in connection with the LMC Spin-Off.  The agreement provides for, among other things, a four year term ending on December 31, 2016, with an annual base salary of $825,000, subject to adjustments at Liberty Media’s discretion, and an annual discretionary bonus beginning in the calendar year 2013. Pursuant to the terms of the agreement, Mr. Baer’s target bonus for each year is 100% of his annual base salary for that year, and in no event will his bonus for any year be greater than two times his annual base salary. Mr. Baer is also entitled to certain benefits and perquisites available to Liberty Media’s senior executives. Pursuant to the agreement, on November 8, 2012, as part of the consideration for his services under the employment agreement, Mr. Baer was granted a combination of options and restricted shares. One-half of these options and one-half of these restricted shares vested on December 31, 2015 and December 15, 2015, respectively. The remaining options vest on December 31, 2016, and the remaining restricted shares vest on December 15, 2016, in each case, subject to Mr. Baer being employed by our company on the applicable vesting date and to the early vesting events described below. The options have a term of ten years. The other terms and conditions of Mr. Baer’s options and restricted shares, including acceleration and continued exercisability in connection with certain terminations of employment, are described in the applicable award agreements.

 

The agreement provides that, in the event Mr. Baer is terminated for cause (as defined in the employment agreement), he will be entitled to his accrued but unpaid base salary through the date of termination and any unpaid expenses. If, however, Mr. Baer terminates his employment for good reason (as defined in the employment agreement) or if his employment is terminated without cause (as defined in the employment agreement), then he is entitled to receive his accrued but unpaid base salary, any unpaid expenses, any accrued but unpaid bonus from the prior year and a severance payment of two times his annual base salary at the time of termination. If Mr. Baer terminates his employment without good reason (as defined in the employment agreement), he is entitled to receive any accrued but unpaid base salary, any accrued but unpaid bonus from the prior year and any unpaid expenses. In the case of Mr. Baer’s death or

 

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disability (as defined in the employment agreement), the employment agreement provides for the right for his estate or him, as applicable, to receive any accrued but unpaid base salary, any unpaid expenses, any accrued but unpaid bonus from the prior year and a severance payment of two times his annual base salary at the time of death or disability (as defined in the employment agreement). As a condition to Mr. Baer’s receipt of any severance payments as a result of his termination, as well as any acceleration of vesting or extension of exercise periods described in the grant agreements for the equity grants, Mr. Baer must execute a severance agreement and release in favor of Liberty Media in accordance with the procedures set forth in the employment agreement.

 

Although we are not a party to Mr. Baer’s employment agreement, we are obligated to reimburse Liberty Media for our allocable portion of any payments made to Mr. Baer thereunder (other than payments relating to equity awards which are directly settled with the applicable issuer) pursuant to the services agreement.

 

Equity Incentive Plans

 

The 2010 Incentive Plan and 2012 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, cash awards, performance awards or any combination of the foregoing under the existing incentive plans (collectively, awards).

 

As of December 31, 2015, (i) the maximum number of shares of our common stock with respect to which awards may be issued under the 2012 Incentive Plan is 47,245,000, subject to anti-dilution and other adjustment provisions of the 2012 Incentive Plan (which gives effect to certain anti-dilution adjustments resulting from the reattribution completed in October 2014), and (ii) with limited exceptions, no person may be granted in any calendar year awards covering more than 9,600,000 shares of our common stock under the 2012 Incentive Plan (subject to anti-dilution and other adjustment provisions of the 2012 Incentive Plan) nor may any person receive under the 2012 Incentive Plan 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. The 2012 Incentive Plan has a five 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, the 2006 deferred compensation plan).  In connection with the LMC Split-Off (pursuant to which employees of our company became employees of Old LMC), Old LMC assumed this plan and all obligations outstanding thereunder. In connection with the LMC Spin-Off, Liberty Media assumed this plan and all obligations outstanding thereunder. Prior to the assumption of this plan by Old LMC, 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.

 

Following the LMC Split-Off, our officers are no longer permitted to elect the deferral of a portion of their base salary and performance bonus allocable to our company. Mr. Shean took advantage of a one-time deferral opportunity in 2011 with respect to a portion of his 2011 performance-bonus that was allocable to and paid by our company, and we will be responsible for the payment of such deferred amount and all interest thereon going forward.

