Exhibit 10.4
EXECUTIVE VICE
PRESIDENT
CHANGE IN CONTROL SEVERANCE
AGREEMENT
THIS AGREEMENT, dated
, 2007, is made by and between XM Satellite Radio Holdings Inc., a
Delaware corporation (the “Company”), and
(the “Executive”).
WHEREAS, the Company considers it
essential to the best interests of its stockholders to foster the
continued employment of key management personnel; and
WHEREAS, the Board recognizes that,
as is the case with many publicly held corporations, the
possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its
stockholders; and
WHEREAS, the Board has determined
that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the
Company’s management, including the Executive, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a Change
in Control;
NOW, THEREFORE, in consideration of
the premises and the mutual covenants herein contained, the Company
and the Executive hereby agree as follows:
1. Defined Terms . The
definitions of capitalized terms used in this Agreement are
provided in the last Section hereof.
2. Term of Agreement . The
Term of this Agreement shall commence on the date hereof and shall
continue in effect through December 31, 2008; provided,
however, that commencing on January 1, 2008 and each
January 1 thereafter, the Term shall automatically be extended
for one additional year unless, not later than September 30 of
the preceding year, the Company or the Executive shall have given
notice not to extend the Term; and further provided ,
however , that if a Change in Control shall have occurred
during the Term, the Term shall expire twelve (12) months
beyond the month in which such Change in Control
occurred.
3. Company’s Covenants
Summarized . In order to induce the Executive to remain in the
employ of the Company, the Company agrees, under the conditions
described herein, to pay the Executive the Severance Payments and
the other payments and benefits described herein. Except as
provided in Section 8.1 hereof, no Severance Payments shall be
payable under this Agreement unless there shall have been (or,
under the terms of the second sentence of Section 5.1 hereof,
there shall be deemed to have been) a termination of the
Executive’s employment with the Company following a Change in
Control and during the Term. This Agreement shall not be construed
as creating an express or implied contract of employment and,
except as otherwise agreed in writing between the Executive and the
Company, the Executive shall not have any right to be retained in
the employ of the Company.
4. Compensation Other Than
Severance Payments .
4.1 Following a Change in Control
and during the Term, during any period that the Executive fails to
perform the Executive’s full-time duties with the Company as
a result of incapacity due to physical or mental illness, the
Company shall pay the Executive’s full salary to the
Executive at the rate in effect at the commencement of any such
period, together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit
plan,
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program or arrangement maintained by the Company
during such period (other than any disability plan), until the
Executive’s employment is terminated by the Company for
Disability.
4.2 If the Executive’s
employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay the
Executive’s full salary to the Executive through the Date of
Termination at the rate in effect immediately prior to the Date of
Termination or, if higher, the rate in effect immediately prior to
the first occurrence of an event or circumstance constituting Good
Reason, together with all compensation and benefits payable to the
Executive through the Date of Termination under the terms of the
Company’s compensation and benefit plans, programs or
arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
4.3 If the Executive’s
employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay to the Executive
the Executive’s normal post-termination compensation and
benefits as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, the Company’s retirement, insurance and
other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good
Reason.
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5. Severance Payments
.
5.1 If the Executive’s
employment is terminated following a Change in Control and during
the Term, other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without
Good Reason, then the Company shall pay the Executive the amounts,
and provide the Executive the benefits, described in this
Section 5.1 (“Severance Payments”) and
Section 5.2, in addition to any payments and benefits to which
the Executive is entitled under Section 4 hereof. For purposes
of this Agreement, the Executive’s employment shall be deemed
to have been terminated following a Change in Control by the
Company without Cause or by the Executive with Good Reason, if
(i) the Executive’s employment is terminated by the
Company without Cause prior to a Change in Control (whether or not
a Change in Control ever occurs) and such termination was at the
request or direction of a Person (other than the Company) who has
entered into an agreement with the Company the consummation of
which would constitute a Change in Control, (ii) the Executive
terminates his employment for Good Reason prior to a Change in
Control (whether or not a Change in Control ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the
request or direction of such Person, or (iii) the
Executive’s employment is terminated by the Company without
Cause or by the Executive for Good Reason and such termination or
the circumstance or event which constitutes Good Reason is
otherwise in connection with or in anticipation of a Change in
Control (whether or not a Change in Control ever occurs).
