Classmates.com 2009 Annual Report Download - page 26

Table of Contents
A security breach or inappropriate access to, or use of, our networks, computer systems or services or those of third-party vendors
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, whether intentional, unintentional
or as a result of criminal activity, 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 or investigations could subject us to substantial liability, require us to change our business practices, and adversely affect
our business, financial condition, results of operations, and cash flows.
We are currently, and have been in the past, party to various legal actions and investigations. 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, right of publicity, 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, cancelation, refund, or disclosure
practices. As discussed in the risk factor related to changes in laws and regulations, certain governmental agencies have been investigating post-
transaction sales practices and the companies that engage in such practices, including us. 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 our incurring significant liabilities related to judgments or 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 condition,
results of operations, and cash flows.
Our online social networking and online loyalty marketing services, as well as our FTD segment's consumer business, rely heavily on
email campaigns, and any disruptions or restrictions on the sending of emails or increase in the associated costs could adversely affect
our business and results of operations.
Our emails generate the majority of the traffic on our social networking Web sites and are the most important driver of member activity for
our online loyalty marketing service. A significant number of members of our online social networking and online loyalty marketing services
elect to opt-out of receiving certain types of emails. Without the ability to email these members, we have very limited means of inducing
members to return to our Web sites and utilize our services. In addition, each month, a significant number of email addresses for members of our
online social networking and online
25