XM Radio 2010 Annual Report Download - page 119

prepayments of certain debt, in each case subject to exceptions. We operated XM as an unrestricted subsidiary for
purposes of compliance with the covenants contained in our debt instruments through January 12, 2011.
Under our debt agreements, the following generally constitute an event of default: (i) a default in the payment
of interest; (ii) a default in the payment of principal; (iii) failure to comply with covenants; (iv) failure to pay other
indebtedness after final maturity or acceleration of other indebtedness exceeding a specified amount; (v) certain
events of bankruptcy; (vi) a judgment for payment of money exceeding a specified aggregate amount; and
(vii) voidance of subsidiary guarantees, subject to grace periods where applicable. If an event of default occurs and
is continuing, our debt could become immediately due and payable.
At December 31, 2010, we were in compliance with our debt covenants.
(12) Stockholders’ Equity
Common Stock, par value $0.001 per share
We were authorized to issue up to 9,000,000,000 shares of common stock as of December 31, 2010 and 2009.
There were 3,933,195,112 and 3,882,659,087 shares of common stock issued and outstanding as of December 31,
2010 and 2009, respectively.
As of December 31, 2010, approximately 3,361,345,000 shares of common stock were reserved for issuance in
connection with outstanding convertible debt, preferred stock, warrants, incentive stock awards and common stock
to be granted to third parties upon satisfaction of performance targets.
To facilitate the offering of the Exchangeable Notes, we entered into share lending agreements with Morgan
Stanley Capital Services Inc. (“MS”) and UBS AG London Branch (“UBS”) in July 2008, under which we loaned
MS and UBS an aggregate of 262,400,000 shares of our common stock in exchange for a fee of $0.001 per share.
The obligations of MS to us under its share lending agreement are guaranteed by its parent company, Morgan
Stanley. During the third quarter of 2009, MS returned to us 60,000,000 shares of our common stock borrowed in
July 2008, which were retired upon receipt. As of December 31, 2010 and 2009, there were 202,400,000 shares
loaned under the facilities.
Under each share lending agreement, the share loan will terminate in whole or in part, as the case may be, and
the relevant borrowed shares must be returned to us upon the earliest of the following: (i) the share borrower
terminates all or a portion of the loan between it and us, (ii) we notify the share borrower that some of the
Exchangeable Notes as to which borrowed shares relate have been exchanged, repaid or repurchased or are
otherwise no longer outstanding, (iii) the maturity date of the Exchangeable Notes, December 1, 2014, (iv) the date
as of which the entire principal amount of the Exchangeable Notes ceases to be outstanding as a result of exchange,
repayment, repurchase or otherwise or (v) the termination of the share lending agreement by the share borrower or
by us upon default by the other party, including the bankruptcy of us or the share borrower or, in the case of the MS
share lending agreement, the guarantor. A share borrower may delay the return of borrowed shares for up to 30
business days (or under certain circumstances, up to 60 business days) if such share borrower is legally prevented
from returning the borrowed shares to us, in which case the share borrower may, under certain circumstances,
choose to pay us the value of the borrowed shares in cash instead of returning the borrowed shares. Once borrowed
shares are returned to us, they may not be re-borrowed under the share lending agreements. There were no
requirements for the share borrowers to provide collateral.
The shares we loaned to the share borrowers are issued and outstanding for corporate law purposes, and holders
of borrowed shares (other than the share borrowers) have the same rights under those shares as holders of any of our
other outstanding common shares. Under GAAP, the borrowed shares are not considered outstanding for the
purpose of computing and reporting our net income (loss) per common share. The accounting method may change
if, due to a default by either UBS or MS (or Morgan Stanley, as guarantor), the borrowed shares, or the equivalent
value of those shares, will not be returned to us as required under the share lending agreements.
F-31
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)