GOVERNANCE OF THE COMPANY
How does the board of directors oversee our risk management process?
The board executes its oversight responsibility for risk management directly and through its committees, as follows:
The Audit Committee has primary responsibility for monitoring our internal audit, corporate, financial and risk management processes and overseeing our system of internal controls and financial reporting. The Audit Committee discusses specific risk areas throughout the year, including those that may arise from time to time and the measures taken by management to monitor and limit risk.
The Audit Committee receives regular reports throughout the year on matters related to risk management. At each regularly scheduled meeting, the Audit Committee receives reports from our (i) external auditor on the status of audit activities and findings and (ii) our executive in charge of internal audit (who reports directly to the Audit Committee) on the status of the internal audit plan, audit results and any corrective action taken in response to internal audit findings.
| | |
| • | The Audit Committee has primary responsibility for monitoring our internal audit, corporate, financial and risk management processes and overseeing our system of internal controls and financial reporting. The Audit Committee discusses specific risk areas throughout the year, including those that may arise from time to time and the measures taken by management to monitor and limit risk. |
|
| • | The Audit Committee receives regular reports throughout the year on matters related to risk management. At each regularly scheduled meeting, the Audit Committee receives reports from our (i) external auditor on the status of audit activities and findings and (ii) our executive in charge of internal audit (who reports directly to the Audit Committee) on the status of the internal audit plan, audit results and any corrective action taken in response to internal audit findings. |
|
| • | We have a Compliance Officer who is in charge of our compliance with FCC related laws and regulations and training and monitoring compliance with those laws and regulations. Our Executive Vice President, General Counsel and Secretary reports to the Audit Committee throughout the year on calls to our compliance hotline and any changes or developments in compliance matters. Each quarter, our Chief Financial Officer reports to the board of directors on our performance and discusses how actual performance compares to our business plan and budget. Our executive officers report regularly to the board about the risks and exposures related to our business. |
|
| • | The other committees of the board of directors oversee risks associated with their respective areas of responsibility. For example, the Compensation Committee assesses risks associated with our compensation policies and programs for executives as well as employees generally. |
|
| • | The committees report to the board of directors at every regular board meeting on the topics discussed and actions taken at the most recent committee meeting. Our board of directors discusses the risks and exposures, if any, involved in the matters or recommendations of the committees, as necessary. |
|
| • | Our board of directors also considers specific risk topics throughout the year, including risks associated with our business plan, operational efficiency, government regulation, physical facilities, information technology infrastructure and capital structure, among many others. The board is informed about and regularly discusses our risk profile, including legal, regulatory and operational risks to our business. |
We have a Compliance Officer who is in charge of our compliance with FCC related laws and regulations and training and monitoring compliance with those laws and regulations. Our Executive Vice President, General Counsel and Secretary reports to the Audit Committee throughout the year on calls to our compliance hotline and any changes or developments in compliance matters. Each quarter, our Chief Financial Officer reports to the board of directors on our performance and discusses how actual performance compares to our business plan and budget. Our executive officers report regularly to the board about the risks and exposures related to our business.
The other committees of the board of directors oversee risks associated with their respective areas of responsibility. For example, the Compensation Committee assesses risks associated with our compensation policies and programs for executives as well as employees generally.
The committees report to the board of directors at every regular board meeting on the topics discussed and actions taken at the most recent committee meeting. Our board of directors discusses the risks and exposures, if any, involved in the matters or recommendations of the committees, as necessary.
Our board of directors also considers specific risk topics throughout the year, including risks associated with our business plan, operational efficiency, government regulation, physical facilities, information technology infrastructure and capital structure, among many others. The board is informed about and regularly discusses our risk profile, including legal, regulatory and operational risks to our business.
What are our policies and procedures for related party transactions?
We have adopted a written policy and written procedures for the review, approval and monitoring of transactions involving the company and “related persons.” For the purposes of the policy, “related persons” include executive officers, directors and director nominees or their immediate family members, or stockholders owning five percent or greater of our common stock.
Our related person transaction policy requires:
that any transaction in which a related person has a material direct or indirect interest and which exceeds $120,000 (such transaction referred to as a “related person” transaction) and any material amendment or modification to a related person transaction, be reviewed and approved or ratified by a committee of the board composed solely of independent directors who are disinterested or by the disinterested members of the board; and
| | |
| • | that any transaction in which a related person has a material direct or indirect interest and which exceeds $120,000 (such transaction referred to as a “related person” transaction) and any material amendment or modification to a related person transaction, be reviewed and approved or ratified by a committee of the board composed solely of independent directors who are disinterested or by the disinterested members of the board; and |
|
| • | that any employment relationship or transaction involving an executive officer and any related compensation must be approved by the Compensation Committee of the board or recommended by the Compensation Committee to the board for its approval. |
18
19
In connection with the review and approval or ratification of a related person transaction, management must:
disclose to the committee or disinterested directors, as applicable, the material terms of the related person transaction, including the approximate dollar value of the amount involved in the transaction, and all the material facts as to the related person’s direct or indirect interest in, or relationship to, the related person transaction;
advise the committee or disinterested directors, as applicable, as to whether the related person transaction complies with the terms of our agreements governing our material outstanding indebtedness that limit or restrict our ability to enter into a related person transaction;
| | |
| • | disclose to the committee or disinterested directors, as applicable, the material terms of the related person transaction, including the approximate dollar value of the amount involved in the transaction, and all the material facts as to the related person’s direct or indirect interest in, or relationship to, the related person transaction; |
|
| • | advise the committee or disinterested directors, as applicable, as to whether the related person transaction complies with the terms of our agreements governing our material outstanding indebtedness that limit or restrict our ability to enter into a related person transaction; |
|
| • | advise the committee or disinterested directors, as applicable, as to whether the related person transaction will be required to be disclosed in our SEC filings. To the extent required to be disclosed, management must ensure that the related person transaction is disclosed in accordance with SEC rules; and |
|
| • | advise the committee or disinterested directors, as applicable, as to whether the related person transaction constitutes a “personal loan” for purposes of Section 402 of the Sarbanes-Oxley Act of 2002. |
advise the committee or disinterested directors, as applicable, as to whether the related person transaction will be required to be disclosed in our SEC filings. To the extent required to be disclosed, management must ensure that the related person transaction is disclosed in accordance with SEC rules; and
advise the committee or disinterested directors, as applicable, as to whether the related person transaction constitutes a “personal loan” for purposes of Section 402 of the Sarbanes-Oxley Act of 2002.
In addition, the related person transaction policy provides that the Compensation Committee, in connection with any approval or ratification of a related person transaction involving a non-employee director or director nominee, should consider whether such transaction would compromise the director or director nominee’s status as an “independent,” “outside,” or “non-employee” director, as applicable, under the rules and regulations of the SEC, NASDAQ and Internal Revenue Code.
In 2010,2011, there were no related party transactions that are required to be disclosed pursuant to the SEC rules and regulations.
Relationship with Liberty Media
In February and March 2009, we entered into several transactions to borrow up to $530 million from Liberty Media Corporation and its affiliates. All of the loans made were repaid during 2009 in cash from the proceeds of notes issued by us and XM.
As part of the transactions with Liberty Media, on February 17, 2009, we entered into an investment agreement (the “Investment Agreement”) with Liberty Radio, LLC, an indirect wholly-owned subsidiary of Liberty Media Corporation. Pursuant to the Investment Agreement, we agreed to issueissued to Liberty Radio, LLC 12,500,000 shares of convertible preferred stock with a liquidation preference of $0.001 per share in partial consideration for the loan investments described herein. The preferred stock was issued on March 6, 2009, as described below. See “Relationship with Liberty Media — Issuance of the Preferred Stock”.
The preferred stock is convertible into approximately 40% of our outstanding shares of common stock (after giving effect to such conversion). Liberty Radio, LLC has agreed not to acquire more than 49.9% of our outstanding common stock for three years from the date the preferred stock was issued, except that Liberty Radio, LLC may acquire more than 49.9% of our outstanding common stock at any time after the second anniversary of such date pursuant to any cash tender offer for all of the outstanding shares of our common stock that are not beneficially owned by Liberty Radio, LLC or its affiliates at a price per share greater than the closing price of the common stock on the trading day preceding the earlier of the public announcement or commencement of such tender offer. The Investment Agreement also provides for certain other standstill provisions during such three year period.
The rights, preferences and privileges of the preferred stock are set forth in the Certificate of Designations of Convertible Perpetual Preferred Stock,Series B-1 (the “Certificate of Designations”), filed with the Secretary of State of the State of Delaware. The holder of our preferred stock is entitled to appoint a proportionate number of our board of directors based on its ownership levels from time to time. The Certificate of Designations also provides that so long as at least 6,250,000 shares ofSeries B-1 Preferred
19
Stock are outstanding, we need the consent of the holder of the
Series B-1 Preferred Stock for certain actions, including:
the grant or issuance of our equity securities;
any merger or consolidation, or any sale of all or substantially all of our assets;
| | |
| • | the grant or issuance of our equity securities; |
|
| • | any merger or consolidation, or any sale of all or substantially all of our assets; |
|
| • | any acquisition or disposition of assets other than in the ordinary course of business above certain thresholds; |
|
| • | the incurrence of debt in amounts greater than a stated threshold; |
|
| • | engaging in a business different than the business currently conducted by us; and |
|
| • | amending our certificate of incorporation or by-laws in a manner that materially adversely affects the holders of the preferred stock. |
any acquisition or disposition of assets other than in the ordinary course of business above certain thresholds;
the incurrence of debt in amounts greater than a stated threshold;
engaging in a business different than the business currently conducted by us; and
20
amending our certificate of incorporation or by-laws in a manner that materially adversely affects the holders of the preferred stock.
The preferred stock, with respect to dividend rights, ranks on parity with our common stock, and with respect to rights on liquidation,winding-up and dissolution, ranks senior to our common stock. Dividends on the preferred stock are payable, on a non-cumulative basis, as and if declared on our common stock, in cash, on an as-converted basis.
Issuance of the Preferred Stock
On March 6, 2009, we issued 1,000,000 shares of ourSeries B-1 Preferred Stock and 11,500,000 nonvoting shares of Convertible Perpetual Preferred Stock,Series B-2 (the“Series B-2 Preferred Stock”) as provided30, 2012, in the Investment Agreement referred to above. All of the shares of ourSeries B-2 Preferred Stock were converted into 11,500,000 shares ofSeries B-1 Preferred Stock on April 21, 2009. The rights, preferences and privileges of the preferred stock are described in the Certificate of Designations. A summary of the terms of the Certificate of Designations is described above. The foregoing description of the Certificate of Designations does not purport to be a complete description of all of the terms of such Certificate of Designations and is qualified in its entirety by referenceresponse to the Certificate of Designations, a copy of which is filed as Exhibit 3.1 to the Current Report onForm 8-K dated March 6, 2009 filedfiling by Liberty Media Corporation with the SecuritiesFederal Communications Commission (the “FCC”) of an application for consent to transfer ofde facto control of Sirius XM, we filed a petition to dismiss or deny such application. Liberty Media’s application was not filed in connection with a transaction between Liberty Media and Exchange Commission.
us.Does SIRIUS XM have corporate governance guidelines and a code of ethics?
Our board of directors adopted theGuidelineswhich set forth a flexible framework within which the board, assisted by its committees, directs our affairs. TheGuidelinescover, among other things, the composition and functions of our board of directors, director independence, management succession and review, committee assignments and selection of new members of our board of directors.
Our board of directors has also adopted aCode of Ethics, which is applicable to all our directors and employees, including our chief executive officer, principal financial officer and principal accounting officer.
OurGuidelinesand theCode of Ethicsare available on our website athttp://investor.siriusxm.comunder “Corporate Governance” and in print to any stockholder who provides a written request for either document to our Corporate Secretary. If we amend or waive any provision of theCode of Ethicswith respect to our directors, chief executive officer, principal financial officer or principal accounting officer, we will post the amendment or waiver at this location on our website.
20
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis, or “CD&A,” describes and analyzes our executive compensation program for our Chief Executive Officer, our Chief Financial Officer and the four other officers named in our Summary Compensation Table for 2011.Table. We refer to these six officers throughout the CD&A and the accompanying tables as our “named executive officers.”
OurThe Compensation Committee is responsible for developing and maintaining compensation programprograms for our named executive officersofficers. The Compensation Committee has strived to design these compensation programs with great care, focusing first and foremost on the incentives that the programs promote. The Compensation Committee is designedkeenly aware of the heightened sensitivity that compensation programs have been subjected to (1)in recent years, particularly with regard to pay packages that could be deemed excessive. In the final analysis, the Compensation Committee believes that our ability to recruit and retain highly qualified and effectivetop executive talent with the skills and experience necessary to enhance stockholder value, (2) provide incentivesis essential to our executiveslong-term success. Accordingly, the Compensation Committee believes it has successfully balanced the sometimes competing obligations to support our corporate strategy and business by rewarding performance that meets our key business objectives, and (3) alignmake decisions which meet the interestsneeds of our executives with the interests of our stockholders.
We achieve these objectives through an executivecompany against various “one-size-fits-all” legislative, regulatory and “best practice” mandates.Our compensation program consistingconsists primarily of three elements: base salary; performance-based annual bonus and long-term equity compensation. We believe that these three elements, when taken together, provide an optimum mix of fixed compensation and short- and long-term incentives, and therefore serve as the most effective means of attracting, retaining and motivating executives with the skills and experience necessary to achieve our business goals and enhance stockholder value.
value, while also avoiding unnecessary or excessive risk-taking.21
At our annual meeting in May 2011, we held an advisory “say on pay” vote on the compensation of our named executive officers. Our stockholders overwhelmingly approved the compensation of our named executive officers, with over 98% of the voting power of our common stock and Series B-1 Preferred Stock, voting together as a single class, present in person or by proxy and entitled to vote on the proposal casting votes in favor of our 2011 say-on-pay resolution. In making compensation decisions for 2011, the Compensation Committee considered the strong support our stockholders expressed for our pay for performance compensation philosophy and therefore did not make changes to the core elements of our compensation programs, except for the addition of a Section 162(m)-compliant bonus plan.
We intend to include an advisory “say on pay” vote on the compensation of our named executive officers every three years. Accordingly, the next such vote will be held at our 2014 annual meeting of stockholders.
Fiscal Year 20102011 Performance Summary
We had a very successful year in 2010 in light2011. In the face of ongoing challenges raised by the U.S. and global economy andincreasing competition for our products, we continued to invest in infrastructure, new products, high-quality programming and our brand. In the face of the prevailing economic conditions,Further, our performance was exceptional.
Our financial results exceeded our projections and were reflected in a
172%12% increase in our
year-over-year stock price.
