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This excerpt taken from the SIRI DEF 14A filed Apr 30, 2009. Federal
Income Tax Consequences Relating to Awards
The following is a brief summary of some of the federal income
tax consequences of certain transactions under the Plan based on
federal income tax laws in effect on the date hereof. This
summary is not intended to be complete and does not describe
state or local tax consequences. It is not intended as tax
guidance to participants in the plan.
Tax
Consequences to Participants
Non-qualified Stock Options. In general,
(i) no income will be recognized by an optionee at the time
a non-qualified stock option is granted; (ii) at the time
of exercise of a non-qualified stock option, ordinary income
will be recognized by the optionee in an amount equal to the
difference between the option price paid for the shares and the
fair market value of the shares, if unrestricted, on the date of
exercise; and (iii) at the time of sale of shares acquired
pursuant to the exercise of a non-qualified stock option,
appreciation (or depreciation) in value of the shares after the
date of exercise will be treated as either short-term or
long-term capital gain (or loss) depending on how long the
shares have been held.
Incentive Stock Options. No income generally
will be recognized by an optionee upon the grant or exercise of
an ISO. The exercise of an ISO, however, may result in
alternative minimum tax liability. If shares of our common stock
are issued to the optionee pursuant to the exercise of an ISO,
and if no disqualifying disposition of such shares is made by
such optionee within two years after the date of grant or within
one year after the transfer of such shares to the optionee, then
upon sale of such shares, any amount realized in excess of the
option price will be taxed to the optionee as a long-term
capital gain and any loss sustained will be a long-term capital
loss.
If shares of our common stock acquired upon the exercise of an
ISO are disposed of prior to the expiration of either holding
period described above, the optionee generally will recognize
ordinary income in the year of disposition in an amount equal to
the excess (if any) of the fair market value of such shares at
the time of exercise (or, if less, the amount realized on the
disposition of such shares if a sale or exchange) over the
option price paid for such shares. Any further gain (or loss)
realized by the participant generally will be taxed as
short-term or long-term capital gain (or loss) depending on the
holding period.
SARs. No income will be recognized by a
participant in connection with the grant of a tandem SAR or a
free-standing SAR. When the SAR is exercised, the participant
normally will be required to include as taxable ordinary income
in the year of exercise an amount equal to the amount of cash
received and the fair market value of any unrestricted shares of
our common stock received on the exercise.
Restricted Stock. The recipient of restricted
stock generally will be subject to tax at ordinary income rates
on the fair market value of the restricted stock (reduced by any
amount paid by the participant for such restricted stock) at
such time as the shares are no longer subject to forfeiture or
restrictions on transfer for
Table of Contents
purposes of Section 83 of the Code
(“Restrictions”). However, a recipient who so elects
under Section 83(b) of the Code within 30 days of the
date of transfer of the shares will have taxable ordinary income
on the date of transfer of the shares equal to the excess of the
fair market value of such shares (determined without regard to
the Restrictions) over the purchase price, if any, of such
restricted stock. If a Section 83(b) election has not been
made, any dividends received with respect to restricted stock
that is subject to the Restrictions generally will be treated as
compensation that is taxable as ordinary income to the
participant.
RSUs. No income generally will be recognized
upon the award of RSUs. The recipient of a RSU award generally
will be subject to tax at ordinary income rates on the fair
market value of unrestricted shares of our common stock on the
date that such shares are transferred to the participant under
the award (reduced by any amount paid by the participant for
such RSUs), and the capital gains/loss holding period for such
shares will also commence on such date.
Performance Awards. No income generally will
be recognized upon the grant of performance awards. Upon payment
in respect of the earn-out of performance awards, the recipient
generally will be required to include as taxable ordinary income
in the year of receipt an amount equal to the amount of cash
received and the fair market value of any unrestricted shares of
our common stock received.
Tax
Consequences to Us or Our Subsidiary
To the extent that a participant recognizes ordinary income in
the circumstances described above, we or the subsidiary for
which the participant performs services will be entitled to a
corresponding deduction provided that, among other
things, the income meets the test of reasonableness, is an
ordinary and necessary business expense, is not an “excess
parachute payment” within the meaning of Section 280G
of the Code and is not disallowed by the $1 million
limitation on certain executive compensation under
Section 162(m) of the Code.
Compliance
with Section 162(m) of the Code
The Plan is designed to enable us to provide certain forms of
performance-based compensation to executive officers that will
meet the requirements for tax deductibility under
Section 162(m) of the Code.
Compliance
with Section 409A of the Code
To the extent applicable, it is intended that the Plan and any
grants made thereunder comply with the provisions of
Section 409A of the Code, so that the income inclusion
provisions of Section 409A(a)(1) of the Code do not apply
to the participants. The Plan and any grants made under the Plan
will be administered in a manner consistent with this intent.
Any reference in the Plan to Section 409A of the Code will also
include any regulations or any other formal guidance promulgated
with respect to such Section by the U.S. Department of the
Treasury or the Internal Revenue Service.
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