NOTE 10: COMMITMENTS AND CONTINGENCIES Commitments to Purchase Inventory The Company uses contract manufacturers for its manufacturing operations. Under these arrangements, the contract manufacturer procures inventory to manufacture products based upon management forecast of customer demand. The Company has similar arrangements with certain other suppliers. The Company is responsible for the financial impact on the supplier or contract manufacturer of any reduction or product mix shift in the forecast relative to materials that the third party had already purchased under a prior forecast. Such a variance in forecasted demand could require a cash payment for inventory in excess of current customer demand or for costs of excess or obsolete inventory. As of December 31, 2018, the Company had issued non-cancelable commitments for $29.9 million to purchase inventory from its contract manufacturers and suppliers. Legal Proceedings On July 22, 2016, Realtime Data LLC d/b/a IXO (Realtime Data) filed a patent infringement lawsuit against Quantum in the U.S. District Court for the Eastern District of Texas, alleging infringement of U.S. Patents Nos. 7,161,506, 7,378,992, 7,415,530, 8,643,513, 9,054,728, and 9,116,908. The lawsuit has been transferred to the U.S. District Court for the Northern District of California for further proceedings. Realtime Data asserts that the Company has incorporated Realtime Datas patented technology into its compression products and services. Realtime Data seeks unspecified monetary damages and other relief that the Court deems appropriate. On July 31, 2017, the District Court stayed proceedings in this litigation pending decision in Inter Partes Review proceedings currently before the Patent Trial and Appeal Board and relating to the Realtime patents. That stay remains pending. The Company believes the probability that this lawsuit will have a material adverse effect on its business, operating results or financial condition is remote. In February 2018, two putative class action lawsuits were filed in the United States District Court for the Northern District of California against the Company and two former executive officers (the Class Action). The lawsuits were consolidated on May 16, 2018. The Class Action plaintiffs sought unspecified damages for certain alleged material misrepresentations and omissions made by the Company in connection with its financial statements for its fiscal year 2017. On December 25, 2018, the Court granted permission to plaintiffs in the action to file an Amended Consolidated Complaint. Before the plaintiffs filed their amended consolidated complaint, the parties met with a mediator to discuss a potential settlement of the case. On February 20, 2019, the parties reached a settlement in principal; under the terms of the settlement, the Company agreed to pay $8.2 million to plaintiffs. The amount includes all of plaintiffs attorneys fees, and the full amount will be paid by the Companys directors and officers liability insurance carriers. A Stipulation of Settlement was signed by the Parties on June 28, 2019, and the Court granted preliminary approval on July 26, 2019. A hearing on final approval of the settlement has been scheduled for November 14, 2019. In May 2018, two shareholders filed litigation in California Superior Court for Santa Clara County on behalf of Quantum against several current and former officers and directors of the Company. A third action brought by a shareholder on behalf of Quantum was filed on March 4, 2019. These three lawsuits (the Derivative Litigation), which were consolidated by the Court, alleged, inter alia , that the board members and certain of the Companys senior officers breached their fiduciary duties the Company and its shareholders by causing the Company to make materially false and misleading statements concerning the Companys financial health, business operations, and growth prospects in its public filings and communications with investors, including misrepresentations regarding the Companys disclosure controls and procedures, revenue recognition, and internal controls over financial reporting. After extensive negotiations, the parties reached a definitive agreement to settle the Derivative Litigation in late February 2019. The settlement requires the Company to adopt a number of corporate governance reforms and to pay plaintiffs attorneys fees of $0.8 million, which will be paid by the Companys directors and officers liability insurance carriers. A hearing on final approval of the Derivative Litigation settlement has been set for September 6, 2019. In February 2018, the Company received a document subpoena from the SEC requesting information pertaining to the Companys financial statements for the period April 1, 2017 through the date of the subpoena. The Company responded to that subpoena. In August 2018, the Company received a second subpoena requesting similar documents for the period April 1, 2015 through the date of the subpoena. The Company understands that the SECs investigation relates to the facts and circumstances described in the Explanatory Paragraph and Note 2: Restatement , included in the Companys most recently filed Annual Report on Form 10-K. The Company has produced a substantial volume of documents to the SEC and is cooperating with the SEC staff. The investigation is ongoing. Other Matters Additionally, from time to time, the Company is a party to various legal proceedings and claims arising from the normal course of business activities. Based on current available information, the Company does not expect that the ultimate outcome of any currently pending unresolved matters, individually or in the aggregate, will have a material adverse effect on its results of operations, cash flows or financial position.