Clearwire 2009 Annual Report Download - page 40

r
ecru
i
t
i
ng an
d
retent
i
on. T
h
ese potent
i
a
l
con
fli
cts o
fi
nterest cou
ld h
ave a mater
i
a
l
a
d
verse e
ff
ect on our
b
us
i
ness
,
financial condition, results of operations or prospects if attractive corporate opportunities are allocated b
y
th
e
Founding Stockholders to themselves or their other affiliates or we lose key personnel to them
.
We ma
y
sustain
f
inancia
ll
osses i
f
S
p
rint
f
ai
l
sto
f
u
lf
i
ll
its in
d
emni
f
ication o
bl
igations to us
.
Under the Transaction A
g
reement, Sprint must indemnif
y
us a
g
ainst certain losses relatin
g
to, amon
g
othe
r
thi
ngs, any
b
reac
h
o
f
certa
i
no
f
Spr
i
nt’s representat
i
ons as to t
h
e Spr
i
nt W
i
MAX Bus
i
ness, any pre-C
l
os
i
ng taxes
i
ncurre
db
yanyo
f
Spr
i
nt’s su
b
s
idi
ar
i
es,
li
t
i
gat
i
on re
l
ate
d
to certa
i
no
f
Spr
i
nt’s a
ffili
ates an
d
any
li
a
bili
t
i
es unre
l
ate
d
t
o the Sprint WiMAX Business. These indemnification obli
g
ations
g
enerall
y
continue until the statute of limitations
for the applicable claim has expired. The indemnification obligations regarding Sprint’s representations as to the
S
pr
i
nt W
i
MAX Bus
i
ness an
df
or
li
a
bili
t
i
es unre
l
ate
d
to t
h
e Spr
i
nt W
i
MAX Bus
i
ness,
h
owever, eac
h
surv
i
ve
f
or
th
ree
y
ears
f
rom t
h
eC
l
os
i
n
g
. Spr
i
nt’s
i
n
d
emn
ifi
cat
i
on o
blig
at
i
ons are
g
enera
lly
un
li
m
i
te
d
,w
i
t
h
t
h
e except
i
on o
f
a
$
25 million deductible for claims based on a breach of re
p
resentation that S
p
rint’s subsidiaries that hold the S
p
rin
t
W
iMAX Business have, subject to certain limited exceptions, a specific, limited set of liabilities at the Closing.
We cannot provide any assurances that Sprint will fulfill its indemnification obligations in accordance with the
Transaction Agreement. If it turns out that the representations made by Sprint as to the Sprint WiMAX Business, for
w
hi
c
h
Spr
i
nt
i
so
blig
ate
d
to
i
n
d
emn
ify
us un
d
er t
h
e Transact
i
on A
g
reement, are
i
naccurate, we ma
y
susta
i
n
s
i
g
nificant financial losses. If Sprint fails to fulfill its indemnification obli
g
ations under the Transaction A
g
reement
t
o indemnify and defend us for any such financial loss or claim, as the case may be, it could adversely affect ou
r
fi
nanc
i
a
l
con
di
t
i
on, cas
hfl
ows an
d
resu
l
ts o
f
operat
i
ons. In a
ddi
t
i
on,
if
t
h
et
i
me per
i
o
df
or any
i
n
d
emn
ifi
cat
i
on
c
laims has expired b
y
wa
y
of the statue of limitations or b
y
operation of the three-
y
ear period in the Transaction
Ag
reement, our business, prospects, operatin
g
results and financial condition ma
y
be adversel
y
affected.
If
we
f
ai
l
to maintain a
d
e
q
uate interna
l
contro
l
s, or i
f
we ex
p
erience
d
i
ff
icu
l
ties in im
pl
ementing new o
r
r
evise
d
contro
l
s, our
b
usiness an
d
o
p
erating resu
l
ts cou
ld b
e
h
arme
d.
Effective internal controls are necessary for us to prepare accurate and complete financial reports and t
o
eff
ect
i
ve
l
y prevent an
dd
etect
f
rau
d
or mater
i
a
l
m
i
sstatements to our
fi
nanc
i
a
l
statements. I
f
we are una
bl
et
o
m
aintain effective internal controls, our abilit
y
to prepare and provide accurate and complete financial statement
s
m
a
y
be affected. The Sarbanes-Oxle
y
Act of 2002 requires us to furnish a report b
y
mana
g
ement on internal contro
l
over
fi
nanc
i
a
l
report
i
ng,
i
nc
l
u
di
ng managements’ assessment o
f
t
h
ee
ff
ect
i
veness o
f
suc
h
contro
l
.I
f
we
f
a
il
t
o
m
aintain adequate internal controls, or if we experience difficulties in implementin
g
new or revised controls, ou
r
business and operatin
g
results could be harmed or we could fail to meet our reportin
g
obli
g
ations
.
For example, we concluded that control deficiencies in procedures we implemented for recordin
g
an
d
m
onitorin
g
the movement of network infrastructure equipment constituted a material weakness in our interna
l
c
ontro
l
over
fi
nanc
i
a
l
report
i
ng as o
f
Decem
b
er 31, 2009. Dur
i
ng t
h
et
hi
r
d
quarter o
f
2009, we
i
mp
l
emente
d
ne
w
p
roce
d
ures re
l
ate
d
to t
h
e assem
bly
,s
hi
pment, an
d
stora
g
eo
f
networ
ki
n
f
rastructure equ
i
pment to
i
mprov
e
flexibilit
y
in deplo
y
in
g
network infrastructure equipment in markets under development. We believed that these
n
ew procedures would improve our ability to manage the substantial increases in the volume of network
i
n
f
rastructure equ
i
pment s
hi
pments necessar
y
to meet our networ
kd
ep
l
o
y
ment tar
g
ets. T
h
ese new proce
d
ure
s
i
nc
l
u
d
e
di
ncreas
i
n
g
t
h
e num
b
er o
f
ware
h
ouses ut
ili
ze
df
or rece
i
v
i
n
g
, stor
i
n
g
an
d
s
hi
pp
i
n
g
equ
i
pment an
d
outsourcing the management of equipment inventory movements to third party vendors. However, the ne
w
p
roce
d
ures
i
mp
l
emente
d did
not a
d
equate
ly
prov
id
e
f
or t
h
et
i
me
ly
up
d
at
i
n
g
an
d
ma
i
nta
i
n
i
n
g
o
f
account
i
n
g
r
ecor
d
s
f
or t
h
e networ
ki
n
f
rastructure equ
i
pment. As a resu
l
t, movements o
f
t
hi
s equ
i
pment were not proper
ly
r
ecorded in our accountin
g
s
y
stem. Accordin
g
l
y
, we concluded that it is reasonabl
y
possible that a materia
l
mi
sstatement o
f
our
i
nter
i
m or annua
lfi
nanc
i
a
l
statements may not
b
e prevente
d
or
d
etecte
d
on a t
i
me
l
y
b
as
i
s
d
ue t
o
th
ese contro
ld
e
fi
c
i
enc
i
es
.
Upon
id
ent
if
y
i
ng t
h
e pro
bl
em, we
b
egan un
d
erta
ki
ng var
i
ous m
i
t
i
gat
i
on an
d
reme
di
at
i
on steps to
i
mprove t
h
e
c
ontro
l
san
d
up
d
ate t
h
e
b
oo
k
so
f
recor
d
. As a resu
l
to
f
t
h
ese steps, management
b
e
li
eves t
h
e contro
l
wea
k
ness
h
as
n
ot resulted in material misstatements of the financial statements in the current or previous reportin
g
periods
.
30