Document:

Exhibit

10.50

EMPLOYMENT AGREEMENT

Between

XM SATELLITE RADIO HOLDINGS INC. and 

XM SATELLITE RADIO INC.

and

HUGH PANERO

Dated as of June 1, 2001

Amended March 20, 2003

 

 

THIS AGREEMENT is entered into as of June 1, 2001 (the

“Effective Date”), by and between XM Satellite Radio Holdings Inc., a Delaware

corporation, and its subsidiary XM Satellite Radio Inc., a Delaware

corporation, both having a place of business at 1500 Eckington Place, N.E.,

Washington, D.C. 20002 (hereinafter collectively referred to as “XM”) and Hugh

Panero (“EMPLOYEE”) a resident of the State of Maryland.

WHEREAS, XM is engaged in the development,

implementation and operation of a digital audio satellite service to portable

receivers; and

WHEREAS, XM is interested in employing EMPLOYEE as its

Chief Executive Officer and EMPLOYEE is interested in being employed in that

position subject to the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing

premises and the mutual covenants and agreements of the parties contained

herein, the parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

For purposes of this Agreement, the terms defined in

this Article 1 shall have the respective meanings set forth below:

1.1           “Affiliate” shall mean any

corporation, partnership or other entity (i) owning more than ten percent

(10%) of the then outstanding voting shares of XM; or (ii) controlling,

controlled by, or under common control with XM.  For purposes of this definition, “control” (including the terms

“controlling” and “controlled”) means the power to direct or cause the

direction of the management and policies of an entity, whether through the

ownership of securities, by contract, or otherwise.

1.2           “Confidential information” shall mean

all information relating to the business of XM known to XM or learned by

EMPLOYEE during the term of employment and not generally known, including any

and all general and specific knowledge, experience, information and data,

technical or non-technical, and whether or not patentable, including, without

limitation processes, skills, information, know-how, trade secrets, data,

designs, formulae, algorithms, specifications, samples, methods, techniques,

compilations, computer programs, devices, concepts, inventions, developments,

discoveries, improvements, and commercial or financial information, in any

form, including without limitation, oral, written, graphic, demonstrative,

machine recognizable, specimen or sample form.

1.3           “Conflicting Product or Service”

shall mean any product or service of any person or organization other than XM,

in existence or under development, which resembles or competes with a product

or service of XM.

 

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1.4           “Conflicting Organization” shall mean

any person or organization engaged in, or about to become engaged in, research

on or development, production, marketing, or selling of a “Conflicting Product

or Service.” 

1.5           “Inventions” shall mean inventions,

designs, discoveries, developments, creations, and improvements created,

discovered, developed, conceived or reduced to practice.

1.6           “Works of Authorship” shall mean all

computer software programs or other writings, including, without limitation,

verbal works, designs, models, drawings, or audio, visual or audiovisual

recordings.

ARTICLE 2

TERM OF AGREEMENT; EMPLOYMENT

2.1          Term. 

Subject to the provisions of Article 4 hereof, this Agreement shall be

in effect for a term of three (3) years commencing as of the Effective

Date.  For the term of this Agreement, each

twelve (12) month period beginning on the Effective Date or any anniversary

thereof shall be considered a “Contract Year.”

2.2          Employment. 

XM agrees to employ EMPLOYEE as Chief Executive Officer and EMPLOYEE

agrees to accept such employment by XM, on the terms and conditions set forth

herein.  EMPLOYEE represents and

warrants that neither the execution and delivery nor performance by him of this

Agreement will violate any agreement, order, judgment or decree to which he is

a party or by which he is bound.

2.3          Duties.

(a)           As Chief Executive Officer of XM,

EMPLOYEE shall have duties and responsibilities related to building the

organization and business, including but not limited to, achieving agreed

revenue, cost, profit and cash-flow targets, and shall report to the Board of

Directors and the Board Chairman.  While

acting as CEO, EMPLOYEE shall also serve as a director of XM.

(b)           EMPLOYEE’s employment with XM shall

be full-time and exclusive.  During the

term of employment, EMPLOYEE shall devote the whole of EMPLOYEE’s business

time, attention, skill, and ability to the faithful and diligent fulfillment of

EMPLOYEE’s duties hereunder.  EMPLOYEE

acknowledges and agrees that EMPLOYEE may be required, without additional

compensation, to perform services for any Affiliates, and to accept such office

or position with any Affiliate as the Board may require, including, but not

limited to, service as an officer or director of XM or any Affiliate, provided

however, that such services, and such office or position, shall be consistent

with EMPLOYEE’s position as Chief Executive Officer of XM.  EMPLOYEE shall comply with all applicable

policies of XM and Affiliates.

(c)           During the term of employme nt, it

shall not be a violation of this Agreement for EMPLOYEE to (i) serve on no more

than one outside corporate board (except the board of a Conflicting

Organization); (ii) serve as an officer or director of a

 

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cooperative housing, or civic or charitable

organization or committee; (iii) deliver lectures, fulfill speaking

engagements, or teach at educational institutions; or (iv) manage personal

passive investments, so long as such activities (individually or collectively)

do not conflict or materially interfere with the performance of EMPLOYEE’s

duties hereunder.

2.4          Indemnification.  During and after the term of this Agreement, XM shall

provide EMPLOYEE with directors and officers insurance, and shall indemnify

EMPLOYEE and his legal representatives to the fullest extent permitted by the

laws of the State of Delaware and the By-Laws of XM as in effect on the date

hereof, against all damages, costs, expenses and other liabilities incurred or

sustained by EMPLOYEE or his legal representatives in connection with any suit,

action or proceeding to which EMPLOYEE or his legal representatives may be made

a party by reason of EMPLOYEE being or having been a director or officer of XM

or any Affiliate or having served in any other capacity or taken any other

action purportedly on behalf of or at the request of XM or any Affiliate.  During and after the term of this Agreement

and without the need for further approval by the Board of Directors of XM or

any Affiliate, XM will promptly advance or pay any and all amounts for costs or

expenses (including but not limited to legal fees and expenses incurred by

counsel of EMPLOYEE’s choice retained by EMPLOYEE) for which EMPLOYEE may claim

XM is obligated to indemnify him. EMPLOYEE undertakes to repay such amounts if

it is ultimately determined that he is not entitled to be indemnified by XM as

provided in this Article 2.4.

ARTICLE 3

COMPENSATION

3.1          Base

Salary.  For services rendered by EMPLOYEE pursuant

to this Agreement, XM agrees to pay EMPLOYEE a base salary (“Base Salary”) of

at least Four Hundred Twelve Thousand Dollars ($412,000), beginning January 1,

2003 and continuing for the third Contract Year.  In determining any increase above the minimums set forth in the

preceding sentence, the Board shall consider any increases in the cost of living

and may provide for performance or merit increases as it deems appropriate in

its sole discretion.  Base Salary shall

be payable in accordance with XM’s then-prevailing executive payroll practices.  The term “Base Salary” as used herein shall

include any adjustments thereto made from time to time as permitted by this

Article 3.1.

3.2          Bonuses.

(a)           With respect to each calendar year

during the term of this Agreement, regardless of XM’s performance, EMPLOYEE

shall be entitled to a bonus (the “Leadership Bonus”) equal to thirty percent

(30%) of his Base Salary for the calendar year if, in the reasonable judgment

of the XM Board of Directors, he shall have made the effort and provided the

leadership expected of the CEO.  In any

calendar year in which EMPLOYEE is employed by XM for less than the full year,

the Leadership Bonus will be paid on a pro-rata basis for the portion of the

calendar year for which EMPLOYEE was employed by XM and provided the expected

effort and leadership.

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The Leadership Bonus shall be paid within sixty (60)

days of the end of each calendar year.

(b)           With respect to each calendar year

during the term of this Agreement, EMPLOYEE will be eligible to receive such

bonuses (the “Discretionary Bonus”) as may be authorized and declared by the XM

Board of Directors based upon EMPLOYEE meeting or substantially exceeding

performance criteria to be set by the Board, after consultation with EMPLOYEE,

at the start of each calendar year.  For

2001, such criteria shall be set by July 1, 2001.  Although the actual amount of any Discretionary Bonus will be

determined by the Board, the “target” amount of the annual Discretionary Bonus

will be thirty to seventy percent (30-70%) of EMPLOYEE’s Base Salary for the

calendar year, reflecting the Board’s determination that EMPLOYEE has met (30%)

or substantially exceeded (70%) the established performance criteria.

3.3          Participation

in Benefit Plans.  Subject to applicable eligibility

requirements, and to the terms of this Agreement, EMPLOYEE shall be eligible

during the term of this Agreement to participate in any stock option, employee

stock ownership, pension, thrift, profit sharing, group life or disability

insurance, medical or dental coverage, education, or other retirement or

employee benefit plan or program that XM has adopted or may adopt for the

benefit of its employees, on the same basis as other executive employees.  EMPLOYEE shall be entitled to paid vacation,

paid sick leave, and holidays on the same basis as may from time to time apply

to other XM executive employees generally. 

