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Information required in proxy statement.
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(Amendment No. )
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240.14a-12
SIRIUS SATELLITE RADIO INC.
..................................................................
(Name of Registrant as Specified In Its Charter)
..................................................................
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[Logo: SIRIUS SATELLITE RADIO]
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, NOVEMBER 25, 2003
-------------------
You are cordially invited to attend our Annual Meeting of Stockholders,
which will be held on Tuesday, November 25, 2003, at 10:30 a.m. at The
McGraw-Hill Building, in the Auditorium, 2nd Floor, 1221 Avenue of the Americas,
New York, New York. The annual meeting is being held to:
1. Elect seven directors.
2. Amend the Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan.
3. Transact any other business that may properly come before the
meeting.
These items are described in this proxy statement.
Only stockholders of record at the close of business on October 1, 2003 are
entitled to vote at the annual meeting. A list of stockholders entitled to vote
will be available for examination for ten days prior to the annual meeting,
between the hours of 9:00 a.m. and 4:00 p.m., New York City time, at our offices
at 1221 Avenue of the Americas, 36th Floor, New York, New York 10020.
IF YOU PLAN TO ATTEND
PLEASE NOTE THAT SPACE LIMITATIONS MAKE IT NECESSARY TO LIMIT ATTENDANCE TO
STOCKHOLDERS. ADMISSION TO THE MEETING WILL BE ON A FIRST-COME, FIRST-SERVED
BASIS. STOCKHOLDERS HOLDING STOCK IN BROKERAGE ACCOUNTS ('STREET NAME' HOLDERS)
WILL NEED TO BRING A COPY OF A BROKERAGE STATEMENT REFLECTING STOCK OWNERSHIP AS
OF THE RECORD DATE TO ENTER THE MEETING. CAMERAS, RECORDING DEVICES AND OTHER
ELECTRONIC EQUIPMENT WILL NOT BE PERMITTED IN THE MEETING.
YOUR VOTE IS IMPORTANT. WE ENCOURAGE YOU TO SIGN AND RETURN YOUR PROXY CARD
BEFORE THE MEETING SO THAT YOUR SHARES WILL BE REPRESENTED AND VOTED AT THE
MEETING, EVEN IF YOU CANNOT ATTEND.
This proxy statement and our 2002 Annual Report to Stockholders are being
distributed on or about October 20, 2003.
By Order of the Board of Directors,
PATRICK L. DONNELLY
Patrick L. Donnelly
Executive Vice President,
General Counsel and Secretary
New York, New York
October 20, 2003
TABLE OF CONTENTS
PAGE
----
About the Meeting........................................... 1
Item 1 -- Election of Directors............................. 4
Nominees for the Board of Directors..................... 4
Board Governance and Operations............................. 5
Meetings of the Board of Directors...................... 5
Committees of the Board of Directors.................... 6
Report of Compensation Committee........................ 7
Performance Graph....................................... 10
Directors' Compensation................................. 10
Compensation Committee Interlocks and Insider
Participation.......................................... 11
Executive Compensation...................................... 12
Summary Compensation Table.............................. 12
Option Grants in Last Fiscal Year....................... 13
Securities Authorized for Issuance under Equity
Compensation Plan...................................... 13
Equity Compensation Plan Information.................... 14
Employment Agreements................................... 14
Information about Our Common Stock Ownership................ 18
Report of Audit Committee................................... 19
Item 2 -- Amendment of the Sirius Satellite Radio 2003
Long-Term Stock Incentive Plan............................ 22
Other Matters............................................... 25
Appendix A -- Amended and Restated Sirius Satellite Radio
2003 Long-Term Stock Incentive Plan....................... A-1
ABOUT THE MEETING
WHAT AM I VOTING ON?
1. The election of seven directors to our board of directors (Leon D. Black,
Joseph P. Clayton, Lawrence F. Gilberti, James P. Holden, Warren N.
Lieberfarb, Michael J. McGuiness and James F. Mooney).
2. To amend the Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan
to include members of our board of directors as eligible participants.
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HOW DO I VOTE?
If your shares are held in 'street name', through a broker, bank or other
nominee, that institution will send you separate instructions describing the
procedure for voting your shares.
STOCKHOLDERS OF RECORD can vote as follows:
By Mail: Stockholders should sign, date and return their proxy cards in the
pre-addressed, postage-paid envelope that is provided.
At the Meeting: If you attend the annual meeting, you may vote in person by
ballot, even if you have previously returned a proxy card.
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WHO IS ENTITLED TO VOTE AND HOW MANY VOTES DO THEY HAVE?
Holders of our common stock as of the close of business on October 1, 2003
(the 'Record Date') are entitled to vote at the annual meeting. As of the
Record Date, 998,195,750 shares of our common stock were outstanding. Each
share of our common stock is entitled to one vote.
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WHAT IS A PROXY?
A proxy is a person you appoint to vote on your behalf. We are soliciting
proxies so that all shares of our common stock may be voted at the annual
meeting.
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WHO AM I DESIGNATING AS MY PROXY?
You will be designating Patrick L. Donnelly, our Executive Vice President,
General Counsel and Secretary, and Douglas A. Kaplan, our Vice President,
Deputy General Counsel and Assistant Secretary, as your proxies.
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HOW WILL MY PROXY VOTE MY SHARES?
Your proxy will vote according to your instructions. If you complete your
proxy instructions but do not indicate your vote on one or all of the
business matters, your proxy will vote 'FOR' these items. Also, your proxy is
authorized to vote on any other business that properly comes before the
annual meeting in accordance with the recommendation of our board of
directors.
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CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. You may change your vote at any time before your shares are voted at the
annual meeting by:
Notifying our Executive Vice President, General Counsel and Secretary,
Patrick L. Donnelly, in writing, at Sirius Satellite Radio Inc., 1221 Avenue
of the Americas, 36th Floor, New York, New York 10020 that you are revoking
your proxy;
Executing and delivering a later dated proxy card; or
Voting in person at the annual meeting.
However, if you have shares held through a brokerage firm, bank or other
custodian, and you vote by proxy, you may revoke your proxy instructions only
by informing the custodian in accordance with any procedures it has
established.
1
WHAT IS A QUORUM OF STOCKHOLDERS?
Shares representing the majority of the total outstanding votes, present or
represented by proxy, constitute a quorum. If you vote or return a proxy
card, your shares will be considered part of the quorum.
--------------------------------------------------------------------------------
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Assuming a quorum of stockholders is present at the annual meeting, the
affirmative vote of a plurality of all votes cast is required to elect each
director and the affirmative vote of a majority of our outstanding common
stock is needed to amend the Sirius Satellite Radio 2003 Long-Term Stock
Incentive Plan.
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HOW DO YOU COUNT SHARES THAT AREN'T VOTED FOR THE NOMINEES FOR DIRECTOR, OR
ABSTAIN ON ANY MATTER?
With respect to the election of directors, votes withheld will be treated as
shares present for purposes of determining a quorum. Directors are elected by
a plurality vote, so the seven persons receiving the greatest number of votes
will be elected and withheld votes will not affect the outcome of the
election.
With respect to the amendment of the Sirius Satellite Radio 2003 Long-Term
Stock Incentive Plan or any other matter properly brought before the meeting,
abstentions will be treated as shares present for purposes of determining a
quorum. Because a majority of the shares outstanding and entitled to vote is
required to approve the amendment of the Sirius Satellite Radio 2003
Long-Term Stock Incentive Plan, abstentions will have the same effect as a
vote against approval.
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HOW DO YOU COUNT SHARES THAT ARE HELD BY BROKERS BUT NOT VOTED?
Valid proxies submitted by a broker or its nominee that are not voted on a
matter or that are marked 'abstain' will be counted for purposes of
determining a quorum at the annual meeting, but will not be considered as
having voted on that matter.
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WHO WILL COUNT THE VOTES?
A representative of The Bank of New York, our transfer agent, will tabulate
the votes and act as inspector of election.
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HOW DO I ATTEND THE ANNUAL MEETING?
If you are a registered stockholder, an admission ticket is enclosed with
your proxy card. If you wish to attend the annual meeting, please vote your
proxy but keep the admission ticket and bring it with you to the annual
meeting.
If your shares are held in the name of a bank, broker or other holder of
record and you wish to attend the annual meeting, you need to bring a copy of
a bank or brokerage statement to the annual meeting reflecting your stock
ownership as of the Record Date.
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WHO IS SOLICITING MY PROXY AND WHO PAYS THE COST?
Sirius is soliciting your proxy. The cost of soliciting proxies will be borne
by Sirius, which has engaged MacKenzie Partners, Inc. to assist in the
distribution and solicitation of proxies. We have agreed to pay MacKenzie a
fee of $7,500 and to reimburse the firm for its reasonable out-of-pocket
expenses. Sirius will also reimburse brokerage firms, banks and other
custodians for their reasonable out-of-pocket expenses for forwarding these
proxy materials to you. Our directors, officers and employees may solicit
proxies on our behalf by telephone or in writing.
2
WHEN ARE THE STOCKHOLDER PROPOSALS DUE FOR NEXT YEAR'S ANNUAL MEETING?
To be eligible for inclusion in our proxy statement and form of proxy for
next year's annual meeting, stockholder proposals must be submitted in
writing by the close of business on January 7, 2004 to Patrick L. Donnelly,
Executive Vice President, General Counsel and Secretary, Sirius Satellite
Radio Inc., 1221 Avenue of the Americas, 36th Floor, New York, New York
10020.
If any proposal that is not submitted for inclusion in next year's proxy (as
described in the preceding paragraph) is instead sought to be presented
directly at next year's annual meeting, the proxies may vote in their
discretion if (a) we receive notice of the proposal before the close of
business on January 7, 2004 and advise stockholders in next year's proxy
statement about the nature of the matter and how management intends to vote
on such matter or (b) we do not receive notice of the proposal prior to the
close of business on January 7, 2004. Notices of intention to present
proposals at next year's annual meeting should be addressed to Patrick L.
Donnelly, Executive Vice President, General Counsel and Secretary, Sirius
Satellite Radio Inc., 1221 Avenue of the Americas, 36th Floor, New York, New
York 10020.
3
ITEM 1 -- ELECTION OF DIRECTORS
Seven directors will be elected at this year's annual meeting. Directors
serve until the next annual meeting of stockholders or until the director is
succeeded by another qualified director who has been elected. Each of the
nominated directors has agreed to serve if elected. However, if for some reason
one of them is unable to accept nomination or election, proxies will be voted
for the election of a nominee designated by our board of directors. Biographical
information for each of the nominees is presented below.
NOMINEES FOR THE BOARD OF DIRECTORS
LEON D. BLACK, age 52, has been a director since June 2001. Mr. Black is one
of the founding principals of Apollo Advisors, L.P. and Lion Advisors, L.P.,
which manage investment capital on behalf of institutions. He is also the
founder of Apollo Real Estate Advisors, L.P. From 1977 to 1990, Mr. Black worked
at Drexel Burnham Lambert Incorporated, where he served as Managing Director,
head of the Mergers & Acquisitions Group and co-head of the Corporate
Department. Mr. Black is a director of Sequa Corporation, United Rentals, Inc.,
Allied Waste Industries, Inc., AMC Entertainment Inc. and Wyndham International,
Inc. Mr. Black is a trustee of The Museum of Modern Art, Mt. Sinai Hospital, The
Metropolitan Museum of Art, Lincoln Center for The Performing Arts, Prep for
Prep, The Jewish Museum, The Asia Society, Dartmouth College and Vail Valley
Foundation.
JOSEPH P. CLAYTON, age 54, has served as our President and Chief Executive
Officer and a director since November 2001. Mr. Clayton served as Vice Chairman
of Global Crossing Ltd., a global internet and long distance services provider,
and President, Global Crossing North America, from September 1999 until November
2001. On January 28, 2002, Global Crossing Ltd. and certain of its affiliates
filed petitions for relief under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the Southern District of New York.
From August 1997 to September 1999, Mr. Clayton was President and Chief
Executive Officer of Frontier Corporation, a Rochester, New York-based national
provider of local telephone, long distance, data, conferencing and wireless
communications services, which was acquired by Global Crossing in September
1999. Prior to joining Frontier, Mr. Clayton was Executive Vice President,
Marketing and Sales -- Americas and Asia, of Thomson S.A., a leading consumer
electronics company. Mr. Clayton is a member of the board of directors of
Transcend Services Inc., a trustee of Bellarmine University and The Rochester
Institute of Technology and a member of the advisory board of Indiana University
School of Business.
LAWRENCE F. GILBERTI, age 52, has been a director since September 1993.
Since June 2000, Mr. Gilberti has been a partner in the law firm of Reed Smith
LLP; from May 1998 through May 2000, he was of counsel to that firm. From August
1994 to May 1998, Mr. Gilberti was a partner in the law firm of Fischbein
Badillo Wagner & Harding. Mr. Gilberti provided legal services to us from 1992
until 2002.
JAMES P. HOLDEN, age 52, has been a director since August 2001. From October
1999 until November 2000, Mr. Holden was the President and Chief Executive
Officer of DaimlerChrysler Corporation, a subsidiary of DaimlerChrysler AG, one
of the world's largest automakers. Prior to being appointed President in 1999,
Mr. Holden held numerous senior positions within Chrysler Corporation during his
19-year career at the company.
WARREN N. LIEBERFARB, age 60, has been a director since September 2003. Mr.