 

QVC 1997 Nonqualified Defined Pension Restoration Plan, As Amended and Restated

 

The QVC 1997 Nonqualified Defined Pension Restoration Plan, as amended and restated (the Pension Restoration Plan), in which Mr. George is a participant, is unfunded and is maintained primarily for the purpose of providing a select group of QVC-U.S.’s management with a nonqualified defined contribution benefit. Effective as of January 1, 2012, the Pension Restoration Plan has been frozen so that no additional amounts may be credited to the Pension Restoration Plan, and no additional employees may be eligible to participate. Participants’ existing account balances will continue to be credited with earnings at the rate of, (1) for the period prior to December 31, 2005, 12% per annum for amounts credited for the period from the date on which such amount was credited through October 31, 2011 or, (2) for all other amounts, the prime lending rate identified by the Bank of New York, plus 3%, each compounded

 

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annually at the end of the calendar year. Distribution of participants’ vested percentages will be made in a single lump sum payment on the first day of the month following such participant’s separation from service, with the exception of specified employees who are subject to Section 409A of the Code, and thus receive the payment on the first day of the sixth month of such employee’s separation. The Pension Restoration Plan can be amended or terminated at any time.

 

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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, 2015 to the named executive officers.

 

 

 

 

 

Estimated Future Payouts under
Non-Equity Incentive Plan Awards

 

Estimated Future Payouts under Equity
Incentive Plan Awards

 

All Other
Option
Awards:
Number of
Securities

 

Exercise
or Base
Price of
Option

 

Grant Date
Fair Value
of Stock
and

 

Name

 

Grant
Date

 

Threshold
($)(1)

 

Target
($)(1)

 

Maximum
($)(2)

 

Threshold
(#)(3)

 

Target
(#)(3)

 

Maximum
(#)(4)

 

Underlying
Options (#)

 

Awards
($/Sh)

 

Options
Awards ($)

 

Gregory B. Maffei

 

2/26/2015

(5)

 

 

4,803,750

 

 

 

 

 

 

 

QVCB

 

3/31/2015

(6)

 

 

 

 

131,725

 

 

 

29.41

 

1,330,818

 

QVCB

 

3/31/2015

(6)

 

 

 

 

182,215

 

 

 

 

5,358,747

 

LVNTB

 

3/31/2015

(6)

 

 

 

 

135,478

 

 

 

42.33

 

2,295,255

 

LVNTB

 

3/31/2015

(6)

 

 

 

 

13,470

 

 

 

 

570,119

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard N. Baer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2/26/2015

(5)

 

 

875,243

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael A. George

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2/26/2015

(5)

 

 

3,250,000

 

 

 

 

 

 

 

QVCA

 

9/28/2015

 

 

 

 

 

 

 

1,680,065

(7)

26.00

 

17,474,524

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Albert E. Rosenthaler

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2/26/2015

(5)

 

 

850,000

 

 

 

 

 

 

 

QVCA

 

3/04/2015

 

 

 

 

 

 

 

112,875

(8)

29.59

 

1,345,526

 

QVCA

 

3/04/2015

 

 

 

 

 

 

 

255,199

(7)

29.59

 

3,143,439

 

LVNTA

 

3/04/2015

 

 

 

 

 

 

 

31,933

(8)

40.07

 

543,758

 

LVNTA

 

3/04/2015

 

 

 

 

 

 

 

70,850

(7)

40.07

 

1,270,078

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher W. Shean

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2/26/2015

(5)

 

 

850,000

 

 

 

 

 

 

 

QVCA

 

3/04/2015

 

 

 

 

 

 

 

112,875

(8)

29.59

 

1,345,526

 

QVCA

 

3/04/2015

 

 

 

 

 

 

 

255,199

(7)

29.59

 

3,143,439

 

LVNTA

 

3/04/2015

 

 

 

 

 

 

 

31,933

(8)

40.07

 

543,758

 

LVNTA

 

3/04/2015

 

 

 

 

 

 

 

70,850

(7)

40.07

 

1,270,078

 

 

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(1)                                 Our 2015 performance-based bonus program does not provide for a threshold bonus amount.  The program also does not provide for a target payout amount for any named executive officer that would be payable upon satisfaction of the performance criteria under the 2015 performance-based bonus program. For the actual bonuses paid by our company and QVC, as applicable, see the amounts included for 2015 in the column entitled Non-Equity Incentive Plan Compensation in the “Summary Compensation Table” above.

