Interval Leisure Group, Inc. DEF 14A 2009
Documents found in this filing:
QuickLinks -- Click here to rapidly navigate through this document
Statement Pursuant to Section 14(a) of
INTERVAL LEISURE GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of Interval Leisure Group, Inc., a Delaware corporation, will be held at the Miami Marriott Dadeland located at 9090 South Dadeland Boulevard, Miami, Florida 33156, on Wednesday, June 10, 2009, at 4:00 p.m., local time, for the following purposes:
Only stockholders of record at the close of business on April 20, 2009 will be entitled to notice of and to vote at the meeting or any adjournment or postponement of the meeting.
As permitted by the U.S. Securities and Exchange Commission, or SEC, we are mailing to our stockholders a Notice of Internet Availability of Proxy Materials (the "Notice") instead of a paper copy of this proxy statement and our 2008 Annual Report. We believe that this process allows us to provide our stockholders with the information they need in a timelier manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this proxy statement, our 2008 Annual Report and a form of proxy card or voting instruction card. All stockholders who request a paper copy of our proxy materials will receive a paper copy of the proxy materials by mail.
Your vote is important. Whether or not you plan to attend the meeting, please vote as soon as possible. You may vote your shares via a toll-free telephone number or over the Internet. If you received a proxy card or voting instruction card by mail, you may submit your proxy card or voting instruction card by completing, signing, dating and mailing your proxy card or voting instruction card in the envelope provided. Any stockholder attending the meeting may vote in person, even if you have already returned a proxy card or voting instruction card.
Dated: April 27, 2009
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on June 10, 2009.
The 2009 Proxy Statement and 2008 Annual Report on Form 10-K are available at the website listed below beginning on or about April 30, 2009:
INTERVAL LEISURE GROUP, INC.
PROXY STATEMENT FOR THE
This proxy statement and the enclosed proxy card are furnished to you in connection with the solicitation of proxies by the board of directors of Interval Leisure Group, Inc., or ILG, for use at ILG's 2009 Annual Meeting of Stockholders. This proxy statement summarizes information you need to know to vote at the Annual Meeting. The Annual Meeting will be held at the Miami Marriott Dadeland located at 9090 South Dadeland Boulevard, Miami, Florida 33156, on Wednesday, June 10, 2009, at 4:00 p.m., local time. The address of our principal executive office is 6262 Sunset Drive, Miami, Florida 33143, and our telephone number is (305) 666-1861.
The proxy materials, including this proxy statement, proxy card and our 2008 annual report, are being made available on or about April 30, 2009 to all stockholders of record on April 20, 2009. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.
In accordance with rules and regulations adopted by the SEC, we have elected to provide our stockholders access to our proxy materials over the Internet. Accordingly, a Notice of Internet Availability of Proxy Materials, which we refer to as the Notice, was mailed on or about April 30, 2009 to our stockholders who owned our common stock at the close of business on April 20, 2009. Stockholders have the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials be sent to them by following the instructions in the Notice.
The Notice also provided instructions on how you can elect to receive future proxy materials electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until you terminate such election.
Choosing to receive future proxy materials electronically will allow us to provide you with the information you need in a timelier manner, will save us the cost of printing and mailing documents to you and will conserve natural resources.
We will bear the expense of soliciting proxies. In addition to these proxy materials, our directors and employees (who will receive no compensation in addition to their regular salaries) may solicit proxies in person, by telephone or email. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable charges and expenses incurred in forwarding soliciting materials to their clients.
QUESTIONS AND ANSWERS
Who may vote at the meeting?
Our board set the close of business on April 20, 2009 as the record date to determine ILG stockholders entitled to notice of and to vote at the annual meeting. If you owned our stock on that date, you may attend and vote at the meeting. As of April 20, 2009, we had 56,357,403 shares of our common stock outstanding and entitled to vote at the meeting. Holders of our common stock at close of business on the record date are entitled to one vote per share on all matters voted on at the meeting.
What is the quorum requirement for the meeting?
We will have a quorum and will be able to conduct the business of the annual meeting if the holders of a majority of the outstanding shares of our common stock as of the record date are present
at the annual meeting, either in person or by proxy. Proxies we receive marked as abstentions or broker non-votes (shares held in "street name" by a broker or nominee indicating on a proxy that it does not have authority to vote with respect to any matter to be acted on at the annual meeting) will be included in the calculation of the number of shares considered to be present at the meeting.
What matters will ILG stockholders vote on at the annual meeting?
ILG stockholders will vote on the following proposals:
If you do not vote for a nominee, or if you indicate "Withhold Authority" for the nominee on your proxy card, your vote will not count either for or against a nominee. Abstentions will not be voted in favor of the election of directors and also will not be counted as votes cast in the election of directors. Accordingly, abstentions will have no effect on the voting in the election of directors.
This proposal requires the affirmative approval of a majority of votes cast by holders of our common stock present in person, or by proxy, at the annual meeting. Abstentions and broker non-votes will not be considered votes cast on the proposal and will not have a positive or negative effect on the outcome of this proposal.
The Board recommends that you vote FOR the election of the nine directors listed in Proposal 1 and FOR Proposal 2.
Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
We are pleased to take advantage of the SEC rule that allows companies to furnish their proxy materials over the Internet. Accordingly, we have sent our stockholders of record and beneficial owners a Notice regarding Internet availability of proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically on an ongoing basis. A stockholder's election to receive proxy materials by mail or electronically by email will remain in effect until the stockholder terminates such election.
How can I get electronic access to the proxy materials?
You can view the proxy materials for the meeting on the Internet at www.proxyvote.com. Please have your 12 digit control number available. Your 12 digit control number can be found on your Notice. If you received a paper copy of your proxy materials, your 12 digit control number can be found on your proxy card or voting instruction card. Our proxy materials are also available on our Investor Relations website at www.iilg.com/invest.cfm.
Can I vote my shares by filling out and returning the Notice?
No. The Notice will, however, provide instructions on how to vote by Internet, by telephone, by requesting and returning a paper proxy card or voting instruction card, or by submitting a ballot in person at the meeting.
What do I need to do to vote at the annual meeting?
We encourage you to vote promptly. Telephone and Internet voting are available through 11:59 p.m. Eastern Time on Tuesday, June 9, 2009. If your shares are registered in your name, then you are a "registered holder" and you may vote in person at the annual meeting or by proxy. If you decide to vote by proxy, you may do so in any one of the following three ways:
Only persons with proof of stock ownership will be admitted to the annual meeting. If you are a registered stockholder, please bring a form of photo identification with you to the annual meeting. If your shares are not registered in your name, you must bring proof of share ownership (such as a recent bank or brokerage firm account statement, together with photo identification) to be admitted to the annual meeting.
Can I change my vote?
You may revoke your proxy at any time before a vote is taken at the meeting by giving notice to us in writing or at the meeting or by executing and forwarding a later-dated proxy to us or voting a later proxy by telephone or the Internet. Your presence at the annual meeting will not automatically revoke your proxy. If you are a beneficial stockholder only, you should check with the broker, trustee, bank or other nominee who holds your shares to determine how to change or revoke your vote.
How will my shares be voted?
The common stock represented by your proxy will be voted in accordance with specifications provided on your proxy or voting instruction card or with specifications you provided by telephone or Internet. Proxies returned without any such specifications will be voted for the election of the nine directors as set forth under Proposal 1 (Election of Directors) below and in favor of Proposal 2 (ratification of Ernst & Young LLP as independent registered public accounting firm). If any other matters shall properly come before the annual meeting, the persons named in your proxy, or their substitutes, will determine how to vote thereon in accordance with their judgment. The board of directors does not know of any other matters that will be presented for action at the annual meeting.
At the annual meeting, ILG's stockholders will be asked to vote for the election of the nine nominees named below, each to serve until the next annual meeting and until his or her successor is duly elected and qualified. All of the nominees are incumbent directors. Liberty Media Corporation has the right to nominate up to 20% of the directors serving on ILG's board, as described in more detail below under "Certain Relationships and Related TransactionsSpinco Agreement."
Common stock represented by proxies, unless otherwise specified, will be voted for the election of the nine nominees. If, by reason of death or other unexpected occurrence, any one or more of the nominees should not be available for election, the proxies will be voted for the election of one or more substitute nominees as the board may nominate.
Craig M. Nash, age 55, has served as President and Chief Executive Officer of ILG since May 2008 and as Chairman of the Board of ILG since August 2008 and has served as President of Interval since August 1989 and Chief Executive Officer of Interval since March 1998. Prior to assuming this role, Mr. Nash served in a series of increasingly significant roles with Interval, including as General Counsel and Vice President of Regulatory Affairs. Mr. Nash joined Interval in 1982. Mr. Nash also provides management oversight to the Aston businesses. Mr. Nash serves on the board of directors of the American Resort Development Association and is also a member of its Executive Committee.
Gregory R. Blatt, age 40, has served as a director of ILG since May 2008. Mr. Blatt has served as Chief Executive Officer of Match.com, an online dating service and subsidiary of IAC, since February 2009 and as Executive Vice President of IAC, an Internet conglomerate, since March 2005. Mr. Blatt had previously served also as General Counsel and Secretary of IAC from November 2003. Prior to joining IAC in November 2003, Mr. Blatt served as Executive Vice President, Business Affairs and General Counsel of Martha Stewart Living Omnimedia, Inc. ("MSO") from January 2001 to October 2003, Executive Vice President and General Counsel of MSO from September 1999 to January 2001 and Senior Vice President, General Counsel of MSO from May 1999 to September 1999. Prior to joining MSO, Mr. Blatt was an associate with Grubman Indursky & Schindler, P.C., a New York entertainment and media law firm, from 1997 to May 1999, and prior to that, was an associate at Wachtell, Lipton, Rosen & Katz, a New York law firm, from 1995 to 1997. Mr. Blatt currently serves as a director of HSN Inc., a television and online retailer.
