XM Radio 2014 Annual Report Download - page 39

cause, or by the executive for good reason, within two years following a change in control, then in
accordance with the Plans, their equity awards are subject to accelerated vesting.
We believe that these severance 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 our interests.
Fiscal Year 2014 Pay Implications
2014 Base Salary Decisions
We have entered into employment agreements with each of our named executive officers. In
2014, Mr. Donnelly’s base salary was increased as part of the negotiation of his continued
employment agreement. In 2014, no other base salary increases were made for our named
executive officers.
Payment of Performance-Based Discretionary Annual Bonuses for 2014
In 2014, the Compensation Committee again adopted, under the Sirius XM Radio Inc. 2009
Long-Term Stock Incentive Plan, a bonus program designed to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Internal Revenue Code (the “NEO
Bonus Plan”). Pursuant to the NEO Bonus Plan, a bonus pool was established for our Chief
Executive Officer and the other named executive officers, other than our Chief Financial Officer,
consisting of 2.75% of our EBITDA for 2014. The maximum bonus that a named executive officer
could receive under the NEO Bonus Plan was limited to a percentage of the bonus pool (which
percentages were not changed during the performance year) and could not exceed the cash
equivalent of 120 million shares of our common stock (based on the closing price of our common
stock as of the last trading day of 2014). In addition, no amounts could be paid under the NEO
Bonus Plan unless a threshold amount of EBITDA was achieved for 2014.
Following the end of 2014, the Compensation Committee met to consider bonuses for our
named executive officers with respect to 2014 and whether to award bonuses for other employees.
The Compensation Committee carefully reviewed our performance against key metrics in our budget
and bonus plan, including the generation of EBITDA, as required by the NEO Bonus Plan, and our
efforts to increase subscribers, revenue, adjusted EBITDA and free cash flow.
Following its review of our 2014 performance, which the Compensation Committee determined
to be exceptional, 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 as well as other executive officers; and
•reviewed and approved the payment to our Chief Financial Officer whose bonus, pursuant to
Section 162(m) of the Internal Revenue Code, 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 2014 corporate performance, their individual contributions and
performance in their functional areas of responsibility and, with respect to all named executive
officers other than himself, recommendations made by Mr. Meyer. Various specific factors taken
into consideration in determining the bonus amounts for the named executive officers are set forth
below. The annual bonus for Mr. Meyer is discussed below under the heading “Related Policies and
Considerations—Compensation of our Chief Executive Officer.”
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