☐ |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☒ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Title of Each Class
|
Name of Each Exchange on which Registered
|
Ordinary shares, par value NIS 0.03 per share
|
Nasdaq Global Select Market
|
Large accelerated filer ☐
|
Accelerated filer ☒
|
Non-accelerated filer ☐
|
Emerging growth company ☐
|
U.S. GAAP ☒
|
International Financial Reporting Standards as issued by
the International Accounting Standards Board ☐ |
Other ☐
|
Page
|
|||
5
|
|||
5
|
|||
5
|
|||
5
|
|||
30
|
|||
36
|
|||
37
|
|||
51
|
|||
62
|
|||
64
|
|||
65
|
|||
66
|
|||
83
|
|||
84
|
|||
85
|
|||
85
|
|||
85
|
|||
85
|
|||
85
|
|||
85
|
|||
86
|
|||
86
|
|||
86
|
|||
86
|
|||
86
|
|||
87
|
|||
88
|
|||
88
|
|||
88
|
|||
89
|
Year ended December 31,
(U.S. dollars in thousands, except share and per share data) |
||||||||||||||||||||
2014
|
2015
|
2016
|
2017
|
2018
|
||||||||||||||||
Revenues:
|
||||||||||||||||||||
Advertising
|
$
|
45,076
|
$
|
32,053
|
$
|
140,111
|
$
|
134,481
|
$
|
125,977
|
||||||||||
Search and other
|
343,655
|
188,897
|
172,683
|
139,505
|
126,868
|
|||||||||||||||
Total Revenues
|
388,731
|
220,950
|
312,794
|
273,986
|
252,845
|
|||||||||||||||
Costs and Expenses:
|
||||||||||||||||||||
Cost of revenues
|
10,950
|
7,877
|
25,924
|
24,659
|
23,757
|
|||||||||||||||
Customer acquisition costs and media buy
|
174,575
|
91,194
|
140,210
|
130,885
|
128,351
|
|||||||||||||||
Research and development
|
37,427
|
21,692
|
25,221
|
17,189
|
18,884
|
|||||||||||||||
Selling and marketing
|
20,792
|
22,886
|
54,559
|
52,742
|
38,918
|
|||||||||||||||
General and administrative
|
36,730
|
31,064
|
28,827
|
21,911
|
16,450
|
|||||||||||||||
Restructuring charges
|
3,981
|
1,052
|
728
|
-
|
2,075
|
|||||||||||||||
Impairment, net of gain on reversal of contingent consideration
|
19,941
|
72,785
|
-
|
85,667
|
-
|
|||||||||||||||
Depreciation and amortization
|
21,321
|
11,422
|
25,977
|
16,591
|
9,719
|
|||||||||||||||
Total Costs and Expenses
|
325,717
|
259,972
|
301,446
|
349,644
|
238,154
|
|||||||||||||||
Income (Loss) from Operations
|
63,014
|
(39,022
|
)
|
11,348
|
(75,658
|
)
|
14,691
|
|||||||||||||
Financial expense, net
|
2,888
|
1,939
|
8,288
|
5,922
|
3,794
|
|||||||||||||||
Income (Loss) before Taxes on Income
|
60,126
|
(40,961
|
)
|
3,060
|
(81,850
|
)
|
10,897
|
|||||||||||||
Taxes on income
|
10,816
|
697
|
212
|
(8,826
|
)
|
2,776
|
||||||||||||||
Net Income (Loss) from Continuing Operations
|
49,310
|
(41,658
|
)
|
2,848
|
(72,754
|
)
|
8,121
|
|||||||||||||
Net loss from discontinued operations
|
6,484
|
26,999
|
2,647
|
-
|
-
|
|||||||||||||||
Net Income (Loss)
|
$
|
42,826
|
$
|
(68,657
|
)
|
$
|
201
|
$
|
(72,754
|
)
|
$
|
8,121
|
||||||||
Net Earnings (Loss) per Share - Basic:
|
||||||||||||||||||||
Continuing operations
|
$
|
2.17
|
$
|
(1.74
|
)
|
$
|
0.11
|
$
|
(2.81
|
)
|
$
|
0.31
|
||||||||
Discontinued operations
|
$
|
(0.29
|
)
|
$
|
(1.14
|
)
|
$
|
(0.10
|
)
|
$
|
-
|
-
|
||||||||
Net Income (Loss)
|
$
|
1.88
|
$
|
(2.88
|
)
|
$
|
0.01
|
$
|
(2.81
|
)
|
$
|
0.31
|
||||||||
Net Earnings (Loss) per Share – Diluted:
|
||||||||||||||||||||
Continuing operations
|
$
|
2.11
|
$
|
(1.74
|
)
|
$
|
0.11
|
$
|
(2.81
|
)
|
$
|
0.31
|
||||||||
Discontinued operations
|
$
|
(0.28
|
)
|
$
|
(1.14
|
)
|
$
|
(0.10
|
)
|
$
|
-
|
-
|
||||||||
Net Income (Loss)
|
$
|
1.83
|
$
|
(2.88
|
)
|
$
|
0.01
|
|
$
|
(2.81
|
)
|
$
|
0.31
|
|||||||
Number of shares continuing and discontinued:
|
||||||||||||||||||||
Basic
|
22,737,736
|
23,766,811
|
25,520,151
|
25,849,724
|
25,850,067
|
|||||||||||||||
Diluted
|
23,442,470
|
23,766,811
|
25,557,934
|
25,849,724
|
25,855,225
|
Balance Sheet Data
|
As of December 31,
|
|||||||||||||||||||
(U.S. dollars in thousands):
|
2014
|
2015
|
2016
|
2017
|
2018
|
|||||||||||||||
Cash and cash equivalents
|
$
|
101,183
|
$
|
17,519
|
$
|
23,962
|
$
|
31,567
|
$
|
39,109
|
||||||||||
Working capital
|
$
|
91,255
|
$
|
37,394
|
$
|
27,048
|
$
|
32,895
|
$
|
26,779
|
||||||||||
Total assets
|
$
|
356,139
|
$
|
442,298
|
$
|
368,452
|
$
|
274,027
|
$
|
256,446
|
||||||||||
Total liabilities
|
$
|
110,142
|
$
|
242,461
|
$
|
160,308
|
$
|
135,695
|
$
|
107,665
|
||||||||||
Shareholders’ equity
|
$
|
245,997
|
$
|
199,837
|
$
|
208,144
|
$
|
138,332
|
$
|
148,781
|
· |
our customers or partners could acquire, or be acquired by, our competitors and terminate their relationship with us; and
|
· |
competitors could improve their competitive position or broaden their offerings through strategic acquisitions or mergers.
|
· |
Supply sources may impose significant restrictions on the advertising inventory they sell, or may impose other unfavorable terms and conditions on the advertisers using their sites or platforms. For example, these restrictions may include frequency caps, prohibitions on advertisements from specific advertisers or specific industries, or restrictions on the use of specified creative content or advertising formats, which would restrain our supply of available inventory.
|
· |
Supply sources that offer online content and mobile applications may shift from an advertising-based monetization method to a pay for content/services model, thereby reducing available inventory.
|
· |
Social media platforms may be successful in keeping users within their sites via products such as Facebook’s Instant Articles. If, as a result, users are not on the open web, advertising inventory on the open web (including our publisher’s sites) may be reduced or may become less attractive to our advertising customers.
|
· |
Supply sources may be reluctant or unable to adopt certain of our proprietary and unique high-impact ad formats for a variety of reasons (such as user preference changes making such ad formats less desirable, or technological limitations, such as connection with header bidding or the ability to transact programmatically) resulting in limited advertising inventory supply for such formats and inhibiting our ability to scale such formats.
|
· |
Historically, in most cases our advertising solution experienced the lowest sales in the first quarter and the highest sales in the fourth quarter, with the second and third quarters being slightly stronger than the first quarter. Fourth quarter sales tend to be the highest due to a need to utilize remaining budgets, and increased customer advertising volumes during the holiday selling season.
|
· |
Product and service revenues are influenced by political advertising, which generally occurs every two years.
|
· |
In any single period, product and service revenues and delivery costs are subject to significant variation based on changes in the volume and mix of deliveries performed during such period.
|
· |
Revenues are subject to the changes of brand marketing trends, including when and where brands choose to spend their money in a given year.
|
· |
Advertising customers generally retain the right to supplement, extend, or cancel existing advertising orders at any time prior to their completion, and we have no control over the timing or magnitude of these revenue changes.
|
· |
Relative complexity of individual advertising formats, and the length of the creative design process.
|
· |
recruiting and retaining highly qualified employees for our current business and new businesses we are developing; and
|
· |
attracting and acquiring new publishers to support and expand our business.
|
· |
negative fluctuations in our quarterly revenues and earnings or those of our competitors;
|
· |
pending sales into the market due to the sale of large blocks of shares, due to, among other reasons, the expiration of any tax-related or contractual lock–ups with respect to significant amounts of our ordinary shares;
|
· |
shortfalls in our operating results compared to levels forecast by us or securities analysts;
|
· |
changes in our senior management;
|
· |
changes in regulations or in policies of search engine companies or other industry conditions;
|
· |
mergers and acquisitions by us or our competitors;
|
· |
technological innovations;
|
· |
the introduction of new products;
|
· |
the conditions of the securities markets, particularly in the Internet and Israeli sectors; and
|
· |
political, economic and other developments in Israel and worldwide.
|
· |
potential loss of proprietary information due to piracy, misappropriation or laws that may be less protective of our intellectual property rights than those of the United States;
|
· |
costs and delays associated with translating and supporting our products in multiple languages;
|
· |
foreign exchange rate fluctuations and economic instability, such as higher interest rates and inflation, which could make our products more expensive in those countries;
|
· |
costs of compliance with a variety of laws and regulations;
|
· |
restrictive governmental actions such as trade restrictions and potential trade wars;
|
· |
limitations on the transfer and repatriation of funds and foreign currency exchange restrictions;
|
· |
compliance with different consumer and data protection laws and restrictions on pricing or discounts;
|
· |
lower levels of adoption or use of the Internet and other technologies vital to our business and the lack of appropriate infrastructure to support widespread Internet usage;
|
· |
lower levels of consumer spending on a per capita basis and fewer opportunities for growth in certain foreign market segments compared to the United States;
|
· |
lower levels of credit card usage and increased payment risk;
|
· |
changes in domestic and international tax regulations; and
|
· |
geopolitical events, including war and terrorism.
|
· |
subject to limited exceptions, the judgment is final and non-appealable;
|
· |
the judgment was given by a court competent under the laws of the state of the court and is otherwise enforceable in such state;
|
· |
the judgment was rendered by a court competent under the rules of private international law applicable in Israel;
|
· |
the laws of the state in which the judgment was given provide for the enforcement of judgments of Israeli courts;
|
· |
adequate service of process has been effected and the defendant has had a reasonable opportunity to present his arguments and evidence;
|
· |
the judgment and its enforcement are not contrary to the law, public policy, security or sovereignty of the State of Israel;
|
· |
the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties; and
|
· |
an action between the same parties in the same matter was not pending in any Israeli court at the time the lawsuit was instituted in the U.S. court.
|
· |
we may be unable to meet the requirements for continuing to qualify for some programs;
|
· |
these programs and tax benefits may be unavailable at their current levels; or
|
· |
we may be required to refund previously recognized tax benefits if we are found to be in violation of the stipulated conditions.
|
· |
Supply Management;
|
· |
Demand Management;
|
· |
High Impact Programmatic Market Place;
|
· |
Creative platform;
|
· |
Data Management;
|
· |
Data lake; and
|
· |
AI platform.
|
a. |
Smart Planning
– the planning platform provides a recommendation for campaign media plan that will hit the goals of the brand. Such plan includes recommendation of media tactics, targeting tactics, sequences and creative strategy based on benchmarks and past experiences of the brand.
|
b. |
Campaign management
– The planning platform pushes instructions to the campaign management system to execute. The campaign management system receives parameters like dates, volume level, creatives, list of supply sources and campaign goal.
|
c. |
Cross social optimization
- is a proprietary social platform that helps manage social campaigns across multiple social platforms and optimizes different targeting and or creative tactics to achieve the best results.
|
d. |
Analytics Platform
- is the system that helps the teams to report back to the brands on the results of their campaign investment proving the value for our customers. This is a flexible system that reports all the required data from impression delivered, budget invested, reach on the campaign, engagement with the ads etc. The analytics platform supports our data driven culture – providing business stakeholders full visibility of KPI’s on key processes. Data and reporting are accessed in a self-service manner and pre-build dashboards and reports.
|
|
·
|
Provide a user-friendly monetization solution, that enables them to engage users, by providing quality products and services, easy setup, while creating monetization through, non-intrusive and transparent means;
|
|
·
|
deliver analytics and optimization tools providing insights to our publishers that allow them to extend their reach and increase monetization with a positive return on investment; and
|
|
·
|
offer creative and flexible monetization models with scalable risk and reward, suited to the business of our publishers.
|
2016
|
2017
|
2018
|
||||||||||||||||||||||
Search and other Revenues
|
Advertising Revenues
|
Search and other Revenues
|
Advertising Revenues
|
Search and other Revenues
|
Advertising Revenues
|
|||||||||||||||||||
North America
|
75
|
%
|
89
|
%
|
70
|
%
|
86
|
%
|
65
|
%
|
91
|
%
|
||||||||||||
Europe
|
20
|
%
|
9
|
%
|
24
|
%
|
11
|
%
|
29
|
%
|
8
|
%
|
||||||||||||
Other
|
5
|
%
|
2
|
%
|
6
|
%
|
3
|
%
|
6
|
%
|
1
|
%
|
||||||||||||
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
Square feet
(net) |
Annual Rent
for 2018 in US$ in thousands (net) |
Lease expires
on (not including options) |
||||||||||
New York, New York
|
40,310
|
$
|
1,946
|
2019
|
||||||||
Chicago, Illinois
|
3,984
|
$
|
142
|
2023
|
Square feet
|
Annual Rent
for 2018 in US$ in thousands |
Lease expires
on (not including options) |
||||||||||
Paris, France
|
6,200
|
$
|
450
|
2019
|
Year Ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Advertising
|
$
|
140,111
|
$
|
134,481
|
$
|
125,977
|
||||||
Search and other
|
172,683
|
139,505
|
126,868
|
|||||||||
Total Revenues
|
$
|
312,794
|
$
|
273,986
|
$
|
252,845
|
·
|
A corporate income tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017 (“Rate Reduction”);
|
·
|
The transition of U.S international taxation from a worldwide tax system to a territorial system by providing a 100 percent deduction to an eligible U.S. shareholder on foreign sourced dividends received from a foreign subsidiary (“100% Dividend Received Deduction”);
|
· |
A one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017;
|
· |
Taxation of global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries beginning after December 31, 2017. The GILTI tax imposes a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations; and
|
· |
Taxation of base erosion and anti-abuse (“BEAT”) payments made by U.S. corporations to foreign related parties. The BEAT tax applies only to corporation with average gross domestic sales of $500 million over three successive years.
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Cost of revenues
|
$
|
25,924
|
$
|
24,659
|
$
|
23,757
|
||||||
Customer acquisition costs and media buy
|
140,210
|
130,885
|
128,351
|
|||||||||
Research and development
|
25,221
|
17,189
|
18,884
|
|||||||||
Selling and marketing
|
54,559
|
52,742
|
38,918
|
|||||||||
General and administrative
|
28,827
|
21,911
|
16,450
|
|||||||||
Depreciation and amortization
|
25,977
|
16,591
|
9,719
|
|||||||||
Restructuring costs
|
728
|
-
|
2,075
|
|||||||||
Impairment, net of change in fair value of contingent consideration
|
-
|
85,667
|
-
|
|||||||||
Total Costs and Expenses
|
$
|
301,446
|
$
|
349,644
|
$
|
238,154
|
Year Ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Revenues:
|
||||||||||||
Advertising
|
45
|
%
|
49
|
%
|
50
|
%
|
||||||
Search and other
|
55
|
51
|
50
|
|||||||||
Total revenues
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||
Costs and expenses:
|
||||||||||||
Cost of revenues
|
8
|
%
|
9
|
%
|
9
|
%
|
||||||
Customer acquisition costs and media buy
|
45
|
48
|
51
|
|||||||||
Research and development
|
8
|
6
|
7
|
|||||||||
Selling and marketing
|
17
|
19
|
15
|
|||||||||
General and administrative
|
9
|
8
|
7
|
|||||||||
Depreciation and amortization
|
8
|
6
|
4
|
|||||||||
Restructuring charges
|
(*
|
)
|
(*
|
)
|
1
|
|||||||
Impairment, net of change in fair value of contingent consideration
|
-
|
31
|
-
|
|||||||||
Total costs and expenses
|
96
|
127
|
94
|
|||||||||
Operating income (loss)
|
4
|
(27
|
)
|
6
|
||||||||
Financial expenses, net
|
3
|
2
|
2
|
|||||||||
Income (loss) before taxes on income
|
1
|
(29
|
)
|
4
|
||||||||
Income tax expense (benefit)
|
(*
|
)
|
(3
|
)
|
1
|
|||||||
Loss from continuing operations
|
(1
|
)
|
(26
|
)
|
3
|
|||||||
Loss from discontinuing operations, net
|
1
|
-
|
-
|
|||||||||
Net Income (loss)
|
(*
|
)%
|
(26
|
)%
|
3
|
%
|
||||||
B. |
LIQUIDITY AND CAPITAL RESOURCES
|
Year ended December 31
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Net cash provided by continuing operating activities
|
$
|
33,784
|
$
|
36,013
|
$
|
32,801
|
||||||
Net cash used in discontinued operating activities
|
(3,329
|
)
|
-
|
-
|
||||||||
Net cash provided by (used in) investing activities
|
28,084
|
(4,851
|
)
|
(1,822
|
)
|
|||||||
Net cash used in financing activities
|
(52,607
|
)
|
(23,840
|
)
|
(23,009
|
)
|
||||||
$
|
5,932
|
$
|
7,322
|
$
|
7,970
|
· |
shareholders’ equity of at least $120 million at the end of each quarter (at least $80 million after repayment in full of the Bonds);
|
· |
ratio of net financial indebtedness to twelve-month EBITDA of not more than 2.5 at the end of each quarter (less than 2.25 after repayment in full of the Bonds);
|
· |
twelve-month EBITDA at the end of each quarter of not less than 40% of original aggregate principal amount of the bonds (not applicable after repayment in full of the Bonds); and
|
· |
maintenance at all times of cash and cash equivalents in an amount equal to the lesser of (i) $10 million and (ii) the amount of the following payment of principal and interest.
