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Annual report pursuant to Section 13 and 15(d)

Related Party Transactions with Officers and Directors

v3.22.4
Related Party Transactions with Officers and Directors
12 Months Ended
Dec. 31, 2022
Related Party Transactions with Officers and Directors

(14)聽聽Related Party Transactions with Officers and Directors

Chief Executive Officer Compensation Arrangement

In December 2019, the Compensation Committee (the 鈥淐ommittee鈥) of Liberty approved a compensation arrangement (the 鈥淐EO Arrangement鈥) for its President and Chief Executive Officer (the 鈥淐EO鈥). Also in December 2019, each of the Service Companies executed an amendment to each Service Company鈥檚 services agreement with Liberty, pursuant to which components of the CEO鈥檚 compensation described below are either paid directly to the CEO by each Service Company or reimbursed to Liberty, in each case based on allocations among Liberty and each of the Service Companies set forth in the service agreement amendments. This allocation 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-wide and CEO basis, weighted 50%, in each case, absent agreement to the contrary by Liberty and the Service Companies in consultation with the CEO. The allocation percentage will then be adjusted annually and following certain events. For the years ended December 31, 2022, 2021 and 2020, the allocation percentage for Liberty was 49%, 41% and 44%, respectively.

The CEO Arrangement provides for a five year employment term which began on January 1, 2020 and ends December 31, 2024, with an annual base salary of $3 million (with no contracted increase), a one-time cash commitment bonus of $5 million (paid in December 2019) and an annual target cash performance bonus of $17 million (with payment subject to the achievement of one or more performance metrics as determined by the applicable company鈥檚 Compensation Committee), upfront equity awards and annual equity awards (as described below).

The CEO was entitled to receive term equity awards with an aggregate grant date fair value of $90 million (the 鈥淯pfront Awards鈥) which were granted in two equal tranches. The first tranche consisted of time-vested stock options from each of Liberty, Qurate Retail, Liberty Broadband and GCI Liberty and time-vested restricted stock units from Liberty TripAdvisor (collectively, the 鈥2019 term awards鈥) that vest, in each case, on December 31, 2023 (except Liberty TripAdvisor鈥檚 award of time-vested restricted stock units, which vests on December 15, 2023), subject to the CEO鈥檚 continued employment, except under certain circumstances. Liberty鈥檚 portion of the 2019 term awards, granted in December 2019, had an aggregate grant date fair value of $19,800,000 and consisted of stock options to purchase 927,334 Series C Liberty SiriusXM common stock (鈥淟SXMK鈥) shares, 313,342 Series C Liberty Braves (鈥淏ATRK鈥) shares and 588,954 Series C Formula One common stock (鈥淔WONK鈥) shares, with exercise prices of $47.11, $29.10 and $43.85, respectively. The second tranche of the Upfront Awards consisted of time-vested stock options from each of Liberty, Qurate Retail, Liberty Broadband and GCI Liberty and time-vested restricted stock units from Liberty TripAdvisor (collectively, the 鈥2020 term awards鈥) that vest, in each case, on December 31, 2024 (except Liberty TripAdvisor鈥檚 award of time-vested restricted stock units, which vests on December 7, 2024), subject to the CEO鈥檚 continued employment, except under certain circumstances. 聽Liberty鈥檚 portion of the 2020 term awards, granted in December 2020, had an aggregate grant date fair value of $19,107,000 and consisted of stock options to purchase 665,140 LSXMK shares, 352,224 BATRK shares and 544,508 FWONK shares, with exercise prices of $42.13, $26.36 and $43.01, respectively.

Beginning in 2020, the CEO received annual equity award grants with an annual aggregate grant date fair value of $17.5 million, consisting of time-vested options and/or performance-based restricted stock units. The CEO elected the portions of his annual equity awards that he desired to be issued in the form of options, performance-based restricted stock units or a combination of both. The annual equity awards were allocated across Liberty and each of the Service Companies. Vesting of any of these annual performance-based restricted stock units will be subject to the achievement of one or more performance metrics to be approved by the Compensation Committee of the applicable company with respect to its respective allocable portion of the annual performance-based restricted stock units. At Liberty, the CEO鈥檚 annual equity awards were issued with respect to LSXMK, BATRK and FWONK.

The CEO will be entitled to payments and benefits if his employment is terminated, subject to the execution of releases. Such payments and benefits generally will take the form of cash payments, issuance of fully vested shares and the acceleration of unvested equity awards, depending on the type of termination. In the event that the CEO鈥檚 services to a Service Company are discontinued and he remains employed by Liberty following such discontinuation (unless such discontinuation is for cause (as defined in his employment agreement)), the Service Company will be required to make a termination payment to Liberty, as well as provide the CEO with certain payments and benefits upon termination under certain circumstances.

Exchange Agreement with Chairman

On July 28, 2021, the Company entered into an exchange agreement, among the Company, John C. Malone (the Chairman of the Board of the Company), and a revocable trust of which Mr. Malone is the sole trustee and beneficiary (the 鈥淛M Trust鈥) (the 鈥淓xchange Agreement鈥), whereby, among other things, Mr. Malone agreed to an arrangement under which his aggregate voting power in the Company would not exceed 49% (the 鈥淭arget Voting Power鈥) plus 0.5% (under certain circumstances).