Lieberfarb is president and chief executive officer of Warren N. Lieberfarb &
Associates, a media, entertainment and technology consulting firm. From 1984
until December 2002, Mr. Lieberfarb was President of Warner Home Video, a
subsidiary of Warner Bros. Entertainment, a global leader in the creation,
distribution, licensing and marketing of theatrical motion pictures, TV
programming, animation, video/DVD and related products. Mr. Lieberfarb serves on
the board of trustees of the University of Pennsylvania, on the board's
nominating and development committees, and on the undergraduate executive board
of the Wharton School. He also serves on the board of directors and the board of
trustees of the American Film Institute, and chairs its entrepreneurial
committee,
4
and on the board of directors of DTS (Digital Theatre Systems, Inc.). Mr.
Lieberfarb is also a member of the Academy of Motion Picture Arts and Sciences.
MICHAEL J. MCGUINESS, age 39, has been a director since June 2003. Since
1994, Mr. McGuiness has been a portfolio manager for W.R. Huff Asset Management
Co., L.L.C., an investment adviser and private equity boutique.
JAMES F. MOONEY, age 48, has been a director since July 2003. Since March
2003, Mr. Mooney has been chairman of the board of directors of NTL
Incorporated, a cable television company with operations in the United Kingdom
and Ireland. From April 2001 to September 2002, Mr. Mooney was the Executive
Vice President and Chief Operating Officer of Nextel Communications Inc., a
provider of wireless communications services. From January 2000 to January 2001,
Mr. Mooney was the Chief Executive Officer and Chief Operating Officer of
Tradeout Inc., an asset management firm owned jointly by General Electric
Capital, Ebay Inc. and Benchmark Capital. From March 1999 to January 2000, Mr.
Mooney was the Chief Financial Officer/Chief Operating Officer at Baan Company,
a business management software provider. From 1980 until 1999, Mr. Mooney held a
number of positions with IBM Corporation, including Chief Financial Officer of
the Americas.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR' EACH OF THE NOMINEES.
BOARD GOVERNANCE AND OPERATIONS
The business and affairs of Sirius are managed by or under the direction of
our board of directors. Our board includes a majority of non-employee directors.
Our board reaffirms its accountability to stockholders through the annual
election process. All directors stand for election annually.
Our board reviews and ratifies senior management selection and compensation,
monitors overall corporate performance and ensures the integrity of our
financial controls. Our board of directors also oversees our strategic and
business planning processes.
Mr. David Margolese currently serves as chairman of our board of directors
and, at his election, has not been nominated for re-election as a director.
Following the annual meeting, the board of directors will select a director to
serve as our chairman or a lead director.
MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 31, 2002, there were thirteen meetings of our
board of directors, and the board took action twice by written consent in lieu
of meetings. Each director attended more than 90% of the total number of
meetings of the board and meetings held by committees on which he served.
5
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors maintains three standing committees, an Audit
Committee, a Compensation Committee and a Finance Committee. The Finance
Committee was established by our board of directors on August 27, 2002. The
board of directors does not maintain a Nominating Committee.
The following table shows the present members of each committee, the number
of committee meetings held during 2002 and the functions performed by each
committee:
COMMITTEE FUNCTIONS
AUDIT Selects our independent auditors
Number of Meetings: Four Reviews reports of independent auditors
Reviews and approves the scope and cost of all services,
Members: including all non-audit services, provided by the firm
Lawrence F. Gilberti selected to conduct the audit
James P. Holden Monitors the effectiveness of the audit process
James F. Mooney* Reviews adequacy of financial and operating controls
Monitors corporate compliance program
COMPENSATION Reviews and approves salaries and other compensation
Number of Meetings: Eight matters for executive officers
Administers stock compensation program, including grants
Members: of options, restricted stock units and other equity based
Leon D. Black compensation to executive officers under our long-term
Lawrence F. Gilberti* incentive plan
James P. Holden
FINANCE Reviews and approves operating and capital budgets
Number of Meetings: One Assists in identifying and implementing means to reduce
operating and capital expenditures and increase and
Members: enhance profitability and cash flows
Leon D. Black
James P. Holden*
Michael J. McGuiness
* Chairperson
6
REPORT OF COMPENSATION COMMITTEE
The following Report of the Compensation Committee of our board of directors
and the performance graphs included elsewhere in this proxy statement do not
constitute soliciting material and should not be deemed filed or incorporated by
reference into any other filings by us under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent we specifically
incorporate this Report or the performance graphs by reference therein.
The Compensation Committee of our board of directors, comprised solely of
directors who are not current or former employees, is responsible for overseeing
and administering our compensation programs. The Compensation Committee consults
with our Senior Vice President, Human Resources, and from time to time seeks the
advice of Towers Perrin, independent compensation consultants retained by it.
The Compensation Committee also reviews, monitors and approves executive
compensation, establishes compensation guidelines for our officers, reviews
projected personnel needs and administers our long-term stock incentive plan.
During 2001 and 2002, we recruited new executive management -- Joseph P.
Clayton, our President and Chief Executive Officer (November 2001); Guy D.
Johnson, our Executive Vice President, Sales and Product Management (January
2002); Michael S. Ledford, our Executive Vice President, Engineering (September
2001); and Mary Patricia Ryan, our Executive Vice President, Marketing (May
2002). Members of the Compensation Committee actively participated in the
process of interviewing and selecting these executive officers, and recommended
to our board of directors approval of their compensation arrangements.
We entered into an employment agreement with each of these executive
officers. A summary of these employment agreements and the employment agreements
between us, Patrick L. Donnelly, our Executive Vice President, General Counsel
and Secretary, David J. Frear, our current Executive Vice President and Chief
Financial Officer, and Joseph A. LaPlante, our Executive Vice President,
Programming, are described below under the heading 'Employment Agreements'.
COMPENSATION PHILOSOPHY
Our compensation program in 2002 for executive officers consisted of three
key elements:
a base salary;
an annual bonus program; and
grants of stock options.
The Compensation Committee believes that this three-part approach is
consistent with programs adopted by similarly situated companies and best serves
the interests of our stockholders. It enables us to meet the requirements of the
competitive environment in which we operate, while ensuring that executive
officers are compensated in a manner that advances both the short and long-term
interests of stockholders. Under this approach, compensation for our executive
officers involves a high proportion of pay that is 'at risk' -- namely, the
annual bonus and the value of stock options. Stock options relate a significant
portion of long-term remuneration directly to stock price appreciation realized
by stockholders.
During 2002, the Compensation Committee approved a bonus plan for executive
officers and other employees. Under this program, employees were awarded bonuses
based upon net subscriber activations, operating expenses, subscriber
acquisition costs, customer satisfaction and employee satisfaction. The
Compensation Committee assigned each of these criteria weight, and measured the
achievement of these items in January 2003 based upon objective data certified
by management. These criteria were established by the Compensation Committee
after review of our business plan and budget for the year ended December 31,
2002, discussions with our management and consultation with Towers Perrin. The
Compensation Committee intends to review this bonus program in 2003 and may
change one or all of the parameters for bonuses in its discretion.
7
BASE SALARIES
The base salaries paid to each of our executive officers during 2002 were
paid pursuant to the written employment agreements described below under the
heading 'Employment Agreements'. Changes in base salaries for our executive
officers were based upon competitive salary comparisons, a subjective assessment
of the nature of the position and the contribution and experience of the officer
and the length of the officer's service. The Compensation Committee did not
assign any relative weight to the various factors it considered or set
predetermined performance targets for purposes of these base salary
determinations.
The Compensation Committee approved a base salary increase on January 1,
2002 for Mr. Scelfo, our former Executive Vice President and Chief Financial
Officer, from $300,000 to $345,000 and for Mr. Donnelly from $325,000 to
$345,000. No other executive officer received an increase in his or her base
salary during 2002.
ANNUAL BONUS
In January 2003, the Compensation Committee awarded a cash bonus to
Mr. Clayton of $300,000, Mr. Johnson of $200,000, Ms. Ryan of $160,000,
Mr. Scelfo of $172,500, Mr. Donnelly of $172,500, and Mr. Ledford of $170,000.
Many of our executive officers were guaranteed bonuses for the year ended
December 31, 2002 as part of their employment agreements. The annual bonuses
awarded for the year ended December 31, 2002 to Mr. Clayton, Mr. Johnson, Ms.
Ryan, Mr. Scelfo and Mr. Donnelly were guaranteed under their respective
employment agreements. The Compensation Committee does not expect to enter into
additional agreements which provide guaranteed bonuses for our executive
officers. The annual bonus awarded to Mr. Ledford was determined in accordance
with the criteria contained in our 2002 bonus program.
STOCK OPTIONS
We provide long-term incentives through stock options granted to our
executive officers under our long-term stock incentive plan. The Compensation
Committee believes that the potential for stock ownership by executives and
other employees is the most effective method by which the interests of
management may be aligned with those of our stockholders. The options granted
typically vest over three years, have a term of ten years and an exercise price
equal to the fair market value of our common stock on the grant date or the date
we commit to issue the options.
Except for options granted to Mr. Johnson and Ms. Ryan in connection with
their employment agreements and the options awarded to Mr. Scelfo, the
Compensation Committee did not award any of our executive officers stock options
during 2002.
The Compensation Committee has authorized executive management to grant
stock options to employees below the executive officer level on an annual basis
according to guidelines intended to be competitive with comparable companies and
to reward individual achievement appropriately. Our executive officers do not
receive annual stock option grants under this program.
STOCK OPTION REPRICING
During 2002, no options held by executive officers or other employees were
repriced or otherwise amended.
COMPENSATION OF OUR CHIEF EXECUTIVE OFFICER
In November 2001, our board of directors negotiated, and we entered into, an
employment agreement with Mr. Clayton, our President and Chief Executive
Officer. Our board of directors engaged Towers Perrin, an independent
compensation consultant, to assist it in the process of
8
evaluating appropriate compensation for Mr. Clayton. Towers Perrin identified
for the board competitive compensation arrangements against which the board
measured the compensation agreed to with Mr. Clayton. Mr. Clayton's compensation
fell within observed competitive practices provided by Towers Perrin.
Pursuant to Mr. Clayton's employment agreement, we issued Mr. Clayton
options to purchase 750,000 shares of our common stock at an exercise price of
$5.25 on each of November 26, 2001 and November 26, 2002. These options were
exercisable on the date of grant. Under his employment agreement, we are
obligated to issue Mr. Clayton options to purchase 750,000 shares of our common
stock at an exercise price of $5.25 per share on each of November 26, 2003 and
November 26, 2004. These options will also be exercisable on the date of grant.
POLICY WITH RESPECT TO INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code places a $1 million per person
limitation on the tax deduction we may take for compensation paid to our Chief
Executive Officer and our four other highest paid executive officers, except
that compensation constituting performance-based compensation, as defined by the
Internal Revenue Code, is not subject to the $1 million limit. The Compensation
Committee generally intends to grant awards under our long-term stock incentive
plan consistent with the terms of Section 162(m) so that such awards will not be
subject to the $1 million limit. The Compensation Committee also expects to take
actions in the future that may be necessary to preserve the deductibility of
executive compensation to the extent reasonably practicable and consistent with
other objectives of our compensation program. However, the Compensation
Committee reserves the discretion to pay compensation that does not qualify for
exemption under Section 162(m) where the Compensation Committee believes such
action to be in our best interest.
Compensation Committee
LEON D. BLACK
LAWRENCE F. GILBERTI, Chairman
JAMES P. HOLDEN
9
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative performance of our
common stock with the Standard & Poor's Composite-500 Stock Index (the 'S&P
500') and the Nasdaq Telecommunications Index from December 31, 1998 to December
31, 2002. The graph assumes that $100 was invested on December 31, 1998 in each
of our common stock, the S&P 500 and the Nasdaq Telecommunications Index and
that all dividends were reinvested.
[GRAPH]
TOTAL STOCKHOLDER RETURNS
NASDAQ
DATE SIRIUS S&P 500 TELECOMMUNICATIONS INDEX(1)
---- ------ ------- ---------------------------
December 31, 1998.................................... $100 $100 $100
December 31, 1999.................................... $130 $121 $203
December 31, 2000.................................... $ 87 $110 $ 92
December 31, 2001.................................... $ 34 $ 97 $ 47
December 31, 2002.................................... $ 2 $ 76 $ 22
---------
(1) The Nasdaq Telecommunications Index is a capitalization weighted index
designed to measure the performance of all Nasdaq-traded stocks in the
telecommunications sector, including satellite technology.
DIRECTORS' COMPENSATION
Each member of our board of directors who is not employed by us will receive
an annual retainer of $80,000 per year payable in the following manner:
$24,000 in the form of cash, restricted stock units, options to purchase
our common stock, or any combination thereof, at the election of the
director; and
$56,000 in the form of restricted stock units, options to purchase our
common stock, or any combination thereof, at the election of the director.
If any director fails to attend at least 75% of the meetings of the board of
directors in any given year, he or she will forfeit 25% of his or her
compensation that is payable in cash.
In addition to this annual retainer, each director who serves as chair of a
committee of the board of directors will receive an additional payment of
$20,000. These fees are payable in the form of cash, restricted stock units,
options to purchase our common stock, or any combination thereof, at the
election of the director.
10
Further, the board of directors has awarded Messrs. Gilberti and Holden a
one-time grant of restricted stock units valued at $56,000 to compensate them
for their prior service. Each new director will also be awarded a one-time grant
of restricted stock units valued at $56,000 upon his or her election to the
board of directors.