 

(2)                                 With respect to Messrs. Maffei, Baer, Rosenthaler and Shean, represents the maximum amount that would have been payable to each named executive officer assuming (x) the Threshold was met in order to permit the maximum bonus amounts to have been payable, (y) the full 60% of the participant’s maximum bonus amount attributable to individual performance was attained and (z) the full 40% of the participant’s maximum bonus amount attributable to corporate performance of our company was attained. For more information on this performance bonus program, see “—Compensation Discussion and Analysis—Elements of 2015 Executive Compensation—2015 Performance-based Bonuses—Liberty Awards—Overview.” With respect to Mr. George, represents the maximum amount that would have been payable to Mr. George assuming (x) the QVC Global EBITDA target of $1,969.9 million 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 2015 Executive Compensation—2015 Performance-based Bonuses—QVC Bonus Award.”

 

(3)                                 The terms of Mr. Maffei’s LIC Target Equity Awards do not provide for a threshold amount that would be payable upon satisfaction of the performance criteria established by the compensation committee. Represents the target amount that would have been payable to Mr. Maffei assuming (x) maximum achievement of the 162(m) objective metrics was attained and (y) our compensation committee determined not to reduce such payout after considering a combination of the objective, subjective and discretionary criteria established by our compensation committee in March 2015. For the actual 2015 Annual Options and 2015 Annual RSUs that vested, see “—Compensation Discussion and Analysis—Elements of 2015 Executive Compensation—Equity Incentive Compensation—Maffei Performance-based Equity Awards.”

 

(4)                                 Our compensation committee also set a maximum grant value payout of the annual performance awards based on our company’s relative market capitalization of $14,234,400. Any payout of an equity award by our company above the LIC Target Equity Award of $9,489,600 would be in our compensation committee’s sole discretion, would be issued in the first quarter of 2016, and would vest immediately after grant. For more information on Mr. Maffei’s LIC Target Equity Award, see “—Compensation Discussion and Analysis—Elements of 2015 Executive Compensation—Maffei Performance-based Equity Awards.”

 

(5)                                 Reflects the date on which our compensation committee established the terms of the 2015 performance-based bonus program, as described under “—Compensation Discussion and Analysis—Elements of 2015 Executive Compensation—2015 Performance-based Bonuses—Liberty Awards—Overview” and  “—Compensation Discussion and Analysis—Elements of 2015 Executive Compensation—2015 Performance-based Bonuses—QVC Bonus Award.”

 

(6)                                 Reflects the date on which our compensation committee established the terms of Mr. Maffei’s LIC Target Equity Awards, as described under “—Compensation Discussion and Analysis—Elements of 2015 Executive Compensation—Maffei Performance-based Equity Awards.”

 

(7)                                 Vests 50% on December 31, 2019 and 50% on December 31, 2020.

 

(8)                                 Vests 33-1/3% on March 4, 2016, 33-1/3% on March 4, 2017 and 33-1/3% on March 4, 2018.

 

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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, 2015 and held by the named executive officers.

 

 

 

Option awards

 

Stock awards

 

Name

 

Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable

 

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

 

Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)

 

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 ($)

 

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregory B. Maffei

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVCA

 

1,826,731

 

 

 

17.74

 

12/17/2019

 

 

 

 

 

QVCA

 

3,643,497

 

 

 

17.74

 

12/17/2019

 

 

 

 

 

QVCB

 

 

646,352

(1)

 

29.87

 

12/24/2021

 

 

 

 

 

QVCB

 

 

 

131,725

(2)

29.41

 

03/31/2022

 

 

 

 

 

LVNTA

 

361,803

 

 

 

14.86

 

