XM Radio 2009 Annual Report Download - page 19

• 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.
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;
• 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.
Since the beginning of 2009, we have entered into several related party transactions with General Motors,
American Honda and Liberty Media Corporation. Each of these transactions was evaluated and approved in
accordance with our related party transaction policy.
Relationship with General Motors
Distribution Agreement
Our wholly-owned subsidiary, XM Satellite Radio Inc. (“XM”), has a long-term distribution agreement
with General Motors Corp. (“GM”). GM has a representative on our board of directors and is considered a
related party. Mr. Huber has indicated that he does not wish to stand for reelection at this meeting and GM
will no longer be a related party following his term as a director. During the term of the agreement, which
expires in 2020, GM has agreed to distribute the XM service.
In order to encourage the broad installation of XM radios in GM vehicles, XM has agreed to subsidize a
portion of the cost of XM radios, and to make incentive payments to GM when the owners of GM vehicles
with installed XM radios become subscribers to XM’s service. XM must also share with GM a percentage of
the subscription revenue attributable to GM vehicles with installed XM radios. As part of the agreement, GM
provides certain call-center related services directly to XM subscribers who are also GM customers for which
we reimburse GM.
Bandwidth
XM has agreed to make bandwidth available to OnStar Corporation for audio and data transmissions to
owners of XM-enabled GM vehicles, regardless of whether they are XM subscribers. XM can use the
bandwidth until it is actually used by OnStar. OnStar’s use of XM’s bandwidth must be in compliance with
applicable laws, must not compete or adversely interfere with XM’s business, and must meet XM’s quality
standards. XM also granted to OnStar a certain amount of time to use XM’s studios on an annual basis and
agreed to provide certain audio content for distribution on OnStar’s services.
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