All options to purchase common stock awarded to our directors will vest over
a four-year period, and all restricted stock units awarded to our directors will
vest on the date that is one year following the director's resignation,
retirement from the board of directors or failure to be re-elected for any
reason whatsoever. Payment of this compensation is subject to approval by
stockholders of an amendment to the Sirius Satellite Radio 2003 Long-Term Stock
Incentive Plan, which is described in this proxy statement.
We also pay the reasonable travel and accommodation expenses of directors in
connection with their participation in meetings of the board of directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Gilberti, a director, is a partner in the law firm of Reed Smith LLP and
has provided legal services to us from 1992 to 2002. We paid Reed Smith LLP
$2,646, $3,845 and $24,462 for legal services during the years ended December
31, 2002, 2001 and 2000, respectively.
Mr. Clayton was a member of the board of directors of Global Crossing Ltd.,
a global internet and long distance services provider, and Good Guys Inc., a
regional consumer electronics retailer. We have entered in an agreement with
Global Crossing to provide us telecommunications services for monitoring our
terrestrial repeater network and an agreement with Good Guys in connection with
the marketing and sale of subscriptions to our service. We also have reimbursed
Mr. Clayton for expenses associated with our use of an airplane which is
partially owned by him in an amount not more than the costs of a similar charter
aircraft. We do not expect to reimburse Mr. Clayton for the use of this airplane
in the future, except in cases where its use is expressly authorized by our
board of directors.
11
EXECUTIVE COMPENSATION
The table below shows the compensation for the last three years for our
President and Chief Executive Officer and the five next highest paid executive
officers at the end of 2002.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
----------------------------------- STOCK UNDERLYING ALL OTHER
SALARY BONUS OTHER ANNUAL AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR ($) ($) COMPENSATION($) ($) (#) ($)(2)
------------------------------ ---- --- --- --------------- --- --- ------
Joseph P. Clayton .................... 2002 600,000 300,000 49,372(3) -- 750,000 8,250
President and Chief 2001 61,538 -- -- -- 750,000 --
Executive Officer 2000 -- -- -- -- -- --
Guy D. Johnson ....................... 2002 394,103 200,000 103,701(3) 915,000(4) 500,000 8,250
Executive Vice President, 2001 -- -- -- -- -- --
Sales and Product Planning 2000 -- -- -- -- -- --
Patrick L. Donnelly .................. 2002 345,000 172,500 -- -- -- 8,250
Executive Vice President, 2001 325,000 225,000 -- -- 100,000 10,500
General Counsel and 2000 310,417 323,000 -- -- 75,000 10,500
Secretary
Michael S. Ledford ................... 2002 340,000 170,000 14,601(5) -- -- 8,250
Executive Vice President, 2001 99,167 100,000 -- 200,000(6) 300,000 --
Engineering 2000 -- -- -- -- -- --
Mary Patricia Ryan ................... 2002 178,256 185,000 -- -- 240,000 --
Executive Vice President, 2001 -- -- -- -- -- --
Marketing 2000 -- -- -- -- -- --
John J. Scelfo ....................... 2002 345,000 172,500 -- -- 100,000 8,250
Executive Vice President 2001 225,000 225,000 -- -- 300,000 10,500
and Chief Financial Officer 2000 -- -- -- -- -- --
---------
(1) Mr. Clayton became an executive officer in November 2001. Mr. Johnson became
an executive officer in January 2002. Ms. Ryan became an executive officer
in June 2002. Mr. Scelfo became an executive officer in April 2001 and
resigned in April 2003. Mr. Ledford became an executive officer in September
2001.
(2) Represents matching contributions by us under our 401(k) savings plan. These
amounts were paid in the form of common stock.
(3) Represents amounts reimbursed to Messrs. Clayton and Johnson for temporary
living expenses in accordance with their respective employment agreements.
(4) On January 7, 2002, we granted Mr. Johnson 100,000 restricted shares of our
common stock. The restrictions applicable to these shares of common stock
lapse in increments of 34,000 on January 7, 2003, if the average closing
price of our common stock equals or exceeds $15.00 per share; 33,000 on
January 7, 2004, if the average closing price of our common stock equals or
exceeds $20.00 per share; and 33,000 on January 7, 2005, if the average
closing price of our common stock equals or exceeds $25.00 per share. Amount
represents the value of this restricted stock (calculated by multiplying the
closing price of our common stock on January 7, 2002, $9.15 per share, by
the number of shares awarded, 100,000) awarded Mr. Johnson as of January 7,
2002. On December 31, 2002, these restricted shares of our common stock had
an aggregate value of $64,000 (calculated by multiplying the closing price
of our common stock on December 31, 2002, $0.64 per share, by the number of
shares awarded, 100,000). Mr. Johnson forfeited 34,000 of these restricted
shares of common stock on January 7, 2003 because the average price of our
common stock failed to equal or exceed the performance target established by
our board of directors.
(5) Represents gross proceeds received by Mr. Ledford from the sale of 12,500
restricted shares of common stock. The restrictions applicable to these
shares of stock lapsed on September 17, 2002.
(6) On September 17, 2001, we granted Mr. Ledford 50,000 restricted shares of
our common stock. The restrictions applicable to these shares of common
stock lapse in equal increments over four years. Amount represents the value
of this restricted stock (calculated by multiplying the closing price of our
common stock on September 17, 2001, $4.00 per share, by the number of shares
awarded, 50,000) awarded Mr. Ledford as of September 17, 2001. On December
31, 2002, these restricted shares of our common stock had an aggregate value
of $24,000 (calculated by multiplying the closing price of our common stock
on December 31, 2002, $0.64 per share, by the number of shares that remain
restricted at December 31, 2002, 37,500). The restrictions applicable to
25,000 shares of restricted stock awarded to Mr. Ledford on September 17,
2001 have lapsed.
12
The following table sets forth certain information for the fiscal year ended
December 31, 2002, with respect to options granted to individuals named in the
Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OPTIONS % OF TOTAL EXERCISE OF STOCK PRICE APPRECIATION
GRANTED OPTIONS GRANTED PRICE EXPIRATION ---------------------------
NAME (#) TO EMPLOYEES ($/SHARE) DATE 5% ($) 10% ($)
---- ------- --------------- ------------ ---------- ------------ ------------
Joseph P. Clayton (1)........ 750,000 23.1 5.25 11/26/12 2,476,273 6,275,361
Guy D. Johnson (2)........... 500,000 15.4 9.46 01/07/12 2,974,672 7,538,402
Patrick L. Donnelly.......... -- -- -- -- -- --
Michael S. Ledford (2)....... -- -- -- -- -- --
Mary Patricia Ryan........... 240,000 7.4 3.67 06/10/12 533,930 1,403,768
John J. Scelfo (3)........... 100,000 3.1 9.46 01/03/12 594,934 1,507,680
---------
(1) Under his employment agreement, we are obligated to issue Mr. Clayton
options to purchase 750,000 shares of our common stock at an exercise price
of $5.25 per share on each of November 26, 2003 and November 26, 2004. These
options will be exercisable on the date of grant.
(2) Does not include shares of restricted common stock granted to Messrs.
Johnson and Ledford.
(3) Mr. Scelfo resigned as our Executive Vice President and Chief Financial
Officer in April 2003, and these options terminated on July 6, 2003.
The following table sets forth certain information with respect to the
number of shares covered by both exercisable and unexercisable stock options
held by the individuals named in the Summary Compensation Table as of December
31, 2002. Also reported are the values for 'in-the-money' stock options that
represent the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of our common stock as of
December 31, 2002 ($0.64 per share).
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON FISCAL YEAR END (#) FISCAL YEAR END ($)
EXERCISE VALUE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
Joseph P. Clayton (1)....... -- -- 1,500,000 -- -- --
Guy D. Johnson (2).......... -- -- 125,000 375,000 -- --
Patrick L. Donnelly......... -- -- 500,000 -- -- --
Michael S. Ledford (2)...... -- -- 100,000 200,000 -- --
Mary Patricia Ryan.......... -- -- 60,000 180,000 -- --
John J. Scelfo (3).......... -- -- 325,000 75,000 -- --
---------
(1) Under his employment agreement, we are obligated to issue Mr. Clayton
options to purchase 750,000 shares of our common stock at an exercise price
of $5.25 per share on each of November 26, 2003 and November 26, 2004. These
options will be exercisable on the date of grant.
(2) Does not include shares of restricted common stock granted to Messrs.
Johnson and Ledford.
(3) Mr. Scelfo resigned as our Executive Vice President and Chief Financial
Officer in April 2003, and these options terminated on July 6, 2003.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information as of December 31, 2002 regarding
the number of shares of our common stock to be issued under outstanding options,
warrants or rights, the weighted average exercise price of such outstanding
options, warrants or rights, and the securities remaining available for issuance
under our equity compensation plans that have been approved and not approved by
our security holders.
13
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE
ISSUED UPON EXERCISE OF EXERCISE PRICE OF NUMBER OF SECURITIES REMAINING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, AVAILABLE FOR FUTURE ISSUANCE UNDER
PLAN CATEGORY WARRANTS OR RIGHTS WARRANTS OR RIGHTS EQUITY COMPENSATION PLANS (1)
------------- ------------------ ------------------ -----------------------------
Equity compensation plans
approved by security
holders (2)............ 13,341,339 $12.16 4,170,655
Equity compensation plans
not approved by
security holders....... -- -- --
Total............ 13,341,339 $12.16 4,170,655
---------
(1) The number of securities available for issuance under the Sirius Satellite
Radio 1999 Long-Term Stock Incentive Plan is equal to 15% of the sum of: (i)
the issued and outstanding shares of our common stock (other than shares
issued upon exercise of stock options by employees or directors pursuant to
the plan, our Amended and Restated 1994 Stock Option Plan, our Amended and
Restated 1994 Directors' Nonqualified Stock Option Plan or otherwise); (ii)
any shares of our common stock which are issuable as a result of any
conversion, exchange or exercise of any preferred stock, warrant or other
security of the company which is outstanding on the date of determination;
and (iii) the shares of our common stock which have been issued or are
issuable to employees, consultants and directors pursuant to the plan, our
Amended and Restated 1994 Stock Option Plan and our Amended and Restated
1994 Directors' Nonqualified Stock Option Plan.
(2) Our stockholders have approved the Sirius Satellite Radio 2003 Long-Term
Stock Incentive Plan, the Sirius Satellite Radio 1999 Long-Term Stock
Incentive Plan, our Amended and Restated 1994 Stock Option Plan and our
Amended and Restated 1994 Directors' Nonqualified Stock Option Plan. The
information presented does not include any options, warrants or rights that
may be issued under the Sirius Satellite Radio 2003 Long-Term Stock
Incentive Plan which was approved by stockholders on March 4, 2003.
EMPLOYMENT AGREEMENTS
We are a party to an employment agreement with each of Joseph P. Clayton,
Guy D. Johnson, David J. Frear, Mary Patricia Ryan, Patrick L. Donnelly, Michael
S. Ledford and Joseph A. LaPlante.
EMPLOYMENT AGREEMENT WITH JOSEPH P. CLAYTON
On November 26, 2001, we entered into an employment agreement with Joseph P.
Clayton to serve as our President and Chief Executive Officer for three years.
This agreement provides for an annual base salary of $600,000, subject to
increase from time to time by our board of directors. We have also agreed to
reimburse Mr. Clayton for the reasonable costs of an apartment in New York City
and for the reasonable costs of commercial travel to and from his home in
Rochester, New York, to our headquarters in New York City. In connection with
this agreement, we agreed to grant Mr. Clayton options to purchase 3,000,000
shares of our common stock at an exercise price of $5.25 per share. 1,500,000 of
these options are issued and exercisable. The remaining options will be issued
and become exercisable in increments of 750,000 on November 26, 2003 and
November 26, 2004.
Under the terms of this agreement, if Mr. Clayton's employment is terminated
without cause or he terminates his employment for good reason (as defined in the
employment agreement), then he is entitled to receive a lump sum amount equal to
(1) his base salary in effect from the termination date through December 31,
2004 and (2) any annual bonuses, at a level equal to 75% of his base salary,
that would have been customarily paid during the period from the termination
date through December 31, 2004; provided that in no event shall this amount be
less than 1.75 times his base salary. In the event Mr. Clayton's employment is
terminated without cause or he terminates his employment for good reason, we are
also obligated to continue his medical and life insurance benefits until
December 31, 2004.
If, following the occurrence of a 'change of control', Mr. Clayton is
terminated without cause or he terminates his employment for good reason, we are
obligated to pay to Mr. Clayton an amount equal to 5.25 times his base salary
and continue his medical and life insurance benefits until the third anniversary
of his termination date. If, in the opinion of a nationally recognized
14
accounting firm, a 'change of control' would require Mr. Clayton to pay an
excise tax under the United States Internal Revenue Code on any amounts received
by him, we have agreed to pay Mr. Clayton the amount of such taxes 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. Under the
terms of the employment agreement, Mr. Clayton may not disclose any of our
proprietary information or, during his employment with us and for three years
thereafter, engage in any business involving the transmission of radio
entertainment programming in North America.
EMPLOYMENT AGREEMENT WITH GUY D. JOHNSON
On January 7, 2002, we entered into an employment agreement with Guy D.
