Incredimail 2013 Annual Report Download - page 13

These provisions could effectively limit our ability to raise funds in equity financings or issue shares in consideration for the acquisition
of other companies or business. This could impair 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 have been named as a defendant in this type of litigation in connection with our decision to acquire ClientConnect. Any litigation of
this sort could result in considerable costs and a diversion of management’s attention and resources.
If we are deemed to be not in compliance with applicable data protection laws, 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 in Israel and may be subject to laws and regulations in, the United States, the
European Union and other countries as well. 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.
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 effect on our business. See "Item 4.B Business Overview —
Government Regulation" for additional
discussion of applicable regulations.
If users or third parties express privacy or security concerns regarding our collection, use and handling of personal information, we
could incur substantial expenses.
Although we strive to comply with strict privacy data security requirements and take all reasonable steps to ensure the security of
personal information, concerns may be expressed, from time to time, about whether our products compromise the privacy or confidentiality of
the information of users and others. Concerns about our collection, use, sharing or handling of personal information or other privacy related
matters, even if unfounded, could damage our reputation and operating results. See "Item 4.B Business Overview —
Government Regulation"
for additional discussion of applicable regulations.
•
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;
• we may not sell more than 10% of ClientConnect's outstanding shares;
•
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%; and
• there may be no transfers of cash or other consideration, granting of guaranties or any other activities
between Conduit and
ClientConnect outside the ordinary course of business.
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