XM Radio 2009 Annual Report Download

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PROXY STATEMENT
AND
2009 ANNUAL REPORT
TABLE OF CONTENTS
Letter to Stockholders
Notice of Annual Meeting of Stockholders
Proxy Statement .............................................. 1
Annual Report
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Comparison of Cumulative Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Quantitative and Qualitative Disclosure About Market Risks . . . . . . . . . . . . . . . . . . 50
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . F-2
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9

Table of contents

  • Page 1
    PROXY 2009 S TAT E M E N T AND REPORT ANNUAL TA B L E O F C O N T E N T S Letter to Stockholders Notice of Annual Meeting of Stockholders Proxy Statement ...Annual Report Management's Discussion and Analysis of Financial Condition and Results of Operations ...Market for Registrant's Common Equity...

  • Page 2
    ... channel of customers. We have a newly created internal team dedicated to growing our presence in the pre-owned market. As of year-end 2009, there were approximately 27 million satellite radios installed in cars, with only 11.6 million that were active. The number of vehicles on the road with SIRIUS...

  • Page 3
    ... the XM SkyDock, the first satellite radio controlled by an iPod touch or iPhone. The XM SkyDock allows subscribers to enjoy all of XM and the complete "Best of SIRIUS" programming package on iPod touch or iPhone anywhere they drive. With a consumer market that is increasingly price sensitive...

  • Page 4
    ... economy improves and we continue to execute our business plan, we believe it will be reflected in an improved stock price. With the merger behind us, we have integrated the two companies and continue to realize the benefits of that transaction every day. Last year's investment by Liberty Media and...

  • Page 5
    ..., New York, New York 10019. The annual meeting is being held to: 1. Elect the eight directors listed herein. 2. Approve a short-term stockholder rights plan (the "Rights Plan") designed to preserve certain potential tax benefits to the company. 3. Extend for one more year our board of directors...

  • Page 6
    ... for next year's annual meeting of stockholders? ...STOCK OWNERSHIP ...Who are the principal owners of SIRIUS XM's stock? ...How much stock do the directors and executive officers of SIRIUS XM own? ...Section 16(a) Beneficial Ownership Reporting Compliance ...GOVERNANCE OF THE COMPANY ...What are...

  • Page 7
    ... Benefits ...Potential Payments ...Director Compensation Table for 2009 ...ITEM 1 - ELECTION OF DIRECTORS ...Common Stock Director Nominees ...Preferred Stock Director Designees ...ITEM 2 - ADOPTION OF THE RIGHTS PLAN ...ITEM 3 - EXTEND FOR ONE MORE YEAR OUR BOARD OF DIRECTORS' AUTHORITY (THROUGH...

  • Page 8
    ... the year ended December 31, 2009, as filed with the Securities and Exchange Commission, except for exhibits, will be furnished without charge to any stockholder upon written request to Sirius XM Radio Inc., Attention: Corporate Secretary, 1221 Avenue of the Americas, 36th Floor, New York, New York...

  • Page 9
    ..."). John C. Malone, Gregory B. Maffei and David J.A. Flowers were elected to our board of directors in 2009 as Preferred Stock Directors. At the annual meeting, management will also report on our performance and respond to questions from stockholders. What are the voting rights of the holders...

  • Page 10
    ...the voting power of the issued and outstanding shares of our common stock, our Series A Convertible Preferred Stock and our Series B-1 Preferred Stock entitled to vote at the annual meeting is necessary to constitute a quorum to transact business. In addition, the presence, in person or by proxy, of...

  • Page 11
    ... and annual report to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies for this year or future years should be directed to: Sirius XM Radio Inc., Attention: Corporate Secretary, 1221 Avenue of the Americas, 36th Floor, New York, New York 10020...

  • Page 12
    ... or nominees as may be designated by our board of directors, unless our board of directors reduces the number of directors on our board. Who is soliciting my proxy, and who will pay the costs of the solicitation? SIRIUS XM is soliciting your proxy. The cost of soliciting proxies will be borne by...

  • Page 13
    ... do not receive notice of the proposal prior to the close of business on March 9, 2011. Notices of intention to present proposals at next year's annual meeting should be addressed to our Corporate Secretary, Sirius XM Radio Inc., 1221 Avenue of the Americas, 36th Floor, New York, New York 10020. 6

  • Page 14
    ... Stock is convertible into 206.9581409 shares of our common stock. Our Series B-1 Preferred Stock is convertible into an aggregate of 2,586,976,762 shares of our common stock. How much stock do the directors and executive officers of SIRIUS XM own? The following table shows the number of shares...

  • Page 15
    ... 1,900 shares held by Mr. Frear's spouse. Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon a review of Form 4s furnished to us during our most recent fiscal year, we know of no director, executive officer or beneficial owner of more than ten percent of our common stock who...

  • Page 16
    ... are the responsibilities of the board of directors? The business and affairs of our company are managed by or under the direction of our board of directors. Our board reviews and ratifies senior management selection and compensation, monitors overall corporate performance and ensures the integrity...

  • Page 17
    ..., including stockholders, for possible Common Stock Directors. Such suggestions, together with appropriate biographical information, should be submitted to our Corporate Secretary, Sirius XM Radio Inc., 1221 Avenue of the Americas, 36th Floor, New York, New York 10020. Candidates who are suggested...

  • Page 18
    ... Chief Executive Officer regularly to discuss the risks facing us, highlighting any new risks that may have arisen since they last met. The Audit Committee will also report to the board of directors to apprise them of their discussions with the Chief Financial Officer regarding our risk management...

  • Page 19
    ... XM radios become subscribers to XM's service. XM must also share with GM a percentage of the subscription revenue attributable to GM vehicles with installed XM radios. As part of the agreement, GM provides certain call-center related services directly to XM subscribers who are also GM customers...

  • Page 20
    ... supplier of satellite radio and related data services in Honda and Acura vehicles. XM also agreed to make incentive payments to American Honda for each purchaser of a Honda or Acura vehicle that becomes a self-paying XM subscriber and share with American Honda a portion of the subscription revenue...

  • Page 21
    ... by employees of concerns regarding questionable accounting or auditing matters. These procedures are available upon request. Does SIRIUS XM have corporate governance guidelines and a code of ethics? Our board of directors has adopted Corporate Governance Guidelines which set forth a flexible...

  • Page 22
    ... in 2009 with respect to the compensation of our named executive officers included the following: • new employment agreements with Messrs. Karmazin, Greenstein, Meyer and Donnelly, providing for increases in their base salaries effective in 2010 and grants of options related to the execution of...

  • Page 23
    ...' long-term compensation, including stock options and/or restricted stock units and matching contributions under the Sirius XM 401(k) Savings Plan. Compensation for our executives also involves a high proportion of pay that is "at risk" - namely, the discretionary annual bonus and the value of...