EMPLOYEE shall also be entitled to supplemental disability insurance

beginning no earlier than April 1, 2003, at the company’s expense.

3.4          Expenses.  XM shall reimburse EMPLOYEE for all reasonable,

ordinary and necessary business expenses actually incurred by EMPLOYEE in

connection with the performance of his duties hereunder, including ordinary and

necessary expenses incurred by EMPLOYEE in connection with travel on XM business.  As Chief Executive Officer of XM, EMPLOYEE

shall be entitled to fly first class. 

All expenses shall be approved in advance by XM in accordance with and

subject to the terms and conditions of XM’s then-prevailing expense

policy.  As a condition precedent to

obtaining reimbursement of expenses, EMPLOYEE shall provide to XM any and all

statements, bills, or receipts evidencing the expenses for which EMPLOYEE seeks

reimbursement, and such related information or materials as XM may from time to

time reasonably require. EMPLOYEE shall account to XM for any expenses that are

eligible for reimbursement under this Section 3.4 in accordance with XM policy.

3.5          Employment and Supplies.  XM shall provide EMPLOYEE with administrative support

relating to the performance of EMPLOYEE’s duties of the same type and at least

the same extent as is provided to other executive employees.  XM shall acquire and/or provide to EMPLOYEE

for his business use:  a multimedia

portable computer and subscriptions to various trade publications and various

trade books.  Such items shall remain

the exclusive property of XM, are to be used solely for XM’s benefit, and shall

be returned promptly to XM upon request at the termination of EMPLOYEE’s employment

for whatever reason.

 

 

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3.6          Withholding. 

Anything in this Agreement to the contrary notwithstanding, al payments

required to be made by XM hereunder to EMPLOYEE or EMPLOYEE’s estate or

beneficiaries in connection with EMPLOYEE’s employment hereunder shall be

subject to the withholding of such amounts relating to taxes as XM may

reasonably determine it should withhold pursuant to any applicable law or

regulation.

3.7          Stock

Option Grants.  EMPLOYEE shall receive options to purchase

Class A common stock of XM Satellite Radio Holdings Inc. (“XM Stock”) on the

following terms.

(a)           On the Effective Date of the

Amendment, XM will grant EMPLOYEE an option to purchase Three Hundred Fifty

Thousand (350,000) shares of XM Stock. 

Additional stock options shall be awarded at the discretion of the

Compensation Committee and the Board of Directors.

(b)           The options granted pursuant to

Article 3.7(a) hereof will be non-qualified. 

The exercise price for such options shall be, with respect to each

grant, the closing price of  XM Stock on

the date of grant.

(c)           Subject to the provisions of Article

4 hereof, the options granted pursuant to Article 3.7(a) hereof will vest and

become exercisable on the following schedule: 

with respect to each grant, one third of the shares covered by the

option shall become exercisable on the first anniversary of the grant, one

third of the shares covered by the option shall become exercisable on the

second anniversary of the grant, and one third of the shares covered by the

option shall become exercisable on the third anniversary of the grant.  In addition to the annual vesting

requirement, the initial options granted upon the amendment of the contract

shall also require that EMPLOYEE will not sell, pledge or otherwise dispose of

shares issued upon the exercise of such initial options until the first to

occur of the following: (i) the average closing price of XM Stock on the Nasdaq

National Market system, or principal stock exchange on which shares of XM Stock

are then listed, over any 20 consecutive trading days following the date of

grant equals or exceeds $10, or (ii) seven years have elapsed since the date of

grant. In the event that EMPLOYEE holds non-vested options at the time his

employment by XM terminates, such non-vested options shall vest or shall be

forfeited, as the case may be, in accordance with the provisions of Article 4

hereof.

(d)           Vested options may be exercised

within ten (10) years of the date on which they were granted.  In the event that EMPLOYEE holds unexercised

vested options at the time his employment by XM terminates, such vested options

may be exercised within the time periods set forth in Article 4 hereof.

(e)           XM agrees that the XM Stock to be

issued to EMPLOYEE upon his exercise of the options granted pursuant to Article

3.7(a) hereof will be registered for sale to the public on XM’s Form S-8

Registration Statement.

 

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ARTICLE 4

TERMINATION

4.1          General. 

EMPLOYEE’s employment hereunder shall terminate in accordance with the

provisions of this Article 4 upon EMPLOYEE’s death or Disability, upon

EMPLOYEE’s termination by XM with or without Cause, upon EMPLOYEE’s resignation

with or without Good Reason, or upon the expiration of the term of this

Agreement without renewal.

4.2          Death. 

If the EMPLOYEE’s employment terminates because of his death, the date

of termination shall be the date of death.

(a)           If the EMPLOYEE’s employment

terminates because of his death, XM shall continue to pay EMPLOYEE’s then

current Base Salary, pro-rated Leadership Bonus, and pro-rated Discretionary

Bonus (based on the percentage of Base Salary awarded to EMPLOYEE as a

Discretionary Bonus in the prior year), and shall continue to make all

applicable benefits available, to EMPLOYEE’s legal representatives, estate,

beneficiaries or heirs, in accordance with XM’s then-prevailing executive

payroll practices, through the end of the third calendar month following

EMPLOYEE’s death.  In addition, XM shall

continue any health, medical, dental, or similar benefits which members of

EMPLOYEE’s family were receiving for  a

period of one year, or pay such family members an amount equal to their cost

for obtaining equivalent coverage.

(b)           If the EMPLOYEE’s employment

terminates because of his death, EMPLOYEE’s non-vested options shall be

forfeited.  EMPLOYEE’s legal

representatives, estate, beneficiaries or heirs shall be entitled to exercise

any of EMPLOYEE’s vested options within one (1) year after EMPLOYEE’s death.

4.3          Disability. For purposes of this Agreement, EMPLOYEE

shall be deemed to be under a Disability if EMPLOYEE shall be unable, by virtue

of illness or physical or mental incapacity or disability (from any cause or

causes whatsoever), to perform EMPLOYEE’s essential job functions hereunder, whether

with or without reasonable accommodation, in substantially the manner and to

the extent required hereunder prior to the commencement of such disability, for

a period exceeding ninety (90) consecutive days.

(a)           Upon EMPLOYEE’s Disability, the

payment of benefits under XM’s short-term and long-term disability insurance

programs, if any, shall offset XM’s obligations under Article 3.1 hereof to the

extent such benefits are received by EMPLOYEE.

(b)           Subject to any

applicable legal requirements, in the event EMPLOYEE shall remain under a

Disability for a period exceeding one hundred twenty (120) days in any twelve

(12) month period, XM shall have the right to terminate EMPLOYEE’s employment

hereunder.  XM shall effect such

termination by giving EMPLOYEE a notice specifying the effective date of such

termination, which date shall not be earlier than the last day of the calendar

month following the giving of notice.

 

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(c)           If XM terminates the EMPLOYEE’s employment

because of Disability, XM shall continue to pay EMPLOYEE’s then current Base

Salary, pro-rated Leadership Bonus, and pro-rated Discretionary Bonus (based on

the percentage of Base Salary awarded to EMPLOYEE as a Discretionary Bonus in

the prior year), and shall continue to make all applicable benefits available,

to EMPLOYEE, in accordance with XM’s then-prevailing executive payroll

practices, through the end of the third calendar month following

termination.  In addition, XM shall

continue any health, medical, dental, or similar benefits which EMPLOYEE

(and/or members of EMPLOYEE’s family) were receiving for  a period of one year, or pay EMPLOYEE an

amount equal to the cost of obtaining equivalent coverage.

(d)           If XM terminates EMPLOYEE’s

employment because of Disability, EMPLOYEE’s non-vested options shall be

forfeited.  EMPLOYEE shall be entitled

to exercise any of his vested options within one (1) year after termination.

4.4          Termination

for Cause or Voluntary Resignation.

(a)           For purposes of this Agreement, Cause

shall mean:  (i) EMPLOYEE’s willful or

gross misconduct, willful or gross negligence in the performance of his duties

for XM, or intentional or habitual neglect of his duties for XM, provided that

XM shall have given EMPLOYEE notice specifying the conduct it believes to fall

within this sentence and EMPLOYEE shall have failed to remedy such conduct

within ten (10) days thereafter; or (ii) EMPLOYEE’s theft or misappropriation

of funds of XM or conviction of a felony. 

XM shall effect a termination for Cause by giving EMPLOYEE a notice

specifying the effective date of such termination.

(b)           For purposes of this Agreement,

voluntary resignation means the EMPLOYEE’s resignation of his employment

hereunder without Good Reason (as defined in Article 4.5(b) hereof.  EMPLOYEE shall effect a termination by

voluntary resignation by giving XM a notice specifying the effective date of

such termination, which date shall not be earlier than thirty (30) days after

the giving of notice.