Johnson to serve as our Executive Vice President, Sales and Product Planning,
for three years. This agreement provides for an annual base salary of $400,000,
subject to increase from time to time by our board of directors. We have also
agreed to reimburse Mr. Johnson for his living expenses in New York City, up to
$6,000 per month, and for the reasonable costs of commercial travel to and from
his home in British Columbia to our headquarters in New York City. In connection
with this agreement, we granted Mr. Johnson options to purchase 500,000 shares
of our common stock at an exercise price of $9.46 per share. Options with
respect to 250,000 of these shares are currently exercisable. The remaining
options become exercisable in increments of 125,000 on January 7, 2004 and
January 7, 2005. We also granted Mr. Johnson 100,000 restricted shares of common
stock. Mr. Johnson forfeited 34,000 of these shares on January 7, 2003 because
the average price of our common stock during the twenty trading days preceding
January 7, 2003 failed to equal or exceed $15.00, the performance target
established by our board of directors for vesting of these shares. The
restrictions applicable to 33,000 of these shares will lapse on January 7, 2004
if the average price of our common stock on the twenty trading days preceding
January 7, 2004 equals or exceeds $20.00; and the restrictions applicable to the
remaining 33,000 shares will lapse on January 7, 2005 if the average price of
our common stock on the twenty trading days preceding January 7, 2005 equals or
exceeds $25.00. Any shares of restricted stock which do not vest on January 7,
2004 or January 7, 2005 will be forfeited.
Under the terms of this agreement, if Mr. Johnson's employment is terminated
without cause or he terminates his employment for good reason (as defined in the
employment agreement), then he is entitled to receive a lump sum amount equal to
(1) his base salary in effect from the termination date through January 6, 2005
and (2) any annual bonuses, at a level equal to 75% of his base salary, that
would have been customarily paid during the period from the termination date
through January 6, 2005; provided that in no event shall this amount be less
than 1.00 times his base salary. In the event Mr. Johnson's employment is
terminated without cause or he terminates his employment for good reason, we are
also obligated to continue his medical and life insurance benefits until January
6, 2005.
If, following the occurrence of a 'change of control', Mr. Johnson is
terminated without cause or he terminates his employment for good reason, we are
obligated to pay to Mr. Johnson an amount equal to 1.75 times his base salary
and continue his medical and life insurance benefits until the third anniversary
of his termination date. If, in the opinion of a nationally recognized
accounting firm, a 'change of control' would require Mr. Johnson to pay an
excise tax under the United States Internal Revenue Code on any amounts received
by him, we have agreed to pay Mr. Johnson the amount of such taxes 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.
Under the terms of the agreement, Mr. Johnson may not disclose any of our
proprietary information or, during his employment with us and for two years
thereafter, engage in any business involving the transmission of radio
entertainment programming in North America.
15
EMPLOYMENT AGREEMENT WITH PATRICK L. DONNELLY
We have entered into an employment agreement with Patrick L. Donnelly to
serve as our Executive Vice President, General Counsel and Secretary until March
28, 2004. Pursuant to this agreement, we pay Mr. Donnelly an annualized base
salary of $345,000 per year.
Under the terms of this agreement, if Mr. Donnelly's employment is
terminated without cause or he terminates his employment for good reason (as
defined in the employment agreement), we are obligated to pay Mr. Donnelly an
amount equal to the sum of his annual salary and the annual bonus last paid to
him.
If, in the opinion of a nationally recognized accounting firm, a 'change of
control' would require Mr. Donnelly to pay an excise tax under the United States
Internal Revenue Code on any amounts received by him, we have agreed to pay Mr.
Donnelly the amount of such taxes 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.
Under the terms of the agreement, Mr. Donnelly may not disclose any of our
proprietary information or, during his employment with us and for two years
thereafter (or one year thereafter if Mr. Donnelly's employment is terminated
without cause or he terminates his employment for good reason), enter into the
employment of, render services to, or otherwise assist our competitors.
EMPLOYMENT AGREEMENT WITH DAVID J. FREAR
On June 3, 2003, we entered in an employment agreement with David J. Frear
to serve as our Executive Vice President and Chief Financial Officer for three
years. This agreement provides for an annual base salary of $325,000, subject to
increase from time to time by our board of directors. We have also agreed to pay
expenses associated with Mr. Frear's relocation to the New York metropolitan
area in an amount up to $150,000. In connection with this agreement, we granted
Mr. Frear options to purchase 1,400,000 shares of our common stock at an
exercise price of $1.85 per share, and 600,000 restricted stock units. 1,000,000
of these options vest on July 1, 2008; however, this vesting will accelerate if
certain performance criteria for the years ending December 31, 2003 and December
31, 2004 are met. The balance of Mr. Frear's options, 400,000, vest in equal
installments on July 1, 2004, July 1, 2005 and July 1, 2006. Mr. Frear's 600,000
restricted stock units will also vest on July 1, 2008; however, this vesting
will accelerate if certain performance criteria for the year ending December 31,
2005 are met. Each restricted stock unit entitles Mr. Frear to one share of our
common stock on the applicable vesting date.
Under the terms of this agreement, if Mr. Frear's employment is terminated
without cause or he terminates his employment for good reason (as defined in the
employment agreement), we are obligated to pay Mr. Frear an amount equal to his
annual salary and the annual bonus last paid to him; provided that until
bonuses, if any, are paid with respect to the year ending December 31, 2004,
such bonus amount will be not less than $97,500.
If, in the opinion of a nationally recognized accounting firm, a 'change of
control' would require Mr. Frear to pay an excise tax under the United States
Internal Revenue Code on any amounts received by him, we have agreed to pay Mr.
Frear the amount of such taxes 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.
Under the terms of the agreement, Mr. Frear may not disclose any of our
proprietary information or, during his employment with us and for two years
thereafter (or one year thereafter if Mr. Frear's employment is terminated
without cause or he terminates his employment for good reason), enter into the
employment of, render services to, or otherwise assist our competitors.
16
EMPLOYMENT AGREEMENT WITH JOSEPH A. LAPLANTE
On August 1, 2003, we entered in an employment agreement with Joseph A.
LaPlante to serve as our Executive Vice President, Programming, for three years.
This agreement provides for an annual base salary of $250,000, subject to
increase from time to time by our board of directors.
Under the terms of this agreement, if Mr. LaPlante's employment is
terminated without cause or he terminates his employment for good reason (as
defined in the employment agreement), we are obligated to pay Mr. LaPlante an
amount equal to his annual salary and the annual bonus last paid to him.
If, in the opinion of a nationally recognized accounting firm, a 'change of
control' would require Mr. LaPlante to pay an excise tax under the United States
Internal Revenue Code on any amounts received by him, we have agreed to pay Mr.
LaPlante the amount of such taxes 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.
Under the terms of the agreement, Mr. LaPlante may not disclose any of our
proprietary information or, during his employment with us and for two years
thereafter (or one year thereafter if Mr. LaPlante's employment is terminated
without cause or he terminates his employment for good reason), enter into the
employment of, render services to, or otherwise assist our competitors.
EMPLOYMENT AGREEMENT WITH MICHAEL S. LEDFORD
On August 29, 2001, we entered into an employment agreement with Michael S.
Ledford to serve as our Executive Vice President, Engineering, for three years.
This agreement provides for an annual base salary of $340,000, subject to
increase from time to time by our board of directors. In connection with this
agreement, we granted Mr. Ledford options to purchase 300,000 shares of our
common stock at an exercise price of $4.00 per share. Options with respect to
200,000 of these shares are exercisable and the balance will become exercisable
on September 17, 2004. We also granted Mr. Ledford 50,000 restricted shares of
common stock. The restrictions applicable to 25,000 of these shares have lapsed.
The restrictions applicable to the remaining 25,000 restricted shares of common
stock will lapse on September 17, 2004 and September 17, 2005 in equal
increments of 12,500 shares.
Under the terms of this agreement, if Mr. Ledford's employment is terminated
without cause or he terminates his employment for good reason (as defined in the
employment agreement), we are obligated to pay Mr. Ledford an amount equal to
his annual salary.
If, in the opinion of a nationally recognized accounting firm, a 'change of
control' would require Mr. Ledford to pay an excise tax under the United States
Internal Revenue Code on any amounts received by him, we have agreed to pay Mr.
Ledford the amount of such taxes 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.
Under the terms of the agreement, Mr. Ledford may not disclose any of our
proprietary information or, during his employment with us and for two years
thereafter (or one year thereafter if Mr. Ledford's employment is terminated
without cause or he terminates his employment for good reason), enter into the
employment of, render services to, or otherwise assist our competitors.
EMPLOYMENT AGREEMENT WITH MARY PATRICIA RYAN
On May 3, 2002, we entered into an employment agreement with Mary Patricia
Ryan to serve as our Executive Vice President, Marketing, for three years. This
agreement provides for an annual base salary of $320,000, subject to increase
from time to time by our board of directors. Under this agreement, we paid Ms.
Ryan a $25,000 starting bonus. In connection with this agreement, we also
granted Ms. Ryan options to purchase 240,000 shares of our common stock at an
exercise
17
price of $3.67 per share. Options with respect to 120,000 of these shares are
exercisable and the remaining options become exercisable in equal installments
on June 10, 2004 and June 10, 2005.
Under the terms of this agreement, if Ms. Ryan's employment is terminated
without cause or she terminates her employment for good reason (as defined in
the employment agreement), we are obligated to pay Ms. Ryan an amount equal to
the sum of her annual salary and the annual bonus last paid to her.
If, in the opinion of a nationally recognized accounting firm, a 'change of
control' would require Ms. Ryan to pay an excise tax under the United States
Internal Revenue Code on any amounts received by her, we have agreed to pay Ms.
Ryan the amount of such taxes and such additional amount as may be necessary to
place her in the exact same financial position that she would have been in if
the excise tax was not imposed.
Under the terms of the agreement, Ms. Ryan may not disclose any of our
proprietary information or, during her employment with us and for two years
thereafter (or one year thereafter if Ms. Ryan's employment is terminated
without cause or she terminates her employment for good reason), enter into the
employment of, render services to, or otherwise assist our competitors.
INFORMATION ABOUT OUR COMMON STOCK OWNERSHIP
The following table sets forth information regarding beneficial ownership of
our common stock as of August 31, 2003 by each person known by us to be the
beneficial owner of more than 5% of our outstanding common stock. In general,
'beneficial ownership' includes those shares a person has the power to vote or
transfer, and options to acquire our common stock that are exercisable currently
or become exercisable within 60 days. Except as otherwise indicated, we believe
that the beneficial owners of the common stock listed below, based on
information furnished by these owners, have sole investment and voting power
with respect to these shares, except as otherwise provided by community property
laws where applicable.
SHARES BENEFICIALLY
OWNED AS OF
AUGUST 31, 2003
NAME AND ADDRESS OF BENEFICIAL ---------------------
OWNER OF COMMON STOCK NUMBER PERCENT
--------------------- ------ -------
OppenheimerFunds, Inc. (1) ................................. 219,943,037 22.0%
Atlas Global Growth Fund
Clarington Global Equity Fund
Security Benefit Life Global Series Fund
Security Benefit Life Worldwide Equity Series D/VA
CUNA Global Series Fund/VA
JNL/Oppenheimer Global Growth Series VA
Oppenheimer Global Fund
Oppenheimer Global Securities Fund/VA
Oppenheimer Global Growth & Income Fund
498 Seventh Avenue
New York, New York 10018
Apollo Investment Fund IV, L.P. (2)......................... 162,986,042 15.6%
Apollo Overseas Partners IV, L.P.
Two Manhattanville Road
Purchase, New York 10577
---------
(1) This information is based upon the Schedule 13G filed by Oppenheimer on
April 10, 2003.
(2) Represents 117,569,352 shares of our common stock and warrants to purchase
an additional 45,416,690 shares of our common stock.
18
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the number of shares of common stock beneficially
owned by each director, our Chief Executive Officer and the six other most
highly compensated executive officers as of August 31, 2003. The table also
shows common stock beneficially owned by all of our directors and executive
officers as a group on August 31, 2003:
SHARES
NAME OF NUMBER OF SHARES PERCENT ACQUIRABLE
BENEFICIAL OWNER BENEFICIALLY OWNED (1) OF CLASS WITHIN 60 DAYS
---------------- ---------------------- -------- --------------
David Margolese..................................... 6,300,000 * 4,700,000
Leon D. Black (2)................................... -- * --
Lawrence F. Gilberti................................ 67,000 * 65,000
James P. Holden..................................... 40,000 * 40,000
Warren N. Lieberfarb................................ -- * --
Michael J. McGuiness................................ -- * --
James F. Mooney (3)................................. 2,100 * --
Joseph P. Clayton (4)............................... 6,164,354 * 1,500,000
Guy D. Johnson...................................... 359,890 * 250,000
Patrick L. Donnelly................................. 1,710,708 * 500,000
David J. Frear (5).................................. 613,900 * --
Joseph A. LaPlante (6).............................. 618,666 * 16,666
Michael S. Ledford.................................. 229,524 * 200,000
Mary Patricia Ryan.................................. 1,184,000 * 120,000
All Executive Officers and Directors as a Group
(14 persons) (7).................................. 17,290,143 1.7% 7,391,666
---------
* Less than 1% of our outstanding shares of common stock.
