Item 5.02. Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Amendment to Services Agreement
In connection with a prior spin-off transaction
involving Qurate Retail, Inc. (“Qurate”) and Liberty Tripadvisor Holdings, Inc. (“TripCo”),
Liberty Media Corporation (“Liberty Media”) and TripCo entered into a services agreement, dated August 27, 2014,
pursuant to which Liberty Media’s employees, including Gregory B. Maffei, the President and Chief Executive Officer of each
of Liberty Media and Tripco, provide TripCo with general and administrative services, including legal, tax, accounting, treasury
and investor relations support services, and Liberty Media is compensated for the time spent providing services to TripCo. Liberty
Media has executed a new employment agreement with Mr. Maffei, effective December 13, 2019 (the “Employment Agreement”).
The Employment Agreement provides for a five-year employment term commencing on January 1, 2020 and ending on December 31, 2024,
with an annual base salary, annual cash performance bonus, initial cash commitment bonus, annual equity awards (as defined below),
Upfront Awards (as defined below), perquisites and other benefits described in “Liberty Media CEO Employment Agreement”
below. Also, effective December 13, 2019, TripCo has executed a First Amendment to Services Agreement (the “Services Amendment”)
pursuant to which components of Mr. Maffei’s compensation will either be paid directly to Mr. Maffei by TripCo or reimbursed
to Liberty Media, in each case, based on allocations among Liberty Media, Qurate, Liberty Broadband Corporation (“LBC”),
TripCo and GCI Liberty, Inc. (“GCIL,” and together with Qurate, LBC and TripCo, the “Service Companies”
and each, a “Service Company”)), as set forth in the Services Amendment. Each of these other Services Companies
also receive services from Liberty Media personnel pursuant to a services arrangement with Liberty Media executed in connection
with each of their respective separation transactions, and each has executed amendments to these services arrangements substantively
identical to the Services Amendment. The following descriptions of the Employment
Agreement and the Services Amendment are qualified in their entirety by reference to the Employment Agreement and form of Services
Amendment, which are Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K and incorporated by reference
into this Item 5.02.
The Services Amendment provides that Liberty
Media is responsible for paying or providing annual base salary, the initial commitment bonus, perquisites and other employee benefits,
Severance Benefits (as defined below) and certain reimbursements directly to Mr. Maffei, and a portion of these expenses will be
allocated to, and reimbursed by, each of the Service Companies based on such Service Company’s Executive Percentage. For
Mr. Maffei’s 2020 compensation, the “Executive Percentage” will be:
|
Liberty Media
|
Qurate
|
GCIL
|
LBC
|
TripCo
|
FWONK
|
LSXMK
|
BATRK
|
QRTEA
|
GLIBA
|
LBRDK
|
LTRPB
|
By ticker
|
16.0%
|
23.0%
|
5.0%
|
19.0%
|
14.0%
|
18.0%
|
5.0%
|
By company
|
44.0%
|
19.0%
|
14.0%
|
18.0%
|
5.0%
|
Beginning with Mr. Maffei’s 2021 compensation, the “Executive
Percentage” will be determined based on a combination of (1) relative market capitalizations, weighted 50%, and (2) a blended
average of historical time allocation on a Liberty Media-wide and CEO basis, weighted 50%, in each case, absent agreement to the
contrary by Liberty Media and the Service Companies in consultation with Mr. Maffei. The Executive Percentage will be adjusted
annually thereafter and upon the occurrence of certain events as set forth in the Services Amendment, including the discontinuation
of Mr. Maffei’s services to a Service Company, the combination of one or more Service Companies or the addition of a new
service company.
Each Service Company has agreed to pay directly
to Mr. Maffei the portions of the annual cash performance bonus, the Upfront Awards and the annual equity awards that are allocated
to the Service Company based on its respective Executive Percentage.
In the event that Mr. Maffei’s services
to TripCo are discontinued and Mr. Maffei remains employed by Liberty Media following such discontinuation (unless the discontinuation
of Mr. Maffei’s services to TripCo is for cause (as defined in the Employment Agreement)), TripCo will be required to make
a termination payment to Liberty Media pursuant to the Services Amendment representing the net present value of the portion of
his compensation allocable to TripCo, including the 2020 term award (defined below) if such award has not been granted prior to
such date, from the date of the discontinuation of services to TripCo through December 31 of the following calendar year. See “Liberty
Media CEO Employment Agreement¾Termination Payments and Benefits” for other
payments and benefits that Mr. Maffei may receive in connection with the termination of his employment at Liberty Media or of his
services at TripCo.
Liberty Media CEO Employment Agreement
As described above, Liberty Media has executed
the Employment Agreement with Mr. Maffei, effective December 13, 2019, which provides for the following benefits:
Base Salary. Mr. Maffei’s initial
annual base salary will be $3 million, with no contracted increase.