  • Page 24
    ... proportion of each executive officer's compensation to performance in the form of the discretionary annual bonus as well as long-term stock-based compensation, which is tied to our stock price performance. Year 2009 Decisions. During 2009, our Compensation Committee approved an increase in the base...

  • Page 25
    ...role in the company being cash flow positive for full year 2009, the reduction of operating expense growth, the stabilization of self-pay churn levels and improvement in customer save rates, the reduction in subscriber acquisition costs per gross addition, the launch of the SIRIUS XM application for...

  • Page 26
    ... fair market value as the stock price on the close of business on the day of grant for existing employees and on the close of business the day before hiring for new employees. Year 2009 Decisions. The long-term compensation awarded by the Compensation Committee to named executive officers in 2009...

  • Page 27
    ...New York City. We also pay Mr. Meyer an additional amount to hold him harmless as a result of any federal, state or New York City income taxes imputed in respect of the expenses we reimburse him for. Payments to Named Executive Officers Upon Termination or Change-in-Control The employment agreements...

  • Page 28
    ...Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan. Mr. Karmazin's decision to forfeit these options allowed us to more efficiently use these shares to meet our purposes of attracting, motivating and retaining key employees. Mr. Karmazin did not receive any consideration...

  • Page 29
    ... in such capacities as of December 31, 2009 for services rendered to us during the past three fiscal years. These six officers are referred to herein as the named executive officers. Name and Principal Position Year Salary ($) Stock Option All Other Bonus(2) Awards(3) Awards(3) Compensation(4 Total...

  • Page 30
    ...the value of restricted stock awards that vested during 2009. Grants of Plan-Based Awards in 2009 The following table provides information with respect to equity grants made during fiscal year 2009 to the named executive officers. All Other Stock Awards: Number of Shares of Stock or Units (#)(1) All...

  • Page 31
    ... executive officers. Option Awards Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Option Exercise Options Options Price Exercisable Unexercisable Name Option Expiration Date Market Value Number of Shares or Units of Shares or of Stock that Units of Stock...

  • Page 32
    ... options granted at an exercise price of $0.6735 vested in four equal annual installments from the date of grant on August 31, 2009; and of the 200,000 restricted stock units, 100,000 vested on March 5, 2010 and 100,000 vest on February 12, 2011. (7) Vesting and payment of all restricted stock units...

  • Page 33
    ... in 2009 The following table provides information with respect to option exercises and restricted stock and restricted stock units that vested during 2009. Option Awards Number of Shares Acquired Value Realized on Exercise on Exercise (#) ($) Stock Awards Number of Shares Acquired on Value Realized...

  • Page 34
    ... Sales, through May 1, 2013. The employment agreement provides for an initial annual base salary of $950,000, with specified increases. In connection with the execution of the employment agreement, we granted Mr. Meyer an option to purchase 25,184,984 shares of our common stock at an exercise price...

  • Page 35
    ...agreement provides for an initial annual base salary of $575,000, with specified increases. In connection with the execution of the employment agreement, we granted Mr. Donnelly an option to purchase 13,163,495 shares of our common stock at an exercise price of $0.6669 per share (the last sale price...

  • Page 36
    ... stock units is valued at the closing price times the number of shares of restricted stock and restricted stock units. (2) Assumes that medical and dental benefits would be continued under COBRA for up to 18 months at current rates; thereafter assumes rate of two times current employer costs...

  • Page 37
    ... Annual Report on Form 10-K for the year ended December 31, 2009. (4) In 2009, directors, other than Messrs. Huber and Mendel, were each awarded 214,237 options at an exercise price of $0.35 per share with a grant date fair value of $50,459, and 53,973 options at an exercise price of $0.54 per share...

  • Page 38
    ...given year, forfeits 25% of his or her compensation that is payable in cash. During 2009, all of our directors, other than Leon Black, attended over 75% of the meetings of our board of directors. Each director who serves as chair of a committee of the board of directors receives an additional annual...

  • Page 39
    ... and Corporate Governance Committee believes is valuable. Eddy W. Hartenstein ...As the former Chief Executive Officer of DirecTV, Mr. Hartenstein has extensive experience in building, managing, marketing and operating a satellite service. He brings direct and highly relevant expertise to the board...

  • Page 40
    ... long-term business plans. Jack Shaw ...As the retired Chief Executive Officer of Hughes Electronics, Mr. Shaw has broad experience in satellite systems and telecommunications infrastructures. This experience, together with his general management expertise, assists the board in evaluating satellite...

  • Page 41
    ... Stock Director Nominees Joan L. Amble, age 56, has been a director since July 2008. From December 2006 until the closing of the merger with XM in July 2008, Ms. Amble served as a director of XM Satellite Radio Holdings Inc. Ms. Amble has served as Executive Vice President and Corporate Comptroller...

  • Page 42
    ...Baan Company, a business management software provider. From 1980 until 1999, Mr. Mooney held a number of positions with IBM Corporation, including Chief Financial Officer of the Americas. Jack Shaw, age 71, has been a director since July 2008. From May 1997 until the closing of the merger with XM in...

  • Page 43
    ...Item 2 - Adoption of the Rights Plan Our board of directors is asking stockholders to approve the rights agreement, dated as of April 29, 2009 (the "Rights Plan"), between the company and The Bank of New York Mellon (the "Rights Agent") that our board adopted. Unless stockholder approval is obtained...

  • Page 44
    ... board of directors. The Rights Plan exempts future acquisitions of common stock by Liberty Radio, LLC and its affiliates but does not in any respect alter the respective rights and obligations of the company and Liberty Radio, LLC and its affiliates under the terms of the Investment Agreement dated...

  • Page 45
    ... by the Acquiring Person (which will be void), will have the right to receive upon exercise and payment of the Purchase Price, that number of shares of our common stock having a market value of two times the Purchase Price. Exchange. On or after the Distribution Date, we (1) will, if on such date...

  • Page 46
    ...of our common stock might be affected. The Rights Plan could discourage or prevent accumulations of substantial blocks of shares in which our stockholders might receive a substantial premium above market value. However, these disadvantages are outweighed, in the opinion of our board of directors, by...

  • Page 47
    ... these criteria is that a company's common stock have a trading price that is greater than or equal to $1.00 per share. On September 15, 2009, we received notice from the NASDAQ Stock Market that our common stock had closed below $1.00 per share for 30 consecutive business days and was therefore not...

  • Page 48
    ... the additional shares would provide us with additional flexibility to meet business and financing needs as they arise; • based upon the reverse stock split ratio selected by our board of directors, proportionate adjustments will be made to the per share exercise price and/or the number of shares...

  • Page 49
    ... market price prior to the reverse stock split. • Because the number of issued and outstanding shares of common stock would decrease as result of the reverse stock split, the number of authorized but unissued shares of common stock would increase on a relative basis. If we issue additional shares...