|
· |
shareholders’ equity of at least $120 million at the end of each quarter;
|
· |
ratio of net financial indebtedness to twelve-month EBITDA of not more than 2.5 at the end of each quarter;
|
· |
twelve-month EBITDA at the end of each quarter of not less than 40% of original aggregate principal amount of the bonds; and
|
· |
cash and cash equivalents of at least $10 million (and, six months prior to each principal payment date, a sufficient amount to repay the principal and interest then due).
|
1. |
The digital advertising environment is very crowded and consumers suffer from over exposure to advertising promotions. This in turn has brought on a certain level of blindness to advertising, decreasing their effectiveness and value to advertisers. We are therefore concentrating on unique stand-out quality ad formats with great creative execution that grabs the attention of consumers, increasing the effectiveness of the ad and ultimately the value to advertisers.
|
2. |
The digital advertising environment is also complex and fragmented. As a result, it is increasingly difficult for advertisers, including brands and agencies, as well as investors, to discern the difference between the offerings, and this situation requires that advertisers to maintain only small number of relationships which provide a comprehensive and holistic solution and service. In addition, advertisers are looking for clean, safe and transparent solutions. We are attempting to address these needs in our various revenue streams by providing robust, scalable and differentiated products across multiple platforms. Our solution offers a full suite of services for the advertising brand and agency, including the entire advertising process from creative through analytic data collection and processing which is also utilized through programmatic capabilities which has an increasing demand. Our solution also includes a technology platform for buying media on social and mobile platforms which helps optimize the money spent by agencies and advertisers. In turn, we also provide the publisher a solution for creating new advertising inventory and increasing their revenue.
|
3. |
Our search monetization revenue is predominantly within the desktop computers environment. The transition in recent years of consumer consumption of applications, services and content from desktop towards mobile platforms has accelerated and, as a result, an increasing share of advertising campaigns are channeled towards mobile platforms resulting in fewer consumer software downloadable products are being developed. To address this trend, we have shifted the growth focus of all parts of this business away from downloadable desktop software towards the monetization of other search assets.
|
4. |
In past years the browser companies, particularly Google and Microsoft, as well as others, have been instituting policy changes, regulations and technologies that is making it increasingly difficult to change a browser’s settings even with user consent, including the ability to change a browser’s default search settings. Changing such settings has been a major part of the Company’s monetization model and until now we have been successful in dealing with these measures, within the framework allowed by these companies We continue to believe, as supported by the level of revenues over the last couple of years, that as the market continues to consolidate around accepted marketing practices, there remains sufficient business at a level sufficient to generate significant revenues and profits.
|
Payments Due by Period
(****
)
|
||||||||||||||||||||
Contractual Commitments as of December 31, 2018
|
Total
|
Less than
1 year |
1-3 Years
|
3-5 Years
|
More than
5 Years |
|||||||||||||||
Long-term debt, including current portion
(
*
)
|
$
|
25,000
|
$
|
8,333
|
$
|
16,667
|
$
|
-
|
$
|
-
|
||||||||||
Accrued severance pay
(**
)
|
1,676
|
-
|
-
|
-
|
1,676
|
|||||||||||||||
Uncertain tax positions (
ASC-740)
|
3,487
|
-
|
-
|
-
|
3,487
|
|||||||||||||||
Convertible debt
(
*
)
|
15,313
|
7,657
|
7,656
|
-
|
-
|
|||||||||||||||
Payment obligation related to acquisitions (***)
|
1,813
|
1,813
|
-
|
-
|
-
|
|||||||||||||||
Operating leases
|
36,520
|
5,102
|
11,753
|
9,743
|
9,922
|
|||||||||||||||
Total
|
$
|
80,322
|
$
|
22,904
|
$
|
36,076
|
$
|
9,743
|
$
|
11,598
|
||||||||||
(*) |
Long-term debt and convertible debt obligations represent maximum repayment of principal and do not include interest payments due thereunder.
|
(**) |
Prior notice to our executive employees as well as severance pay obligations to our Israeli employees, as required under Israeli labor law and as set forth in employment agreements, are payable only upon termination, retirement or death of the respective employee and are for the most part covered by ongoing payments to funds to cover such obligations.
|
(***)
|
Payment obligation related to acquisitions, represents the maximum cash payments we will be obligated to make under consideration arrangements with former owners of certain entities we acquired.
|
Name
|
Age
|
Position
|
|||
Eyal Kaplan*
(1)(2)
|
59
|
Chairman of the Board of Directors
|
|||
Doron Gerstel
|
58
|
Chief Executive Officer; Director
|
|||
Maoz Sigron
|
41
|
Chief Financial Officer
|
|||
Dror Erez
|
49
|
Director
|
|||
Sarit Firon*
(1)(3)(4)
|
52
|
External Director
|
|||
Rami Schwartz*
(1) (3)
|
61
|
Director
|
|||
Daniel E. Aks
*
(2)(3)(4)
|
59
|
External Director
|
|||
Michael Vorhaus*
(2) (4)
|
61
|
Director
|
|||
Miki Kolko
|
56
|
Chief Technology Officer
|
|||
Tal Jacobson
|
44
|
General Manager, CodeFuel
|
|||
Ran Cohen
|
48
|
Senior Vice President, Product
|
|||
* |
“Independent director” under the Nasdaq Listing Rules.
|
(1) |
Member of the investment committee.
|
(2) |
Member of the nominating and governance committee.
|
(3) |
Member of the compensation committee.
|
(4) |
Member of the audit committee.
|
Name and Principal Position
(1)
|
Salary Cost
(2)
|
Bonus
(3)
|
Equity-Based
Compensation
(4)
|
Total
|
||||||||||||
Doron Gerstel, Chief Executive Officer
|
438
|
290
|
498
|
1,226
|
||||||||||||
Michael Pallad, former President, Undertone
|
671
|
121
|
231
|
1,023
|
||||||||||||
Mike Glover, former General Manager, CodeFuel Business Unit
|
440
|
350
|
133
|
923
|
||||||||||||
Ran Cohen, Senior Vice President, Product
|
455
|
110
|
42
|
607
|
||||||||||||
Miki Kolko, Chief Technology Officer
|
303
|
67
|
187
|
557
|
(1) |
Unless otherwise indicated herein, all Covered Executives are employed on a full-time (100%) basis.
|
(2) |
Salary cost includes the Covered Executive’s gross salary plus payment of social benefits made by the Company on behalf of such Covered Executive. Such benefits may include, to the extent applicable to the Covered Executive, payments, contributions and/or allocations for savings funds (
e.g.,
Managers’ Life Insurance Policy), education funds (referred to in Hebrew as “
keren hishtalmut
”), pension, severance, risk insurances (
e.g.,
life, or work disability insurance), payments for social security and tax gross-up payments, vacation, car, medical insurances and benefits, phone, convalescence or recreation pay and other benefits and perquisites consistent with the Company’s policies.
|
(3) |
Annual bonuses granted to the Covered Executives based on formulas set forth in the annual compensation plan approved by the Board of Directors.
|
(4) |
Represents the equity-based compensation expenses recorded in our consolidated financial statements for the year ended December 31, 2018. Such numbers are based on the option grant date fair value in accordance with accounting guidance for equity-based compensation and does not necessarily reflect the cash proceeds to be received by the applicable officer upon the vesting and sale of the underlying shares. For a discussion of the assumptions used in reaching this valuation, see Note 2 to our Financial Statements.
|
|
(a)
|
A time-limited increase of the base monthly salary by a gross monthly amount of NIS 36,270, following of which the gross monthly salary will be NIS 131,270. Subject to the approval of the shareholders, Mr. Gerstel’s amendment of the base monthly salary will become effective as of January 15, 2019 and will continue for a period of one (1) year following the date of the shareholders meeting;
|
|
|
|
|
(b)
|
An annual bonus of up to 12 monthly salaries (instead of 9 monthly salaries), subject to performance matrix to be approved by the Company’s compensation committee and board of directors on an annual basis, while up to 25% of such annual bonus may be discretionary and not subject to measurable performance indexes; and
|
|
(c)
|
A one-time grant of options to purchase 150,000 Ordinary Shares, with a 3-year vesting schedule (the options will vest on a quarterly basis in equal tranches over a three-year period), commencing on January 15, 2019 (in this section (c), the “Option”). The exercise price per share for the shares underlying the Option will be as follows:
(i) the first 75,000 of shares underlying the Option will be exercised at a price per share equal to $2.87, which is the weighted average closing price of our ordinary shares on Nasdaq in the last 90 days prior to the date of approval of the grant by our board of directors on February 12, 2019, as reported by the Nasdaq Stock Market (the “Base PPS”)
;
and (ii) the remaining 75,000 of shares underlying the Option will be exercised at a price per share equal to $3.30 which is a price15% higher than the Base PPS. The Option will be subject to the terms and conditions of our Equity Incentive Plan, as amended (in this section (c), the “Plan”) and the terms of the option agreement to be issued to Mr. Gerstel pursuant to the Plan, which Mr. Gerstel will be required to sign as a condition to receiving the Option.
The vesting schedule of the Option will fully accelerate in accordance of the acceleration provisions of the options previously granted to Mr.
Gerstel (with change in the board event measured as of the date of the shareholders meeting).
|
· |
establishing our policies and overseeing the performance and activities of our chief executive officer;
|
· |
convening shareholders’ meetings;
|
· |
approving our financial statements;
|
· |
determining our plans of action, principles for funding them and the priorities among them, our organizational structure and examining our financial status; and
|
· |
issuing securities and distributing dividends.
|
December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Cost of sales
|
87
|
94
|
76
|
|||||||||
Research and development
|
141
|
117
|
86
|
|||||||||
Selling and marketing
|
197
|
167
|
141
|
|||||||||
General and administration
|
110
|
86
|
60
|
|||||||||
Total
|
535
|
464
|
363
|
Name
|
Number of Ordinary Shares Beneficially Owned
|
Percentage of Ordinary Shares Outstanding
|
||||||
Dror Erez
(1)
|
1,558,546
|
6.0
|
%
|
|||||
All directors and officers as a group (11 persons)
(2)
|
2,104,360
|
8.1
|
%
|
Name of Beneficial Owner
|
Shares Beneficially Owned
|
|||||||
Number
|
Percentage
|
|||||||
Benchmark Israel II, L.P.
(1)
|
3,096,296
|
11.90
|
%
|
|||||
Zack and Orli Rinat
(2)
|
2,161,449
|
8.31
|
%
|
|||||
EA2K Ltd.
(3)
|
1,800,000
|
6.92
|
%
|
|||||
Dror Erez
(4)
|
1,538,547
|
5.9
2
|
%
|
|||||
Ronen Shilo
(5)
|
1,462,644
|
5.62
|
%
|
|||||
J.P. Morgan Investment Management Inc.
(6)
|
1,401,022
|
5.39
|
%
|
(1)
|
Based solely upon, and qualified in its entirety with reference to, a Schedule 13G/A filed with the SEC on February 11, 2019, by Benchmark Israel II, L.P. (“BI II”) and affiliates. BCPI Partners II, L.P. (“BCPI-P”), the general partner of BI II, may be deemed to have sole power to vote and dispose of the 3,096,296 Ordinary Shares directly held by BI II. BCPI Corporation II (“BCPI-C”), the general partner of BCPI-P, may be deemed to have sole power to vote and dispose of the shares directly held by BI II. Michael A. Eisenberg and Arad Naveh, the directors of BCPI-C, may be deemed to have shared power to vote and dispose of the shares directly held by BI II.
94,294 Ordinary Shares are held in nominee form for the benefit of persons associated with BCPI-C. BCPI-P may be deemed to have sole power to vote and dispose of these shares, BCPI-C may be deemed to have sole power to vote and dispose of these shares and Messrs. Eisenberg and Naveh may be deemed to have shared power to vote and dispose of these shares. The Address of BI II is 2965 Woodside Road Woodside, California 94062s.
|
(2) |
Based solely upon, and qualified in its entirety with reference to, a Schedule 13G filed with the SEC on January 16, 2014, by Zack and Orli Rinat. The Ordinary Shares are held by Zack Rinat and Orli Rinat as community property. The address of Zack and Orli Rinat is 26319 Esperanza Drive Los Altos Hills, CA
.
|
(3)
|
Based solely upon, and qualified in its entirety with reference to, a Schedule 13G/A filed with the SEC on January 30, 2019, by
EA2K Ltd.
(“EA2K”). Baruch Erlich controls EA2K, and by reason of such control may be deemed to have shared power to vote and dispose of the 1,800,000 Ordinary Shares directly held by EA2K. The Address of each ofEA2K and Baruch Erlich is
12
Mevo Habustan St. Har Adar 90836, Israel.
|
(4) |
Based solely upon, and qualified in its entirety with reference to, a Schedule 13D/A filed with the SEC on February 20, 2019. Mr. Erez serves as a director of the Company. The Address of Mr. Erez is Dror Erez c/o Conduit Ltd., 2 Ilan Ramon St. Ness-Ziona 7403635, Israel
.
|
(5) |
Based solely upon, and qualified in its entirety with reference to, a Schedule 13D/A filed with the SEC on February 20, 2019. The Address of Mr. Shilo is Ronen Shilo c/o Conduit Ltd., 2 Ilan Ramon St. Ness-Ziona 7403635, Israel
.
|
(6) |
Based solely upon, and qualified in its entirety with reference to, a Schedule 13G/A filed with the SEC on December 11, 2017, by JPMIM, DGF, and Condor. Consists of 1,401,022 Ordinary Shares directly held by
Project Condor LLC (“
Condor
”). PEG Digital Growth Fund L.P. (“
DGF
”) owns 98.75
% of the membership interests of Condor. As the holder of the majority of the membership interests of Condor, DGF manages Condor and has shared voting or dispositive power over the 1,401,022 Ordinary Shares
held by Condor. J.P. Morgan Investment Management Inc. (“
JPMIM
”) serves
as investment advisor to DGF. The address for JPMIM, DGF and Condor is 320 Park Avenue, New York, New York 1002.
|
· |
amend our articles of association (except as set forth below) or our memorandum of association;
|
· |
make changes in our capital structure such as a reduction of capital, increase of capital or share split, merger or consolidation;
|
· |
authorize a new class of shares;
|
· |
elect directors, other than external directors; or
|
· |
appoint auditors
|
· |
the majority must include at least a majority of the shares of the voting shareholders who have no personal interest in the transaction voted at the meeting; or
|
· |
the total shareholdings of those who have no personal interest in the transaction and who vote against the transaction must not represent more than 2% of the aggregate voting rights in the company.
|
· |
any amendment to the articles of association;
|
· |
an increase in the company’s authorized share capital;
|
· |
a merger; or
|
· |
approval of related party transactions that require shareholder approval.
|
· |
any monetary liability whether imposed on him or her in favor of another person pursuant to a judgment, a settlement or an arbitrator’s award approved by a court;
|
· |
reasonable litigation expenses, including attorneys’ fees, incurred by him or her as a result of an investigation or proceedings instituted against him or her by an authority empowered to conduct an investigation or proceedings, which are concluded either (i) without the filing of an indictment against the office holder and without the levying of a monetary obligation in lieu of criminal proceedings upon the office holder, or (ii) without the filing of an indictment against the office holder but with levying a monetary obligation in substitute of such criminal proceedings upon the office holder for a crime that does not require proof of criminal intent;
|
· |
reasonable litigation expenses, including attorneys’ fees, in proceedings instituted against him or her by the company, on the company’s behalf or by a third-party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for a crime that does not require proof of criminal intent, or in connection with an administrative enforcement proceeding or financial sanction instituted against him; and
|
· |
reasonable litigation expenses, including attorneys’ fees, incurred by him or her as a result of an administrative enforcement proceeding instituted against him or her.
|
· |
Form F-3 Shelf Registration Rights
. We were required to file a “shelf” registration statement on Form F-3, as soon as practicable following the filing of our 2013 annual report, to register the resale from time to time by the holders thereof whose resale of shares would otherwise be subject to volume limitations set forth in SEC Rule 144. The holders of an aggregate of approximately [15.4] million ordinary shares have requested to include such shares in such registration statement, including Ronen Shilo, Dror Erez, Benchmark Israel, Zack and Orli Rinat, Project Condor and Roy Gen. We undertook to use our commercially reasonable efforts to maintain the effectiveness of the registration statement until the earliest of (i) five years following effectiveness, (ii) the resale of all the shares covered thereby and (iii) with respect to any shareholder, the ability of such shareholder to sell all of its shares under SEC Rule 144 without any volume limitations. Accordingly, we filed a shelf registration statement on May 8, 2014, and it was declared effective on August 7, 2014. For a period of three years following the expiration of such registration statement, at the request of holders whose resale of shares would otherwise be subject to volume limitations under SEC Rule 144, we would be required to file additional shelf registration statements and maintain the effectiveness thereof until the disposition of all the shares covered thereby. Such shelf registration rights are limited to four requests during such three-year period.
|
· |
Piggyback Registration Rights
. If we effect a registered offering of securities, the holders of registrable securities consisting of at least 3% of our outstanding share capital at the relevant time (or 2% in the case of W Capital Engage, L.P.) or a holder whose resale of registrable securities would otherwise be subject to volume limitations set forth in SEC Rule 144 will have the right to include its shares in the registration effected pursuant to such offering. The number of piggyback registrations is unlimited.
|
· |
All reasonable expenses incurred in connection with any such registrations, other than underwriting discounts and commissions, will be borne by us. We are subject to customary indemnification undertakings with respect to any registration effected pursuant to the Registration Rights Undertaking.
|
· |
shareholders’ equity of at least $120 million at the end of each quarter (at least $80 million after repayment in full of the Bonds);
|
· |
ratio of net financial indebtedness to twelve-month EBITDA of not more than 2.5 at the end of each quarter (less than 2.25 after repayment in full of the Bonds);
|
· |
twelve-month EBITDA at the end of each quarter of not less than 40% of original aggregate principal amount of the bonds (not applicable after repayment in full of the Bonds); and
|
· |
maintenance at all times of cash and cash equivalents in an amount equal to the lesser of (i) $10 million and (ii) the amount of the following payment of principal and interest.
|
· |
amortization of the cost of purchased know-how and patents, which are used for the development or advancement of the company, over an eight-year period;
|
· |
accelerated depreciation rates on equipment and buildings;
|
· |
under specified conditions, an election to file consolidated tax returns with additional related Israeli Industrial Companies; and
|
· |
expenses related to a public offering are deductible in equal amounts over three years.
|
· |
an individual citizen or resident of the United States;
|
· |
a corporation (or entity classified as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state of the United States or the District of Columbia;
|
· |
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
|
· |
a trust if (i) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (ii) the trust has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a U.S. person.