David Flowers, age 54, has served as a director of ILG since August 2008. Mr. Flowers has served as Senior Vice President & Treasurer of Liberty Media Corporation, which holds ownership interests in a broad range of electronic retailing, media, communication and entertainment businesses, since October 2000, Treasurer since April 1997 and Vice President since June 1995. He has also served as Senior Vice President and Treasurer of Discovery Holding Company since May 2005. Mr. Flowers is a member of the board of directors of Summit Bank & Trust, a state chartered bank in Colorado.
Mr. Flowers was nominated as a director by Liberty Media Corporation.
Gary S. Howard, age 58, has served as a director of ILG since August 2008. Mr. Howard served as Executive Vice President and Chief Operating Officer of Liberty Media Corporation from July 1998 to February 2004 as well as serving on Liberty Media Corporation's board of directors from July 1998 until January 2005. Additionally, Mr. Howard held several executive officer positions with companies affiliated with Liberty Media Corporation. Mr. Howard currently serves on the board of directors of Dish Network Corporation.
Mr. Howard was nominated as a director by Liberty Media Corporation.
Lewis J. Korman, age 64, has served as a director of ILG since August 2008. Mr. Korman is a business advisor to various companies: X.L. Capital, Ltd, a reinsurance company, since 1997; Starlight International Ltd, a marketer and distributor of dietary supplements, 1998 - 2002; Trident Media
Group LLC, a literary agency in the media business, since 2002; Sandler Travis Trade Advisory Services, Inc., a customs management, consulting and trade compliance company, since 2006; and Sandler, Travis & Rosenberg, P.A., an international trade law firm and business practice, since 2007. Since 1999, Mr. Korman has been a director of Learning Express LLC, a company engaged in test preparation for occupational certification and test assessment for educational institutions through the internet. From 1998 - 2007, Mr. Korman was the Vice-Chairman of RAB Holdings, the owner of Millbrook Distribution Services, Inc., a distributor of specialty foods and other products to supermarkets, and The B. Manischewitz Company, a manufacturer of kosher and related ethnic food products. Mr. Korman co-produced two works of photojournalism: A Day in the Life of the United States Armed Forces (Harper Collins, May 2003) and A Day in the Life of the American Woman (Bulfinch Press October 2005). From 1992 to 1997, until acquired by a predecessor of IAC, Mr. Korman was President and Chief Operating Officer of Savoy Pictures Entertainment, Inc. (motion picture distributor and owner of four Fox affiliated television stations). He was Senior Executive Vice President and Chief Operating Officer of Columbia Pictures Entertainment, Inc. (motion picture production and distribution, television production and distribution, Loews theatre chain) from 1988 until 1990 and was Senior Executive Vice President of its predecessor, TriStar Pictures, Inc. from 1987 until it merged with Columbia in 1988.
Thomas J. Kuhn, age 46, has served as a director of ILG since August 2008. Mr. Kuhn has been a Managing Director at Allen & Company LLC, an investment banking firm, since 2000. Prior to joining Allen, he had been the Senior Vice President and General Counsel of USA Networks, Inc. (a predecessor to IAC). From 1988 to 1994, Mr. Kuhn was an associate at Wachtell, Lipton, Rosen & Katz in New York City in the firm's corporate department.
Thomas J. McInerney, age 44, has served as a director of ILG since May 2008. Mr. McInerney has been Executive Vice President and Chief Financial Officer of IAC since January 2005. Mr. McInerney previously served as Chief Executive Officer of IAC's Retailing sector from January 2003 through December 2005. Prior to this time, Mr. McInerney served as Executive Vice President and Chief Financial Officer of Ticketmaster (prior to it becoming a wholly-owned subsidiary of IAC in January 2003) and its predecessor company, Ticketmaster Online-Citysearch, Inc., since May 1999. Prior to joining Ticketmaster, Mr. McInerney worked at Morgan Stanley, most recently as a Principal. Mr. McInerney currently serves as a director of HSN Inc., a television and online retailer.
Thomas P. Murphy, Jr., age 60, has served as a director of ILG since August 2008. Mr. Murphy is Chairman and Chief Executive Officer of Coastal Construction Group, a construction company, which he founded in 1989. Mr. Murphy has 41 years of construction and development experience, which encompasses hospitality, resort, office, retail, industrial, institutional and residential projects. Mr. Murphy is an honorary board member of Baptist Health Systems of South Florida and is a member of the National Construction Industry Round Table, the National Association of Home Builders and the Florida Home Builders Association.
Avy H. Stein, age 54, has served as a director of ILG since August 2008 and as Lead Director since December 2008. Mr. Stein is a Managing Partner of Willis Stein & Partners, a Chicago-based private equity firm that invests in companies in the consumer, education, healthcare and specialized business service industries. Mr. Stein co-founded Willis Stein & Partners with John Willis in 1995. Mr. Stein serves many philanthropic organizations. He is a co-chairman of the Development Council for B.U.I.L.D. (Broader Urban Involvement in Leadership Development), an organization that provides career and educational development for inner city youth, a member of board of directors of the University of Illinois Foundation and its Investment Policy Committee; a member of the Board of Trustees, former Treasurer, and Chairman of the Investment Committee of the Ravinia Festival; a Board member and member of the Executive Committee of Steppenwolf Theatre Company; a Board member of the Chicago Humanities Festival; as well as a member of CCA (Civic Consulting Alliance), the Economic Club and Commercial Club of Chicago. Mr. Stein is a certified public accountant, and received his law degree in 1980 from Harvard University.
Board of Directors
Director Independence. ILG's board of directors currently consists of nine members. The board of directors has affirmatively determined that each of Mr. Howard, Mr. Korman, Mr. Kuhn, Mr. Murphy and Mr. Stein are "independent directors" within the meaning of the NASDAQ's listing standards. In making this determination, the board of directors considers information regarding transactions, relationships and arrangements involving ILG and its businesses and each director that it deems relevant to independence, including those required by NASDAQ listing standards. This information is obtained from director responses to a questionnaire circulated by ILG management, ILG records and publicly available information. ILG management monitors those transactions, relationships and arrangements that are relevant to determinations of independence, and solicits updated information potentially relevant to independence from internal personnel and directors, to determine whether there have been any developments that could potentially have an adverse impact on ILG's prior independence determinations.
In determining independence, the board considered the following relationships and transactions: (1) Mr. Korman's son serves as an executive officer of Ticketmaster, an affiliate of ours prior to the spin-off in August 2008, and his son's former position as an officer of IAC/InterActiveCorp, our former parent company, (2) Mr. Murphy's son is an accountant at Deloitte & Touche LLP, which provides tax and valuation services to us, however, Mr. Murphy's son does not have a material direct or indirect interest in such business relationship, also Mr. Murphy's company in the past had been involved in construction for ILG and for Mr. Nash, (3) the firm in which Mr. Stein is a principal had controlled ILG's main business prior to 2002, (4) Mr. Kuhn had been an executive at IAC's predecessor prior to 2000 and (5) Mr. Howard was an executive at Liberty Media Corp. prior to 2003.
With respect to the remaining directors, (i) Mr. Nash is an executive of ILG, (ii) Mr. Blatt and Mr. McInerney are executive officers of IAC, which was ILG's parent company prior to August 2008 and (iii) Mr. Flowers is Senior Vice President and Treasurer of Liberty Media Corporation.
Governance Guidelines. ILG's board of directors has adopted Corporate Governance Guidelines that are available on our website at www.iilg.com/governance.cfm.
Meetings. Prior to the spin-off in August 2008, the board of directors had acted through written consents. For the remainder of 2008 following the spin-off, the board of directors held two meetings, which were attended by all directors other than Mr. McInerney who was unable to attend one of the meetings. Absent unusual circumstances, all directors are expected to attend the annual meeting of stockholders. Since ILG was formed in 2008, no annual meeting of stockholders was held last year.
The independent directors of the board regularly meet in executive session without management. Mr. Stein was named lead director in December 2008. The lead director serves as a liaison between the Chairman of the Board and other directors and presides at meetings of the independent directors.
Committees of the Board of Directors
The board of directors has a standing audit committee, compensation and human resources committee, and nominating committee, each of which operates under a written charter, as well as an executive committee. Current copies of these charters are available to stockholders on our website, www.iilg.com, under "Corporate Governance." Each director serving as a member on a board committee, other than the executive committee, is an independent director within the meaning of the NASDAQ's listing standards applicable to such members and under the applicable committee's charter.
Audit Committee. The audit committee assists the board of directors in fulfilling its oversight responsibilities for the integrity of our accounting, reporting and financial control practices. The audit committee monitors:
In addition, the audit committee considers and pre-approves any non-audit services proposed to be performed by the independent registered public accounting firm.
The members of the audit committee are Mr. Howard, Mr. Kuhn and Mr. Korman, chairman of the audit committee. Our board of directors has determined that Mr. Howard meets the requirements for an audit committee financial expert under Item 407 of Regulation S-K promulgated under the Securities Act of 1933. During 2008, the audit committee held five meetings. Each committee member attended more than 75% of the aggregate number of meetings of the committees on which he served in 2008, except that Mr. Howard was unable to attend two of the audit committee meetings.
Compensation and Human Resources Committee. The members of the compensation and human resources committee are Mr. Murphy and Mr. Stein, chairman of the committee. The compensation and human resources committee is authorized to exercise all of the powers of the ILG board of directors with respect to matters pertaining to compensation and benefits that affect the executive officers of ILG, including, but not limited to,
To assist in this process, the compensation and human resources committee reviews data and recommendations from an independent compensation consultant based on the compensation paid to officers at comparable companies. During 2008, the compensation and human resources committee held two meetings which all committee members attended. For more information on how executive compensation decisions are made, see "Compensation Discussion and Analysis."