(c)           In the event EMPLOYEE’s employment is

terminated by XM for Cause or by EMPLOYEE by voluntary resignation:

(i)            XM shall pay to EMPLOYEE, in

accordance with XM’s then-prevailing executive payroll practices, all Base

Compensation, benefits and other payments to which EMPLOYEE was entitled

hereunder through the effective date of termination.

(ii)           In the case of voluntary resignation

only, EMPLOYEE shall be entitled to exercise any of his vested options within

three (3) months after termination. 

Subject to the previous sentence of this Article 4.4(c)(ii), EMPLOYEE’s

non-vested and vested but unexercised options shall be forfeited.

(iii)          Except as set forth

in this Article 4.4, XM shall have no further obligation to EMPLOYEE (or

EMPLOYEE’s legal representatives, estate, beneficiaries or heirs) for any

compensation, benefits or other payments hereunder, 

 

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provided that

nothing herein shall be deemed to affect EMPLOYEE’s entitlement, if any, to any

vested pension or similar benefits to which he may be or may become entitled.

 

4.5          Termination

Without Cause or Resignation for Good Reason.

(a)           For the purposes of this Agreement,

termination without Cause is any termination by XM of EMPLOYEE’s employment

hereunder without Cause, as defined in Article 

4.4(a) hereof.  XM shall effect a

termination without Cause by giving EMPLOYEE a notice specifying the effective

date of such termination, which date shall not be earlier than thirty (30) days

after the giving of notice.

(b)           For the purposes of this Agreement,

Good Reason shall mean:  (i) a

substantial diminution of EMPLOYEE’s responsibilities or status; (ii) XM’s

relocation of EMPLOYEE outside the Washington, D.C. area; (iii) a material

breach of this Agreement by XM, provided that EMPLOYEE shall have given XM

notice of the conduct he believes to constitute the material breach and XM

shall have failed to remedy such breach within ten (10) days thereafter; (iv)

the departure of Gary M. Parsons as Chairman of the Board of Directors of XM,

unless the newly named Chairman is reasonably acceptable to EMPLOYEE; or (v) a

Change of Control of XM as defined in Article 4.5(c) hereof.  EMPLOYEE shall effect a termination by

resignation for Good Reason by giving XM a notice specifying the effective date

of such termination.

(c)           For the purposes of

this Agreement, a Change of Control will occur where (i) any person or group

becomes beneficial owner of securities of XM representing more than 40% of the

then voting power of XM; (ii) Board members (together with new members

appointed by at least two thirds (2/3) of those members) at the beginning of a

two-year period no longer constitute two thirds (2/3) of the Board during such

two-year period; (iii) a merger/consolidation of XM occurs wherein the XM

voting securities immediately prior thereto do not constitute at least sixty

percent (60%) of the combined voting securities after the merger/consolidation;

or (iv) the stockholders approve a plan of complete liquidation or winding-up

or an agreement for the sale or disposition of all or substantially all of XM’s

assets.

 

(d)           In the event EMPLOYEE’s employment is

terminated by XM without Cause or by EMPLOYEE by resignation for Good Reason:

(i)            XM shall continue to pay EMPLOYEE’s

then current Base Salary and pro-rated Leadership Bonus, and shall continue to

make all applicable benefits available to EMPLOYEE, in accordance with XM’s

then-prevailing executive payroll practices, for two (2) years from such

termination.  With respect to the

health, medical, dental, or similar benefits which EMPLOYEE (and/or members of

EMPLOYEE’s family) were receiving, XM may pay EMPLOYEE an amount equal to his

cost for obtaining equivalent coverage, as an alternative to continuing such

benefits.

(ii)           XM shall pay EMPLOYEE’s pro-rated

Discretionary Bonus (based on the percentage of Base Salary awarded to EMPLOYEE

as a 

 

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Discretionary Bonus in the prior year), for the

portion of the calendar year EMPLOYEE was employed by XM prior to the termination.

(e)           In the event EMPLOYEE’s employment is

terminated by XM without Cause or by EMPLOYEE by resignation for Good Reason,

all options that have been granted to EMPLOYEE shall immediately vest and

become exercisable, and EMPLOYEE shall be entitled to exercise any of his

vested options within eighteen (18) months after termination.

(f)            If, as a result of a Change of

Control, it is determined that EMPLOYEE would be subject to the excise tax

imposed by Section 4999 of the Internal Revenue Code, XM shall reimburse

EMPLOYEE for the amount of such tax, and shall pay EMPLOYEE such additional

amount as may be necessary to place EMPLOYEE in the same financial position

that he would have been in if he had not incurred such excise tax liability.  All determinations under this Article

4.5(f), including whether EMPLOYEE is liable for the excise tax, and the amount

to be paid to EMPLOYEE by XM, shall be made by a nationally-recognized

accounting firm to be selected by EMPLOYEE and paid by XM.

4.6          Expiration

of Contract Term.

(a)           For the purposes of this Agreement,

Renewal Offer means a bona fide offer by XM to enter into a new employment

agreement with EMPLOYEE, on terms at least as favorable to EMPLOYEE as this

Agreement, made to EMPLOYEE at least four (4) months before the expiration of

this Agreement.

(b)           In the event that XM makes a Renewal

Offer to Employee, but the parties nevertheless do not enter into a new

employment agreement and EMPLOYEE’s employment by XM therefore terminates upon

the expiration of this Agreement, any options scheduled to vest on the third

anniversary of the Effective Date of this Agreement pursuant to Article 3.7(c)

shall immediately vest and become exercisable, all other non-vested options

shall be forfeited, and EMPLOYEE shall be entitled to exercise any of his

vested options within three (3) months after termination.

(c)           In the event that XM does not make a

Renewal Offer to Employee and EMPLOYEE’s employment by XM therefore terminates

at the expiration of the term of this Agreement, all options that have been

granted to EMPLOYEE shall immediately vest and become exercisable, and EMPLOYEE

shall be entitled to exercise any of his vested options within eighteen (18)

months after termination.

ARTICLE 5

RESTRICTIVE COVENANTS

5.1          Confidentiality. 

Except as authorized or directed by XM, EMPLOYEE shall not, at any time

during or subsequent to the term of this Agreement, directly or indirectly

publish or disclose any Confidential Information of XM or of any of its

Affiliates, or Confidential Information of others that has come into the

possession of XM or of any of its Affiliates, or into the EMPLOYEE’s possession

in the course of his 

 

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employment with XM or of his services and duties

hereunder, to any other person or entity, and EMPLOYEE shall not use any such

Confidential Information for EMPLOYEE’s own personal use or advantage or make

it available to others for use.  All

Confidential Information, whether oral or written, regarding the business or

affairs of XM or any of its Affiliates, including, without limitation,

information as to their products, services, systems, designs, inventions,

software, finances (including prices, costs and revenues), marketing plans,

programs, methods of operation, prospective and existing contracts, customers

and other business arrangements or business plans, procedures, and strategies,

shall all be deemed Confidential Information, except to the extent the same

shall have been lawfully and without breach of the EMPLOYEE’S confidentiality

obligation made available to the general public without restriction, or that

EMPLOYEE can prove, by documentary evidence, was previously known to EMPLOYEE

prior to the term of EMPLOYEE’s employment. 

The Company shall be under no obligation to identify specifically any

information as to which the protection of this Section 5.1 extends by any

notice or other action.  Upon expiration

or termination of this Agreement for any reason, EMPLOYEE shall promptly return

to XM all Confidential Information, including all copies thereof in EMPLOYEE’s

possession, whether prepared by him or others.

5.2          Unfair

Competition.  During his employment pursuant to this

Agreement and for a period of one (1) year after the termination of his

employment, EMPLOYEE shall not, within the United States, directly or

indirectly, and whether or not for compensation, as a stockholder owning

beneficially or of record more than five percent (5%) of the outstanding shares

of any class of stock of an issuer, or as an officer, director, employee,

consultant, partner, joint venturer, proprietor, or otherwise, engage in or

become interested in any Conflicting Organization in connection with research,

development, consulting, manufacturing, purchasing, accounting, engineering, marketing,

merchandising or selling of any Conflicting Product or Service, directly or

indirectly, in competition with XM or any of its Affiliates (or any of their

successors) as conducted from time to time during such period.  During the period in which EMPLOYEE is

receiving any payments under this Agreement and for a period of one (1) year

thereafter, EMPLOYEE shall not, without the prior written consent of XM,

solicit or hire or induce the termination of employment of any employees or

other personnel providing services to XM, or any of its Affiliates, for any

business activity, other than a business activity owned or controlled, directly

or indirectly, by XM or any of its Affiliates.

5.3          Injunctive

Relief.

