XM Radio 2011 Annual Report Download - page 116

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Covenants and Restrictions
Our debt generally requires compliance with certain covenants that restrict our ability to, among other
things, (i) incur additional indebtedness unless our consolidated leverage ratio would be no greater than 6.00 to
1.00 after the incurrence of the indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted
payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate
with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and
(vii) make voluntary prepayments of certain debt, in each case subject to exceptions.
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, 2011, we were in compliance with our debt covenants.
(14) 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, 2011 and
2010. There were 3,753,201,929 and 3,933,195,112 shares of common stock issued and outstanding as of
December 31, 2011 and 2010, respectively.
As of December 31, 2011, approximately 3,342,818,000 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. During the third quarter of 2009, MS returned to us 60,000,000 shares of our common stock borrowed.
In October 2011, MS and UBS returned the remaining 202,400,000 shares loaned. The returned shares were
retired upon receipt and removed from outstanding common stock. The share lending agreements have been
terminated.
The shares we loaned to the share borrowers were issued and outstanding for corporate law purposes
through October 2011, and holders of borrowed shares (other than the share borrowers) had the same rights under
those shares as holders of any of our other outstanding common shares. Under GAAP, the borrowed shares were
not considered outstanding for the purpose of computing and reporting our net income (loss) per common share.
We recorded interest expense related to the amortization of the costs associated with the share-lending
arrangement and other issuance costs of $11,189, $10,095 and $9,248, respectively, for the years ended
December 31, 2011, 2010 and 2009. As of December 31, 2011, the unamortized balance of the debt issuance
costs was $40,054, with $39,253 recorded in deferred financing fees, net, and $801 recorded in long-term related
party assets. As of December 31, 2010, the unamortized balance of the debt issuance costs was $51,243, with
$50,218 recorded in deferred financing fees, net, and $1,025 recorded in long-term related party assets. As of
December 31, 2010, the estimated fair value of the outstanding 202,400,000 loaned shares was approximately
$329,912. These costs will continue to be amortized until the debt is terminated.
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