The radio executive and the Rabbi…
Yesterday, Sirius XM Radio (SIRI) announced that Gary Parsons, the company’s Chairman and one of the co-founders of XM Radio before the two companies merged last summer, had resigned. One oddity is that the press release was a little vague on when Parsons was leaving (or whether he had already left). Of course, it may be considered somewhat surprising that Parsons stuck around as long as he did, since there’s usually only room for one majordomo at most companies.
Perhaps even more interesting was the 8-K that the company filed, which noted that Parsons would receive a “Rabbi trust” — something that used to be pretty common, but which we haven’t seen as frequently in the filings. The structure was apparently dictated by Parsons’ employment agreement with XM, which dates back to 2004.
Under Parsons’ new agreement, Sirius XM is required to establish a Rabbi Trust within 10 days and fund it with $2.6 million. That money, which will be invested in “money markets or other risk-free investments” will be paid next May, according to the agreement.
The new agreement also references Parsons’ 2004 employment agreement with Sirius, which we dug up and after checking the relevant section, also appears to include two years of salary and all of his options vest immediately.
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Posted in Tags: 8Ks, M&A |
 2 Comments » |
November 13th, 2009 at 12:12 pm
Interesting. There’s a bunch today about replacement of CEOs for these guys too.
S&P upgraded SIRI other day. And this bit about Liberty Media’s stake.
fwiw I hate ‘tracking stocks’ — see Barnes & Noble busted one, gone BNBN.
UPDATE 1-Liberty Media sees Sirius stake spin in future
Thu Nov 12, 2009 4:22pm EST
NEW YORK, Nov 12 (Reuters) – Liberty Media Corp (LINTA.O: Quote, Profile, Research, Stock Buzz) expects that it will spin out its 40 percent stake in satellite radio operator Sirius XM “at some stage”, Liberty CEO Greg Maffei said on Thursday.
Liberty, the media conglomerate owned by media mogul John Malone, made an opportunistic acquisition of the stake in Sirius in February when the satellite company was on the verge of bankruptcy.
Maffei, who was speaking at the Media & Money conference in New York, said the Sirius investment had been one of the best bets the company had ever made.
Liberty Media paid $530 million in loans with a high 15 percent interest rate in exchange for preferred stock convertible into a 40 percent stake in the company. Today the stake is now worth more than $1 billion.
“It will be logical to spin out the stake at some stage,” Maffei said.
Liberty Media has traditionally avoided transactions that could lead to it incurring taxes on top of a deal price. One option would be to spin-out the stake directly to shareholders of its Liberty Capital tracking stock through which it made the Sirius investment.
(Reporting by Yinka Adegoke; Editing Bernard Orr)
© Thomson Reuters 2009. All rights reserved.
November 13th, 2009 at 2:54 pm
This looks benign. Probably, his severance cannot be paid for 6 months under 409A because he’s a specified employee. Most companies would not fund a rabbi trust for only a brief 6 month delay, but Sirius/XM isn’t exactly investment-grade, and I’m sure the ex-CEO wants as much security as he can get without violating 409A. A rabbi trust, in and of itself, is not meaningful — it’s just a funding mechanism.