Initial Cash Commitment Bonus. Mr.
Maffei received a one-time cash commitment bonus of $5 million in connection with his entry into the Employment Agreement.
Annual Cash Performance Bonus.
The aggregate target value for Mr. Maffei’s annual cash performance bonus will be $17 million for each year during the
term of the Employment Agreement and will be payable by Liberty Media and each Service Company based on each company’s
allocable share of such obligation (as determined pursuant to the relevant services agreement). Payment of the annual cash performance
bonus will be subject to the achievement of one or more performance metrics to be approved by the Compensation Committee of
Liberty Media (the “LMC Committee”) and the Compensation Committee of each Service Company (each a
“Service Company Committee”) with respect to its respective allocable portion of the annual cash
performance bonus.
Perquisites and Other Benefits. Mr.
Maffei will be eligible to participate in all employee benefit plans and perquisites that are generally available to other senior
executive officers of Liberty Media. In addition, Mr. Maffei’s perquisites include 120 hours of annual aircraft usage, subject
to payment by Mr. Maffei of tax on the standard industry fare level value, plus 50 additional hours, subject to Mr. Maffei’s
payment for the cost of such usage.
Annual Equity Awards. The aggregate
grant date fair value of Mr. Maffei’s annual equity awards will be $17.5 million for each year during the term of the Employment
Agreement and will be comprised of awards of time-vested stock options (the “Annual Option Awards”), performance-based
restricted stock units (“Performance RSUs”) or a combination of award types, at Mr. Maffei’s election,
allocable across Liberty Media and the Service Companies (collectively, the “annual equity awards”). Vesting
of any Performance RSUs will be subject to the achievement of one or more performance metrics to be approved by the LMC Committee
and each Service Company Committee with respect to its respective allocable portion of the Performance RSUs. At TripCo, Mr. Maffei’s
annual equity awards will be issued with respect to TripCo’s Series B common stock, par value $0.01 per share (“LTRPB”).
The
description of the annual equity awards set forth herein is qualified in its entirety by reference to the forms of TripCo’s
award agreements for the Annual Option Awards and the Performance RSUs, which
are attached hereto as Exhibits 10.3 and 10.4, respectively, and incorporated by reference into this Item
5.02.
Upfront Awards. In connection with
the execution of the Employment Agreement, Mr. Maffei is entitled to receive term equity awards with an aggregate grant date fair
value of $90 million (the “Upfront Awards”) to be granted in two equal tranches. The first tranche consists
of time-vested stock options from each of Liberty Media, Qurate, LBC and TripCo and time-vested restricted stock units from TripCo
(collectively, the “2019 term awards”) that vest, in each case, on December 31, 2023 (except TripCo’s
award of time-vested restricted stock units which vests on the fourth anniversary of its grant date), subject to Mr. Maffei’s
continued employment, except as described below. TripCo’s portion of the 2019 term awards has an aggregate grant date fair
value of $2,250,000 and consists of 320,057 time-vested restricted stock units with respect to LTRPB shares.
The second tranche of the Upfront
Awards will be granted on or before December 15, 2020, subject to Mr. Maffei’s continued employment on such date or the
earlier occurrence of a termination of employment due to death, disability, by the issuing company without cause or by Mr.
Maffei for good reason, and will consist of time-vested stock options from each of Liberty Media, Qurate, LBC and GCIL and
time-vested restricted stock units from TripCo (collectively, the “2020 term awards”). The 2020 term
awards will vest, in each case, on December 31, 2024, subject to Mr. Maffei’s continued employment, (except
TripCo’s award of time-vested restricted stock units which vests on the fourth anniversary of its grant date), except
as described below. The portion of the 2020 term awards to be granted by TripCo is expected to consist of time-vested
restricted stock units with respect to LTRPB shares.
The
description of the Upfront Awards set forth herein is qualified in its entirety by reference to the form of TripCo’s
award agreement for Upfront Awards, which is attached hereto as Exhibit 10.5
and incorporated by reference into this Item 5.02.
Termination Payments and Benefits.
Mr. Maffei will be entitled to the following payments and benefits from Liberty Media (with Liberty Media being reimbursed by TripCo
for its allocated portion of the Severance Benefits pursuant to the Services Amendment) if his employment is terminated at Liberty
Media under the circumstances described below, subject to the execution of releases by Liberty Media and Mr. Maffei in a form to
be mutually agreed. The following discussion also summarizes the termination payments and benefits that Mr. Maffei would be entitled
to if his services are terminated at TripCo under the scenarios described below.
