XM Radio 2008 Annual Report Download - page 159

compensation or other amount owing to a participant the amount (in cash, shares, other securities, other
awards or other property) of any applicable withholding taxes in respect of an award, its exercise, or any
payment or transfer under an award or under the Plan and to take such other action as may be necessary in
our opinion to satisfy all obligations for the payment of such taxes. A participant may satisfy, in whole or in
part, the withholding liability by delivery of shares owned by the participant (which are not subject to any
pledge or other security interest and which have been owned by the participant for at least six months) with a
fair market value equal to such withholding liability or by having us withhold from the number of shares
otherwise issuable upon the occurrence of a vesting event a number of shares with a fair market value equal to
such withholding liability.
Termination
No grant will be made under the Plan more than 10 years after the date on which the Plan is first
approved by our board of directors, but all grants made on or prior to such date will continue in effect
thereafter subject to the terms thereof and of the Plan.
Federal Income Tax Consequences Relating to Awards
The following is a brief summary of some of the federal income tax consequences of certain transactions
under the Plan based on federal income tax laws in effect on the date hereof. This summary is not intended to
be complete and does not describe state or local tax consequences. It is not intended as tax guidance to
participants in the plan.
Tax Consequences to Participants
Non-qualified Stock Options. In general, (i) no income will be recognized by an optionee at the time a
non-qualified stock option is granted; (ii) at the time of exercise of a non-qualified stock option, ordinary
income will be recognized by the optionee in an amount equal to the difference between the option price paid
for the shares and the fair market value of the shares, if unrestricted, on the date of exercise; and (iii) at the
time of sale of shares acquired pursuant to the exercise of a non-qualified stock option, appreciation (or
depreciation) in value of the shares after the date of exercise will be treated as either short-term or long-term
capital gain (or loss) depending on how long the shares have been held.
Incentive Stock Options. No income generally will be recognized by an optionee upon the grant or
exercise of an ISO. The exercise of an ISO, however, may result in alternative minimum tax liability. If shares
of our common stock are issued to the optionee pursuant to the exercise of an ISO, and if no disqualifying
disposition of such shares is made by such optionee within two years after the date of grant or within one year
after the transfer of such shares to the optionee, then upon sale of such shares, any amount realized in excess
of the option price will be taxed to the optionee as a long-term capital gain and any loss sustained will be a
long-term capital loss.
If shares of our common stock acquired upon the exercise of an ISO are disposed of prior to the
expiration of either holding period described above, the optionee generally will recognize ordinary income in
the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at the
time of exercise (or, if less, the amount realized on the disposition of such shares if a sale or exchange) over
the option price paid for such shares. Any further gain (or loss) realized by the participant generally will be
taxed as short-term or long-term capital gain (or loss) depending on the holding period.
SARs. No income will be recognized by a participant in connection with the grant of a tandem SAR or
a free-standing SAR. When the SAR is exercised, the participant normally will be required to include as
taxable ordinary income in the year of exercise an amount equal to the amount of cash received and the fair
market value of any unrestricted shares of our common stock received on the exercise.
Restricted Stock. The recipient of restricted stock generally will be subject to tax at ordinary income
rates on the fair market value of the restricted stock (reduced by any amount paid by the participant for such
restricted stock) at such time as the shares are no longer subject to forfeiture or restrictions on transfer for
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