  • Page 50
    ... the reverse stock split, the board of directors will consider various factors in selecting the ratio including the overall market conditions at the time and the recent trading history of the common stock. Fractional Shares Stockholders will not receive fractional post-reverse stock split shares in...

  • Page 51
    ... the common stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts. If a stockholder holds registered shares in book-entry form with the transfer agent, no action needs to be taken to receive post-reverse stock split shares or cash payment in...

  • Page 52
    ... that elect to use a mark to market method of accounting; • persons who own more than 5% of our outstanding stock; • persons that hold our common stock as part of a straddle, hedge, constructive sale or conversion transaction; and • U.S. holders who acquired their shares of our common...

  • Page 53
    ... Public Accountants The board of directors has selected KPMG LLP ("KPMG") as our independent registered public accountants for 2010. As such, KPMG will audit and report on our financial statements for the year ending December 31, 2010. Representatives of KPMG are expected to be present at the annual...

  • Page 54
    ... board of directors unanimously recommends a vote "FOR" the ratification of KPMG LLP as our independent registered public accountants for 2010. Principal Accountant Fees and Services The following table sets forth the fees billed to us by KPMG LLP as of and for the years ended December 31, 2009 and...

  • Page 55
    ... of our board of directors. The following report concerns the Audit Committee's activities regarding oversight of our financial reporting and auditing process. The Audit Committee is comprised solely of independent directors, as defined in the Marketplace Rules of The NASDAQ Global Select Market and...

  • Page 56
    ... the Audit Committee's discussions with management and KPMG LLP, the Audit Committee recommended that our board of directors include the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009. Audit Committee JOAN L. AMBLE, CHAIRWOMAN...

  • Page 57
    ...the annual meeting, the persons named in the accompanying proxy will vote the shares represented by it in accordance with the recommendation of our board of directors. By Order of the Board of Directors, Patrick L. Donnelly Executive Vice President, General Counsel and Secretary New York, New York...

  • Page 58
    Appendix A RIGHTS AGREEMENT dated as of April 29, 2009 between SIRIUS XM RADIO INC. and THE BANK OF NEW YORK MELLON, as Rights Agent

  • Page 59
    ...Company Covenants Concerning Securities and Rights ...Record Date ...Adjustment of Purchase Price, Number and Kind of Securities or Number of Rights ...Certificate of Adjusted Purchase Price or Number of Shares ...Reserved ...Fractional Rights and Fractional Shares ...Rights of Action ...Agreement...

  • Page 60
    ... Sirius XM Radio Inc., a Delaware corporation (the "Company") and The Bank of New York Mellon, a New York banking corporation (the "Rights Agent"). WITNESSETH WHEREAS, on April 28, 2009, the Board authorized and declared a dividend distribution of one right (a "Right") for each share of common stock...

  • Page 61
    ... holding, voting or disposing of any securities of the Company, but only if the effect of such agreement, arrangement or understanding is to treat such Persons as an "entity" under Section 1.382-3(a)(1) of the Treasury Regulations; provided, however, that a Person shall not be deemed the "Beneficial...

  • Page 62
    ... States of New York or New Jersey (or such other state in which the principal office of the Rights Agent may be located) are authorized or obligated by law or executive order to close. (i) "Close of Business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however...

  • Page 63
    ...17, 2009, between the Company and Liberty Radio, LLC, a Delaware corporation and indirect wholly owned subsidiary of Liberty Media, as amended from time to time. (z) "Liberty Party" shall have the meaning ascribed to such term in the Liberty Investment Agreement. (aa) "Nasdaq" means The Nasdaq Stock...

  • Page 64
    ...Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company... to the terms of this Agreement. The Rights...Company shall send by first class, postage prepaid mail, to each record holder of shares of Common Stock as of the Close of Business...

  • Page 65
    ... between Sirius XM Radio Inc. and The Bank of New York Mellon, dated as of April 29, 2009 and as amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Sirius XM Radio Inc...

  • Page 66
    ... of a share of Preferred Stock as is set forth therein at the Purchase Price; provided, however, that the Purchase Price, the number and kind of securities issuable upon exercise of each Right and the number of Rights outstanding shall be subject to adjustments as provided in this Agreement. SECTION...

  • Page 67
    ... such Rights Certificate, (ii) provided such additional evidence of the identity of the... duly executed, accompanied by payment of the Purchase Price for the shares to be...shares) certificates representing the total number of one-millionths of a share of Preferred Stock to be purchased (and the Company...

  • Page 68
    ..., a number of shares of Preferred Stock (or any other security of the Company as may be applicable at the time of exercise) that shall be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7. (b) The Company covenants and agrees so long as the shares of...

  • Page 69
    ...was duly surrendered and payment of the Purchase Price (and all applicable taxes and charges) was duly made; provided, however, that if the date of such surrender and payment is a date upon which the transfer books of the Company for shares of Preferred Stock (or Common Stock and/or other securities...

  • Page 70
    ...% of the Current Per Share Market Price of the Company's Common Stock (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event; provided, however, that the Purchase Price (as so adjusted) and the number of shares of Common Stock so receivable upon exercise of a Right...

  • Page 71
    ...) The Company may at its option substitute for a share of Common Stock issuable upon the exercise of Rights in accordance with the foregoing subparagraph (ii) such number or fractions of shares of Preferred Stock having an aggregate current market value equal to the Current Per Share Market Price of...

  • Page 72
    ... outstanding on such record date plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the...

  • Page 73
    ..., "Current Per Share Market Price" of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent. For all purposes of this Agreement, the current per share market price of one one...

  • Page 74
    ...an adjustment reducing the Purchase Price below one onemillionth of the then par value, if any, of the shares of Preferred Stock or below the then par value, if any, of any other securities of the Company issuable upon exercise of the Rights, the Company shall take any corporate action which may, in...

  • Page 75
    ... on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company delivers to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares of Preferred Stock or other securities upon the occurrence...

  • Page 76
    ... of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one-millionth of a share of Preferred Stock. For purposes...

  • Page 77
    ...restraining performance of such obligation; provided, however that the Company shall use commercially reasonable efforts to have ...vote, receive dividends or be deemed for any purpose the holder of the number of one-millionths of a share of Preferred Stock or any other securities of the Company which...

  • Page 78
    ... provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate have been exercised in accordance with the provisions of this Agreement. SECTION 18 Concerning the Rights Agent (a) The Company agrees to pay...

  • Page 79
    ... force provided in the Rights Certificates and in this Agreement. SECTION 20 Duties of Rights Agent The Rights Agent undertakes to perform the duties and obligations expressly imposed by this Agreement (and no implied duties) upon the following terms and conditions, by all of which the Company and...

  • Page 80
    ... may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though the Rights Agent were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent or any such stockholder, affiliate, director, officer or employee from acting...