|
· |
insurance companies;
|
· |
dealers in stocks, securities or currencies;
|
· |
financial institutions and financial services entities;
|
· |
regulated investment companies or real estate investment trusts;
|
· |
grantor trusts;
|
· |
S corporations;
|
· |
persons that acquire ordinary shares upon the exercise of employee stock options or otherwise as compensation;
|
· |
tax-exempt organizations;
|
· |
persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument;
|
· |
individual retirement and other tax-deferred accounts;
|
· |
certain former citizens or long-term residents of the United States;
|
· |
persons (other than Non-U.S. Holders) having a functional currency other than the U.S. dollar; and
|
· |
persons that own directly, indirectly or constructively 10% or more of our voting shares.
|
(a) |
the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market in the United States, or
|
(b) |
that corporation is eligible for the benefits of a comprehensive income tax treaty with the United States which includes an information exchange program and is determined to be satisfactory by the United States Secretary of the Treasury. The Internal Revenue Service has determined that the United States-Israel Tax Treaty is satisfactory for this purpose.
|
· |
the item is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States and (i) in the case of a resident of a country which has a treaty with the United States, the item is attributable to a permanent establishment, or (ii) in the case of an individual, the item is attributable to a fixed place of business in the United States; or
|
· |
the Non-U.S. Holder is an individual who holds the ordinary shares as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition, and certain other conditions are met.
|
U.S. dollars
|
NIS
|
Other Currencies
|
Total
|
|||||||||||||
In thousands of U.S. dollars
|
||||||||||||||||
Current assets
|
96,510
|
2,773
|
5,509
|
103,892
|
||||||||||||
Long-term assets
|
4,978
|
63
|
317
|
5,357
|
||||||||||||
Current liabilities
|
(61,840
|
)
|
(11,354
|
)
|
(3,920
|
)
|
(77,114
|
)
|
||||||||
Long-term liabilities
|
(20,809
|
)
|
(8,507
|
)
|
(1,235
|
)
|
(30,552
|
)
|
||||||||
Total
|
17,939
|
(17,025
|
)
|
670
|
1,584
|
Notional
Amount |
Fair Value
|
|||||||
In thousands of U.S. dollars
|
||||||||
Cross currency SWAP
|
15,313
|
860
|
||||||
Zero-cost collar contracts to hedge payroll expenses
|
563
|
(11
|
)
|
Year Ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Average rate for period
|
3.840
|
3.599
|
3.597
|
|||||||||
Rate at year-end
|
3.845
|
3.467
|
3.748
|
(a) |
Disclosure controls and procedures
|
(b) |
Management annual report on internal control over financial reporting
|
(c) |
Attestation Report of the Registered Public Accounting Firm
|
(d) |
Changes in internal control over financial reporting
|
2017
|
2018
|
|||||||
Audit Fees
|
$
|
707
|
$
|
480
|
||||
Tax Fees
|
111
|
35
|
||||||
Audit Related fees
|
53
|
18
|
||||||
Total
|
$
|
871
|
$
|
533
|
· |
the securities issued amount to 20% or more of our outstanding voting rights before the issuance;
|
· |
some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and
|
· |
the transaction will increase the relative holdings of a shareholder that holds 5% or more of our outstanding share capital or voting rights or will cause any person to become, as a result of the issuance, a holder of more than 5% of our outstanding share capital or voting rights.
|
Page
|
|
F-2
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-8
|
|
F-9
|
|
F-11
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
Ordinary shares of ILS 0.03 par value - Authorized:
40,000,000 and
43,333,333 shares
at December 31, 2017 and 2018, respectively
; Issued: 25,965,360 and 25,965,527 shares at December 31, 2017 and 2018, respectively; Outstanding: 25,850,021 and 25,850,188 shares at December 31, 2017 and 2018, respectively
|
211
|
211
|
||||||
Additional paid-in capital
|
236,975
|
239,693
|
||||||
Treasury shares at cost (115,339 shares at December 31, 2017 and 2018)
|
(1,002
|
)
|
(1,002
|
)
|
||||
Accumulated other comprehensive income
|
532
|
142
|
||||||
Accumulated deficit
|
(98,384
|
)
|
(90,263
|
)
|
||||
Total Shareholders' Equity
|
138,332
|
148,781
|
||||||
Total Liabilities and Shareholders' Equity
|
$
|
274,027
|
$
|
256,446
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Revenues:
|
||||||||||||
Advertising
|
$
|
140,111
|
$
|
134,481
|
$
|
125,977
|
||||||
Search and other
|
172,683
|
139,505
|
126,868
|
|||||||||
Total Revenues
|
312,794
|
273,986
|
252,845
|
|||||||||
Costs and Expenses:
|
||||||||||||
Cost of revenues
|
25,924
|
24,659
|
23,757
|
|||||||||
Customer acquisition costs and media buy
|
140,210
|
130,885
|
128,351
|
|||||||||
Research and development
|
25,221
|
17,189
|
18,884
|
|||||||||
Selling and marketing
|
54,559
|
52,742
|
38,918
|
|||||||||
General and administrative
|
28,827
|
21,911
|
16,450
|
|||||||||
Depreciation and amortization
|
25,977
|
16,591
|
9,719
|
|||||||||
Impairment, loss of goodwill and intangibles
|
-
|
85,667
|
-
|
|||||||||
Restructuring charges
|
728
|
-
|
2,075
|
|||||||||
Total Costs and Expenses
|
301,446
|
349,644
|
238,154
|
|||||||||
Income (Loss) from Operations
|
11,348
|
(75,658
|
)
|
14,691
|
||||||||
Financial expenses, net
|
8,288
|
5,922
|
3,794
|
|||||||||
Income (Loss) before Taxes on Income
|
3,060
|
(81,580
|
)
|
10,897
|
||||||||
Taxes on income (benefit)
|
212
|
(8,826
|
)
|
2,776
|
||||||||
Net Income (Loss) from Continuing Operations
|
2,848
|
(72,754
|
)
|
8,121
|
||||||||
Net loss from discontinued operations
|
2,647
|
-
|
-
|
|||||||||
Net Income (Loss)
|
$
|
201
|
$
|
(72,754
|
)
|
$
|
8,121
|
|||||
Net Earnings (Loss) per Share - Basic:
|
||||||||||||
Continuing operations
|
$
|
0.11
|
$
|
(2.81
|
)
|
$
|
0.31
|
|||||
Discontinued operations
|
$
|
(0.10
|
)
|
$
|
-
|
$
|
-
|
|||||
Net income (Loss)
|
$
|
0.
01
|
|
$
|
(2.81
|
)
|
$
|
0.31
|
||||
Net Earnings (Loss) per Share – Diluted:
|
||||||||||||
Continuing operations
|
$
|
0.11
|
$
|
(2.81
|
)
|
$
|
0.31
|
|||||
Discontinued operations
|
$
|
(0.
10
|
)
|
$
|
-
|
$
|
-
|
|||||
Net income (Loss)
|
$
|
0.
01
|
|
$
|
(2.81
|
)
|
$
|
0.31
|
||||
Weighted average number of shares – Basic:
|
||||||||||||
Continuing and Discontinued operations
|
25,520,151
|
25,849,724
|
25,850,067
|
|||||||||
Weighted average number of shares – Diluted:
|
||||||||||||
Continuing and Discontinued operations
|
25,557,934
|
25,849,724
|
25,855,225
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Net income (loss)
|
$
|
201
|
$
|
(72,754
|
)
|
$
|
8,121
|
|||||
Other comprehensive income (loss):
|
||||||||||||
Change in foreign currency translation adjustment
|
521
|
717
|
(167
|
)
|
||||||||
Cash Flow Hedge:
|
||||||||||||
Unrealized gain (loss) from cash flow hedges
|
175
|
605
|
(429
|
)
|
||||||||
Less: reclassification adjustment for net gain (loss) included in net income (loss)
|
(167
|
)
|
(525
|
)
|
206
|
|||||||
Net change
|
8
|
80
|
(223
|
)
|
||||||||
Other comprehensive income (loss)
|
529
|
797
|
(390
|
)
|
||||||||
Comprehensive income (loss)
|
$
|
730
|
$
|
(71,957
|
)
|
$
|
7,731
|
Common shares
|
Additional paid-in capital
|
Accumulated Other Comprehensive income (loss)
|
Retained earnings (Accumulated deficit)
|
Treasury shares
|
Total shareholders’ equity
|
|||||||||||||||||||||||
Number of Shares
|
$
|
$
|
$
|
$
|
$
|
$
|
||||||||||||||||||||||
Balance as of December 31, 2015
|
25,270,495
|
206
|
227,258
|
(794
|
)
|
(25,831
|
)
|
(1,002
|
)
|
199,837
|
||||||||||||||||||
Issuance of shares related to acquisitions
|
96,993
|
1
|
674
|
-
|
-
|
-
|
675
|
|||||||||||||||||||||
Issuance of shares related to price adjustment of private placement
|
260,993
|
2
|
(2
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||
Share-based compensation
|
-
|
-
|
6,900
|
-
|
-
|
-
|
6,900
|
|||||||||||||||||||||
Exercise of share options and vesting of restricted share units
|
112,540
|
1
|
1
|
-
|
-
|
-
|
2
|
|||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
529
|
-
|
-
|
529
|
|||||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
201
|
-
|
201
|
|||||||||||||||||||||
Balance as of December 31, 2016
|
25,741,021
|
210
|
234,831
|
(265
|
)
|
(25,630
|
)
|
(1,002
|
)
|
208,144
|
||||||||||||||||||
Share-based compensation
|
-
|
-
|
2,144
|
-
|
-
|
-
|
2,144
|
|||||||||||||||||||||
Exercise of share options and vesting of restricted share units
|
109,000
|
1
|
-
|
-
|
-
|
-
|
1
|
|||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
797
|
-
|
-
|
797
|
|||||||||||||||||||||
Net income (loss)
|
-
|
-
|
-
|
-
|
(72,754
|
)
|
-
|
(72,754
|
)
|
|||||||||||||||||||
Balance as of December 31, 2017
|
25,850,021
|
211
|
236,975
|
532
|
(98
,
384
|
)
|
(1,002
|
)
|
138
,
332
|
|||||||||||||||||||
Share-based compensation
|
-
|
-
|
2,718
|
-
|
-
|
-
|
2,718
|
|||||||||||||||||||||
Exercise of share options and vesting of restricted share units
|
167
|
-
|
*
|
)
|
-
|
-
|
-
|
*
|
) | |||||||||||||||||||
Other comprehensive income (loss)
|
-
|
-
|
-
|
(390
|
)
|
-
|
-
|
(390
|
)
|
|||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
8,121
|
-
|
8,121
|
|||||||||||||||||||||
Balance as of December 31, 2018
|
25,850,188
|
211
|
239,693
|
142
|
(90,263
|
)
|
(1,002
|
)
|
148
,
781
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Operating activities:
|
||||||||||||
Net income (loss)
|
$
|
201
|
$
|
(72,754
|
)
|
$
|
8,121
|
|||||
Loss from discontinued operations, net
|
(2,647
|
)
|
-
|
-
|
||||||||
Net income (loss) from continuing operations
|
2,848
|
(72
,
754
|
)
|
8,121
|
||||||||
Adjustments required to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
25,977
|
16,591
|
9,719
|
|||||||||
Impairment of intangible assets and goodwill
|
-
|
85,667
|
-
|
|||||||||
Restructuring costs related to impairment of property and equipment
|
254
|
-
|
462
|
|||||||||
Share-based compensation expense
|
6,844
|
2,112
|
2,718
|
|||||||||
Foreign currency translation
|
980
|
83
|
3
|
|||||||||
Accretion of payment obligation related to acquisition
|
320
|
43
|
-
|
|||||||||
Accrued interest, net
|
406
|
475
|
1,005
|
|||||||||
Deferred taxes, net
|
(3,268
|
)
|
(8,877
|
)
|
335
|
|||||||
Accrued severance pay, net
|
214
|
801
|
(783
|
)
|
||||||||
Change in payment obligation related to acquisitions
|
983
|
-
|
-
|
|||||||||
Fair value revaluation - convertible debt
|
1,350
|
3,785
|
(1,585
|
)
|
||||||||
Loss from sale of property and equipment
|
149
|
-
|
-
|
|||||||||
Net changes in operating assets and liabilities:
|
||||||||||||
Accounts receivable, net
|
(5,333
|
)
|
8,888
|
7,423
|
||||||||
Prepaid expenses and other current assets
|
8,613
|
(3,241
|
)
|
9,451
|
||||||||
Accounts payable
|
(1,702
|
)
|
1,106
|
(1,066
|
)
|
|||||||
Accrued expenses and other liabilities
|
(2,486
|
)
|
1,429
|
(1,524
|
)
|
|||||||
Deferred revenues
|
(2,365
|
)
|
(95
|
)
|
(1,478
|
)
|
||||||
Net cash provided by continuing operating activities
|
33,784
|
36,013
|
32,801
|
|||||||||
Net cash used in discontinued operating activities
|
(3,329
|
)
|
-
|
-
|
||||||||
Net cash provided by operating activities
|
$
|
30,455
|
$
|
36,013
|
$
|
32,801
|
||||||
Investing activities:
|
||||||||||||
Purchases of property and equipment
|
$
|
(1,504
|
)
|
$
|
(1,606
|
)
|
$
|
(2,038
|
)
|
|||
Proceeds from sale of property and equipment
|
151
|
10
|
59
|
|||||||||
Capitalization of development costs
|
(4,591
|
)
|
(5,756
|
)
|
(1,756
|
)
|
||||||
Short-term deposits, net
|
34,028
|
2,501
|
1,913
|
|||||||||
Net cash provided by (used in) investing activities
|
$
|
28,084
|
$
|
(4,851
|
)
|
$
|
(1,822
|
)
|
||||
Financing activities:
|
||||||||||||
Exercise of share options and restricted share units
|
$
|
2
|
$
|
1
|
$
|
-
|
||||||
Payments made in connection with acquisition
|
(29,537
|
)
|
(2,551
|
)
|
(3,333
|
)
|
||||||
Proceeds from short-term loans
|
40,000
|
-
|
-
|
|||||||||
Proceeds from long-term loans
|
-
|
5,000
|
25,000
|
|||||||||
Repayment of short-term loans
|
(46,000
|
)
|
(7,000
|
)
|
-
|
|||||||
Repayment of convertible debt
|
(7,620
|
)
|
(7,901
|
)
|
(8,167
|
)
|
||||||
Repayment of long-term loans
|
(9,452
|
)
|
(11,389
|
)
|
(36,509
|
)
|
||||||
Net cash used in continuing financing activities
|
$
|
(52,607
|
)
|
$
|
(23,840
|
)
|
$
|
(23,009
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(136
|
)
|
287
|
78
|
||||||||
Net increase in cash and cash equivalents and restricted cash
|
$
|
9,125
|
$
|
7,609
|
$
|
8,048
|
||||||
Decrease in cash and cash equivalents and restricted cash- discontinued activities
|
(3,329
|
)
|
-
|
|||||||||
Cash and cash equivalents and restricted cash at beginning of year
|
19,350
|
25,146
|
32,755
|
|||||||||
Cash and cash equivalents and restricted cash at end of year
|
$
|
25,146
|
$
|
32,755
|
$
|
40,803
|
Year ended December 31
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheet
|
||||||||||||
Cash and cash equivalents
|
$
|
23,962
|
$
|
31,567
|
$
|
39,109
|
||||||
Restricted cash included in Long-term interest-bearing bank deposits
|
1,184
|
1,188
|
1,694
|
|||||||||
Total cash, cash equivalents, and restricted cash
|
$
|
25,146
|
$
|
32,755
|
$
|
40,803
|
||||||
Supplemental Disclosure of Cash Flow Activities:
|
||||||||||||
Cash paid during the year for:
|
||||||||||||
Income taxes
|
$
|
3,976
|
$
|
2,702
|
$
|
1,256
|
||||||
Interest
|
$
|
5,678
|
$
|
4,619
|
$
|
3,567
|
||||||
Non-cash investing and financing activities:
|
||||||||||||
Issuance of shares in connection with acquisitions
|
$
|
673
|
$
|
-
|
$
|
-
|
||||||
Issuance of shares in private placement
|
$
|
2
|
$
|
-
|
$
|
-
|
||||||
Share-based compensation capitalized as part of capitalization of software development costs
|
$
|
14
|
$
|
31
|
$
|
-
|
||||||
Purchase of property and equipment on credit
|
$
|
322
|
$
|
-
|
$
|
1
|
a. |
Perion Network Ltd. ("Perion") and its wholly-owned subsidiaries (collectively referred to as the "Company"), is a global technology company that delivers advertising solutions to brands and publishers. Perion is committed to providing data-driven execution, from high-impact ad formats to branded search and a unified social and mobile programmatic platform.
|
b. |
In March 2016, the Company decided to discontinue the operations of the mobile self-serve side of the business and sell the mobile engagement business. Certain parts of the mobile marketing platform were redeployed so that it no longer functions as an independent business. In August 2016, the Company completed the sale of the mobile engagement business. Accordingly, the statements of income and statements of cash flows, related to the mobile self-serve and mobile engage operations are classified as discontinued operations for all periods presented.
|
%
|
|
Computers and peripheral equipment
|
33
|
Office furniture and equipment
|
6 - 15
|
Year ended December 31
|
|||||
2016
|
2017
|
2018
|
|||
Risk-free interest rate
|
0.46% - 1.73%
|
0.81% - 2.08%
|
1.50% - 3.00%
|
||
Expected volatility
|
49.49% - 53.54%
|
52% - 56%
|
48% - 57%
|
||
Early exercise factor
|
150% - 200%
|
150% - 200%
|
150% - 200%
|
||
Forfeiture rate post vesting
|
5% - 20%
|
0% - 23%
|
0% - 34%
|
||
Dividend yield
|
0%
|
0%
|
0%
|
· |
Level 1
-
Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.
|
· |
Level 2
- Other inputs that are directly or indirectly observable in the market place.
|
· |
Level 3
- Unobservable inputs which are supported by little or no market activity.