Notwithstanding anything to the contrary in this Agreement, to the
extent required in order to avoid accelerated taxation and/or tax
penalties under Section 409A of the Code, amounts that would
otherwise be payable and benefits that would otherwise be provided
pursuant to this Agreement during the six-month period immediately
following the Date of Termination shall instead be paid on the
first business day after the date that is six months following the
Executive’s “separation from service” within the
meaning of Section 409A of the Code.
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(A) In lieu of any further salary
payments to the Executive for periods subsequent to the Date of
Termination and in lieu of any severance benefit otherwise payable
to the Executive, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two times the sum of
(i) the Executive’s base salary as in effect immediately
prior to the Date of Termination or, if higher, in effect
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, and (ii) the
Executive’s target annual bonus under any annual bonus or
incentive plan maintained by the Company in respect of the fiscal
year in which occurs the Date of Termination or, if higher, the
fiscal year in which occurs the first event or circumstance
constituting Good Reason.
(B) For the twenty-four
(24) month period immediately following the Date of
Termination, the Company shall arrange to provide the Executive and
his dependents health, medical, dental, and similar insurance
benefits substantially similar to those provided to the Executive
and his dependents immediately prior to the Date of Termination or,
if more favorable to the Executive, those provided to the Executive
and his dependents immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, at no greater
after-tax cost to the Executive than the after-tax cost to the
Executive immediately prior to such date or occurrence;
provided , however , that, unless the Executive
consents to a different method, such health insurance benefits
shall be provided through a third-party insurer. Benefits otherwise
receivable by the Executive pursuant to this Section 5.1(B)
shall be reduced to the extent benefits of the same type are
received by or made available to the Executive during the
twenty-four (24) month period following the Executive’s
termination of employment (and any such benefits received by or
made available to the Executive shall be reported to the Company by
the Executive); provided , however , that the Company
shall reimburse the Executive for the excess, if any, of the
after-tax cost of such benefits to the Executive over such cost
immediately prior to the Date of Termination or, if more favorable
to the Executive, the first occurrence of an event or circumstance
constituting Good Reason.
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(C) Notwithstanding any provision of
any annual or long term incentive plan to the contrary, the Company
shall pay to the Executive a lump sum amount, in cash, equal to the
sum of (i) any unpaid incentive compensation which has been
allocated or awarded to the Executive for a completed fiscal year
or other measuring period preceding the Date of Termination under
any such plan and which, as of the Date of Termination, is
contingent only upon the continued employment of the Executive to a
subsequent date, and (ii) a pro rata portion to the Date of
Termination of the aggregate value of all contingent cash incentive
compensation awards to the Executive for all then uncompleted
periods under any such plan, calculated as to each such award by
multiplying the award that the Executive would have earned on the
last day of the performance award period, assuming the achievement,
at the target level, of the individual and corporate performance
goals established with respect to such award, by the fraction
obtained by dividing the number of full months and any fractional
portion of a month during such performance award period through the
Date of Termination by the total number of months contained in such
performance award period.
(D) The Company shall provide the
Executive with outplacement services suitable to the
Executive’s position for a period of two years or, if
earlier, until the first acceptance by the Executive of an offer of
employment.
(E) All restrictions relating to the
sale or disposal of restricted shares of Company common stock
granted to the Executive on March 14, 2006, as set forth in a
letter agreement between the Company and the Executive dated
May 18, 2006, shall lapse notwithstanding anything to the
contrary contained in the award agreement, letter agreement, or
otherwise.
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5.2 (A) Whether or not the Executive
becomes entitled to the Severance Payments, if any of the payments
or benefits received or to be received by the Executive (including
any payment or benefit received or to be received in connection
with a Change in Control or the Executive’s termination of
employment, whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement) (all such payments and
benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the “Total Payments”) will be subject to
the Excise Tax, the Company shall pay to the Executive an
additional amount (the “Gross-Up Payment”) such that
the net amount retained by the Executive, after deduction of any
Excise Tax on the Total Payments and any federal, state and local
income and employment taxes and Excise Tax upon the Gross-Up
Payment, and after taking into account the phase out of itemized
deductions and personal exemptions attributable to the Gross-Up
Payment, shall be equal to the Total Payments.
