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This excerpt taken from the SIRI 10-Q filed Nov 8, 2006. Other Information FCC Inquiry. In April 2006, we learned that two manufacturers of SIRIUS radios and our principal competitor had received inquiries from the Federal Communications Commission as to whether the FM transmitters in their products complied with the FCC’s emissions and frequency rules. We promptly began an internal review of the compliance of the FM transmitters in a number of our radios. On June 20, we received a letter directly from the FCC making similar inquiries. On July 12, we responded to the letter from the FCC in respect of the preliminary results of our review. On August 7, we received a follow-up letter of inquiry from the FCC. We continue to cooperate with the FCC’s inquiry. During our internal review, we determined that certain of our radios with FM transmitters were not compliant with FCC rules. We have taken a series of actions to correct the problem. In connection with our internal review, we discovered that certain SIRIUS personnel requested manufacturers to produce SIRIUS radios that were not consistent with the FCC’s rules. As a result of this review, we are taking significant steps to ensure that this situation does not happen again, including the adoption of a comprehensive compliance plan, approved by our board of directors, to ensure that in the future our products comply with all applicable FCC rules. The FCC is continuing its review of our products as well as products of other companies containing FM transmitters. The FCC’s laboratory has tested a number of our products and found them to be compliant with the FCC’s rules. We are discussing with the FCC methods to bring devices in retail inventory and in consumers’ hands into compliance with the FCC's rules. We believe our radios that are currently in production comply with applicable FCC's rules. SIRIUS radios that include compliant FM transmitters may be subject to some transmission noise, which may result in us encouraging professional installation in some cases. We continue to study methods to improve the customer experience for our subscribers using SIRIUS radios that rely on FM transmissions. No health or safety issues are involved with these SIRIUS radios and radios which are factory-installed in new vehicles are not affected. We do not expect the resolution of these issues to have an adverse impact on our previous guidance. On October 13, 2006, we ceased operating 11 of our terrestrial repeaters which we discovered had been operating at variance to the specifications and applied to the FCC for new authority to resume operating these repeaters. Copyright Royalty Board Proceeding.We are a party to a proceeding before the Copyright Royalty Board of the Library of Congress to establish the royalty rate and terms for the sound recordings we use on our satellite radio service for the period for 2007 through 2012. On October 30, 2006, we and XM filed our direct case in this proceeding with the Copyright Royalty Board and proposed a royalty rate of 0.88% of our satellite radio subscription revenue. The Copyright Royalty Board must set a rate that is calculated to achieve four statutory objectives:
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We believe that the fee we proposed achieves these objectives and is consistent in principle with the fee established under the same standard for digital cable audio. SoundExchange, the organization that collects and distributes royalties from various digital music services on behalf of artists and music labels, simultaneously submitted its direct case in this proceeding and proposed a substantially higher royalty rate than we proposed. This submission of direct cases is the beginning of a twelve to eighteen month process which, absent an agreement among the parties, will result in a determination by the Copyright Royalty Board of an applicable royalty rate. Reference is made to the Risk Factors set forth in Part II, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2005. The Risk Factors remain applicable from our Form 10-K with the exception of the following changes: This excerpt taken from the SIRI 10-Q filed Aug 9, 2006. Other Information In April 2006, we learned that two manufacturers of SIRIUS radios and our principal competitor had received inquiries from the Federal Communications Commission as to whether the FM transmitters in their products complied with the FCC’s emissions and frequency rules. We promptly began an internal review of the compliance of the FM transmitters in a number of our radios. On June 20, we received a letter directly from the FCC making similar inquiries. On July 12, we responded to the letter from the FCC in respect of the preliminary results of our review. On August 7, we received a follow-up letter of inquiry from the FCC. During our internal review, we determined that certain of our radios with FM transmitters were not compliant with FCC rules. We have taken a series of actions to evaluate, mitigate and correct the problem. We directed manufacturers of SIRIUS radios with FM transmitters to suspend manufacture and shipment to retailers of non-compliant devices and to make the necessary changes in production to bring the radios into compliance. In connection with our internal review, we discovered that certain SIRIUS personnel requested manufacturers to produce SIRIUS radios that were not consistent with the FCC’s rules. As a result of this review, we are taking significant steps to ensure that this situation does not happen again, including the adoption of a comprehensive compliance plan, approved by our board of directors, to ensure that in the future our products comply with all applicable FCC rules. The FCC is continuing its review of our products as well as products of other companies containing FM transmitters. The FCC’s laboratory has tested a number of our products and found them to be compliant with the FCC’s rules. Based upon