Nominating Committee. The members of the nominating committee are Mr. Korman and Mr. Kuhn, chairman of the committee. The nominating committee:
During 2008, the nominating and corporate governance committee held two meetings, which all members attended.
Stockholders may recommend individuals to the nominating committee for consideration as potential director candidates by submitting their names, together with appropriate biographical
information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of ILG's common shares for at least a year as of the date such recommendation is made, to the following address: Interval Leisure Group, Inc., 6262 Sunset Drive, Miami, Florida 33143, Attn: Victoria J. Kincke, Secretary. Any such recommendation should be accompanied by a written statement from the candidate of his or her consent to be named as a candidate and, if nominated and elected, to serve as a director. Assuming that appropriate biographical and background material has been provided on a timely basis, the nominating committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.
The nominating committee has not established specific minimum qualifications a candidate must have in order to be recommended to the board of directors. However, in determining qualifications for new directors, the committee will consider whether the potential candidate qualifies as independent under NASDAQ listing standards, his or her skills and experience, and whether such candidate will effectively serve stockholders' long-term interests and contribute to ILG's overall corporate goals. The nominating committee will consider potential board candidates recommended by stockholders and others, including management and current directors and the nominating committee may retain a board search consultant to assist in searching for potential board candidates. The committee has not engaged a consultant at this time.
Executive Committee. The members of the executive committee are Mr. Nash, Mr. Blatt and Mr. Stein. The executive committee has all the power and authority of the ILG board of directors, except those powers specifically reserved to the ILG board of directors by Delaware law or ILG's organizational documents.
Other Committees. In addition to the foregoing committees, the ILG board of directors, by resolution, may from time to time establish other committees of the ILG board of directors, consisting of one or more of its directors.
Stockholder Communications with the Board of Directors
Any stockholder who desires to communicate with any of the members of ILG's board of directors may do so electronically by sending an email to email@example.com. Alternatively, a stockholder may communicate with the members of the Board by writing to Interval Leisure Group, Inc., 6262 Sunset Drive, Miami, Florida 33143, Attn: Victoria J. Kincke, Secretary. Communications may be addressed to an individual director, a board committee, the non-management directors or the full board of directors. All such communications must identify the author as a stockholder and provide evidence of the sender's stock ownership. Communications received by the Secretary will be reviewed by the Secretary and, if appropriate, distributed to the appropriate directors. Solicitations for the sale of merchandise, publications or services of any kind will not be forwarded to the directors.
Non-Employee Director Arrangements. Each member of the ILG board of directors that is not an employee of ILG or its affiliates receives an annual retainer in the amount of $50,000. Each member of the audit and compensation and human resources committees (including their respective chairs) receives an additional annual retainer in the amount of $10,000. Each member of the Nominating Committee (including its chair) receives an additional annual retainer in the amount of $5,000. Lastly, the chair of each of the Audit and Compensation and Human Resources Committees receives an additional annual chairperson retainer in the amount of $15,000.
In addition, each non-employee director receives a grant of restricted stock units with a dollar value of $100,000 upon his or her initial election to the ILG board of directors and annually thereafter
upon re-election on the date of ILG's annual meeting of stockholders. The terms of these restricted stock units provide for (i) vesting in two equal annual installments commencing on the first anniversary of the grant date, (ii) cancellation and forfeiture of unvested units in their entirety upon termination of service with the ILG board of directors and (iii) full acceleration of vesting upon a change in control of ILG. Non-employee directors are also reimbursed for all reasonable expenses incurred in connection with attendance at ILG board and committee meetings.
The following table and footnotes provide information regarding the compensation of non-employee members of ILG's board of directors for fiscal year 2008. These amounts relate to the period from the spin-off on August 20, 2008 through December 31, 2008.
The nominating committee has primary responsibility for establishing non-employee director compensation arrangements, which are designed to provide competitive compensation necessary to attract and retain high quality non-employee directors and to encourage ownership of ILG stock to further align directors' interests with those of ILG's stockholders. When considering non-employee director compensation arrangements, ILG management provides the nominating committee with information regarding various types of non-employee director compensation arrangements and practices of select peer companies.
Deferred Compensation Plan for Non-Employee Directors. Under ILG's Deferred Compensation Plan for Non-Employee Directors, non-employee directors are able to defer all or a portion of their Board and Board Committee fees. Eligible directors who defer all or any portion of these fees can elect to have such fees applied to the purchase of share units, representing the number of shares of ILG common stock that could have been purchased on the relevant date, or credited to a cash fund. If any dividends are paid on ILG common stock, dividend equivalents will be credited on the share units. The cash fund will be credited with deemed interest at an annual rate equal to the weighted average prime lending rate of JPMorgan Chase Bank. After a director ceases to be a member of the ILG board of directors, he or she will receive (i) with respect to share units, such number of shares of ILG common stock as the share units represent and (ii) with respect to the cash fund, a cash payment in an amount equal to deferred amounts, plus accrued interest. These payments will be made in either one
lump sum or up to five installments, as previously elected by the eligible director at the time of the related deferral election.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee have been an officer or employee of ILG. None of ILG's executive officers or directors serves or has served on the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of ILG's board of directors or compensation committee.
At the time of our spin-off from IAC on August 20, 2008, we participated in IAC's compensation programs and therefore our overall executive compensation program and policies had been established by IAC's compensation committee. Thus, our compensation and human resources committee (often referred to as our compensation committee) was not involved in determining 2008 compensation for our executive officers, except for approval of 2008 incentive bonuses paid in 2009. Our compensation committee has made some modifications to the program and policies and anticipates that the program and policies will continue to evolve in support of our ongoing business strategy and as we mature as a public company. Except where otherwise noted, the description of our executive compensation program and policies described below are in effect on the date of this proxy statement. References in this section to ILG for periods prior to the spin-off are to the subsidiaries of ILG that were contributed to ILG in connection with the spin-off in August 2008.
The following discussion of executive compensation reviews:
Compensation Actions Prior to and in Preparation for the Spin-off
Prior to the spin-off, ILG's executive officer compensation program was designed to increase long-term stockholder value by attracting, retaining, motivating and rewarding leaders with the competence, character, experience and ambition necessary to enable ILG to meet its growth objectives. When establishing compensation packages for a given executive, ILG follows a flexible approach, and makes decisions based on factors particular to each executive's situation, including ILG's firsthand experience with the competition for recruiting and retaining executives, negotiation and discussion with the relevant individual, competitive survey data, internal equity considerations and other factors deemed relevant at the time. ILG's primary approach is to pay base salaries at or around market levels while rewarding annual profit growth through an annual bonus program and long-term value creation through equity participation.
Prior to the spin-off, neither ILG nor IAC had an ongoing relationship with any particular compensation consulting firm; however, IAC has from time to time retained the services of consultants on specific occasions regarding broad based IAC compensation programs. At no time prior to the spin-off had a consultant been engaged with respect to compensation of any of ILG's executive officers.
The compensation packages for ILG's executive officers have primarily consisted and continue to primarily consist of salary, annual bonuses, long term incentives (typically equity awards), perquisites and other benefits. Prior to making specific decisions related to any particular element of
compensation, ILG typically reviewed the total compensation of each executive and evaluated the executive's total near and long-term compensation in the aggregate. ILG determined which element or combinations of compensation elements (salary, bonus or equity) it believed could be used most effectively to further our compensation objectives. However, all such decisions were subjective, and made on a facts and circumstances basis without any prescribed relationship between the various elements of the total compensation package.
The following summary describes the elements of compensation established by the actions taken prior to and in preparation for the spin-off.
General. ILG has typically negotiated 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 ILG, ILG's location, salary levels of other executives within ILG, salary levels available to the individual in alternative opportunities, reference to certain survey information and the extent to which we desire to secure the executive's services. Mr. Nash's salary was established through negotiations with IAC.
Once established, salaries may increase based on a number of factors, including the assumption of additional responsibilities, internal equity, periodic market checks and other factors which demonstrate an executive's increased value to ILG.
IAC utilized the following salary surveys, depending upon the executive position, to determine a relevant market range of salaries for each position: Towers Perrin Executive Compensation Data Bank, Radford Executive Survey, and the Mercer Premium Executive Remuneration Survey. At least two surveys were used in each analysis.
2007. Mr. Nash entered into a new employment agreement with IAC under which his salary was increased from $568,788 to $650,000 through negotiation. Ms. Marbert received a salary increase from $300,000 to $350,000 based on discussions between Ms. Marbert and Mr. Nash, and Mr. Nash's views of internal equity. Mr. Galea also received a salary increase from $200,000 to $250,000 based on reviews of market data and internal equity considerations. Ms. Lee and Ms. Kincke both received ordinary course salary increases of approximately 5% effective January 1, 2007.
2008. Mr. Nash and Ms. Marbert each entered into new employment agreements which became effective upon the spin-off (the "New Nash Employment Agreement" and the "New Marbert Employment Agreement", respectively). Under these agreements, Mr. Nash receives a base salary of $750,000, arrived at by negotiation between IAC and Mr. Nash and a recognition by IAC of his increased responsibilities as the Chairman and Chief Executive Officer of a public company. Ms. Marbert receives a base salary of $400,000, negotiated with IAC, which again reflects increased public company responsibilities. Additionally, Ms. Kincke's base salary was raised to $250,000 to reflect her increased responsibilities as General Counsel of a public company. Ms. Lee received an ordinary course salary increase of approximately 5% effective January 1, 2008. In connection with Mr. Harvey joining ILG in June 2008, he entered into an employment agreement providing for an initial base salary of $325,000, subject to increase following an annual review.
General. ILG's bonus program was designed to reward performance on an annual basis. Because of the variable nature of the bonus program, and because in any given year bonuses have the potential to make up a significant amount of an executive's total compensation, it provided an important incentive tool to achieve ILG's annual objectives.