These results are highlightedThe following highlights our financial and operating results:achieving adjusted EBITDA growth of 17% to over $731 million in 2011;
increasing our revenue by the following:7%; and
increasing our free cash flow by 98% to $416 million, and reducing our long-term debt by over $200 million.
| | |
| • | achieving adjusted EBITDA growth of 35% to over $626 million in 2010; |
|
| • | increasing our 2010 revenue by 13.9% over 2009; |
|
| • | growing average monthly revenue per user (“ARPU”) by 7% as compared to 2009; and |
|
| • | increasing free cash flow by 14% to $210 million despite capital expenditures in 2010 that were $63 million above 2009 levels. |
In addition, 20102011 was marked by key subscriber and content-based achievements and other measures that contributed to our continued growth and success, including:
| | |
| • | increasing our net subscriber additions by over 1.4 million as compared to a loss of approximately 230,000 subscribers in 2009; |
|
| • | reducing our average monthly subscriber churn to 1.9%, down from 2.0% in 2009; |
|
| • | increasing our conversion rate, the percentage of owners and lessees of new vehicles that receive our service and convert to become self-paying subscribers after an initial promotional period, to 46.2% as compared to 45.4% in 2009; |
|
| • | negotiating new long-term programming agreements with Howard Stern and the NFL; |
|
| • | adding compelling content to our service while reducing programming expenses; and |
|
| • | successfully constructing, launching and commissioning of our XM-5 satellite. |
21adding approximately 1.7 million net new subscribers, resulting in a total of nearly 21.9 million subscribers, an increase of over 8% as compared to 2010;
launching SiriusXM 2.0, a technology which expanded our channel lineup to include new music, sports and comedy channels, as well as the debut of SiriusXM Latino, a suite of new Latin channels featuring programming from leading providers of Spanish-language music, sports, news, talk and entertainment; andintroducing our Lynx portable radio, our most advanced radio to date that allows subscribers to pause, rewind, replay and store content.
In this CD&A, we use certain financial performance measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States of America (“Non-GAAP”). These Non-GAAP financial measures include:include adjusted EBITDA; average monthly revenue per subscriber (“ARPU”);EBITDA and free cash flow. We also use in this CD&A subscriber churn, and conversion rate, twoa performance metricsmetric which management uses in measuring our business. We use these Non-GAAP financial measures and other performance metrics to manage our business, set operational goals and, in certain cases, as a basis for determining compensation for our employees. Please refer to the footnotesglossary contained in our Annual Report for the year ended December 31, 20102011 which accompanies this proxy statement for a discussion of such Non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure and a discussion of these other performance metrics.
Fiscal Year 2010 Pay Implications
Performance-Based Discretionary Annual Bonuses. None of our named executive officers or employees is entitled to a guaranteed bonus. Following the end of 2010, the Compensation Committee met to determine whether to exercise its discretion to pay bonuses to our named executive officers with respect to 2010. In making this determination, the Compensation Committee carefully reviewed our performance against various key metrics included in our budget and business plan for 2010, including our efforts to increase subscribers, revenue, adjusted EBITDA, free cash flow and OEM conversion rate and to control subscriber churn and operating expenses.
Following its review of our 2010 performance, which the Compensation Committee determined to be exceptional, the Compensation Committee exercised its discretion and approved a cash bonus pool to be divided among our employees, other than the named executive officers, and approved the individual amounts to be granted to our named executive officers. The actual amount of the bonus paid to each named executive officer was based on a combination of factors, including our 2010 corporate performance, his or her individual contributions and performance in his or her functional areas of responsibility and, with respect to all named executive officers other than himself, upon recommendations made by Mr. Karmazin, our Chief Executive Officer. The amount of Mr. Karmazin’s bonus was approved by the board of directors following a recommendation from the Compensation Committee. The amount of the bonus paid to each named executive officer, and the specific factors taken into consideration in determining such amounts, is set forth below under the heading “Executive Compensation Elements”.
Long-Term Equity Grants. We made a broad-based grant of stock options to our employees in 2010, including Ms. Altman and Mr. Frear, who received options to purchase 1,052,300 shares and 2,244,800 shares, respectively. The specific number of options granted to each of these named executive officers was determined by the Compensation Committee with the assistance of our Chief Executive Officer, as further described under “— Long-Term Incentive Compensation — Process”. In addition, we granted options to purchase 13,163,495 shares to Mr. Donnelly in connection with his entering into an extended employment agreement with us in 2010. There were no other long-term equity grants to any of our other named executive officers in 2010.
Base Salary Increases. Mr. Donnelly’s base salary was increased in connection with his entering into an extended employment agreement in 2010, as described below. In 2010, Mr. Greenstein’s base salary increased from $850,000 to $925,000, and Mr. Meyer’s base salary increased from $950,000 to $1,100,000. These salary increases were negotiated with Messrs. Greenstein and Meyer in 2009 as part of the execution of new employment agreements with each of them. There were no other contractual base salary increases for any of our other named executive officers in 2010.
Employment Agreement with Mr. Donnelly. Consistent with our practice for our other named executive officers, we entered into a new employment agreement with Mr. Donnelly in 2010. The extended agreement, which is described in more detail below under the heading “Potential Payments upon Termination orChange-in-Control — Employment Agreements,” increased Mr. Donnelly’s base salary to $575,000 from $525,000 and provided him with a grant of options to purchase 13,163,495 shares of our common stock at an exercise price of $0.6669 per share (the last sale price of our common stock on the NASDAQ prior to the
22
execution of the agreement), which vests generally over four years, subject to his continued employment. The Compensation Committee determined that the increase in base salary and grant of options was appropriate in light of Mr. Donnelly’s performance and necessary for us to retain and continue to properly incentivize him.
Overall Program Objectives and Processes
We strive to attract, motivate and retain high-quality executives with the skills and experience necessary to achieve our key business goals and enhance stockholder value by providing total compensation that is largely performance-based and competitive with the various markets and industries in which we compete for talent. We strive to provide incentives to align the interests of our executives with those of our stockholders and deliver levels of compensation that we believe are commensurate with performance.
22
We achieve these objectives through three primary compensation elements:
a performance-based discretionary annual bonus that constitutes the short-term incentive element of our program; and
| | |
| • | a base salary; |
|
| • | a performance-based discretionary annual bonus that constitutes the short-term incentive element of our program; and |
|
| • | grants of stock options that constitute the long-term incentive element of our program. |
grants of stock options that constitute the long-term incentive element of our program.
The Compensation Committee believes that this three-part approach is consistent with programs adopted by companies with which we compete for executive talent and best serves the interests of our stockholders. The approach is an effort to meet the requirements of the competitive environment in which we operate, while ensuring that named executive officers are compensated in a manner that advances both the short- and long-term interests of our stockholders.
The Compensation Committee believes that delivering compensation in the form of, or based on the value of, our common stock promotes alignment between executive performance and stockholder interests.interests and avoids unnecessary or excessive risk-taking. Accordingly, the value of our common stock represents a large portion of our executives’ long-term compensation, including through grants of stock options and matching contributions in the form of our common stock under our Sirius XM 401(k) Savings Plan. Compensation for our named executives officers also involves a high proportion of pay that is “at risk” — namely, the discretionary annual bonus and the value of equity-based awards. This “at risk” compensation is used to motivate executivesnamed executive officers to achieve goals and objectives that support our business plan and align executives with the short- and long-term interests of our stockholders.
Processes and Compensation Decisions
The Compensation Committee regularly reviews our compensation practices to assess — in light of current market conditions, the status of our business and development and our financial condition and prospects — whether our existing compensation structure properly advances the near- and long-term interests of our stockholders. In 2011, the Compensation Committee engaged Exequity LLP to assist it in designing a bonus program that would qualify for the performance-based exception contained in Section 162(m) of the Internal Revenue Code. During 2011, Exequity did not provide advice to the Compensation Committee on other compensation-related decisions. Instead, the members of the Compensation Committee relied on their significant experience and informed judgment in making compensation decisions as to base salaries, annual bonuses and long-term incentive awards.
The Compensation Committee does not attempt to set compensation levels for each named executive officer within a particular range related to levels provided by peers. Instead, the Compensation Committee occasionally uses informal market comparisons as one of many factors in making compensation decisions. Other factors considered when making individual executive compensation decisions include individual contribution and performance, reporting structure, historical compensation, internal pay equity, complexity and importance of roles and responsibilities, expected future contributions, leadership and growth potential, and our performance.
In determining compensation element levels, including the annual grants of stock options, if any, for each named executive officer (other than the Chief Executive Officer), the Compensation Committee also consults with and considers the recommendations and input of our Chief Executive Officer.
Total Compensation for Named Executive Officers
The Compensation Committee’s goal is to award compensation that incentivizes our named executive officers to enhance value for our stockholders and is reasonable when all elements of potential compensation are considered. In making decisions with respect to any element of a named executive officer’s compensation, the Compensation Committee considers the officer’s level of responsibility, experience and contributions, and the
23
total compensation that may be awarded to the officer, including salary, annual bonus, long-term incentives, perquisites and other benefits. In addition, the Compensation Committee considers the other benefits to which the officer is entitled under his or her employment agreement, including compensation payable upon termination of employmentemployment. (The named executive officers are employed pursuant to agreements described under “Potential Payments upon Termination orChange-in-Control — Employment Agreements” below.) In making its decisions regarding compensation for 2010, the Compensation Committee reviewed as part of its decision-making process the total compensation potentially payable to, and the benefits accruing to, each named executive officer.
Processes and Compensation Decisions
The Compensation Committee is responsible for developing and maintaining compensation programs for our named executive officers. The Compensation Committee has strived to design these compensation programs with great care, focusing first and foremost on the incentives that the programs promote. The Compensation Committee is keenly aware of the heightened sensitivity that compensation programs have been
23
subjected to in recent years, particularly with regard to pay packages that could be deemed excessive. In the final analysis, the Compensation Committee believes that our ability to recruit and retain top executive talent is essential to our long-term success. We operate in a highly competitive industry and the competition we face is increasing. Accordingly, the Compensation Committee believes it has successfully balanced the sometimes competing obligations to make decisions which meet the needs of our company against various “one-size-fits-all” legislative, regulatory and “best practice” mandates.
The Compensation Committee regularly reviews our compensation practices to assess — in light of current market conditions, the status of our business and development and our financial condition and prospects — whether our existing compensation structure properly advances the near- and long-term interests of our stockholders. The Compensation Committee did not employ a compensation consultant in 2010, relying instead on the significant experience and informed judgment of its members in making executive compensation-related decisions.
The Compensation Committee does not attempt to set compensation levels for each executive within a particular range related to levels provided by peers. Instead, the Compensation Committee occasionally uses informal market comparisons as one of many factors in making compensation decisions. Other factors considered when making individual executive compensation decisions include individual contribution and performance, reporting structure, historical compensation, internal pay relationship, complexity and importance of roles and responsibilities, leadership and growth potential.
In determining compensation element levels, including the annual grants of stock options, for each named executive officer (other than the Chief Executive Officer); the Compensation Committee also consults with and considers the recommendations and input of our Chief Executive Officer.
The Compensation Committee expects to review our compensation programs in 2011 with a view to ensuring that they continue to provide the correct incentives and are properly sized given the scope and complexity of our business and the competition we face. We have adopted a 2011 bonus program for our named executive officers (other than our Chief Financial Officer) under our 2009 Long-Term Stock Incentive Plan. The awards made under the bonus program are intended to qualify for the performance-based exception under Section 162(m) of the Internal Revenue Code. The bonus program provides for a bonus pool which is based on a percentage of EBITDA, provided that no bonus amount is payable if we do not achieve a specified level of EBITDA. We expect to continue to respond to changes in economic conditions and our business with innovation and flexibility, as needed, to advance our objectives of motivating, attracting and retaining high-quality executives with the skills and experience necessary to achieve our key business objectives and increase stockholder value.
Executive Compensation Elements
Our practices with respect to the primary compensation elements identified above, as well as other elements of compensation, are described below, followed by a discussion of the specific factors considered in determining key compensation elements for the named executive officers for 2010.
Objectives. The objective of base salary is to reflect job responsibilities, value to us, individual performance and market competitiveness. Salaries often are reviewed in connection with the extension of an employment agreement.
Process.Base salaries for named executive officers are determined consistent with their employment agreements. The minimum salaries set forth in the employment agreements and the amount of any increaseincreases over these salaries are determined by the Compensation Committee based on a variety of factors, including:
| | |
| • | the nature and responsibility of the position and, to the extent available and deemed relevant, salary norms for persons in similar positions at comparable companies; |
|
| • | the expertise and past performance of the individual executive; |
24
the expertise and past performance of the individual executive;the executive’s salary history and his or her total compensation, including other cash bonus and stock-based awards;
the competitiveness of the market for the executive’s services; and
the recommendations of our Chief Executive Officer (except as to his own compensation).
| | |
| • | the executive’s salary history and his or her total compensation, including other cash bonus and stock based awards; |
|
| • | the competitiveness of the market for the executive’s services; and |
|
| • | the recommendations of our Chief Executive Officer (except as to his own compensation). |
In setting base salaries, the Compensation Committee also considers the importancepercent of linkingbase salary as a high proportionpercentage of total compensation with the goal that a substantial percentage of each executive officer’s total compensation to performance in the form of the discretionary annual bonus as well as long-term stock-based compensation, which is tied to our stock price performance.
2010 Base Salary Decisions. During 2010, our Compensation Committee approved an increase in the base salary of Mr. Donnelly beginning in January 2010 from $525,000 to $575,000 as part of an agreement to extend his employment. The Compensation Committee believed this increase was appropriate given the competitive market for his services and his individual performance. In 2010, Mr. Greenstein’s base salary increased from $850,000 to $925,000 and Mr. Meyer’s base salary increased from $950,000 to $1,100,000. These salary increases were negotiated with Messrs. Greenstein and Meyer in 2009 as part of the execution of new employment agreements with each of them.
In 2010, Messrs. Meyer and Donnelly waived the increase in their base salaries that each would have been entitled to in 2011 under their employment agreements. We did not solicit those waivers; rather Messrs. Meyer and Donnelly approached us regarding the contractually required increases in their salaries after weighing factors important to each of them. We understand that Messrs. Meyer and Donnelly waived their increases in base salaries principally as a demonstration of leadership and a signal to our employees that any increase in their compensation wouldshould be based on our performance in the form of bonuses and increases in the value of their stock options. In January 2011, Mr. Greenstein’s base salary increased from $925,000 to $1,000,000 as required by the terms of his employment agreement.
performance-based.Annual Bonus
Objectives.The Compensation Committee may award any annual bonuses in cash, restricted stock, restricted stock units, stock options or a combination thereof. The Compensation Committee believes that discretionary bonuses as opposed to formula-based bonuses, provide the best means of incentivizing our named executive officers to enhance stockholder value. Our bonus approach allows the Compensation Committee toshould take into consideration all factors relevant to the Company’s and an executive’s performance, including numerous financial and operational metrics, without being limited by specified financiala purely formulaic approach. None of our named executive officers is entitled to a guaranteed or operational metrics.
minimum bonus.The bonuses approved by the Compensation Committee for 20102011 were intended to achieve two principal objectives:
to link compensation with performance that enhances stockholder value, as measured at the Company and individual levels; and
to reward our named executive officers based on individual performance and contributions to the Company.
In developing the compensation packages for the named executive officers, the Compensation Committee considered the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code (“Section 162(m)”). Section 162(m) generally disallows a tax deduction for compensation that is payable to the chief executive officer or any of the next three most highly compensated executive officers (other than our Chief Financial Officer) to the extent that the compensation for any such individual exceeds $1 million in any taxable year. However, this deduction limitation does not apply to compensation that is “performance-based” under Section 162(m).
