XM Radio 2010 Annual Report Download - page 29

In connection with the review and approval or ratification of a related person transaction, management
must:
• disclose to the committee or disinterested directors, as applicable, the material terms of the related
person transaction, including the approximate dollar value of the amount involved in the transaction,
and all the material facts as to the related person’s direct or indirect interest in, or relationship to, the
related person transaction;
• advise the committee or disinterested directors, as applicable, as to whether the related person
transaction complies with the terms of our agreements governing our material outstanding indebtedness
that limit or restrict our ability to enter into a related person transaction;
• advise the committee or disinterested directors, as applicable, as to whether the related person
transaction will be required to be disclosed in our SEC filings. To the extent required to be disclosed,
management must ensure that the related person transaction is disclosed in accordance with SEC
rules; and
• advise the committee or disinterested directors, as applicable, as to whether the related person
transaction constitutes a “personal loan” for purposes of Section 402 of the Sarbanes-Oxley Act of
2002.
In addition, the related person transaction policy provides that the Compensation Committee, in
connection with any approval or ratification of a related person transaction involving a non-employee director
or director nominee, should consider whether such transaction would compromise the director or director
nominee’s status as an “independent,” “outside,” or “non-employee” director, as applicable, under the rules and
regulations of the SEC, NASDAQ and Internal Revenue Code.
In 2010, there were no related party transactions that are required to be disclosed pursuant to the SEC
rules and regulations.
Relationship with Liberty Media
In February and March 2009, we entered into several transactions to borrow up to $530 million from
Liberty Media Corporation and its affiliates. All of the loans made were repaid during 2009 in cash from the
proceeds of notes issued by us and XM.
As part of the transactions with Liberty Media, on February 17, 2009, we entered into an investment
agreement (the “Investment Agreement”) with Liberty Radio, LLC, an indirect wholly-owned subsidiary of
Liberty Media Corporation. Pursuant to the Investment Agreement, we agreed to issue to Liberty Radio, LLC
12,500,000 shares of convertible preferred stock with a liquidation preference of $0.001 per share in partial
consideration for the loan investments described herein. The preferred stock was issued on March 6, 2009, as
described below. See “Relationship with Liberty Media — Issuance of the Preferred Stock”.
The preferred stock is convertible into approximately 40% of our outstanding shares of common stock
(after giving effect to such conversion). Liberty Radio, LLC has agreed not to acquire more than 49.9% of our
outstanding common stock for three years from the date the preferred stock was issued, except that Liberty
Radio, LLC may acquire more than 49.9% of our outstanding common stock at any time after the second
anniversary of such date pursuant to any cash tender offer for all of the outstanding shares of our common
stock that are not beneficially owned by Liberty Radio, LLC or its affiliates at a price per share greater than
the closing price of the common stock on the trading day preceding the earlier of the public announcement or
commencement of such tender offer. The Investment Agreement also provides for certain other standstill
provisions during such three year period.
The rights, preferences and privileges of the preferred stock are set forth in the Certificate of Designations
of Convertible Perpetual Preferred Stock, Series B-1 (the “Certificate of Designations”), filed with the
Secretary of State of the State of Delaware. The holder of our preferred stock is entitled to appoint a
proportionate number of our board of directors based on its ownership levels from time to time. The
Certificate of Designations also provides that so long as at least 6,250,000 shares of Series B-1 Preferred
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