(a)           EMPLOYEE acknowledges and warrants

that he will be fully able to earn an adequate livelihood for himself and his

dependents if Section 5.2 should be specifically enforced against him, and that

Section 5.2 merely prevents unfair competition against XM for a limited period

of time.  EMPLOYEE agrees and acknowledges

that, by virtue of EMPLOYEE’s employment with XM, EMPLOYEE shall have access to

and maintain an intimate knowledge of XM’s activities and affairs, including

trade secrets, Confidential Information, and other confidential matters.  As a result of such access and knowledge,

and because of the special, unique, and extraordinary services that EMPLOYEE is

capable of performing for XM or one of its

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competitors, EMPLOYEE acknowledges that the services

to be rendered by EMPLOYEE pursuant to this Agreement are of a character giving

them a peculiar value, the loss of which cannot adequately or reasonably be

compensated by money damages. 

Consequently, EMPLOYEE agrees that any breach or threatened breach by

EMPLOYEE of EMPLOYEE’s obligations under this Article 5 would cause irreparable

injury to XM, and that XM shall be entitled to (i) preliminary and permanent

injunctions enjoining EMPLOYEE from violating such provisions, and (ii) actual

money damages suffered by XM as a result of such breach, in the amount of any

fees, compensation, benefits, profits, or other remuneration earned by EMPLOYEE

as a result of such breach, together with interest, and cost and attorney’s

fees expended to collect such damages or secure such injunctions.  Nothing in this Agreement, however, shall be

construed to prohibit XM from pursuing any other remedy, XM and EMPLOYEE having

agreed that all such remedies shall be cumulative.

(b)           The restrictions set forth in this

Article 5 and the following Article 6 shall be construed as independent

covenants, and shall survive the termination or expiration of this Agreement,

and the existence of any claim or cause of action against XM, whether

predicated upon this Agreement or otherwise, shall not constitute a defense to

the enforcement by XM of the restrictions contained in this Article 5 or the

following Article 6.  EMPLOYEE hereby

consents and waives any objection to the jurisdiction over his person or the

venue of any courts within the State of Virginia with respect to any

proceedings in law or in equity arising out of this Article 5 or the following

Article 6.  If any court of competent

jurisdiction shall hold that any of the restrictions contained in Section 5.2

are unreasonable as to time, geographical area, or otherwise, said restrictions

shall be deemed to be reduced to the extent necessary in the opinion of such

court to make their application reasonable.

ARTICLE 6

INVENTIONS, WORKS OF AUTHORSHIP,

PATENTS AND COPYRIGHTS

6.1          Ownership of

Inventions and Works of Authorship.  EMPLOYEE agrees that all Inventions made,

conceived, discovered, developed or reduced to practice by EMPLOYEE and all

software and other works of authorship created by EMPLOYEE, either alone or

with others, at any time, within or without normal working hours, during the

term of this Agreement, arising out of such employment or based upon

Confidential Information, or pertinent to any field of business or research in

which, during such employment, XM is engaged or (if such is known or

ascertainable by EMPLOYEE) is considering engaging, whether or not patented or

patentable, shall be and remain the sole property of XM with respect to all

rights of EMPLOYEE arising from any discovery, conception, development,

reduction to practice, or creation by EMPLOYEE.  XM shall have the full right to assign, license, or transfer all

rights thereto.

6.2          Disclosure of Inventions and Works of

Authorship.  EMPLOYEE shall promptly make full

disclosure to XM or to an authorized representative thereof of all information

relating to the making, conception, discovery, development, creation or 

 

11

 

reduction to practice of Inventions, or of software

and other works of authorship owned by XM pursuant to Section 6.1 above.

6.3          Patent and

Copyright Applications.  At the request of XM and at XM’s expense,

EMPLOYEE shall execute such documents and perform such acts as XM deems

necessary to obtain patents or the like on such Inventions or copyright registrations

for such software and other works of authorship in any jurisdiction or

jurisdictions.  Such obligation shall

continue beyond the term of this Agreement. 

In the event that XM is unable because of  EMPLOYEE’s mental or physical capacity or for any other reason to

secure EMPLOYEE’s signature to apply for or to pursue any applications for

patent or copyright covering Inventions, software and other works of authorship

owned by XM pursuant to Section 6.1, then EMPLOYEE hereby irrevocably

designates and appoints XM as EMPLOYEE’s agent and attorney in fact, upon prior

notice, to act for and in his behalf and stead to execute and file any such

applications and to do all other lawfully permitted acts to further the

prosecution and issuance of patents and copyright registrations thereon with

the same legal force and effect as if executed by EMPLOYEE.  EMPLOYEE further agrees not to file any

patent applications relating to or describing or otherwise disclosing any

Confidential Information or any such Inventions, or to claim any copyright or

file any applications to register any copyright in such software or other works

of authorship, except with the prior written consent of XM.

6.4          Assignment

of Inventions and Works of Authorship.  EMPLOYEE agrees to assign to XM or it

Affiliates all of EMPLOYEE’s right, title and interest in and to any and all

such Inventions and the patent applications and patents relating thereto and to

the copyright in any and all such software and other works of authorship and

any copyright applications and registrations relating thereto conceived,

reduced to practice, discovered, created or otherwise developed by EMPLOYEE and

owned by XM pursuant to Section 6.1 above.

ARTICLE 7

MISCELLANEOUS

7.1          Assignment.  The rights and obligations of XM under this Agreement

shall be binding upon its successors and assigns and, subject to EMPLOYEE’s

rights under Article 4.5 hereof, may be assigned by XM to the successors in

interest of XM.  The rights and

obligations of EMPLOYEE under this Agreement shall be binding upon EMPLOYEE’s

heirs, legatees, personal representatives, executors or administrators.  This Agreement may not be assigned by

EMPLOYEE, but any amount owed EMPLOYEE upon EMPLOYEE’s death shall inure to the

benefit of EMPLOYEE’s heirs legatees, personal representatives, executors, or

administrators.

7.2          Notice.  For purposes of this Agreement, notices and all other

communications provided for in this Agreement shall be in writing and shall be

deemed to have been duly given when hand delivered, sent by overnight courier,

or mailed by first-class, registered, or certified mail, return receipt

requested, postage prepaid, or transmitted by telegram, telecopy, or telex

addressed as follows:

 

12

 

If to EMPLOYEE: (Copy to XM Executive Office)

Hugh Panero

4609 Derussey Parkway 

Chevy Chase, Maryland 20815

 

 

 

If to XM:

 

 

XM Satellite Radio

Holdings Inc.

1500 Eckington Place, N.E.,

Washington, D.C. 20002

Telephone:            703-758-6116

Telecopy:              703-758-6106

 

 

Attn:       General

Counsel

or to such other address as either party may have

furnished to the other in writing in accordance herewith, except that notices

of change of address shall be effective only upon receipt.

7.3          Entire

Agreement.  From and after the Effective Date, this

Agreement constitutes the entire agreement between the parties hereto, and

expressly supersedes all prior oral or written agreements, commitments or

understandings with respect to the matters provided for herein.

7.4          Headings.  Article and Section headings contained in this

Agreement are inserted for convenience of reference only, shall not be deemed

to be a part of this Agreement for any purpose, and shall not in any way define

or affect the meaning, construction or scope of any of the provisions hereof.

7.5          Severability. 

In the event any provision of this Agreement, or any portion thereof, is

determined by any arbitrator or court of competent jurisdiction to be

unenforceable as written, such provision or portion thereof shall be interpreted

so as to be enforceable.  In the event

any provision of this Agreement, or any portion thereof is determined by any

arbitrator or court of competent jurisdiction to be void, the remaining

portions of this Agreement shall nevertheless be binding upon XM and EMPLOYEE

with the same effect as though the void provision or portion thereof had been

severed and deleted.

7.6          Arbitration. 

Without prejudice to XM’s right to seek an injunction pursuant to

Article 5.3(a) hereof from a court of competent jurisdiction, any dispute

between the parties hereto arising out of this Agreement, or otherwise arising

out of or relating to EMPLOYEE’s employment by XM, or the termination thereof,

shall be submitted to non-binding mediation before a mediator to be agreed upon

by the parties or, failing agreement, to be appointed by the American

Arbitration Association (“AAA”).  In the

event that mediation is unsuccessful, such dispute shall be resolved by binding

arbitration, before a single arbitrator, under the rules of the AAA.  The arbitrator shall 

 

13

 

have the authority

to apportion the costs of arbitration, and to render an award including

reasonable attorney’s fees,  as and to

the extent he deems appropriate under the circumstances.

 

7.7          Governing

Law.  This Agreement, the rights and obligations of the

parties hereto, and any claims or disputes relating thereto, shall be governed

by and construed in accordance with the substantive laws of the State of

Virginia (excluding the choice of law rules thereof).

7.8          Amendment;

Modification; Waiver.  No amendment, modification or waiver of

the terms of this Agreement shall be valid unless made in writing and duly

executed by EMPLOYEE and XM.  No delay

or failure at any time on the part of EMPLOYEE or XM in exercising any right,

power or privilege under this Agreement, or in enforcing any provision of this

Agreement, shall impair any such right, power, or privilege, or be construed as

a waiver of any default or as any acquiescence therein, or shall affect the

right of EMPLOYEE or XM thereafter to enforce each and every provision of this

Agreement in accordance with its terms.