24
In 2011, the Compensation Committee adopted a bonus program under our 2009 Long-Term Stock Incentive Plan, where the awards made under this bonus program were intended to qualify for the performance-based exception under Section 162(m) (the “NEO Bonus Plan”). Pursuant the NEO Bonus Plan, a bonus pool was established for our Chief Executive Officer and the four most highly compensated executive officers, other than our Chief Financial Officer, consisting of 2.75% of our EBITDA, calculated in accordance with generally accepted accounting principles. The maximum bonus that a named executive officer could receive under the NEO Bonus Plan was (i) limited by the percentages set forth below (which percentages were not changed during the performance year); and (ii) could not exceed the cash equivalent of 120 million shares (based on our share price as of the end of 2011). In addition, (i) no amounts could be paid under the NEO Bonus Plan unless a threshold amount of EBITDA was achieved for 2011, and (ii) the Compensation Committee retained the ability to exercise its negative discretion to award bonuses in amounts less than the maximum percentages listed below:
| | | | |
Chief Executive Officer | • | to link compensation with performance that enhances stockholder value, as measured at the company and individual levels; and | 40 | % |
President, Operations and Sales | | | 20 | % |
President and Chief Content Officer | • | to reward our named executive officers based on individual performance and contributions to the company. | 20 | % |
General Counsel | | | 15 | % |
Chief Administrative Officer | | | 5 | % |
Process. Although our annual bonus awards are discretionary, the Compensation Committee employed the process described below to assist in shaping its decision and assist in evaluating whether it was appropriate to award bonuses to our named executive officers with respect to 2010. The Compensation Committee may not employ the same process, or may adopt a modified or wholly different process, in making future bonus decisions.
After the end of the year, the Compensation Committee evaluated our actual performance against a set of guidelines, including a variety of key operating metrics to determine the appropriate funding of a bonus poolincluded in our budget and business plan for all employees, other than our named executive officers.2011. As part of such evaluation, the Compensation Committee considered several metrics, including our increase in subscribers, revenue, adjusted EBITDA and free cash flow and conversion rate andflow; our results in controlling subscriber churn and operating expenses,expenses; the introduction of new products and services during the year; and additional accomplishments and other factors the Compensation Committee deemed relevant. ForThe Compensation Committee did not weigh the metrics it considered as part of its evaluation of our performance. In addition, for named executive officers (other than himself), our Chief
25
Executive Officer recommended to the Compensation Committee individual bonus amounts, taking into account the responsibilities and contributions of each individual during the year, our performance and our performance.the percentage limits contained in the NEO Bonus Plan. These amounts were reviewed and discussed with the Compensation Committee by our Chief Executive Officer and, following consideration by the Compensation Committee, the Compensation Committee approved the amounts were approved or modified.while exercising its negative discretion regarding the permitted percentage limits set forth in the NEO Bonus Plan. For theour Chief Executive Officer, the Compensation Committee reviewed his performance for the year, determined that he should receive a bonus and determined the bonus amount, which amount was then reviewed and approved bywhile exercising its negative discretion regarding the board of directors.permitted percentage limits contained in the NEO Bonus Plan. The Compensation Committee determined that the bonuses to our named executive officers would be paid solely in cash. The bonus awards to our named executive officers are described below under “Fiscal Year 2011 Pay Implications — Payment of Performance-Based Discretionary Annual Bonuses for 2011” and are reflected in the Summary Compensation Table.
Payment of Discretionary Bonuses for 2010. The annual bonus for Mr. Karmazin is discussed below under “Related Policies and Considerations — Compensation of our Chief Executive Officer.”
Mr. Greenstein was awarded a bonus for his contributions during the year, including his role in the continued enhancement of our programming, such as the negotiation of a new agreement with the NFL; securing and creating additional compelling and exclusive content, such as Rosie Radio, Dr. Laura Schlessinger and our Fantasy Sports channel; reducing the costs of certain programming and streamlining and introducing efficiencies into our programming operations; reducing our churn; the sale of advertisements on our non-music channels and contribution to our sale of “best of” programming packages; refining our brand awareness; and understanding and analyzing customer satisfaction levels as they relate to our programming and content offerings.
Mr. Meyer was awarded a bonus for his contributions during the year, including his role in our addition of over 1.4 million net subscribers in 2010; generating $210 million in free cash flow; reducing subscriber churn and introducing systems and processes to assist in understanding overall subscriber churn; increasing monthly average revenue per user; increasing our self-pay conversion rate; reducing subscriber acquisition costs; introducing and marketing new data services; overseeing the development of our transmission and radio technology; building our business in pre-owned vehicles, including establishing agreements with automakers for certified pre-owned programs; and the continuing integration of our legacy operations.
Mr. Donnelly was awarded a bonus for his contributions during the year, including his regular on-going contributions as our general counsel, such as the management of complex legal and regulatory issues; his role in managing and attempting to reduce our legal expenses in face of the increasing complexity of our business; assisting in the negotiation and execution of various agreements with programming providers and other essential third parties; and his efforts in the continued integration of our legacy operations, including the continuing integration and rationalization of our legal staff to meet our current and future needs.
Mr. Frear was awarded a bonus for his contributions during the year, including his regular on-going contributions as our chief financial officer and his role in increasing our adjusted EBITDA by 35%; increasing our free cash flow by 14% to $210 million; successfully managing balance sheet opportunities to replace certain high cost debt with more attractive financing; managing the construction, launch and commissioning of our XM-5 satellite; overseeing our investments in XM Canada and SIRIUS Canada and negotiating the pending combination of those companies; and his efforts in the continued integration of our legacy operations, particularly in the areas of information technology and financial planning and reporting.
Ms. Altman was awarded a bonus for her contributions during the year, including her regular on-going contributions as our chief administrative officer and her role in managing our human resources function, and facilities and security operations; supervising the evaluation, management and consolidation of our real estate holdings; overseeing our DC-based operations; and her role in the continued integration of our legacy operations.
Based on the foregoing, the Compensation Committee approved the specific bonus amount set forth in the Summary Compensation Table for each of the above named executive officers.
2011 Considerations. In 2011, the Compensation Committee intends to determine the overall bonus funding for our employees (other than the named executive officers) by evaluating our performance against our 2011 business plan as approved by our board of directors, including operating metrics such as total
26
subscribers, cash, revenue, adjusted EBITDA, subscriber acquisition costs per gross addition, churn, operating expense growth, and other factors that it determines are appropriate. The Compensation Committee intends to adopt a similar process for determining our named executive officers’ bonuses for 2011 as it has done in the past.
Long-term Incentive Compensation
Objectives.The Compensation Committee grants long-term incentive awards in the form of stock options to directly align compensation for our named executive officers over a multi-year period with the interests of our stockholders by motivating and rewarding actions that create or increaseenhance long-term stockholder value. The Compensation Committee determines the level of long-term incentive compensation based on an evaluation of competitive factors in conjunction with total compensation provided to named executive officers and the objectives of the above-described compensation program described above.
Process. Our Compensation Committee grants long-term incentive compensation in the form of stock options because our Compensation Committee believes that our stock option program properly balances the goals of incentivizing our executives to create and sustain long-term stockholder value and retaining our executives in a competitive labor environment. program.Stock options have an exercise price equal to the market price on the date of grant, and therefore provide value to the executives if the executives create value for our stockholders. In addition, stock options generally vest over a period of four years and are generally subject to the executive’s continued employment, which incentivizes the executives to sustain increases in stockholder value over extended periods of time. The specific
25
number of options granted to each of Ms. Altman and Mr. Frear wasis determined by the Compensation Committee with the assistance of our Chief Executive Officer (other than in the case of any stock options award to himself) and by using their informed judgement,judgment, taking into account the executive’s role and responsibilities within the companyCompany and the overall performance of the companyCompany and our common stock, and wasis not based on any specific quantitative or qualitative factors. As part of thatthe process, the Compensation Committee also considered the value and structure of the awards which vest over a four year period, as a retention tool. With respect to Mr. Donnelly, the number of options granted to him was based on negotiations between us and Mr. Donnelly as part of the execution of his new employment agreement.
2010 Stock Option Grants. In 2010, we granted long-term incentive compensation, in the form of stock options, to each of Messrs. Donnelly and Frear and Ms. Altman. The stock options awarded by the Compensation Committee in 2010 to these three named executive officers are identified in the Grants of Plan-Based Awards Table for 2010. The option grant to Mr. Donnelly was made in accordance with our practice of making option grants to named executive officers upon entering into extended employment agreements with us, and the option grant to each of Ms. Altman and Mr. Frear was made as part of a broad-based option grant to our employees. The Compensation Committee did not grant any option awards to Messrs. Karmazin, Greenstein and Meyer in 2010 because they each received grants of options awards as part of entering into new employment arrangements with us in 2009, and those options are expected to be their primary long-term incentive compensation during the term of their employment agreements. Messrs. Karmazin, Greenstein, Meyer and Donnelly did not participate in our broad-based stock option grants in 2010.
The stock options granted to our named executive officers in 2010 vest in equal installments over four years, generally subject to the officer’s continued employment through the vesting period, which enhances the retention value of the award and incentivizes the officers to create and sustain long-term value for our stockholders.
Retirement and Other Employee Benefits
We maintain broad-based benefits for all employees, including health and dental insurance, life and disability insurance and a 401(k) plan, including the matching component of that plan. Our named executive officers are eligible to participate in all of our employee benefit plans on the same basis as other employees. We do not sponsor or maintain any other retirement or deferred compensation plans for any of our employees in addition to our Sirius XM 401(k) plan.
27
Perquisites and Other Benefits for Named Executive Officers
The Compensation Committee supports providing other benefits to named executive officers that, except as to Mr. Meyer under the terms of his employment agreement, are substantially the same as those offered to our other full time employees and are provided to similarly situated executives at companies with which we compete for executive talent.
Due to Mr. Meyer’s principal residence isbeing in Indianapolis, Indiana. WeIndiana, we reimburse Mr. Meyer for the reasonable costs of an apartment in the New York metropolitan area and other incidental living expenses, up to a maximum of $5,000 per month for rent. We also reimburse Mr. Meyer for the reasonable costs of coach class air-fare from his home in Indianapolis, Indiana, to our offices in New York City. We also pay Mr. Meyer an additional amount to hold him harmless as a result of any federal, state or New York City income taxes imputed in respect of the expenses we reimburse him for.
for which he receives reimbursement. The costs of these benefits for Mr. Meyer constitute less than 10% of his total compensation.Payments to Named Executive Officers Upon Termination orChange-in-Control
The employment agreements with our named executive officers provide for severance payments and, in connection withupon an involuntary termination of employment, including involuntary terminations following a severance that occurs after achange-in-control, additional payments (including tax“gross-up” payments to protect the named executive officers from so-called “golden parachute” excise taxes that could arise in such circumstances).change-in-control. These arrangements vary from executive to executive due to individual negotiations based on each executive’s history and individual circumstances.
We believe that these severance and change-in-control arrangements mitigate some of the risk that exists for executives working in our highly competitive industry. These arrangements are intended to attract and retain qualified executives who could have other job alternatives that may appear to them, in the absence of these arrangements, to be less risky.
There is a possibility that we could be acquired inrisky, and such arrangements allow the
future. executives to focus exclusively on the Company’s interests.We believe that severance payments in connection with achange-in-control transaction are necessary to enable key executives to evaluate objectively the benefits to our stockholders of a proposed transaction, notwithstanding its potential effects on their own job security.
Fiscal Year 2011 Pay Implications
2011 Base Salary Decisions
During 2011, as part of an agreement to extend his employment, the Compensation Committee approved an increase in the base salary of Mr. Frear beginning in July 2011 from $750,000 to $850,000. As part of an
26
agreement to extend Ms. Altman’s employment, the Compensation Committee also approved an increase in her base salary beginning in August 2011 from $446,332 to $500,000. The Compensation Committee believed that these increases were appropriate given the competitive market for their services and their individual performances.
We have entered into employment agreements with each of Messrs. Meyer, Greenstein and Donnelly that include increases in their base salaries during the term of the respective agreements. Messrs. Meyer and Donnelly waived the increase in their base salaries that each would have been entitled to in 2011 and 2012 under their employment agreements. We did not solicit those waivers; rather Messrs. Meyer and Donnelly approached us initially in 2010 and again in 2011 regarding the contractually required increases in their base salaries after weighing factors important to each of them. We understand that Messrs. Meyer and Donnelly waived their increases in base salaries principally as a demonstration of leadership and a signal to our employees that any current increase in their compensation would be based on our performance in the form of bonuses and increases in the value of their stock options.
In January 2011, Mr. Greenstein’s base salary increased from $925,000 to $1,000,000 as required by the terms of his employment agreement. Mr. Greenstein waived the increase in his base salary that he would have been entitled to in January 2012 under his employment agreement. Again, we did not solicit this waiver. We understand that Mr. Greenstein waived the increase in his base salary for 2012 principally as a demonstration of leadership and a signal to our employees that any current increase in his compensation would be based on our performance in the form of bonuses and increases in the value of his stock options.
There was no base salary increase for Mr. Karmazin in 2011.
Payment of Performance-Based Discretionary Annual Bonuses for 2011
Following the end of 2011, the Compensation Committee met to determine whether to exercise its discretion to pay bonuses to our named executive officers with respect to 2011 and whether to approve a general cash bonus pool for our other employees. The Compensation Committee carefully reviewed our performance against multiple key metrics in our budget and business plan for 2011, including the generation of EBITDA, as required by the NEO Bonus Plan, our efforts to increase subscribers, revenue, adjusted EBITDA and free cash flow and to control subscriber churn and operating expenses, as well as reviewing our performance in launching new products and services.
Following its review of our 2011 performance, which the Compensation Committee determined to be superior, the Compensation Committee:
approved a cash bonus pool to be divided among our employees, other than the named executive officers;
reviewed the NEO Bonus Plan pool and exercised its negative discretion and approved the individual bonus amounts granted to each of the named executive officers under the NEO Bonus Plan; and
reviewed and approved the bonus amount granted to our Chief Financial Officer whose bonus, pursuant to Section 162(m), is not included in the NEO Bonus Plan.
The actual amount of the bonus paid to each named executive officer was based on a combination of factors, including our 2011 corporate performance, his or her individual contributions and performance in his or her functional areas of responsibility and, with respect to all named executive officers other than himself, upon recommendations made by Mr. Karmazin, our Chief Executive Officer. The amount of Mr. Karmazin’s bonus was approved by the board of directors following a recommendation from the Compensation Committee. Various specific factors taken into consideration in determining the bonus amounts for the named executive officers are set forth below, and the annual bonus for Mr. Karmazin is discussed below under the heading “Related Policies and Considerations — Compensation of our Chief Executive Officer.”
27
Mr. Greenstein was awarded a bonus for his contributions during the year, including his role in the continued enhancement of our programming, such as the expansion of our channel lineup to include new music, sports and comedy channels, as well as the debut of SiriusXM Latino, a suite of new Latin channels featuring programming from leading providers of Spanish-language music, sports, news, talk and entertainment; securing and creating additional compelling and exclusive content; reducing the costs of certain programming; streamlining and introducing efficiencies into our programming operations; the sale of advertisements on our non-music channels; understanding and analyzing customer satisfaction levels as they relate to our programming and content offerings; and the continuing integration of our legacy operations.
Mr. Meyer was awarded a bonus for his contributions during the year, including his role in our addition of over 1.7 million net subscribers in 2011; analyzing, evaluating and managing our subscriber churn and new vehicle conversion rate; reducing subscriber acquisition costs; overseeing the development of our transmission and radio technology; introducing and marketing the first phase of our Sirius XM 2.0 functionality and products, including the introduction of our Lynx portable radio, our most advanced radio introduced to date; building our business in pre-owned vehicles, including establishing agreements with automakers for certified pre-owned programs and with large independent resellers, including AutoNation; and the continuing integration of our legacy operations.
Mr. Donnelly was awarded a bonus for his contributions during the year, including his regular on-going contributions as our general counsel, such as the management of complex legal and regulatory issues; his role in managing our legal expenses in face of the increasing complexity of our business; assisting in the negotiation and execution of various agreements with programming providers and other essential third parties; and the continuing integration of our legacy operations.
