XO Communications 2009 Annual Report Download - page 78

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Other Commitments
The Company also has various non-cancelable long-term contractual obligations with other telecommunica-
tions service providers associated with maintenance costs, software licenses and use fees. These contracts
contain certain minimum purchase commitments and have terms of three to seven years.
At December 31, 2009, estimated future minimum payments under other obligations are as follows (in
thousands):
2010 ............................................................... $ 81,498
2011 ............................................................... 62,287
2012 ............................................................... 57,770
2013 ............................................................... 55,488
2014 ............................................................... 13,163
Thereafter ........................................................... 85,629
Total minimum lease payments ............................................ $355,835
The associated liability for these services is recorded as incurred on a monthly basis and reported in the
Company’s balance sheet as accrued operating expenses.
Indemnification
From time to time, the Company agrees in the ordinary course of business to provide certain customers with
indemnification related to losses caused by the Company with respect to intellectual property infringement or
other claims arising from the use of its services. The Company is not aware of any indemnification obligations
related to intellectual property infringement or other claims arising from the use of its services.
Legal Proceedings
The Company is involved in lawsuits, claims, investigations and proceedings consisting of commercial,
securities, tort and employment matters, which arise in the ordinary course of business. The Company accrues
its best estimates of required provisions for any such matters when the loss is probable and the amount of loss
can be reasonably estimated. The Company reviews these provisions at least quarterly and adjusts them to
reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and
events pertaining to a particular case. Litigation is inherently unpredictable. However, management believes
that the Company has valid defenses with respect to legal matters pending against it. Nevertheless, it is
possible that cash flows or results of operations could be materially and adversely affected in any particular
period by the unfavorable resolution of one or more of these contingencies. Legal costs related to litigation in
these matters are expensed as incurred.
Metro Nashville
The Metropolitan Government of Nashville and Davidson County, Tennessee (“Metro”) filed a complaint
against XO Tennessee, Inc. (“XOT”), now XO Communications Services Inc., successor in interest to XOT, on
March 1, 2002, before the Tennessee State Chancery Court for Davidson County, Tennessee. Metro sought
declaratory judgment that, under Metro’s franchise ordinance and the franchise agreement executed by XOT’s
predecessor, US Signal, on October 18, 1994, XOT (a) owed franchise fees in the amount of five percent of
gross revenues from 1997 to current, and (b) was contractually obligated to allow Metro access and use of
four dark fibers on XOT’s network. On February 28, 2003, XOT answered the complaint contending that the
franchise fee and “dark fiber” compensation provisions violated Tennessee and federal law. XOT also filed a
counterclaim seeking to recover all sums paid to Metro under the invalid ordinance and to recover the value of
the free fiber that Metro has been using and continues to use without payment. In an amended complaint,
Metro added an alternative basis for relief, namely legal or equitable relief up to its costs allocated to XOT for
maintaining, managing, and owning the rights-of-way. Based on a study conducted by Metro (received by the
Company in November 2006) and the length of the relevant period of this case, to date, Metro’s costs, as
calculated by Metro for the relevant period and allocated by Metro to XOT, would likely exceed $20.0 million.
On August 9, 2007, XOT filed a motion for judgment on the pleadings. On February 25, 2008, the court
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