(B) For purposes of determining
whether any of the Total Payments will be subject to the Excise Tax
and the amount of such Excise Tax, (i) all of the Total
Payments shall be treated as “parachute payments”
(within the meaning of section 280G(b)(2) of the Code) unless, in
the opinion of tax counsel (“Tax Counsel”) reasonably
acceptable to the Executive and selected by the accounting firm
which was, immediately prior to the Change in Control, the
Company’s independent auditor (the “Auditor”),
such payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of section 280G(b)(4)(A) of
the Code, (ii) all “excess parachute payments”
within the meaning of section 280G(b)(l) of the Code shall be
treated as subject to the Excise Tax unless, in the opinion of Tax
Counsel, such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered
(within the meaning of section 280G(b)(4)(B) of the Code) in excess
of the Base Amount allocable to such reasonable compensation, or
are otherwise not subject to the Excise
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Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by
the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining
the amount of the Gross-Up Payment, (1) the Executive shall be
deemed to pay federal income tax at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the
Executive’s residence on the Date of Termination (or if there
is no Date of Termination, then the date on which the Gross-Up
Payment is calculated for purposes of this Section 5.2), net
of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes and
(2) the Executive shall be deemed to be subject to the loss of
itemized deductions and personal exemptions to the maximum extent
provided by the Code for each dollar of incremental
income.
(C) In the event that the Excise Tax
is finally determined to be less than the amount taken into account
hereunder in calculating the Gross-Up Payment, the Executive shall
repay to the Company, within five (5) business days following
the time that the amount of such reduction in the Excise Tax is
finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment being
repaid by the Executive), to the extent that such repayment results
in a reduction in the Excise Tax and a dollar-for-dollar reduction
in the Executive’s taxable income and wages for purposes of
federal, state and local income and employment taxes, plus interest
on the amount of such repayment at 120% of the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall
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make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable
by the Executive with respect to such excess) within five
(5) business days following the time that the amount of such
excess is finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or
amount of liability for Excise Tax with respect to the Total
Payments.
5.3 The payments provided in
subsections (A) and (C) of Section 5.1 hereof and in
Section 5.2 hereof shall be made not later than the fifth day
following the Date of Termination (or if there is no Date of
Termination, then the date on which the Gross-Up Payment is
calculated for purposes of Section 5.2 hereof);
provided , however , that if the amounts of such
payments cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as
determined in good faith by the Executive or, in the case of
payments under Section 5.2 hereof, in accordance with
Section 5.2 hereof, of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder
(or on all such payments to the extent the Company fails to make
such payments when due) at 120% of the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day
after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day
after demand by the Company (together with interest at 120% of the
rate provided in section 1274(b)(2)(B) of the Code). At the time
that payments are made under this Agreement, the Company shall
provide the Executive with a written statement setting forth the
manner in which such payments were calculated and the basis for
such calculations including, without limitation, any
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opinions or other advice the Company has
received from Tax Counsel, the Auditor or other advisors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
5.4 The Company also shall pay to
the Executive all legal fees and expenses incurred by the Executive
in disputing in good faith any issue hereunder relating to the
termination of the Executive’s employment, in seeking in good
faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the
extent attributable to the application of section 4999 of the Code
to any payment or benefit provided hereunder. Such payments shall
be made within five (5) business days after delivery of the
Executive’s written requests for payment accompanied with
such evidence of fees and expenses incurred as the Company
reasonably may require.
5.5 Notwithstanding the foregoing,
the Company’s obligations to pay or provide any benefits,
other than as required by Section 4, shall (1) cease as
of the date the Executive breaches any of the provisions of
Section 14 and (2) be conditioned on the Executive
signing a release of claims in favor of the Company, substantially
in the form attached hereto as Exhibit A, and the expiration of any
revocation period provided for in such release.
6. Termination Procedures and
Compensation During Dispute .
6.1 Notice of Termination .
After a Change in Control and during the Term, any purported
termination of the Executive’s employment (other than by
reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in
accordance with Section 9 hereof. For purposes of this
Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in
this Agreement relied upon and
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shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated.
Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board which was called and held for the
purpose of considering such termination (after reasonable notice to
the Executive and an opportunity for the Executive, together with
the Executive’s counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Executive
was guilty of conduct set forth in clause (i) o