Mr. Frear was awarded a bonus for his contributions during the year, including his regular on-going contributions as our chief financial officer and his role in managing our fixed and variable costs; overseeing our investor relations efforts; managing our relationships with debt rating agencies and successfully improving our debt rating; reducing our leverage ratio; overseeing our investments in Sirius XM Canada and completing the combination of XM Canada and Sirius Canada; managing the construction of our FM-6 and XM-6 satellites; and his efforts in the continued integration of our legacy operations, particularly in the areas of information technology and financial planning and reporting.
Ms. Altman was awarded a bonus for her contributions during the year, including her regular on-going contributions as our chief administrative officer and her role in managing our human resources function, including our employee development and diversity and inclusion initiatives, and managing our facilities and security operations; supervising the evaluation, management and consolidation of our real estate holdings, including the review of our New York City real estate portfolio and the extension of our New York City lease holdings; overseeing our DC-based operations; and the continuing integration of our legacy operations.
Based on the foregoing, the Compensation Committee approved the specific bonus amounts set forth in the Summary Compensation Table for each of the above named executive officers.
Long-Term Equity Grants — 2011 Stock Option Grants
In 2011, in connection with Mr. Frear and Ms. Altman entering into extensions of their employment agreements, we granted stock options to Mr. Frear and Ms. Altman. The specific number of options granted to each of these named executive officers was determined by the Compensation Committee with the assistance of our Chief Executive Officer, as further described below, and are identified in the Grants of Plan-Based Awards Table for 2011. The stock options granted to these named executive officers in 2011 generally vest in equal installments over four years, and are generally subject to the officer’s continued employment through the vesting period, which enhances the retention value of the award and incentivizes the officers to create and sustain long-term value for our stockholders. These options are expected to be Mr. Frear’s and Ms. Altman’s primary long-term incentive compensation during the term of their employment agreements.
28
Except in connection with Mr. Frear and Ms. Altman entering into extended employment agreements with us in 2011, there were no other long-term equity grants to any of our named executive officers in 2011.
Employment Agreements with Mr. Frear and Ms. Altman
Consistent with our practice for our named executive officers, we entered into new employment agreements with Mr. Frear and Ms. Altman in 2011. The extended agreements, which are described in more detail below under the heading “Potential Payments upon Termination or Change-in-Control — Employment Agreements,” increased Mr. Frear’s base salary to $850,000 from $750,000 and increased Ms. Altman’s base salary to $500,000 from $446,332. The extended agreements also provided Mr. Frear and Ms. Altman each with a grant of options to purchase 16,000,000 and 7,500,000 shares, respectively, of our common stock at an exercise price of $2.18 and $1.69 per share, respectively. These options vest in equal installments over four years, generally subject to their continued employment through the vesting period.
The Compensation Committee determined that the increases in base salaries and grants of options for both Mr. Frear and Ms. Altman were appropriate in light of their performance and necessary for us to retain and continue to properly incentivize them.
Fiscal Year 2012 Considerations
The Compensation Committee expects to review our compensation programs in 2012 with a view to ensuring that they continue to provide the correct incentives and are properly sized given the scope and complexity of our business and the competition we face. The Compensation Committee may employ the same process, or may adopt a modified or wholly different process, in making future bonus decisions, provided that with respect to 2012, the Compensation Committee has again adopted a bonus program which is intended to comply with Section 162(m) for our named executive officers (other than our Chief Financial Officer) under our 2009 Long-Term Stock Incentive Plan that is designed to promote the achievement of our key financial goals for 2012. This bonus program provides for a bonus pool which is based on a percentage of EBITDA; provided that no bonus amount is payable under such program if we do not achieve a specified level of EBITDA.
We expect to continue to respond to changes in economic conditions and our business with innovation and flexibility, as needed, to advance our objectives of motivating, attracting and retaining high-quality executives with the skills and experience necessary to achieve our key business objectives and increase stockholder value.
Related Policies and Considerations
Compensation of our Chief Executive Officer
In November 2004, our board of directors negotiated, and we entered into, a five-year employment agreement with Mel Karmazin to serve as our Chief Executive Officer. In June 2009, Mr. Karmazin’s employment agreement was extended through the end of 2012. The material terms of Mr. Karmazin’s employment agreement are described below under “Potential Payments Upon Termination andor Change-in-Control — Employment Agreements — Mel Karmazin.”
The terms of Mr. Karmazin’s employment were established by negotiations between Mr. Karmazin and the Compensation Committee. The Compensation Committee did not retain an independent compensation consultant to advise them in the negotiation of Mr. Karmazin’s compensation arrangements or to assess the reasonableness of the compensation arrangements. The Compensation Committee concluded that, in its business judgment, Mr. Karmazin’s qualifications and experience as chief executive officer, particularly in radio, were uniquely suited to our needs, and that the compensation, including the base salary and stock option components of his compensation, was, taken as a whole, appropriate under the circumstances.
Mr. Karmazin did not receive a bonus in respect of the year ended December 31, 2008. 29
In February 2010, with respect to his performance in 2009,2012, the Compensation Committee awarded a cash bonus to Mr. Karmazin of $7,000,000 in recognition of his performance and our corporate performance. In February 2011, the Compensation Committee awarded a cash bonus to Mr. Karmazin of $8,400,000$9,200,000 in recognition of his performance and our corporate performance in 2011, including:
increasing our net subscribers additions by over 1.7 million, resulting in a total of nearly 21.9 million subscribers, an increase of over 8% as compared to 2010;
achieving adjusted EBITDA growth of 17% to over $731 million in 2011;
increasing our 2011 revenue by 7% over 2010 including:
| | |
| • | increasing our net subscribers additions by over 1.4 million, an increase of over 1.6 million net subscriber additions over 2009; |
|
| • | achieving adjusted EBITDA growth of 35% to over $626 million in 2010; |
28levels;
increasing free cash flow by 98% to $416 million;reducing our long-term debt by over $200 million;
improving our corporate debt ratings to BB and B2 from Standard & Poor’s and Moody’s, respectively, and lowering our leverage, further strengthening our liquidity position for future growth;
introducing SiriusXM 2.0 functionality and products, including our Lynx portable radio;
| | |
| • | increasing our 2010 revenue by 13.9% over 2009 levels; |
|
| • | growing ARPU by 7% as compared to 2009; |
|
| • | increasing free cash flow by 14% to $210 million despite capital expenditures in 2010 that were $63 million over 2009 levels; |
|
| • | reducing our monthly average churn; |
|
| • | negotiating new programming agreements; |
|
| • | overseeing the successful construction, launch and commission of our XM-5 satellite; |
|
| • | creating a corporate culture that fosters quality, creativity and innovation to differentiate our content and services; |
|
| • | adding compelling content to our services while reducing programming expenses; and |
|
| • | establishing Sirius XM as the second largest subscription-based media company in the United States. |
expanding our ability to identify and acquire subscribers in certified pre-owned and used vehicles and managing our investment in infrastructure in this area;
adding compelling content to our services while reducing programming expenses;
launching Sirius XM Latino, the most comprehensive radio channel offering in the United States for Spanish-speaking listeners;
managing and implementing, including all communications and marketing efforts, a price increase to certain of our subscription services;
improving our customer care experience, including through the launch of our Internet-based self care functionality and deployment of an Internet-based chat services;
creating a corporate culture that fosters quality, creativity and innovation to differentiate our content and services; and
maintaining Sirius XM as one of the largest subscription-based media companies in the United States.
Policy with Respect to Internal Revenue Code Section 162(m)
In developing the compensation packages for the named executive officers, the Compensation Committee considered the deductibility of executive compensationAs described above under Section 162(m) of the Internal Revenue Code. Section 162(m) generally disallows a tax deduction for compensation that we pay to our Chief Executive Officer or any of the next three most highly compensated executive officers (other than our Chief Financial Officer) to the extent that the compensation for any such individual exceeds $1 million“Fiscal Year 2012 Considerations,” in any taxable year. However, this deduction limitation does not apply to compensation that is “performance-based” under Section 162(m).
In 2011,2012 the Compensation Committee adopted a plan applicable to annual bonuses for our Chief Executive Officer and the four other most highly compensated executive officers, other than our Chief Financial Officer. The Committee anticipates that this plan will result in tax deductibility for any compensation we pay to such executive officers that exceeds $1 million in any taxable year. However, the Compensation Committee may from time to time approve compensation that is not deductible under Section 162(m) if it determines that it is in our best interest to do so.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussion, we recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our annual report onForm 10-K for the year ended December 31, 2010.
2011.Compensation Committee
LawrenceLAWRENCE F. Gilberti,GILBERTI,Chairman
Jack Shaw
HOLDEN
29JACK SHAW
CARL E. VOGEL
30
Summary Compensation Table
The following table provides information concerning total compensation earned or paid to our Chief Executive Officer, our Chief Financial Officer and our four other most highly compensated executive officers who served in such capacities as of December 31, 20102011 for services rendered to us during each of the past three fiscal years. These six officers are referred to herein as the named executive officers.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Stock
| | Option
| | All Other
| | | | | | |
| | | | | Salary
| | Bonus(2)
| | Awards(3)
| | Awards(3)
| | Compensation(4)
| | Total(5)
| | | | |
Name and Principal Position | | Year | | $ | | $ | | $ | | $ | | $ | | $ | | | | |
| |
| Mel Karmazin | | | 2010 | | | | 1,500,000 | | | | 8,400,000 | | | | — | | | | — | | | | 7,350 | | | | 9,907,350 | | | | | | | | | |
| Chief Executive Officer | | | 2009 | | | | 1,250,000 | | | | 7,000,000 | | | | — | | | | 35,209,440 | | | | 7,350 | | | | 43,466,790 | | | | | | | | | |
| | | | 2008 | | | | 1,250,000 | | | | — | | | | — | | | | — | | | | 6,900 | | | | 1,256,900 | | | | | | | | | |
| Scott A. Greenstein | | | 2010 | | | | 925,000 | | | | 1,150,000 | | | | — | | | | — | | | | 7,350 | | | | 2,082,350 | | | | | | | | | |
| President and Chief | | | 2009 | | | | 850,000 | | | | 1,000,000 | | | | 850,035 | | | | 7,986,116 | | | | 27,134 | | | | 10,713,285 | | | | | | | | | |
| Content Officer | | | 2008 | | | | 845,834 | | | | — | | | | 440,003 | | | | 1,123,873 | | | | 6,900 | | | | 2,416,610 | | | | | | | | | |
| James E. Meyer | | | 2010 | | | | 1,100,000 | | | | 1,500,000 | | | | — | | | | — | | | | 159,888 | | | | 2,759,888 | | | | | | | | | |
| President, Operations and Sales | | | 2009 | | | | 950,000 | | | | 1,250,000 | | | | 1,000,022 | | | | 11,500,278 | | | | 176,632 | | | | 14,876,932 | | | | | | | | | |
| | | | 2008 | | | | 945,834 | | | | — | | | | 512,502 | | | | 1,309,025 | | | | 152,967 | | | | 2,920,328 | | | | | | | | | |
| Dara F. Altman(1) | | | 2010 | | | | 446,332 | | | | 700,000 | | | | — | | | | 750,046 | | | | 7,350 | | | | 1,903,728 | | | | | | | | | |
| Executive Vice President and | | | 2009 | | | | 446,332 | | | | 600,000 | | | | 500,029 | | | | 750,139 | | | | 19,006 | | | | 2,315,506 | | | | | | | | | |
| Chief Administrative Officer | | | 2008 | | | | 92,986 | | | | — | | | | — | | | | — | | | | — | | | | 92,986 | | | | | | | | | |
| Patrick L. Donnelly | | | 2010 | | | | 573,301 | | | | 900,000 | | | | — | | | | 6,000,000 | | | | 7,350 | | | | 7,480,651 | | | | | | | | | |
| Executive Vice President, | | | 2009 | | | | 525,000 | | | | 750,000 | | | | 600,020 | | | | 1,000,336 | | | | 21,328 | | | | 2,896,684 | | | | | | | | | |
| General Counsel and Secretary | | | 2008 | | | | 522,917 | | | | — | | | | 300,001 | | | | — | | | | 6,900 | | | | 829,818 | | | | | | | | | |
| David J. Frear | | | 2010 | | | | 750,000 | | | | 1,000,000 | | | | — | | | | 1,600,022 | | | | 7,350 | | | | 3,357,372 | | | | | | | | | |
| Executive Vice President | | | 2009 | | | | 750,000 | | | | 850,000 | | | | 700,012 | | | | 1,000,336 | | | | 23,650 | | | | 3,323,998 | | | | | | | | | |
| and Chief Financial Officer | | | 2008 | | | | 631,251 | | | | — | | | | 1,292,002 | | | | 3,897,033 | | | | 6,900 | | | | 5,827,186 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | | Salary
$ | | | Bonus
$ | | | Stock
Awards(1)
$ | | | Option
Awards(1)
$ | | | All Other
Compensation(2)
$ | | | Total(3)
$ | |
Mel Karmazin | | | 2011 | | | | 1,500,000 | | | | 9,200,000 | | | | — | | | | — | | | | 7,350 | | | | 10,707,350 | |
Chief Executive Officer | | | 2010 | | | | 1,500,000 | | | | 8,400,000 | | | | — | | | | — | | | | 7,350 | | | | 9,907,350 | |
| | | 2009 | | | | 1,250,000 | | | | 7,000,000 | | | | — | | | | 35,209,440 | | | | 7,350 | | | | 43,466,790 | |
| | | | | | | |
Scott A. Greenstein | | | 2011 | | | | 1,000,000 | | | | 1,250,000 | | | | — | | | | — | | | | 7,350 | | | | 2,257,350 | |
President and Chief
Content Officer | | | 2010 | | | | 925,000 | | | | 1,150,000 | | | | — | | | | — | | | | 7,350 | | | | 2,082,350 | |
| | | 2009 | | | | 850,000 | | | | 1,000,000 | | | | 850,035 | | | | 7,986,116 | | | | 27,134 | | | | 10,713,285 | |
| | | | | | | |
James E. Meyer | | | 2011 | | | | 1,100,000 | | | | 1,750,000 | | | | — | | | | — | | | | 236,221 | | | | 3,086,221 | |
President, Operations and Sales | | | 2010 | | | | 1,100,000 | | | | 1,500,000 | | | | — | | | | — | | | | 159,888 | | | | 2,759,888 | |
| | | 2009 | | | | 950,000 | | | | 1,250,000 | | | | 1,000,022 | | | | 11,500,278 | | | | 176,632 | | | | 14,876,932 | |
| | | | | | | |
Dara F. Altman | | | 2011 | | | | 465,666 | | | | 775,000 | | | | — | | | | 7,470,308 | | | | 7,350 | | | | 8,718,324 | |
Executive Vice President and
Chief Administrative Officer | | | 2010 | | | | 446,332 | | | | 700,000 | | | | — | | | | 750,046 | | | | 7,350 | | | | 1,903,728 | |
| | | 2009 | | | | 446,332 | | | | 600,000 | | | | 500,029 | | | | 750,139 | | | | 19,006 | | | | 2,315,506 | |
| | | | | | | |
Patrick L. Donnelly | | | 2011 | | | | 575,000 | | | | 1,050,000 | | | | — | | | | — | | | | 7,350 | | | | 1,632,350 | |
Executive Vice President,
General Counsel and Secretary | | | 2010 | | | | 573,301 | | | | 900,000 | | | | — | | | | 6,000,000 | | | | 7,350 | | | | 7,480,651 | |
| | | 2009 | | | | 525,000 | | | | 750,000 | | | | 600,020 | | | | 1,000,336 | | | | 21,328 | | | | 2,896,684 | |
| | | | | | | |
David J. Frear | | | 2011 | | | | 795,833 | | | | 1,100,000 | | | | — | | | | 18,895,552 | | | | 7,350 | | | | 20,798,735 | |
Executive Vice President
and Chief Financial Officer | | | 2010 | | | | 750,000 | | | | 1,000,000 | | | | — | | | | 1,600,022 | | | | 7,350 | | | | 3,357,372 | |
| | | 2009 | | | | 750,000 | | | | 850,000 | | | | 700,012 | | | | 1,000,336 | | | | 23,650 | | | | 3,323,998 | |
| | |
| (1) | | Information for Ms. Altman is included for the period after September 26, 2008, the date she became an employee. |
|
(2) | | No bonuses were paid for 2008. |
|
(3) | | The aggregate grant date fair value of restricted stock unit and stock option awards was computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 718 (excluding estimated forfeitures). The assumptions used in the valuation are discussed in Note 1315 to our audited consolidated financial statements in our Annual Report onForm 10-K for the year ended December 31, 2010. Mr. Karmazin did not receive equity-based awards in 2008 or 2010.2011. |
|
(4) | (2) | For each named executive officer, in 2010, the amount in the “All Other Compensation” column for 2011 reflects $7,350 of matching contributions by us under our 401(k) savings plan paid in the form of shares of our common stock. “All Other Compensation” for Mr. Meyer also includes amounts reimbursed for temporary living and travel expenses, all of which are reimbursed based upon receipts. In 2010,2011, Mr. Meyer was paid $50,000$70,000 for rent, $30,397$52,309 for travel $3,105and $5,240 for utilities. Travel-related expenses include airfare, taxi/car services, and other incidental travel-related costs. In addition, “All Other Compensation” for Mr. Meyer includes $69,036$101,322 for reimbursement of taxes associated with these expenditures in accordance with his employment agreement. |
|
(5) | (3) | The amount of compensation reported for federal tax purposes for Mr. Karmazin in 2009 was $1,620,316. We are providing this information to highlight the difference between compensation reported under the SEC rules and compensation amounts realized and reported as taxable income on Mr. Karmazin’sForm W-2. The amount reported on Mr. Karmazin’sW-2 includes, among other items: (1) total cash wages and bonuses paid to Mr. Karmazin in 2009, less amounts deferred under our 401(k) plan, and (2) the value of restricted stock awards that vested during 2009. |
30
31
Grants of Plan-Based Awards in 20102011
The following table provides information with respect to equity grants made during fiscal year 20102011 to the named executive officers.