7.9          Additional

Obligations.  Both during and after the term of

employment, EMPLOYEE shall, upon reasonable notice, furnish XM with such

information as may be in EMPLOYEE’s possession or control, and cooperate with

XM, as may reasonably be requested by XM (and, after the term of employment,

with due consideration for EMPLOYEE’s obligations with respect to any new

employment or business activity) in connection with any litigation or other

adversarial proceedings in which XM or any Affiliate is or may become a

party.  XM shall reimburse EMPLOYEE for

all reasonable expenses incurred by EMPLOYEE in fulfilling EMPLOYEE’s

obligations under this Article 7.9.

IN WITNESS WHEREOF, the parties have executed this

Agreement to be effective as of the Effective Date.

 

	

   

  	

  XM Satellite Radio

  Holdings Inc.

  
	

   

  	

  XM Satellite Radio Inc.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By

  	

   

  
	

   

  	

  Gary M. Parsons

  
	

   

  	

  Chairman of the Board

  
	

   

  	

  Date: 

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Hugh Panero

  
	

   

  	

  Date:

  	

   

  	

   

  

 

 

14Exhibit

10.51

EMPLOYMENT AGREEMENT

Between

XM SATELLITE RADIO HOLDINGS INC. and 

XM SATELLITE RADIO INC.

and

GARY PARSONS

Dated as of July 1, 2001

Amended March 20, 2003

 

 

THIS AGREEMENT is entered into as of July 1, 2001 (the

“Effective Date”), by and between XM Satellite Radio Holdings Inc., a Delaware

corporation, and its subsidiary XM Satellite Radio Inc., a Delaware

corporation, both having a place of business at 1500 Eckington Place, N.E.,

Washington, D.C. 20002 (hereinafter collectively referred to as “XM”) and Gary

Parsons (“EMPLOYEE”) a resident of the State of Maryland.

WHEREAS, XM is engaged in the development,

implementation and operation of a digital audio satellite service to portable

receivers; and

WHEREAS, XM is interested in employing EMPLOYEE as the

Chairman of its Board of Directors, and EMPLOYEE is interested in being

employed in that position subject to the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing

premises and the mutual covenants and agreements of the parties contained

herein, the parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

For purposes of this

Agreement, the terms defined in this Article 1 shall have the respective

meanings set forth below:

1.1           “Affiliate” shall mean any

corporation, partnership or other entity (i) owning more than ten percent

(10%) of the then outstanding voting shares of XM; or (ii) controlling,

controlled by, or under common control with XM.  For purposes of this definition, “control” (including the terms

“controlling” and “controlled”) means the power to direct or cause the

direction of the management and policies of an entity, whether through the

ownership of securities, by contract, or otherwise.

1.2           “Confidential information” shall mean

all information relating to the business of XM known to XM or learned by

EMPLOYEE during the term of employment and not generally known, including any

and all general and specific knowledge, experience, information and data,

technical or non-technical, and whether or not patentable, including, without

limitation processes, skills, information, know-how, trade secrets, data,

designs, formulae, algorithms, specifications, samples, methods, techniques,

compilations, computer programs, devices, concepts, inventions, developments,

discoveries, improvements, and commercial or financial information, in any

form, including without limitation, oral, written, graphic, demonstrative,

machine recognizable, specimen or sample form.

1.3           “Conflicting Product

or Service” shall mean any product or service of any person or organization

other than XM, in existence or under development, which resembles or competes

with a product or service of XM.

 

 

 

1.4           “Conflicting Organization” shall mean

any person or organization engaged in, or about to become engaged in, research

on or development, production, marketing, or selling of a “Conflicting Product

or Service.”

1.5           “Inventions” shall mean inventions,

designs, discoveries, developments, creations, and improvements created,

discovered, developed, conceived or reduced to practice.

1.6           “Works of Authorship” shall mean all

computer software programs or other writings, including, without limitation,

verbal works, designs, models, drawings, or audio, visual or audiovisual

recordings.

ARTICLE 2

TERM OF AGREEMENT; EMPLOYMENT

2.1          Term.  

This Agreement supercedes previously existing agreements, and subject to

the provisions of Article 4 hereof, shall be in effect for a term of three (3)

years commencing as of the Effective Date. 

For the term of this Agreement, each twelve (12) month period beginning

on the Effective Date or any anniversary thereof shall be considered a

“Contract Year.”

2.2          Employment. 

XM agrees to employ EMPLOYEE as Chairman of the Board of Directors and

EMPLOYEE agrees to accept such employment by XM, on the terms and conditions

set forth herein.  EMPLOYEE represents

and warrants that neither the execution and delivery nor performance by him of

this Agreement will violate any agreement, order, judgment or decree to which

he is a party or by which he is bound.

2.3          Duties.

(a)           As Chairman of XM, EMPLOYEE shall

have duties and responsibilities related to building the organization and

business, including but not limited to, securing financing for the Company,

merger/acquisition activity, ensuring positive shareholders and partner

relations, and in consort with the CEO, establishing strategic direction and

senior management structure for the Company. 

EMPLOYEE shall report to the Board of Directors and shall also serve as

a director of XM.

(b)           During the term of employment,

EMPLOYEE shall devote   EMPLOYEE’s

business time, attention, skill, and ability to the faithful and diligent

fulfillment of EMPLOYEE’s duties hereunder on a near-fulltime basis.  EMPLOYEE acknowledges and agrees that EMPLOYEE

may be required, without additional compensation, to perform services for any

Affiliates, and to accept such office or position with any Affiliate as the

Board may require, including, but not limited to, service as an officer or

director of XM or any Affiliate, provided however, that such services, and such

office or position, shall be consistent with EMPLOYEE’s position as Chairman of

XM.  EMPLOYEE shall comply with all

applicable policies of XM and Affiliates.

2.4          Indemnification.  During and after the term of this Agreement, XM shall

provide EMPLOYEE with directors and officers insurance, and shall indemnify 

 

 

2

 

 

EMPLOYEE and his legal representatives to the fullest

extent permitted by the laws of the State of Delaware and the By-Laws of XM as

in effect on the date hereof, against all damages, costs, expenses and other

liabilities incurred or sustained by EMPLOYEE or his legal representatives in

connection with any suit, action or proceeding to which EMPLOYEE or his legal

representatives may be made a party by reason of EMPLOYEE being or having been

a director or officer of XM or any Affiliate or having served in any other

capacity or taken any other action purportedly on behalf of or at the request

of XM or any Affiliate.  During and

after the term of this Agreement and without the need for further approval by

the Board of Directors of XM or any Affiliate, XM will promptly advance or pay

any and all amounts for costs or expenses (including but not limited to legal

fees and expenses incurred by counsel of EMPLOYEE’s choice retained by

EMPLOYEE) for which EMPLOYEE may claim XM is obligated to indemnify him.

EMPLOYEE undertakes to repay such amounts if it is ultimately determined that

he is not entitled to be indemnified by XM as provided in this Article 2.4.

ARTICLE 3

COMPENSATION

3.1          Base

Salary.  For services rendered by EMPLOYEE pursuant

to this Agreement, XM shall pay EMPLOYEE a base salary (“Base Salary”) of at

least $250,000 annually beginning January 1, 2003.

3.2          Bonuses. 

With respect to each calendar year during the term of this Agreement,

EMPLOYEE will be eligible to receive such bonuses (the “Discretionary Bonus”)

as may be authorized and declared by the XM Board of Directors based upon

EMPLOYEE’s performance in the sole discretion of the Board of Directors.  Discretionary Bonus will be paid in cash or

stock, at the discretion of the Board, within 60 days of the end of each

calendar year.  The target amount for

the Discretionary Bonus shall be based upon having met (100%) or having

significantly exceeded (200%) the personal and corporate objectives established

by the Board of Directors each year.

3.3          Participation

in Benefit Plans.  Subject to applicable eligibility

requirements, and to the terms of this Agreement, EMPLOYEE shall be eligible

during the term of this Agreement to participate in any stock option, employee

stock ownership, pension, thrift, profit sharing, group life or disability

insurance, medical or dental coverage, education, or other retirement or

employee benefit plan or program that XM has adopted or may adopt for the

benefit of its employees, on the same basis as other executive employees.

3.4          Expenses.  XM

shall reimburse EMPLOYEE for all reasonable, ordinary and necessary business

expenses actually incurred by EMPLOYEE in connection with the performance of

his duties hereunder, including ordinary and necessary expenses incurred by

EMPLOYEE in connection with travel on XM business.  As Chairman of XM, EMPLOYEE shall be entitled to fly first

class.  All expenses shall be approved

in advance by XM in accordance with and subject to the terms and conditions of

XM’s then-prevailing expense policy.  As

a condition precedent to obtaining reimbursement of expenses, EMPLOYEE shall

provide to XM any and all statements, bills, or receipts 

 

 

3

 

evidencing the expenses for which EMPLOYEE seeks

reimbursement, and such related information or materials as XM may from time to

time reasonably require. EMPLOYEE shall account to XM for any expenses that are

eligible for reimbursement under this Section 3.4 in accordance with XM policy.

