Incredimail 2014 Annual Report Download - page 25

Risks Related to Our Operations in Israel
Political, economic and military instability in the Middle East may impede our ability to operate and harm our financial results.
Our principal executive offices are located in Israel. Accordingly, political, economic and military conditions in the Middle East may
affect our business directly. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and
its Arab neighbors, Hamas (an Islamist militia and political group in the Gaza Strip) and Hezbollah (an Islamist militia and political group in
Lebanon). Recent political uprisings, social unrest and violence in various countries in the Middle East and North Africa, including Israel’
s
neighbors Egypt and Syria, are affecting the political stability of those countries. This instability may lead to deterioration of the political
relationships that exist between Israel and these countries and have raised concerns regarding security in the region and the potential for armed
conflict. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a
strong influence among the Syrian government, Hamas and Hezbollah. These situations may potentially escalate in the future to more violent
events which may affect Israel and us. These situations, including conflicts which involved missile strikes against civilian targets in various parts
of Israel, such as the Gaza conflict in the summer of 2014, have in the past negatively affected business conditions in Israel. Any hostilities
involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could have a material adverse effect on
our business, operating results and financial condition. Although such hostilities did not in the past have a material adverse impact on our
business, we cannot guarantee that hostilities will not be renewed and have such an effect in the future. Ongoing and revived hostilities and the
attempts to resolve the conflict between Israel and its Arab neighbors often results in political instability that affects the Israeli capital markets
and can cause volatility in interest rates, exchange rates and stock market quotes. The political and security situation in Israel may result in
parties with whom we have contracts claiming that they are not obligated to perform their commitments under those agreements pursuant to
force majeure provisions. These or other Israeli political or economic factors could harm our operations and product development and cause our
sales to decrease. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could
adversely affect our operations and could make it more difficult for us to raise capital. Furthermore, several countries restrict business with Israel
and Israeli companies and, although the impact of these restrictions is not as important for a company such as ours that sells its products through
the Internet, it may nevertheless have an adverse effect on our results of operations. Since our headquarters are located in Israel, we could
experience serious disruptions if acts associated with this conflict result in any serious damage to our facilities. Our business interruption
insurance may not adequately compensate us for losses that may occur and any losses or damages incurred by us could have a material adverse
effect on our business. Any future armed conflicts or political instability in the region would likely negatively affect business conditions and
harm our results of operations.
Our operations may be disrupted by the obligations of our personnel to perform military service.
All non-
exempt male adult citizens and permanent residents of Israel under the age of 40, or older for reserves officers or citizens with
certain occupations, as well as certain female adult citizens and permanent residents of Israel, are obligated to perform military reserve duty and
may be called to active duty under emergency circumstances. In recent years, there have been significant call-
ups of military reservists, including
in the summer of 2014, and it is possible that there will be additional call-
ups in the future. Many of our male employees in Israel, including
members of senior management, are obligated to perform up to 36 days of military reserve duty annually until they reach the relevant age of
discharge from army service and, in the event of a military conflict, could be called to active duty. While we have operated effectively despite
these conditions in the past, we cannot assess what impact these conditions may have in the future, particularly if emergency circumstances arise.
Our operations could be disrupted by the absence of a significant number of our employees related to military service or the absence for
extended periods of military service of one or more of our executive officers or key employees. Any disruption in our operations would harm our
business.
Investors and our shareholders generally may have difficulties enforcing a U.S. judgment against us, our executive officers or our
directors or asserting U.S. securities laws claims in Israel.
We are incorporated under the laws of the State of Israel. Service of process on us, our Israeli subsidiaries, our directors and officers
and the Israeli experts, if any, named in this annual report, substantially all of whom reside outside of the United States, may be difficult to
obtain within the United States.
Furthermore, because the majority of our assets and investments, and substantially all of our directors, officers and Israeli external
experts are located outside the United States, any judgment obtained in the United States against us or any of them may be difficult to collect
within the United States.
We have been informed by our legal counsel in Israel that it may also be difficult to assert U.S. securities laws claims in original actions
instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the
most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not
U.S. law is applicable to the claim. There is little binding case law in Israel addressing these matters. If U.S. law is found to be applicable, the
content of applicable U.S. law must be proved as a fact, which can be a time-
consuming and costly process. Certain matters of procedure will
also be governed by Israeli law.
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