|
Year ended December 31,
|
||||
2016 (*)
|
|
|||
Costs and expenses
|
5,192
|
|||
Impairment of intangible assets and goodwill
|
-
|
|||
Gain on disposal of the discontinued operations
|
(1,750
|
)
|
||
Loss before taxes on income
|
(3,442
|
)
|
||
Taxes on income
|
795
|
|||
Total net loss on discontinued operations
|
$
|
(2,647
|
)
|
NOTE 3: |
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
Fair value measurements using input type
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Assets:
|
||||||||||||||||
Derivative assets
|
$
|
-
|
$
|
871
|
$
|
-
|
$
|
871
|
||||||||
Total financial assets
|
$
|
-
|
$
|
871
|
$
|
-
|
$
|
871
|
||||||||
Liabilities:
|
||||||||||||||||
Derivative liabilities
|
-
|
153
|
-
|
153
|
||||||||||||
Convertible debt
|
15,453
|
-
|
-
|
15,453
|
||||||||||||
Total financial liabilities
|
$
|
15,453
|
$
|
153
|
$
|
-
|
$
|
15,606
|
Fair value measurements using input type
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Assets:
|
||||||||||||||||
Derivative assets
|
$
|
-
|
$
|
3,486
|
$
|
-
|
$
|
3,486
|
||||||||
Total financial assets
|
$
|
-
|
$
|
3,486
|
$
|
-
|
$
|
3,486
|
||||||||
Liabilities:
|
||||||||||||||||
Convertible debt
|
25,353
|
-
|
-
|
25,353
|
||||||||||||
Total financial liabilities
|
$
|
25,353
|
$
|
-
|
$
|
-
|
$
|
25,353
|
NOTE 4: |
ACQUISITIONS
|
a. |
Interactive Holding Corp.
|
b. |
Make Me Reach SAS
|
NOTE 5: |
PROPERTY AND EQUIPMENT, NET
|
December 31,
|
||||||||
2017
|
2018
|
|||||||
Cost:
|
||||||||
Computers and peripheral equipment
|
$
|
10,295
|
$
|
7,004
|
||||
Office furniture and equipment
|
2,811
|
2,836
|
||||||
Leasehold improvements
|
7,779
|
8,712
|
||||||
Capitalized software
|
10,650
|
12,645
|
||||||
Total cost
|
31,535
|
31,197
|
||||||
Less: accumulated depreciation and amortization
|
(14,059
|
)
|
(15,548
|
)
|
||||
Property and equipment, net
|
$
|
17,476
|
$
|
15,649
|
NOTE 6: |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET
|
a. |
Goodwill
|
Balance as of January 1, 2017
|
$
|
190,737
|
||
Impairment on Undertone's goodwill
|
(65,686
|
)
|
||
Balance as of December 31, 2017
|
$
|
125,051
|
||
Balance as of December 31, 2018
|
$
|
125,051
|
b. |
Intangible assets, net
|
December 31, 2017
|
Amortization
|
OCI
|
December 31, 2018
|
|||||||||||||
Acquired technology
|
$
|
30,837
|
$
|
-
|
$
|
(30
|
)
|
$
|
30,807
|
|||||||
Accumulated amortization
|
(19,959
|
)
|
(1,301
|
)
|
18
|
(21,242
|
)
|
|||||||||
Impairment
|
(8,749
|
)
|
-
|
-
|
|
(8,749
|
)
|
|||||||||
Acquired technology, net
|
2,129
|
(1,301
|
)
|
(12
|
)
|
816
|
||||||||||
Customer relationships
|
31,949
|
-
|
(9
|
)
|
31,940
|
|||||||||||
Accumulated amortization
|
(18,832
|
)
|
(999
|
)
|
6
|
(19,825
|
)
|
|||||||||
Impairment
|
(10,426
|
)
|
-
|
-
|
|
(10,426
|
)
|
|||||||||
Customer relationships, net
|
2,691
|
(999
|
)
|
(3
|
)
|
1,689
|
||||||||||
Tradename and other
|
18,457
|
-
|
(42
|
)
|
18,415
|
|||||||||||
Accumulated amortization
|
(6,858
|
)
|
(2,469
|
)
|
13
|
(9,314
|
)
|
|||||||||
Impairment
|
(5,110
|
)
|
-
|
-
|
|
(5,110
|
)
|
|||||||||
Tradename and other, net
|
6,489
|
(2,469
|
)
|
(29
|
)
|
3,991
|
||||||||||
Intangible assets, net
|
$
|
11,309
|
$
|
(4,769
|
)
|
$
|
(44
|
)
|
$
|
6,496
|
December 31, 2016
|
Amortization
|
OCI
|
Impairment
|
December 31, 2017
|
||||||||||||||||
Acquired technology
|
$
|
30,674
|
$
|
-
|
$
|
163
|
-
|
$
|
30,837
|
|||||||||||
Accumulated amortization
|
(14,490
|
)
|
(5,390
|
)
|
(79
|
)
|
-
|
(19,959
|
)
|
|||||||||||
Impairment
|
(956
|
)
|
-
|
-
|
(7,793
|
)*)
|
|
(8,749
|
)
|
|||||||||||
Acquired technology, net
|
15,228
|
(5,390
|
)
|
84
|
(7,793
|
)
|
2,129
|
|||||||||||||
Customer relationships
|
31,898
|
-
|
51
|
-
|
31,949
|
|||||||||||||||
Accumulated amortization
|
(13,905
|
)
|
(4,900
|
)
|
(27
|
)
|
-
|
(18,832
|
)
|
|||||||||||
Impairment
|
(91
|
)
|
-
|
-
|
(10,335
|
)*)
|
|
(10,426
|
)
|
|||||||||||
Customer relationships, net
|
17,902
|
(4,900
|
)
|
24
|
(10,335
|
)
|
2,691
|
|||||||||||||
Tradename and other
|
18,224
|
-
|
233
|
-
|
18,457
|
|||||||||||||||
Accumulated amortization
|
(4,079
|
)
|
(2,734
|
)
|
(45
|
)
|
-
|
(6,858
|
)
|
|||||||||||
Impairment
|
(3,257
|
)
|
-
|
-
|
(1,853
|
)*)
|
|
(5,110
|
)
|
|||||||||||
Tradename and other, net
|
10,888
|
(2,734
|
)
|
188
|
(1,853
|
)
|
6,489
|
|||||||||||||
Intangible assets, net
|
$
|
44,018
|
$
|
(13,024
|
)
|
$
|
296
|
$
|
(19,981
|
)
|
$
|
11,309
|
Estimated
useful life
|
||||
Acquired technology
|
3-5 years
|
|||
Customer relationships
|
4-5 years
|
|||
Tradename and other
|
4-11 years
|
2019
|
$
|
4,228
|
||
2020
|
1,279
|
|||
2021
|
229
|
|||
2022
|
240
|
|||
2023
|
252
|
|||
Thereafter
|
268
|
|||
$
|
6,496
|
NOTE 7: |
ACCRUED EXPENSES AND OTHER LIABILITIES
|
December 31,
|
||||||||
2017
|
2018
|
|||||||
Employees and payroll accruals
|
$
|
8,020
|
$
|
8,528
|
||||
Government authorities
|
2,427
|
2,068
|
||||||
Professional services accruals
|
1,886
|
1,480
|
||||||
Other accruals
|
4,155
|
4,604
|
||||||
Other overhead related expenses
|
885
|
253
|
||||||
Hosting, software and web services accruals
|
411
|
307
|
||||||
$
|
17,784
|
$
|
17,240
|
December 31,
|
|||||||||
Balance sheet
|
2017
|
2018
|
|||||||
Derivatives designate as hedging instruments:
|
|||||||||
Foreign exchange forward contracts and other derivatives
|
''Prepaid expenses and other current assets''
|
$
|
140
|
$
|
11
|
||||
''Accrued expenses and other liabilities''
|
-
|
153
|
|||||||
''Accumulated other comprehensive income''
|
116
|
(106
|
)
|
||||||
Derivatives not designated as hedging instruments:
|
|||||||||
Cross currency SWAP
|
''Prepaid expenses and other current assets''
|
$
|
3,346
|
$
|
860
|
Gain recognized in Statements of Comprehensive Income
|
Gain (loss) recognized
in consolidated statements of
Income
|
||||||||||||||||
Year ended December 31,
|
Statement of Income
|
Year ended December 31,
|
|||||||||||||||
2018
|
2016
|
2017
|
2018
|
||||||||||||||
Derivatives designated as hedging instruments:
|
|||||||||||||||||
Foreign exchange options and forward contracts
|
$
|
(223
|
)
|
"Operating expenses"
|
$
|
167
|
$
|
525
|
$
|
(206
|
)
|
||||||
Derivatives not designated as hedging instruments:
|
|||||||||||||||||
Foreign exchange options and forward contracts
|
"Financial expenses"
|
(16
|
)
|
132
|
(186
|
)
|
|||||||||||
SWAP
|
"Financial expenses"
|
608
|
2,373
|
2,487
|
|||||||||||||
Total
|
$
|
(223
|
)
|
$
|
759
|
$
|
3,030
|
$
|
2,095
|
NOTE 9: |
SHORT TERM AND LONG-TERM DEBT
|
1. |
On November 30, 2015, concurrently with the closing of the Undertone acquisition, Interactive Holding Corp. entered into a new secured credit agreement for $50,000, due in quarterly installments from March 2016 to November 2019. The installments started at $625 per quarter, increased to $1,250 per quarter in March 2018 and required a final payment upon maturity of $35,000. The interest rate was LIBOR plus 5.5% per annum on the outstanding principal. The loan was secured by substantially all the assets of the companies in the Undertone group and by guarantees of such companies. The debt issuance cost amounted to $1,399, which was deducted from the carrying amount of the loan in the consolidated balance sheets and amortized during the loan's term according to the effective interest method.
|
2. |
On May 9, 2017, the Company secured $17,500 under a new credit facility from an Israeli bank of which $12,500 revolving credit line and $5,000 term loan. The $12,500 credit facility had an interest of LIBOR plus 3.5% per annum and was secured, among other, by a lien on the accounts receivable of ClientConnect Ltd., an Israeli subsidiary. Both facilities were guaranteed by Perion. The $5,000 was a long-term loan bearing interest at LIBOR plus 5% per annum, to be repaid in 36 equal installments starting from June 30, 2017. As of December 31, 2018 the outstanding balance of the credit facility was repaid and replaced by another loan from the same bank (see below).
|
3. |
On December 17, 2018, the company, executed a new loan facility, in the amount of $25,000. Proceeds of the loan facility were applied to refinancing of the existing debt as well as the debt of Undertone. Principal on the loan is payable in twelve equal quarterly instalments beginning March 2019 and maturing on December 31, 2021. The interest on the loan is at the rate of three-month LIBOR plus 5.7% per annum, payable quarterly. The credit facility is secured by liens on the assets of ClientConnect and Undertone and is guaranteed by Perion and Undertone. Each such guarantee is limited to $33 million. Financial covenants for the loan facility are tested at the level of Perion on a consolidated basis. As of December 2018, Perion meets all of its covenants.
|
Repayment amount
|
||||
2019
|
$
|
8,333
|
||
2020
|
8,333
|
|||
2021
|
8,334
|
|||
Present value of principal payments
|
25,000
|
|||
Less: current portion
|
(8,333
|
)
|
||
Long-term debt
|
$
|
16,667
|
NOTE 10: |
CONVERTIBLE DEBT
|
Balance as of January 1, 2017
|
$
|
29,526
|
||
Change in accrued interest
|
1,344
|
|||
Change in fair value
|
3,785
|
|||
Payment of interest
|
(1,401
|
)
|
||
Payment of principal
|
(7,901
|
)
|
||
Balance as of December 31, 2017*
|
$
|
25,353
|
||
Change in accrued interest
|
863
|
|||
Change in fair value
|
(1,585
|
)
|
||
Payment of interest
|
(1,011
|
)
|
||
Payment of principal
|
(8,167
|
)
|
||
Balance as of December 31, 2018*
|
$
|
15,453
|
Repayment amount
|
||||
2019
|
$
|
7,657
|
||
2020
|
7,656
|
|||
$
|
15,313
|
NOTE 11: |
COMMITMENTS AND CONTINGENT LIABILITIES
|
a. |
Office lease commitments
|
Minimum lease payments
|
Minimum sublease rentals
|
Net future minimum lease commitment
|
||||||||||
2019
|
$
|
5,102
|
$
|
3,248
|
$
|
1,854
|
||||||
2020
|
5,985
|
2,940
|
3,045
|
|||||||||
2021
|
5,768
|
2,880
|
2,888
|
|||||||||
2022
|
5,062
|
2,325
|
2,737
|
|||||||||
2023
|
4,681
|
1,987
|
2,694
|
|||||||||
Thereafter
|
9,922
|
2,153
|
7,769
|
|||||||||
$
|
36,520
|
$
|
15,533
|
$
|
20,987
|
b. |
Contingent purchase obligation
|
c. |
Legal Matters
|
NOTE 12: |
SHAREHOLDERS' EQUITY
|
a. |
Ordinary shares
|
b. |
Private placement
|
c. |
Share Options, Restricted Share Units and Warrants
|
Weighted average
|
||||||||||||||||
Number of options
|
Exercise price
|
Remaining contractual term (in years)
|
Aggregate intrinsic value
|
|||||||||||||
Outstanding at January 1, 2018
|
4,203,888
|
$
|
4.
52
|
4.27
|
$
|
56
|
||||||||||
Granted
|
1,035,481
|
3.08
|
-
|
-
|
||||||||||||
Exercised
|
(167
|
)
|
3.24
|
-
|
-
|
|||||||||||
Cancelled
|
(
1,494,395
|
)
|
5.20
|
-
|
-
|
|||||||||||
Outstanding at December 31, 2018
|
3,744,807
|
$
|
3.85
|
4.
97
|
$
|
27
|
||||||||||
Exercisable at December 31, 2018
|
1,314,690
|
$
|
4.
88
|
3.86
|
$
|
4
|
||||||||||
Vested and expected to vest at December 31, 2018
|
2,906,311
|
$
|
4.57
|
4.11
|
$
|
19
|
Weighted average
|
||||||||||||||||
Number of Performance based options
|
Exercise price
|
Remaining contractual term (in years)
|
Aggregate intrinsic value
|
|||||||||||||
Outstanding at January 1, 2018
|
283,331
|
$
|
4.93
|
-
|
$
|
-
|
||||||||||
Cancelled
|
(66,666
|
)
|
6.84
|
-
|
-
|
|||||||||||
Outstanding at December 31, 2018
|
216,665
|
4.35
|
4.12
|
-
|
||||||||||||
Exercisable at December 31, 2018
|
116,666
|
5.30
|
2.55
|
-
|
||||||||||||
Vested and expected to vest at December 31, 2018
|
116,666
|
$
|
5.30
|
2.55
|
$
|
-
|
Outstanding
|
Exercisable
|
|||||||||||||||||||||||||
Range of exercise price
|
Number of options
|
Weighted average remaining contractual life (years)
|
Weighted average exercise price
|
Number of options
|
Weighted average remaining contractual life (years)
|
Weighted average exercise price
|
||||||||||||||||||||
$
|
1.03 – 2.94
|
206,211
|
3.74
|
$
|
2.62
|
69,325
|
1.33
|
$
|
2.78
|
|||||||||||||||||
3.01 – 3.36
|
2,909,553
|
5.64
|
3.20
|
802,145
|
5.14
|
3.23
|
||||||||||||||||||||
4.23 – 6.90
|
720,937
|
3.02
|
4.86
|
435,115
|
2.33
|
5.20
|
||||||||||||||||||||
7.08 – 9.81
|
10,332
|
1.29
|
7.24
|
10,332
|
1.29
|
7.24
|
||||||||||||||||||||
10.01 – 12.75
|
72,220
|
1.49
|
10.85
|
72,220
|
1.49
|
10.85
|
||||||||||||||||||||
$
|
13.14 –40.62
|
42,219
|
0.44
|
26.69
|
42,219
|
0.44
|
26.69
|
|||||||||||||||||||
3,961,472
|
4.92
|
$
|
3.87
|
1,431,356
|
3.75
|
$
|
4.91
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Cost of revenues
|
$
|
219
|
$
|
36
|
$
|
136
|
||||||
Research and development
|
708
|
229
|
448
|
|||||||||
Selling and marketing
|
1,907
|
744
|
848
|
|||||||||
General and administrative
|
4,010
|
1,103
|
1,286
|
|||||||||
Total
|
$
|
6,844
|
$
|
2,112
|
$
|
2,718
|
||||||
Share-based compensation in discontinued operations
|
$
|
42
|
$
|
-
|
$
|
-
|
d. |
In connection with the Undertone acquisition, the Company granted warrants to purchase 66,666 ordinary shares, at a weighted average exercise price of $9.09 per share, to a third-party vendor that provides development services to Undertone. The warrants are exercisable until December 27, 2020, and its weighted-average grant-date fair value was $1.23. The total expense incurred in 2016, 2017 and 2018 was $62, $61 and $61, respectively.
|
e. |
In January 2018, the Company executed a repricing of
2,689,669
share options of the Company's employees, and directors. As part of the repricing, the options' exercise price was adjusted to $
$3.24
with a vesting period of (i) grants issued prior to January 1, 2015, shall vest over a twelve months period in quarterly installments whether or not currently vested or would have been vested by that time; (ii) grants issued after January 1, 2015 will be subject to the following vesting schedule: one third shall vest over twelve months in equal quarterly installments, and the remaining two-thirds shall vest over twenty four months in equal quarterly installments whether or not currently vested or would have been vested by that time. The expiration date of the adjusted options shall be seven years from the date hereof. The total incremental fair value of these options amounted to $1,471.
