Classmates.com 2009 Annual Report Download - page 29

Table of Contents
time. The loss of any of these key employees or our inability to attract or retain other qualified employees could seriously harm our business and
prospects. We do not carry key-person life insurance on any of our employees.
Foreign, state and local governments may attempt to impose additional income taxes, sales and use taxes, value-added taxes or other
taxes on our business activities and Internet-based transactions, including our past sales, which could decrease our ability to compete,
reduce our sales, or have a material adverse effect on our business, financial condition, results of operations, and cash flows.
We are subject to income and various other taxes in the United States and numerous foreign jurisdictions. Significant judgment is required
in evaluating our worldwide provision for income taxes. During the ordinary course of business, there are many transactions for which the
ultimate tax determination is uncertain. In addition, our effective income tax rates could be adversely affected by earnings being lower than
anticipated in countries where we have lower statutory rates and higher (or determined to be higher by a particular taxing jurisdiction) than
anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities or by, among
other factors, changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. We are subject to audit in
various jurisdictions, and such jurisdictions may assess additional income and other taxes against us. Although we believe our tax estimates are
reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions,
and our historical recognition of other tax matters. The results of an audit or litigation could have a material effect on our business, financial
condition, results of operations, and cash flows.
In connection with our Internet-based transactions, a number of states have been considering or adopting legislation or instituting policy
initiatives, including those that would facilitate a finding of nexus to exist between Internet companies with the states, aimed at expanding the
reach of sales and use taxes or imposing state income or other taxes on various innovative theories, including agency attribution from
independent third-party service providers. Such legislation or initiatives could result in the imposition of additional sales and use taxes, or the
payment of state income or other taxes, on certain transactions conducted over the Internet. If such legislation is enacted, or such initiatives are
instituted, and upheld by the courts, the legislation or initiatives could subject us to substantially increased tax liabilities for past and future sales
or state income or other taxes, require us to collect additional sales and use taxes, cause our future sales to decrease, otherwise negatively impact
our businesses, and thus have a material adverse affect on us.
Changes in laws and regulations and new laws and regulations may adversely affect our business, financial condition, results of
operations, and cash flows.
We are subject to a variety of international, federal, state, and local laws and regulations, including, without limitation, those relating to
taxation, bulk email or "spam," advertising, user privacy and data protection, consumer protection, antitrust, and unclaimed property.
Compliance with the various laws and regulations, which in many instances are unclear or unsettled, is complex. Any changes in such laws and
regulations, the enactment of any additional laws or regulations, failure to comply with, or increased enforcement activity of, such laws and
regulations, could significantly impact our products and services, our costs, or the manner in which we conduct business, all of which could
adversely impact our results of operations and cause our business to suffer.
The Federal Trade Commission and certain state agencies have investigated Internet companies, including us, in connection with consumer
protection and privacy matters. Federal, state and foreign governments have also enacted consumer protection laws, including laws protecting
the privacy of consumers' nonpublic personal information. In 2009, a committee of the U.S. Senate commenced an investigation of post-
transaction sales practices and the companies that have engaged in such practices.
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