Prior to the spin-off, IAC established the bonus of the CEO based on its view of corporate performance, based on a target level of 100% of salary. In large part, IAC measured corporate performance based on ILG's growth in year over year profitability, generally as measured by Operating Income Before Amortization ("OIBA"), although achievement of strategic objectives was also taken into account. Mr. Nash's old employment agreement provided for a minimum bonus of $350,000 in the event certain OIBA targets were achieved, but these targets were expected to be met, and a subjective determination of corporate performance was the true driver of Mr. Nash's bonus.
After consultation with ILG management, IAC would establish the annual bonus pool for ILG based on its assessment of ILG's performance for the applicable year. Mr. Nash, with input from executive management, then allocated the pool to the rest of ILG, including to the other executive officers based on individual and corporate success.
ILG generally pays bonuses during the first quarter following finalization of financial results for the prior year.
2007. In 2007, ILG experienced another solid year of profit growth. IAC paid Mr. Nash a bonus of $800,000, based mainly on the OIBA growth of ILG. While in 2007 Ms. Marbert's employment agreement expired, ILG paid her bonus based primarily on the formula that had been set forth in that employment agreement, which provided for a target bonus of 100% of salary, with incremental bonus paid to the extent OIBA exceeded ILG's plan. Ms. Marbert was paid a bonus of $360,000, slightly more than target. Mr. Galea, Ms. Kincke and Ms. Lee received bonuses based on Mr. Nash's view, with input from executive management, of corporate performance and individual contributions.
2008. Prior to the spin-off, ILG agreed to guarantee the 2008 bonuses for Mr. Nash, Ms. Marbert, Ms. Kincke and Mr. Galea at 100%, 100%, 40% and 40% of salary, respectively, presuming continued employment. This decision was made in light of the strong individual performance of ILG through May and the significant effort expended by these executives in connection with the spin-off transaction. Under the New Nash Employment Agreement, Mr. Nash is entitled to a minimum bonus of $250,000 if certain OIBA targets to be established annually are achieved. Following the spin-off, the compensation committee determined to revise the targets from OIBA to EBITDA, which ILG uses to measure corporate performance. Both the New Nash Employment Agreement and the New Marbert Employment Agreement provide for discretionary bonuses with a target of 100% of base salary. Mr. Harvey's agreement provides for a discretionary bonus with a target of 75% of salary to be pro-rated for 2008. Ms. Lee's target bonus for 2008 was 40% of salary.
General. IAC's policies were based on the belief that by providing a meaningful portion of an executive officer's compensation in stock, his or her incentives are aligned with our stockholders' interests in a manner that drives better performance over time. As part of IAC, each ILG executive officer received IAC equity awards on a regular basis.
In setting particular award levels, the predominant objectives included and continue to include providing the person with effective retention incentives, appropriate reward for past performance and incentives for strong future performance. Appropriate levels to meet these goals may vary from year to year, and from individual to individual, based on a variety of factors.
The annual corporate performance factors relevant to setting bonus amounts that were discussed above, while taken into account, are generally less relevant in setting annual equity awards, as the awards tend to be more forward-looking, and are a longer-term retention and reward instrument than annual bonuses.
Prior to the spin-off, awards to the CEO were determined by IAC. Additionally, IAC established a pool for annual equity awards which the CEO allocated to ILG's employees, including the executive
officers, subject to IAC's approval. In establishing the equity pool for ILG, IAC took into account historical practices, its view of market compensation generally, the dilutive impact of equity grants across IAC, and other relevant factors. Additionally, IAC approved any equity grants recommended to be made to ILG executives outside of the annual process. Executive officers received grants that were subjectively determined based on the CEO's view, with input from executive management, of how best to allocate the equity pool for retention, reward and motivation based on a host of subjective factors, including past contribution, retention risk, contribution potential, and market data.
Except where otherwise noted, equity awards are made following year-end after financial results for the prior year have been finalized. The meeting of the compensation and human resources committee of the IAC Board at which the awards are made is generally scheduled months in advance and without regard to the timing of the release of earnings or other material information.
Restricted Stock Units. IAC used restricted stock units, or RSUs, as its exclusive equity compensation tool for ILG executive officers. Through 2006, these awards generally vested in equal annual installments over five years (annual-vesting RSUs), or cliff vested at the end of five years (cliff-vesting RSUs). Annual awards were intended to provide frequent rewards and near-term retention incentives, while cliff-vesting RSUs provided more of a long-term retention mechanism.
In February 2007, IAC implemented a new equity instrument, Growth Shares, which were RSU grants that cliff vest at the end of three years in varying amounts depending upon growth in IAC's publicly reported metric, Adjusted Earnings Per Share, with certain modifications.
These awards were introduced throughout IAC to more closely link long-term reward with IAC's overall performance and to provide greater retentive effect by providing the opportunity to earn greater amounts through increased IAC performance. However, in connection with the spin-off, these awards were converted into three-year cliff-vesting awards at the "target" value (or 50% of the shares actually granted), without variability based on performance. This conversion was based on the recognition that the primary motivation for the Growth Share grants related to incentives to focus on the total performance of the IAC conglomerate, and therefore following the spin-offs that motivation no longer existed.
2007. In February of 2007, our executive officers generally received a mix of Growth Shares and annual-vesting RSUs. Mr. Nash and Ms. Marbert received larger grants than ILG's other executive officers due to their senior positions as CEO and COO of ILG.
Mr. Nash received an award of Growth Shares and annual-vesting RSUs as part of the annual grant process, and then in connection with his entering into a new employment agreement in July, Mr. Nash received two additional RSU grants, each cliff vesting at the end of four years. One award was for 100,000 IAC RSUs and the other was for up to 75,000 IAC RSUs, with the actual amount to vest dependent on growth in ILG over the period, however, this performance-based award was cancelled at the time of the spin-off pursuant to the New Nash Employment Agreement. These awards were determined by negotiation with IAC.
2008. In February 2008, Ms. Marbert received 20,000 IAC RSUs, Ms. Kincke and Mr. Galea each received 6,000 IAC RSUs and Ms. Lee received 4,800 IAC RSUs. These grants vest pro rata over five years and were larger than those of prior years principally because the overall ILG equity pool was larger than in the past. The larger pool resulted from IAC's determination that key ILG employees had smaller equity holdings than did comparable individuals at other IAC companies.
Additionally, under the New Nash Employment Agreement and the New Marbert Employment Agreement, Mr. Nash and Ms. Marbert received ILG RSU grants at the time of the spin-off worth $8 million and $2 million, respectively, with 75% of the award vesting annually over four years and 25% of the award vesting at the end of four years. These amounts were negotiated between IAC and Mr. Nash, and were given in contemplation of, and become effective upon, the spin-off. Pursuant to his agreement, Mr. Harvey received ILG RSU grants worth $750,000 at the time of the spin-off. All of the RSUs granted in connection with the spin-off are subject to meeting at least one of the following performance targets: a specified average membership count during August 2009, closing stock price of more than 5% above the price on the effective date of the spin-off for at least 30 days during the 12 months after the spin-off, consolidated revenue for any of the four fiscal quarters beginning July 1, 2008 are at least flat year over year, specified number of exchange and getaway transactions divided by the average membership base during August 2009, or specified average revenue per member for the twelve months ending June 30, 2009. The consolidated revenue target has been met, so these awards will vest as described above.
ILG believes that providing executives with severance and change of control protection is critical to allowing executives to fully value the forward-looking elements of their compensation packages, and therefore limit retention risk during uncertain times. Accordingly, ILG employment arrangements and equity awards generally provide for salary continuation in the event of certain employment terminations beyond the control of the executive, as well as varying degrees of accelerated vesting in the event of a change of control of ILG. These arrangements were entered into prior to the spin-off.
Under other limited circumstances, ILG executive officers have received non-cash and non-equity compensatory benefits. The values of these benefits are reported under the heading "Other Annual Compensation" in this filing pursuant to applicable rules. The executive officers do not participate in any deferred compensation or retirement program other than IAC's 401(k) plan, and since January 2009, ILG's 401(k) plan.
IAC's practice has been to structure ILG's compensation program in such a manner so that the compensation is deductible by IAC for federal income tax purposes and our compensation committee intends to continue this policy. However, because ILG executive officers became subject to the limitations on deductibility under Section 162(m) of the Internal Revenue Code of 1986, as amended, as a result of the spin-off, certain compensatory arrangements established prior to the spin-off but that will be paid following the spin-off may not result in deductible compensation for ILG.
Effect of the Spin-Off on Executive Compensation
Upon completion of the spin-off, the New Nash Employment Agreement and the New Marbert Employment Agreement described above became effective. Also, the ILG RSU grants described in those agreements and in Mr. Harvey's agreement were granted based on the ILG stock price at spin-off of $14.12.
The following table reflects the effect of various spin-off adjustments on the IAC equity awards (shown in IAC RSUs) then held by ILG's named executive officers:
For more information see "Grants of Plan Based Awards for Fiscal Year 2008" and "Stock Vested For Fiscal Year 2008" below.
Executive Compensation after the Spin-off
Now that ILG is a public company, our compensation committee is introducing a new compensation program beginning in 2009, as summarized below.
The total compensation program at ILG will consist of base salary, annual cash incentive, long-term incentives, benefits and perquisites. The program is designed to attract, reward, motivate, and retain top executives and to provide appropriate incentives for achieving ILG's goals and objectives. A significant portion of each executive's pay will be based on corporate performance. The total compensation opportunities at target levels of performance will be provided near the median of the market, with individual differentiation to reflect executive experience, performance, internal equity, and unique customer relationships that may be difficult to replace.
Compensation Consultant. Hewitt Associates has been engaged as a compensation consultant. Hewitt is providing annual market and other specific information on executive pay and attends compensation committee meetings at the request of the committee. Our compensation committee periodically meets in executive session with Hewitt. Hewitt also will serve as a consultant to the nominating committee on director compensation.