  • Page 81
    ... be (a) a Person organized and doing business under the laws of the United States or of the State of New York or of any other state of the United States, in good standing, which is authorized under such laws to exercise corporate trust, stock transfer or shareholder services powers and which has at...

  • Page 82
    ... from and after the effective time of such conversion of shares of Series B-1 Preferred Stock, the Company shall not issue any additional Rights hereunder, except as provided in clause (i) of the preceding sentence. SECTION 23 Redemption (a) The Board may, at any time prior to the Distribution Date...

  • Page 83
    ... form and with such terms as the Board of Directors shall then approve (the "Trust Agreement"). If the Board of Directors so directs, the Company shall enter into the Trust Agreement and shall issue to the trust created by such agreement (the "Trust") all of the shares of Common Stock (or substitute...

  • Page 84
    ... follows: Sirius XM Radio Inc. 1221 Avenue of the Americas New York, New York 10020 Attention: Patrick L. Donnelly, Esq. Phone: (212) 584-5180 Facsimile: (212) 584-5353 (b) Subject to the provisions of Section 21 any notice or demand authorized by this Agreement to be given or made by the Company or...

  • Page 85
    ... the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 29 Determinations and Actions by the Board (a) For all purposes of this Agreement, any calculation of the number of shares of Common Stock or any other...

  • Page 86
    ... be governed by and construed in accordance with the laws of the State of New York applicable to contracts made to be performed entirely within such State. SECTION 33 Counterparts This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be...

  • Page 87
    ..., the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written. Sirius XM Radio Inc. /s/ Patrick Donnelly Name: Patrick Donnelly Title: Executive Vice President and General Counsel The Bank of New York Mellon, as Rights Agent /s/ James...

  • Page 88
    ...Sirius XM Radio Inc. 2. The certificate of incorporation, as amended (the "Certificate of Incorporation") of the Company authorizes the issuance of 50,000,000 shares of Preferred Stock, $0.001 par value (the "Preferred Stock"), and expressly vests in the Board of Directors of the Company (the "Board...

  • Page 89
    ... Stock into a smaller number of shares or (iv) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation...

  • Page 90
    ... Stock into a smaller number of shares or (iv) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation...

  • Page 91
    ... 9 Rank. The Series C Preferred rank, with respect to the payment of dividends and the distribution of assets, junior to all other series of the Company's Preferred Stock, unless the terms of such series shall so provide. SECTION 10 Fractional Shares. Series C Preferred may be issued in fractions of...

  • Page 92
    IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Company by the undersigned on April 29, 2009. Sirius XM Radio Inc. By: Name: Title: A-33

  • Page 93
    ... to the terms, provisions, and conditions of the Rights Agreement, (the "Rights Agreement"), by and between Sirius XM Radio Inc., a Delaware corporation (the "Company"), and The Bank of New York Mellon, a New York banking corporation (the "Rights Agent"), dated as of April 29, 2009, to purchase...

  • Page 94
    ... evidenced hereby. In lieu of issuing such fractional Preferred Shares or other Securities, the Company may make a cash payment, as provided in the Rights Agreement. No holder of this Rights Certificate, as such, will be entitled to vote or receive dividends or be deemed for any purpose the holder...

  • Page 95
    of WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as , . Sirius XM Radio Inc. By: Name: Title: COUNTERSIGNED: The Bank of New York Mellon, as Rights Agent By: Name: Title: Signature page for Rights Certificate A-36

  • Page 96
    ...of Rights Certificate FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Rights Certificate) FOR VALUE RECEIVED, hereby sells, assigns and transfers unto (Please...or an Affiliate or Associate thereof (as defined in the Rights Agreement). Signature A-37

  • Page 97
    ... a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); and (2) after due inquiry and to the best knowledge of the undersigned, it n did n did not acquire the Rights evidenced by this Rights Certificate from any...

  • Page 98
    ...executed if holder desires to exercise the Rights Certificate) To Sirius XM Radio Inc.: Rights represented by this Rights Certificate The undersigned hereby irrevocably elects to exercise to purchase the number of one-millionths of a Preferred Share... defined in the Rights Agreement). Signature A-39

  • Page 99
    ... who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined pursuant to the Rights Agreement); and (2) after due inquiry and to the best knowledge of the undersigned, it n did n did not acquire the Rights evidenced by this Rights Certificate from any...

  • Page 100
    NOTICE The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. In the event the certification set forth ...

  • Page 101
    ...Directors (the "Board") of Sirius XM Radio Inc., a Delaware corporation (the "Company"), adopted a rights plan and declared a dividend of one preferred share purchase right for each outstanding share of common stock. The dividend is payable to our stockholders of record as of May 11, 2009. The terms...

  • Page 102
    ...and void), will thereafter have the right to receive upon exercise of a Right and payment of the Purchase Price, that number of shares of common stock having a market value of two times the Purchase Price. Exchange. On or after the Distribution Date, the Company, (i) will, if on such date the voting...

  • Page 103
    ... OF SIRIUS XM RADIO INC. The undersigned officer of Sirius XM Radio Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows: FIRST: The name of the Corporation is Sirius XM Radio Inc...

  • Page 104
    ... Date on the basis of the prevailing market prices of the New Common Stock at the time of the sale. After such sale and upon the surrender of the stockholders' stock certificates, the transfer agent will pay to such holders of record their pro rata share of the total net proceeds derived from...

  • Page 105
    of IN WITNESS WHEREOF, the undersigned has signed this Certificate of Amendment as of this day , 201 . Sirius XM Radio Inc. By: Name: Title: B-3

  • Page 106
    2009 ANNUAL REPORT

  • Page 107
    ... our business; • our dependence upon automakers, many of which have experienced a dramatic drop in sales, and other third parties, such as manufacturers and distributors of satellite radios, retailers and programming providers; • the substantial indebtedness of SIRIUS and XM; • the useful life...

  • Page 108
    ... SIRIUS or XM satellite radios as factory or dealer-installed equipment in their vehicles. SIRIUS and XM radios are also offered to customers of rental car companies. As of December 31, 2009, we had 18,772,758 subscribers. Our subscriber totals include subscribers under our regular pricing plans...

  • Page 109
    ... average number of subscribers ...18,576,151 Unaudited Pro Forma For the Three Months Ended December 31, 2009 2008 2007 Average self-pay monthly churn(1)(7)...Conversion rate(2)(7) ...ARPU(3)(7)...SAC, as adjusted, per gross subscriber addition(4)(7) ...Customer service and billing expenses...

  • Page 110
    ... the three months ended December 31, 2009 compared to 2008. Deactivation rates for self-pay subscriptions in the quarter increased to 2.0% per month reflecting reductions in consumer discretionary spending, subscriber response to our increase in prices for multisubscription accounts, channel line-up...

