XM Radio 2009 Annual Report Download - page 53

• a trust, the substantial decisions of which are controlled by one or more U.S. persons and which is
subject to the primary supervision of a U.S. court, or a trust that validly has elected under applicable
Treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes.
Tax Consequences of the Reverse Stock Split Generally
Except as provided below with respect to cash received in lieu of fractional shares, a U.S. holder
will not recognize any gain or loss as a result of the reverse stock split.
Cash received in lieu of fractional shares
A U.S. holder that receives cash in lieu of a fractional share of common stock in the reverse stock split
will generally be treated as having received such fractional share and then as having received such cash in
redemption of such fractional share interest. A U.S. holder generally will recognize gain or loss measured by
the difference between the amount of cash received and the portion of the basis of the pre-reverse stock split
common stock allocable to such fractional interest. Such gain or loss generally will constitute capital gain or
loss and will be long-term capital gain or loss if the U.S. holder’s holding period in our common stock
exchanged therefore was greater than one year as of the date of the exchange.
Tax Basis and Holding Period
A U.S. holder’s aggregate tax basis in the common stock received in the reverse stock split will equal
such stockholder’s aggregate tax basis in our common stock surrendered in the reverse stock split reduced by
any amount allocable to a fractional share of post-reverse stock split common stock for which cash is received.
The holding period for the shares of our common stock received in the reverse stock split generally will
include the holding period for the shares of our common stock exchanged therefor.
Required Vote and Recommendation
The affirmative vote of the holders of a majority of the voting power of our common stock, our Series A
Convertible Preferred Stock and our Series B-1 Preferred Stock, voting together as a single class, and of
holders of a majority of the voting power of our common stock, voting as a separate class, will be required to
approve the Reverse Stock Split Amendment.
The board of directors unanimously recommends a vote “FOR” the proposal to amend our
certificate of incorporation to effect a reverse stock split at a ratio of not less than one-for-two and not
more than one-for-twenty-five any time prior to June 30, 2011, with the exact ratio to be determined by
our board of directors and to reduce the number of authorized shares as set forth in Item 3 above.
Item 4 — Ratification of Independent Registered 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 meeting. They will have an
opportunity to make a statement if they desire to do so and are expected to be available to respond to
appropriate questions.
On September 23, 2008, the Audit Committee of our board of directors approved the engagement of
KPMG as our independent registered public accounting firm. Since 1997, KPMG has performed the audit of
XM Holdings, which became our subsidiary upon the closing of our merger on July 28, 2008. During our two
most recent fiscal years and any subsequent interim period prior to the engagement of KPMG, neither we, nor
anyone on our behalf, consulted with KPMG regarding either (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our
financial statements, or (ii) any matter that was either the subject of a “disagreement” or a “reportable event.”
46