| | | | | | | | | | | | | | | | | |
| | | | | All Other
| | | | Grant Date
|
| | | | | Option Awards:
| | Exercise or
| | Fair Value
|
| | | | | Number of Securities
| | Base Price of
| | of Stock and
|
| | | | | Underlying Options
| | Option Awards
| | Option Awards
|
Name | | Grant Date | | (#)(1) | | ($/Sh)(2) | | ($)(3) |
| |
| Mel Karmazin | | | — | | | | — | | | | — | | | | — | |
| Scott A. Greenstein | | | — | | | | — | | | | — | | | | — | |
| James E. Meyer | | | — | | | | — | | | | — | | | | — | |
| Dara F. Altman | | | 8/9/2010 | | | | 1,052,300 | | | | 1.0400 | | | | 750,046 | |
| Patrick L. Donnelly | | | 1/14/2010 | | | | 13,163,495 | | | | 0.6669 | | | | 6,000,000 | |
| David J. Frear | | | 8/9/2010 | | | | 2,244,800 | | | | 1.0400 | | | | 1,600,022 | |
| | | | | | | | | | | | | | | | |
Name | | Grant Date | | | All Other
Option Awards:
Number of Securities
Underlying Options
(#)(1) | | | Exercise or
Base Price of
Option Awards
($/Sh)(2) | | | Grant Date
Fair Value of
Stock and
Option Awards
($)(3) | |
Mel Karmazin | | | — | | | | — | | | | — | | | | — | |
Scott A. Greenstein | | | — | | | | — | | | | — | | | | — | |
James E. Meyer | | | — | | | | — | | | | — | | | | — | |
Dara F. Altman | | | 8/23/2011 | | | | 7,500,000 | | | | 1.69 | | | | 7,470,308 | |
Patrick L. Donnelly | | | — | | | | — | | | | — | | | | — | |
David J. Frear | | | 7/21/2011 | | | | 16,000,000 | | | | 2.18 | | | | 18,895,522 | |
| | |
| (1) | | All grants were made under the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan. The stock option awards granted on August 9, 2010to Ms. Altman and Mr. Frear vest in equal annual installments over four years from the date of grant and have a term of ten years. The option award granted on January 14, 2010 to Mr. Donnelly in connection with the extension of his employment agreement vests in four equal annual installments beginning on January 14, 2011 and has a term of ten years. |
|
| (2) | | The exercise price of the options granted to Ms. Altman on August 9, 2010 are23, 2011 is equal to the closing price of our common stock on the date of grant. The exercise price of the options granted to Mr. DonnellyFrear on January 14, 2010July 21, 2011 is equal to the last sale price of our common stock prior to the execution on January 14, 2010July 21, 2011 of the employment agreement with Mr. Donnelly.Frear. |
|
| (3) | | The aggregate grant date fair value of stock option awards was computed in accordance with FASB ASC Topic 718 (excluding estimated forfeitures). The assumptions used in the valuation are discussed in Note 1315 to our audited consolidated financial statements in our Annual Report onForm 10-K for the year ended December 31, 2010.2011. |
31
32
Outstanding Equity Awards at Fiscal Year-End 20102011
The following table provides information with respect to the status at December 31, 20102011 of all unexercised options and unvested restricted stock and restricted stock units awarded to each of the named executive officers.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | | | |
| | | Number of
| | Number of
| | | | | | | | |
| | | Securities
| | Securities
| | | | | | Number of
| | Market Value
|
| | | Underlying
| | Underlying
| | | | | | Shares or Units
| | of Shares or
|
| | | Unexercised
| | Unexercised
| | Option
| | | | of Stock that
| | Units of Stock
|
| | | Options
| | Options
| | Exercise
| | Option
| | have not
| | that have not
|
| | | (#)
| | (#)
| | Price
| | Expiration
| | Vested
| | Vested
|
Name | | Exercisable | | Unexercisable | | ($) | | Date | | (#) | | ($)(7) |
| |
| Mel Karmazin(1) | | | 30,000,000 | | | | 90,000,000 | | | | 0.43 | | | | 12/31/2014 | | | | — | | | | — | |
| Scott A. Greenstein(2) | | | 1,000,000 | | | | — | | | | 3.14 | | | | 5/5/2014 | | | | — | | | | — | |
| | | | 1,250,000 | | | | — | | | | 6.6020 | | | | 8/8/2015 | | | | — | | | | — | |
| | | | 326,250 | | | | 108,750 | | | | 3.70 | | | | 2/1/2017 | | | | — | | | | — | |
| | | | 303,500 | | | | 303,500 | | | | 2.87 | | | | 1/23/2018 | | | | — | | | | — | |
| | | | — | | | | 20,826,102 | | | | 0.43 | | | | 7/27/2019 | | | | — | | | | — | |
| James E. Meyer(3) | | | 50,000 | | | | — | | | | 6.75 | | | | 12/14/2011 | | | | — | | | | — | |
| | | | 66,666 | | | | — | | | | 1.04 | | | | 8/11/2013 | | | | — | | | | — | |
| | | | 1,350,000 | | | | — | | | | 5.54 | | | | 2/2/2016 | | | | — | | | | — | |
| | | | 384,000 | | | | 128,000 | | | | 3.70 | | | | 2/1/2017 | | | | — | | | | — | |
| | | | 353,500 | | | | 353,500 | | | | 2.87 | | | | 1/23/2018 | | | | — | | | | — | |
| | | | — | | | | 2,491,500 | | | | 0.6735 | | | | 8/31/2019 | | | | — | | | | — | |
| | | | 2,126,746 | | | | 18,888,738 | | | | 0.5752 | | | | 10/14/2019 | | | | — | | | | — | |
| Dara F. Altman(4) | | | 415,250 | | | | 1,245,750 | | | | 0.6735 | | | | 8/31/2019 | | | | 85,866 | | | | 139,962 | |
| | | | — | | | | 1,052,300 | | | | 1.04 | | | | 8/9/2020 | | | | — | | | | — | |
| Patrick L. Donnelly(5) | | | 400,000 | | | | — | | | | 7.50 | | | | 5/1/2011 | | | | — | | | | — | |
| | | | 100,000 | | | | — | | | | 7.61 | | | | 5/1/2011 | | | | — | | | | — | |
| | | | 16,666 | | | | — | | | | 1.04 | | | | 8/11/2013 | | | | — | | | | — | |
| | | | 120,000 | | | | — | | | | 5.71 | | | | 2/1/2016 | | | | — | | | | — | |
| | | | 192,000 | | | | 64,000 | | | | 3.70 | | | | 2/1/2017 | | | | — | | | | — | |
| | | | 1,450,000 | | | | — | | | | 2.72 | | | | 5/17/2017 | | | | — | | | | — | |
| | | | 553,750 | | | | 1,661,250 | | | | 0.6735 | | | | 8/31/2019 | | | | — | | | | — | |
| | | | — | | | | 13,163,495 | | | | 0.6669 | | | | 1/14/2020 | | | | — | | | | — | |
| David J. Frear(6) | | | 1,150,000 | | | | — | | | | 1.85 | | | | 8/11/2013 | | | | 100,000 | | | | 163,000 | |
| | | | 700,000 | | | | — | | | | 6.61 | | | | 8/10/2015 | | | | — | | | | — | |
| | | | 230,250 | | | | 76,750 | | | | 3.70 | | | | 2/1/2017 | | | | — | | | | — | |
| | | | 241,500 | | | | 241,500 | | | | 2.87 | | | | 1/23/2018 | | | | — | | | | — | |
| | | | 1,000,000 | | | | 500,000 | | | | 3.10 | | | | 2/12/2018 | | | | — | | | | — | |
| | | | 553,750 | | | | 1,661,250 | | | | 0.6735 | | | | 8/31/2019 | | | | — | | | | — | |
| | | | — | | | | 2,244,800 | | | | 1.04 | | | | 8/9/2020 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
| | | Option Awards | |
Name | | Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | |
Mel Karmazin(1) | | | 60,000,000 | | | | 60,000,000 | | | | 0.43 | | | | 12/31/2014 | |
Scott A. Greenstein(2) | | | 1,000,000 | | | | — | | | | 3.14 | | | | 5/5/2014 | |
| | | 1,250,000 | | | | — | | | | 6.6020 | | | | 8/8/2015 | |
| | | 435,000 | | | | — | | | | 3.70 | | | | 2/1/2017 | |
| | | 455,250 | | | | 151,750 | | | | 2.87 | | | | 1/23/2018 | |
| | | 6,942,034 | | | | 13,884,068 | | | | 0.43 | | | | 7/27/2019 | |
James E. Meyer(3) | | | 66,666 | | | | — | | | | 1.04 | | | | 8/11/2013 | |
| | | 1,350,000 | | | | — | | | | 5.54 | | | | 2/2/2016 | |
| | | 512,000 | | | | — | | | | 3.70 | | | | 2/1/2017 | |
| | | 530,250 | | | | 176,750 | | | | 2.87 | | | | 1/23/2018 | |
| | | 830,500 | | | | 1,661,000 | | | | 0.6735 | | | | 8/31/2019 | |
| | | 8,422,992 | | | | 12,592,492 | | | | 0.5752 | | | | 10/14/2019 | |
Dara F. Altman(4) | | | 830,500 | | | | 830,500 | | | | 0.6735 | | | | 8/31/2019 | |
| | | 263,075 | | | | 789,225 | | | | 1.04 | | | | 8/9/2020 | |
| | | — | | | | 7,500,000 | | | | 1.69 | | | | 8/23/2021 | |
Patrick L. Donnelly(5) | | | 16,666 | | | | — | | | | 1.04 | | | | 8/11/2013 | |
| | | 120,000 | | | | — | | | | 5.71 | | | | 2/1/2016 | |
| | | 256,000 | | | | — | | | | 3.70 | | | | 2/1/2017 | |
| | | 1,450,000 | | | | — | | | | 2.72 | | | | 5/17/2017 | |
| | | 1,107,500 | | | | 1,107,500 | | | | 0.6735 | | | | 8/31/2019 | |
| | | 3,290,874 | | | | 9,872,621 | | | | 0.6669 | | | | 1/14/2020 | |
David J. Frear(6) | | | 1,150,000 | | | | — | | | | 1.85 | | | | 8/11/2013 | |
| | | 700,000 | | | | — | | | | 6.61 | | | | 8/10/2015 | |
| | | 307,000 | | | | — | | | | 3.70 | | | | 2/1/2017 | |
| | | 362,250 | | | | 120,750 | | | | 2.87 | | | | 1/23/2018 | |
| | | 1,500,000 | | | | — | | | | 3.10 | | | | 2/12/2018 | |
| | | 1,107,500 | | | | 1,107,500 | | | | 0.6735 | | | | 8/31/2019 | |
| | | 561,200 | | | | 1,683,600 | | | | 1.04 | | | | 8/9/2020 | |
| | | — | | | | 16,000,000 | | | | 2.18 | | | | 7/21/2021 | |
| | |
| (1) | | Outstanding equity awards for Mr. Karmazin vest in four equal installments on December 31, 2010, December 31, 2011, June 30, 2012 and December 31, 2012. |
|
| (2) | | Outstanding equity awards for Mr. Greenstein vest as follows: options granted at an exercise price of $3.14 vested immediately on the date of grant on May 5, 2004; options granted at an exercise price of $6.60$6.6020 vested in three equal annual installments from the date of grant on August 8, 2005; options granted at an exercise price of $3.70 vested in four equal annual installments from the date of grant on February 1, 2007; options granted at an exercise price of $2.87 vestvested in four equal annual installments from the date of grant on January 23, 2008; and options granted at an exercise price of $0.43 vest in four equal annual installments commencing on July 26, 2010. |
|
| (3) | | Outstanding equity awards for Mr. Meyer vest as follows: options granted at an exercise price of $6.75 vested 50% on the date of grant on December 14, 2001 and 25% per year thereafter; options granted at an exercise price of $1.04 vested in three equal annual installments on July 1, 2004, July 1, 2005 and July 1, 2006; options granted at |
33
| an exercise price of $5.54 vested in four equal annual installments from the date of grant on February 2, 2006; options granted at an exercise price of $3.70 vested in four equal annual installments from the date of grant on February 1, 2007; options granted at an exercise price of $2.87 vest |
32
| | |
| | vested in four equal annual installments from the date of grant on January 23, 2008; options granted at an exercise price of $0.6735 vest in four equal annual installments from the date of grant on August 31, 2009; and options granted at an exercise price of $0.5752 vest in four equal annual installments from the date of grant on October 14, 2009. |
|
| (4) | | Outstanding equity awards for Ms. Altman vest as follows: options granted at an exercise price of $0.6735 vest in four equal annual installments from the date of grant on August 31, 2009; options granted at an exercise price of $1.04 vest in four equal annual installments from the date of grant on August 9, 2010; and 85,866 sharesoptions granted at an exercise price of restricted stock vested$1.69 vest in four equal annual installments from the date of grant on February 1,August 23, 2011. |
|
| (5) | | Outstanding equity awards for Mr. Donnelly vest as follows: options granted at an exercise price of $7.50 vested 41.25% on the date of grant on May 1, 2001, 19.75% on October 15, 2001, 19.5% on April 15, 2002 and 19.5% on October 15, 2002; options granted at an exercise price of $7.61 vested immediately on the date of grant on May 1, 2001; options granted at an exercise price of $1.04 vested in three equal annual installments on July 1, 2004, July 1, 2005 and July 1, 2006; options granted at an exercise price of $5.71 vested in four equal annual installments from the date of grant on February 1, 2006; options granted at an exercise price of $3.70 vested in four equal annual installments from the date of grant on February 1, 2007; options granted at an exercise price of $2.72 vested in three equal annual installments from the date of grant on May 17, 2007; options granted at an exercise price of $0.6735 vest in four equal annual installments from the date of grant on August 31, 2009; and options granted at an exercise price of $0.6669 vest in four equal annual installments from the date of grant on January 14, 2010. |
|
| (6) | | Outstanding equity awards for Mr. Frear vest as follows: options granted at an exercise price of $1.85 vested either (i) in three equal annual installments on July 1, 2004, July 1, 2005, and July 1, 2006, (ii) on March 15, 2004 as a result of the satisfaction of performance targets for the year ended December 31, 2003, or (iii) on March 15, 2005 as a result of the satisfaction of performance targets for the year ended December 31, 2004; options granted at an exercise price of $6.61 vested in three equal annual installments from the date of grant on August 10, 2005; options granted at an exercise price of $3.70 vested in four equal annual installments from the date of grant on February 1, 2007; options granted at an exercise price of $2.87 vested in four equal annual installments from the date of grant on January 23, 2008; options granted at an exercise price of $3.10 vested in three equal annual installments from the date of grant on February 12, 2008; options granted at an exercise price of $0.6735 vest in four equal annual installments from the date of grant on August 31, 2009; options granted at an exercise price of $1.04 vest in four equal annual installments from the date of grant on August 9, 2010; and 100,000 restricted stock units vestedoptions granted at an exercise price of $2.18 vest in four equal annual installments from the date of grant on February 18,July 21, 2011. |
|
(7) | | Amount is based on the closing price on the NASDAQ Global Select Market of our common stock of $1.63 on December 31, 2010. |
Option Exercises and Stock Vested in 20102011
The following table provides information with respect to option exercises and restricted stock and restricted stock units that vested during 2010.
| | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| | | Number of
| | | | Number of Shares
| | |
| | | Shares Acquired
| | Value Realized
| | Acquired on
| | Value Realized
|
| | | on Exercise
| | on Exercise
| | Vesting
| | on Vesting
|
Name | | (#) | | ($)(1) | | (#) | | ($)(2) |
| |
| Mel Karmazin | | | — | | | | — | | | | — | | | | — | |
| Scott A. Greenstein | | | 6,942,034 | | | | 4,128,209 | | | | — | | | | — | |
| James E. Meyer | | | 5,000,000 | | | | 4,708,362 | | | | — | | | | — | |
| Dara F. Altman | | | — | | | | — | | | | 193,200 | | | | 180,681 | |
| Patrick L. Donnelly | | | — | | | | — | | | | 91,668 | | | | 98,085 | |
| David J. Frear | | | — | | | | — | | | | 100,000 | | | | 93,400 | |
33
| | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
Name | | Number of
Shares Acquired
on Exercise
(#) | | | Value Realized
on Exercise
($) | | | Number of Shares
Acquired on
Vesting
(#) | | | Value Realized
on Vesting
($)(1) | |
Mel Karmazin | | | — | | | | — | | | | — | | | | — | |
Scott A. Greenstein | | | — | | | | — | | | | — | | | | — | |
James E. Meyer | | | — | | | | — | | | | — | | | | — | |
Dara F. Altman | | | — | | | | — | | | | 85,866 | | | | 138,674 | |
Patrick L. Donnelly | | | — | | | | — | | | | — | | | | — | |
David J. Frear | | | — | | | | — | | | | 100,000 | | | | 180,500 | |
| | |
| (1) | | Value realized on exercise is based on the gain, if any, equal to the difference between the closing prices on the NASDAQ Global Select Market of the stock being acquired upon exercise on the exercise date less the exercise prices, multiplied by the number of options being exercised. |
|
(2) | | Value realized on vesting is based on the closing price on the NASDAQ Global Select MarketingMarket of our common stock on the date of vesting. |
34
Non-Qualified Deferred Compensation and Pension Benefits
We do not offer non-qualified deferred compensation or pension benefits to our named executive officers.
Potential Payments or Benefits Upon Termination or Change-in-ControlChange-in-Control
Employment Agreements
We have entered into an employment agreement with each of our named executive officers that contains provisions regarding payments or benefits upon a termination of employment or change of control.
In November 2004, we entered into a five year term employment agreement with Mel Karmazin to serve as our Chief Executive Officer. In June 2009, we amended our employment agreement with Mr. Karmazin to (i) extend the term of his employment agreement through December 31, 2012, (ii) increase his base salary from $1,250,000 per year to $1,500,000 per year beginning on January 1, 2010, and (iii) provide for a grant of an option to purchase 120,000,000 shares of our common stock, at an exercise price of $0.430 per share (the closing price of our common stock on the date of the amendment). Mr. Karmazin is also entitled under his employment agreement to an annual cash bonus as determined by the Compensation Committee.
The options granted to Mr. Karmazin in connection with the amending of his employment agreement vest in equal installments on each of December 31, 2010, December 31, 2011, June 30, 2012 and December 31, 2012, with potential accelerated vesting upon the termination of Mr. Karmazin’s employment by us without cause, by him for good reason, upon his death or disability and in the event of a change of control. These options will generally expire no later than December 31, 2014;providedthat if the parties subsequently agree to extend the term of his employment agreement through December 31, 2013 or later, then the term of these options will automatically extend until the later of (i) December 31, 2015 and (ii) the date that is one year following the date that such new employment agreement expires, but no later than the 10th anniversary of the date of grant.
In the event Mr. Karmazin’s employment is terminated by us without cause or by Mr. Karmazin for good reason, his unvested stock options will vest immediately and become exercisable, and we will be obligated to pay Mr. Karmazin upon termination, in a lump sum, his current base salary through December 31, 2012, any earned but unpaid annual bonus, a pro rata portion of his target bonus for the year in which the termination occurs (if established) and to continue his health and life insurance benefits through December 31, 2012.
In the event Mr. Karmazin’s employment is terminated as a result of his death or by us as a result of his disability, subject to Mr. Karmazin (or his beneficiary or his estate, as applicable) executing a release of claims, the vesting of his unvested stock options will accelerate and become exercisable.
In the event that any payment we make, or benefit we provide, to Mr. Karmazin would require him to pay an excise tax under Section 280G of the Internal Revenue Code, we have agreed to pay Mr. Karmazin the amount of such tax and such additional amount as may be necessary to place him in the exact same financial position that he would have been in if the excise tax was not imposed.
In July 2009, we entered into a new employment agreement with Scott A. Greenstein to continue to serve as our President and Chief Content Officer through July 27, 2013. The employment agreement provides for an
34
initial annual base salary of $850,000 and specified increases to no less than $925,000 in January 2010, $1,000,000 in January 2011, $1,100,000 in January 2012, and $1,250,000 in January 2013. Mr. Greenstein waived the increase in his base salary that was scheduled to take effect in January 2012 under his employment agreement. Mr. Greenstein is also entitled to participate in any bonus plans generally offered to our executive officers.
35
In connection with the execution of the employment agreement, we granted Mr. Greenstein an option to purchase 27,768,136 shares of our common stock at an exercise price of $0.43 per share (the closing price of our common stock on the date of the employment agreement). These options vest in four equal installments on each of July 26, 2010, July 26, 2011, July 26, 2012 and July 26, 2013, with potential accelerated vesting upon the termination of Mr. Greenstein’s employment by us without cause, by him for good reason, and upon his death or disability. These options will generally expire no later than July 27, 2019, subject to earlier termination following Mr. Greenstein’s termination of employment.
In the event Mr. Greenstein’s employment is terminated by us without cause or he terminates his employment for good reason, subject to his execution of a release of claims, we are obligated to pay him a lump sum payment equal to his then annual salary and the cash value of the bonus last paid or payable to him in respect of the fiscal year preceding the fiscal year in which the termination occurs and to continue his health and life insurance benefits for one year.
In the event that any payment we make, or benefit we provide, to Mr. Greenstein would require him to pay an excise tax under Section 280G of the Internal Revenue Code, we have agreed to pay Mr. Greenstein the amount of such tax and such additional amount as may be necessary to place him in the exact same financial position that he would have been in if the excise tax was not imposed.
In October 2009, we entered into a new employment agreement with James E. Meyer to continue to serve as our President, Operations and Sales, through May 1, 2013. The employment agreement provides for an initial base salary of $950,000 with specified increases to $1,100,000 in January 2010, $1,200,000 in May 2011, and $1,300,000 in June 2012. In 2010, Mr. Meyer waived the increaseincreases in his base salary that waswere scheduled to take effect in May 2011 and June 2012 under his employment agreement. In February 2011, we entered into an amendment to our employment agreement with Mr. Meyer. The amendment changed the date that Mr. Meyer may elect to retire from April 2011 to May 2012, delayed a previously scheduled increase in Mr. Meyer’s base salary from May 1, 2012 to June 1, 2012 and eliminated our obligation to offer Mr. Meyer a one-year consulting agreement upon expiration of his employment agreement or upon his retirement.
In March 2012, we entered into another amendment to our employment agreement with Mr. Meyer that changed the date that he may elect to retire from May 2012 to May 2013.In connection with the execution of the 2009 employment agreement, we granted Mr. Meyer an option to purchase 25,184,984 shares of our common stock at an exercise price of $0.5752 per share (the closing price of our common stock on date of the employment agreement). The options generally vest in four equal annual installments on each of October 14, 2010, October 14, 2011, October 14, 2012 and October 14, 2013, and expire on October 14, 2019, with potential accelerated vesting upon the termination of Mr. Meyer’s employment agreement by us without cause or by him for good reason. If Mr. Meyer’s employment is terminated due to his death or by us as a result of his disability, the vesting of the portion of his option award that otherwise would have become vested within 12 months following the date of such termination will accelerate.
If Mr. Meyer’s employment is terminated without cause or he terminates his employment for good reason, subject to his execution of a release of claims and his compliance with certain restrictive covenants, we are obligated to continue his health benefits for 18 months and his life insurance benefits for one year and pay him a lump sum payment within 60 days, equal to Mr. Meyer’s annual base salary plus the greater of (x) a bonus equal to 60% of his then annual base salary or (y) the prior year’s bonus actually paid to him (the “Designated Amount”). In the event Mr. Meyer elects to retire in May 2012,2013, subject to his execution of a release of claims and his compliance with certain restrictive covenants and generally in lieu of any other payments under his employment agreement, we are obligated to continue his health benefits for two years and pay him a lump sum within 60 days equal to two times the Designated Amount.
36
In the event that any payment we make, or benefit we provide, to Mr. Meyer would require him to pay an excise tax under Section 280G of the Internal Revenue Code, we have agreed to pay Mr. Meyer the amount of
35
such tax and such additional amount as may be necessary to place him in the exact same financial position that he would have been in if the excise tax was not imposed.
In September 2008,August 2011, we entered into a three yearnew employment agreement with Dara F. Altman to continue to serve as our Executive Vice President and Chief Administrative Officer through September 25, 2011.August 15, 2015. This employment agreement provides for an annual base salary of $446,332,$500,000, subject to approved increases.
In connection with the execution of the employment agreement, we granted Ms. Altman an option to purchase 7,500,000 shares of our common stock at an exercise price of $1.69 per share (the last sale price of our common stock on The NASDAQ Global Select Market on the date of execution of the employment agreement). The option will generally vest in four equal annual installments on each of August 23, 2012, August 23, 2013, August 23, 2014 and August 23, 2015, and expires on August 23, 2021, with potential accelerated vesting upon the termination of Ms. Altman’s employment agreement by us without cause, by her for good reason, due to her death or by us as a result of disability.
If Ms. Altman’s employment is terminated without cause or she terminates her employment for good reason, subject to heran execution of a release of claims, we are obligated to pay her a lump sum payment equal to her then annual salary and the cash value of the bonus last paid or payable to her in respect of the preceding fiscal year and to continue her medical, dentalhealth and life insurance benefits for 24 months following her termination and pay her a lump sum severance payment, in cash equal to two times the sum of (1) her base salary as in effect immediately prior to the termination date or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting good reason, and (2) the higher of (a) the last annual bonus actually paid to her and (b) 55% of her base salary as in effect immediately prior to the termination date or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting good reason, and a cash amount equal to the sum of (1) a pro rata cash bonus award for the uncompleted plan year in which the termination occurs and (2) any unpaid incentive compensation that is contingent only upon the continued employment of Ms. Altman and that was allocated or awarded to Ms. Altman for the completed fiscal year or other measuring period preceding the date of termination. We are also obligated to pay outplacement services for a period up to two years or until Ms. Altman accepts an offer of employment. In addition, all options to purchase our common stock, restricted stock units or restricted shares of common stock issued by us to her during the term that are held by her on the termination date shall immediately vest. Any such vested but unexercised stock options shall expire 90 days following the termination.
one year.In the event that any payment we make, or benefit we provide, to Ms. Altman would require her to pay an excise tax under Section 280G of the Internal Revenue Code, we have agreed to pay Ms. Altman the amount of such tax and any additional amount as may be necessary to place her in the exact same financial position that she would have been in if the excise tax was not imposed.
In January 2010, we entered into a new employment agreement with Patrick L. Donnelly to continue to serve as our Executive Vice President, General Counsel and Secretary, through January 13, 2014. The employment agreement provides for an annual base salary in 2010 of $575,000, subject to specified increases to no less than $625,000 in January 2011, $675,000 in January 2012, and $725,000 in January 2013. In 2010, Mr. Donnelly waived the increaseincreases in his base salary that he would have been entitledwere scheduled to take effect in January 2011 and 2012 under his employment agreement.
In connection with the execution of the employment agreement, we granted Mr. Donnelly an option to purchase 13,163,495 shares of our common stock at an exercise price of $0.6669 per share (the last sale price of our common stock on The NASDAQ Global Select Market prior to the execution of the employment agreement). The option will generally vest in four equal annual installments on each of January 14, 2011, January 14, 2012, January 14, 2013 and January 14, 2014, and expires on January 14, 2020, with potential accelerated vesting upon the termination of Mr. Donnelly’s employment agreement by us without cause, by him for good reason, due to his death or by us as a result of disability.
If Mr. Donnelly’s employment is terminated without cause or he terminates his employment for good reason, subject to an execution of a release of claims, we are obligated to pay him a lump sum payment equal to his then annual salary and the cash value of the bonus last paid or payable to him in respect of the preceding fiscal year and to continue his health and life insurance benefits for one year.
37
In the event that any payment we make, or benefit we provide, to Mr. Donnelly would require him to pay an excise tax under Section 280G of the Internal Revenue Code, we have agreed to pay Mr. Donnelly the
36
amount of such tax and any additional amount as may be necessary to place him in the exact same financial position that he would have been in if the excise tax was not imposed.
In June 2003,July 2011, we entered into ana new employment agreement with David A.J. Frear to continue to serve as our Executive Vice President and Chief Financial Officer.Officer through July 20, 2015. The employment agreement was amended in August 2005 and February 2008, and is effective through July 31, 2011. The employment agreement, as amended, provides for an annual base salary of $750,000,$850,000, subject to approved increases.