  • Page 111
    ...the introduction of the U.S. Music Royalty Fee and the sale of "Best of" programming, partially offset by decreased equipment revenue. The decreases in expenses were primarily driven by lower subscriber acquisition costs, lower customer service and billing expense, savings in programming and content...

  • Page 112
    ...-pay subscriptions in the year increased to 2.0% per month reflecting reductions in consumer discretionary spending, subscriber response to our increase in prices for multi-subscription accounts, channel line-up changes in 2008, the institution of a monthly charge for our upgraded streaming service...

  • Page 113
    ... in revenue was due mainly to an increase in weighted average subscribers as well as increased rates on multi-subscription packages, revenues earned on internet packages, the introduction of the U.S. Music Royalty Fee and the sale of "Best of" programming, partially offset by decreased by equipment...

  • Page 114
    ... fees ...14,467 Equipment revenue...19,008 Other revenue ...56,463 Total revenue ...Operating expenses: Satellite and transmission ...Programming and content ...Revenue share and royalties ...Customer service and billing ...Cost of equipment ...Sales and marketing ...Subscriber acquisition costs...

  • Page 115
    ...content agreements. Revenue share and royalties increased 1%, or $1,816, in the three months ended December 31, 2009 compared to 2008 primarily due to an increase in our revenues and an increase in the statutory royalty rate for the performance of sound recordings. Customer service and billing costs...

  • Page 116
    ... fees ...51,754 Equipment revenue ...50,352 Other revenue ...90,280 Total revenue ...Operating expenses: Satellite and transmission ...Programming and content ...Revenue share and royalties...Customer service and billing ...Cost of equipment ...Sales and marketing ...Subscriber acquisition costs...

  • Page 117
    ... provider upon completion of the Merger, reductions in personnel and on-air talent costs as well as savings on certain content agreements. Revenue share and royalties increased 2%, or $9,028, in the year ended December 31, 2009 compared to 2008. Customer service and billing costs decreased...

  • Page 118
    ... measures: average self-pay monthly churn; conversion rate; average monthly revenue per subscriber, or ARPU; subscriber acquisition cost, or SAC, as adjusted, per gross subscriber addition; customer service and billing expenses, as adjusted, per average subscriber; free cash flow; and adjusted...

  • Page 119
    ... average number of subscribers ...18,576,151 Unaudited Actual For the Three Months Ended December 31, 2009 2008 2007 Average self-pay monthly churn(1)(7)...Conversion rate(2)(7) ...ARPU(7)(16) ...SAC, as adjusted, per gross subscriber addition(7)(17) ...Customer service and billing expenses...

  • Page 120
    ... subscriber addition to decline as the costs of subsidized components of SIRIUS and XM radios decrease in the future. Our SAC, as adjusted, per gross subscriber addition will be impacted by our increasing mix of OEM additions and the effects of purchase price accounting adjustments. Customer Service...

  • Page 121
    ..., the introduction of the U.S. Music Royalty Fee and the sale of "Best of" programming. The decreases in expenses were primarily driven by lower subscriber acquisition costs, savings in programming and content expenses, lower customer service and billing expenses and lower legal and consulting...

  • Page 122
    ... For the Years Ended December 31, 2009 2008 2007 Average self-pay monthly churn(1)(7) ...Conversion rate(2)(7) ...ARPU(7)(21) ...SAC, as adjusted, per gross subscriber addition(7)(22) ...Customer service and billing expenses, as adjusted, per average subscriber(7)(23) ...Total revenue ...Free cash...

  • Page 123
    ...SIRIUS and XM radios decrease in the future. Our SAC, as adjusted, per gross subscriber addition will be impacted by our increasing mix of OEM additions and the effects of purchase price accounting adjustments. Customer Service and Billing Expenses, As Adjusted, Per Average Subscriber. For the years...

  • Page 124
    ... fees ...14,467 Equipment revenue...19,008 Other revenue ...54,650 Total revenue ...Operating expenses(1): Satellite and transmission ...Programming and content ...Revenue share and royalties ...Customer service and billing ...Cost of equipment ...Sales and marketing ...Subscriber acquisition costs...

  • Page 125
    ... to share-based payment expense included in operating expenses were as follows: Satellite and transmission ...$ (276) $ 1,349 $ 364 Programming and content ...1,646 4,672 2,786 Customer service and billing ...- 783 165 Sales and marketing ...(474) 2,165 539 Subscriber acquisition costs ...- - 156...

  • Page 126
    ...a result of the inclusion of XM's revenue share and royalties costs. Customer service and billing costs increased 132%, or $38,530, in the three months ended December 31, 2008 compared to 2007. $36,002 of the increase was attributable to the Merger. Sales and marketing cost increased 42%, or $23,833...

  • Page 127
    ...subscribers. Advertising Revenue. Advertising revenue includes the sale of advertising on our non-music channels, net of agency fees. Agency fees are based on a stated percentage per the advertising agreements applied to gross billing revenue. • 2009 vs. 2008: For the years ended December 31, 2009...

  • Page 128
    ...Residuals are monthly fees paid based upon the number of subscribers using SIRIUS and XM radios purchased from retailers. Advertising revenue share is recorded to revenue share and royalties in the period the advertising is broadcast. • 2009 vs. 2008: For the years ended December 31, 2009 and 2008...

  • Page 129
    ... increases in the royalty rate for the performance of sound recordings. Customer Service and Billing. Customer service and billing expenses include costs associated with the operation of third party customer service centers and our subscriber management systems as well as bad debt expense. • 2009...

  • Page 130
    ... a subscriber. Subscriber acquisition costs do not include advertising, loyalty payments to distributors and dealers of SIRIUS and XM radios, and revenue share payments to automakers and retailers of SIRIUS and XM radios. • 2009 vs. 2008: For the years ended December 31, 2009 and 2008, subscriber...

  • Page 131
    ... SIRIUS' Term Loan and Purchase Money Loan borrowings from Liberty Media, the repurchase of a portion of XM Holdings' 10% Convertible Senior Notes due 2009, and the retirement of XM's Amended and Restated Credit Agreement and XM's Second-Lien Credit Agreement. • 2008 vs. 2007: For the year ended...

  • Page 132
    ... attributable to payments received from SIRIUS Canada in excess of our carrying value of our investments, decreases in our share of SIRIUS Canada's and XM Canada's net losses and decreases in impairment charges related to our investment in XM Canada for the year ended December 31, 2009 compared to...

  • Page 133
    ... Convertible Notes due 2009, XM's Amended and Restated Credit Agreement due 2011 and SIRIUS' Term Loan and Purchase Money Loan borrowings from Liberty Media during the year ended December 31, 2009 compared to debt payments to holders of XM's 9.75% Senior Notes due 2014, XM's Senior Floating Rate...