The Exchange Agreement provides for exchanges by the Company and Mr. Malone or the JM Trust of shares of Series B Liberty SiriusXM common stock, Series B Liberty Braves common stock or Series B Liberty Formula One common stock for shares of Series C Liberty SiriusXM common stock, Series C Liberty Braves common stock or Series C Liberty Formula One common stock, respectively, in connection with certain events, including (i) any event that would result in a reduction in the outstanding votes of any of the Company鈥檚 tracking stock groups (each, a 鈥淕roup鈥) or an increase of Mr. Malone鈥檚 beneficially-owned voting power in any Group (other than a Voting Power Exchange (as defined below)) (an 鈥淎ccretive Event鈥), in each case, such that Mr. Malone鈥檚 voting power with respect to such Group would exceed the Target Voting Power plus 0.5%, (ii) from and after the occurrence of any Accretive Event, any event that would result in an increase in the outstanding votes of any Group or a decrease of Mr. Malone鈥檚 beneficially-owned voting power in any Group (a 鈥淒ilutive Event鈥), in each case, such that Mr. Malone鈥檚 voting power with respect to such Group falls below the Target Voting Power less 0.5%, or (iii) on a quarterly basis or in connection with any annual or special meeting of stockholders, upon request by Mr. Malone or the JM Trust, if Mr. Malone鈥檚 aggregate voting power in the Company is less than the Target Voting Power and would continue to be less than the Target Voting Power upon completion of such exchange (a 鈥淰oting Power Exchange鈥). Additionally, the Exchange Agreement contains certain provisions with respect to fundamental events at the Company, meaning any combination, consolidation, merger, exchange offer, split-off, spin-off, rights offering or dividend, in each case, as a result of which holders of Series B common stock of one or more Groups are entitled to receive securities of the Company, securities of another person, property or cash, or a combination thereof.

In connection with an Accretive Event with respect to a Group, Mr. Malone or the JM Trust will be required to exchange with the Company shares of Series B common stock of such Group (鈥淓xchanged Group Series B Shares鈥) for an equal number of shares of Series C common stock of the same Group so as to maintain Mr. Malone鈥檚 voting power with respect to such Group as close as possible to, without exceeding, the Target Voting Power, on the terms and subject to the conditions of the Exchange Agreement. In connection with a Dilutive Event with respect to a Group, Mr. Malone and the JM Trust may exchange with the Company shares of Series C common stock of a Group for an equal number of shares of

Series B common stock of the same Group equal to the lesser of (i) the number of shares of Series B common stock of the same Group which would maintain Mr. Malone鈥檚 voting power with respect to such Group as close as possible to, without exceeding, the Target Voting Power and (ii) the number of Exchanged Group Series B Shares at such time, on the terms and subject to the conditions of the Exchange Agreement. In a Voting Power Exchange, the Company will be required to exchange with Mr. Malone and the JM Trust shares of Series B common stock of any Group on a one-for-one basis for shares of Series C common stock of the same Group, with the maximum number of shares of Series B common stock to be delivered to Mr. Malone or the JM Trust equal to the number of Exchanged Group Series B Shares at such time that may be delivered without resulting in Mr. Malone鈥檚 aggregate voting power in the Company exceeding the Target Voting Power, on the terms and subject to the conditions of the Exchange Agreement.

As of December 31, 2022, there have been no exchanges of the Company鈥檚 shares pursuant to the Exchange Agreement.

Chairman鈥檚 Employment Agreement

On December聽12, 2008, the Committee determined to modify its employment arrangements with Mr. Malone, to permit Mr. Malone to begin receiving payments in 2009 while he remains employed by the Company (instead of following his termination) in satisfaction of Liberty鈥檚 obligations to him under two deferred compensation plans and a salary continuation plan. Under one of the deferred compensation plans (the 鈥8% Plan鈥), compensation has been deferred by Mr. Malone since January聽1, 1993 and accrues interest at the rate of 8% per annum compounded annually from the applicable date of deferral. Under the second plan (the 鈥13% Plan鈥), compensation was deferred by Mr. Malone from 1982 until December聽31, 1992 and accrues interest at the rate of 13% per annum compounded annually from the applicable date of deferral. The amounts owed to Mr. Malone under the 8% Plan and 13% Plan aggregated approximately $2.4聽million and $20聽million, respectively, at December聽31, 2008. The amount owed to Mr. Malone under his salary continuation plan aggregated approximately $39聽million at December聽31, 2008. Mr. Malone will receive 240 equal monthly installments as follows, which began on February 1, 2009: (1)聽approximately $20,000 under the 8% Plan; (2)聽approximately $237,000 under the 13% Plan; and (3)聽approximately $164,000 under the salary continuation plan. Interest ceased to accrue under his salary continuation plan once the payment began.