3.5          Employment

and Supplies.  XM shall provide EMPLOYEE with

administrative support relating to the performance of EMPLOYEE’s duties of the

same type and at least the same extent as is provided to other executive

employees.  XM shall acquire and/or

provide to EMPLOYEE for his business use: 

a multimedia portable computer and subscriptions to various trade

publications and various trade books. 

Such items shall remain the exclusive property of XM, are to be used

solely for XM’s benefit, and shall be returned promptly to XM upon request at

the termination of EMPLOYEE’s employment for whatever reason.

3.6          Withholding. 

Anything in this Agreement to the contrary notwithstanding, all payments

required to be made by XM hereunder to EMPLOYEE or EMPLOYEE’s estate or

beneficiaries in connection with EMPLOYEE’s employment hereunder shall be

subject to the withholding of such amounts relating to taxes as XM may

reasonably determine it should withhold pursuant to any applicable law or

regulation.

3.7          Stock

Option Grants.  EMPLOYEE shall receive options to purchase

Class A common stock of XM Satellite Radio Holdings Inc. (“XM Stock”) on the

following terms.

(a)           On the Effective Date of the

Amendment, XM will grant EMPLOYEE an option to purchase Four Hundred Thousand

(400,000) shares of XM Stock. Subsequent grants of options shall be at the sole

discretion of the Board of Directors.

(b)           The options granted pursuant to

Article 3.7(a) hereof will be non-qualified. 

The exercise price for such options shall be, with respect to each

grant, the closing price of  XM Stock on

the date of grant.

(c)           Subject to the

provisions of Article 4 hereof, the options granted pursuant to Article 3.7(a)

hereof will vest and become exercisable on the following schedule:  with respect to each grant, one third of the

shares covered by the option shall become exercisable on the first anniversary

of the grant, one third of the shares covered by the option shall become

exercisable on the second anniversary of the grant, and one third of the shares

covered by the option shall become exercisable on the third anniversary of the

grant.  In addition to the annual

vesting requirement, the initial options granted upon the amendment of the

contract shall also require that EMPLOYEE will not sell, pledge or otherwise

dispose of shares issued upon the exercise of such initial options until the

first to occur of the following: (i) the average closing price of XM Stock on

the Nasdaq National Market system, or principal stock exchange on which shares

of XM Stock are then listed, over any 20 consecutive trading days following the

date of grant equals or exceeds $10, or (ii) seven years have elapsed since the

date of grant.  In the 

 

4

 

 

event that EMPLOYEE holds non-vested options at the

time his employment by XM terminates, such non-vested options shall vest or

shall be forfeited, as the case may be, in accordance with the provisions of

Article 4 hereof.

(d)           Vested options may be exercised

within ten (10) years of the date on which they were granted.  In the event that EMPLOYEE holds unexercised

vested options at the time his employment by XM terminates, such vested options

may be exercised within the time periods set forth in Article 4 hereof.

(e)           XM agrees that the XM Stock to be

issued to EMPLOYEE upon his exercise of the options granted pursuant to Article

3.7(a) hereof will be registered for sale to the public on XM’s Form S-8

Registration Statement.

ARTICLE 4

TERMINATION

4.1          General. 

EMPLOYEE’s employment hereunder shall terminate in accordance with the

provisions of this Article 4 upon EMPLOYEE’s death or Disability, upon EMPLOYEE’s

termination by XM with or without Cause, upon EMPLOYEE’s resignation with or

without Good Reason, or upon the expiration of the term of this Agreement

without renewal.

4.2          Death. 

If the EMPLOYEE’s employment terminates because of his death, the date

of termination shall be the date of death.

(a)           If the EMPLOYEE’s employment

terminates because of his death, XM shall continue to pay EMPLOYEE’s then

current Base Salary, if any, and Discretionary Bonus (based on the

Discretionary Bonus awarded to EMPLOYEE in the prior year), and shall continue

to make all applicable benefits available, to EMPLOYEE’s legal representatives,

estate, beneficiaries or heirs, in accordance with XM’s then-prevailing

executive payroll practices, through the end of the third calendar month

following EMPLOYEE’s death.  In

addition, XM shall continue any health, medical, dental, or similar benefits

which members of EMPLOYEE’s family were receiving for  a period of one year, or pay such family members an amount equal

to their cost for obtaining equivalent coverage.

(b)           If the EMPLOYEE’s employment

terminates because of his death, EMPLOYEE’s non-vested options shall be

forfeited.  EMPLOYEE’s legal

representatives, estate, beneficiaries or heirs shall be entitled to exercise

any of EMPLOYEE’s vested options within one (1) year after EMPLOYEE’s death.

4.3          Disability. For purposes of this Agreement, EMPLOYEE

shall be deemed to be under a Disability if EMPLOYEE shall be unable, by virtue

of illness or physical or mental incapacity or disability (from any cause or

causes whatsoever), to perform EMPLOYEE’s essential job functions hereunder,

whether with or without reasonable accommodation, in substantially the manner

and to the extent required hereunder prior to the commencement of such disability,

for a period exceeding ninety (90) consecutive days.

 

5

 

(a)           Upon EMPLOYEE’s Disability, the

payment of benefits under XM’s short-term and long-term disability insurance

programs, if any, shall offset XM’s obligations under Article 3.1 hereof to the

extent such benefits are received by EMPLOYEE.

(b)           Subject to any applicable legal

requirements, in the event EMPLOYEE shall remain under a Disability for a

period exceeding one hundred twenty (120) days in any twelve (12) month period,

XM shall have the right to terminate EMPLOYEE’s employment hereunder.  XM shall effect such termination by giving

EMPLOYEE a notice specifying the effective date of such termination, which date

shall not be earlier than the last day of the calendar month following the

giving of notice.

(c)           If XM terminates the EMPLOYEE’s

employment because of Disability, XM shall continue to pay EMPLOYEE’s then

current Base Salary, if any,  and

Discretionary Bonus (based on the Discretionary Bonus awarded to EMPLOYEE in

the prior year), and shall continue to make all applicable benefits available,

to EMPLOYEE, in accordance with XM’s then-prevailing executive payroll

practices, through the end of the third calendar month following termination.  In addition, XM shall continue any health,

medical, dental, or similar benefits which EMPLOYEE (and/or members of

EMPLOYEE’s family) were receiving for  a

period of one year, or pay EMPLOYEE an amount equal to the cost of obtaining

equivalent coverage.

(d)           If XM terminates EMPLOYEE’s

employment because of Disability, EMPLOYEE’s non-vested options shall be

forfeited.  EMPLOYEE shall be entitled

to exercise any of his vested options within one (1) year after termination.

4.4          Termination

for Cause or Voluntary Resignation.

(a)           For purposes of this Agreement, Cause

shall mean:  (i) EMPLOYEE’s willful or

gross misconduct, willful or gross negligence in the performance of his duties

for XM, or intentional or habitual neglect of his duties for XM, provided that

XM shall have given EMPLOYEE notice specifying the conduct it believes to fall

within this sentence and EMPLOYEE shall have failed to remedy such conduct

within ten (10) days thereafter; or (ii) EMPLOYEE’s theft or misappropriation

of funds of XM or conviction of a felony. 

XM shall effect a termination for Cause by giving EMPLOYEE a notice

specifying the effective date of such termination.

(b)           For purposes of this Agreement,

voluntary resignation means the EMPLOYEE’s resignation of his employment

hereunder without Good Reason (as defined in Article 4.5(b) hereof.  EMPLOYEE shall effect a termination by

voluntary resignation by giving XM a notice specifying the effective date of

such termination, which date shall not be earlier than thirty (30) days after

the giving of notice.

(c)           In the event EMPLOYEE’s employment is

terminated by XM for Cause or by EMPLOYEE by voluntary resignation:

(i)            XM shall pay to EMPLOYEE, in

accordance with XM’s then-prevailing executive payroll practices, all Base

Compensation, benefits and other 

 

6

 

 

payments to which EMPLOYEE was entitled hereunder

through the effective date of termination.

(ii)           In the case of voluntary resignation

only, EMPLOYEE shall be entitled to exercise any of his vested options within

three (3) months after termination. 

Subject to the previous sentence of this Article 4.4(c)(ii), EMPLOYEE’s

non-vested and vested but unexercised options shall be forfeited.

(iii)          Except as set forth in this Article

4.4, XM shall have no further obligation to EMPLOYEE (or EMPLOYEE’s legal

representatives, estate, beneficiaries or heirs) for any compensation, benefits

or other payments hereunder, provided that nothing herein shall be deemed to

affect EMPLOYEE’s entitlement, if any, to any vested pension or similar

benefits to which he may be or may become entitled.

4.5          Termination

Without Cause or Resignation for Good Reason.