|
NOTE 13: |
FINANCIAL INCOME (EXPENSE), NET
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Financial income:
|
||||||||||||
Interest income
|
$
|
204
|
$
|
132
|
$
|
296
|
||||||
Foreign currency translation gains, net
|
-
|
204
|
1,013
|
|||||||||
Change in fair value of convertible debt
|
-
|
-
|
1,585
|
|||||||||
Change in fair value of SWAP
|
608
|
2,373
|
-
|
|||||||||
Other
|
-
|
197
|
355
|
|||||||||
$
|
812
|
$
|
2,906
|
$
|
3,249
|
|||||||
Financial expense:
|
||||||||||||
Foreign currency translation losses, net
|
$
|
(779
|
)
|
$
|
-
|
$
|
-
|
|||||
Interest and change in fair value of payment obligation related to acquisitions
|
(1,303
|
)
|
(43
|
)
|
-
|
|||||||
Interest expense on debts
|
(5,306
|
)
|
(4,794
|
)
|
(3,820
|
)
|
||||||
Change in fair value of SWAP
|
-
|
-
|
(2,487
|
)
|
||||||||
Change in fair value of convertible debt
|
(1,350
|
)
|
(3,785
|
)
|
-
|
|||||||
Bank charges and other
|
(362
|
)
|
(206
|
)
|
(736
|
)
|
||||||
$
|
(9,100
|
)
|
$
|
(8,828
|
)
|
$
|
(7,043
|
)
|
||||
Financial expense, net
|
$
|
(8,288
|
)
|
$
|
(5,922
|
)
|
$
|
(3,794
|
)
|
NOTE 14: |
INCOME TAXES
|
a. |
Income (Loss) before taxes on income
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Domestic
|
$
|
(3,393
|
)
|
$
|
10,485
|
$
|
9,081
|
|||||
Foreign
|
6,453
|
(92,065
|
)
|
1,816
|
||||||||
Total
|
$
|
3,060
|
$
|
(81,580
|
)
|
$
|
10,897
|
b. |
Taxes on income
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Current taxes
|
$
|
3,753
|
$
|
1,212
|
$
|
1,706
|
||||||
Taxes in respect of previous years
|
(273
|
)
|
(1,179
|
)
|
612
|
|||||||
Deferred tax expense (benefit)
|
(3,268
|
)
|
(8,859
|
)
|
458
|
|||||||
Total
|
$
|
212
|
$
|
(8,826
|
)
|
$
|
2,776
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Domestic
|
$
|
3,396
|
$
|
1,548
|
$
|
2,187
|
||||||
Foreign
|
(3,184
|
)
|
(10,374
|
)
|
589
|
|||||||
Total
|
$
|
212
|
$
|
(8,826
|
)
|
$
|
2,776
|
|||||
Domestic:
|
||||||||||||
Current taxes
|
$
|
2,800
|
$
|
387
|
$
|
1,121
|
||||||
Deferred tax (benefit) expense
|
937
|
2,532
|
649
|
|||||||||
Taxes in respect of previous years
|
(341
|
)
|
(1,371
|
)
|
417
|
|||||||
Total - Domestic
|
$
|
3,396
|
$
|
1,548
|
$
|
2,187
|
||||||
Foreign:
|
||||||||||||
Current taxes
|
$
|
953
|
$
|
825
|
$
|
585
|
||||||
Deferred tax benefit
|
(4,205
|
)
|
(11,391
|
)
|
(191
|
)
|
||||||
Taxes in respect of previous years
|
68
|
192
|
195
|
|||||||||
Total - Foreign
|
$
|
(3,184
|
)
|
$
|
(10,374
|
)
|
$
|
589
|
||||
Total income tax expense
|
$
|
212
|
$
|
(8,826
|
)
|
$
|
2,776
|
c. |
Deferred Taxes
|
December 31,
|
||||||||
2017
|
2018
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carry forwards
|
$
|
5,809
|
$
|
4,992
|
||||
Research and development
|
753
|
2,216
|
||||||
Intangible assets
|
829
|
1,480
|
||||||
Other temporary differences mainly relating to reserve and allowances
|
1,937
|
718
|
||||||
Deferred tax assets, before valuation allowance
|
9,328
|
9,406
|
||||||
Valuation allowance
|
4,530
|
4,992
|
||||||
Total deferred tax assets, net
|
$
|
4,798
|
$
|
4,414
|
||||
Deferred tax liabilities:
|
||||||||
Intangible assets
|
$
|
-
|
$
|
-
|
||||
Property and equipment, net
|
-
|
$
|
-
|
|||||
Total deferred tax liabilities
|
$
|
-
|
$
|
-
|
||||
Total deferred tax liability, net
|
$
|
4,798
|
$
|
4,414
|
||||
Domestic:
|
||||||||
Long term deferred tax asset, net
|
$
|
1,536
|
$
|
950
|
||||
Long term deferred tax liability
|
-
|
-
|
||||||
$
|
1,536
|
$
|
950
|
|||||
Foreign:
|
||||||||
Long term deferred tax asset, net
|
$
|
3,262
|
$
|
3,464
|
||||
Long term deferred tax liability
|
-
|
-
|
||||||
$
|
3,262
|
$
|
3,464
|
|||||
Total deferred tax asset (liability), net
|
$
|
4,798
|
$
|
4,414
|
d. |
Reconciliation of the Company’s effective tax rate to the statutory tax rate in Israel
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Income (Loss) before taxes on income
|
$
|
3,060
|
$
|
(81,580
|
)
|
$
|
10,897
|
|||||
Statutory tax rate in Israel
|
25.0
|
%
|
24.0
|
%
|
23.0
|
%
|
||||||
Theoretical tax expense (income)
|
$
|
765
|
$
|
(19,579
|
)
|
$
|
2,506
|
|||||
Increase (decrease) in tax expenses resulting from:
|
||||||||||||
"Preferred Enterprise" benefits *
|
(1,356
|
)
|
(584
|
)
|
(1,301
|
)
|
||||||
Non-deductible expenses
|
1,777
|
1,150
|
298
|
|||||||||
Non- deductible Impairment charges
|
-
|
12,652
|
-
|
|||||||||
Deferred taxes on losses and other temporary charges for which a valuation allowance was provided, net
|
527
|
(209
|
)
|
541
|
||||||||
Tax adjustment in respect of different tax rate of foreign subsidiaries
|
(2,032
|
)
|
(3,392
|
)
|
511
|
|||||||
Change in future tax rate
|
448
|
836
|
-
|
|||||||||
Other
|
83
|
300
|
221
|
|||||||||
Taxes on income
|
$
|
212
|
$
|
(8,826
|
)
|
$
|
2,776
|
|||||
* Benefit per ordinary share from "Preferred Enterprise" status:
|
||||||||||||
Basic
|
$
|
0.05
|
$
|
0.02
|
$
|
0.05
|
||||||
Diluted
|
$
|
0.05
|
$
|
0.02
|
$
|
0.05
|
e. |
Income tax rates
|
f. |
Law for the Encouragement of Capital Investments, 1959
|
g. |
The New Technological Enterprise Incentives Regime (Amendment 73 to the Investment Law)
|
h. |
Uncertain tax positions
|
December 31,
|
||||||||
2017
|
2018
|
|||||||
Balance at the beginning of the year
|
$
|
3,236
|
$
|
4,063
|
||||
Increase (decrease) related to prior year tax positions, net
|
153
|
(658
|
)
|
|||||
Increase related to current year tax positions
|
674
|
82
|
||||||
Balance at the end of the year
|
$
|
4,063
|
$
|
3,487
|
i. |
Tax loss carry-forwards
|
j. |
US Tax Reform:
|
· |
A corporate income tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017 (“Rate Reduction”);
|
· |
The transition of U.S international taxation from a worldwide tax system to a territorial system by providing a 100 percent deduction to an eligible U.S. shareholder on foreign sourced dividends received from a foreign subsidiary (“100% Dividend Received Deduction”);
|
· |
A one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017;
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Numerator:
|
||||||||||||
Net income (Loss) attributable to ordinary shares - basic
|
$
|
2,848
|
$
|
(72,754
|
)
|
$
|
8,121
|
|||||
Net income (Loss) from continuing operations - diluted
|
$
|
2,848
|
$
|
(72,754
|
)
|
$
|
8,121
|
|||||
Net loss from discontinued operations – basic and diluted
|
$
|
(2,647
|
)
|
$
|
-
|
$
|
-
|
|||||
Denominator:
|
||||||||||||
Number of ordinary shares outstanding during the year
|
25,520,151
|
25,849,724
|
25,850,067
|
|||||||||
Weighted average effect of dilutive securities:
|
||||||||||||
Employee options and restricted share units
|
37,783
|
-
|
5,158
|
|||||||||
Diluted number of ordinary shares outstanding - Continuing and discontinued operations
|
25,557,934
|
25,849,724
|
25,855,225
|
|||||||||
Basic net earnings (loss) per ordinary share
|
||||||||||||
Continuing operations
|
0.11
|
$
|
(2.81
|
)
|
$
|
0.31
|
||||||
Discontinued operations
|
(0.10
|
)
|
$
|
-
|
$
|
-
|
||||||
Net income (loss)
|
0.01
|
|
$
|
(2.81
|
)
|
$
|
0.31
|
|||||
Diluted net earnings (loss) per ordinary share
|
||||||||||||
Continuing operations
|
0.11
|
$
|
(2.81
|
)
|
$
|
0.31
|
||||||
Discontinued operations
|
(0.10
|
)
|
$
|
-
|
$
|
-
|
||||||
Net income (loss)
|
0.01
|
|
$
|
(2.81
|
)
|
$
|
0.31
|
|||||
Ordinary shares equivalents excluded because their effect would have been anti-dilutive
|
3,566,788
|
5,408,206
|
4,725,618
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
Customer A
|
49
|
%
|
46
|
%
|
45
|
%
|
Year ended December 31,
|
||||||||||||
2016
|
2017
|
2018
|
||||||||||
North America (mainly U.S.)
|
$
|
253,960
|
$
|
213,471
|
$
|
197,440
|
||||||
Europe
|
47,012
|
48,146
|
46,858
|
|||||||||
Other
|
11,822
|
12,369
|
8,547
|
|||||||||
$
|
312,794
|
$
|
273,986
|
$
|
252,845
|
December 31,
|
||||||||
2017
|
2018
|
|||||||
Israel
|
$
|
12,229
|
$
|
11,193
|
||||
U.S.
|
4,064
|
3,997
|
||||||
Europe
|
1,183
|
459
|
||||||
17,476
|
$
|
15,649
|
No.
|
Description
|
||
101
|
Financial information from Perion Network Ltd.’s Annual Report on Form 20-F for the year ended December 31, 2018 formatted in XBRL (eXtensible Business Reporting Language)
|
(1) |
Previously filed with the SEC on April 29, 2013 as an exhibit to our annual report on Form 20-F, and incorporated herein by reference
|
(2) |
Previously filed with the SEC on October 15, 2013 as an exhibit to our Report on Form 6-K, and incorporated herein by reference
|
(3) |
Previously filed with the SEC on March 27, 2018 as an exhibit to our annual report on Form 20-F, and incorporated herein by reference
|
(4) |
Previously filed with the SEC on April 16, 2015 as an exhibit to our annual report on Form 20-F, and incorporated herein by reference
|
(5) |
Previously filed with the SEC on March 24, 2016 as an exhibit to our annual report on Form 20-F, and incorporated herein by reference
|
* |
Confidential treatment was granted with respect to certain portions of this exhibit pursuant to 17.C.F.R. §240.24b-2. Omitted portions were filed separately with the SEC
|
PERION NETWORK LTD.
|
|||
|
By:
|
/s/ Doron Gerstel | |
Name: Doron Gerstel | |||
Title: Chief Executive Officer | |||
By: | /s/ Maoz Sigron | ||
Name: Maoz Sigron | |||
Title: Chief Financial Officer |
1. |
Name of the Company: Perion Network Ltd.
|
2. |
The objective for which the Company was formed:
|
(a) |
The development, manufacture and marketing of software.
|
(b) |
Any other objective determined by the Company’s board of directors.
|
3. |
The liability of the shareholders is limited.
|
4. |
The share capital of the Company shall be NIS 1,300,000, consisting of 43,333,333 ordinary shares, each having a nominal value of NIS 0.03.
|
5. |
Amendments to this Memorandum of Association shall be adopted if approved by the holders of a simple majority of the voting power of the Company represented at the meeting, in person or by proxy, and voting thereon.
|
1. |
In these Articles, unless the context otherwise requires:
|
2. |
The Company is a public company as such term is defined in Section 1 of the Law. The liability of the Company’s Shareholders is limited and, accordingly, each Shareholder’s responsibility for the Company’s obligations shall be limited to the payment of the nominal value of the shares held by such Shareholder, subject to the provisions of these Articles and the Law.
|
3. |
The Company's objectives are:
|
3.1. |
The development, manufacture and marketing of software;
|
3.2. |
Any other objective as determined by the Board.
|
4. |
Share Capital
|
5. |
Allotment of Shares
|
6. |
Bearer Shares
|
7 . |
Special Rights
|
8. |
Consolidation and Subdivision: Fractional Shares
|
8.1. |
From time to time, by resolution of the Shareholders, subject to the Articles and the Law:
|
8.1.1. |
Consolidate all or any of its issued or unissued share capital into shares bearing a per share nominal value that is larger than the per share nominal value of its existing shares;
|
8.1.2. |
Cancel any shares that at the date of the adoption of such resolution have not been acquired or agreed to be acquired by any person, and reduce the amount of its share capital by the amount of the shares so cancelled;
|
8.1.3. |
Subdivide its shares (issued or unissued) or any of them, into shares of smaller per share nominal value than is fixed by these Articles. The resolution pursuant to which any share is subdivided may determine that, as among the holders of the shares resulting from such subdivision, one or more of such shares may, as compared with the others, have special rights, or be subject to any such restrictions, as the Company has power to attach to unissued or new shares;
|
8.1.4. |
Reduce its share capital in any manner, including with and subject to any incidental authorities and/or consents required by law.
|
8.2. |
Upon any consolidation or subdivision of shares that may result in fractional shares, the Board may settle any difficulty that may arise with regard thereto as it deems fit, including, without limitation, by:
|
8.2.1. |
Allotting, in contemplation of, or subsequent to, such consolidation or other action, such shares or fractional shares sufficient to preclude or remove fractional shareholdings;
|
8.2.2. |
Notwithstanding Section 295 of the Law, making such arrangements for the sale or transfer of the fractional shares to such other shareholders of the Company at such times and at such price as the Board deems fit so as to most expeditiously preclude or remove any fractional shareholdings and cause the transferees of such fractional shares to pay the full fair market value thereof to the transferors, and the Board is hereby authorized to act as agent for the transferors and transferees with power of substitution and off-setting for purposes of implementing the provisions of this sub-Article;
|
8.2.3. |
To the extent as may be permitted under the Law, redeeming or purchasing such fractional shares sufficient to preclude and remove such fractional shareholding; and
|
8.2.4. |
Determining, as to the holders of shares so consolidated, which issued shares shall be consolidated into each share of a larger nominal value.
|
9. |
Increase of Capital
|
9.1. |
The Company, by resolution of the Shareholders, may from time to time, whether or not all the shares then authorized have been issued, and whether or not all the shares theretofore issued have been fully called up for payment, increase its authorized share capital. Any such new share capital shall be of such amount and divided into shares of such nominal values and (subject to any special rights then attached to any existing class of shares) bear such rights or preferences or be subject to such conditions or restrictions (if any) as the resolution approving such share capital increase shall provide.
|
9.2. |
Except so far as otherwise provided in such resolution or pursuant to the Articles, such new shares shall be subject to all the provisions of the Articles applicable to the shares of such class included in the existing share capital.
|
10. |
Modification of Class Rights
|
10.1. |
If at any time the share capital of the Company is divided into different classes of shares, the right attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may be modified only upon consent of a separate general meeting of the holders of the shares of that class. The provisions of these Articles relating to general meetings of Shareholders shall apply
mutatis mutandis
to every such separate general class meeting.
|
10.2. |
Unless otherwise provided by these Articles, the increase in an authorized class of shares, or the issuance of additional shares thereof out of the authorized and unissued share capital, shall not be deemed, for the purposes of Article 10.1 to vary, modify or abrogate the rights attached to previously issued shares of such class or of any other class of shares.
|
11. |
Redeemable Shares
|
12. |
Issuance of Share Certificates: Replacement, of Lost. Certificates
|
12.1. |
Share certificates, when issued, shall be issued, upon the written request of a Shareholder, under the Seal and shall bear the signature of any person or persons so authorized by the Board.
|
12.2. |
Each Shareholder shall be entitled to one or more numbered certificate(s) for all the shares of any class registered in his name, each of which shall state the number of shares represented by the certificate, their serial numbers and the amount paid on account of their nominal value.
|
12.3. |
A share certificate registered in the Shareholders Register in the names of two or more persons shall be delivered to the person first named in the Shareholders Register in respect of such co-ownership and the Company shall not be obligated to issue more than one certificate to all of the joint holders.
|
12.4. |
A share certificate that has been defaced, lost or destroyed, may be replaced, and the Company shall issue a new certificate to replace such defaced, lost or destroyed certificate upon payment of such fee, and upon the furnishing of such evidence of ownership and such indemnity, as the Board, in its discretion, deems fit.
|
13. |
Registered Holder
|
14. |
Payment in Installment
|
15. |
Calls on Shares
|
15.1. |
The Board may, from time to time, as in its discretion it deems fit, make calls for payment upon Shareholders in respect of any sum which has not been paid up in respect of shares held by such Shareholders and that is not, pursuant to the terms of allotment or issue of such shares or otherwise, payable at a fixed time. Each Shareholder shall pay the amount of every call so made upon him (and of each installment thereof if the same is payable in installments), to the person(s) and at the time(s) and place(s) designated by the Board. Unless otherwise stipulated in the resolution of the Board (and in the notice referred to below), each payment in response to a call shall be deemed to constitute a pro rata payment on account of all the shares in respect of which such call was made.
|
15.2. |
Notice of any call for payment by a Shareholder shall be given in writing to such Shareholder not less than 14 days prior to the time of payment fixed in such notice, and shall specify the time and place of payment, and the person to whom such payment is to be made. Prior to the time for any such payment fixed in a notice of a call given to a Shareholder, the Board may in its discretion, by notice in writing to such Shareholder, revoke such call in whole or in part, extend the time fixed for payment thereof, or designate a different place of payment or person to whom payment is to be made. In the event of a call payable in installments, only one notice thereof need be given.
|
15.3. |
If, pursuant to the terms of allotment or issue of a share or otherwise, an amount is made payable at a fixed time (whether on account of such share or by way of premium), such amount shall be payable at such time as if it were payable by virtue of a call made by the Board and for which notice was given in accordance with this Article 15, and the provisions of these Articles with regard to calls (and the non-payment thereof) shall be applicable to such amount (and the non-payment thereof).
|
15.4. |
Joint holders of a share shall be jointly and severally liable to pay all calls for payment in respect of such share and all interest payable thereon.
|
15.5. |
Any amount called for payment that is not paid when due shall bear interest from the date fixed for payment until actual payment thereof, at such rate and payable at such time(s) as the Board may prescribe.
|
15.6. |
The Board may provide for differences among the allottees of such shares as to the amounts and times for payment of calls for payment in respect of such shares.
|
16. |
Prepayment
|
17. |
Forfeiture and Surrender
|
17.1. |
If any Shareholder fails to pay an amount payable by virtue of a call, or interest thereon as provided for in accordance herewith, on or before the day fixed for payment of the same, the Board may, at any time after the day fixed for such payment, so long as such amount (or any portion thereof) or interest thereon (or any portion thereof) remains unpaid, forfeit all or any of the shares in respect of which such payment was called for. All expenses incurred by the Company in attempting to collect any such amount or interest thereon, including, without limitation, attorneys’ fees and costs of legal proceedings, shall be added to, and shall, for all purposes (including the accrual of interest thereon), constitute a part of, the amount payable to the Company in respect of such call.
|
17.2. |
Upon the adoption of a resolution as to the forfeiture of a Shareholder’s share, the Board shall cause notice thereof to be given to such Shareholder, which notice shall state the place that payment is to be made and that, in the event of the failure to pay the entire amount so payable by a date specified in the notice (which date shall be not less than seven days after the date such notice is given and which may be extended by the Board), such shares shall be
ipso facto
forfeited;
provided, however,
that, prior to such date, the Board may nullify such resolution of forfeiture, but no such nullification shall prevent the Board from adopting a further resolution of forfeiture in respect of the non-payment of the same amount.
|
17.3. |
Without derogating from Articles 17.1 and 17.2 hereof, whenever shares are forfeited as herein provided, any and all dividends declared in respect of such shares and not actually paid shall be deemed to have been forfeited at the same time as the forfeiture of such shares.
|
17.4. |
The Company, by resolution of the Board, may accept the voluntary surrender of any share. A surrendered share shall be treated as if it had been forfeited.
|
17.5. |
Any share forfeited or surrendered as provided herein shall become the property of the Company, and the same, subject to the provisions of these Articles, may be sold, re-allotted or otherwise disposed of, as the Board deems fit.
|
17.6. |
Any Shareholder whose shares have been forfeited or surrendered shall cease to be a Shareholder in respect of the forfeited or surrendered shares, but shall, notwithstanding, be liable to pay, and shall forthwith pay, to the Company, all calls, interest and expenses owing upon or in respect of such shares at the time of forfeiture or surrender, together with interest thereon from the time of forfeiture or surrender until actual payment, at the rate prescribed in Article 15.5 above, and the Board, in its discretion, may, but shall not be obligated to, enforce the payment of such monies, or any part thereof. In the event of such forfeiture or surrender, the Company, by resolution of the Board, may accelerate the date(s) of payment of any or all amounts then owing to the Company by the Shareholder in question (but not yet due) in respect of all shares owned by such Shareholder, solely or jointly with another.
|
17.7. |
The Board may at any time, before any share so forfeited or surrendered shall have been sold, re-allotted or otherwise disposed of, nullify the forfeiture or surrender on such conditions as it deems fit, but no such nullification shall prevent the Board from re-exercising its powers of forfeiture pursuant to this Article 17.
|
17.8. |
A declaration in writing by a director or secretary of the Company that a share in the Company has been duly forfeited on the date stated in the declaration shall be conclusive evidence of the facts therein stated against all persons claiming to be entitled to the share.
|
17.9. |
The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the amount of the share, or by way of premium, as if the same had been payable by virtue of a call duly made and notified.
|
18. |
Lien
|
18.1. |
Except to the extent the same may be waived or subordinated in writing, the Company shall have a first and paramount lien upon all the shares registered in the name of each Shareholder (without regard to any equitable or other claim or interest in such shares on the part of any other person), and upon the proceeds of the sale thereof, for his debts or other liabilities to the Company arising from any amount payable by such Shareholder in respect of any unpaid or partly paid share, whether or not such debt or other liability has matured. Such lien shall extend to all dividends from time to time declared or paid in respect of such share. Unless otherwise provided, the registration by the Company of a transfer of shares shall be deemed to be a waiver on the part of the Company of the lien (if any) existing on such shares immediately prior to such transfer.
|
18.2. |
The Board may cause the Company to sell a share subject to such a lien when the debt or other liability giving rise to such lien has matured, in such manner and for such sums as the Board deems fit, but no such sale shall be made unless such debt or other liability has not been satisfied within seven days after written notice of the intention to sell shall have been served on such Shareholder, his executors or administrators.
|
18.3. |
The net proceeds of any such sale, after payment of the costs thereof, shall be applied in or toward satisfaction of the debts or other liabilities of such Shareholder in respect of such share (whether or not the same have matured), and the remainder (if any) shall be paid to the Shareholder, his executors, administrators or assigns.
|
19. |
Sale After Forfeiture or Surrender or in Enforcement, of Lien
|
20. |
Purchase of the Company’s Shares
|
21. |
Registration of Transfer
|
21.1. |
No transfer of shares shall be registered unless a proper writing or instrument of transfer (in any customary form or any other form satisfactory to the Board) has been submitted to the Company (or its transfer agent), together with the share certificate(s) or such other evidence of title as the Board may reasonably require.
|
21.2. |
The Board may, in its discretion to the extent it deems necessary and subject to any restrictions in the Law or the rules of any stock exchange upon which the Ordinary Shares are listed or included for quotation, close the Shareholders Register for registrations of transfers of shares during any year for periods to be determined by the Board, and no registrations in the Shareholders Register of transfers of shares shall be made by the Company during any such period during which the Shareholders Register is so closed.
|
22. |
Decedents’ Shares
|
22.1. |
In case of a share registered in the name of two or more shareholders, the Company may recognize the survivor(s) as the sole owner(s) thereof unless and until the provisions of Article 22.2 have been effectively invoked.
|
22.2. |
Any person becoming entitled to a share in consequence of the death of any person, upon producing evidence of the grant of probate or letters of administration or declaration of succession (or such other evidence as the Board may reasonably deem sufficient), shall be registered as a Shareholder in respect of such share, or may, subject to the regulations as to transfer herein contained, transfer such share. However, nothing herein shall release the estate of a deceased Shareholder (whether sole or joint) of a share from any obligation to the Company with respect to any share held by the deceased.
|
23. |
Receivers and Liquidators
|
23.1. |
The Company may recognize any receiver, liquidator or similar official appointed to wind-up, dissolve or otherwise liquidate a Shareholder that is an entity, and a trustee, manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceeding with respect to, a Shareholder or its properties, as being entitled to the shares registered in the name of such Shareholder.
|
23.2. |
Any such receiver, liquidator or similar official appointed to wind-up, dissolve or otherwise liquidate a Shareholder that is an entity and any such trustee, manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceedings with respect to, a Shareholder or its properties, upon producing such evidence as the Board may deem sufficient as to his authority to act in such capacity or under this Article, shall with the consent of the Board (which the Board may grant or refuse in its discretion), be registered as a Shareholder in respect of such shares, or may, subject to the provisions as to transfer herein contained, transfer such shares.
|
24. |
Branch Registers
|
25. |
Record Date for Notices of General Meetings
|
25.1. |
Notwithstanding any provision of these Articles to the contrary and subject to applicable law, the Board may fix a date, not exceeding 40 days, and not less than four days, prior to the date of any general meeting of the Shareholders, as the date of which Shareholders entitled to participate and to vote at such meeting shall be determined, and all persons who were holders of record of voting shares on such date and no others shall be entitled to notice of, participate in and to vote at such meeting. A determination of Shareholders of record entitled to participate and to vote at any meeting shall apply to any adjournment of such meeting;
provided, however,
that the Board may fix a new record date for the adjourned meeting.
|
25.2. |
Any Shareholder or Shareholders of the Company holding at least one percent of the voting rights in the issued share capital of the Company may, subject to the Law, request that the Board include a subject in the agenda of a general meeting to be held in the future. Any such request (i) must be in writing, (ii) must include all information related to the subject matter and the reason that such subject is proposed to be brought before the general meeting and (iii) must be signed by the Shareholder or Shareholders making such request. In addition, subject to the Law, the Board may include such subject in the agenda of a general meeting only if the request has been delivered to the secretary of the Company at least 75 days and not more than 120 days prior to the date set for the relevant Annual General Meeting or Extraordinary General Meeting, as applicable. Each such request shall also set forth: (a) the name and address of the Shareholder making the request; (b) a representation that the Shareholder is a holder of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting; (c) a description of all arrangements or understandings between the Shareholder and any other person or persons (naming such person or persons) in connection with the subject which is requested to be included in the agenda; and (d) a declaration that all the information that is required under the Law and any other applicable law to be provided to the Company in connection with such subject, if any, has been provided. In addition, if such subject includes a nomination to the Board in accordance with the Articles, the request shall also set forth the consent of each nominee to serve as a director of the Company if so elected and a declaration signed by each of the nominees declaring that there is no limitation under applicable law for the appointment of such a nominee. Furthermore, the Board may, in its discretion, to the extent it deems necessary, require that the Shareholders making the request provide additional information so as to include a subject in the agenda of a general meeting.
|
26. |
Annual Meetings
|
27. |
Extraordinary General Meetings
|
28. |
Powers of the General Meeting
|
29. |
Notice of General Meetings; Omission to Give Notice
|
30. |
Manner of Meeting
|
31. |
Quorum
|
31.1. |
No business shall be transacted at any general meeting unless a quorum is present when the meeting commences. For all purposes, the quorum shall be at least two Shareholders present in person, or by proxy, holding in the aggregate at least 33 1/3% (thirty three percent and one-third of a percent) of the voting rights in the issued share capital of the Company.
|
31.2. |
If within 30 minutes from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the request of the Shareholders, shall be dissolved; if the meeting is not convened upon the request of a Shareholder it shall stand adjourned to the same day in the next week at the same place and time, or to such day and at such time and place as the chairperson may determine with the consent of the holders of a majority of the voting power represented at the meeting in person or by proxy and voting on the question of adjournment. No business shall be transacted at any adjourned meeting except business that might lawfully have been transacted at the meeting as originally called. If at the adjourned meeting a legal quorum is not present after 30 minutes from the time specified for the commencement of the adjourned meeting, than the meeting shall take place regardless of the number of members present and in such event the required quorum shall consist of any number of shareholders present in person or by proxy.
|
32. |
Chairperson
|
33. |
Adoption of Resolutions at General Meetings
|
33.1. |
Subject to Article 34 below, resolutions of the Shareholders with respect to all matters shall be deemed adopted if approved by the holders of a simple majority of the voting power of the Company represented at the meeting in person or by proxy and voting thereon, other than as specified in the Articles or otherwise required by the Law.
|
33.2. |
Every question submitted to a general meeting shall be decided by a show of hands, but if a written ballot is demanded by any Shareholder present in person or by proxy and entitled to vote at the meeting, the same shall be decided by such ballot. A written ballot may be demanded before the voting on a proposed resolution or immediately after the declaration by the chairperson of the meeting of the results of the vote by a show of hands. If a vote by written ballot is taken after such declaration, the results of the vote by a show of hands shall be of no effect, and the proposed resolution shall be decided by such written ballot. The demand for a written ballot may be withdrawn at any time before the same is conducted, in which event another Shareholder may then demand such written ballot. The demand for a written ballot shall not prevent the continuance of the meeting for the transaction of business other than the question on which the written ballot was demanded.
|
33.3. |
A declaration by the chairperson of the meeting that a resolution was carried unanimously, or carried by a particular majority, or did not receive the required majority in order to be carried, and an entry to that effect in the minute book of the Company, shall be prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favor of or against such resolution.
|
34. |
Special Resolution
|
35. |
Voting Power
|
36. |
Voting Rights
|
36.1. |
In the case of joint holders, the vote of the senior holder to tender a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. For the purpose of this Article, seniority shall be determined by the order in which the names appear in the Shareholders Register (or in the Company’s transfer agent records). The appointment of a proxy to vote on behalf of a jointly held share shall be executed by the senior holder.
|
36.2. |
No Shareholder shall be entitled to vote at any general meeting (or be counted as a part of the quorum thereat), unless all calls and other sums then payable by him in respect of his shares in the Company have been paid.
|
36.3. |
Any Shareholder entitled to vote may vote either personally or by proxy (who need not be a shareholder of the Company), or, if the Shareholder is a company or other entity, by a representative authorized pursuant to Article 36.4.
|
36.4. |
A company or other corporate body that is a Shareholder of the Company may, by resolution of its directors or any other managing body thereof, authorize any person to be or to appoint its representative at any meeting of the Company. Any person so authorized shall be entitled to exercise on behalf of such Shareholder all the power that the latter could have exercised if it were an individual shareholder. Upon the request of the chairperson of the meeting, written evidence of such authorization (in form reasonably acceptable to the chairperson) shall be delivered to him.
|
37. |
Instrument of Appointment
|
37.1. |
The instrument appointing a proxy shall be in writing in such form as may be approved by the Board from time to time in compliance with applicable law.
|
37.2. |
The instrument appointing a proxy (and the power of attorney or other authority, if any, under which such instrument has been signed) shall either be delivered to the Company (at its Registered Office, at its principal place of business, at such place as the Board may specify, or by any other means, including electronic form, all in compliance with applicable law) not less than the close of business on the business day preceding the time fixed for the meeting at which the person named in the instrument proposes to vote, or presented to the chairperson at such meeting.
|
37.3. |
The Board may cause the Company to send, by mail or otherwise, instruments of proxy to Shareholders for use at any general meeting.
|
38. |
Effect of Death of Appointer or Revocation of Appointment
|
39. |
Multiple Proxies
|
40. |
Number of Directors
|
41. |
Qualification of Directors
|
42. |
Continuing Directors in the Event of Vacancies
|
43. |
Vacation of Office; Removal of Directors
|
43.1. |
The office of a director shall be vacated,
ipso facto,
upon his death or if he be found legally incompetent; if he becomes bankrupt, if he is prevented by applicable law or listing requirements from serving as a director of the Company, if the Board terminates his office according to Section 231 of the Law, if a court order is given in accordance with Section 233 of the Law, or if under the Law his term otherwise automatically terminates.
|
43.2. |
The office of a director shall be vacated by his written resignation. Such resignation shall become effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later.
|
43.3. |
A director shall be removed from office only pursuant to the provisions of Article 43.1 or by a resolution of the general meeting of the Company approved by Shareholders holding more than two-thirds of the voting power of the issued and outstanding share capital of the Company.
|
44. |
Remuneration of Directors
|
45. |
Conflict of Interests; Approval of Related Party Transactions
|
45.1. |
Subject to the Law and the Articles, a transaction between the Company and an Office Holder, and a transaction between the Company and another entity in which an Office Holder of the Company has a personal interest, which is not an Extraordinary Transaction (as defined by the Law), shall be approved by the Board or a committee of the Board. Such authorization, as well as the actual approval, may be for a particular transaction or more generally for specific type of transactions.
|
45.2. |
A director or other Office Holder, shall not participate in deliberations concerning, nor vote upon a resolution approving, a transaction with the Company in which he has a personal interest, except as otherwise provided for in the Law.
|
46. |
Powers of the Board of Directors
|
46.1. |
General
|
46.2. |
Borrowin
g
Power
|
46.3. |
Reserves
|
47. |
Exercise of Powers of Directors
|
47.1. |
A meeting of the Board at which a quorum is present shall be competent to exercise all the authorities, powers and discretions vested in or exercisable by the Board.
|
47.2. |
Except as otherwise specifically set forth in these Articles or as required by the Law, a resolution proposed at any meeting of the Board shall be deemed adopted if approved by a majority of the directors present when such resolution is put to a vote and voting thereon.
|
47.3. |
A resolution in writing signed by all directors then in office and lawfully entitled to vote thereon, or to which all such directors have given their written consent (by letter, telegram, email, facsimile, telecopier, email, or otherwise), shall be deemed to have been unanimously adopted by a meeting of the Board duly convened and held.
|
48. |
Delegation of Powers
|
48.1. |
The Board may, subject to the provisions of the Law and any other applicable law, delegate any or all of its powers to committees, and it may from time to time revoke such delegation or alter the composition of any such committee. Any Committee so formed (in these Articles referred to as a “Committee of the Board”), shall, in the exercise of the powers so delegated, conform to any regulations imposed on it by the Board. The meetings and proceedings of any Committee of the Board shall be governed, with the relevant changes, by the provisions herein contained for regulating the meetings of the Board, so far as not superseded by any regulations adopted by the Board under this Article. Unless otherwise expressly provided by the Board in delegating powers to a Committee of the Board, such Committee shall not be empowered to further delegate such powers. In accordance with and subject to Section 271 of the Law, the Compensation Committee of the Board (if any) shall have the full power and authority to approve the terms of compensation of the Office Holders of the Company, other than Office Holders who are also directors.
|
48.2. |
Without derogating from the provisions of Article 48.1, the Board may, subject to the provisions of the Law, from time to time appoint a secretary to the Company, as well as officers, agents, employees and independent contractors, as the Board may deem fit, and may terminate the service of any such person. The Board may, subject to the provisions of the Law, determine the powers and duties, as well as the salaries and emoluments, of all such persons, and may require security in such cases and in such amounts as it thinks fit.
|
48.3. |
The Board may from time to time, by power of attorney or otherwise, appoint any person, company, firm or body of persons to be the attorney or attorneys of the Company at law or in fact for such purpose(s) and with such powers, authorities and discretions, and for such period and subject to such conditions, as it thinks fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board may think fit, and may also authorize any such attorney to delegate all or any of the powers, authorities and discretions vested in him.
|
49. |
Other than External Directors, the directors will be elected in three staggered classes by the vote of a majority of the ordinary shares present and entitled to vote. The directors of only one class will be elected at each annual meeting for a three year term, so that the regular term of only one class of directors expires annually. The directors serving as of the date these Articles become effective will be classified as shall be determined by a resolution of the Board. At the Company's Annual General Meeting to be held in 2006, the term of the first class, consisting of two directors will expire, and the directors elected at that meeting will be elected for a three-year term. At the Company's Annual General Meeting to be held in 2007, the term of the second class, consisting of two directors, will expire and the directors elected at that meeting will be elected for a three-year term. At the Company's Annual General Meeting to be held in 2008, the term of the third class, consisting of one director, will expire and the director elected at that meeting will be elected for a three-year term. The External Directors will not be assigned a class.
|
50. |
Subject to Article 49, directors shall be elected at the Annual General Meeting or an Extraordinary General Meeting of the Company by the vote of the holders of a majority of the voting power represented at such meeting in person or by proxy and voting on the election of directors.
|
51. |
Notwithstanding the provisions of Article 49, External Directors shall be elected and hold office in accordance with the provisions of the Law.
|
52. |
Nominations to the Board
|
52.1. |
Nominations for the election of directors may be made by the Board or a Committee of the Board or, subject to the Law, by any Shareholder. Any Shareholder or Shareholders holding at least five percent of the voting rights in the issued share capital of the Company may nominate one or more persons for election as directors at a general meeting only if a written notice of such Shareholder’s intent to make such nomination or nominations has been given to the secretary of the Company and each such notice sets forth all the details and information set forth in Article 25.2. The chairperson of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.
|
52.2. |
Notwithstanding the provisions of Articles 52.1 and 51, no person shall be nominated or appointed to the office of a director if such person is disqualified under the Law from being appointed as a director.
|
52.3. |
A director’s term (including External Directors) shall begin either on the date of his appointment to the Board or at such later date designated in the resolution appointing such director.
|
53. |
Subject to the provisions of Article 49, the Board may at any time appoint any other person as a director, whether to fill a vacancy or as an addition to the then current number of directors, provided that the total number of directors shall not at any time exceed seven directors. Any director so appointed shall hold office until the Annual General Meeting at which the term for the other directors of his class expires, unless otherwise stated in the appointing resolution.
|
54. |
Subject to the provisions of the Law, a director may appoint an alternate director to attend a meeting in his or her place, but an alternate director so appointed must be approved by the board prior to the relevant meeting.
|
55. |
Meetings of the Board
|
55.1. |
The Board may meet and adjourn its meetings at such places either within or out the State of Israel and otherwise regulate such meetings and proceedings as the directors think fit, provided that meetings shall be convened at least once every three months. Subject to all of the other provisions of the Articles concerning meetings of the Board, the Board may meet by telephone conference call or other communication equipment so long as each director participating in such call can hear, and be heard by, each other director participating in such call. The directors participating in this manner shall be deemed to be present in person at such meeting and shall be entitled to vote or be counted in a quorum accordingly.
|
55.2. |
Board meetings may be convened at any time by the chairperson of the Board. The chairperson of the Board shall convene a Board meeting upon the written request of any two directors (or one director if the Board is comprised of fewer than seven directors) as soon as practicable after receiving such request and shall otherwise convene a Board meeting as provided by the Law.
|
56. |
Notice
|
56.1. |
Notice of a Board meeting shall contain the information required by the Law and shall be delivered to the directors not less than three days before such meeting.
|
56.2. |
Notice of a meeting of the Board shall be given in writing, and may be sent by hand, post, facsimile or electronic mail to a director at the address, facsimile number or electronic mail address given by such director to the Company for such purpose. Any such notice shall be deemed duly received, if sent by post, three days following the day when any such notice was duly posted and if delivered by hand or transmitted by facsimile transmission or electronic mail, such notice shall be deemed duly received by the director on the date of delivery or, as the case may be, transmission of the same.
|
56.3. |
Notwithstanding anything contained to the contrary herein, failure to deliver notice to a director of any such meeting in the manner required hereby may be waived (in advance or retroactively) by such director and a meeting shall be deemed to have been duly convened notwithstanding such defective notice if such failure or defect is waived (in advance or retroactively), by all directors entitled to participate at such meeting and to whom notice was not duly given. The presence of a director at any such meeting shall be deemed due receipt of prior notice or a waiver of any such notice requirement by such director.
|
57. |
Quorum
|
57.1. |
A quorum at a meeting of the Board shall be constituted by the presence in person, or by telephone or similar communication equipment of a majority of the directors then in office who are lawfully entitled to participate and vote at the meeting. If within 30 minutes (or within such longer time as the chairperson of the meeting may decide) from the time appointed for the holding of the Board meeting a quorum is not present, the Board meeting shall stand adjourned to the date, time, and place determined by the chairperson. No business shall be transacted at a meeting of the Board unless the requisite quorum is present.
|
57.2. |
If at any adjourned Board meeting a quorum is not present within 30 minutes (or within such longer time as the chairperson of the meeting may decide) from the time appointed for holding the meeting, then the quorum at such meeting shall be constituted by the presence in person, or by telephone or similar communication equipment of two of the directors then in office who are lawfully entitled to participate and vote at the meeting. If at such meeting such quorum is not present within the above mentioned time frame, the Board meeting shall be adjourned in accordance with the provisions of this Article 57. No business shall be transacted at a meeting of the Board unless the requisite quorum is present.
|
58. |
Chairperson
|
59. |
Validity of Acts
|
60. |
Subject to the Articles and the Law, the Board may from time to time appoint one or more persons, whether or not directors, as the General Manager, Chief Executive Officer, and/or President of the Company (the “Chief Executive Officer"). Subject to the Law, the powers, authorities and responsibilities any such Chief Executive Officer shall have shall be those that the Board may, at its discretion, lawfully confer on the same. The Board may, from time to time, as the Board may deem fit, modify or revoke, such title(s), duties and authorities the Board conferred as aforesaid. Subject to the Articles and the Law, any such appointment(s) and any such powers, authorities and responsibilities may be either for a fixed term or without any limitation of time, and may be made upon such conditions and subject to such limitations and restrictions as the Board may, from time to time, determine. In addition, the Board may from time to time (subject to the provisions of any applicable law or the rules of any stock exchange upon which securities of the Company are listed or included for quotation and of any contract between any such person(s) and the Company) determine the salary of any such person(s) and remove or dismiss any such person(s) from office and appoint another or others in his or their place.
|
61. |
The management and the operation of the Company’s affairs and business in accordance with the policies determined by the Board shall be vested in the Chief Executive Officer, in addition to all powers and authorities of the Chief Executive Officer, as specified in the Law. Without derogating from the above, all powers of management and executive authority that are not vested by the Law or by the Articles in another organ of the Company shall be vested in the Chief Executive Officer.
|
62. |
The Company shall cause minutes to be recorded of all general meetings of the Company and also of all appointments of directors and Office Holders and of the proceedings of all meetings of the Board and any Committees thereof. Such minutes shall set forth the names of persons present and all business transacted at such meetings. Any such minutes of any meeting, if purporting to be signed by the chairperson of such meeting or of the next succeeding meeting, or by the chairperson of the Board or the secretary of the Company, shall be
prima facie
evidence of the facts therein stated. Minutes of a meeting shall be kept at the Office for the period, and in the manner, prescribed in the Law.
|
63. |
Declaration of Dividends
|
64. |
Funds Available for Payment of Dividends
|
65. |
Amount Payable by Way of Dividends
|
66. |
Interest
|
67. |
Payment in Kind
|
67.1. |
A dividend may be paid, wholly or partly, by the distribution of specific assets, and, in particular, by distribution of paid-up shares, debentures of the Company or debentures of any other company, or in any one or more such ways.
|
67.2. |
The Board may resolve that: (a) any monies, investments, or other assets forming part of the undivided profits of the Company standing to the credit of the reserve fund, or to the credit of any reserve fund for the redemption of capital, or to the credit of a reserve fund for the revaluation of real estate or other assets of the Company or any other reserve fund or investment funds or assets in the hands of the Company and available for dividends, or representing premiums received on the issue of shares and standing to the credit of the share premium account, be capitalized and distributed among such of the Shareholders as would be entitled to receive the same if distributed by the way of dividend and in the same proportion on the basis that they become entitled thereto as capital; (b) all or any part of such capitalized fund be applied on behalf of such Shareholders in paying up in full, either at nominal or at such premiums as the resolution may provide, any unissued shares or debentures of the Company that shall be distributed accordingly or in or towards the payment, in full or in part, of the uncalled liability on any issued shares or debentures of the Company; and (c) such distribution or payment shall be accepted by such Shareholders in full satisfaction of their share and interest in the said capitalized sum.
|
68. |
Implementation of Powers under Article 67
|
69. |
Dividends on Unpaid Shares
|
69.1. |
Without derogating from Article 65 hereof, the Board may give an instruction that shall prevent the distribution of a dividend to the holders of shares for which the full amount payable has not been paid.
|
69.2. |
The Board may deduct from any dividend payable to any Shareholder all sums of money, if any, presently payable by such Shareholder to the Company on account of calls or otherwise in relation to the shares of the Company. The Board may retain any dividend or other moneys payable on or in respect of a share on which the Company has a lien, and may apply the same in or toward the satisfaction of the debts, liabilities or engagement in respect of which the lien exists.
|
70. |
Retention of Dividends
|
70.1. |
The Board may retain any dividend or other monies payable or property distributable in respect of a share on which the Company has a lien, and may apply the same in or toward satisfaction of the debts, liabilities, or engagements in respect of which the lien exists.
|
70.2. |
The Board may retain any dividend or other monies payable or property distributable in respect of a share in respect of which any person is, under Article 21 entitled to become a Shareholder, or which any person is, under such Article, entitled to transfer, until such person shall become a shareholder in respect of such share or shall transfer the same.
|
71. |
Unclaimed Dividends
|
72. |
Payment
|
73. |
Receipt from a Joint Holder
|
74. |
Books of Account
|
75. |
Audit.
|
76. |
Auditors
|
77. |
Rights of Signature
|
78. |
Notices
|
78.1. |
Any written notice or other document may be served by the Company upon any Shareholder either personally, electronically, or by sending it by prepaid mail (airmail if sent internationally) addressed to such Shareholder at his address as described in the Shareholders Register or such other address as he may have designated in writing for the receipt of notices and other documents. Any written notice or other document may be served by any Shareholder upon the Company by tendering the same in person to the secretary or the Chief Executive Officer of the Company at the Office or by sending it by prepaid registered mail (airmail if posted outside Israel) to the Company at its Office. Any such notice or other document shall be deemed to have been served 48 hours after it has been posted (seven business days if sent internationally), or when actually received by the addressee if sooner than 48 hours or seven business days, as the case may be, after it has been posted, or when actually tendered in person, to such shareholder (or to the secretary or the Chief Executive Officer). Notice sent by telegram, facsimile or electronic mail shall be deemed to have been served when actually received by the addressee, including in the event that it was defectively addressed or failed, in some other respect, to comply with the provisions of this Article 78.1.
|
78.2. |
All notices to be given to the Shareholders shall, with respect to any share to which persons are jointly entitled, be given to whichever of such persons is named first in the Shareholders Register or in the records of the Company’s transfer agent, and any notice so given shall be sufficient notice to the holders of such share.
|
78.3. |
Any Shareholder whose address is not described in the Shareholders Register, and who shall not have designated in writing an address for the receipt of notices, shall not be entitled to receive any notice from the Company.
|
78.4. |
Notwithstanding anything to the contrary contained herein and subject to the provisions of the Law, notice to a Shareholder may be served, as general notice to all Shareholders, in accordance with applicable rules and regulations of any stock exchange upon which the Company’s shares are listed or included for quotation.
|
78.5. |
Subject to applicable law, any Shareholder, director or any other person entitled to receive notice in accordance with these Articles or Law, may waive notice, in advance or retroactively, in a particular case or type of cases or generally, and if so, notice will be deemed as having been duly served, and all proceedings or actions for which the notice was required will be deemed valid.
|
78.6. |
The accidental omission to give notice of a meeting to any Shareholder or the non-receipt of notice by any Shareholder entitled to receive notice shall not invalidate the proceedings at any meeting or any resolution(s) adopted by such a meeting.
|
79. |
Subject to the provisions of the Law and the Israeli Securities Law, 5728 - 1968 (the "Israeli Securities Law"), the Company may:
|
79.1. |
Enter into a contract for the insurance of the liability, in whole or in part, of any of its Office Holders with respect to an obligation imposed on such Office Holder due to an act performed by the Office Holder in the Office Holder’s capacity as an Office Holder of the Company arising from any of the following:
|
79.1.1. |
A breach of duty of care to the Company or to any other person;
|
79.1.2. |
A breach of the duty of loyalty to the Company provided that the Office Holder acted in good faith and had reasonable grounds to assume that the act would not harm the interests of the Company;
|
79.1.3. |
A financial liability imposed on such Office Holder in favor of any other person; and
|
79.1.4. |
Reasonable litigation expenses, including attorney fees, incurred by the Office Holder as a result of an administrative enforcement proceeding instituted against him. Without derogating from the generality of the foregoing, such expenses will include a payment imposed on the Office Holder in favor of an injured party as set forth in Section 52(54)(a)(1)(a) of the Israeli Securities Law and expenses that the Office Holder incurred in connection with a proceeding under Chapters H'3, H'4 or I'1 of the Securities Law, including reasonable legal expenses, which term includes attorney fees.
|
79.2. |
Undertake, in advance to indemnify, or may indemnify retroactively, an Office Holder of the Company with respect to any of the following liabilities or expenses that arise from an act performed by the Office Holder by virtue of being an Office Holder of the Company:
|
79.2.1. |
A financial liability imposed on an Office Holder in favor of another person by any judgment, including a judgment given as a result of a settlement or an arbitrator’s award which has been confirmed by a court;
|
79.2.2. |
Reasonable litigation expenses including attorney's fees, incurred by him as a result of an investigation or proceedings instituted against him by an authority empowered to conduct an investigation or proceedings, which are concluded without the filing of an indictment against the Office Holder and without the levying of a monetary obligation in lieu of criminal proceedings upon the Office Holder, or which are concluded without the filing of an indictment against the Office Holder but with levying a monetary obligation in substitute of such criminal proceedings upon the Office Holder for a crime that does not require proof of criminal intent; or in connection with an administrative enforcement proceeding or a financial sanction. Without derogating from the generality of the foregoing, such expenses will include a payment imposed on the Office Holder in favor of an injured party as set forth in Section 52(54)(a)(1)(a) of the Israeli Securities Law, and expenses that the Office Holder incurred in connection with a proceeding under Chapters H'3, H'4 or I'1 of the Securities Law, including reasonable legal expenses, which term includes attorney fees; and
|
79.2.3. |
Reasonable litigation expenses, including attorney's fees, expended by an Office Holder or which were imposed on an Office Holder by a court in proceedings filed against the Office Holder by the Company or in its name or by any other person or in a criminal charge on which the Office Holder was acquitted or in a criminal charge on which the Office Holder was convicted for an offense which did not require proof of criminal intent;
|
80. |
Subject to the provisions of the Law and the Israeli Securities Law, the Company hereby releases, in advance, its Office Holders from liability to the Company for damage that arises from the breach of the Office Holder’s duty of care to the Company.
|
81. |
The provisions of Articles 79 and 80 are not intended, and shall not be interpreted, to restrict the Company in any manner in respect of the procurement of insurance or in respect of indemnification (i) in connection with any person who is not an Office Holder, including, without limitation, any employee, agent, consultant or contractor of the Company who is not an Office Holder, or (ii) in connection with any Office Holder to the extent that such insurance and/or indemnification is not specifically prohibited under law; provided that the procurement of any such insurance or the provision of any such indemnification shall be approved by the Board . Any modification of Articles 79 through 81 shall be prospective in effect and shall not affect the Company’s obligation or ability to indemnify an Office Holder for any act or omission occurring prior to such modification.
|
1. |
Long-term loan
(
hereinafter: the
"Loan"):
|
1.1. |
Loan Amount
– a foreign currency loan in the amount of USD 25M, that may be withdrawn until January 15, 2019 (hereinafter: the "
Expiration of Withdrawal Period
");
|
1.2. |
Type of interest
– the Loan will bear annual LIBOR interest for three months + 5.7%.
|
1.3. |
Payment of the Loan Fund
– 12 equal and consecutive payments made every three months as of March 2019 according to the amortization schedule provided to the Borrower with the Loan.
|
1.4. |
Payment of interest
– as of _________, in consecutive installments made every three months, according to the amortization schedule provided to the Borrower with the Loan.
|
1.5. |
Fees
–
|
1.6. |
The Loan amount will be transferred to the Borrower's account, or to an account in the Borrower's name in the branch of the Bank abroad. The Bank may, at any time and subject to the provisions set forth in any law, transfer the Loan from one branch to another – including to a branch abroad, provided that the Borrower shall not incur any additional costs in connection with such transfer as aforesaid.
|
2. |
Instructions regarding provision of the Loan
|
A. |
Upon provision of the Loan – to pay in a final and absolute manner the full credit that the Bank provided to the Borrower until the date of signing this Agreement, including the credit that was provided to the Borrower by virtue of the Master Agreement dated May 9, 2017 (hereinafter: the "
Master Agreement
") (including all interests, fees, expenses and charges in connection therewith). It is clarified that no early repayment charge will be paid in connection with the payment of the credit by virtue of the Master Agreement. Upon payment of the existing credit, all credit limits in the Borrower's Account will be canceled, including the entire commitments of the Borrower and Perion Network Ltd., Company Registration No. 512849498 (hereinafter: the "
Parent Company
") by virtue of the Master Agreement. Until and no later than six months as of the registration date of the charges stated hereunder, the Bank shall deliver to the Borrower, at its request, a document referred to the Registrar of Companies confirming the cancellation of charge no. 2 in the Registrar of Companies.
|
B. |
Upon provision of the Loan – to transfer to SunTrust Bank, in its capacity as administrative agent by virtue of the Loan Agreement dated November 30, 2015 (hereinafter: "
SunTrust
") the amount required in the letter of intent stated in Section 3.2.
|
3. |
Preliminary conditions for provision of the Loan:
|
3.1. |
The Borrower opened account no. 616846 in the main business center of the Bank in Tel Aviv (461) (hereinafter: the "
Borrower's Account
"), signed all the customary credit documents in the Bank and provided all protocols and approvals by its attorneys as customary in the Bank.
|
3.2. |
The Borrower provided to the Bank a letter of intent from SunTrust, according to which upon the transfer of the full amount stated in the letter of intent SunTrust will eliminate all the charges registered in its favor on the Borrower's assets, the Parent Company and Undertone, within its meaning hereunder, in Israel and abroad in any register, in the form hereby enclosed as
Annex 3.2
of this Agreement.
|
(a) |
Rights of lien and setoff in favor of banks in connection with the current management of accounts during the ordinary course of business;
|
(b) |
Charges made in favor of the Bank and in favor of SunTrust that will be eliminated in accordance with the provisions set forth in Section 2(a) and this Section 3.2;
|
(c) |
An undertaking for a negative pledge dated July 13, 2014 from the Parent Company to Bank Leumi le-Israel Ltd.;
|
(d) |
An undertaking for a negative pledge of the Parent Company in accordance with a Deed of Trust for the bonds (Series K);
|
(e) |
A charge on the deposits of Intercept Interactive Inc. dba Undertone (hereinafter: "
Undertone
") in the amount of approximately USD 1,200,000 made in favor of HSBC Bank USA (hereinafter: "
HSBC
") in connection with the lease guarantees;
|
(f) |
Charges on office equipment (floating charge for the purchase of property) of Undertone made in favor of CIT Bank, N.A. and Steelcase Financial Services Inc.; and
|
(g) |
Deposits in the amount of USD 138,000 of Undertone in connection with a shared work space, deposited as a collateral with the lessor of the shared work space;
|
3.3. |
The Borrower and the Parent Company provided a letter bearing their signature in the form hereby enclosed as
Annex 3.3
.
|
3.4. |
For the purpose of assuring the fulfillment of the entire obligations and undertakings of the Borrower towards the Bank, the Borrower provided to the Bank the entire collaterals and signed and/or caused the signing of deeds of pledge in the customary form of the Bank and provided the protocols and the advocate confirmations in the customary form of the Bank:
|
3.4.1. |
A senior floating charge for an unlimited amount on the entire property, moneys, assets and rights of any kind of the Borrower and a senior fixed charge, for an unlimited amount, on the Borrower's reputation, fixed assets, the rights of the Borrower to receive payments from Undertone and from Interactive Holding Corp., its intellectual property, documents and tradable instruments, and all as stated in the bond in the form hereby enclosed as
Annex 3.4.1
.
|
3.4.2. |
A senior fixed charge, for an unlimited amount on all moneys, assets, deposits and rights in the Borrower's Account, as stated in the deed of pledge of moneys, assets, deposits and rights in the account, in the form enclosed as
Annex 3.4.2
.