Peer Groups. In early 2009, our compensation committee conducted, with the assistance of Hewitt, a benchmarking study of compensation levels and design practices for the top executive positions. The analysis compared ILG to two different groups:
Our compensation committee believes that the hospitality industry group should be the primary reference point for the top executives, while the general industry group is more relevant as a secondary reference and for lower levels within the organization.
Base Salary Based upon the results of the benchmarking and the uncertain economic environment, no salary increases are planned for executives during 2009.
Short and Long-Term Incentives. Our compensation committee is introducing new incentive arrangements effective in 2009. These arrangements will include a new annual incentive program and a new long-term incentive program, both of which are being implemented under our 2008 Stock and Annual Incentive Plan, approved by our shareholder in 2008. While the new programs are reflective of those in place at the peer companies, they are tailored to meet ILG's business objectives and environment.
The annual incentive program provides for a cash payment in an amount based upon each executive's target short-term incentive opportunity, ILG financial performance, and, for some executives, individual performance. For 2009, ILG's financial performance for purposes of the annual incentive program will be measured using EBITDA. Corporate executives will be measured on ILG's consolidated EBITDA performance. EBITDA was selected as the performance measure because it best reflects the financial focus of ILG. For this purpose EBITDA is defined as net income excluding, if applicable: (1) non-cash compensation expense, (2) depreciation expense, (3) amortization expense, (4) goodwill and asset impairments, (5) income tax provision, (6) minority interest in income of consolidated subsidiaries, (7) interest income and interest expense, (8) other non-operating income and expense, (9) one time charges and (10) amounts accrued for bonus payments.
The long-term incentive program will consist of two components: annual RSUs and cliff vested performance RSUs. Equity-based incentives will be important to increase alignment of executive's interests with shareholders and to increase executive stock ownership.
For 2009, 75% of the total long-term incentive opportunity will be delivered through annual RSUs and 25% will be delivered through cliff vested performance RSUs. This allocation reflects the compensation committee's view that time-vested awards can achieve the goal of aligning executive's and shareholders' interests, while mitigating the impact that the current unpredictable economic environment has on ILG's and our executive's ability to meet performance targets. The annual RSUs will vest 25% each year with full vesting occurring four years after the date of grant, subject to initial performance conditions related to specified operating metrics. The cliff vested performance RSUs will consist of RSUs that can be earned initially based on achievement of a targeted level of EBITDA (defined as above but without excluding item 10) performance for 2009. If target levels of performance are achieved, the target performance shares will be earned. If higher levels of performance are achieved, additional shares will be earned. If lower levels of performance are achieved, fewer shares will be earned. If minimum performance levels are not achieved, no performance shares will be earned. Any shares that are earned based on 2009 EBITDA performance will vest on the third anniversary of the grant date. If the executive leaves the organization prior to the vesting, the cliff vested performance RSUs will be forfeited.
Payment of 2008 Bonus Awards. In early 2009, our compensation committee approved the bonus payouts to executives. As previously noted, each of Mr. Nash, Ms. Marbert, Mr. Galea and Ms. Kincke had been guaranteed minimum payouts for 2008 performance, based on their significant contribution related to the spin-off. The approved payout for each of these executives was at the guaranteed minimum amount. Each of Mr. Harvey and Ms. Lee received discretionary bonus payments based on targets discussed above, which in the case of Mr. Harvey was pro-rated for his partial year of service. The actual payments were less than these targets based on the compensation committee's consideration of corporate and individual performance, with input from the chief executive officer and with respect to Ms. Lee, the chief operating officer.
Compensation and Human Resources Committee Report
The compensation and human resources committee reviewed and discussed the compensation discussion and analysis for the year ended December 31, 2008 with ILG's management. Based on the review and discussions with management, the compensation and human resources committee recommended to the board of directors that the compensation discussion and analysis be included in ILG's Annual Report on Form 10-K and this proxy statement.
Compensation and Human Resources Committee
The following table sets forth information concerning the total compensation received for services rendered to ILG and its subsidiaries during 2007 and 2008 by our chief executive officer, chief financial officer, the chief financial officer of our operating businesses prior to their contribution to ILG in connection with the spin-off in August 2008 and our three other most highly compensated executive officers for 2008, all of whom are referred to in this proxy statement as named executive officers.
The amounts and forms of compensation reported below do not necessarily reflect the compensation these persons will receive in the future, which could be higher or lower, because historical compensation was determined by IAC. Future compensation levels will be determined based on the compensation policies, programs and procedures established by our compensation committee.
Craig M. Nash. Mr. Nash entered into a new employment agreement that was effective upon the spin-off. Under this agreement, Mr. Nash receives a base salary of $750,000 and is entitled to receive a discretionary annual bonus with a target of 100% of base salary and a minimum bonus of $250,000 in the event certain EBITDA targets to be established annually by the compensation and human resources committee are achieved, provided that a bonus equal to 100% of base salary was guaranteed for 2008. The agreement also provided for the grant of RSUs worth $8 million at the time of the spin-off, of which 75% vest annually over four years and 25% vest at the end of four years.
Jeanette E. Marbert. Ms. Marbert entered into a new employment agreement that was effective upon the spin-off. Under this agreement, Ms. Marbert receives a base salary of $400,000 and is entitled to receive a discretionary annual bonus, with a target of 100% of base salary. ILG guaranteed the target bonus for 2008. The agreement also provided for the grant of RSUs worth $2 million at the time of the spin-off, of which 75% vest annually over four years and 25% vest at the end of four years.
William L. Harvey. Mr. Harvey entered into an employment agreement providing for an initial base salary of $325,000, and a discretionary bonus with a target of 75% of salary to be pro-rated for 2008. The agreement also provided for a grant of RSUs worth $750,000 at the time of the spin-off, which vest annually over four years.
John A. Galea. In July 2008, Mr. Galea entered into a severance agreement with ILG providing for severance payments equal to 12 months of his base salary upon a termination by ILG other than for death, disability or cause. In addition, ILG guaranteed Mr. Galea's 2008 bonus at 40% of salary.
Victoria J. Kincke. In July 2008, Ms. Kincke entered into a severance agreement with ILG providing for severance payments equal to 12 months of her base salary upon a termination by ILG other than for death, disability or cause. In addition, ILG guaranteed Ms. Kincke's 2008 bonus at 40% of salary.
Marie A. Lee. In July 2008, Ms. Lee entered into a severance agreement with ILG providing for severance payments equal to 6 months of her base salary upon a termination by ILG other than for death, disability or cause.
2008 Stock and Annual Incentive Plan
In August 2008, ILG's board of directors adopted and its stockholder approved ILG's 2008 Stock and Annual Incentive Plan, which was amended and restated in December 2008 to incorporate certain changes to comply with recent changes in applicable tax laws. The purpose of the plan is to assist ILG in attracting, retaining and motivating officers and employees, and to provide ILG with the ability to provide incentives more directly linked to the profitability of our businesses and increases in stockholder value. In addition, the plan provides for the assumption of awards pursuant to the adjustment of awards granted prior to the spin-off under the plans of IAC and its subsidiaries. The plan provides for a variety of awards, including incentive or nonqualified stock options, restricted shares, restricted stock units, performance units, appreciation rights, bonus awards or any combination of the foregoing. The plan is administered by the compensation and human resources committee, or such other committee as the ILG's board of directors shall designate, which has the authority to determine the terms, conditions and restrictions applicable to each award.
In the event of a change of control (as defined in the Stock and Annual Incentive Plan), the committee will have the discretion to determine the treatment of awards granted under the Stock and Annual Incentive Plan, including providing for the acceleration of such awards upon the occurrence of the change of control and/or upon a qualifying termination of employment (e.g., without cause or for good reason) following the change of control.
Bonus awards granted to eligible employees of ILG and its subsidiaries and affiliates under the Stock and Annual Incentive Plan will be based upon the attainment of the performance goals established by the committee for the plan year or such shorter performance period as may be established by the committee. Bonus amounts earned by any individual will be limited to $10 million for any plan year, pro rated (if so determined by the committee) for any shorter performance period. Bonus amounts will be paid in cash or, in the discretion of ILG, in ILG common stock, as soon as practicable following the end of the plan year. The committee may reduce or eliminate a participant's bonus award in any year notwithstanding the achievement of performance goals. In the case of performance-based awards that are intended to qualify under Section 162(m)(4) of the Internal Revenue Code of 1986, as amended, performance goals will be based on the attainment of one or any combination of the following: specified levels of earnings per share from continuing operations, net profit after tax, EBITDA, EBITA, gross profit, cash generation, unit volume, market share, sales, asset quality, earnings per share, operating income, revenues, return on assets, return on operating assets, return on equity, profits, total shareholder return (measured in terms of stock price appreciation and/or dividend growth), cost saving levels, marketing-spending efficiency, core non-interest income, change in working capital, return on capital and/or stock price, with respect to ILG or any subsidiary, division or department of ILG. Such performance goals also may be based upon the attaining of specified levels of ILG, subsidiary, affiliate or divisional performance under one or more of the measures described above relative to the performance of other entities, divisions or subsidiaries.
401(k) Plan and Trust
ILG has established a 401(k) plan for our employees that is intended to qualify under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. Generally, all employees are eligible to participate in the 401(k) plan from their start of service. Eligible employees electing to participate in the 401(k) plan may defer from one percent of their compensation up to the statutorily prescribed limit, on a pre-tax basis, by making a contribution to the plan. Prior to March 1, 2009, ILG made discretionary matching contributions equal to 50% of each participant's contribution of up to 6% of the participant's salary, not to exceed 3% of the participant's compensation. Employer matching contributions vest after two years of service.
The following table sets forth information with respect to the grants of plan-based awards to the named executive officers during the year ended December 31, 2008. All awards granted prior to August 20, 2008 were originally denominated in IAC shares, but were converted to ILG shares in connection with the spin-off. The share amounts below are all listed as ILG shares.
