XO Communications 2009 Annual Report Download - page 66

stock based on a share price of $4.62, a premium of approximately 20.0% above the trading price of the
common stock on the closing date of the Preferred Stock Offering. The Company may also, at its sole option,
redeem the Class A preferred stock at any time after August 5, 2007 if the average market price of the
Company’s common stock for the 20 days prior to such redemption is equal to or greater than 250% of the
conversion price of the Class A preferred stock. Each holder of the Class A preferred stock is entitled to one
vote for each share of common stock issuable upon the conversion of the shares of Class A preferred stock as
of the record date for such stockholders vote. Holders of Class A preferred stock shall vote together with the
holders of common stock as a single class. The holders of Class A preferred stock also have anti-dilution
protection in the event that the Company issues shares of common stock at a price below the then-prevailing
market price of the Company’s common stock.
On April 28, 2006, affiliates of the Chairman sold in a private sale to “qualified institutional buyers” an
aggregate of 1,725,000 Class A preferred shares. On August 13, 2008, affiliates of the Chairman purchased
521,549 Class A preferred shares. On February 5, 2009, ACF Holding, an affiliate of the Chairman, agreed to
extend the date on which the Company would be required to redeem the shares of its 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. Other than continued accretion of the liquidation preference until the ACF Holding Shares are redeemed
by the Company, the extension creates no additional financial obligations on the part of the Company. 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 and retired 304,314 shares of Class A preferred
stock from entities unaffiliated with the Company at an aggregate purchase price of approximately $18.4 mil-
lion, which reduced the number of outstanding shares of Class A preferred stock to 3,695,686. ACF Holding is
the record holder of 3,096,549 shares of Class A preferred stock which represented 83.8% of the 3,695,686
outstanding shares of the Class A preferred stock at December 31, 2009. On January 15, 2010, the Company
redeemed and retired 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.
Issuance of Class B Convertible Preferred Stock and Class C Perpetual Preferred Stock
On July 25, 2008, the Company issued $780.0 million of preferred shares through two new series of preferred
stock to affiliates of the Chairman in order to retire all outstanding debt, fund growth initiatives and provide
ongoing working capital for its business and pursue additional opportunities which create value for the
shareholders. Pursuant to a Stock Purchase Agreement entered into between the Company and the Purchasers,
on July 25, 2008 (the “Issue Date”), the Purchasers bought 555,000 shares of the Company’s Class B
convertible preferred stock and 225,000 shares of the Company’s Class C perpetual preferred stock. Both the
Class B convertible preferred stock and the Class C perpetual preferred stock were issued with an initial
liquidation preference of $1,000 per share.
The Stock Purchase Agreement contains a provision in which the Purchasers agree that neither they, nor any
of their affiliates, will, directly or indirectly, consummate any transaction (including the conversion of the
Class B convertible preferred stock or the Class A preferred stock into common stock, the exercise of warrants
or options to purchase common stock of the Company, or a merger pursuant to Section 253 of the Delaware
General Corporation Law (“Delaware Law”)), if as a result of such transaction, the Purchasers or their
affiliates would own at least 90% of the outstanding shares of each class of the Company’s capital stock, of
which class there are outstanding shares, that absent the provisions of Section 253 of Delaware Law, would be
entitled to vote on a merger of the Company with or into such Purchaser or affiliate under Delaware Law,
except solely as a result of (i) a tender offer for all of the outstanding shares of common stock by the
Purchasers or their affiliates wherein a majority of the outstanding shares of common stock not held by such
Purchasers or their affiliates are tendered or (ii) a merger or acquisition transaction by the Purchasers or their
affiliates that has been approved by a special committee of the Company’s board of directors comprising
disinterested directors in respect of such merger or acquisition wherein the Purchasers or their affiliates acquire
all of the Company’s outstanding common stock.
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