XM Radio 2009 Annual Report Download - page 46

redeemable, and no such amendment may cause the rights again to become redeemable or cause the Rights
Plan again to become amendable other than in accordance with this sentence.
Other Considerations. Our board of directors believes that attempting to safeguard our NOLs as
described above is in our best interests. Nonetheless, the Rights Plan could have certain potentially negative
consequences:
•Potential Effects on Liquidity. The Rights Plan is expected to deter stockholders from acquiring,
directly or indirectly, additional shares of our common stock in excess of the specified limitations.
Furthermore, a stockholder’s ability to dispose of our stock may be limited by reducing the class of
potential acquirers for such stock.
•Potential Impact on Value. Because the Rights Plan may restrict a stockholder’s ability to acquire our
common stock, the market value 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 the importance of maintaining the availability of our tax benefits.
Our board of directors did not adopt the Rights Plan to discourage stockholders from accumulating our
common stock. The purpose of the Rights Plan is to reduce the risk that we may be unable to fully
utilize our tax benefits as a result of future transfers of our common stock, and to increase our
flexibility to repurchase our stock. We have also retained the ability under the Rights Plan for our board
of directors to redeem the rights or cause the Rights Plan to expire if our board of directors determines
that the rights are no longer in the best interests of the company and its stockholders.
Vote Required
The affirmative vote of a majority in voting power of our common stock, our Series A Convertible
Preferred Stock and our Series B-1 Convertible Preferred Stock, voting together as a single class, present in
person or by proxy, and entitled to vote on the proposal, is required for the approval of the Rights Plan.
The board of directors unanimously recommends a vote “FOR” the proposal.
Item 3 — Extend for One More Year our Board of Directors’ Authority (through the Approval of an
Amendment to Our Certificate of Incorporation) to Effect a Reverse Stock Split and to Reduce
the Number of Authorized Shares of Our Common Stock
General
Our board of directors has approved, and is hereby soliciting stockholder approval of the authority to
effect a reverse stock split through an amendment to our certificate of incorporation at a ratio of not less than
one-for-two and not more than one-for-twenty-five in the form set forth in Appendix B to this proxy statement
(the “Reverse Stock Split Amendment”).
Our stockholders approved an amendment to our certificate of incorporation at our 2008 and 2009 annual
meetings of stockholders to authorize an amendment to our certificate of incorporation to effect a reverse stock
split, decrease the number of authorized shares under our certificate of incorporation following a reverse stock
split, and provide for certain other actions described herein. Approval of this amendment to our certificate of
incorporation would extend previous authority for a reverse stock split and reduction in shares that was
approved at our 2009 annual meeting to June 30, 2011 from June 30, 2010. If stockholders approve this Item 3,
this approval will supersede the approval we received to amend our certificate of incorporation to effect a
reverse stock split at our 2009 annual meeting of stockholders on May 27, 2009.
A vote FOR this Item 3 will constitute approval of the Reverse Stock Split Amendment providing for the
combination of any whole number of shares of common stock between and including two and twenty-five into
one share of common stock and will grant our board of directors the authority to select which of the approved
exchange ratios within that range will be implemented. If stockholders approve this proposal, our board of
directors will have the authority, but not the obligation, in its sole discretion and without further action on the
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