As mentioned above, in connection with the spin-off a number of existing IAC RSUs were adjusted to become RSUs in ILG, IAC and the other Spincos (HSN, Ticketmaster and Tree.com). The following table sets forth for each of the named executive officers the number of such RSUs in IAC and each other Spinco and the aggregate market value as of the date of the spin-off, August 20, 2008. Note that the closing stock prices as of that date were: IAC - $15.36, HSN - $12.61, Ticketmaster - $21.64 and Tree.com - $7.42.
The following table sets forth information with respect to the value of restricted stock units held by the named executive officers on December 31, 2008, based on the closing price for ILG shares of $5.39 on The NASDAQ Stock Market on that date.
RSUs that vested or are scheduled to vest in each of the fiscal years ending December 31, 2009, 2010, 2011, 2012 and 2013.
The awards were converted into RSUs with respect to ILG stock in connection with the spin-off and any amounts that would otherwise vest on or before February 28, 2009 were accelerated.
The following table sets forth information with respect to the value to the named executive officers of restricted stock units that vested during 2008, based on the closing price of $14.12 for ILG shares on The NASDAQ Stock Market on the applicable vesting date, August 20, 2008, which does not reflect the current value. In 2008, none of the named executive officers had any options.
ILG does not offer a pension plan.
ILG does not have a deferred compensation plan for executive officers.
Potential Payments Upon Termination or Change in Control
Pursuant to the terms of ILG's equity compensation plans and the award agreements thereunder, upon a change of control as defined in the executive's employment agreement, or if the executive does not have an employment agreement, as defined in the relevant plan, the named executive officers are generally entitled to accelerated vesting of (i) equity awards made prior to 2006 and (ii) equity awards made thereafter if, following such change in control, their employment is terminated by ILG for any reason other than death, disability or cause (as defined in the relevant employment agreement), or by the executive for good reason (as defined in the relevant employment agreement or plan document) (a "Qualifying Termination"). Additionally, under the 2008 Nash Employment Agreement, the 2008 Marbert Employment Agreement and Mr. Harvey's employment agreement, Mr. Nash, Ms. Marbert and Mr. Harvey will be entitled to two-years forward vesting of the RSUs granted under those agreements (including with respect to Mr. Nash and Ms. Marbert, pro ration two years forward on the cliff vesting portions of those awards). In addition, the 2008 Nash Employment Agreement contains a provision requiring ILG to gross-up payments that are subject to an excise tax imposed by Section 4999 of the Internal Revenue Code, provided that, in the event the payment triggering the gross-up provision is no more than 110% of the base amount times 2.99 (referred to as the safe harbor amount), instead of a gross-up, the amounts payable shall be reduced to the safe harbor amount.
Cash. Upon a Qualifying Termination, ILG executive officers are entitled to salary continuation of, with respect to Mr. Nash and Ms. Marbert, twenty-four months, with respect to Mr. Galea and Ms. Kincke, 12 months, with respect to Ms. Lee, 6 months and with respect to Mr. Harvey, 6 months, or if the Qualifying Termination occurs after June 30, 2009, 12 months. Additionally, under the 2008 Nash Employment Agreement and 2008 Marbert Employment Agreement, Mr. Nash and Ms. Marbert are entitled to pro rated portions of the bonus they would otherwise earn during the year in which the Qualifying Termination occurs, payable at the time such bonus would otherwise be determined.
Equity. Upon a Qualifying Termination, Mr. Nash and Ms. Marbert will receive two-year's forward vesting and Mr. Harvey will receive forward vesting for the period of his salary continuation, of their RSUs granted under those agreements (including for Mr. Nash and Ms. Marbert pro ration two years forward on the cliff vesting portions of those awards).
Obligations. The amounts payable upon a Qualifying Termination are all subject to the execution of a general release and to compliance with confidentiality, non-compete, non-solicitation of employees and non-solicitation of customer covenants set forth in the relevant employment agreements. Salary continuation payments will be offset by the amount of any compensation earned by an executive from other employment during the severance payment period.
The amounts shown in the table assume that the termination or change in control was effective as of December 31, 2008 and that the price of ILG common stock on which certain calculations are based was the closing price of $5.39 on The NASDAQ Stock Market on that date. These amounts are estimates of the incremental amounts that would have been paid out to the executive upon such terminations/change in control, and do not take into account equity grants made, and contractual
obligations entered into, after December 31, 2008. The actual amounts to be paid out can only be determined at the time the event actually occurs.
The following table sets forth certain information regarding the beneficial ownership of ILG common stock as of April 20, 2009, except as otherwise disclosed in the notes below, by:
Unless otherwise indicated, beneficial owners listed here may be contacted at ILG's corporate headquarters at 6262 Sunset Drive, Miami, FL 33143. Except as otherwise described in the notes below,
the following beneficial owners have sole voting power and sole investment power with respect to all common shares set forth opposite their respective names:
Schedule 13G, Arrow Capital Management, LLC, has shared voting power of 1,399,014 shares and shared dispositive power over 4,049,480 shares, including options to purchase up to 764,435 shares of ILG common stock. Other members of the group include Arrow Partners LP, Arrow Offshore, Ltd., Alexandre von Furstenberg, Mal Serure, Barry Diller and Diane von Furstenberg.
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and owners of more than 10% of a registered class of ILG's equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common shares and other equity securities of ILG. Executive officers, directors and owners of more than 10% of the common shares are required by SEC regulations to furnish ILG with copies of all forms they file pursuant to Section 16(a).
To our knowledge, based solely on review of the copies of such reports furnished to ILG and written representations that no other reports were required, during the fiscal year ended December 31, 2008, all Section 16(a) filing requirements applicable to its executive officers, directors and greater than 10% beneficial owners were complied with.
In accordance with its written charter adopted by the board of directors, the audit committee assists the board of directors in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of ILG.
The audit committee reviewed and discussed the audited consolidated financial statements of ILG for the year ended December 31, 2008 with management and the independent registered public accountants. Management has the responsibility for the preparation of ILG's consolidated financial statements, and for determining that the financial statements are complete and accurate and in accordance with U.S. generally accepted accounting principles. ILG's independent registered public accountants are responsible for planning and conducting audits for the examination of those consolidated financial statements.
The audit committee obtained the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board and discussed with the independent registered public accountants any relationships that may impact their objectivity and independence. The audit committee also reviewed and discussed with the independent registered public accountants all communications required by the Public Company Accounting Oversight Board standards, including those described in Statement on Auditing Standards No. 61, as amended, "Communication with Audit Committees," and reviewed and discussed the results of the independent registered public accountants' audit of the financial statements.
Based on the above-described review and discussions with management and the independent registered public accountants, the audit committee recommended to the board of directors that ILG's audited consolidated financial statements be included in its Annual Report on Form 10-K for the year ended December 31, 2008.
Transactions with Related Persons
ILG has adopted a written policy for the review of transactions with related persons by the audit committee of the board of directors. The policy requires review, approval or ratification of transactions exceeding $120,000 in which ILG is a participant and in which an ILG director, executive officer, a significant stockholder or an immediate family member of any of the foregoing persons has a direct or indirect material interest. The audit committee determines whether these transactions are in, or not inconsistent with, the best interests of ILG and its stockholders, taking into consideration whether they are on terms no less favorable to ILG than those available with other parties and the related person's interest in the transaction. The relationships and related party transactions described below were entered into prior to or in connection with ILG's spin-off from IAC/Interactive in August 2008. The terms "related person" and "transaction" have the meanings set forth in Item 404(a) of Regulations S-K under the Securities Act.
Agreements with Liberty Media Corporation
In May 2008, in connection with the settlement of litigation relating to the proposed spin-offs, IAC entered into a "Spinco Agreement" with Liberty Media Corporation, or Liberty, and affiliates of Liberty that hold shares of IAC common stock and/or Class B common stock (together with Liberty, the "Liberty Parties"), among others. At the time of the spin-offs, ILG and each of HSN, Inc., Ticketmaster Entertainment, Inc. and Tree.com, Inc., the other entities that were spun off from IAC in August 2008 (each a "Spinco") assumed from IAC all of those rights and obligations under the Spinco Agreement providing for post-spin-off governance arrangements at the Spincos. As of April 20, 2009, Liberty beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) 16,643,958 shares or 29.6% of ILG common stock. The following summary describes the material terms of those governance arrangements and related matters and is qualified by reference to the full Spinco Agreement, which previously have been filed with the SEC. As required by the Spinco Agreement, ILG entered into a registration rights agreement with the Liberty Parties at the time of the spin-off, as described below.
Representation of Liberty on the Spinco Boards of Directors
The Spinco Agreement generally provides that so long as Liberty beneficially owns securities of ILG representing at least 20% of the total voting power of ILG's equity securities, Liberty has the right to nominate up to 20% of the directors serving on ILG's board of directors (rounded up to the nearest whole number). Any director nominated by Liberty must be reasonably acceptable to a majority of the directors on ILG's Board who were not nominated by Liberty. All but one of Liberty's nominees serving on ILG's board of directors must qualify as "independent" under applicable stock exchange rules. In addition, the nominating and/or governance committee of the ILG Board may include only "Qualified Directors," namely directors other than any who were nominated by Liberty, are officers or employees of ILG or were not nominated by the nominating and/or governance committee of the ILG Board in their initial election to the board and for whose election any Liberty Party voted shares.
Until August 2010, the Liberty Parties agreed to vote all of the equity securities of ILG beneficially owned by them in favor of the election of the full slate of director nominees recommended to stockholders by the ILG board of directors so long as the slate includes the director-candidates that Liberty has the right to nominate.
