XM Radio 2014 Annual Report Download - page 51

If the 2015 Plan is approved, we intend to utilize the shares authorized under the 2015 Plan to
continue our practice of incentivizing key individuals through annual equity grants. Based on our
current projections, we anticipate that the shares requested under the 2015 Plan will last for
approximately five years.
We have demonstrated a commitment to sound equity compensation practices in recent years.
We recognize that equity compensation awards dilute stockholder equity, so we have carefully
managed our equity incentive compensation. Our equity compensation practices are intended to be
competitive and consistent with market practices, and we believe our historical share usage has
been responsible and mindful of stockholder interests.
As of February 28, 2015:
•there were 5,548,711,486 shares of our common stock outstanding;
•RSU awards covering 11,537,367 shares were outstanding;
•stock options to purchase 255,907,697 shares of our common stock were outstanding, with
an average exercise price of $2.76 and an average remaining term of approximately
6.96 years; and
•20,382,926 shares remained available for issuance under the 2009 Plan. Upon stockholder
approval of the 2015 Plan, a total of 400 million shares would be available for issuance
under the 2015 Plan, while all shares currently available for issuance under the 2009 Plan
would no longer be available for issuance.
The closing price of our common stock on NASDAQ on February 27, 2015 was $3.89.
Section 162(m)
The Code limits to $1 million per year the deduction allowed for federal income tax purposes
for certain compensation paid to the Chief Executive Officer and certain other highly compensated
executive officers of public companies, other than the Chief Financial Officer (the “Deduction Limit”).
The Deduction Limit does not apply to compensation paid under a stockholder-approved plan that
meets certain requirements for “qualified performance-based compensation.” Not all awards granted
under the 2009 Plan and expected to be granted under the 2015 Plan meet the requirements for
“qualified performance-based compensation.”
In evaluating this Item, stockholders should consider the remaining information in this Item.
Purpose
The Plan authorizes the Compensation Committee of our board of directors, or another
committee designated by our board of directors and made up of not less than two directors, each of
whom is required to be a non-employee director within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, and an outside director within the meaning of Section 162(m)
of the Code (the “Committee”), to provide equity-based or other incentive-based compensation for
the purpose of attracting and retaining directors, employees and certain consultants and providing
our directors, employees and such consultants incentives and rewards for superior performance.
The Plan is intended to comply with the requirements of applicable federal and state securities
laws, and the Code, including allowing us to issue awards that may comply with the performance-
based exclusion from the deduction limitations under Section 162(m) of the Code.
Shares Subject to the 2015 Plan
Our board of directors has authorized the issuance of 400 million shares of our common stock
(approximately 7.2% of the total shares of our common stock outstanding) in connection with
awards pursuant to the 2015 Plan. No more than 75 million of those shares are available for the
grant of ISOs. The number of shares with respect to options and SARs that may be granted under
the 2015 Plan to any individual participant in any single fiscal year during the term of the 2015 Plan
may not exceed 75 million shares, and the maximum number of shares that may be paid to any
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