Incredimail 2010 Annual Report Download - page 23

Provisions of our articles of association and Israeli law may delay, prevent or make difficult an acquisition of our Company, which could
prevent a change of control and, therefore, depress the price of our shares.
Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special
approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types
of transactions. In addition, our articles of association contain provisions that may make it more difficult to acquire our Company, such as
provisions establishing a classified board. Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to some
of our shareholders. See "Item 10.B Memorandum and Articles of Association — Approval of Related Party Transactions" and "Item 10.E
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Taxation — Israeli Taxation" for additional discussion about some anti-takeover effects of Israeli law.
These provisions of Israeli law may delay, prevent or make difficult an acquisition of our Company, which could prevent a change of
control and therefore depress the price of our shares.
Future sales of our ordinary shares could reduce our stock price.
Sales by shareholders of substantial amounts of our ordinary shares, or the perception that these sales may occur in the future, could
materially and adversely affect the market price of our ordinary shares. In addition, our executive officers, directors and certain large
shareholders are no longer subject to contractual restrictions on the sale by them of shares, resulting in a substantial number of shares held by
them or issuable upon exercise of options currently eligible for sale in the public market. Furthermore, the market price of our ordinary shares
could drop significantly if our executive officers, directors, or certain large shareholders sell their shares, or are perceived by the market as
intending to sell them.
U.S. investors in our Company could suffer adverse tax consequences if we are characterized as a passive foreign investment company.
If, for any taxable year, our passive income or our assets that produce passive income exceed levels provided by law, we may be
characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. This characterization could result in
adverse U.S. tax consequences to our shareholders. If we were classified as a passive foreign investment company, a U.S. holder of our ordinary
shares could be subject to increased tax liability upon the sale or other disposition of ordinary shares or upon the receipt of amounts treated as
"excess distributions." Under these rules, the excess distribution and any gain would be allocated ratably over the U.S. holder’
s holding period
for the ordinary shares, and the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were
a passive foreign investment company would be taxed as ordinary income. The amount allocated to each of the other taxable years would be
subject to tax at the highest marginal rate in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed
deferral benefit would be imposed on the resulting tax allocated to such other taxable years. The tax liability with respect to the amount allocated
to years prior to the year of the disposition, or "excess distribution," cannot be offset by any net operating losses. In addition, holders of shares in
a passive foreign investment company may not receive a "step-
up" in basis on shares acquired from a decedent. U.S. shareholders should consult
with their own U.S. tax advisors with respect to the U.S. tax consequences of investing in our ordinary shares, as well as the specific application
of the "excess distribution" and other rules discussed in this paragraph. For a discussion of how we might be characterized as a PFIC and related
tax consequences, please see "Item 10.E Taxation — United States Federal Income Tax Considerations —
Passive Foreign Investment Company
Considerations."
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