The Liberty Parties have agreed in the Spinco Agreement not to acquire beneficial ownership of any equity securities of ILG (with specified exceptions) unless:
The "Applicable Percentage" initially is Liberty's ownership percentage of ILG upon the spin-off, based on voting power (approximately 29.6%), plus 5%, but in no event more than 35%. Following the spin-off, the Applicable Percentage will be reduced for specified transfers of equity securities of ILG by the Liberty Parties. During the first two years following the spin-off, acquisitions by the Liberty Parties are further limited to specified extraordinary transactions and, otherwise, to acquisitions representing no more than one-third of the ILG common stock received by the Liberty Parties in the spin-off.
Until August 2010, unless a majority of the Qualified Directors consent or to the extent permitted by the provisions described under "Acquisition Restrictions" or "Competing Offers" or in certain other limited circumstances, no Liberty Party may:
Unless a majority of the Qualified Directors consent, the Spinco Agreement prohibits transfers by the Liberty Parties of any equity securities of ILG to any person except for certain transfers, including:
ownership percentage (based on voting power) of ILG's equity securities, giving effect to the transfer, would exceed 15%;
During the first two years following the spin-off, transfers otherwise permitted by the first and third bullets above will be prohibited, and transfers otherwise permitted by the fourth and sixth bullets above in respect of which IAC and ILG do not make certain determinations with respect to the transferee will be prohibited, unless such transfers represent no more than one-third of the ILG common stock received by the Liberty Parties in the spin-off.
During the period when Liberty continues to have the right to nominate directors to ILG's board of directors, if the ILG's board of directors determines to pursue certain types of transactions on a negotiated basis (either through an "auction" or with a single bidder), Liberty is granted certain rights to compete with the bidder or bidders, including the right to receive certain notices and information, subject to specified conditions and limitations. In connection with any such transaction that ILG is negotiating with a single bidder, ILG's board must consider any offer for a transaction made in good faith by Liberty but is not obligated to accept any such offer or to enter into negotiations with Liberty.
If a third party (i) commences a tender or exchange offer for at least 35% of the capital stock of ILG other than pursuant to an agreement with ILG or (ii) publicly discloses that its ownership percentage (based on voting power) exceeds 20% and ILG's Board fails to take certain actions to block such third party from acquiring an ownership percentage of ILG (based on voting power) exceeding the Applicable Percentage, the Liberty Parties generally will be relieved of the obligations described under "Standstill Restrictions" and "Acquisition Restrictions" above to the extent reasonably necessary to permit Liberty to commence and consummate a competing offer. If Liberty's ownership percentage (based on voting power) as a result of the consummation of a competing offer in response to a tender or exchange offer described in (i) above exceeds 50%, any consent or approval requirements of the Qualified Directors in the Spinco Agreement will be terminated, and, following the later of the second anniversary of the spin-off and the date that Liberty's ownership percentage (based on voting power) exceeds 50%, the obligations described under "Acquisition Restrictions" will be terminated.
Amendments to the Spinco Agreement and determinations required to be made thereunder (including approval of transactions between a Liberty Party and ILG that would be reportable under the proxy rules) will require the approval of the Qualified Directors.
Registration Rights Agreement
As indicated above under "Spinco Agreement," ILG granted to Liberty the registration rights described below at the time of the spin-off.
Under the registration rights agreement, the Liberty Parties and their permitted transferees (the "Holders") are entitled to three demand registration rights (and unlimited piggyback registration rights) in respect of the shares of ILG common stock received by the Liberty Parties as a result of the spin-off and other shares of ILG common stock acquired by the Liberty Parties consistent with the Spinco Agreement (collectively, the "Registrable Shares"). The Holders are permitted to exercise their registration rights in connection with certain hedging transactions that they may enter into in respect of the Registrable Shares.
ILG is obligated to indemnify the Holders, and each selling Holder is obligated to indemnify the Spinco, against specified liabilities in connection with misstatements or omissions in any registration statement.
Relationships Among ILG, IAC and the Spincos
Following the spin-offs, the relationships among IAC, ILG and the other Spincos are governed by a number of agreements. These agreements include, among others:
The summaries of each such agreement are qualified by reference to the full text of the applicable agreement which were previously filed with the SEC.
Separation and Distribution Agreement
The Separation and Distribution Agreement sets forth the arrangements among IAC, ILG and each of the other Spincos regarding the principal transactions that were necessary to separate ILG and each of the other Spincos from IAC, as well as governs certain aspects of the relationship of ILG with IAC and other Spincos after the completion of the spin-offs.
ILG and each other Spinco agreed to indemnify, defend and hold harmless (and to cause the other members of its respective group to indemnify, defend and hold harmless), under the Separation and Distribution Agreement, IAC and each of the other Spincos, and each of their respective current and former directors, officers and employees, from and against any losses arising out of any breach by such indemnifying companies of the Spin-Off Agreements, any failure by such indemnifying company to assume and perform any of the liabilities allocated to such company and any liabilities relating to the indemnifying company's financial and business information included in filings made with the SEC in connection with the spin-offs. IAC agrees to indemnify, defend and hold harmless ILG and each of the other Spincos, and each of their respective current and former directors, officers and employees, from and against losses arising out of any breach by IAC of the Spin-Off Agreements, and any failure by IAC to perform its obligations under the Separation and Distribution Agreement or any Spin-Off Agreement.
In addition, the Separation and Distribution Agreement also governs insurance and related reimbursement arrangements, provision and retention of records, access to information and confidentiality, cooperation with respect to governmental filings and third party consents and access to property.
Tax Sharing Agreement
The Tax Sharing Agreement governs the respective rights, responsibilities and obligations of IAC, ILG and each other Spinco after the spin-off with respect to taxes for periods ending on or before the spin-off. In general, pursuant to the Tax Sharing Agreement, IAC will prepare and file the consolidated federal income tax return, and any other tax returns that include IAC (or any of its subsidiaries) and ILG (or any of its subsidiaries) for all taxable periods ending on or prior to, or including, the distribution date of ILG with the appropriate tax authorities, and, except as otherwise set forth below, IAC will pay any taxes relating thereto to the relevant tax authority (including any taxes attributable to an audit adjustment with respect to such returns; provided that IAC will not be responsible for audit adjustments relating to the business of ILG (or any of its subsidiaries) with respect to pre-spin off periods if ILG fails to fully cooperate with IAC in the conduct of such audit). ILG will prepare and file all tax returns that include solely ILG and/or its subsidiaries and any separate company tax returns for ILG and/or its subsidiaries for all taxable periods ending on or prior to, or including, the distribution date of ILG, and will pay all taxes due with respect to such tax returns (including any taxes attributable to an audit adjustment with respect to such returns). In the event an adjustment with respect to a pre-spin off period for which IAC is responsible results in a tax benefit to ILG in a post-spin off period, ILG will be required to pay such tax benefit to IAC. In general, IAC controls all audits and administrative matters and other tax proceedings relating to the consolidated federal income tax return of the IAC group and any other tax returns for which the IAC group is responsible.
Under the Tax Sharing Agreement, ILG generally (i) may not take (or fail to take) any action that would cause any representation, information or covenant contained in the separation documents or the documents relating to the IRS private letter ruling and the tax opinion regarding the spin-off to be untrue, (ii) may not take (or fail to take) any other action that would cause the spin-off to lose its tax free status, (iii) may not sell, issue, redeem or otherwise acquire any of its equity securities (or equity securities of members of its group), except in certain specified transactions for a period of 25 months following the spin-off, and (iv) may not, other than in the ordinary course of business, sell or otherwise dispose of a substantial portion of its assets, liquidate, merge or consolidate with any other person for a period of 25 months following the spin-off. During the 25-month period, ILG may take certain actions prohibited by these covenants if (i) it obtains IAC's prior written consent, (ii) it provides IAC with an IRS private letter ruling or an unqualified opinion of tax counsel to the effect that such actions will not affect the tax free nature of the spin-off, in each case satisfactory to IAC in its sole discretion, or (iii) IAC obtains a private letter ruling at ILG's request. In addition, with respect to actions or transactions involving acquisitions of ILG stock entered into at least 18 months after the distribution of ILG, ILG will be permitted to proceed with such transaction if it delivers an unconditional officer's certificate establishing facts evidencing that such acquisition satisfies the requirements of a specified safe harbor set forth in applicable U.S. Treasury Regulations, and IAC, after due diligence, is satisfied with the accuracy of such certification. The other Spincos are generally subject to the same provisions.
Notwithstanding the receipt of any such IRS ruling, tax opinion or officer's certificate, generally ILG and each other Spinco must indemnify IAC and each other Spinco for any taxes and related losses resulting from (i) any act or failure to act by ILG or such Spinco described in the covenants above, (ii) any acquisition of equity securities or assets of ILG or another Spinco or any member of its group, and (iii) any breach by ILG or another Spinco or any member of its group of any representation or covenant contained in the separation documents or the documents relating to the IRS private letter ruling or tax opinion concerning the spin-off of such Spinco.
Under U.S. federal income tax law, IAC, ILG and the other Spincos are severally liable for all of IAC's federal income taxes attributable to periods prior to and including the current taxable year of IAC, which ends on December 31, 2008. Thus, if IAC failed to pay the federal income taxes attributable to it under the Tax Sharing Agreement for periods prior to and including the current taxable year of IAC, ILG and the other Spincos would be severally liable for such taxes. In the event
ILG or another Spinco is required to make a payment in respect of a spin-off related tax liability of the IAC consolidated federal income tax return group under these rules for which such Spinco is not responsible under the Tax Sharing Agreement and full indemnification cannot be obtained from the Spinco responsible for such payment under the Tax Sharing Agreement, IAC will indemnify the Spinco that was required to make the payment from and against the portion of such liability for which full indemnification cannot be obtained from the Spinco responsible for such payment under the Tax Sharing Agreement.