In connection with the execution of the employment agreement, we granted Mr. Frear an option to purchase 16,000,000 shares of our common stock at an exercise price of $2.18 per share (the last sale price of our common stock on The NASDAQ Global Select Market on the date of execution of the employment agreement). The option will generally vest in four equal annual installments on each of July 21, 2012, July 21, 2013, July 21, 2014 and July 21, 2015, and expires on July 21, 2021, with potential accelerated vesting upon the termination of Mr. Frear’s employment agreement by us without cause, by him for good reason, due to his death or by us as a result of disability.
If Mr. Frear’s employment is terminated without cause or he terminates his employment for good reason, subject to his execution of a release of claims, we are obligated to pay him a lump sum equal to his annual salary as of the date of the termination and the cash value of the bonus last annual bonus actually paid or payable to him in respect of the preceding fiscal year and to continue his health and life insurance benefits for one year.
In the event that any payment we make, or benefit we provide, to Mr. Frear would require him to pay an excise tax under Section 280G of the Internal Revenue Code, we have agreed to pay Mr. Frear the amount of such tax and such additional amount as may be necessary to place him in the exact same financial position that he would have been in if the excise tax was not imposed.
2003 Long-Term Stock Incentive Plan
Messrs. Greenstein, Meyer, DonnelleyDonnelly and Frear also have outstanding options or restricted stock units as of December 31, 20102011 that were granted under the 2003 Long-Term Stock Incentive Plan. Under the 2003 Long-Term Stock Incentive Plan, the outstanding equity awards granted to these named executive officers are subject to potential accelerated vesting upon a change of control. In addition, Mr. Frear’s award agreements relating to options and restricted stock units granted to him in February 2008 under the 2003 plan provide that such equity awards are subject to potential accelerated vesting upon his death and disability. All of the outstanding options granted under the 2003 plan held by the named executive officers were “out-of the money” as of December 31, 2010,2011, and, therefore, are not included in the table of potential payments and benefits below.
2009 Long-Term Stock Incentive Plan
All of our named executive officers have outstanding equity awards as of December 31, 20102011 that were granted under the 2009 Long-Term Stock Incentive Plan. Under the terms of the 2009 plan, the outstanding equity awards granted to the named executive officers are subject to potential accelerated vesting upon termination without cause by the company or termination by the executive for good reason during a two year period following a change of control, to the extent outstanding awards granted under the plan are either assumed, converted or replaced by the resulting entity in the event of a change of control.
37
38
Potential Payments and Benefits
The following table describes the potential payments and benefits under the named executive officers’ agreements and our stock incentive plans to which they would have been entitled if a termination of employment orchange-in-control had occurred as of December 31, 2010:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Lump Sum
| | | Accelerated
| | | Continuation of
| | | | | | | |
| | | | | Severance
| | | Equity
| | | Insurance
| | | Excise Tax
| | | | |
| | | | | Payment
| | | Vesting(1)
| | | Benefits(2)
| | | Gross-Up
| | | Total
| |
Name | | Triggering Event | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | |
| |
| Mel Karmazin | | Change-in-control | | | — | | | | 108,000,000 | | | | — | | | | 7,123,771 | | | | 115,123,771 | |
| | | Termination due to death or disability | | | — | | | | 108,000,000 | | | | — | | | | — | | | | 108,000,000 | |
| | | Termination without cause or for good reason | | | 3,000,000 | | | | 108,000,000 | | | | 32,487 | | | | — | | | | 111,032,487 | |
| | | Termination without cause or for good reason following change-in-control | | | 3,000,000 | | | | 108,000,000 | | | | 32,487 | | | | 8,731,686 | | | | 119,764,173 | |
| Scott A. Greenstein | | Termination due to death or disability | | | — | | | | 24,991,322 | | | | — | | | | — | | | | 24,991,322 | |
| | | Termination without cause or for good reason | | | 1,925,000 | | | | 24,991,322 | | | | 18,679 | | | | — | | | | 26,935,001 | |
| | | Termination without cause or for good reason following change-in-control | | | 1,925,000 | | | | 24,991,322 | | | | 18,679 | | | | — | | | | 26,935,011 | |
| James E. Meyer | | Termination due to death or disability | | | — | | | | 6,641,280 | | | | — | | | | — | | | | 6,641,280 | |
| | | Termination without cause or for good reason | | | 2,350,000 | | | | 19,923,841 | | | | 29,629 | | | | — | | | | 22,303,470 | |
| | | Termination for scheduled retirement(3) | | | 4,700,000 | | | | — | | | | 49,781 | | | | — | | | | 4,749,781 | |
| | | Termination without cause or for good reason following change-in-control | | | 2,350,000 | | | | 22,306,961 | | | | 29,629 | | | | — | | | | 24,686,590 | |
| Dara F. Altman | | Termination without cause or for good reason | | | 2,092,663 | | | | 1,952,378 | | | | 51,928 | | | | — | | | | 4,096,969 | |
| | | Termination without cause or for good reason following change-in-control | | | 2,092,663 | | | | 1,952,378 | | | | 51,928 | | | | — | | | | 4,096,969 | |
| Patrick L. Donnelly | | Termination due to death or disability | | | — | | | | 12,677,762 | | | | — | | | | — | | | | 12,677,762 | |
| | | Termination without cause or for good reason | | | 1,325,000 | | | | 12,677,762 | | | | 20,153 | | | | — | | | | 14,022,915 | |
| | | Termination without cause or for good reason following change-in-control | | | 1,325,000 | | | | 14,266,748 | | | | 20,153 | | | | — | | | | 15,611,901 | |
| David J. Frear | | Change-in-control | | | — | | | | 163,000 | | | | — | | | | — | | | | 163,000 | |
| | | Termination due to death or disability | | | — | | | | 163,000 | | | | — | | | | — | | | | 163,000 | |
| | | Termination without cause or for good reason | | | 1,600,000 | | | | — | | | | 18,679 | | | | — | | | | 1,618,679 | |
| | | Termination without cause or for good reason following a change-in-control | | | 1,600,000 | | | | 3,076,418 | | | | 18,679 | | | | — | | | | 4,695,097 | |
| | | | | | | | | | | | | | | | | | | | | | |
Name | | Triggering Event | | Lump Sum
Severance
Payment
($) | | | Accelerated
Equity
Vesting(1)
($) | | | Continuation of
Insurance
Benefits(2)
($) | | | Excise Tax
Gross-Up
($) | | | Total
($) | |
Mel Karmazin | | Change-in-control | | | — | | | | 83,400,000 | | | | — | | | | — | | | | 83,400,000 | |
| | Termination due to death or disability | | | — | | | | 83,400,000 | | | | — | | | | — | | | | 83,400,000 | |
| | Termination without cause or for good reason | | | 1,500,000 | | | | 83,400,000 | | | | 13,941 | | | | — | | | | 84,913,941 | |
| | Termination without cause or for good reason following change-in-control | | | 1,500,000 | | | | 83,400,000 | | | | 13,941 | | | | — | | | | 84,913,941 | |
Scott A. Greenstein | | Termination due to death or disability | | | — | | | | 19,298,855 | | | | — | | | | — | | | | 19,298,855 | |
| | Termination without cause or for good reason | | | 2,150,000 | | | | 19,298,855 | | | | 21,233 | | | | — | | | | 21,470,088 | |
| | Termination without cause or for good reason following change-in-control | | | 2,150,000 | | | | 19,298,855 | | | | 21,233 | | | | — | | | | 21,470,088 | |
James E. Meyer | | Termination due to death or disability | | | — | | | | 7,837,567 | | | | — | | | | — | | | | 7,837,567 | |
| | Termination without cause or for good reason | | | 2,600,000 | | | | 15,675,134 | | | | 31,454 | | | | — | | | | 18,306,588 | |
| | Termination for scheduled retirement(3) | | | 5,200,000 | | | | — | | | | 52,823 | | | | — | | | | 5,252,823 | |
| | Termination without cause or for good reason following change-in-control | | | 2,600,000 | | | | 17,579,471 | | | | 31,454 | | | | — | | | | 20,210,924 | |
Dara F. Altman | | Termination due to death or disability | | | — | | | | 975,000 | | | | — | | | | — | | | | 975,000 | |
| | Termination without cause or for good reason | | | 1,200,000 | | | | 975,000 | | | | 21,233 | | | | — | | | | 2,196,233 | |
| | Termination without cause or for good reason following change-in-control | | | 1,200,000 | | | | 2,542,764 | | | | 21,233 | | | | — | | | | 3,763,997 | |
Patrick L. Donnelly | | Termination due to death or disability | | | — | | | | 11,384,119 | | | | — | | | | — | | | | 11,384,119 | |
| | Termination without cause or for good reason | | | 1,475,000 | | | | 11,384,119 | | | | 21,233 | | | | — | | | | 12,880,352 | |
| | Termination without cause or for good reason following change-in-control | | | 1,475,000 | | | | 12,653,868 | | | | 21,233 | | | | — | | | | 14,150,101 | |
David J. Frear | | Termination without cause or for good reason | | | 1,850,000 | | | | — | | | | 21,233 | | | | — | | | | 1,871,233 | |
| | Termination without cause or for good reason following a change-in-control | | | 1,850,000 | | | | 2,582,957 | | | | 21,233 | | | | — | | | | 4,454,190 | |
| | |
| (1) | | Amounts were calculated based on the closing price on the NASDAQ Global Select Market of our common stock on December 31, 201030, 2011 of $1.63.$1.82. The accelerated vesting of options is valued at (a) the difference |
39
| between the closing price and the exercise price of the options multiplied by (b) the number of shares of common stock underlying the options. The accelerated vesting of restricted stock and restricted stock units is valued at the closing price times the number of shares of restricted stock and restricted stock units. |
38
| | |
| (2) | | Assumes that medical and dental benefits would be continued under COBRA for up to 18 months at current rates; thereafter assumes rate of two times current employer costs, unless otherwise indicated in the employment agreement. Assumes that life insurance would be continued at rate of two times current employer cost. For Ms. Altman, also includes the present value of up to two years of outplacement services upon termination without cause or for good reason pursuant to the terms of her employment agreement. |
|
| (3) | | Refers to scheduled retirement in May 2012 pursuant to the terms of Mr. Meyer’s employment agreement.agreement, as in effect on December 31, 2011. |
39
40
ITEM 2 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Ratification of Independent Registered Public Accountants
(Item 2 on Proxy Card)
The Audit Committee has selected KPMG LLP (“KPMG”) as our independent registered public accountants for 2011.2012. As such, KPMG will audit and report on our financial statements for the year ending December 31, 2011.2012 and on the effectiveness of internal control over financial reporting as of December 31, 2012. KPMG has served as our independent registered public accountants since September 2008. The Audit Committee and the board are requesting, as a matter of policy, that stockholders ratify the selection of KPMG. The Audit Committee and the board are not required to take any action as a result of the outcome of the vote on this proposal.
Representatives of KPMG are expected to be present at the annual meeting. They will have an opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
The board of directors unanimously recommends a vote “FOR” the ratification of KPMG LLP as our independent registered public accountants for 2011.
Principal Accountant Fees and Services
The following table sets forth the fees billed to us by KPMG as of and for the years ended December 31, 20102011 and 2009:
| | | | | | | | | |
| | | For the Year Ended
| |
| | | December 31, | |
| | | 2010 | | | 2009 | |
| |
| Audit fees(1) | | $ | 1,872,327 | | | $ | 2,175,458 | |
| Audit-related fees(2) | | | 98,350 | | | | 183,725 | |
| Tax fees(3) | | | 22,969 | | | | — | |
| All other fees(4) | | | — | | | | 22,187 | |
| | | | | | | | | |
| | | $ | 1,993,646 | | | $ | 2,381,370 | |
| | | | | | | | | |
| | | | | | | | |
| | | For the Year Ended
December 31, | |
| | | 2011 | | | 2010 | |
Audit fees(1) | | $ | 1,715,660 | | | $ | 1,872,327 | |
Audit-related fees(2) | | | 277,006 | | | | 98,350 | |
Tax fees(3) | | | 113,365 | | | | 22,969 | |
All other fees(4) | | | 28,121 | | | | — | |
| | | | | | | | |
| | $ | 2,134,152 | | | $ | 1,993,646 | |
| | | | | | | | |
| | |
| (1) | | Audit fees billed by KPMG related to the audits of our annual consolidated financial statements and internal control over financial reporting; the review of our interim consolidated financial statements; review of documents filed with the SEC, including comfort letters, consents and registration statements;SEC; and reimbursement for directout-of-pocket expenses. |
|
| (2) | | Audit-related fees billed by KPMG related to audits of employee benefit plans.plans, licensing and contractual compliance services, and financial due diligence services. |
|
| (3) | | FeesTax fees billed by KPMG LLP for services relating to federal, state and local tax consulting services.consulting. |
|
| (4) | | FeesAll other fees billed for all other services rendered to us for state and local tax compliance and consulting servicesby KPMG LLP related to engagements originating prior to KPMG’s appointment as our independent auditor.seminars purchased by us. |
Pre-Approval Policy for Services of Independent Auditor
It is the Audit Committee’s responsibility to review and consider, and ultimately pre-approve, all audit and permitted non-audit services to be performed by our independent registered public accounting firm. In accordance with its charter, the Audit Committee’s pre-approval policies with respect to audit and permitted non-audit services to be provided by our independent registered public accounting firm are as follows:
The independent registered public accounting firm is not permitted to perform consulting, legal, book-keeping, valuation, internal audit, management functions, or other prohibited services, under any circumstances;
The engagement of our independent registered public accounting firm, including related fees, with respect to the annual audits and quarterly reviews of our consolidated financial statements is specifically approved by the Audit Committee on an annual basis;
| | |
| • | The independent registered public accounting firm is not permitted to perform consulting, legal, book-keeping, valuation, internal audit, management functions, or other prohibited services, under any circumstances; |
|
| • | The engagement of our independent registered public accounting firm, including related fees, with respect to the annual audits and quarterly reviews of our consolidated financial statements is specifically approved by the Audit Committee on an annual basis; |
40
The Audit Committee reviews and pre-approves a detailed list of other audit and audit-related services annually or more frequently, if required. Such services generally include services performed under the audit and attestation standards established by regulatory authorities or standard setting bodies and include services related to SEC filings, employee benefit plan audits and subsidiary audits;
41
The Audit Committee reviews and pre-approves a detailed list of permitted non-audit services annually or more frequently, if required; and
The Audit Committee pre-approves each proposed engagement to provide services not previously included in the approved list of audit and non-audit services and for fees in excess of amounts previously pre-approved.
| | |
| • | The Audit Committee reviews and pre-approves a detailed list of other audit and audit-related services annually or more frequently, if required. Such services generally include services performed under the audit and attestation standards established by regulatory authorities or standard setting bodies and include services related to SEC filings, employee benefit plan audits and subsidiary audits; |
|
| • | The Audit Committee reviews and pre-approves a detailed list of permitted non-audit services annually or more frequently, if required; and |
|
| • | The Audit Committee pre-approves each proposed engagement to provide services not previously included in the approved list of audit and non-audit services and for fees in excess of amounts previously pre-approved. |
The Audit Committee has delegated to the chair of the Audit Committee the authority to approve permitted services by the independent registered public accounting firm so long as he or she reports decisions to the Audit Committee at its next meeting.
All of the services covered under the captions “Audit Fees”, “Audit-Related Fees” and “Audit-Related“Tax Fees” were pre-approved by the Audit Committee.
Who is the Audit Committee’s financial expert?
