XM Radio 2012 Annual Report Download - page 37

Payments to Named Executive Officers Upon Termination or Change-in-Control
The employment agreements with our named executive officers provide for severance payments upon an
involuntary termination of employment, including involuntary terminations following a 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, and such arrangements allow the executives to focus exclusively on the
Company’s interests.
We believe that severance payments in connection with a change-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 2012 Pay Implications
2012 Base Salary Decisions
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 their respective agreements. Messrs. Meyer, Greenstein
and Donnelly waived the increase in their base salaries that each would have been contractually entitled to in
2012 under their respective employment agreements. We did not solicit those waivers; rather Messrs. Meyer,
Greenstein and Donnelly approached us regarding the contractually required increases in their base salaries after
weighing factors important to each of them.
In December 2012, we entered into an amendment to our existing employment agreement with Mr. Meyer,
pursuant to which he was appointed as our new Chief Executive Officer. In connection with his appointment,
Mr. Meyer’s base salary was reinstated from $1,100,000 to $1,300,000, the amount that Mr. Meyer was
scheduled to receive under the terms of his existing employment agreement and that he had previously waived.
In February 2013, Mr. Greenstein’s base salary was reinstated from $1,000,000 to $1,250,000, and
Mr. Donnelly’s base salary was reinstated from $575,000 to $725,000, as required by the terms of their
respective employment agreements.
There were no base salary increases in 2012 for Messrs. Karmazin or Frear, or Ms. Altman.
Payment of Performance-Based Discretionary Annual Bonuses for 2012
Following the end of 2012, the Compensation Committee met to determine whether to exercise its discretion
to pay bonuses to our named executive officers with respect to 2012 and whether to approve a general cash bonus
pool for our other employees. The Compensation Committee carefully reviewed our performance against key
metrics in our budget and business plan for 2012, 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 our performance in launching new products and services.
Following its review of our 2012 performance, which the Compensation Committee determined in almost
all respects to be superior, the Compensation Committee:
• approved a cash bonus pool to be divided among our employees, other than the named executive
officers;
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