The Tax Sharing Agreement also contains provisions regarding the apportionment of tax attributes of the IAC consolidated federal income tax return group, the allocation of deductions with respect to compensatory equity interests, cooperation, and other customary matters. In general, tax deductions arising by reason of exercises of options to acquire IAC, ILG or other Spinco stock, vesting of "restricted" IAC, ILG or other Spinco stock, or settlement of restricted stock units with respect to IAC, ILG or other Spinco stock held by any person will be claimed by the party that employs such person at the time of exercise, vesting or settlement, as applicable (or in the case of a former employee, the party that last employed such person).
Employee Matters Agreement
The Employee Matters Agreement covers a wide range of compensation and benefit issues related to the spin-offs. In general, under the Employee Matters Agreement:
Following a transition period through the end of 2008 with respect to health and welfare benefits, as of January 1, 2009, ILG no longer participates in IAC's employee benefit plans and has established its own employee benefit plans that are substantially similar to the plans sponsored by IAC prior to the spin-offs. Through the end of 2008, IAC continued to provide health and welfare benefits to employees of ILG and ILG bore the cost of this coverage with respect to its employees. Assets and liabilities from the IAC Retirement Savings Plan relating to ILG employees and former employees were transferred to the newly established Interval International Retirement Savings Plan at the beginning of 2009.
Transition Services Agreement
Pursuant to a Transition Services Agreement among IAC, ILG and the other Spincos, some combination of the following services, among others, were provided on an interim, transitional basis from the completion of the spin-offs are being provided by/to the parties (and/or their respective businesses) as set forth below:
The charges for these services are on a cost plus fixed percentage or agreed upon hourly rate basis. In general, the services provided by/to the parties (and/or their respective businesses) began on the date of the completion of the spin-offs and cover a period generally not expected to exceed 12 months following the spin-offs. Any party may terminate the agreement with respect to one or more particular services being received by it upon such notice as will be provided for in the Transition Services Agreement.
Other Transactions with IAC and its Subsidiaries
Below is a brief description of commercial agreements between ILG and IAC or another Spinco that, individually or together with similar agreements, involve revenues to either IAC or a Spinco in excess of $120,000.
Certain subsidiaries of ILG distribute their respective products and services via arrangements with certain subsidiaries of IAC and/or other Spincos (and vice versa). For example, Interval promotes and distributes ticketing services for certain events, either through advance access or by passing along a deeper discount to its members via a link to the Ticketmaster booking engine. Distribution agreements generally involve the payment of fees (usually on a fixed-per-transaction, revenue sharing or commission basis) from the party seeking distribution of the product or service to the party that is providing the distribution.
Aggregate payments made by ILG subsidiaries to IAC subsidiaries in respect of these agreements were approximately $1.5 million in 2008. Such numbers include payments to and received from Entertainment Publications, Inc., prior to its sale by IAC in May 2008.
Effective upon the completion of the spin-off, IAC ceased to be a related party to ILG. ILG paid a dividend in cash and senior notes issued by a subsidiary of ILG to IAC of $365.9 million and the receivable from IAC totaling $496.0 million was extinguished by recording a non-cash distribution to IAC.
Through August 20, 2008 (the effective date of the spin-off), ILG's expenses included allocations from IAC of costs associated with IAC's accounting, treasury, legal, tax, corporate support, human resources and internal audit functions. These allocations were based on the ratio of ILG's revenue as a percentage of IAC's total revenue. Allocated costs were $0.5 million for the year ended December 31, 2008. The expense allocations from IAC ceased after the spin-off on August 20, 2008.
The portion of interest income reflected in ILG's consolidated statements of income that is intercompany in nature was $8.2 million for the year ended December 31, 2008. This intercompany interest related to the receivables from IAC and ceased upon spin-off on August 20, 2008.
Prior to the spin-off, IAC contributed to ILG all of IAC's rights in $1.0 million that IAC had placed in an escrow account to be used for ILG's purchase of a 1/16 fractional interest in a mid-size business jet. The contribution was settled through the receivable from IAC, with no cash outlay by ILG.
Prior to the spin-off, IAC assigned to ILG 50% of its original 1/8 fractional interest in a mid-size business jet, at book value of $0.2 million. We recorded the fractional interest in fixed assets on our consolidated balance sheet at September 30, 2008. Available hours for this jet commenced in late November 2008.
Certain Other Relationships and Related Person Transactions
From January 1, 2008 through August 20, 2008, an ILG subsidiary made payments to Arise Virtual Solutions in the aggregate amount of approximately $2.8 million for call center services. Arise Virtual Solutions is a related party of IAC, and therefore of ILG prior to the spin-off, because it is a portfolio company of Accretive LLC, of which Mr. Edgar Bronfman, a member of the IAC board of directors, is a partner.
The following table sets forth fees for professional services rendered by Ernst & Young LLP. Fees billed by Ernst & Young LLP to IAC for periods prior to the August 20, 2008 spin-off date are not included below.
Audit Committee Pre-Approval of Independent Accountant Services.
The audit committee pre-approves, on an individual basis, all audit and permissible non-audit services provided by the independent registered public accountants. These services may include audit services, audit-related services, tax services and other services.
Ernst & Young LLP has been selected by the audit committee to serve as ILG's independent registered public accountants for the fiscal year ending December 31, 2009. A representative of Ernst & Young LLP will be present at the annual meeting, will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
ILG is asking its stockholders to ratify the selection of Ernst & Young LLP as ILG's independent registered public accounting firm for the year ending December 31, 2009. Although ratification is not required, the board of directors is submitting the selection of Ernst & Young LLP to its stockholders for ratification as a matter of good corporate governance practices. If the selection is not ratified, the audit committee will consider whether it is appropriate to select another registered public accounting firm. Even if the selection is ratified, the audit committee in its discretion may select a different registered public accounting firm at any time during the fiscal year if it determines that such a change would be in the best interests of ILG and its stockholders.
The board of directors recommends that you vote FOR the proposal to ratify the selection of Ernst & Young LLP as ILG's independent registered public accounting firm for the year ending December 31, 2009.
Management does not know of any other matters which will be presented for action at the meeting. If any other matters shall properly come before the meeting, the persons named in the proxy will vote thereon in accordance with their judgment.
Stockholder Proposals for 2010 Annual Meeting
An eligible stockholder who wishes to have its qualifying stockholder proposal considered for inclusion in our proxy materials for such meeting must send a qualifying stockholder proposal to our Corporate Secretary at our executive offices at the address below no later than January 1, 2010. To qualify as an eligible stockholder with regard to making a stockholder proposal, a stockholder must, among other things, have continuously held at least $2,000 in market value or 1%, of our outstanding capital stock (which stock may have included IAC capital stock for that period prior to our spin-off from IAC) for at least one year by the date of submission of the stockholder proposal, and must continue to own that amount of stock through the date of the annual meeting.
If you want to make a proposal or nominate a director for consideration at next year's Annual Meeting without having the proposal included in our proxy materials, you must comply with the current advance notice provisions and other requirements set forth in our Bylaws. Under our Bylaws, a stockholder may bring a matter to vote upon at an annual meeting by giving adequate notice to our Corporate Secretary. To be adequate, that notice must contain information specified in our Bylaws and be received by us not earlier than February 15, 2010 nor later than 5:00 p.m., Eastern Time, on March 17, 2010. If, however, the date of the annual meeting is advanced or delayed by more than 30 days from June 10, 2010, timely notice by the stockholder must be delivered not later than the 90th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.
If we do not receive your proposal or nomination by the appropriate deadline, then it may not be brought before the 2010 Annual Meeting. The fact that we may not insist upon compliance with these requirements should not be construed as a waiver by our right to do so at any time in the future.
All proposals or nominations should be addressed to Interval Leisure Group, Inc., 6262 Sunset Drive, Miami, Florida 33143, Attention: Corporate Secretary.
The SEC permits a single Notice of Internet Availability of Proxy Materials or set of annual reports and proxy statements to be sent to any household at which two or more stockholders reside if they appear to be members of the same family. Each stockholder continues to receive a separate proxy card. This procedure, referred to as householding, reduces the volume of duplicate information stockholders receive and reduces mailing and printing costs. A number of brokerage firms have instituted householding. Only one copy of our Notice of Internet Availability of Proxy Materials or this proxy statement and the attached annual report will be sent to certain beneficial stockholders who share a single address, unless any stockholder residing at that address gave contrary instructions.
If any beneficiary stockholder residing at such an address desires at this time to receive a separate copy of our Notice of Internet Availability of Proxy Materials or this proxy statement and the attached annual report or if any such stockholder wishes to receive a separate proxy statement and annual report in the future, the stockholder should provide such instructions to ILG by calling ILG Investor Relations, at 305-666-1861x6030, or by writing Interval Leisure Group, Inc., 6262 Sunset Drive, Miami, Florida 33143, Attention: Investor Relations.
Upon written request to the Corporate Secretary, Interval Leisure Group, Inc., 6262 Sunset Drive, Miami, Florida 33143, ILG will provide without charge to each person solicited a copy of ILG's 2008 Annual Report on Form 10-K, including the financial statements and financial statement schedule filed therewith. Copies are also available on our website, www.iilg.com/invest.cfm. ILG will furnish requesting stockholders with any exhibit not contained in its 2008 Annual Report on Form 10-K upon payment of copying costs.
order of the Board of Directors,
Dated: April 27, 2009
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
PROPOSAL 1ELECTION OF DIRECTORS
Information Regarding the Director Nominees
COMPENSATION DISCUSSION AND ANALYSIS
Summary Compensation Table
Grants of Plan-Based Awards for Fiscal Year 2008
Outstanding Equity Awards at Fiscal Year-End for Fiscal Year 2008
Stock Vested for Fiscal Year 2008
Pension Benefits for Fiscal Year 2008
Nonqualified Deferred Compensation for Fiscal Year 2008
Equity Compensation Plan Information
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
AUDIT COMMITTEE REPORT
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS' FEES
PROPOSAL 2RATIFICATION OF THE SELECTION OF ILG'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM