Clearwire 2008 Annual Report Download - page 118

P
urc
h
ase o
bl
i
g
ation
s
—
As part o
f
t
h
eC
l
os
i
ng, we assume
d
certa
i
n agreements an
d
t
h
eo
bli
gat
i
ons t
h
ere-
un
d
er,
i
nc
l
u
di
ng a num
b
er o
f
arrangements
f
or t
h
e sourc
i
ng o
f
equ
i
pment, supp
li
es an
d
serv
i
ces w
i
t
h
ta
k
e-or-pa
y
obli
g
ations. Our obli
g
ations with these suppliers run throu
g
h 2013 and have total minimum purchase obli
g
ations of
$
334.8 million.
Legal proceedings
—
On December 1, 2008, Ada
p
tix, Inc., which we refer to as Ada
p
tix, filed suit for
p
aten
t
i
nfringement against us and Sprint in the U.S. District Court for the Eastern District of Texas, alleging that we an
d
S
pr
i
nt
i
n
f
r
i
n
g
e
d
s
i
x patents purporte
dly
owne
dby
A
d
apt
i
x. On Fe
b
ruar
y
10, 2009, A
d
apt
i
x
fil
e
d
an Amen
d
e
d
Comp
l
a
i
nt a
ll
e
gi
n
gi
n
f
r
i
n
g
ement o
f
a sevent
h
patent. A
d
apt
i
xa
ll
e
g
es t
h
at
by
o
ff
er
i
n
g
mo
bil
eW
i
MAX serv
i
ces to
c
ustomers in compliance with the 802.16 and 802.16e WiMAX standards, and by making, using and/or selling th
e
s
upport
i
n
g
W
i
MAX networ
k
use
d
to prov
id
e suc
h
W
i
MAX serv
i
ces, we an
d
Spr
i
nt
i
n
f
r
i
n
g
e
d
t
h
e seven patents
.
A
daptix is seekin
g
monetar
y
dama
g
es, attorne
y
s’ fees and a permanent in
j
unction en
j
oinin
g
us from further acts of
alle
g
ed infrin
g
ement. On Februar
y
2
5
, 2009, we filed an Answer to the Amended Complaint, den
y
in
g
infrin
g
emen
t
an
d
assert
i
ng severa
l
a
ffi
rmat
i
ve
d
e
f
enses,
i
nc
l
u
di
ng t
h
at t
h
e asserte
d
patents are
i
nva
lid
.Atr
i
a
li
ssc
h
e
d
u
l
e
df
or
D
ecember 2010, and the parties are expected to commence discover
y
in earl
y
2009.
O
n May 7, 2008, Spr
i
nt
fil
e
d
an act
i
on
i
nt
h
eDe
l
aware Court o
f
C
h
ancery aga
i
nst
i
PCS, Inc., w
hi
c
h
we re
f
er t
o
as
i
PCS, an
d
certa
i
nsu
b
s
idi
ar
i
es o
fi
PCS, w
hi
c
h
we re
f
er to as t
h
e
i
PCS Su
b
s
idi
ar
i
es, see
ki
n
g
a
d
ec
l
arator
y
judgment that, among other things, the Transactions do not violate iPCS’ and iPCS Subsidiaries’ rights under their
s
eparate agreements w
i
t
h
Spr
i
nt to operate an
d
manage port
i
ons o
f
Spr
i
nt’s PCS networ
ki
n certa
i
n geograp
hic
areas. T
h
eDe
l
aware case was
l
ater sta
y
e
dby
t
h
eDe
l
aware court. On Ma
y
12, 2008,
i
PCS an
d
t
h
e
i
PCS Su
b
s
idi
ar
i
e
s
filed a competin
g
lawsuit in the Circuit Court of Cook Count
y
, Illinois, alle
g
in
g
that the Transactions would breac
h
t
he exclusivity provisions in their management agreements with Sprint. On January 30, 2009, iPCS and the iPCS
S
u
b
s
idi
ar
i
es
fil
e
d
an Amen
d
e
d
Comp
l
a
i
nt see
ki
n
g
a
d
ec
l
arator
yj
u
dg
ment t
h
at t
h
e consummat
i
on o
f
t
h
e Trans-
actions violates their mana
g
ement a
g
reements with Sprint, a permanent in
j
unction preventin
g