(1) These amounts include shares of common stock which the individuals hold and
shares of common stock they have a right to acquire within the next 60 days
as shown in the last column through the exercise of stock options. Also
included in the table are the number of shares of common stock acquired
under our 401(k) Savings Plan as of August 31, 2003: Mr. Clayton -- 4,354
shares; Mr. Johnson -- 8,890 shares; Mr. Donnelly -- 10,708 shares;
Mr. Ledford -- 4,524 shares; and Ms. Ryan -- 4,000 shares. These amounts
also include restricted stock units awarded to the following individuals on
August 11, 2003: Mr. Clayton -- 4,500,000 units; Mr. Frear -- 600,000 units;
Mr. Donnelly -- 1,200,000 units; Ms. Ryan -- 1,050,000 units; and Joseph
LaPlante -- 600,000 units. Each restricted stock unit entitles the holder to
one share of our common stock on the applicable vesting date.
(2) Mr. Black is the founding partner of Apollo Management, L.P., an affiliate
of Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
Mr. Black disclaims beneficial ownership of all shares of our common stock
in excess of his pecuniary interest, if any.
(3) Includes 2,100 shares held as a custodian for a child.
(4) Includes 10,000 shares held by a partnership and 50,000 shares held in a
trust.
(5) Includes 1,900 shares held by spouse.
(6) Includes 2,000 shares held by significant other.
(7) Includes 7,391,666 shares of common stock issuable under stock options
exercisable within 60 days. Does not include 20,553,334 shares issuable
under stock options that are not exercisable within 60 days.
REPORT OF AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other filing by us under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent we specifically incorporate this Report by
reference therein.
The Securities and Exchange Commission rules now require us to include in
this proxy statement a report from the Audit Committee of our board of
directors. The following report concerns the Audit Committee's activities
regarding oversight of our financial reporting and auditing process.
The Audit Committee is comprised solely of independent directors, as defined
in the Marketplace Rules of the NASDAQ Stock Market, and it operates under a
written charter adopted by our board of directors, a copy of which is available
upon request. The composition of the Audit Committee, the attributes of its
members and the responsibilities of the Audit Committee, as reflected in its
charter, are intended to be in accordance with applicable requirements for
corporate audit committees. The committee reviews and assesses the adequacy of
its charter on an annual basis.
19
As described more fully in its charter, the purpose of the Audit Committee
is to assist our board of directors in its general oversight of our financial
reporting, internal control and audit functions. Management is responsible for
the preparation, presentation and integrity of the company's financial
statements, accounting and financial reporting principles, internal controls and
procedures designed to ensure compliance with accounting standards, applicable
laws and regulations. Ernst & Young LLP, our independent auditor, is responsible
for performing an independent audit of our consolidated financial statements in
accordance with auditing standards generally accepted in the United States.
The Audit Committee members are not professional accountants or auditors,
and their functions are not intended to duplicate or to certify the activities
of management and the independent auditor, nor can the Audit Committee certify
that the independent auditor is 'independent' under applicable rules. The Audit
Committee serves a board-level oversight role, in which it provides advice,
counsel and direction to management and the auditors on the basis of the
information it receives, discussions with management and the auditors and the
experience of the Audit Committee's members in business, financial and
accounting matters.
Among other matters, the Audit Committee monitors the activities and
performance of our auditor, including the audit scope, external audit fees,
auditor independence matters and the extent to which the independent auditor may
be retained to perform non-audit services. The Audit Committee and our board of
directors have ultimate authority and responsibility to select, evaluate and,
when appropriate, replace our independent auditor. The Audit Committee also
reviews the results of the audit work with regard to the adequacy and
appropriateness of the company's financial, accounting and internal controls.
Management and independent auditor presentations to and discussions with the
Audit Committee also cover various topics and events that may have significant
financial impact or are the subject of discussions between management and the
independent auditor. In addition, the Audit Committee generally oversees the
company's internal compliance programs.
The Audit Committee has reviewed and discussed the consolidated financial
statements with management and the independent auditor. Management represented
to the Audit Committee that our consolidated financial statements were prepared
in accordance with generally accepted accounting principles, and the independent
auditor represented that its presentations included the matters required to be
discussed with the independent auditor by Statement on Auditing Standards No.
61, as amended, 'Communication with Audit Committees.'
Ernst & Young LLP, our independent auditor, also provided the Audit
Committee with the written disclosures required by Independence Standards Board
Standard No. 1, 'Independence Discussions with Audit Committees,' and the Audit
Committee discussed with Ernst & Young LLP the firm's independence.
Following the Audit Committee's discussions with management and Ernst &
Young LLP, the Audit Committee recommended that our board of directors include
the audited consolidated financial statements in our annual report on Form 10-K
for the year ended December 31, 2002.
Audit Committee
LAWRENCE F. GILBERTI
JAMES P. HOLDEN
JAMES F. MOONEY, Chairman
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the fees billed to us by Ernst & Young LLP,
our independent auditor as of and for the year ended December 31, 2002:
FOR THE YEAR ENDED
DECEMBER 31,
-------------------
2002 2001
---- ----
Audit fees.................................................. $397,030 $ --
Audit-related fees.......................................... 15,000 --
Tax fees.................................................... 59,840 --
All other fees.............................................. 29,100 109,854
-------- --------
$500,970 $109,854
-------- --------
-------- --------
AUDIT FEES
Audit fees billed by Ernst & Young LLP related to the following services:
(i) audit of our annual consolidated financial statements as of and for the year
ended December 31, 2002; (ii) review of our interim consolidated financial
statements included in our Quarterly Reports on Form 10-Q for the periods ended
March 31, June 30 and September 30, 2002; (iii) attest services and the
provisions of comfort letters; (iv) the provision of consents; and (v) review
and advice in respect of accounting matters in connection with our
recapitalization.
AUDIT-RELATED FEES
Audit-related fees billed by Ernst & Young LLP related to the audit of our
401(k) Savings Plan financial statements.
TAX FEES
Tax fees billed by Ernst & Young LLP related to the following services:
(i) tax compliance; (ii) tax planning; and (iii) tax advice in connection with
our recapitalization.
ALL OTHER FEES
Other fees billed by Ernst & Young LLP related to: (i) the administrative
and consulting services in connection with our 401(k) Savings Plan; and
(ii) advisory services associated with our stock option plans.
The following table sets forth the fees billed to us by Arthur Andersen LLP,
our independent accountant as of and for the year ended December 31, 2001:
FOR THE YEAR ENDED
DECEMBER 31,
-------------------
2002 2001
---- ----
Audit fees.................................................. $ -- $275,750
Audit-related fees.......................................... -- 16,000
Tax fees.................................................... 146,000 534,425
All other fees.............................................. -- 64,006
-------- --------
$146,000 $890,181
-------- --------
-------- --------
AUDIT FEES
Audit fees billed by Arthur Andersen LLP related to the following services:
(i) audit of our consolidated financial statements as of and for the year ended
December 31, 2001; (ii) review of our interim consolidated financial statements
included in our Quarterly Reports on Form 10-Q for the periods ended March 31,
June 30, and September 30, 2001; (iii) attest services and provisions of comfort
letters; and (iv) provisions of consents.
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AUDIT-RELATED FEES
Audit-related fees billed by Arthur Andersen LLP related to the audit of our
401(k) Savings Plan financial statements.
TAX FEES
Tax fees billed by Arthur Andersen LLP related to the following services:
(i) tax compliance; (ii) tax planning; and (iii) tax advice.
ALL OTHER FEES
All other fees billed by Arthur Andersen LLP related to consulting services
provided during the implementation of our financial and informational reporting
systems.
ITEM 2 -- AMENDMENT OF THE SIRIUS SATELLITE RADIO
2003 LONG-TERM STOCK INCENTIVE PLAN
On January 21, 2003, our board of directors adopted the Sirius Satellite
Radio 2003 Long-Term Stock Incentive Plan (referred to herein as the 'stock
plan'), which was approved by our stockholders on March 4, 2003. The stock plan
currently provides that employees of, and consultants to, the company and any of
its affiliates are eligible to be selected as participants and receive awards
under the stock plan by the plan's administering committee (referred to herein
as the 'stock plan committee').
AMENDMENT TO THE PLAN
Our board of directors has amended the stock plan as of June 24, 2003,
subject to approval of our stockholders, to permit non-employee directors of the
company or any of its affiliates to be eligible to be selected as participants
under the stock plan by the stock plan committee. The amendments do not increase
the number of shares otherwise available for grant pursuant to the stock plan
nor expand the types of awards available thereunder, all of which have
previously been approved by our stockholders.
The following is a summary of the types of awards that would be available
for grant to non-employee directors as a result of the amendments described
herein.
NON-QUALIFIED STOCK OPTIONS
Non-qualified stock options granted under the stock plan will be subject to
such terms and conditions, including exercise price and conditions and timing of
exercise, as may be determined by the stock plan committee and specified in the
applicable award agreement. Payment in respect of the exercise of an option
granted under the stock plan may be made in cash or its equivalent, or, to the
extent permitted by the stock plan committee, (i) by exchanging shares owned by
the optionee (which are not the subject of any pledge or other security interest
and which have been owned by such optionee for at least six months) or
(ii) subject to such rules as may be established by the stock plan committee,
through delivery of irrevocable instructions to a broker to sell the shares
being acquired upon exercise of the option and to deliver promptly to us an
amount equal to the aggregate exercise price, or by a combination of the
foregoing, provided that the combined value of all cash and cash equivalents and
the fair market value of such shares so tendered to us as of the date of such
tender is at least equal to the aggregate exercise price of the option.
STOCK APPRECIATION RIGHTS
Stock appreciation rights granted under the stock plan will be subject to
such terms and conditions, including grant price and the conditions and
limitations applicable to exercise thereof, as may be determined by the stock
plan committee and specified in the applicable award
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agreement. Stock appreciation rights may be granted in tandem with another
award, in addition to another award, or freestanding and unrelated to another
award. A stock appreciation right will entitle the participant to receive an
amount equal to the excess of the fair market value of a share on the date of
exercise of the stock appreciation right over the grant price thereof. The stock
plan committee, in its sole discretion, will determine whether a stock
appreciation right shall be settled in cash, shares or a combination of cash and
shares.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
Restricted stock and restricted stock units granted under the stock plan
will be subject to such terms and conditions, including, without limitation, the
duration of the period during which, and the conditions, if any, under which,
the restricted stock and restricted stock units may be forfeited to us, as may
be determined by the stock plan committee in its sole discretion. Each
restricted stock unit will have a value equal to the fair market value of a
share of our common stock. Restricted stock units will be paid in cash, shares,
other securities or other property, as determined by the stock plan committee in
its sole discretion, upon the lapse of the restrictions applicable thereto, or
otherwise in accordance with the applicable award agreement. Dividends paid on
any shares of restricted stock may be paid directly to the participant, withheld
by us subject to vesting of the restricted shares, or reinvested in additional
shares of restricted stock or in additional restricted stock units, as
determined by the stock plan committee in its sole discretion.
PERFORMANCE AWARDS
Performance awards granted under the stock plan will consist of a right
which is (i) denominated in cash or shares, (ii) valued, as determined by the
stock plan committee, in accordance with the achievement of such performance
goals during such performance periods as the stock plan committee will
establish, and (iii) payable at such time and in such form as the stock plan
committee will determine. Subject to the terms of the stock plan and any
applicable award agreement, the stock plan committee will determine the
performance goals to be achieved during any performance period, the length of
any performance period, the amount of any performance award and the amount and
kind of any payment or transfer to be made pursuant to any performance award.
Performance awards may be paid in a lump sum or in installments following the
close of the performance period or, in accordance with procedures established by
the stock plan committee, on a deferred basis.
OTHER STOCK-BASED AWARDS
In addition to the foregoing types of awards, the stock plan committee will
have authority to grant to participants an 'other stock-based award' (as defined
in the stock plan), which will consist of any right which is (i) not a stock
option, stock appreciation right, restricted stock or restricted unit award or
performance award and (ii) an award of shares or an award denominated or payable
in, valued in whole or in part by reference to, or otherwise based on or related
to, shares of our common stock (including, without limitation, securities
convertible into shares of our common stock), as deemed by the stock plan
committee to be consistent with the purposes of the stock plan; provided that
any such rights must comply, to the extent deemed desirable by the stock plan
committee, with Rule 16b-3 promulgated under the Securities Exchange Act of 1934
and applicable law. Subject to the terms of the stock plan and any applicable
award agreement, the stock plan committee will determine the terms and
conditions of any such other stock-based award, including the price, if any, at
which securities may be purchased pursuant to any other stock-based award
granted under the stock plan.
In the sole discretion of the stock plan committee, an award, whether made
as an other stock-based award or as any other type of award issuable under the
stock plan, may provide the participant with the right to receive dividends or
dividend equivalents, payable in cash, shares, other securities or other
property and on a current or deferred basis.
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TRANSFERABILITY
Each award, and each right under any award, will be exercisable only by the
participant during the participant's lifetime, or, if permissible under
applicable law, by the participant's guardian or legal representative, and
except as otherwise provided in an applicable award agreement, no award may be
sold, assigned, pledged, attached, alienated or otherwise transferred or
encumbered by a participant, other than by will or by the laws of descent and
distribution, and any such purported sale, assignment, pledge, attachment,
alienation, transfer or encumbrance will be void and unenforceable against us or
any affiliate; provided that the designation of a beneficiary will not
constitute a sale, assignment, pledge, attachment, alienation, transfer or
encumbrance. Notwithstanding the foregoing, the stock plan committee has the
discretion under the stock plan to provide that options granted under the stock
plan that are not intended to qualify as incentive stock options may be
transferred without consideration to certain family members or trusts,
partnerships or limited liability companies whose only beneficiaries or partners
are the original grantee and/or such family members.