|
3.4.3. |
A senior fixed charge in favor of the Bank, limited to an amount of USD 33M on all the assets and property of Undertone, including its right to receive payments from its customers and charges on all its bank accounts (SunTrust Bank and HSBC) and a guarantee limited to an amount of USD 33M of Undertone.
|
3.4.4. |
The Parent Company signed a guarantee for a limited amount of USD 33M in the form hereby enclosed as
Annex 3.4.4
of this Agreement and furnished to the Bank a resolution of the company in connection with the creation of the guarantee to the satisfaction of the Bank.
|
3.4.5. |
The Parent Company signed a negative pledge letter, in the form hereby enclosed as
Annex 3.4.5
. Such negative pledge letter as aforesaid will include a provision stipulating that the Parent Company shall be entitled to create charges for the purpose of supporting the current operations of the group members during the ordinary course of business, such as charges on deposits against guarantees (including against bank guarantees), and on the condition that the total amount of the charged assets of the Parent Company for the purpose assuring the aforesaid current operations will not be greater than USD 1,000,000.
|
3.4.6. |
Deposit in the Borrower's Account
– the Borrower deposited in the Borrower's Account cash in an amount that will not fall below, at any time, 25% of the balance of the revalued Loan and in any event will not fall below $5M.
|
3.5. |
There shall be no statutory preclusion or any other preclusion stemming from the procedures of the Bank regarding the provision of the Loan and the Loan shall not be provided in violation of the legal provisions and/or in contravention of the instructions set forth by the Supervisor of Banks (including Proper Conduct of Banking Business Directive no. 311 "Minimal capital ratio" and Directive no. 313 "Limitations on the Indebtedness of a Borrower and of a Group of Borrowers" and/or any other directive superseding the same) and in this regard will not result in deviation from the liability limitations of a borrower and/or a group of borrowers and/or violation of the Bank procedures. The Bank declares that as of the date of signing this Agreement it is not aware of any preclusion and/or deviation as aforesaid.
|
4. |
Financial covenants
|
4.1. |
Definitions
–
|
4.2. |
In addition to the grounds for calling for immediate repayment stated in each document signed by the Borrower, the Bank shall be entitled to call the Loan for immediate repayment if, until the final and absolute payment date of the bonds (Series K) that the Parent Company issued to the bondholders (hereinafter respectively: the "
Bonds
" and the "
Bondholders
") one or more of the events stated in Sections 4.2.1 – 4.2.5 occurs with respect to the Parent Company:
|
4.2.1. |
The equity of the Parent Company, according to its consolidated financial statements (including minority rights) at the end of each calendric quarter, falls below USD 120M.
|
4.2.2. |
The ratio between the net financial debt, at the end of each calendric quarter, and the amount of EBITDA of the Parent Company as of that date, according to its consolidated financial statements, is greater than 2.5.
|
4.2.3. |
The amount of EBITDA of the Parent Company, based on its consolidated financial statements at the end of each calendric quarter, falls below an amount of NIS 57,394,400 (40% of the total par value of the Bonds (Series K) as listed in the Stock Exchange in the past).
|
4.2.4. |
The Parent Company will hold (on consolidated basis) at any time, cash, cash equivalents and short-term deposits (up to one year) for an amount lower than USD 10M (and in the period of the six months that preceded the payment date of any bonds principal – an amount lower than the amount equal to the principal and interest that the Parent Company is obligated to pay to the Bondholders on the next payment date of the principal).
|
4.2.5. |
The Parent Company shall declare or distribute a dividend (hereinafter: the "
Distribution
") in contravention of one or more of the following rules:
|
1. |
The Parent Company shall not perform a Distribution if and to the extent that as a result of the Distribution the total amount of equity of the Parent Company according to its consolidated financial statements (including minority rights) prior to the resolution on the Distribution, with deduction of the Distribution amount, falls below USD 150M.
|
2. |
The performance of the Distribution is stipulated on the condition that as of the end of the calendric quarter that preceded the date of adopting the resolution on the Distribution, the Parent Company did not violate any of the financial covenants set out in Sections 4.2.1 – 4.2.4 above.
|
3. |
No Distribution shall be performed, in each calendric year, for an amount that is greater than 50% of the net annual profit of the Parent Company on consolidated basis in that calendric year.
|
4. |
No Distribution shall be made from unrealized revaluation gains.
|
5. |
No Distribution shall be performed if the ratio set out in Section 4.2.2, as of the date of the last consolidated financial statement of the Parent Company that was published prior to the resolution on the Distribution is greater than 1.5.
|
6. |
No Distribution shall be performed if the balance of retained earnings of the Parent Company on consolidated basis after the Distribution falls below USD 31.5M.
|
4.3. |
It is agreed that upon the full and final repayment of the Bonds, in addition to the grounds for calling for immediate repayment stated in each document signed by the Borrower, the Bank shall be entitled to call the Loan for immediate repayment, if one or more of the following events occurs in the Parent Company (instead of the events stated in Sections 4.2.1 – 4.2.5 above):
|
4.3.1. |
The equity of the Parent Company, according to its consolidated financial statements (including minority rights) at the end of each calendric quarter falls below USD 80M.
|
4.3.2. |
The ratio between the net financial debt, at the end of each calendric quarter and the EBITDA amount of the Parent Company as of that date, according to its consolidated financial statements, is greater than 2.25.
|
4.3.3. |
The Parent Company will keep (on consolidated basis) at any time, cash, cash equivalents and short-term deposits (up to one year) in an amount lower than USD 10M, or an amount that is lower than an amount equal to the principal and the interest that the Borrower is obligated to pay to the Bank on the next principal payment date (whichever is lower).
|
4.3.4. |
The Parent Company declares or distributes a dividend in contravention of one or more of the rules set out hereunder:
|
1. |
The Parent Company will not perform a Distribution if, as a result of the Distribution, the total amount of the equity of the Parent Company according to its consolidated financial statements (including minority rights) prior to the resolution on the Distribution, with deduction of the Distribution amount, falls below USD 115M.
|
2. |
The performance of the Distribution is stipulated on the condition that as of the end of the calendric quarter that preceded the date of adopting a resolution on the Distribution, the Parent Company is not in violation of any of the financial covenants set out in Sections 4.3.1-4.3.3 above.
|
3. |
No Distribution shall be performed, in each calendric year, for an amount that is greater than 50% of the net annual earnings of the Parent Company on consolidated basis in that calendric year.
|
4. |
No Distribution shall be performed from unrealized revaluation gains.
|
5. |
No Distribution shall be performed if the financial ratio set out in Section 4.3.2 as of the date of the last financial statement of the Parent Company that was published prior to the resolution on the Distribution is greater than 1.35.
|
4.4. |
Notwithstanding the aforesaid, it is agreed that deviation of up to 10% from the financial covenant stated in Section 4.3.1 or 4.3.2, as the case may be, in a specific quarter, does not give rise to grounds for immediate repayment, and on the condition that in the subsequent quarter the Parent Company returned to observe the relevant financial covenant, as stated above.
|
4.5. |
It is agreed that the Borrower shall be entitled to perform a Distribution or the disburse, whether directly or indirectly, sums from the earnings or the capital or from any other source to its shareholders, on the condition that on the date of the said Distribution (a) no Breach Event that was not cured occurred and (b) there is no default in payment of the Loan.
|
4.6. |
A review of the financial covenants set out in this Section 4 above (hereinafter: the "
Criteria
") shall be performed each quarter according to the annual and quarterly consolidated financial statements of the Parent Company. No later than five (5) business days as of the date of delivering the financial statements of the Parent Company as stated in Section 7 hereunder, the Borrower shall deliver a calculation of all data in connection with the Criteria with the approval and signature of the CEO or the CFO of the Borrower.
|
4.7. |
In any event in which the Borrower makes a commitment towards any third-party to meet any financial ratios, and this commitment includes conditions regarding compliance with data or financial ratios that examine data or ratios that are different than the one examined in the financial ratios subject matter of this Agreement, or examine data or ratios that are similar however are stricter towards the Borrower compared to the requirements imposed on the Borrower within the framework of the financial ratios subject matter of this Agreement (hereinafter in this Section: "
Commitment towards a Third-Party
") the Borrower undertakes to notify the Bank promptly about the same. In such circumstances as aforesaid, the Bank reserves the right to notify to the Borrower at any time regarding the addition to this Section of financial ratios out of the Commitment towards a Third-Party and/or regarding the equalization of the terms of the financial ratios set out in this Section to the terms of the financial ratios set out in the Commitment towards a Third-Party, and this Agreement shall be deemed to have been amended accordingly, and the signature or the approval of the Borrower or any other party shall not be required in connection therewith.
|
4.8. |
It is clarified that the Criteria are based on accounting standards, accounting rules, estimates and accounting policy (hereinafter: the "
Accounting Treatment
") as applied in the last financial statements of the Parent Company, as of the date of signing this Agreement (hereinafter: the "
Last Statements
").
|
5. |
Additional undertakings
|
5.1. |
The Borrower hereby undertakes to cause that the entire Microsoft Payments (within their meaning hereunder) and clients that engage with the Borrower after the date of signing this Agreement, shall be made solely to the Borrower's Account and the Borrower will indicate this Account in all the invoices the Borrower issues.
|
5.2. |
The Borrower shall not provide and shall not undertake to provide to any third-party (including to related entities thereto), in any manner and form, any loans or credit and/or assistance from the Borrower for the purpose of receiving loans and/or credit (including the provision of a collateral) and/or guarantees from the Borrower – without obtaining the prior and written approval the Bank in connection therewith. Notwithstanding the said, it is agreed that the Borrower shall be entitled to provide guarantees to related entities, provided that the guarantees are provided during the ordinary course of business and for a cumulative amount that shall not be greater than USD 2M.
|
5.3. |
The Borrower declares and affirms that the two subsidiaries owned by the Borrower (ClientConnect B.V. and ClientConnect Inc.) have no assets or have assets for marginal values and it intends to act for the purpose of their liquidation.
|
6. |
Retention of the holdings and the structure of the Borrower
|
6.1. |
The Borrower declares that the issued and paid-up share capital of the Company (based on full dilution) as of the date of signing this Agreement is held by the Parent Company.
|
6.2. |
The Parent Company will hold at any time a minimum of 50.01% of each of the means of control in the Borrower (in full dilution) and will control the Borrower (within the meaning of the term "
control
" and "
means of control
" in the Securities Law 5728-1968).
|
7. |
Reports
|
7.1. |
The annual audited financial statements of the Borrower, the Parent Company (consolidated) and Undertone immediately after signing thereof, and no later than April 30 of each calendric year. In the event the Borrower publishes additional consolidated or other financial statements in Israel or abroad, audited or unaudited, the Company shall deliver to the Bank a copy of the said reports as shortly as possible after their publication.
|
7.2. |
A balance sheet and a quarterly income statement (without notes) of the Borrower, signed by the CEO or the CFO of the Borrower, no later than 60 days as of the end of each calendric quarter.
|
7.3. |
Quarterly consolidated financial statements of the Parent Company (reviewed) until and no later than 60 days as of the end of each calendric quarter.
|
7.4. |
In ten days as of the end of each calendric month – the balance of funds deposited in the accounts of Undertone and that are charged to the Bank on the last day of the previous month.
|
7.5. |
In addition to the said, and without derogating from the foregoing, the Borrower shall deliver to the Bank, upon receiving the demand of the Bank, information regarding the business of the Borrower and the Parent Company, their financial position and the bank obligo of each.
|
7.6. |
The Borrower will deliver written notice to the Bank in seven (7) business days, after the Borrower learns about: (a) a material adverse effect that affected the Borrower's position emanating from a change in its business, operations or its financial position; (b) any information that can prove that the financial statements that were delivered in accordance with this Agreement are inaccurate or incorrect and the information that the Borrower provided to the Bank is no longer accurate in any material respect; (c) any material matter relating to the collaterals that were provided and/or that will be provided by the Borrower for the purpose of securing its debts to the Bank and (d) any matter relating to the contract made between the Parent Company and Microsoft Ireland Operations Limited (hereinafter respectively: "
Microsoft
" and the "
Microsoft Agreement
").
|
7.7. |
The Borrower undertakes to deliver a written report to the Bank immediately after learning about the occurrence of any Breach Event.
|
8. |
Representations
|
8.1. |
It is a company that was lawfully incorporated and registered in Israel and it is an active and existing company.
|
8.2. |
The entire undertakings of the Borrower, the Parent Company and Undertone in accordance with this Agreement, including the collaterals, are valid undertakings of the Borrower, the Parent Company and Undertone, and each of these undertakings are binding and enforceable.
|
8.3. |
The signing of the Borrower on this Agreement and its performance by the Borrower: (1) do not cause and will not cause a breach of the Borrower of any agreement to which the Borrower is a party and/or grant to any person or entity any right and/or grounds to demand immediate repayment of the debts and liabilities of the Borrower and/or (2) do not constitute and will not constitute any violation and/or deviation from any legal provision; and/or (3) do not cause and will not cause the violation of any license and/or permit granted to the Borrower.
|
8.4. |
No Breach Event occurred at the time of signing this Agreement.
|
8.5. |
As of the date of signing this Agreement: (a) save as provided in the last financial statements of the Parent Company that were delivered to the Bank, there is no proceeding, claim, arbitration, litigation or any administrative proceeding pending against the Borrower, the Parent Company and/or Undertone and, to the best of knowledge of the Borrower, no such proceedings are expected to commence against any thereof; (b) no motion for the appointment of a receiver and/or a liquidator was filed against the Borrower, the Parent Company and/or against Undertone and no order with respect to any of these matters was issued against any thereof, and to the best of knowledge of the Borrower no motions or orders as aforesaid are expected to be filed or issued against them as aforesaid; and (c) the Borrower, the Parent Company and Undertone did not adopt a resolution regarding voluntary liquidation.
|
8.6. |
The Borrower, the Parent Company and Undertone did not take credit and/or issued guarantees bearing its signature of any kind towards another, save as provided in Section 5.2 above and save as provided in
Annex 8.6
.
|
8.7. |
Save as provided in
Annex 8.7
, the Borrower, the Parent Company and Undertone did not enter into and are not a party to any agreement with any of their related parties and there is no agreement, undertaking, understanding, whether verbal or written in any matter between the Borrower and/or the Parent Company and/or Undertone and their related parties and/or related entities thereof and/or related parties therein – no loans were provided to them by the Borrower and/or the Parent Company and/or Undertone and no benefit was provided to any thereof.
|
8.8. |
The entire information that was provided by the Borrower to the Bank is true and duly reflects the state of business of the Borrower and/or the Parent Company and/or Undertone as of the date of signing this Agreement. In addition, the Borrower has no information in connection with the Borrower and/or the Parent Company and/or Undertone that was not presented to Bank, and if it had been presented to the Bank, it would have resulted in circumstances that the Bank would have avoided from providing the Loan and/or would have resulted in circumstances in which the Bank would not have agreed to rely on the collaterals for the purpose of securing the repayment of the Loan, or that can limit in any manner the manner of realization of the Bonds, or any part thereof.
|
8.9. |
A copy of the Microsoft Agreement as reported to the U.S. SEC in the annual report of the Parent Company is enclosed as
Annex 8.9
, when some of its commercial data were omitted in accordance with an NDA that was signed between the Parent Company and Microsoft.
|
9. |
The parties agree that each of the following events, in addition to the aforesaid events, shall also be deemed as part of the events that give rise to grounds for the Bank for calling the credit for immediate repayment:
|
9.1. |
In the event a material adverse change in the Microsoft Agreement occurs and/or in the event the Microsoft Agreement is terminated (except for termination on the grounds of the cessation of operations of Bing, as stated in Section 10, and to which the provisions set forth in Section 10 hereunder shall apply);
|
9.2. |
In the event the Microsoft Agreement is not extended;
|
9.3. |
In the event the authorization for the performance of the Microsoft Agreement (including amendments thereof) is granted to any entity other than the Borrower;
|
9.4. |
In the event the Microsoft Agreement is extended under conditions that constitute a material adverse change compared to the present Agreement;
|
9.5. |
In the event any of the undertakings set out in this Agreement is breached. It is agreed that a delay in the submission of the reports as stated in this Agreement and that is not greater than ten (10) business days shall not give rise to grounds for immediate repayment.
|
9.6. |
If one of the grounds stated in Sections 24.1.2, 24.1.3, 24.1.4, 24.1.6, 24.1.8, 24.1.9, 24.1.11, 24.1.12, 24.1.13, 24.1.14, 14.1.15, 24.1.16 in the booklet of the general terms in credit operations signed by the Borrower holds true with respect to the Parent Company or Undertone (
mutatis mutandis
).
|
10. |
It is agreed that in the event Microsoft notifies the Borrower or the Parent Company that after expiration of one year as of the date of its notice the Microsoft Agreement is terminated as a result of the termination of operation of Bing – in such circumstances the Borrower shall notify the Bank regarding the aforesaid termination forthwith and shall repay the full amount of the Loan in a final and absolute manner (including interests, charges and early repayment charges) until expiration of a period of nine months as of the date of the notice. Notwithstanding the said, the Bank shall be entitled to call the Loan for immediate repayment if, as a result of the said termination, a material adverse change occurs or in the event other grounds for immediate repayment arise.
|
11. |
For the avoidance of doubt, the aforesaid is not intended to grant rights to any third-party, and shall not constitute a representation on which any third-party may rely.
|
12. |
The entire annexes of this Agreement constitute an integral part thereof and everything stated in the annexes shall supplement and add to the said in this Agreement.
|
13. |
This Agreement shall come into operation subject to its signing hereof by the Borrower and after its return to the Bank until and no later than December 17, 2018 and subject to the signature of the Bank thereon.
|
14. |
In the event of discrepancy between the provisions set forth in this Agreement and the provisions set forth in the credit documents, the provisions set forth in this Agreement shall take precedence. In any other event the provisions set forth in this Agreement and the provisions set forth in the credit documents shall be deemed to supplement each other.
|
1.
|
I have reviewed this annual report on Form 20-F of Perion Network Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
|
4.
|
The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
|
(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
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5.
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The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
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/s/ Doron Gerstel
Doron Gerstel
Chief Executive Officer
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1.
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I have reviewed this annual report on Form 20-F of Perion Network Ltd.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
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4.
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The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
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5.
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The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
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(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
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/s/
Maoz Sigron
Maoz Sigron
Chief Financial Officer
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1.
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The Report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
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By:
/s/ Doron Gerstel
Doron Gerstel
Chief Executive Officer
|
1.
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The Report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
|
Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
|
|
By:
/s/ Maoz Sigron
Maoz Sigron
Chief Financial Officer
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|
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/s/
KOST FORER GABBAY & KASIERER
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Tel Aviv, Israel
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KOST FORER GABBAY & KASIERER
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March 19, 2019
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A member of Ernst & Young Global
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