XO Communications 2010 Annual Report Download - page 68

XO Holdings, Inc.
Notes to Consolidated Financial Statements
10. REDEEMABLE PREFERRED STOCK − (continued)
The Class A preferred stock ranked senior to the Company’s common stock and junior to the Class B
convertible preferred stock and Class C perpetual preferred stock. Holders of the Class A preferred stock were
not entitled to receive annual dividends; however, both the conversion ratio and the voting power of each
share of Class A preferred stock was automatically increased as the liquidation preference increased at the rate
of 1.5% each quarter through the maturity date. The terms of the Class A preferred stock provided that the
Company redeem for cash the then outstanding shares of Class A preferred stock on the maturity date at 100%
of their aggregate liquidation preference, including compounded accretion through that date, unless earlier
redeemed or converted into common stock. The shares of Class A preferred stock were convertible into
common 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 was also able, at its sole
option, to 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 was equal to or greater than 250% of
the conversion price of the Class A preferred stock. Each holder of the Class A preferred stock was 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 voted together with
the holders of common stock as a single class. The holders of Class A preferred stock also had anti-dilution
protection in the event that the Company issued 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 were
redeemed by the Company, the extension created 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 million, which reduced the number of outstanding shares of Class A preferred stock to
3,695,686. ACF Holding was 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 its Chairman for cash at a redemption price equal to 100% of the aggregate
liquidation preference of $41.4 million as of such date. In accordance with the agreement with ACF Holding
extending the redemption date for the ACF Holding Shares, on April 15, 2010, the Company redeemed and
retired the remaining 3,096,549 ACF Holding Shares for cash at a redemption price equal to 100% of the
aggregate liquidation preference for such shares of $217.5 million as of such date. As of December 31, 2010,
there were no shares of Class A preferred stock outstanding.
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.
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