  • Page 134
    ... approved the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan (the "2009 Plan"). Employees, consultants and members of our board of directors are eligible to receive awards under the 2009 Plan, which provides for the grant of stock options, restricted stock, restricted stock units and other...

  • Page 135
    ... our board of directors, as critical to our business and understanding our results of operations. Fair Value of XM Assets Acquired and Liabilities Assumed. On July 28, 2008, our wholly owned subsidiary Vernon Merger Corporation merged with and into XM Satellite Radio Holdings Inc., with XM Holdings...

  • Page 136
    ... subscription. Prepaid subscription fees received from certain automakers are recorded as deferred revenue and amortized to revenue ratably over the service period which commences upon retail sale and activation. We reimburse automakers for certain costs associated with the satellite radio installed...

  • Page 137
    ...up to 90 days after the trial service ends for vehicle owners and lessees to respond to our marketing communications and become self-paying subscribers. (3) ARPU is derived from total earned subscriber revenue and net advertising revenue, divided by the number of months in the period, divided by the...

  • Page 138
    ... Months Ended December 31, 2009 2008 2007 Customer service and billing expenses ...$ Less: share-based payment expense ...Customer service and billing expenses, as adjusted ...$ 58,981 (94) 58,887 $ $ 67,906 (870) 67,036 $ $ 65,991 (985) 65,006 Daily weighted average number of subscribers...

  • Page 139
    ...in the fair market value of our common stock, the effect of which is unrelated to the operational conditions that give rise to variations in the components of our subscriber acquisition costs and customer service and billing expenses. Specifically, the exclusion of share-based payment expense in our...

  • Page 140
    ... in evaluating our company compared with our GAAP results of operations, which reflects overall financial performance. We use pro forma unadjusted results of operations to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP...

  • Page 141
    ... (loss) ... (1) Amounts related to share-based payment expense included in operating expenses were as follows: Satellite and transmission ...Programming and content ...Customer service and billing ...Sales and marketing ...Subscriber acquisition costs ...General and administrative ...Engineering...

  • Page 142
    ... and amortization shown separately below)(1) Cost of services: Satellite and transmission ...Programming and content ...Revenue share and royalties...Customer service and billing ...Cost of equipment ...Sales and marketing ...Subscriber acquisition costs ...General and administrative ...Engineering...

  • Page 143
    ...,041) (1) Amounts related to share-based payment expense included in operating expenses were as follows: Satellite and transmission ...Programming and content ...Customer service and billing ...Sales and marketing ...Subscriber acquisition costs ...General and administrative ...Engineering, design...

  • Page 144
    ... as follows (in thousands, except for subscriber and per subscriber amounts): Unaudited Pro Forma For the Years Ended December 31, 2009 2008 2007 Customer service and billing expenses ...$ Less: share-based payment expense ...Customer service and billing expenses, as adjusted ...$ 234,909 (2,504...

  • Page 145
    ...follows (in thousands): Unaudited Pro Forma For the Years Ended December 31, 2009 2008 2007 Reconciliation of Net loss to Adjusted income...loss) from operations ...Restructuring, impairments and related costs ...Depreciation and amortization ...Share-based payment expense ...147,805 32,807 203,145 78...

  • Page 146
    ...: Unaudited for the Year Ended December 31, 2009 Purchase Price Allocation of Accounting Share-based As Reported Adjustments Payment Expense Pro Forma (In thousands) Revenue: Subscriber revenue, including effects of rebates . Advertising revenue, net of agency fees ...Equipment revenue ...Other...

  • Page 147
    ... $ (902,335) $ (1) Amounts related to share-based payment expense included in operating expenses were as follows: Satellite and transmission ...Programming and content ...Customer service and billing . Sales and marketing ...Subscriber acquisition costs . General and administrative . . Engineering...

  • Page 148
    ......Net loss ... (1) Amounts related to share-based payment expense included in operating expenses were as follows: Satellite and transmission ...Programming and content ...Customer service and billing ...Sales and marketing ...Subscriber acquisition costs ...General and administrative ...Engineering...

  • Page 149
    ... Actual For the Three Months Ended December 31, 2009 2008 2007 Customer service and billing expenses ...Less: share-based payment expense ...Customer service and billing expenses, as adjusted ...Daily weighted average number of subscribers ...Customer service and billing expenses, as adjusted, per...

  • Page 150
    ..., except for subscriber and per subscriber amounts): Unaudited Actual For the Years Ended December 31, 2009 2008 2007 Subscriber acquisition cost ...$ 340,506 Less: share-based payment expense granted to third parties and employees ...- (Less) Add: margin from direct sales of radios and accessories...

  • Page 151
    ...): Unaudited Actual For the Years Ended December 31, 2009 2008 2007 Customer service and billing expenses ...Less: share-based payment expense ...Customer service and billing expenses, as adjusted ...Daily weighted average number of subscribers ...Customer service and billing expenses, as adjusted...

  • Page 152
    ...sets forth the high and low sales price for our common stock, as reported by Nasdaq, for the periods indicated below: High Low Year ended December 31, 2008 First Quarter...Second Quarter...Third Quarter ...Fourth Quarter ...Year ended December 31, 2009 First Quarter...Second Quarter...Third Quarter...

  • Page 153
    ... 31, 2004 in each of our common stock, the S&P 500 and the NASDAQ Telecommunications Index and that all dividends were reinvested. 250 225 200 175 DOLLARS 150 125 100 75 50 25 0 Dec-04 Dec-05 Dec-06 YEAR Nasdaq Telecommunications Index S&P 500 Index Sirius XM Radio Inc. Dec-07 Dec-08 Dec-09...

  • Page 154
    ... Statements and related notes thereto included in this Annual Report and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 2009 For the Years Ended December 31, 2008(1) 2007 2006 (In thousands, except per share data) 2005 Statements of Operations Data: Total...

  • Page 155
    ... and the fair market value of our debt is sensitive to changes in interest rates. Under our current policies, we do not use interest rate derivative instruments to manage our exposure to interest rate fluctuations. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...

  • Page 156
    ... material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sirius XM Radio Inc. and subsidiaries' internal control over financial reporting as of December 31, 2009, based on criteria...

  • Page 157
    ...also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sirius XM Radio Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders' equity...

  • Page 158
    Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Sirius XM Radio Inc. (formerly Sirius Satellite Radio Inc.) and Subsidiaries: We have audited the accompanying consolidated statements of operations, stockholders' equity (deficit) and comprehensive ...

  • Page 159
    ...,967 (1) Amounts related to share-based payment expense included in operating expenses were as follows: Satellite and transmission ...Programming and content ...Customer service and billing ...Sales and marketing ...Subscriber acquisition costs ...General and administrative ...Engineering, design...

