Incredimail 2014 Annual Report Download - page 14

We are effectively limited in our ability to issue ordinary shares or effect significant corporate transactions with respect to
ClientConnect until the end of 2015.
As a result of the Israeli tax ruling obtained by Conduit in connection with the Conduit Split and the ClientConnect Acquisition, from
January 2014, the date of acquisition, and through December 31, 2015, Conduit and its shareholders would be subject to adverse tax
consequences, for which we have undertaken to indemnify them, if we were to:
These provisions could effectively limit our ability to raise funds in equity financings or issue shares in consideration for the acquisition
of other substantial companies or business, subsequently impairing our ability to grow our company by way of acquisitions.
In addition, during the same period, we are effectively subject to the following restrictions with respect to ClientConnect:
These provisions could limit our ability to capitalize on opportunities to maximize the value of ClientConnect outside the ordinary
course of business.
For more information, see Item 10C. "Material Contracts—Agreements Relating to the ClientConnect Acquisition—Tax-
related
Restrictions."
Class action litigation due to share price volatility or other factors could cause us to incur substantial costs and divert our management’
s
attention and resources.
Historically, public companies that experience periods of volatility in the market price of their securities and/or engage in substantial
transactions, are sometimes met with class action litigation. Companies in the Internet and software industry, such as ours, are particularly
vulnerable to this kind of litigation as a result of the volatility of their stock prices and their regular involvement in transactional activities. Most
recently, we were named as a defendant in this type of litigation in connection with our acquisition of ClientConnect, and although this lawsuit
was dismissed, in the future litigation of this sort could result in considerable costs and a diversion of management’
s attention and resources. For
more information, see Item 8.A below under "Legal Proceedings."
If we are deemed to be non-
compliant with applicable data protection laws, or are even thought to be so, our operating results could be
materially affected.
We collect and maintain certain information about our customers in our database. Such collection and maintenance of customer
information is subject to data protection laws and regulations. A failure to comply with applicable regulations could result in class actions,
governmental investigations and orders, and criminal and civil liabilities, which could materially affect our operating results. Moreover, concerns
about our collection, use, sharing or handling of personal information or other privacy related matters, even if unfounded, could harm our
reputation and operating results.
Although we strive to comply with the applicable laws and regulations and use our best efforts to comply with the evolving global
standards regarding privacy and inform our customers of our business practices prior to any installations of our product and use of our services,
it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data collection and preservation practices or
that it may be argued that our practices do not comply with other countries' privacy and data protection laws and regulations. In addition to the
possibility of fines, such a situation could result in the issuance of an order requiring that we change our data collection or retention practices,
which in turn could have a material adverse effect on our business. See "Item 4.B Business Overview —
Government Regulation" for additional
discussion of applicable regulations.
•
issue ordinary shares in a private placement to any single person (or a group of affiliated persons) in excess of 25% of our
outstanding ordinary shares, computed prior to the issuance; or
•
dilute the holdings of the persons who held 5% or more of our outstanding ordinary shares immediately following the closing of the
ClientConnect Acquisition by more than 49% in the aggregate.
• we may not sell a majority of ClientConnect's assets or more than 10% of its outstanding shares; and
•
ClientConnect may not issue shares in a private placement to any single person (or a group of affiliated persons) in excess of 25%
of its outstanding shares, computed prior to the issuance, or otherwise dilute our holdings by more than 49%.
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