this testing, the FCC has permitted a grant of authority for the Starmate Replay to remain effective, and we expect the FCC to permit new equipment authorizations for other products shortly, including the Sportster Replay, Sirius One and U.S. Electronic’s Visor. We believe our radios that are currently in production comply with applicable FCC rules. SIRIUS radios that include compliant FM transmitters may be subject to some transmission noise, which may result in us encouraging professional installation in some cases. We continue to study methods to improve the customer experience for our subscribers using SIRIUS radios that rely on FM transmissions. We continue to cooperate with the FCC’s on-going inquiry. As part of this cooperation, we are discussing with the FCC the proper testing methodology for SIRIUS radios that include FM transmitters and methods to bring devices in retail inventory or in consumers’ hands into compliance with the FCC’s rules. No health or safety issues are involved with these SIRIUS radios and radios which are factory-installed in new vehicles are not affected. We do not expect the resolution of these issues to have an adverse impact on our previous guidance. Reference is made to the Risk Factors set forth in Part II, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2005. The Risk Factors remain applicable from our Form 10-K with the exception of the following changes: This excerpt taken from the SIRI 10-Q filed May 9, 2006. Other Information There are no material changes to the legal proceedings disclosed on the Form 10-K filed for the year ended December 31, 2005. There are no material changes to the risk factors disclosed on the Form 10-K filed for the year ended December 31, 2005. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This excerpt taken from the SIRI 10-K filed Mar 16, 2005. Other Information
On November 18, 2004, Joseph P. Clayton relinquished his role as our Chief Executive Officer and became Chairman of our board of directors. On November 18, 2004, we granted Mr. Clayton options to purchase 2,000,000 shares of our common stock, at an exercise price of $4.72 per share, and 500,000 restricted stock units. 500,000 of these stock options vested immediately; and 750,000 stock options will vest on each of December 31, 2005 and December 31, 2006. Mr. Clayton's restricted stock units will vest in equal installments on January 1, 2006 and January 1, 2007. Our board of directors has also authorized our compensation committee to negotiate further arrangements with Mr. Clayton in respect of his new role as Chairman of our board of directors. As part of these arrangements, we expect to enter into an agreement with Mr. Clayton to, among other things:
We also intend to accelerate the vesting of restricted stock units held by Mr. Clayton on November 17, 2004 to January 2006, and will replace the provisions in his stock option agreements that terminate the options ninety days after the end of his employment with a provision that will terminate such options three years after he ceases to be chairman of our board of directors. We expect to effect these modifications in a mutually acceptable manner, while preserving the intended economic benefits to Mr. Clayton of his stock options without any increased cost to us. On February 2, 2005, the compensation committee of our board of directors approved new annual base salaries for certain of our executive officers for 2005, which are set forth below:
On February 2, 2005, the compensation committee also authorized the payment of annual bonuses to certain of our executive officers in respect of the year ended December 31, 2004. These bonuses were paid one-half in cash and one-half in the form of restricted stock units, and were awarded based upon formulas established by the compensation committee in 2004 and the recommendations of our management. These restricted stock units will vest in February 2006. The following table sets forth annual bonuses awarded to certain executive officers as described above:
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We intend to provide additional information regarding the compensation awarded to our executive officers in respect of and during the year ended December 31, 2004 in the proxy statement for our 2005 annual meeting of stockholders, which we expect to file with the Securities and Exchange Commission in April 2005. On March 9, 2005, the compensation committee approved performance goals applicable to our executive officers for the year ending December 31, 2005. Our executive officers and eligible employees will be awarded bonuses based upon the attainment of prescribed levels of corporate achievement, including subscriber activations, average monthly subscriber churn, cash flow and automakers' models available for installation of SIRIUS radios. The compensation committee has assigned each of these criteria a weight and will measure the achievement of these items in January 2006 based upon objective data. Executive officers and other eligible employees in certain operational divisions may also have to achieve additional objectives relevant to their specific areas of responsibility, such as programming or sales as well
as individual objectives. Executive officers and eligible employees may receive cash bonuses and restricted stock units at different levels if we achieve threshold, standard or premier attainments as established by the compensation committee. The criteria of corporate achievement were established by the compensation committee after review of our business plan and discussions with our management. On March 9, 2005, we agreed on the terms of an amended and restated employment agreement with James E. Meyer, our President, Sales and Operations. The terms of this amended agreement are discussed in this Annual Report on Form 10-K under the section “Executive Officers of the Registrant—Employment Agreements.” | EXCERPTS ON THIS PAGE:
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