Termination by Liberty Media without
Cause or by Mr. Maffei for Good Reason. If Mr. Maffei’s employment is terminated by Liberty Media without cause
(as defined in the Employment Agreement) or if Mr. Maffei terminates his employment for good reason (as defined in the Employment
Agreement) on or after January 1, 2020, he is entitled to the following: (i) his accrued base salary, any accrued but unpaid bonus
for a prior completed year, any unpaid expense reimbursements and any amounts due under applicable law (the “Standard
Entitlements”); (ii) a severance payment of two times his base salary during the year of his termination to be paid in
equal installments over 24 months; (iii) fully vested shares with an aggregate grant date fair value of $35 million consisting
of shares of the applicable series of common stock from Qurate, Liberty Media, GCIL, TripCo and LBC; (iv) full vesting of his Upfront
Awards (including the grant and full vesting of the 2020 term awards if the termination occurs before they have been granted) and
full vesting of the annual equity awards for the year in which the termination occurs (including the grant and full vesting of
such annual equity awards if the termination occurs before they have been granted); (v) lump sum cash payment of two times the
average annual cash performance bonus paid for the two calendar years ending prior to the termination, but in no event less than
two times his target annual cash performance bonus of $17 million, with (subject to certain exceptions) up to 25% of such amount
payable in shares of the applicable series of common stock from Qurate, Liberty Media, GCIL, TripCo and LBC; (vi) a lump sum cash
payment equal to the greater of (x) $17 million and (y) the annual cash performance bonus otherwise payable for the year of termination,
in each case, prorated based on the number of days that have elapsed within the year of termination (including the date of termination),
with (subject to certain exceptions) up to 25% of such amount payable in shares of the applicable series of common stock from Qurate,
Liberty Media, GCIL, TripCo and LBC; and (vii) continued use for 12 months after such termination of certain services and perquisites
provided by Liberty, including continued use of Liberty’s aircraft (the “Services”) (clauses (i) through
(vii) are collectively referred to as the “Severance Benefits”).
Termination at TripCo by TripCo without
Cause or by Mr. Maffei for Good Reason. In addition, if Mr. Maffei’s services at TripCo are terminated by TripCo
without cause (as defined in the Employment Agreement) or by Mr. Maffei for good reason (as defined in the Employment Agreement)
after January 1, 2020, he will be entitled to full vesting of the Upfront Awards and the annual equity awards, in each case, granted
by TripCo for the year of his termination, and if Mr. Maffei remains employed by Liberty Media at or following the date of termination
of his services to TripCo, he will also be entitled to payment of TripCo’s allocated portion of the annual cash performance
bonus for the year, prorated for the portion of the calendar year in which Mr. Maffei served as an officer of TripCo. Other than
as described above, no Severance Benefits will be due to Mr. Maffei if he remains employed by Liberty Media at or following the
date of termination of his services to TripCo.
Termination by Reason of Death or Disability.
In the event of Mr. Maffei’s death or disability, he will be entitled to the same payments and benefits as if his services
to TripCo had been terminated by TripCo without cause or by Mr. Maffei for good reason.
For Cause Termination at TripCo.
In the event Mr. Maffei’s services to TripCo are terminated by TripCo for cause, he will forfeit any unvested portion
of the Upfront Awards granted by TripCo, and if the termination for cause occurs before December 31 of the relevant grant year,
Mr. Maffei will forfeit TripCo’s allocated portion of the annual cash performance bonus and all of the annual equity awards
granted by TripCo for that grant year. If Mr. Maffei’s services are terminated by TripCo after December 31 of the relevant
grant year but is terminated by TripCo, including for cause, prior to the date on which TripCo’s Compensation Committee (the
“TripCo Committee”) certifies achievement of the performance metric for TripCo’s Performance RSUs for
the grant year (the “Certification Date”), the award will remain outstanding until TripCo’s Certification
Date and will vest to the extent determined by the TripCo Committee.
Voluntary
Termination at TripCo without Good Reason. If Mr. Maffei voluntarily terminates the services he provides to TripCo
without good reason on or after January 1, 2020, he will be entitled to pro rata vesting of the Upfront Awards granted by
TripCo (based on the number of days that have elapsed during the vesting period), pro rata vesting of his annual equity
awards for the year of termination granted by TripCo (based on the elapsed number of days in the calendar year of
termination) and a pro rata payment of TripCo’s allocated portion of his annual cash performance bonus of $17
million (based upon the elapsed number of days in the calendar year of termination). Any Performance RSUs for the year of
termination that are unvested on the date of termination will remain outstanding until the performance criteria is determined
and will vest pro rata (based upon the elapsed number of days in the calendar year of termination) to the extent determined
by the TripCo Committee (at a level not less than 100% of the target award). Other than as described above, no Severance
Benefits will be due to Mr. Maffei if he remains employed by Liberty Media at or following the date of termination of his
services to TripCo.