(a)           For the purposes of this Agreement,

termination without Cause is any termination by XM of EMPLOYEE’s employment

hereunder without Cause, as defined in Article 

4.4(a) hereof.  XM shall effect a

termination without Cause by giving EMPLOYEE a notice specifying the effective

date of such termination, which date shall not be earlier than thirty (30) days

after the giving of notice.

(b)           For the purposes of this Agreement,

Good Reason shall mean:  (i) a

substantial diminution of EMPLOYEE’s responsibilities or status; (ii) XM’s

relocation of EMPLOYEE outside the Washington, D.C. area; (iii) a material

breach of this Agreement by XM, provided that EMPLOYEE shall have given XM

notice of the conduct he believes to constitute the material breach and XM

shall have failed to remedy such breach within ten (10) days thereafter;

(iv)  a Change of Control of XM as

defined in Article 4.5(c) hereof. 

EMPLOYEE shall effect a termination by resignation for Good Reason by

giving XM a notice specifying the effective date of such termination.

(c)           For the purposes of this Agreement, a

Change of Control will occur where (i) any person or group becomes beneficial

owner of securities of XM representing more than 40% of the then voting power

of XM; (ii) Board members (together with new members appointed by at least two

thirds (2/3) of those members) at the beginning of a two-year period no longer

constitute two thirds (2/3) of the Board during such two-year period; (iii) a

merger/consolidation of XM occurs wherein the XM voting securities immediately

prior thereto do not constitute at least sixty percent (60%) of the combined

voting securities after the merger/consolidation; or (iv) the stockholders

approve a plan of complete liquidation or winding-up or an agreement for the

sale or disposition of all or substantially all of XM’s assets.

(d)           In the event EMPLOYEE’s employment is

terminated by XM without Cause or by EMPLOYEE by resignation for Good Reason:

XM shall continue to pay

EMPLOYEE’s then current Base Salary, if any, and Discretionary Bonus (based on

the Discretionary Bonus awarded to EMPLOYEE in the prior year), and shall

continue to make all applicable benefits 

 

7

 

 

available to EMPLOYEE, in accordance with XM’s

then-prevailing executive payroll practices, for two (2) years from such

termination.  With respect to the

health, medical, dental, or similar benefits which EMPLOYEE (and/or members of

EMPLOYEE’s family) were receiving, XM may pay EMPLOYEE an amount equal to his

cost for obtaining equivalent coverage, as an alternative to continuing such

benefits.

(e)           In the event EMPLOYEE’s employment is

terminated by XM without Cause or by EMPLOYEE by resignation for Good Reason,

all options that have been granted to EMPLOYEE shall immediately vest and

become exercisable, and EMPLOYEE shall be entitled to exercise any of his

vested options within eighteen (18) months after termination.

(f)            If, as a result of a Change of

Control, it is determined that EMPLOYEE would be subject to the excise tax

imposed by Section 4999 of the Internal Revenue Code, XM shall reimburse

EMPLOYEE for the amount of such tax, and shall pay EMPLOYEE such additional

amount as may be necessary to place EMPLOYEE in the same financial position

that he would have been in if he had not incurred such excise tax

liability.  All determinations under

this Article 4.5(f), including whether EMPLOYEE is liable for the excise tax,

and the amount to be paid to EMPLOYEE by XM, shall be made by a

nationally-recognized accounting firm to be selected by EMPLOYEE and paid by

XM.

4.6          Expiration

of Contract Term.

(a)           For the purposes of this Agreement,

Renewal Offer means a bona fide offer by XM to enter into a new employment

agreement with EMPLOYEE, on terms at least as favorable to EMPLOYEE as this

Agreement, made to EMPLOYEE at least four (4) months before the expiration of

this Agreement.

(b)           In the event that XM makes a Renewal

Offer to Employee, but the parties nevertheless do not enter into a new

employment agreement and EMPLOYEE’s employment by XM therefore terminates upon

the expiration of this Agreement, any options scheduled to vest on the third

anniversary of the Effective Date of this Agreement pursuant to Article 3.7(c)

shall immediately vest and become exercisable, all other non-vested options

shall be forfeited, and EMPLOYEE shall be entitled to exercise any of his

vested options within three (3) months after termination.

(c)           In the event that XM does not make a

Renewal Offer to Employee and EMPLOYEE’s employment by XM therefore terminates

at the expiration of the term of this Agreement, all options that have been

granted to EMPLOYEE shall immediately vest and become exercisable, and EMPLOYEE

shall be entitled to exercise any of his vested options within eighteen (18)

months after termination.

ARTICLE 5

RESTRICTIVE COVENANTS

5.1          Confidentiality. 

Except as authorized or directed by XM, EMPLOYEE shall not, at any time

during or subsequent to the term of this Agreement, directly or 

 

8

 

 

indirectly publish or disclose any Confidential

Information of XM or of any of its Affiliates, or Confidential Information of

others that has come into the possession of XM or of any of its Affiliates, or

into the EMPLOYEE’s possession in the course of his employment with XM or of

his services and duties hereunder, to any other person or entity, and EMPLOYEE

shall not use any such Confidential Information for EMPLOYEE’s own personal use

or advantage or make it available to others for use.  All Confidential Information, whether oral or written, regarding

the business or affairs of XM or any of its Affiliates, including, without

limitation, information as to their products, services, systems, designs,

inventions, software, finances (including prices, costs and revenues),

marketing plans, programs, methods of operation, prospective and existing

contracts, customers and other business arrangements or business plans,

procedures, and strategies, shall all be deemed Confidential Information,

except to the extent the same shall have been lawfully and without breach of

the EMPLOYEE’S confidentiality obligation made available to the general public

without restriction, or that EMPLOYEE can prove, by documentary evidence, was

previously known to EMPLOYEE prior to the term of EMPLOYEE’s employment.  The Company shall be under no obligation to

identify specifically any information as to which the protection of this

Section 5.1 extends by any notice or other action.  Upon expiration or termination of this Agreement for any reason,

EMPLOYEE shall promptly return to XM all Confidential Information, including

all copies thereof in EMPLOYEE’s possession, whether prepared by him or others.

5.2          Unfair

Competition.  During his employment pursuant to this

Agreement and for a period of one (1) year after the termination of his

employment, EMPLOYEE shall not, within the United States, directly or

indirectly, and whether or not for compensation, as a stockholder owning

beneficially or of record more than five percent (5%) of the outstanding shares

of any class of stock of an issuer, or as an officer, director, employee,

consultant, partner, joint venturer, proprietor, or otherwise, engage in or

become interested in any Conflicting Organization in connection with research,

development, consulting, manufacturing, purchasing, accounting, engineering,

marketing, merchandising or selling of any Conflicting Product or Service,

directly or indirectly, in competition with XM or any of its Affiliates (or any

of their successors) as conducted from time to time during such period.  During the period in which EMPLOYEE is

receiving any payments under this Agreement and for a period of one (1) year

thereafter, EMPLOYEE shall not, without the prior written consent of XM,

solicit or hire or induce the termination of employment of any employees or

other personnel providing services to XM, or any of its Affiliates, for any

business activity, other than a business activity owned or controlled, directly

or indirectly, by XM or any of its Affiliates.

5.3          Injunctive

Relief.

(a)           EMPLOYEE

acknowledges and warrants that he will be fully able to earn an adequate

livelihood for himself and his dependents if Section 5.2 should be specifically

enforced against him, and that Section 5.2 merely prevents unfair competition

against XM for a limited period of time. 

EMPLOYEE agrees and acknowledges that, by virtue of EMPLOYEE’s employment

with XM, EMPLOYEE shall have access to and maintain an intimate knowledge of

XM’s activities and affairs, 

 

 

9

 

 

including trade secrets, Confidential Information, and

other confidential matters.  As a result

of such access and knowledge, and because of the special, unique, and

extraordinary services that EMPLOYEE is capable of performing for XM or one of

its competitors, EMPLOYEE acknowledges that the services to be rendered by

EMPLOYEE pursuant to this Agreement are of a character giving them a peculiar

value, the loss of which cannot adequately or reasonably be compensated by

money damages.  Consequently, EMPLOYEE

agrees that any breach or threatened breach by EMPLOYEE of EMPLOYEE’s

obligations under this Article 5 would cause irreparable injury to XM, and that

XM shall be entitled to (i) preliminary and permanent injunctions enjoining

EMPLOYEE from violating such provisions, and (ii) actual money damages suffered

by XM as a result of such breach, in the amount of any fees, compensation,

benefits, profits, or other remuneration earned by EMPLOYEE as a result of such

breach, together with interest, and cost and attorney’s fees expended to

collect such damages or secure such injunctions.  Nothing in this Agreement, however, shall be construed to

prohibit XM from pursuing any other remedy, XM and EMPLOYEE having agreed that

all such remedies shall be cumulative.

