| Dependence on Proprietary
Technology; Risks of Infringement
The
Company relies primarily on a combination of copyright
and trademark laws, trade secrets, confidentiality procedures
and contractual provisions to protect its proprietary
rights as set forth below in the section entitled "Proprietary
Rights and Trademark Litigation" in "Item
4 - Information on the Company." The Company has
certain patent applications pending and there can be
no assurance that the Company's patent applications
will be issued either at all or within the scope of
the claims sought by the Company. Furthermore, there
can be no assurance that any issued patent will not
be challenged, and if such challenges are brought, that
such patents will not be invalidated. In addition, there
can be no assurance that others will not develop technologies
that are similar or superior to the Company's technology
or design around any patents issued to the Company.
Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may copy aspects of the
Company's products or obtain and use information that
the Company regards as proprietary. Policing any of
such unauthorized uses of the Company's products is
difficult, and although the Company is unable to determine
the extent to which piracy of its software products
exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries
do not protect the Company's proprietary rights as fully
as do the laws of the United States or Israel. To date,
the Company has not conducted any material amount of
business in such countries. There can be no assurance
that the Company's efforts to protect its proprietary
rights will be adequate or that the Company's competitors
will not independently develop similar technology.
Approved Enterprise Status
The
Company receives significant tax benefits in Israel,
particularly as a result of the "Approved Enterprise"
status of the Company's facilities and programs. To
be eligible for tax benefits, the Company must meet
certain conditions, relating principally to adherence
to the investment program filed with the Investment
Center of the Israeli Ministry of Industry and Trade
and to periodic reporting obligations. Although the
Company believes that it will be able to meet such conditions
in the future, if the Company fails to meet such conditions
it would be subject to corporate tax in Israel at the
standard rate of 36%, and could be required to refund
tax benefits already received. There can be no assurance
that such tax benefits will be continued in the future
at their current levels or otherwise. The termination
or reduction of certain programs and tax benefits (particularly
benefits available to the Company as a result of the
Approved Enterprise status of the Company's facilities
and programs) or a requirement to refund tax benefits
already received would have a material adverse effect
on the Company's business, operating results and financial
condition. See "Item
4 - Information on the Company" and "Israeli Taxation,
Foreign Exchange Regulation and Investment Programs"
in "Item
10 - Additional Information."
Anti-Takeover Effects Of Israeli
Laws
Under
the Israeli Companies Law, a merger is generally required
to be approved by the shareholders and board of directors
of each of the merging companies. Shares held by a party
to the merger are not counted toward the required approval.
If the share capital of the company that will not be
the surviving company is divided into different classes
of shares, the approval of each class is also required.
A merger may not be approved if the surviving company
will not be able to satisfy its obligations. At the
request of a creditor, a court may block a merger on
this ground. In addition, a merger can be completed
only after all approvals have been submitted to the
Israeli Registrar of Companies and 70 days have passed
from the time that a proposal for approval of the merger
was filed with the Registrar.
The
Israeli Companies Law provides that an acquisition of
shares in a public company must be made by means of
a tender offer, if as a result of the acquisition, the
purchaser would become a 25% shareholder of the company.
This rule does not apply if there is already another
25% shareholder of the company. Similarly, the Israeli
Companies Law provides that an acquisition of shares
in a public company must be made by means of a tender
offer if, as a result of the acquisition, the purchaser
would become a 45% shareholder of the company, unless
someone else already holds a majority of the voting
power of the company. These rules do not apply if the
acquisition is made by way of a merger. |