CHANGE OF CONTROL
In the event of a 'change of control' (as defined in the stock plan), all
outstanding awards then held by a participant which are unexercisable or
otherwise unvested will automatically be deemed exercisable or otherwise vested,
as the case may be, immediately prior to such change of control.
AMENDMENT TO STOCK PLAN
Our board of directors may amend, alter, suspend, discontinue, or terminate
the stock plan or any portion thereof at any time; provided that no such
amendment, alteration, suspension, discontinuation or termination will be made
without stockholder approval if such approval is necessary to comply with any
tax or regulatory requirement applicable to the stock plan, and no such action
that would adversely affect the rights of any participant with respect to awards
previously granted under the stock plan will be effective without the
participant's consent.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO AWARDS
The following summary of the Federal income tax consequences of awards
granted under the stock plan is intended to reflect the current provisions of
the Internal Revenue Code of 1986 (the 'Code') and the regulations thereunder.
This summary is not intended to be a complete statement of applicable law, nor
does it address state and local tax considerations.
Non-Qualified Stock Options. No income will be realized by an optionee upon
grant of a non-qualified stock option, and no deduction is available to us at
such time. Upon exercise of a non-qualified stock option, the optionee will
recognize ordinary compensation income, and we will realize a tax deduction, in
an amount equal to the excess, if any, of the fair market value of the
underlying stock over the option exercise price, referred to herein as the
'spread,' at the time of exercise. The optionee's tax basis in the underlying
shares acquired by exercise of a non-qualified stock option will equal the
exercise price plus the amount taxable as compensation to the optionee. Upon
sale of the shares received by the optionee upon exercise of the non-qualified
stock option, any gain or loss is generally long-term or short-term capital gain
or loss, depending on the holding period. The optionee's holding period for
shares acquired pursuant to the exercise of a non-qualified stock option will
begin on the date of exercise of such option.
The payment by an optionee of the exercise price, in full or in part, with
previously acquired shares will not affect the tax treatment of the exercise
described above. No gain or loss generally will be recognized by the optionee
upon the surrender of the previously acquired shares to us, and shares received
by the optionee, equal in number to the previously surrendered shares, will have
the same tax basis as the shares surrendered to us and will have a holding
period that includes the holding period of the shares surrendered. The value of
shares received by the optionee in excess of the number of shares surrendered to
us will be taxable to the optionee. Such additional shares
24
will have a tax basis equal to the fair market value of such additional shares
as of the date ordinary income is recognized, and will have a holding period
that begins on the date ordinary income is recognized.
Stock Appreciation Rights. No income is realized by the participant at the
time a stock appreciation right is granted, and no deduction is available to us
at such time. When the right is exercised, ordinary income is realized by the
participant in the amount of the cash and/or the fair market value of the shares
received by the participant, and we will be entitled to a deduction of
equivalent value.
Restricted Stock. The participant recognizes taxable income, and we will
realize a tax deduction, equal to the fair market value of the restricted stock
at the time the restrictions on the shares awarded lapse, unless the participant
elects to recognize such income immediately by so electing not later than 30
days after the date of grant by the company to the participant of a restricted
stock award as permitted under Section 83(b) of the Code, in which case both the
participant's inclusion in income and our deduction occur on the grant date.
Restricted Stock Units and Other Stock-Based Awards. The value of any part
of any restricted stock unit or other stock-based award distributed to
participants will be taxable as ordinary income to such participant in the year
in which such award is paid in cash or securities to the participant, and we
will be entitled to a corresponding tax deduction.
The description of the proposed amendment of the stock plan is qualified in
all respects by the actual provisions of the plan, as amended and restated,
which is attached to this Proxy Statement as Appendix A. The stock plan, as
attached, has been marked to show the text of the amendments thereto for which
stockholders approval is sought.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR' THE AMENDMENT OF
THE SIRIUS SATELLITE RADIO 2003 LONG-TERM STOCK INCENTIVE PLAN.
OTHER MATTERS
Our board of directors does not intend to present, or have any reason to
believe others will present, any items of business other than those stated
above. If other matters are properly brought before the annual meeting, the
persons named in the accompanying proxy will vote the shares represented by it
in accordance with the recommendation of our board of directors.
By Order of the Board of Directors,
PATRICK L. DONNELLY
Patrick L. Donnelly
Executive Vice President,
General Counsel and Secretary
New York, New York
October 20, 2003
25
APPENDIX A
AMENDED AND RESTATED SIRIUS SATELLITE RADIO
2003 LONG-TERM STOCK INCENTIVE PLAN
SECTION 1. Purpose. The purposes of this AMENDED AND RESTATED Sirius
Satellite Radio 2003 Long-Term Stock Incentive Plan are to promote the interests
of Sirius Satellite Radio Inc. and its stockholders by (i) attracting and
retaining employees AND DIRECTORS of, and consultants to, the Company and its
Affiliates, as defined below; (ii) motivating such individuals by means of
performance-related incentives to achieve longer-range performance goals; and
(iii) enabling such individuals to participate in the long-term growth and
financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following terms shall have
the meanings set forth below:
'Affiliate' shall mean any entity (i) that, directly or indirectly, is
controlled by, controls or is under common control with, the Company or (ii) in
which the Company has a significant equity interest, in either case as
determined by the Committee.
'Award' shall mean any Option, Stock Appreciation Right, Restricted Stock
Award, Restricted Stock Unit Award, Performance Award, Other Stock-Based Award
or Performance Compensation Award made or granted from time to time hereunder.
'Award Agreement' shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
'Board' shall mean the Board of Directors of the Company.
'Change of Control' shall mean the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in one or a
series of related transactions, of all or substantially all of the assets of the
Company to any 'person' or 'group' (as such terms are used in Sections 13(d)(3)
and 14(d)(2) of the Exchange Act), (ii) any person or group is or becomes the
'beneficial owner' (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have 'beneficial ownership' of all
shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total voting power of the voting stock of
the Company, including by way of merger, consolidation or otherwise or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
directors of the Company, then still in office, who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board, then in office.
'Code' shall mean the Internal Revenue Code of 1986, as amended from time to
time.
'Committee' shall mean a committee of the Board designated by the Board to
administer the Plan and composed of not less than two directors, each of whom is
required to be a 'Non-Employee Director' (within the meaning of Rule 16b-3) and
an 'outside director' (within the meaning of Section 162(m) of the Code) to the
extent Rule 16b-3 and Section 162(m) of the Code, respectively, are applicable
to the Company and the Plan. If at any time such a committee has not been so
designated, the Board shall constitute the Committee.
'Company' shall mean Sirius Satellite Radio Inc., together with any
successor thereto.
'Exchange Act' shall mean the Securities Exchange Act of 1934, as amended.
'Fair Market Value' shall mean (i) with respect to any property other than
Shares, the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee and
(ii) with respect to the Shares, as of any date, (1) the mean between the high
and low sales prices of the Shares on the Nasdaq Stock Market for such date (or
if not then trading on the Nasdaq Stock Market, the mean between the high and
low sales price of the Shares on the stock exchange or over-the-counter market
on which the Shares are principally trading on such date), or, if
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there were no sales on such date, on the closest preceding date on which there
were sales of Shares or (2) in the event there shall be no public market for the
Shares on such date, the fair market value of the Shares as determined in good
faith by the Committee.
'Incentive Stock Option' shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to meet
the requirements of Section 422 of the Code or any successor provision thereto.
'Negative Discretion' shall mean the discretion authorized by the Plan to be
applied by the Committee to eliminate or reduce the size of a Performance
Compensation Award; provided that the exercise of such discretion would not
cause the Performance Compensation Award to fail to qualify as
'performance-based compensation' under Section 162(m) of the Code. By way of
example and not by way of limitation, in no event shall any discretionary
authority granted to the Committee by the Plan including, but not limited to,
Negative Discretion, be used to (a) grant or provide payment in respect of
Performance Compensation Awards for a Performance Period if the Performance
Goals for such Performance Period have not been attained or (b) increase a
Performance Compensation Award above the maximum amount payable under
Section 4(a) or 11(d)(vi) of the Plan. Notwithstanding anything herein to the
contrary, in no event shall Negative Discretion be exercised by the Committee
with respect to any Option or Stock Appreciation Right (other than an Option or
Stock Appreciation Right that is intended to be a Performance Compensation Award
under Section 11 of the Plan).
'Non-Qualified Stock Option' shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is not intended to
be an Incentive Stock Option.
'Option' shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
'Other Stock-Based Award' shall mean any right granted under Section 10 of
the Plan.
'Participant' shall mean any employee of, or consultant to, the Company or
its AFFILIATES, OR NON-EMPLOYEE DIRECTOR WHO IS A MEMBER OF THE BOARD OR THE
BOARD OF DIRECTORS OF AN AFFILIATE, eligible for an Award under Section 5 and
selected by the Committee to receive an Award under the Plan.
'Performance Award' shall mean any right granted under Section 9 of the
Plan.
'Performance Compensation Award' shall mean any Award designated by the
Committee as a Performance Compensation Award pursuant to Section 11 of the
Plan.
'Performance Criteria' shall mean the criterion or criteria that the
Committee shall select for purposes of establishing the Performance Goal(s) for
a Performance Period with respect to any Performance Compensation Award under
the Plan. The Performance Criteria that will be used to establish the
Performance Goal(s) shall be based on the attainment of specific levels of
performance of the Company (or an Affiliate, division or operational unit of the
Company) and shall be limited to the following: return on net assets, return on
shareholders' equity, return on assets, return on capital, shareholder returns,
profit margin, earnings per Share, net earnings, operating earnings, earnings
before interest, taxes, depreciation and amortization, number of subscribers,
growth of subscribers, operating expenses, capital expenses, subscriber
acquisition costs, Share price or sales or market share. To the extent required
under Section 162(m) of the Code, the Committee shall, within the first 90 days
of a Performance Period (or, if longer, within the maximum period allowed under
Section 162(m) of the Code), define in an objective fashion the manner of
calculating the Performance Criteria it selects to use for such Performance
Period.
'Performance Formula' shall mean, for a Performance Period, the one or more
objective formulas applied against the relevant Performance Goal to determine,
with regard to the Performance Compensation Award of a particular Participant,
whether all, some portion but less than all, or none of the Performance
Compensation Award has been earned for the Performance Period.
'Performance Goals' shall mean, for a Performance Period, the one or more
goals established by the Committee for the Performance Period based upon the
Performance Criteria. The Committee is authorized at any time during the first
90 days of a Performance Period, or at any time thereafter (but only to the
extent the exercise of such authority after the first 90 days of a Performance
Period would not cause the Performance Compensation Awards granted to any
Participant for the Performance Period to fail to qualify as 'performance-based
compensation' under Section 162(m) of the Code), in its
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sole and absolute discretion, to adjust or modify the calculation of a
Performance Goal for such Performance Period to the extent permitted under
Section 162(m) of the Code in order to prevent the dilution or enlargement of
the rights of Participants, (a) in the event of, or in anticipation of, any
unusual or extraordinary corporate item, transaction, event or development
affecting the Company; or (b) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business conditions.
'Performance Period' shall mean the one or more periods of time of at least
one year in duration, as the Committee may select, over which the attainment of
one or more Performance Goals will be measured for the purpose of determining a
Participant's right to and the payment of a Performance Compensation Award.
'Person' shall mean any individual, corporation, partnership, association,
limited liability company, joint-stock company, trust, unincorporated
organization, government or political subdivision thereof or other entity.
'Plan' shall mean this AMENDED AND RESTATED Sirius Satellite Radio 2003
Long-Term Stock Incentive Plan.
'Restricted Stock' shall mean any Share granted under Section 8 of the Plan.
'Restricted Stock Unit' shall mean any unit granted under Section 8 of the
Plan.
'Rule 16b-3' shall mean Rule 16b-3 as promulgated and interpreted by the SEC
under the Exchange Act, or any successor rule or regulation thereto as in effect
from time to time.
'SEC' shall mean the Securities and Exchange Commission or any successor
thereto and shall include the Staff thereof.
'Shares' shall mean the common stock of the Company, $.001 par value, or
such other securities of the Company (i) into which such common stock shall be
changed by reason of a recapitalization, merger, consolidation, split-up,
combination, exchange of shares or other similar transaction or (ii) as may be
determined by the Committee pursuant to Section 4(b) of the Plan.
'Stock Appreciation Right' shall mean any right granted under Section 7 of
the Plan.
'Substitute Awards' shall have the meaning specified in Section 4(c) of the
Plan.
SECTION 3. Administration. (a) The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to a
Participant and designate those Awards which shall constitute Performance
Compensation Awards; (iii) determine the number of Shares to be covered by, or
with respect to which payments, rights, or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent, and under what circumstances Awards may
be settled or exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited, or suspended and the method or methods by
which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi)
determine whether, to what extent, and under what circumstances cash, Shares,
other securities, other Awards, other property, and other amounts payable with
respect to an Award (subject to Section 162(m) of the Code with respect to
Performance Compensation Awards) shall be deferred either automatically or at
the election of the holder thereof or of the Committee; (vii) interpret,
administer or reconcile any inconsistency, correct any defect, resolve
ambiguities and/or supply any omission in the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; (ix) establish and
administer Performance Goals and certify whether, and to what extent, they have
been attained; and (x) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan.
(b) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole
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discretion of the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the Company, any Affiliate,
any Participant, any holder or beneficiary of any Award, and any stockholder.