(b)           The restrictions set forth in this

Article 5 and the following Article 6 shall be construed as independent

covenants, and shall survive the termination or expiration of this Agreement,

and the existence of any claim or cause of action against XM, whether

predicated upon this Agreement or otherwise, shall not constitute a defense to

the enforcement by XM of the restrictions contained in this Article 5 or the

following Article 6.  EMPLOYEE hereby

consents and waives any objection to the jurisdiction over his person or the

venue of any courts within the State of Virginia with respect to any proceedings

in law or in equity arising out of this Article 5 or the following Article

6.  If any court of competent

jurisdiction shall hold that any of the restrictions contained in Section 5.2

are unreasonable as to time, geographical area, or otherwise, said restrictions

shall be deemed to be reduced to the extent necessary in the opinion of such

court to make their application reasonable.

ARTICLE 6

INVENTIONS, WORKS OF AUTHORSHIP,

PATENTS AND COPYRIGHTS

6.1          Ownership of Inventions and Works of

Authorship.  EMPLOYEE agrees that all Inventions made,

conceived, discovered, developed or reduced to practice by EMPLOYEE and all

software and other works of authorship created by EMPLOYEE, either alone or

with others, at any time, within or without normal working hours, during the

term of this Agreement, arising out of such employment or based upon

Confidential Information, or pertinent to any field of business or research in

which, during such employment, XM is engaged or (if such is known or

ascertainable by EMPLOYEE) is considering engaging, whether or not patented or

patentable, shall be and remain the sole property of XM with respect to all

rights of EMPLOYEE arising from any discovery, conception, development,

reduction to practice, or creation by EMPLOYEE.  XM shall have the full right to assign, license, or transfer all

rights thereto.

 

 

10

 

 

6.2          Disclosure

of Inventions and Works of Authorship.  EMPLOYEE shall promptly make full

disclosure to XM or to an authorized representative thereof of all information

relating to the making, conception, discovery, development, creation or

reduction to practice of Inventions, or of software and other works of

authorship owned by XM pursuant to Section 6.1 above.

6.3          Patent and

Copyright Applications.  At the request of XM and at XM’s expense,

EMPLOYEE shall execute such documents and perform such acts as XM deems

necessary to obtain patents or the like on such Inventions or copyright

registrations for such software and other works of authorship in any

jurisdiction or jurisdictions.  Such

obligation shall continue beyond the term of this Agreement.  In the event that XM is unable because of  EMPLOYEE’s mental or physical capacity or

for any other reason to secure EMPLOYEE’s signature to apply for or to pursue

any applications for patent or copyright covering Inventions, software and

other works of authorship owned by XM pursuant to Section 6.1, then EMPLOYEE

hereby irrevocably designates and appoints XM as EMPLOYEE’s agent and attorney

in fact, upon prior notice, to act for and in his behalf and stead to execute

and file any such applications and to do all other lawfully permitted acts to

further the prosecution and issuance of patents and copyright registrations

thereon with the same legal force and effect as if executed by EMPLOYEE.  EMPLOYEE further agrees not to file any

patent applications relating to or describing or otherwise disclosing any

Confidential Information or any such Inventions, or to claim any copyright or

file any applications to register any copyright in such software or other works

of authorship, except with the prior written consent of XM.

6.4          Assignment

of Inventions and Works of Authorship.  EMPLOYEE agrees to assign to XM or it

Affiliates all of EMPLOYEE’s right, title and interest in and to any and all

such Inventions and the patent applications and patents relating thereto and to

the copyright in any and all such software and other works of authorship and

any copyright applications and registrations relating thereto conceived,

reduced to practice, discovered, created or otherwise developed by EMPLOYEE and

owned by XM pursuant to Section 6.1 above.

ARTICLE 7

MISCELLANEOUS

7.1          Assignment.  The rights and obligations of XM under this Agreement

shall be binding upon its successors and assigns and, subject to EMPLOYEE’s

rights under Article 4.5 hereof, may be assigned by XM to the successors in

interest of XM.  The rights and

obligations of EMPLOYEE under this Agreement shall be binding upon EMPLOYEE’s

heirs, legatees, personal representatives, executors or administrators.  This Agreement may not be assigned by

EMPLOYEE, but any amount owed EMPLOYEE upon EMPLOYEE’s death shall inure to the

benefit of EMPLOYEE’s heirs legatees, personal representatives, executors, or

administrators.

7.2          Notice.  For purposes of this Agreement, notices and all other

communications provided for in this Agreement shall be in writing and shall be

deemed to have been duly given when hand delivered, sent by overnight courier,

or mailed by 

 

11

 

 

first-class, registered, or certified mail, return

receipt requested, postage prepaid, or transmitted by telegram, telecopy, or

telex addressed as follows:

If to EMPLOYEE: (Copy to XM Executive Office)

Gary Parsons

11009 Stanmore Drive 

Potomac, Maryland 20854

 

 

 

If to XM:

 

 

XM Satellite Radio

Holdings Inc.

1500 Eckington Place, N.E.,

Washington, D.C. 20002

Telephone:            703-758-6116

Telecopy:              703-758-6106

 

 

Attn:       General

Counsel

or to such other address as either party may have

furnished to the other in writing in accordance herewith, except that notices

of change of address shall be effective only upon receipt.

7.3          Entire

Agreement.  From and after the Effective Date, this

Agreement constitutes the entire agreement between the parties hereto, and

expressly supersedes all prior oral or written agreements, commitments or

understandings with respect to the matters provided for herein.

7.4          Headings.  Article and Section headings contained in this

Agreement are inserted for convenience of reference only, shall not be deemed

to be a part of this Agreement for any purpose, and shall not in any way define

or affect the meaning, construction or scope of any of the provisions hereof.

7.5          Severability. 

In the event any provision of this Agreement, or any portion thereof, is

determined by any arbitrator or court of competent jurisdiction to be

unenforceable as written, such provision or portion thereof shall be

interpreted so as to be enforceable.  In

the event any provision of this Agreement, or any portion thereof is determined

by any arbitrator or court of competent jurisdiction to be void, the remaining

portions of this Agreement shall nevertheless be binding upon XM and EMPLOYEE

with the same effect as though the void provision or portion thereof had been

severed and deleted.

7.6          Arbitration. 

Without prejudice to XM’s right to seek an injunction pursuant to

Article 5.3(a) hereof from a court of competent jurisdiction, any dispute

between the parties hereto arising out of this Agreement, or otherwise arising

out of or relating to EMPLOYEE’s employment by XM, or the termination thereof,

shall be submitted to non-binding mediation before a mediator to be agreed upon

by the parties 

 

 

12

 

 

or, failing agreement, to be appointed by the American

Arbitration Association (“AAA”).  In the

event that mediation is unsuccessful, such dispute shall be resolved by binding

arbitration, before a single arbitrator, under the rules of the AAA.  The arbitrator shall have the authority to

apportion the costs of arbitration, and to render an award including reasonable

attorney’s fees,  as and to the extent

he deems appropriate under the circumstances.

7.7          Governing

Law.  This Agreement, the rights and obligations of the

parties hereto, and any claims or disputes relating thereto, shall be governed

by and construed in accordance with the substantive laws of the State of

Virginia (excluding the choice of law rules thereof).

7.8          Amendment;

Modification; Waiver.  No amendment, modification or waiver of

the terms of this Agreement shall be valid unless made in writing and duly

executed by EMPLOYEE and XM.  No delay

or failure at any time on the part of EMPLOYEE or XM in exercising any right,

power or privilege under this Agreement, or in enforcing any provision of this

Agreement, shall impair any such right, power, or privilege, or be construed as

a waiver of any default or as any acquiescence therein, or shall affect the

right of EMPLOYEE or XM thereafter to enforce each and every provision of this

Agreement in accordance with its terms.

7.9          Additional

Obligations.  Both during and after the term of

employment, EMPLOYEE shall, upon reasonable notice, furnish XM with such

information as may be in EMPLOYEE’s possession or control, and cooperate with

XM, as may reasonably be requested by XM (and, after the term of employment,

with due consideration for EMPLOYEE’s obligations with respect to any new

employment or business activity) in connection with any litigation or other

adversarial proceedings in which XM or any Affiliate is or may become a

party.  XM shall reimburse EMPLOYEE for

all reasonable expenses incurred by EMPLOYEE in fulfilling EMPLOYEE’s

obligations under this Article 7.9.

IN WITNESS WHEREOF, the parties have executed this

Agreement to be effective as of the Effective Date.

 

	

   

  	

  XM Satellite Radio

  Holdings Inc.

  
	

   

  	

  XM Satellite Radio Inc.

  
	

   

  	

   

  
	

   

  	

  By  

  	

   

  	

  Date: 

  	

   

  
	

   

  	

   

  	

  Gary M. Parsons

  
	

   

  	

   

  	

  Chairman of the Board

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

  Date:

  	

   

  
	

   

  	

   

  	

  Tom Donohue

  
	

   

  	

   

  	

  Chairman/Comp Comm

  
							

 

13

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