Classmates.com 2008 Annual Report Download - page 27

Table of Contents
A security breach or inappropriate access to, or use of, our networks, computer systems or services could expose us to liability, claims
and a loss of revenue.
The success of our business depends on the security of our networks and, in part, on the security of the network infrastructures of our third-
party vendors. Unauthorized or inappropriate access to, or use of, our networks, computer systems or services could potentially jeopardize the
security of confidential information, including credit card information, of our customers and of third-parties. We cannot assure you that the
security measures we take will be effective in preventing these types of activities. We also cannot assure you that the security measures of our
third-party network providers, providers of customer and billing support services or other vendors will be adequate. In addition to potential legal
liability, these activities may adversely impact our reputation or our revenues and may interfere with our ability to provide our products and
services, all of which could adversely impact our business.
Legal actions could subject us to substantial liability and expense and require us to change our business practices.
We are currently, and have been in the past, party to various legal actions. These actions may include, without limitation, claims by private
parties in connection with consumer protection and other laws, claims that we infringe third-party patents, claims involving unfair competition,
claims in connection with employment practices, securities laws claims, breach of contract claims, and other business-related claims. The nature
of our business could subject us to additional claims for similar matters, as well as a wide variety of other claims including, without limitation,
claims for defamation, negligence, trademark and copyright infringement, and privacy and security matters. Various governmental agencies have
in the past, and may in the future, assert claims, institute legal actions, inquiries or investigations, or impose obligations relating to our business
practices, such as our marketing, billing, customer retention, renewal, cancellation, refund, or disclosure practices. Defending against lawsuits,
inquiries and investigations involves significant expense and diversion of management's attention and resources from other matters. We may not
prevail in existing or future claims. The failure to successfully defend against certain types of claims, including claims relating to our business
practices or alleging infringement of proprietary rights, could result in significant judgments, settlements or require us to change our business
practices. Infringement claims may also result in our being required to obtain licenses from third-parties, which licenses may not be available on
acceptable terms, if at all. Both the cost of defending claims, as well as the effect of settlements and judgments, could cause our results of
operations to fluctuate significantly from period to period and could materially and adversely affect our business, financial position, results of
operations, and cash flows.
Our substantial amount of indebtedness could adversely affect our ability to raise additional capital to fund operations, our flexibility in
operating our business and our ability to react to changes in the economy or our industry, and prevent us from satisfying our debt
obligations.
We have a substantial amount of indebtedness which could have important consequences for our business and financial condition. For
example:
• if we fail to meet payment obligations or otherwise default under the agreements governing our indebtedness, the lenders under
those agreements will have the right to accelerate the indebtedness and exercise other rights and remedies against us; we will be
required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds
available for working capital, capital expenditures, dividends, acquisitions, and other purposes;
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