ServiceMagic 2015 Annual Report Download - page 13

TableofContents
Salary
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Wetypicallynegotiateanewexecutiveofficer’sstartingsalaryuponarrival,basedontheexecutive’spriorcompensationhistory,priorcompensation
levelsfortheparticularpositionwithintheCompany,theCompany’sNewYorkCitylocation,salarylevelsofotherexecutiveswithintheCompanyandsalary
levelsavailabletotheindividualinalternativeopportunities.Salariescanincreasebasedonanumberoffactors,includingtheassumptionofadditional
responsibilitiesandotherfactorswhichdemonstrateanexecutive’sincreasedvaluetotheCompany.Noexecutiveofficer’ssalarywasadjustedduring2015.
Annual Bonuses
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General. Weestablishbonuslevelsthroughatwo-prongedprocess.First,atthebeginningofeachyear,theCommitteesetsperformanceobjectives,
whichhistoricallyhavebeentiedtotheachievementofEBITDA(asdefinedbelow),revenueorsharepriceperformancetargetsduringtheforthcomingyear,and
maximumbonusamounts.Ingeneral,theseperformancetargetsareminimumacceptableperformanceconditions,butwithrespecttowhichthereissubstantial
uncertaintywhenweestablishthem.Theestablishmentofperformancetargetsandmaximumbonusamountsisundertakenprimarilytosatisfytherequirementsof
Section162(m)oftheInternalRevenueCode,asamended.SatisfactionofoneormoreoftheperformancetargetsestablishedbytheCommitteeallowsforthe
paymentofbonusesthatwillbedeductiblebytheCompanyforfederalincometaxpurposes,shouldanybonusesbeawardedtotheCompany’snamedexecutive
officers.However,satisfactionoftheapplicableperformancetargetsdoesnotobligatetheCommitteetoapproveanyspecificbonusamountforanyexecutive
officer,andtheCommitteehashistoricallyreducedthemaximumbonusamountbasedonadiscretionaryassessmentofCompanyand,toalesserextent,individual
performance.Inmakingitsdeterminationsregardingindividualannualbonusamounts,theCommitteeconsidersavarietyoffactors,suchasgrowthinprofitability
orachievementofstrategicobjectivesbytheCompany,andanindividual’sperformanceandcontributiontotheCompany.TheCommitteedoesnotquantifythe
weightgiventoanyspecificelementorotherwisefollowaformulaiccalculation.Rather,theCommitteeengagesinanoverallassessmentofappropriatebonus
levelsbasedonasubjectiveinterpretationofallrelevantcriteria.ThisprocessisdesignedtopermittheCompanytodeductthebonuscompensationpaidto
executivesforincometaxpurposes.
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ThedefinitionofEBITDAusedforestablishingSection162(m)performanceobjectivescomesfromIAC’s2013StockandAnnualIncentivePlan,andis
asfollows:“EBITDA”meansforanyperiod,operatingprofit(loss)plus,ifapplicable:(i)depreciation,(ii)amortizationandimpairmentofintangibles,
(iii)goodwillimpairment,(iv)non-cashcompensationexpense,(v)restructuringcharges,(vi)noncashwrite-downsofassets,(vii)chargesrelatingtodisposalof
linesofbusiness,(viii)litigationsettlementamountsand(ix)costsincurredforproposedandcompletedacquisitions.
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2015 Bonuses. For2015,theCommitteepredicatedthepaymentofbonusestoexecutiveofficersonattaining:(i)EBITDAinanyofthefourconsecutive
calendarquartersbeginningwiththefirstquarterof2015atleastequaltoEBITDAinthecorrespondingcalendarquartertwelvemonthsbefore,(ii)revenueinany
ofthefourconsecutivecalendarquartersbeginningwiththefirstquarterof2015atleastequaltorevenueinthecorrespondingcalendarquartertwelvemonths
beforeor(iii)sharepricegrowthofatleast5%over$63.83(theclosingpriceoftheCompany’scommonstockonDecember31,2014)onany20tradingdays
duringtheperiodbeginningonJanuary1,2015throughDecember31,2015.Twoofthetargetsweremet.Afterconcludingthatthethresholdperformancetargets
forthepaymentofbonuseshadbeenachieved,theCommitteethenexerciseditsrighttoreducebonusamountsforeachindividualexecutiveofficerfromthe
maximumlevelestablished.Insettingactualbonuslevels,theCommitteeconsideredavarietyoffactors,including:
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·Successful Completion of Match Group IPO. InNovember2015,MatchGroupsuccessfullycompleteditsinitialpublicoffering.TheCompany
believesthatthistransactionhaspositionedbothIACandMatchGrouptoenhancetheabilityofshareholdersofbothcompaniestorealizevalueover
thelongterm.AtDecember31,2015,theCompany’sownershipinterestandvotinginterestinMatchGroupwere84.6%and98.2%,respectively;
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·Successful Completion of Other Transactions. TheCompanyamendedandextendeditsservicesagreementwithGoogleandcontinuedits
disciplinedapproachtoacquisitions,includingtheacquisitionofPlentyOfFish;
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·Capitalization and Cash Position. TheCompanyrepatriatedasignificantamountofcashtostockholdersduring2015bywayofsharerepurchases
andquarterlycashdividends.Inaddition,during2015:(i)theCompanyamendedandextendedits$300millionrevolvingcreditfacility,and
(ii)MatchGroupenteredintoacreditagreementprovidingfora$500millioncreditfacilityandan$800milliontermloanandexchanged$445.3
millionofIAC’s4.75%seniornotesfor$445.2ofMatchGroup6.75%seniornotes,providingforappropriatecapitalstructuresforbothentitiesas
theycontinuetoinvestintheirbusinessesandidentifynewopportunitiesforexpansion;and
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