(c) The mere fact that a Committee member shall fail to qualify as a
'Non-Employee Director' or 'outside director' within the meaning of Rule 16b-3
and Section 162(m) of the Code, respectively, shall not invalidate any Award
made by the Committee which Award is otherwise validly made under the Plan.
(d) No member of the Committee shall be liable to any Person for any action
or determination made in good faith with respect to the Plan or any Award
hereunder.
(e) With respect to any Performance Compensation Award granted to a Covered
Employee (within the meaning of Section 162(m) of the Code) under the Plan, the
Plan shall be interpreted and construed in accordance with Section 162(m) of the
Code.
(f) Notwithstanding the foregoing, the Committee may delegate to one or more
officers of the Company the authority to grant awards to Participants who are
not officers or directors of the Company subject to Section 16 of the Exchange
Act or Covered Employees (within the meaning of Section 162(m) of the Code).
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section 4(b), the
aggregate number of Shares with respect to which Awards may be granted from time
to time under the Plan shall in the aggregate not exceed, at any time, 15% of
the sum of (i) the issued and outstanding Shares, (ii) any Shares which are
issuable as a result of any conversion, exchange or exercise of any preferred
stock, warrant or other security of the Company which is outstanding on the date
of determination; and (iii) the Shares which have been issued or are issuable to
employees, consultants and directors of the Company pursuant to the Plan, the
Company's 1999 Long-Term Stock Incentive Plan, the Company's Amended and
Restated 1994 Stock Option Plan and the Company's Amended and Restated 1994
Directors' Nonqualified Stock Option Plan; provided, however, that the aggregate
number of Shares with respect to which Incentive Stock Options may be granted
under the Plan shall be 40,000,000. The maximum number of Shares with respect to
which Options and Stock Appreciation Rights may be granted to any Participant in
any fiscal year shall be 40,000,000 and the maximum number of Shares which may
be paid to a Participant in the Plan in connection with the settlement of any
Award(s) designated as 'Performance Compensation Awards' in respect of a single
Performance Period shall be 40,000,000 or, in the event such Performance
Compensation Award is paid in cash, the equivalent cash value thereof. If, after
the effective date of the Plan, any Shares covered by an Award granted under the
Plan, or to which such an Award relates, are forfeited, or if an Award has
expired, terminated or been canceled for any reason whatsoever (other than by
reason of exercise or vesting), then the Shares covered by such Award shall
again be, or shall become, Shares with respect to which Awards may be granted
hereunder.
(b) Adjustments. Notwithstanding any provisions of the Plan to the contrary,
in the event that the Committee determines in its sole discretion that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other corporate transaction or event affects the Shares such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, equitably adjust any or all of (i) the number of
Shares or other securities of the Company (or number and kind of other
securities or property) with respect to which Awards may be granted, (ii) the
number of Shares or other securities of the Company (or number and kind of other
securities or property) subject to outstanding Awards, and (iii) the grant or
exercise price with respect to any Award or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award in
consideration for the cancellation of such Award, which, in the case of Options
and Stock Appreciation Rights shall equal the
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excess, if any, of the Fair Market Value of the Shares subject to such Options
or Stock Appreciation Rights over the aggregate exercise price or grant price of
such Options or Stock Appreciation Rights.
(c) Substitute Awards. Awards may, in the discretion of the Committee, be
made under the Plan in assumption of, or in substitution for, outstanding awards
previously granted by the Company or its Affiliates or a company acquired by the
Company or with which the Company combines ('Substitute Awards'). The number of
Shares underlying any Substitute Awards shall be counted against the aggregate
number of Shares available for Awards under the Plan.
(d) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
SECTION 5. Eligibility. Any employee of, or consultant to, the Company or
any of its Affiliates (including any prospective employee), OR NON-EMPLOYEE
DIRECTOR WHO IS A MEMBER OF THE BOARD OR THE BOARD OF DIRECTORS OF AN AFFILIATE,
shall be eligible to be selected as a Participant.
SECTION 6. Stock Options.
(a) Grant. Subject to the terms of the Plan, the Committee shall have sole
and complete authority to determine the Participants to whom Options shall be
granted, the number of Shares to be covered by each Option, the exercise price
therefor and the conditions and limitations applicable to the exercise of the
Option. The Committee shall have the authority to grant Incentive Stock Options,
or to grant Non-Qualified Stock Options, or to grant both types of Options. In
the case of Incentive Stock Options, the terms and conditions of such grants
shall be subject to and comply with such rules as may be prescribed by
Section 422 of the Code, as from time to time amended, and any regulations
implementing such statute. All Options when granted under the Plan are intended
to be Non-Qualified Stock Options, unless the applicable Award Agreement
expressly states that the Option is intended to be an Incentive Stock Option. If
an Option is intended to be an Incentive Stock Option, and if for any reason
such Option (or any portion thereof) shall not qualify as an Incentive Stock
Option, then, to the extent of such nonqualification, such Option (or portion
thereof) shall be regarded as a Non-Qualified Stock Option appropriately granted
under the Plan; provided that such Option (or portion thereof) otherwise
complies with the Plan's requirements relating to Non-Qualified Stock Options.
(b) Exercise Price. The Committee shall establish the exercise price at the
time each Option is granted, which exercise price shall be set forth in the
applicable Award Agreement.
(c) Exercise. Each Option shall be exercisable at such times and subject to
such terms and conditions as the Committee may, in its sole discretion, specify
in the applicable Award Agreement. The Committee may impose such conditions with
respect to the exercise of Options, including without limitation, any relating
to the application of federal or state securities laws, as it may deem necessary
or advisable. Options with an exercise price equal to or greater than the Fair
Market Value per Share as of the date of grant are intended to qualify as
'performance-based compensation' under Section 162(m) of the Code. In the sole
discretion of the Committee, Options may be granted with an exercise price that
is less than the Fair Market Value per Share and such Options may, but need not,
be intended to qualify as performance-based compensation in accordance with
Section 11 hereof.
(d) Payment. (i) No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the aggregate exercise price therefor is
received by the Company. Such payment may be made in cash, or its equivalent, or
(x) by exchanging Shares owned by the optionee (which are not the subject of any
pledge or other security interest and which have been owned by such optionee for
at least six months) or (y) subject to such rules as may be established by the
Committee, through delivery of irrevocable instructions to a broker to sell the
Shares otherwise deliverable upon the exercise of the Option and to deliver
promptly to the Company an amount equal to the aggregate exercise price or by a
combination of the foregoing, provided that the combined value of all cash and
cash equivalents and the Fair Market Value of any such Shares so tendered to the
Company as of the date of such tender is at least equal to such aggregate
exercise price.
(ii) Wherever in this Plan or any Award Agreement a Participant is permitted
to pay the exercise price of an Option or taxes relating to the exercise of an
Option by delivering Shares, the Participant may, subject to procedures
satisfactory to the Committee, satisfy such delivery requirement by presenting
proof of beneficial ownership of such Shares, in which case the Company shall
treat the
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Option as exercised without further payment and shall withhold such number of
Shares from the Shares acquired by the exercise of the Option.
SECTION 7. Stock Appreciation Rights.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Stock
Appreciation Rights shall be granted, the number of Shares to be covered by each
Stock Appreciation Right Award, the grant price thereof and the conditions and
limitations applicable to the exercise thereof. Stock Appreciation Rights with a
grant price equal to or greater than the Fair Market Value per Share as of the
date of grant are intended to qualify as 'performance-based compensation' under
Section 162(m) of the Code. In the sole discretion of the Committee, Stock
Appreciation Rights may be granted with an exercise price that is less than the
Fair Market Value per Share and such Stock Appreciation Rights may, but need
not, be intended to qualify as performance-based compensation in accordance with
Section 11 hereof. Stock Appreciation Rights may be granted in tandem with
another Award, in addition to another Award, or freestanding and unrelated to
another Award. Stock Appreciation Rights granted in tandem with or in addition
to an Award may be granted either before, at the same time as the Award or at a
later time.
(b) Exercise and Payment. A Stock Appreciation Right shall entitle the
Participant to receive an amount equal to the excess of the Fair Market Value of
a Share on the date of exercise of the Stock Appreciation Right over the grant
price thereof. The Committee shall determine in its sole discretion whether a
Stock Appreciation Right shall be settled in cash, Shares or a combination of
cash and Shares.
(c) Other Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine, at the grant of a
Stock Appreciation Right, the term, methods of exercise, methods and form of
settlement, and any other terms and conditions of any Stock Appreciation Right.
The Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it shall deem appropriate.
SECTION 8. Restricted Stock and Restricted Stock Units.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Shares of
Restricted Stock and Restricted Stock Units shall be granted, the number of
Shares of Restricted Stock and/or the number of Restricted Stock Units to be
granted to each Participant, the duration of the period during which, and the
conditions, if any, under which, the Restricted Stock and Restricted Stock Units
may be forfeited to the Company, and the other terms and conditions of such
Awards.
(b) Transfer Restrictions. Shares of Restricted Stock and Restricted Stock
Units may not be sold, assigned, transferred, pledged or otherwise encumbered,
except, in the case of Restricted Stock, as provided in the Plan or the
applicable Award Agreements. Certificates issued in respect of Shares of
Restricted Stock shall be registered in the name of the Participant and
deposited by such Participant, together with a stock power endorsed in blank,
with the Company. Upon the lapse of the restrictions applicable to such Shares
of Restricted Stock, the Company shall deliver such certificates to the
Participant or the Participant's legal representative.
(c) Payment. Each Restricted Stock Unit shall have a value equal to the Fair
Market Value of a Share. Restricted Stock Units shall be paid in cash, Shares,
other securities or other property, as determined in the sole discretion of the
Committee, upon the lapse of the restrictions applicable thereto, or otherwise
in accordance with the applicable Award Agreement. Dividends paid on any Shares
of Restricted Stock may be paid directly to the Participant, withheld by the
Company subject to vesting of the Restricted Shares pursuant to the terms of the
applicable Award Agreement, or may be reinvested in additional Shares of
Restricted Stock or in additional Restricted Stock Units, as determined by the
Committee in its sole discretion.
SECTION 9. Performance Awards.
(a) Grant. The Committee shall have sole and complete authority to determine
the Participants who shall receive a 'Performance Award', which shall consist of
a right which is (i) denominated in cash or Shares, (ii) valued, as determined
by the Committee, in accordance with the achievement of
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such performance goals during such performance periods as the Committee shall
establish, and (iii) payable at such time and in such form as the Committee
shall determine.
(b) Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the Performance Goals
to be achieved during any Performance Period, the length of any Performance
Period, the amount of any Performance Award and the amount and kind of any
payment or transfer to be made pursuant to any Performance Award.
(c) Payment of Performance Awards. Performance Awards may be paid in a lump
sum or in installments following the close of the Performance Period or, in
accordance with procedures established by the Committee, on a deferred basis.
SECTION 10. Other Stock-Based Awards.
(a) General. The Committee shall have authority to grant to Participants an
'Other Stock-Based Award', which shall consist of any right which is (i) not an
Award described in Sections 6 through 9 above and (ii) an Award of Shares or an
Award denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, Shares (including, without limitation,
securities convertible into Shares), as deemed by the Committee to be consistent
with the purposes of the Plan; provided that any such rights must comply, to the
extent deemed desirable by the Committee, with Rule 16b-3 and applicable law.
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of any such Other Stock-Based
Award, including the price, if any, at which securities may be purchased
pursuant to any Other Stock-Based Award granted under this Plan.
(b) Dividend Equivalents. In the sole and complete discretion of the
Committee, an Award, whether made as an Other Stock-Based Award under this
Section 10 or as an Award granted pursuant to Sections 6 through 9 hereof, may
provide the Participant with dividends or dividend equivalents, payable in cash,
Shares, other securities or other property on a current or deferred basis.
SECTION 11. Performance Compensation Awards.
(a) General. The Committee shall have the authority, at the time of grant of
any Award described in Sections 6 through 10 (other than Options and Stock
Appreciation Rights granted with an exercise price or grant price, as the case
may be, equal to or greater than the Fair Market Value per Share on the date of
grant), to designate such Award as a Performance Compensation Award in order to
qualify such Award as 'performance-based compensation' under Section 162(m) of
the Code.
(b) Eligibility. The Committee will, in its sole discretion, designate
within the first 90 days of a Performance Period (or, if longer, within the
maximum period allowed under Section 162(m) of the Code) which Participants will
be eligible to receive Performance Compensation Awards in respect of such
Performance Period. Designation of a Participant eligible to receive an Award
hereunder for a Performance Period shall not in any manner entitle the
Participant to receive payment in respect of any Performance Compensation Award
for such Performance Period. The determination as to whether or not such
Participant becomes entitled to payment in respect of any Performance
Compensation Award shall be decided solely in accordance with the provisions of
this Section 11. Moreover, designation of a Participant eligible to receive an
Award hereunder for a particular Performance Period shall not require
designation of such Participant eligible to receive an Award hereunder in any
subsequent Performance Period and designation of one person as a Participant
eligible to receive an Award hereunder shall not require designation of any
other person as a Participant eligible to receive an Award hereunder in such
period or in any other period.
(c) Discretion of Committee with Respect to Performance Compensation Awards.
With regard to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type(s) of
Performance Compensation Awards to be issued, the Performance Criteria that will
be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the
Performance Goals(s) is/are to apply to the Company and the Performance Formula.
Within the first 90 days of a Performance Period (or, if longer, within the
maximum period allowed under Section 162(m) of the Code), the Committee shall,
with regard to the Performance Compensation Awards to be issued for such
Performance Period, exercise its discretion with respect to each of the matters
enumerated in the immediately preceding sentence of this Section 11(c) and
record the same in writing.
