XM Radio 2011 Annual Report Download - page 39

Except in connection with Mr. Frear and Ms. Altman entering into extended employment agreements with
us in 2011, there were no other long-term equity grants to any of our named executive officers in 2011.
Employment Agreements with Mr. Frear and Ms. Altman
Consistent with our practice for our named executive officers, we entered into new employment agreements
with Mr. Frear and Ms. Altman in 2011. The extended agreements, which are described in more detail below
under the heading “Potential Payments upon Termination or Change-in-Control — Employment Agreements,”
increased Mr. Frear’s base salary to $850,000 from $750,000 and increased Ms. Altman’s base salary to
$500,000 from $446,332. The extended agreements also provided Mr. Frear and Ms. Altman each with a grant of
options to purchase 16,000,000 and 7,500,000 shares, respectively, of our common stock at an exercise price of
$2.18 and $1.69 per share, respectively. These options vest in equal installments over four years, generally
subject to their continued employment through the vesting period.
The Compensation Committee determined that the increases in base salaries and grants of options for both
Mr. Frear and Ms. Altman were appropriate in light of their performance and necessary for us to retain and
continue to properly incentivize them.
Fiscal Year 2012 Considerations
The Compensation Committee expects to review our compensation programs in 2012 with a view to
ensuring that they continue to provide the correct incentives and are properly sized given the scope and
complexity of our business and the competition we face. The Compensation Committee may employ the same
process, or may adopt a modified or wholly different process, in making future bonus decisions, provided that
with respect to 2012, the Compensation Committee has again adopted a bonus program which is intended to
comply with Section 162(m) for our named executive officers (other than our Chief Financial Officer) under our
2009 Long-Term Stock Incentive Plan that is designed to promote the achievement of our key financial goals for
2012. This bonus program provides for a bonus pool which is based on a percentage of EBITDA; provided that
no bonus amount is payable under such program if we do not achieve a specified level of EBITDA.
We expect to continue to respond to changes in economic conditions and our business with innovation and
flexibility, as needed, to advance our objectives of motivating, attracting and retaining high-quality executives
with the skills and experience necessary to achieve our key business objectives and increase stockholder value.
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. The material terms of Mr. Karmazin’s
employment agreement are described below under “Potential Payments Upon Termination or
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 qualifications and experience as chief executive officer, particularly in radio, were uniquely
suited to our needs, and that the compensation, including the base salary and stock option components of his
compensation, was, taken as a whole, appropriate under the circumstances.
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