Cricket Wireless 2012 Annual Report Download - page 91

provide to Sprint in a given year above the minimum purchase commitment for that particular year is credited to
the next succeeding year. However, to the extent our revenues were to fall beneath the applicable commitment
amount for any given year, excess revenues from a subsequent year could not be carried back to offset such
shortfall.
Our obligation to provide the minimum purchase amount for any calendar year is subject to Sprint’s
compliance with specified covenants in the wholesale agreement. Based upon a review of information provided
by us to Sprint, we informed Sprint that certain of those covenants had not been met in 2012 and that, as a result,
we were not subject to the minimum purchase commitment for that year. Sprint disputed that assertion. In
February 2013, the parties resolved the matter.
In addition, in the event we are involved in a change-of-control transaction with another facilities-based
wireless carrier with annual revenues of at least $500 million in the fiscal year preceding the date of the change
of control agreement (other than MetroPCS Communications, Inc., or MetroPCS, either we (or our successor in
interest) or Sprint may terminate the wholesale agreement within 60 days following the closing of such a
transaction. In connection with any such termination, we (or our successor in interest) would be required to pay
to Sprint a specified percentage of the remaining aggregate minimum purchase commitment, with the percentage
to be paid depending on the year in which the change of control agreement was entered into, being 20% for any
such agreement entered into in 2013 and 10% for any such agreement entered into in 2014 or 2015.
In the event that we are involved in a change-of-control transaction with MetroPCS during the term of the
wholesale agreement, then the agreement would continue in full force and effect, subject to certain revisions,
including, without limitation, an increase to the total minimum purchase commitment to $350 million, taking into
account any revenue contributed by Cricket prior to the date thereof. In the event Sprint is involved in a change-
of-control transaction, the agreement would bind Sprint’s successor-in-interest.
STX Wireless Joint Venture
Cricket service is offered in South Texas by our joint venture STX Operations, which Cricket controls
through a 75.75% membership interest in its parent company STX Wireless. The joint venture was created in
October 2010 through the contribution by us and Pocket, of substantially all of our respective wireless spectrum
and operating assets in the South Texas region. In exchange for such contributions, Cricket received a 75.75%
controlling membership interest in STX Wireless and Pocket received a 24.25% non-controlling membership
interest. Additionally, in connection with the transaction, we made payments to Pocket of approximately $40.7
million in cash.
Cricket controls and manages the joint venture under the terms of the amended and restated limited liability
company agreement of STX Wireless, or the STX LLC Agreement. Under the STX LLC Agreement, Pocket has the
right to put, and we have the right to call, all of Pocket’s membership interests in STX Wireless, which rights are
generally exercisable on or after April 1, 2014. In addition, in the event of a change of control of Leap, Pocket is
obligated to sell to us all of its membership interests in STX Wireless. The purchase price for Pocket’s membership
interests would be equal to 24.25% of the product of Leap’s enterprise value-to-revenue multiple for the four most
recently completed fiscal quarters multiplied by the total revenues of STX Wireless and its subsidiaries over that
same period, subject to adjustment in certain circumstances. In the event optional cash distributions are made to the
members of STX Wireless pursuant to the STX LLC Agreement, the purchase price is reduced by the total amount
of such distributions made to Pocket plus an amount equal to an 8.0% per annum return on each such distribution
from the date it was made. The purchase price is payable in either cash, Leap common stock or a combination
thereof, as determined by Cricket in its discretion (provided that, if permitted by Cricket’s debt instruments, at least
$25 million of the purchase price must be paid in cash). We have the right to deduct from or set off against the
purchase price certain distributions made to Pocket, as well as any obligations owed to us by Pocket. Under the STX
LLC Agreement, Cricket is permitted to purchase Pocket’s membership interests in STX Wireless over multiple
closings in the event that the block of shares of Leap common stock issuable to Pocket at the closing of the purchase
would be greater than 9.9% of the total number of shares of Leap common stock then issued and outstanding.
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