12/17/2019

 

 

 

 

 

LVNTA

 

204,376

 

 

 

14.86

 

12/17/2019

 

 

 

 

 

LVNTA

 

259,560

 

 

 

22.31

 

12/17/2019

 

 

 

 

 

LVNTA

 

517,704

 

 

 

22.31

 

12/17/2019

 

 

 

 

 

LVNTB

 

 

1,406,463

(1)

 

37.63

 

12/24/2021

 

 

 

 

 

LVNTB

 

 

 

135,478

(2)

42.33

 

03/31/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSU Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVCB

 

 

 

 

 

 

 

 

182,215

(3)

4,948,959

 

LVNTB

 

 

 

 

 

 

 

 

13,470

(3)

610,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard N. Baer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVCA

 

238,108

 

238,109

(4)

 

18.27

 

11/08/2022

 

 

 

 

 

LVNTA

 

26,407

 

26,407

(4)

 

14.37

 

11/08/2022

 

 

 

 

 

LVNTA

 

33,843

 

33,845

(4)

 

22.98

 

11/08/2022

 

 

 

 

 

 

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Option awards

 

Stock awards

 

Name

 

Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable

 

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

 

Equity
Incentive Plan
Awards:
Number of
Securities
Underlying Unexercised
Unearned
Options (#)

 

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 ($)

 

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVCA

 

 

 

 

 

 

45,189

(5)

1,234,563

 

 

 

LVNTA

 

 

 

 

 

 

6,424

(5)

289,787

 

 

 

LVNTA

 

 

 

 

 

 

4,552

(5)

205,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael A. George

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVCA

 

1

 

 

 

17.74

 

04/06/2016

 

 

 

 

 

QVCA

 

2,769,843

 

 

 

17.74

 

03/02/2018

 

 

 

 

 

QVCA

 

 

1,680,065

(6)

 

26.00

 

12/31/2022

 

 

 

 

 

LVNTA

 

296,825

 

 

 

14.86

 

03/02/2018

 

 

 

 

 

LVNTA

 

378,880

 

 

 

22.31

 

03/02/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Albert E. Rosenthaler

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVCA

 

162,990

 

 

 

17.74

 

03/19/2020

 

 

 

 

 

QVCA

 

 

112,875

(7)

 

29.59

 

03/04/2022

 

 

 

 

 

QVCA

 

 

255,199

(8)

 

29.59

 

03/04/2023

 

 

 

 

 

LVNTA

 

16,631

 

 

 

14.86

 

03/19/2020

 

 

 

 

 

LVNTA

 

23,159

 

 

 

22.31

 

03/19/2020

 

 

 

 

 

LVNTA

 

 

31,933

(7)

 

40.07

 

03/04/2022

 

 

 

 

 

LVNTA

 

 

70,850

(8)

 

40.07

 

03/04/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher W. Shean

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QVCA

 

325,980

 

 

 

17.74

 

03/19/2020

 

 

 

 

 

QVCA

 

 

112,875

(7)

 

29.59

 

03/04/2022

 

 

 

 

 

QVCA

 

 

255,199

(8)

 

29.59

 

03/04/2023

 

 

 

 

 

LVNTA

 

11,415

 

 

 

14.86

 

12/17/2016

 

 

 

 

 

LVNTA

 

2,489

 

 

 

14.86

 

12/17/2016

 

 

 

 

 

 

32



Table of Contents

 

 

 

Option awards

 

Stock awards

 

Name

 

Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable

 

Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable

 

Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)

 

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 ($)

 

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)

 

LVNTA

 

49,892

 

 

 

14.86

 

03/19/2020

 

 

 

 

 

LVNTA

 

46,318

 

 

 

22.31

 

03/19/2020

 

 

 

 

 

LVNTA

 

 

31,933

(7)

 

40.07

 

03/04/2022

 

 

 

 

 

LVNTA

 

 

70,850

(8)

 

40.07

 

03/04/2023

 

 

 

 

 

 


(1)                                 Vests 50% on December 24, 2018 and 50% on December 24, 2019.

 

(2)                                 Represents the target number of 2015 Annual Options that Mr. Maffei could earn based on our performance in 2015.