  • Page 160
    ... party long-term liabilities ...17,508 Other long-term liabilities ...61,052 Total liabilities ...7,226,096 Commitments and contingencies (Note 15) Stockholders' equity: Preferred stock, par value $0.001; 50,000,000 authorized at December 31, 2009 and 2008: Series A convertible preferred stock...

  • Page 161
    ... plans, net of forfeitures ...Structuring fee on 10% Senior PIK Secured Notes due 2011 ...Share-based payment expense ...Returned shares under share borrow agreements . . Issuance of restricted stock units in satisfaction of accrued compensation ...Exchange of 21⁄2% Convertible Notes due 2009...

  • Page 162
    ...Merger related costs ...Sale of restricted and other investments...Net cash (used in) provided by investing activities ...Cash flows from financing activities: Proceeds from exercise of warrants and stock options ...Preferred stock issuance costs, net of costs ...Long-term borrowings, net of costs...

  • Page 163
    ... companies. Our primary source of revenue is subscription fees, with most of our customers subscribing to an annual, semiannual, quarterly or monthly plan. We also derive revenue from activation and other fees, the sale of advertising on select non-music channels, the direct sale of satellite radios...

  • Page 164
    ... of our satellites, share-based payment expense, and valuation allowances against deferred tax assets. The economic conditions in the United States have impacted our business. Such conditions could have a material impact to our accounting estimates. Recent Accounting Pronouncements In September 2009...

  • Page 165
    ... subscription. Prepaid subscription fees received from certain automakers are recorded as deferred revenue and amortized to revenue ratably over the service period which commences upon retail sale and activation. We reimburse automakers for certain costs associated with the satellite radio installed...

  • Page 166
    ...subscriber is activated. During the years ended December 31, 2009, 2008 and 2007, we recorded advertising costs of $128,784, $109,253 and $107,485, respectively. These costs are reflected in Sales and marketing expense in our consolidated statements of operations. Stock-Based Compensation We account...

  • Page 167
    ... automakers are expensed upon either the sale or activation of radios. Chip sets that are shipped to radio manufacturers and held on consignment are recorded as inventory and expensed as Subscriber acquisition costs when placed into production by radio manufacturers. Costs for chip sets not held on...

  • Page 168
    ... maturity of three months or less when purchased. Cash and cash equivalents are stated at fair market value. Accounts Receivable Accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts. Our allowance for doubtful accounts considers historical experience...

  • Page 169
    ...inputs developed using management's assumptions about the inputs used for pricing the asset or liability. We use Level 3 inputs to fair value our investments in auction rate certificates issued by student loan trusts and the 8% convertible unsecured subordinated debentures issued by XM Canada. These...

  • Page 170
    .... The fair value for publicly traded instruments is determined using quoted market prices and, for non-publicly traded instruments, fair value is based upon estimates from a market maker and brokerage firm. As of December 31, 2009 and 2008, the carrying value of our long-term debt was $3,076...

  • Page 171
    ... 31, 2009 Weighted Average Useful Lives Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value December 31, 2008 Accumulated Amortization Net Carrying Value Indefinite life intangible assets FCC licenses ...Trademark ...Definite life intangible assets Subscriber...

  • Page 172
    ... audio radio service and provide ancillary services. The following table outlines the years in which each of our licenses expire: FCC License Expiration Year SIRIUS FM-1 satellite ...SIRIUS FM-2 satellite ...SIRIUS FM-3 satellite ...SIRIUS FM-4 ground spare satellite ...SIRIUS FM-5 satellite ...XM...

  • Page 173
    SIRIUS XM RADIO INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) for prepaid subscriptions included in the sale or lease price of vehicles are also included in subscriber revenue over the service period, after sale or subscriber activation. Subscriber revenue consists ...

  • Page 174
    ... use in the XM system. In 2006, XM entered into an agreement with Sea Launch to secure a launch for XM-5. In June 2009, Sea Launch filed for bankruptcy protection under Title 11 of the United States Code and as a result, we recorded a charge of $24,196 to Restructuring, impairments and related costs...

  • Page 175
    ... of such tender offer. The Investment Agreement also provides for certain other standstill provisions during such three year period. We accounted for the Series B Preferred Stock by recording a $227,716 increase to additional paid-in capital, excluding issuance costs, for the amount of allocated...

  • Page 176
    ... 2005, XM entered into agreements to provide XM Canada with the right to offer XM satellite radio service in Canada. The agreements have an initial term of ten years and XM Canada has the unilateral option to extend the term of the agreements for an additional five years at no additional cost beyond...

  • Page 177
    ...our board of directors and is considered a related party. During the term of the agreement, GM has agreed to distribute the XM service. XM subsidizes a portion of the cost of XM radios and makes incentive payments to GM when the owners of GM vehicles with installed XM radios become subscribers to XM...

  • Page 178
    ... Honda: 2009 GM $31,037 12,254 $43,291 $16,803 7,504 $24,307 $- - $- For the Years Ended December 31, 2008 American American Honda GM Honda GM 2007 American Honda Sales and marketing ...Revenue share and royalties ...Subscriber acquisition costs ...Customer service and billing ...Interest...

  • Page 179
    ...) on investments: For the Years Ended December 31, 2009 2008 2007 Share of SIRIUS Canada net loss ...Payments received from SIRIUS Canada in excess of carrying value . . Release of liability with SIRIUS Canada ...Share of XM Canada net loss ...Impairment of XM Canada ...Other ...Total ... $ (6,636...

  • Page 180
    SIRIUS XM RADIO INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (11) Debt Our debt consists of the following: Conversion Price (per share) December 31, 2009 2008 SIRIUS Debt 83⁄4% Convertible Subordinated Notes due 2009(a) ...31⁄4% Convertible Notes due 2011(b) ...

  • Page 181
    ... October 15 of each year. The obligations under the 31⁄4% Notes are not secured by any of our assets. (c) Senior Secured Term Loan due 2012 In June 2007, SIRIUS entered into a term credit agreement with a syndicate of financial institutions. The term credit agreement provides for a senior secured...

  • Page 182
    ...every $1 principal amount of 10% Convertible Notes exchanged. The total number of Structuring Fee Shares delivered was 59,178,819, and the aggregate cash delivered was approximately $5,100. In October 2009, we purchased $58,800 aggregate principal amount of the PIK Notes at a price of $60,499, which...

  • Page 183
    ...875 per share of common stock. Expired Credit Arrangements LM Term Loan and LM Purchase Money Loan In February 2009, SIRIUS entered into a Credit Agreement (the "LM Credit Agreement") with Liberty Media Corporation, as administrative agent and collateral agent. The LM Credit Agreement provided for...

  • Page 184
    ... Agreement, SIRIUS borrowed $250,000 under the LM Term Loan. The proceeds of the LM Term Loan were used (i) to repay at maturity our outstanding 21⁄2% Convertible Notes due February 17, 2009 and (ii) for general corporate purposes, including related transaction costs. In August 2009, SIRIUS used...

