XM Radio 2009 Annual Report Download - page 28

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. As reflected in the Grants of Plan-Based
Awards Table for 2009, Mr. Karmazin received an award of stock options in 2009 upon entering into his
employment agreement extension. This is the first equity-based award granted to Mr. Karmazin since joining
us in 2004. The material terms of Mr. Karmazin’s employment agreement are described below under “Potential
Payments Upon Termination and 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 profile, qualifications and experience, particularly in radio, were uniquely
suited to our needs, and that the compensation, including the base salary and stock option components of the
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, nor did he receive
an award of restricted stock units in 2009. In February 2010, with respect to his performance in 2009, the
Compensation Committee awarded a cash bonus to Mr. Karmazin of $7,000,000 in recognition of his
performance and our corporate performance, including:
• Achieving positive free cash flow for the full year 2009;
• Achieving an improvement of over $1 billion in EBITDA over a two-year period;
• Successfully negotiating and executing a restructuring of our capital structure, including the transactions
with Liberty Media;
• Directing the successful integration of the SIRIUS and XM operations, while achieving synergies in
excess of $500 million;
• Increasing our 2009 revenues, on a pro forma basis, by approximately 4% and reducing total cash
operating expenses (excluding depreciation and stock-based compensation) by approximately 20%;
• Stabilizing our average monthly churn;
• Launching the SIRIUS XM on-line application for the iPhone and iPod touch;
• Continuing to enhance our programming while reducing programming expenses; and
• Executing extensions to our agreements with various automakers, and securing increased penetration
rates from automakers.
In May 2009, Mr. Karmazin voluntarily forfeited an aggregate of 30,000,000 non-qualified stock options.
These options had an exercise price of $4.72 per share. Of these options, 24,000,000 were vested, and
6,000,000 were unvested. Upon forfeiture of these options, the shares underlying these options again became
available for grants under the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive
Plan. Mr. Karmazin’s decision to forfeit these options allowed us to more efficiently use these shares to meet
our purposes of attracting, motivating and retaining key employees. Mr. Karmazin did not receive any
consideration in exchange for the forfeiture of these stock options.
Policy with Respect to Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code places a $1 million per person limitation on the tax
deduction we may take for compensation paid to our Chief Executive Officer and our three other highest paid
executive officers other than our Chief Executive Officer and Chief Financial Officer, except that compensation
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