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(d) Payment of Performance Compensation Awards. (i) Condition to Receipt of
Payment. Unless otherwise provided in the applicable Award Agreement, a
Participant must be employed by the Company on the last day of a Performance
Period to be eligible for payment in respect of a Performance Compensation Award
for such Performance Period.
(ii) Limitation. A Participant shall be eligible to receive payment in
respect of a Performance Compensation Award only to the extent that: (1) the
Performance Goals for such period are achieved; and (2) the Performance Formula
as applied against such Performance Goals determines that all or some portion of
such Participant's Performance Award has been earned for the Performance Period.
(iii) Certification. Following the completion of a Performance Period, the
Committee shall meet to review and certify in writing whether, and to what
extent, the Performance Goals for the Performance Period have been achieved and,
if so, to calculate and certify in writing that amount of the Performance
Compensation Awards earned for the period based upon the Performance Formula.
The Committee shall then determine the actual size of each Participant's
Performance Compensation Award for the Performance Period and, in so doing, may
apply Negative Discretion, if and when it deems appropriate.
(iv) Negative Discretion. In determining the actual size of an individual
Performance Award for a Performance Period, the Committee may reduce or
eliminate the amount of the Performance Compensation Award earned under the
Performance Formula in the Performance Period through the use of Negative
Discretion if, in its sole judgement, such reduction or elimination is
appropriate.
(v) Timing of Award Payments. The Awards granted for a Performance Period
shall be paid to Participants as soon as administratively possible following
completion of the certifications required by this Section 11.
(vi) Maximum Award Payable. Notwithstanding any provision contained in the
Plan to the contrary, the maximum Performance Compensation Award payable to any
one Participant under the Plan for a Performance Period is 40,000,000 Shares or,
in the event the Performance Compensation Award is paid in cash, the equivalent
cash value thereof on the last day of the Performance Period to which such Award
relates. Furthermore, any Performance Compensation Award that has been deferred
shall not (between the date as of which the Award is deferred and the payment
date) increase (i) with respect to Performance Compensation Award that is
payable in cash, by a measuring factor for each fiscal year greater than a
reasonable rate of interest set by the Committee or (ii) with respect to a
Performance Compensation Award that is payable in Shares, by an amount greater
than the appreciation of a Share from the date such Award is deferred to the
payment date.
SECTION 12. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without stockholder approval if such approval is necessary to
comply with any tax or regulatory requirement applicable to the Plan; and
provided, further, that any such amendment, alteration, suspension,
discontinuance or termination that would impair the rights of any Participant or
any holder or beneficiary of any Award previously granted shall not be effective
without the consent of the affected Participant, holder or beneficiary.
(b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate,
any Award theretofore granted; provided that any such waiver, amendment,
alteration, suspension, discontinuance, cancellation or termination that would
impair the rights of any Participant or any holder or beneficiary of any Award
previously granted shall not be effective without the consent of the affected
Participant, holder or beneficiary.
(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make equitable
adjustments in the terms and conditions of, and the criteria included in, all
outstanding Awards in recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4(b) hereof) affecting the
Company, any Affiliate, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan; provided that
no such adjustment shall be authorized to the extent that such
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authority or adjustment would cause an Award designated by the Committee as a
Performance Compensation Award under Section 11 of the Plan to fail to qualify
as 'performance-based compensation' under Section 162(m) of the Code.
SECTION 13. Change of Control. In the event of a Change of Control, any
outstanding Awards then held by Participants which are unexercisable or
otherwise unvested shall automatically be deemed exercisable or otherwise
vested, as the case may be, effective as of immediately prior to such Change of
Control.
SECTION 14. General Provisions.
(a) Nontransferability.
(i) Each Award, and each right under any Award, shall be exercisable only by
the Participant during the Participant's lifetime, or, if permissible under
applicable law, by the Participant's legal guardian or representative.
(ii) No Award may be sold, assigned, alienated, pledged, attached or
otherwise transferred or encumbered by a Participant otherwise than by will or
by the laws of descent and distribution, and any such purported sale,
assignment, alienation, pledge, attachment, transfer or encumbrance shall be
void and unenforceable against the Company or any Affiliate; provided that the
designation of a beneficiary shall not constitute a sale, assignment,
alienation, pledge, attachment, transfer or encumbrance.
(iii) Notwithstanding the foregoing, the Committee may in the applicable
Award Agreement evidencing an Option granted under the Plan or at any time
thereafter in an amendment to an Award Agreement provide that Options granted
hereunder which are not intended to qualify as Incentive Options may be
transferred by the Participant to whom such Option was granted (the 'Grantee')
without consideration, subject to such rules as the Committee may adopt to
preserve the purposes of the Plan, to: (1) the Grantee's spouse, children or
grandchildren (including adopted and stepchildren and grandchildren)
(collectively, the 'Immediate Family'); (2) a trust solely for the benefit of
the Grantee and his or her Immediate Family; or (3) a partnership, corporation
or limited liability company whose only partners, members or shareholders are
the Grantee and his or her Immediate Family; (each transferee described in
clauses (1), (2) and (3) above is hereinafter referred to as a 'Permitted
Transferee'); provided that the Grantee gives the Committee advance written
notice describing the terms and conditions of the proposed transfer and the
Committee notifies the Grantee in writing that such a transfer would comply with
the requirements of the Plan and any applicable Award Agreement evidencing the
Option.
The terms of any Option transferred in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee and any reference in
the Plan or in an Award Agreement to an optionee, Grantee or Participant shall
be deemed to refer to the Permitted Transferee, except that (a) Permitted
Transferees shall not be entitled to transfer any Options, other than by will or
the laws of descent and distribution; (b) Permitted Transferees shall not be
entitled to exercise any transferred Options unless there shall be in effect a
registration statement on an appropriate form covering the Shares to be acquired
pursuant to the exercise of such Option if the Committee determines that such a
registration statement is necessary or appropriate, (c) the Committee or the
Company shall not be required to provide any notice to a Permitted Transferee,
whether or not such notice is or would otherwise have been required to be given
to the Grantee under the Plan or otherwise and (d) the consequences of
termination of the Grantee's employment by, or services to, the Company under
the terms of the Plan and the applicable Award Agreement shall continue to be
applied with respect to the Grantee, following which the Options shall be
exercisable by the Permitted Transferee only to the extent, and for the periods,
specified in the Plan and the applicable Award Agreement.
(b) No Rights to Awards. No Participant or other Person shall have any claim
to be granted any Award, and there is no obligation for uniformity of treatment
of Participants, or holders or beneficiaries of Awards. The terms and conditions
of Awards and the Committee's determinations and interpretations with respect
thereto need not be the same with respect to each Participant (whether or not
such Participants are similarly situated).
(c) Share Certificates. All certificates for Shares or other securities of
the Company or any Affiliate delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to such stop
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transfer orders and other restrictions as the Committee may deem advisable under
the Plan or the rules, regulations, and other requirements of the SEC, any stock
exchange upon which such Shares or other securities are then listed, and any
applicable Federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
(d) Withholding. (i) A Participant may be required to pay to the Company or
any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Award, from any payment due or transfer
made under any Award or under the Plan or from any compensation or other amount
owing to a Participant the amount (in cash, Shares, other securities, other
Awards or other property) of any applicable withholding taxes in respect of an
Award, its exercise, or any payment or transfer under an Award or under the Plan
and to take such other action as may be necessary in the opinion of the Company
to satisfy all obligations for the payment of such taxes. The Committee may
provide for additional cash payments to holders of Awards to defray or offset
any tax arising from the grant, vesting, exercise or payments of any Award.
(ii) Without limiting the generality of clause (i) above, a Participant may
satisfy, in whole or in part, the foregoing withholding liability by delivery of
Shares owned by the Participant (which are not subject to any pledge or other
security interest and which have been owned by the Participant for at least six
months) with a Fair Market Value equal to such withholding liability or by
having the Company withhold from the number of Shares otherwise issuable
pursuant to the exercise of the option a number of Shares with a Fair Market
Value equal to such withholding liability.
(iii) Notwithstanding any provision of this Plan to the contrary, in
connection with the transfer of an Option to a Permitted Transferee pursuant to
Section 14(a), the Grantee shall remain liable for any withholding taxes
required to be withheld upon the exercise of such Option by the Permitted
Transferee.
(e) Award Agreements. Each Award hereunder shall be evidenced by an Award
Agreement which shall be delivered to the Participant and shall specify the
terms and conditions of the Award and any rules applicable thereto, including
but not limited to the effect on such Award of the death, disability or
termination of employment or service of a Participant and the effect, if any, of
such other events as may be determined by the Committee.
(f) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other compensation arrangements, which may, but need not, provide for the
grant of options, restricted stock, Shares and other types of Awards provided
for hereunder (subject to stockholder approval if such approval is required),
and such arrangements may be either generally applicable or applicable only in
specific cases.
(g) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of, or in any
consulting relationship to, OR AS A DIRECTOR ON THE BOARD OR BOARD OF DIRECTORS,
AS APPLICABLE, OF, the Company or any Affiliate. Further, the Company or an
Affiliate may at any time dismiss a Participant from employment or discontinue
any consulting relationship, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan, any Award Agreement or
any applicable employment contract or agreement.
(h) No Rights as Stockholder. Subject to the provisions of the applicable
Award, no Participant or holder or beneficiary of any Award shall have any
rights as a stockholder with respect to any Shares to be distributed under the
Plan until he or she has become the holder of such Shares. Notwithstanding the
foregoing, in connection with each grant of Restricted Stock hereunder, the
applicable Award shall specify if and to what extent the Participant shall not
be entitled to the rights of a stockholder in respect of such Restricted Stock.
(i) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of New York, applied without
giving effect to its conflict of laws principles.
(j) Severability. If any provision of the Plan or any Award is or becomes or
is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to
any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform the applicable laws, or if it cannot be construed or deemed
amended
A-10
without, in the determination of the Committee, materially altering the intent
of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award and the remainder of the Plan and any such Award
shall remain in full force and effect.
(k) Other Laws. The Committee may refuse to issue or transfer any Shares or
other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws.
(l) No Trust or Fund Created. Neither the Plan nor any Award shall create or
be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(m) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights thereto
shall be canceled, terminated, or otherwise eliminated.
(n) Headings. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 15. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of the date of its
approval by the stockholders of the Company.
(b) Expiration Date. No Award shall be granted under the Plan after December
31, 2012. Unless otherwise expressly provided in the Plan or in an applicable
Award Agreement, any Award granted hereunder may, and the authority of the Board
or the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under any such Award shall,
continue after December 31, 2012.
A-11
Appendix 1
SIRIUS SATELLITE RADIO INC.
Proxy Solicited on behalf of the Board of
Directors of Sirius Satellite Radio Inc.
The undersigned hereby appoints Patrick L. Donnelly and Douglas A.
Kaplan, and each of them, proxies, with full power of substitution in each of
them, for and on behalf of the undersigned to vote as proxies, as directed and
permitted herein to vote the undersigned's shares of Sirius Satellite Radio
Common Stock (including any shares of Common Stock which the undersigned has the
right to direct the proxies to vote under the Sirius Satellite Radio Inc. 401(k)
Savings Plan) at the Annual Meeting of Stockholders of SIRIUS SATELLITE RADIO
INC. to be held on Tuesday, November 25, 2003, at 10:30 A.M., in the Auditorium
on the second floor of the McGraw-Hill Building, 1221 Avenue of the Americas,
New York, New York, and at any adjournments thereof upon matters set forth in
the Proxy Statement and, in their judgment and discretion, upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
on the reverse hereof by the Stockholder. If no direction is made, this proxy
will be voted FOR all nominees listed and FOR item 2.
(Continued and to be dated and signed on the reverse side)
SIRIUS SATELLITE RADIO
P.O. BOX 11492
NEW YORK, N.Y. 10203-0492
SIRIUS SATELLITE RADIO
ADMISSION TICKET
2003 ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, NOVEMBER 25, 2003
10:30 A.M.
TO BE HELD AT
THE MCGRAW-HILL BUILDING
THE AUDITORIUM, 2ND FLOOR
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK
THIS TICKET MUST BE PRESENTED TO ENTER THE MEETING
DETACH PROXY CARD HERE
[ ] Please Vote, Sign, Date and [X] Votes must be indicated
Return Promptly in the (x) in Black or Blue ink.
Enclosed Envelope.
The Board of Directors recommends a vote "FOR" each item.
1. To elect seven (7) members to the Board of Directors:
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees: Leon D. Black, Joseph P. Clayton, Lawrence F. Gilberti,
James P. Holden, Warren N. Lieberfarb, Michael J. McGuiness and
James F. Mooney
(Instructions: To withhold authority to vote for any individual nominee, mark
the "*Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions __________________________________________________________
FOR AGAINST ABSTAIN
2. To amend the Sirius Satellite Radio
2003 Long-Term Stock Incentive Plan [ ] [ ] [ ]
To change your address, please mark this box. [ ]
To include any comments, please mark this box. [ ]
S C A N L I N E
The signature on this Proxy should correspond exactly with stockholders name as
printed to the left. In case of joint tenancies, co-executors, or co-trustees,
both should sign. Persons signing as Attorney, Executor, Administrator, Trustee
or Guardian should give their full title.
Date Stock Owner sign here Co-Owner sign here
------- ----------------------------- -----------------------------
4374