XM Radio 2011 Annual Report Download - page 48

In the event that any payment we make, or benefit we provide, to Mr. Donnelly would require him to pay an
excise tax under Section 280G of the Internal Revenue Code, we have agreed to pay Mr. Donnelly the amount of
such tax and any additional amount as may be necessary to place him in the exact same financial position that he
would have been in if the excise tax was not imposed.
David J. Frear
In July 2011, we entered into a new employment agreement with David J. Frear to continue to serve as our
Executive Vice President and Chief Financial Officer through July 20, 2015. The employment agreement
provides for an annual base salary of $850,000, subject to approved increases.
In connection with the execution of the employment agreement, we granted Mr. Frear an option to purchase
16,000,000 shares of our common stock at an exercise price of $2.18 per share (the last sale price of our common
stock on The NASDAQ Global Select Market on the date of execution of the employment agreement). The
option will generally vest in four equal annual installments on each of July 21, 2012, July 21, 2013, July 21, 2014
and July 21, 2015, and expires on July 21, 2021, with potential accelerated vesting upon the termination of
Mr. Frear’s employment agreement by us without cause, by him for good reason, due to his death or by us as a
result of disability.
If Mr. Frear’s employment is terminated without cause or he terminates his employment for good reason,
subject to his execution of a release of claims, we are obligated to pay him a lump sum equal to his annual salary
as of the date of the termination and the cash value of the bonus last paid or payable to him in respect of the
preceding fiscal year and to continue his health and life insurance benefits for one year.
In the event that any payment we make, or benefit we provide, to Mr. Frear would require him to pay an
excise tax under Section 280G of the Internal Revenue Code, we have agreed to pay Mr. Frear the amount of
such tax and such additional amount as may be necessary to place him in the exact same financial position that he
would have been in if the excise tax was not imposed.
2003 Long-Term Stock Incentive Plan
Messrs. Greenstein, Meyer, Donnelly and Frear also have outstanding options as of December 31, 2011 that
were granted under the 2003 Long-Term Stock Incentive Plan. Under the 2003 Long-Term Stock Incentive Plan,
the outstanding equity awards granted to these named executive officers are subject to potential accelerated
vesting upon a change of control. In addition, Mr. Frear’s award agreements relating to options and restricted
stock units granted to him in February 2008 under the 2003 plan provide that such equity awards are subject to
potential accelerated vesting upon his death and disability. All of the outstanding options granted under the 2003
plan held by the named executive officers were “out-of the money” as of December 31, 2011, and, therefore, are
not included in the table of potential payments and benefits below.
2009 Long-Term Stock Incentive Plan
All of our named executive officers have outstanding equity awards as of December 31, 2011 that were
granted under the 2009 Long-Term Stock Incentive Plan. Under the terms of the 2009 plan, the outstanding
equity awards granted to the named executive officers are subject to potential accelerated vesting upon
termination without cause by the company or termination by the executive for good reason during a two year
period following a change of control, to the extent outstanding awards granted under the plan are either assumed,
converted or replaced by the resulting entity in the event of a change of control.
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