Incredimail 2010 Annual Report Download - page 21

The cost of compliance with the world taxation, consumer protection and privacy related laws and regulations could be material and we
may not be able to comply with the applicable regulations in a timely or cost-
effective manner. In response to evolving legal requirements, we
may be compelled to change our business model and practices, which could reduce our sales, and we may not be able to replace the revenues lost
as a consequence of the change. These changes could also require us to incur significant expenses, subject us to liability and require increased
time and attention of our management. See "Item 4.B Business Overview —
Government Regulation" for additional discussion of applicable
regulations affecting our Company.
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. During the winter of 2008, Israel was engaged in an armed conflict with Hamas, a militia group and political party operating
in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia
group and political party. These, including conflicts which involved missile strikes against civilian targets in various parts of Israel, 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 affect adversely our operations. 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. In addition, political unrest in the Middle East and North Africa could adversely affect us. These or other Israeli
political or economic factors could harm our operations and product development and cause our sales to decrease. Furthermore, several
countries, principally those in the Middle East, still 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.
Our operations may be disrupted by the obligations of our personnel to perform military service.
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 age 48 and, in the event of a military conflict, could be called to active duty. 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 key employees.
Investors and our shareholders generally may have difficulties enforcing a U.S. judgment against us, our executive officers and our
directors or asserting U.S. securities laws claims in Israel.
We are incorporated in Israel and all of our executive officers and most of our directors reside outside the United States. Service of
process upon them may be difficult to effect within the United States. Furthermore, all of our assets and most of the assets of our executive
officers and directors are located outside the United States. Therefore, a judgment obtained against us or any of them in the United States,
including one based on the civil liability provisions of the U.S. federal securities laws may not be collectible in the United States and may not be
enforced by an Israeli court. It also may be difficult for you to assert U.S. securities law claims in original actions instituted in Israel.
The tax benefits available to us require us to meet several conditions and may be terminated or reduced in the future, which would
increase our costs and taxes.
We have generated income and therefore, are able to take advantage of tax exemptions and reductions resulting from the "Approved
Enterprise" and "Beneficiary Enterprise" status of our facilities in Israel, albeit, since instituting our dividend policy, to a limited extent. To
remain eligible for these tax benefits, we must continue to meet certain conditions stipulated in the Law for the Encouragement of Capital
Investments, 1959 (the "Investment Law"), and its regulations and the criteria set forth in the specific certificate of approval. If we fail to meet
the required conditions in the future, the tax benefits would be canceled and we could be required to refund any tax benefits we have received
with interest and adjustment for change in Israeli consumer price index. These tax benefits may not be continued in the future at their current
levels or at any level.
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