 

(3)                                 Represents the target number of 2015 Annual RSUs that Mr. Maffei could earn based on our performance in 2015.

 

(4)                                 Vests in full on December 31, 2016.

 

(5)                                 Vests in full on December 15, 2016.

 

(6)                                 Vests 50% on December 31, 2019 and 50% on December 31, 2020.

 

(7)                                 Vests 33-1/3% on March 4, 2016, 33-1/3% on March 4, 2017 and 33-1/3% on March 4, 2018.

 

(8)                                 Vests 50% on December 31, 2019 and 50% on December 31, 2020.

 

33



Table of Contents

 

Option Exercises and Stock Vested

 

The following table sets forth information concerning 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, 2015.

 

 

 

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

 

 

 

 

 

 

 

 

 

QVCA

 

1,235,078

 

11,300,964

 

 

 

LVNTA

 

311,437

 

7,621,483

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard N. Baer

 

 

 

 

 

 

 

 

 

QVCA

 

 

 

45,188

 

1,220,528

 

LVNTA

 

 

 

10,976

 

478,883

 

 

 

 

 

 

 

 

 

 

 

Michael A. George

 

 

 

 

 

 

 

 

 

QVCA

 

1,114,249

 

10,837,196

 

270,192

 

(2)

LVNTA

 

277,672

 

5,426,283

 

77,607

 

(2)

 

 

 

 

 

 

 

 

 

 

Albert E. Rosenthaler

 

 

 

 

 

 

 

 

 

QVCA

 

100,000

 

1,184,200

 

39,635

 

(2)

LVNTA

 

41,267

 

860,887

 

10,884

 

(2)

 

 

 

 

 

 

 

 

 

 

Christopher W. Shean

 

 

 

 

 

 

 

 

 

QVCA

 

 

 

39,635

 

(2)

LVNTA

 

13,036

 

338,154

 

10,884

 

(2)

 


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

 

(2)                     On December 4, 2012 (the Grant Date), to effect our 2012 option modification program, our compensation committee approved the acceleration of each unvested in-the-money option to acquire shares of QVCA and LVNTA held by certain of its and its subsidiaries’ officers (collectively, the Eligible Optionholders), including our then- and our current-named executive officers Messrs. George, Rosenthaler and Shean. Following this acceleration, also on the Grant Date, each Eligible Optionholder exercised, on a net settled basis, substantially all of his or her outstanding in-the-money vested and unvested options to acquire QVCA or LVNTA shares (the Eligible Options) and with respect to each unvested Eligible Option, each Eligible Optionholder acquired QVCA or LVNTA shares which have a vesting schedule identical to that of the unvested Eligible Option.

 

The Value column below represents the value related to awards that were subject to continued vesting requirements as of the Grant Date, but which vested during the twelve months ended December 31, 2015. Such value was realized by the applicable named executive officer in 2012 and therefore included in our proxy statement relating to our 2013 annual meeting of stockholders under “Executive Compensation—Option Exercises and Stock Vested.”

 

Name

 

Number of shares
acquired upon lapse of
restriction (#)

 

Value ($)

 

Michael George

 

 

 

 

 

QVCA

 

270,192

 

4,428,717

 

LVNTA

 

77,607

 

1,362,524

 

Albert E. Rosenthaler

 

 

 

 

 

QVCA

 

39,635

 

649,657

 

LVNTA

 

10,884

 

192,352

 

Christopher W. Shean

 

 

 

 

 

QVCA

 

39,635

 

649,657

 

LVNTA

 

10,884

 

192,352

 

 

34



Table of Contents

 

Nonqualified Deferred Compensation Plans

 

The following table sets forth certain information regarding the Pension Restoration Plan in which Mr. George participated and the 2006 nonqualified deferred compensation plan in which Mr. Shean participated, in each case during the year ended December 31, 2015. During December 31, 2015, no other named executive officers participated in the Pension Restoration Plan or the 2006 deferred compensation plan.

 

 

 

 

 

 

 

 

 

 

 

Aggregate

 

 

 

Executive

 

Registrant

 

Aggregate

 

Aggregate

 

balance at