Digital River 2002 Annual Report Download - page 23

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System failures could reduce the attractiveness of our service offerings.
We provide commerce, marketing and delivery services to our clients and end-users through our proprietary technology transaction processing
and client management systems. These systems also maintain an electronic inventory of products and gather consumer marketing information.
The satisfactory performance, reliability and availability of the technology and the underlying network infrastructure are critical to our
operations, level of client service, reputation and ability to attract and retain clients. We have experienced periodic interruptions, affecting all or
a portion of our systems, which we believe will continue to occur from time to time. Any systems damage or interruption that impairs our ability
to accept and fill client orders could result in an immediate loss of revenue to us, and could cause some clients to purchase services offered by
our competitors. In addition, frequent systems failures could harm our reputation.
Our systems and operations are vulnerable to damage or interruption from:
• fire, flood and other natural disasters;
• operator negligence, improper operation by, or supervision of, employees, physical and electronic break-ins, misappropriation,
computer viruses and similar events; and
• power loss, computer systems failures, and Internet and telecommunications failure.
We do not carry sufficient business interruption insurance to fully compensate us for losses that may occur.
We may become liable to clients who are dissatisfied with our services.
We design, develop, implement and manage electronic commerce solutions that are crucial to the operation of our clients’ businesses. Defects in
the solutions we develop could result in delayed or lost revenue, adverse end-user reaction and negative publicity or require expensive
corrections. As a result, clients who experience these adverse consequences either directly or indirectly as a result of our services could bring
claims against us for substantial damages. Any claims asserted could exceed the level of our insurance. The insurance we carry may not
continue to be available on economically reasonable terms, or at all. The successful assertion of one or more large claims that are uninsured,
exceed insurance coverage or result in changes to insurance policies, including premium increases, could adversely affect our operating results
or financial condition.
Our chief executive officer and key technical employees are critical to our business and if they do not remain with us in the future, we
may be unable to effectively replace them.
Our future success significantly depends on the continued services and performance of our senior management, particularly Joel A. Ronning,
our chief executive officer. Our performance also depends on our ability to retain and motivate our key technical employees who are skilled in
maintaining our proprietary technology platform. The loss of the services of any of our executive officers or key technical employees could
harm our business if we are unable to effectively replace that officer or employee, or if that person should decide to join a competitor or
otherwise directly or indirectly compete with us. Further, we may need to incur additional operating expenses and divert other management time
in order to search for a replacement. We do not maintain any key person life insurance policies.
We must continually attract and retain technical and other key personnel in order to be able to successfully execute our business
strategy.
Our future success depends on our ability to continue to identify, attract, hire, train, retain and motivate highly skilled technical, managerial,
operations, merchandising, sales and marketing and client service personnel. Competition for these personnel is intense, particularly in the
Internet industry and we may be unable to successfully attract, assimilate or retain sufficiently qualified personnel. Failure to do so could harm
our business growth and ability to achieve profitability. In addition, the market price of our Common Stock has fluctuated substantially since our
initial public offering in August 1998. Consequently, potential employees may perceive our equity incentives such as stock options as less
attractive and current employees whose options are no longer attractively priced may choose not to remain with our organization. In that case,
our ability to attract employees will be adversely affected. Finally, should our stock price substantially decline, the retention value of stock
options granted since our initial public offering will decline and our employees may choose not to remain with our organization.