Sprint and its relate
d
p
arties, which iPCS alle
g
es includes Clearwire, from implementin
g
the Transactions and competin
g
with Plaintiffs
,
d
amages aga
i
nst Spr
i
nt
f
or un
l
aw
f
u
l
compet
i
t
i
on an
d
costs an
dl
ega
lf
ees. No tr
i
a
ld
ate
i
ne
i
t
h
er case
i
s current
ly
s
cheduled. We are not named as a part
y
in either liti
g
ation, but have received a subpoena from iPCS and iPCS
S
ubsidiaries seekin
g
documents and testimon
y
. If iPCS prevails and obtains a permanent in
j
unction and the Cour
t
d
eems C
l
earw
i
re to
b
eare
l
ate
d
party un
d
er t
h
e management agreements t
h
en we may
b
e restr
i
cte
df
rom compet
i
ng
w
ith iPCS and iPCS Subsidiaries. We do not believe that the inabilit
y
to offer services in iPCS Covera
g
e area
s
w
ould have a material adverse effect on our business
.
Cl
earw
i
re
i
s a part
y
to var
i
ous ot
h
er pen
di
n
gl
e
g
a
l
procee
di
n
g
s, c
l
a
i
ms,
i
nvest
ig
at
i
ons an
d
a
d
m
i
n
i
strat
i
ve
p
roceedin
g
s. Our mana
g
ement and le
g
al counsel have reviewed the probable outcome of these proceedin
g
s, th
e
c
osts and expenses reasonably expected to be incurred, the availability and limits of our insurance coverage
,
e
x
i
st
i
n
g
contractua
li
n
d
emn
ifi
cat
i
on prov
i
s
i
ons an
d
eac
h
o
f
our esta
bli
s
h
e
dli
a
bili
t
i
es. W
hil
et
h
e outcome o
f
t
h
ese
other pendin
g
proceedin
g
s cannot be predicted with certaint
y
, based on our review, we believe that an
y
unrecorde
d
liabilit
y
that ma
y
result will not have a material adverse effect on our liquidit
y
, financial condition or results of
operat
i
ons
.
In
d
emni
f
ication agreements
—
We are current
l
y a party to, or contemp
l
at
i
ng enter
i
ng
i
nto,
i
n
d
emn
ifi
cat
i
on
agreements w
i
t
h
certa
i
no
ffi
cers an
d
eac
h
o
f
t
h
e mem
b
ers o
f
our Boar
d
o
f
D
i
rectors. No
li
a
bili
t
i
es
h
ave
b
ee
n
r
ecorded in the consolidated balance sheets for an
y
indemnification a
g
reements.
W
arrants — In accor
d
ance w
i
t
h
t
h
e Transact
i
on A
g
reement, a
ll
O
ld
C
l
earw
i
re warrants
i
ssue
d
an
d
outstan
d-
i
n
g
at t
h
eC
l
os
i
n
g
were exc
h
an
g
e
d
on a one-
f
or-one
b
as
i
s
f
or warrants w
i
t
h
equ
i
va
l
ent terms. T
h
e
f
a
i
rva
l
ue o
f
t
he
w
arrants exchan
g
ed of $18.5 million is included in the calculation of purchase consideration usin
g
the Black-
S
choles option pricing model using a share price of
$
6.62. See Note 3, Strategic Transactions, for further discussion
.
Holders ma
y
exercise their warrants at an
y
time, with exercise prices ran
g
in
g
from
$
3.00 to
$
48.00. Old Clearwir
e
g
ranted the holders of the warrants re
g
istration ri
g
hts coverin
g
the shares sub
j
ect to issuance under the warrants. The
1
06
CLEARWIRE CORPORATION AND
S
UB
S
IDIARIE
S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —
(
Continued
)