XO Communications 2009 Annual Report Download - page 28

Risks Related to our Common Stock
An entity owned and controlled by our Chairman is our majority stockholder.
As disclosed in amendments to its Schedule 13D filed with the SEC by the Chairman and certain affiliated
entities, the Chairman beneficially owns approximately 89% of the aggregate vote of shares of XO Holdings.
As a result, the Chairman has the power to elect all of our directors. Under applicable law and our certificate
of incorporation and by-laws, certain actions can be taken with the approval of holders of a majority of our
voting stock, including mergers, sale of substantially all of our assets and amendments to our certificate of
incorporation and by-laws.
Future sales or issuances of our common stock could adversely affect our stock price and/or our ability
to raise capital.
Future sales or issuances of substantial amounts of our common stock, or the perception that such sales or
issuances could occur, could adversely affect the prevailing market price of the common stock and our ability
to raise capital. As of December 31, 2009, there were 182,075,035 shares of our common stock outstanding,
with additional common shares potentially issuable based on the exercise of warrants, stock options or
preferred stock.
There are options outstanding to purchase 7.4 million shares of our common stock that have been reserved for
issuance under the XO Communications, Inc. 2002 Stock Incentive Plan as of December 31, 2009. Unless
surrendered or canceled earlier under the terms of the 2002 Stock Incentive Plan, those options will begin to
expire in 2013. In addition, the 2002 Stock Incentive Plan authorizes future grants of options to purchase our
common stock, or awards of our restricted common stock, with respect to 8.2 million additional shares of our
common stock.
Pursuant to the terms of the Class A preferred stock, the number of shares of common stock into which the
Class A preferred stock is convertible increases quarterly. On February 5, 2009, ACF Industries Holding Corp.
(“ACF Holding”), an affiliate of Mr. Carl Icahn, the Chairman of our Board of Directors and our majority
stockholder (the “Chairman”), agreed to extend the date on which we would be required to redeem the shares
of Class A Preferred Stock held by ACF Holding (the “ACF Holding Shares”) from January 15, 2010 to a date
no later than April 15, 2010. The extension did not affect the redemption date of any of the shares of Class A
Preferred Stock other than the ACF Holding Shares. On July 9, 2009, the Company redeemed 304,314 shares
of Class A preferred stock from entities unaffiliated with the Company at an aggregate purchase price of
approximately $18.4 million, which reduced the number of outstanding shares of Class A preferred stock to
3,695,686. On January 15, 2010, the Company redeemed all 599,137 shares of Class A preferred stock held by
entities unaffiliated with the Chairman at an aggregate purchase price of approximately $41.4 million. As of
March 31, 2010 ACF Holding is the holder of 100% of the remaining 3,096,549 shares of Class A preferred
stock. The Company is required to redeem any outstanding ACF Holding Shares for cash at an aggregate
liquidation preference of up to $217.4 million at a date no later than April 15, 2010. ACF Holding has the
right to require us to register for resale the Class A preferred stock and the shares of common stock into which
it is convertible under the Securities Act, and to include such preferred stock and/or common stock in certain
registration statements filed by us from time to time. As of December 31, 2009, approximately half of the
Class A preferred stock shares have been registered.
On July 25, 2008, 555,000 shares of our 7% Class B convertible preferred stock were issued to affiliates of
our Chairman for an aggregate purchase price of $555.0 million. These shares are convertible at the option of
the holder into shares of our common stock. As of December 31, 2009, the Class B convertible preferred stock
was convertible into 408,863,667 shares of our common stock. However, pursuant to the terms of the Class B
convertible preferred stock, the number of shares of common stock into which the Class B convertible
preferred stock is convertible increases quarterly unless we elect to pay cash dividends in lieu of such
accretion for any quarterly period. All of the Class B preferred stock is held by various affiliates of the
Chairman. The holders of the Class B convertible preferred stock have the right to require us to register for
resale the Class B convertible preferred stock and the shares of common stock into which it is convertible
under the Securities Act, and to include such preferred stock and/or common stock in certain registration
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