Our board of directors has determined that Joan L. Amble, the chairwoman of the Audit Committee and an independent director, is qualified as an “audit committee financial expert” within the meaning of SEC regulations, and she has accounting and relatedis financial management expertisesophisticated within the meaning of the NASDAQ listing standards.
REPORT OF THE AUDIT COMMITTEE
As described more fully in its charter, the purpose of the Audit Committee is to assist our board of directors in its general oversight of our financial reporting, internal control and audit functions. Management is responsible for the preparation, presentation and integrity of our consolidated financial statements; accounting and financial reporting principles; and internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. KPMG LLP, our independent registered public accounting firm, is responsible for performing an independent audit of our consolidated financial statements and the effectiveness of internal control over financial reporting in accordance with auditing standards generally accepted inof the United States.
Public Company Accounting Oversight Board (United States).In the performance of its oversight function, the Audit Committee reviewed and discussed our audited financial statements with management and with our independent registered public accounting firm. The Audit Committee also discussed with the independent registered public accounting firm the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards, Vol. 1. AU section 380)., as adopted by the Public Company Accounting Oversight Board in Rule 32007. In addition, the Audit Committee received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and discussed with the independent registered public accounting firm their independence.
Based upon the review and discussions described in the preceding paragraph, the Audit Committee recommended to the board of directors that our audited financial statements be included in our Annual Report onForm 10-K for the year ended December 31, 20102011 filed with the SEC.
JoanJOAN L. Amble, Chairwoman
EddyAMBLE, CHAIRWOMAN
EDDY W. Hartenstein
JamesHARTENSTEIN
JAMES P. Holden
JamesHOLDEN
JAMES F. Mooney
41VANESSA A. WITTMAN
42
Advisory Vote on Executive Compensation
(Item 3 on Proxy Card)
In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)) and the related rules of the SEC, we are including in this proxy statement a separate resolution subject to stockholder vote to approve, in a non-binding, advisory vote, the compensation paid to our named executive officers. While the results of the vote are non-binding and advisory in nature, the board of directors intends to consider the results of this vote.
The language of the resolution is as follows:
“RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed in this proxy statement pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and any related narrative discussion is hereby APPROVED.”
This vote is not intended to address any specific item of compensation, but rather our executive compensation as disclosed in this proxy statement. Accordingly, your vote will not directly affect or otherwise limit any existing compensation or award arrangement of any of our named executive officers.
The board of directors recommends that stockholders vote “FOR” this proposal.
What is the advisory vote on the“say-on-pay” proposal?
You are voting on a proposal, commonly known as a“say-on-pay” proposal, which gives stockholders the opportunity to approve or disapprove, in a non-binding vote, of our executive compensation.
What factors should I consider in voting on this proposal?
We urge you to consider the various factors regarding compensation matters as discussed in the Compensation Discussion and Analysis, beginning on page 21 of this proxy statement.
As discussed at length in the Compensation Discussion and Analysis, we believe that our executive compensation program is reasonable, competitive and strongly focused on performance. Through equity-based incentives, we also align the interests of our named executive officers with those of our stockholders and the long-term interests of SIRIUS XM. Our executive compensation policies have enabled us to attract and retain talented and experienced senior executives. We believe that the 2010 compensation of our named executive officers was appropriate and aligned with our 2010 results and position us for continued strong performance in future years.
42
Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation
(Item 4 on Proxy Card)
In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Act) and the related rules of the SEC, we are submitting for stockholder consideration a separate resolution to determine, in a non-binding, advisory vote, whether a stockholder vote to approve the compensation paid to our named executive officers should occur every one, two or three years. While the results of the vote are non-binding and advisory in nature, the board of directors intends to consider the results of this vote.
After consideration, the board of directors has determined that an advisory vote on executive compensation that occurs every three years (triennially) is the most appropriate policy for us. Our reasons include:
| | |
| • | We value consistency and we do not expect our executive compensation program to change significantly from year to year; |
|
| • | In our view, our executive compensation program does not contain any significant risks that might be of concern to our stockholders; |
|
| • | A longer frequency is generally consistent with our long-term compensation objectives; and |
|
| • | Our executive compensation program is designed to reward and incentivize long-term performance and a triennial vote corresponds more closely with our long-term incentive awards, which typically vest over a three or four year period. |
We encourage our stockholders to evaluate our executive compensation program over a multi-year horizon and to review our named executive officers’ compensation over the past three fiscal years as reported in the Summary Compensation Table. We believe that a triennial advisory vote on executive compensation reflects the appropriate time frame for our board of directors and Compensation Committee to evaluate the results of the most recent advisory vote on executive compensation, to discuss the implications of that vote with stockholders to the extent needed, to develop and implement any adjustments to our executive compensation program that may be appropriate in light of a past advisory vote on executive compensation, and for stockholders to see and evaluate the compensation committee’s actions in context. Because the advisory vote on executive compensation occurs after we have already implemented our executive compensation program for the current year, and because the different elements of compensation are designed to operate in an integrated manner and to complement one another, in certain cases it may not be appropriate or feasible to fully address and respond to any one year’s advisory vote on executive compensation by the time of the following year’s annual meeting of stockholders.
We have in the past been, and will in the future continue to be, engaged with our stockholders on a number of topics and in a number of forums. We view the advisory vote on executive compensation as an additional, but not exclusive, opportunity for our stockholders to communicate with us regarding their views on executive compensation. In addition, because our executive compensation program has not typically changed materiallyyear-to-year and is designed to operate over the long-term and to enhance long-term performance, an annual advisory vote on executive compensation could lead to a near-term perspective inappropriately bearing on our executive compensation programs. We believe that holding an advisory vote on executive compensation every three years will reflect the right balance of considerations in the normal course, but we intend to periodically reassess that view and can provide for an advisory vote on executive compensation on a more frequent basis if changes in our compensation program or other circumstances suggest that such a vote would be appropriate.
Stockholders will be able to specify one of four choices for this proposal on the proxy card: three years, two years, one year or abstain. Stockholders are not voting to approve or disapprove the board’s recommendation. This advisory vote on the frequency of future advisory votes on executive compensation is non-binding on the board of directors. Notwithstanding the board’s recommendation and the outcome of the stockholder vote, the board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to compensation programs.
The board of directors recommends that stockholders vote “THREE YEARS” with respect to the frequency with which stockholders are provided an advisory vote on the compensation paid to our named executive officers.
43
OTHER MATTERS
Our board of directors does not intend to present, or have any reason to believe others will present, any other items of business. If other matters are properly brought before the annual meeting, the persons named in the accompanying proxy will vote the shares represented by it in accordance with the recommendation of our board of directors.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 25, 201122, 2012
This proxy statement and our annual report for the year ended December 31, 20102011 are available for you to view online athttp://bnymellon.mobular.net/bnymellon/siri.www.proxyvoting.com/siri.
By Order of the Board of Directors,
Patrick L. Donnelly
Executive Vice President,
General Counsel and Secretary
We make available, free of charge on our website, all of our filings that are made electronically with the SEC, includingForms 10-K,10-Q and8-K. To access these filings, go to our website,www.siriusxm.com, and click on “Reports & Filings” and then on “SEC Filings” under the “Investor Relations” heading. Copies of our Annual Report onForm 10-K for the year ended December 31, 2010, including financial statements and schedules thereto, are also available without charge to stockholders upon written request addressed to:
Investor Relations
Sirius XM Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
44
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY. |
We encourage youmake available, free of charge on our website, all of our filings that are made electronically with the SEC, including Forms 10-K, 10-Q and 8-K. To access these filings, go to take advantageour website,www.siriusxm.com, and click on “Reports & Filings” and then on “SEC Filings” under the “Investor Relations” heading. Copies of Internet or telephone voting. Bothour Annual Report on Form 10-K for the year ended December 31, 2011, including financial statements and schedules thereto, are also available 24 hours a day, 7 days a week. Internet and telephone voting is available through 11:59 PM Eastern Tim e on the day priorwithout charge to annual meeting day. stockholders upon written request addressed to: |
Investor Relations Sirius XM Radio Inc. 1221 Avenue of the Americas 36th Floor New York, New York 10020 |
43
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time on
the day prior to annual meeting day.
| | |
Sirius XM Radio Inc. | | INTERNET http://www.proxyvoting.com/siri Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site. |
| OR |
| TELEPHONE 1-866-540-5760 Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. |
| If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card. To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. |
| | | | |
WO# 97624 FOLD AND DETACH HERE A. 21690 | | Fulfillment# 21699-1 | | |
‚ FOLD AND DETACH HERE ‚
| | | | |
| | Please mark your votes as indicated in this example | | x |
1. Sirius XM’s Directors recommend a voteFOR each director (please mark your vote for each director separately).
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | 2. Sirius XM’s Directors recommend a voteFOR Proposal 2. | | |
| | | | | | FOR ALL | | WITHHOLD FOR each director (please mark your vote for each director separately). Please mark your votes as indicated in this example X ALL | | *EXCEPTIONS | | | | | | | | FOR | | AGAINST | | ABSTAIN |
| | | | | | | | | | |
Item 1. | | Election of Directorsdirectors for a Term of one year FOR AGAINST ABSTAIN 1.1 Joan L. Amble 1.2 Leon D. Black 1.3 Lawrence F. Gilberti 1.4 Eddy W. Hartenstein FOR AGAINST ABSTAIN 1.5 James P. Holden 1.6 Mel Karmazin 1.7 James F. Mooney 1.8 Jack Shaw B. Sirius XM’s Directors recommend a vote FOR Proposals 2-3. FOR AGAINST ABSTAIN | | ¨ | | ¨ | | ¨ | | | | Item 2. | | Ratification of the appointment of KPMG LLP as our independent registered public accountants for 2011. Item 3. Proposal2012. | | ¨ | | ¨ | | ¨ |
| | | | | | | | |
| | Nominees: | | | | | | | | | | | | | | |
| | | | | | | | |
| | 1.1 Joan L. Amble | | 1.5 James P. Holden | | | | | | | | | | | | |
| | 1.2 Leon D. Black | | 1.6 Mel Karmazin | | | | | | | | | | | | |
| | 1.3 Lawrence F. Gilberti | | 1.7 James F. Mooney | | | | | | | | | | | | |
| | 1.4 Eddy W. Hartenstein | | 1.8 Jack Shaw | | | | | | | | | | | | |
(INSTRUCTIONS: To withhold authority to approve the advisory (non-binding) resolution relating to executive compensation. C. Sirius XM’s Directors recommends a vote for stockholder approval EVERY (3) YEARS on Item 4. 1 YEAR 2 YEARS 3 YEARS ABSTAIN Item 4. Advisory (non-binding) vote on frequency of future executive compensation votes. any individual nominee, mark the “Exceptions” box above and write that nominee’s name in the space provided below.) | | | | | | | | | | | | |
*Exceptions | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Mark Here for | | ¨ | | |
| | | | | | | | | | | | | | | | | | | | | | Address Change | | |
| | | | | | | | | | | | | | | | | | | | | | or Comments | | |
| | | | | | | | | | | | | | | | | | | | | | SEE REVERSE The signature should correspond exactly with stockholders name as printed to the left. In case of joint tenancies, co-executors, or co-trustees, both should sign. Persons signing as Attorney, Executor, Administrator, Trustee or Guardian should give their full title. Signature Signature Date | | |
The signature should correspond exactly with stockholders name as printed to the left. In case of joint tenancies, co-executors, or co-trustees, both should sign. Persons signing as Attorney, Executor, Administrator, Trustee or Guardian should give their full title.
SIRIUS XM RADIO INC.
ADMISSION TICKET
2012 ANNUAL MEETING OF STOCKHOLDERSTUESDAY, MAY 22, 2012
9:00 A.M.
TO BE HELD AT
THE EQUITABLE CENTER
THE AUDITORIUM
787 SEVENTH AVENUE
NEW YORK, NEW YORK
THIS TICKET MUST BE PRESENTED TO ENTER THE MEETING
SIRIUS XM RADIO INC. ADMISSION TICKET 2011 ANNUAL MEETING OF STOCKHOLDERS WEDNESDAY, MAY 25, 2011 9:00 A.M. TO BE HELD AT THE EQUITABLE CENTER THE AUDITORIUM 787 SEVENTH AVENUE NEW YORK, NEW YORK THIS TICKET MUST BE PRESENTED TO ENTER THE MEETING |
Choose MLinkSM MLinkSMfor fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect(R) ServiceDirect®atwww.bnymellon.com/shareowner/equityaccess where step-by-step instructions will prompt you through enrollment. Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders. The Proxy Statement and 2010 Annual Report, are available at: http://www.proxyvoting.com/siri FOLD AND DETACH HERE SIRIUS XM RADIO INC. Proxy Solicited on behalf of the Board of Directors of Sirius XM Radio Inc. The undersigned hereby appoints Patrick L. Donnelly and Ruth A. Ziegler, and each of them, proxies, with full power of substitution, for and on behalf of the undersigned to represent the undersigned and vote, as directed and permitted herein the undersigned’s shares of Sirius XM Radio Inc. common stock (including any shares of common stock which the undersigned has the right to direct the proxies to vote under the Sirius XM Radio Inc. 401(k) Savings Plan) and shares of Convertible Perpetual Preferred Stock, Series B-1, at the Annual Meeting of Stockholders of Sirius XM Radio Inc. to be held on Wednesday, May 25, 2011, at 9:00 A.M., in the Auditorium at The Equitable Center, 787 Seventh Avenue, New York, New York, and at any adjournments thereof upon all matters set forth in the Proxy Statement and, in their judgment and discretion, upon such other business as may properly come before the meeting. This proxy when properly executed will be voted in the manner directed on the reverse hereof by the Stockholder. If this proxy is executed but no direction is given, this proxy will be voted FOR all nominees listed herein and FOR Items 2 and 3 and EVERY (3) YEARS on Item 4. (Continued and to be dated and signed on the reverse side) |
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders. The Proxy Statement and 2011 Annual Report are available at:http://www.proxyvoting.com/siri
‚ FOLD AND DETACH HERE ‚
SIRIUS XM RADIO INC.
Proxy Solicited on behalf of the Board of Directors of
Sirius XM Radio Inc.
The undersigned hereby appoints Patrick L. Donnelly and Ruth A. Ziegler, and each of them, proxies, with full power of substitution, for and on behalf of the undersigned to represent the undersigned and vote, as directed and permitted herein the undersigned’s shares of Sirius XM Radio Inc. common stock (including any shares of common stock which the undersigned has the right to direct the proxies to vote under the Sirius XM Radio Inc. 401(k) Savings Plan) and shares of Convertible Perpetual Preferred Stock, Series B-1, at the Annual Meeting of Stockholders of Sirius XM Radio Inc. to be held on Tuesday, May 22, 2012, at 9:00 A.M., in the Auditorium at The Equitable Center, 787 Seventh Avenue, New York, New York, and at any adjournments thereof upon all matters set forth in the Proxy Statement and, in their judgment and discretion, upon such other business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed on the reverse side hereof by the undersigned.If this proxy is executed but no direction is given, this proxy will be voted FOR all nominees listed herein and FOR Item 2.
(Continued and to be dated and signed on the reverse side)
| | | | | | | | |
Address Change/Comments (Mark (Mark the corresponding box on the reverse side) BNY MELLON | | | | | | | | |
| | | | | | | | |
| | | | SHAREOWNER SERVICES | | | | |
| | | | P.O. BOX 3550 | | | | |
| | | | SOUTH HACKENSACK, NJ 07606-9250 WO# 97624 | | |
| | | | | | | | |
| | | | |
| | WO# 21690 | | Fulfillment#
21699-1 |