  • Page 185
    ... under the share lending agreements. In January 2004, SIRIUS signed a seven-year agreement with a sports programming provider. Upon execution of this agreement, SIRIUS delivered 15,173,070 shares of common stock valued at $40,967 to that programming provider. These shares of common stock are subject...

  • Page 186
    ...proceeds received and an additional $186,188 increase to paidin capital for the beneficial conversion feature, which was recognized as a charge to retained earnings. In 2009, our board of directors created and reserved for issuance in accordance with the Rights Plan (as described below) 9,000 shares...

  • Page 187
    ...Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan (the "2009 Plan"). Employees, consultants and members of our board of directors are eligible to receive awards under the 2009 Plan. The 2009 Plan provides for the grant of stock options, restricted stock, restricted stock units and other stock...

  • Page 188
    ... reported share-based payment expense to third parties, other than non-employee members of our board of directors, for the years ended December 31, 2009, 2008 and 2007: For the Years Ended December 31, 2009 2008 2007 Risk-free Expected Expected Expected interest rate ...life - years ...stock price...

  • Page 189
    SIRIUS XM RADIO INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the nonvested restricted stock and restricted stock unit activity under our share-based payment plans for the years ended December 31, 2009, 2008 and 2007 (shares in ...

  • Page 190
    SIRIUS XM RADIO INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) sharing contributions during any year in which they are employed on the last day of the year. Profit-sharing contribution expense was $0, $6,610 and $4,877 for the years ended December 31, 2009, 2008 and ...

  • Page 191
    ...2009 2008 Deferred tax assets: Net operating loss carryforwards ...GM payments and liabilities ...Deferred revenue ...Severance accrual ...Accrued bonus...Expensed costs capitalized for tax ...Loan financing costs ...Investments ...Stock... a result of the Merger, both SIRIUS and XM had a Section 382 ...

  • Page 192
    .... We have entered into various programming agreements. Under the terms of these agreements, we are obligated to provide payments to other entities that may include fixed payments, advertising commitments and revenue sharing arrangements. Marketing and distribution. We have entered into various...

  • Page 193
    ...the XM Helix, the XM SkyFi3, the SIRIUS S50 and the SIRIUS Stiletto line of radios. The plaintiffs brought this action in the United States District Court for the Southern District of New York, seeking monetary damages and equitable relief. XM has settled these claims with the major record companies...

  • Page 194
    ... diluted) does not necessarily agree to the net loss per share for the year due to the timing of our common stock issuances. (17) Condensed Consolidating Financial Information Sirius Asset Management, LLC and Satellite CD Radio, Inc. (collectively, the "Guarantor Subsidiaries") are our wholly owned...

  • Page 195
    ... BALANCE SHEETS AS OF DECEMBER 31, 2009 Sirius XM Radio Sirius Asset Mgmt Inc. LLC Satellite CD Radio NonGuarantors Eliminations Consolidated Sirius XM Radio Inc. (In thousands) Current assets: Cash and cash equivalents ...Accounts receivable, net...Due from subsidiaries/affiliates Inventory...

  • Page 196
    ... BALANCE SHEETS AS OF DECEMBER 31, 2008 Sirius XM Radio Sirius Asset Mgmt Inc. LLC Satellite CD Radio NonGuarantors Eliminations Consolidated Sirius XM Radio Inc. (In thousands) Current assets: Cash and cash equivalents ...Accounts receivable, net...Due from subsidiaries/affiliates Inventory, net...

  • Page 197
    ...YEAR ENDED DECEMBER 31, 2009 Sirius XM Radio Inc. Sirius Asset Mgmt LLC Satellite CD Radio (In thousands) NonGuarantors Eliminations Consolidated Sirius XM Radio Inc. Revenue ...Cost of services ...Sales and marketing ...Subscriber acquisition costs...value ...) ...Preferred stock beneficial conversion ...

  • Page 198
    ...YEAR ENDED DECEMBER 31, 2008 Sirius XM Radio Inc. Sirius Asset Mgmt LLC Satellite CD Radio (In thousands) NonGuarantors Eliminations Consolidated Sirius XM Radio Inc. Revenue ...Cost of services...Sales and marketing ...Subscriber acquisition costs...loss) on change in value of embedded derivative ......

  • Page 199
    ... OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007 Sirius XM Radio Inc. Sirius Asset Mgmt LLC Satellite CD Radio (In thousands) NonGuarantors Eliminations Consolidated Sirius XM Radio Inc. Revenue ...Cost of services ...Sales and marketing ...Subscriber acquisition costs ...General and administrative...

  • Page 200
    ... common stock issued to XM Satellite Radio Holdings stockholders ...Issuance of common stock to employees and employee benefit plans, net of forfeitures ...Issuance of common stock issued under share borrow agreements ...Series A convertible preferred stock issued to XM Satellite Radio Holdings...

  • Page 201
    ... Satellite CD Radio (In thousands) NonGuarantors Consolidated Sirius XM Radio Eliminations Inc. Net cash provided by (used in) operating activities ...Cash flows from investing activities: Additions to property and equipment ...Purchases of restricted and other investments ...Merger related costs...

  • Page 202
    ...FLOWS FOR THE YEAR ENDED DECEMBER 31, 2008 Sirius XM Radio Sirius Asset Mgmt Inc. LLC Satellite CD Radio (In thousands) NonGuarantors Consolidated Sirius XM Radio Eliminations Inc. Net cash (used in) provided by operating activities ...Cash flows from investing activities: Additions to property and...

  • Page 203
    ... Sirius Asset Mgmt NonSirius XM Radio Inc. LLC Satellite CD Radio Guarantors Eliminations Inc. (In thousands) Net cash (used in) provided by operating activities ...Cash flows from investing activities: Additions to property and equipment ...Sales of property and equipment ...Merger related costs...

  • Page 204
    SIRIUS XM RADIO INC. AND SUBSIDIARIES Schedule II - Schedule of Valuation and Qualifying Accounts Description Balance January 1, Charged to Write-offs/ Expenses Payments/ Other (In thousands) Balance December 31, 2007 Allowance for doubtful accounts... price in connection with the Merger. F-50

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    ... Shaw Director Chief Executive Officer (Retired) Hughes Electronics Corporation Executive Offices Sirius XM Radio Inc. 1221 Avenue of the Americas 36th Floor New York, New York 10020 212.584.5100 www.siriusxm.com Preferred Stock Directors John C. Malone Director Chairman of the Board Liberty Media...

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    ...free) and 201-680-6685 (international callers) 800-231-5469 (hearing impaired TDD phone) www.bnymellon.com/shareowner/isd Sirius XM common stock is listed on The NASDAQ Global Select Market under the symbol "SIRI". Independent Registered Public Accounting Firm KPMG LLP 345 Park Avenue New York, New...

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