Incredimail 2013 Annual Report Download

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PERION NETWORK LTD.
FORM 20-F
(Annual and Transition Report (foreign private issuer))
Filed 04/10/14 for the Period Ending 12/31/13
Telephone 972-3-769-6100
CIK 0001338940
Symbol PERI
SIC Code 7371 - Computer Programming Services
Industry Computer Services
Sector Technology
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2014, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ... Sector Fiscal Year 972-3-769-6100 0001338940 PERI 7371 - Computer Programming Services Computer Services Technology 12/31 http://www.edgar-online.com © Copyright 2014, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

  • Page 2
    ... THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report...For the transition period from ____ to _____ Commission File No. 000-51694 Perion Network Ltd. (Exact Name of Registrant as specified in its charter) N/A (Translation of Registrant's name into English) Israel...

  • Page 3

  • Page 4
    ...known seasoned issuer, as defined in Rule 405 of the Securities Act Yes 1 No  If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934. Yes 1 No  Indicate...

  • Page 5
    ... exchange rate reported by the Bank of Israel on December 31, 2013. Trademarks Perionâ„¢, IncrediMailâ„¢, PhotoJoyâ„¢, Smilebox Teeth Designâ„¢, Smileboxâ„¢, SWEETPACKSâ„¢ and SWEETIMâ„¢ are our registered trademarks. All other registered trademarks and trade names appearing in this annual report...

  • Page 6
    ...Identity of Directors, Senior Management and Advisers Offer Statistics and Expected Timetable Key Information Information on the Company Unresolved Staff Comments Operating and Financial Review and Prospects Directors, Senior Management and Employees Major Shareholders and Related Party Transactions...

  • Page 7
    ... filing this annual report, we expect to submit with the U.S. Securities and Exchange Commission ("SEC") a report on Form 6-K containing the audited consolidated statements of income, change in shareholders' equity and cash flows of ClientConnect for the years ended December 31, 2011, 2012 and 2013...

  • Page 8
    .... There are very few companies in the market that provide Internet search and advertising services similar to those provided by Google, Microsoft and Yahoo. These three are the dominant players in this market, particularly on a global scale, and competitors do not offer as much coverage through...

  • Page 9
    ... of the services agreement by our search partners. The guidelines imposed pursuant to our agreement with Google, with respect to homepage resets, installing toolbars and default search resets to Google services when providing downloadable applications were changed in February 2013, and this...

  • Page 10
    ... users to accept our offering, designating the Company as its default search provider and accept the other search properties offered. To achieve these goals, we rely heavily on third-party publishers to distribute our search syndication services as a value-added component of their own software...

  • Page 11
    ... and as long as (if at all) the user performs searches, for which we receive payments from search providers. To the extent we incorrectly estimate the expected revenue from the search activity of the end user over time, for any reason including changes in the market, our operating results will be...

  • Page 12
    ... products, technologies or businesses or achieve anticipated revenues or cost benefits. Future acquisitions could result in customer dissatisfaction, performance problems with an acquired product, technology or company. Paying the purchase price for acquisitions in the form of cash, debt or equity...

  • Page 13
    ... If users or third parties express privacy or security concerns regarding our collection, use and handling of personal information, we could incur substantial expenses. Although we strive to comply with strict privacy data security requirements and take all reasonable steps to ensure the security of...

  • Page 14
    .... Each of our third party Internet and telecommunication providers may not continue to provide services to us without disruptions in services at the current cost or at all. Moreover, as traffic to our websites and applications increases and the number of new (and presumably more complex) products...

  • Page 15
    ... also offer search services alongside their primary software product, users often replace our search services with those provided by these vendors in the course of installing new software or updating existing software. Any event that results in a significant number of users changing or upgrading...

  • Page 16
    ... new users could be adversely affected. Although we have established programs to attract new employees and provide incentives to retain existing employees, particularly senior management, we cannot be assured that we will be able to retain the services of senior management or other key employees...

  • Page 17
    ...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...

  • Page 18
    ... the patent applications that we have filed will result in a patent being issued, or that any existing or future patents will afford adequate protection against competitors and similar technologies. We use certain "open source" software tools that may be subject to intellectual property infringement...

  • Page 19
    ... that the terms of any offered licenses will be acceptable to us. Our failure to obtain a license for key intellectual property rights from a third party for technology or content, sound or graphic used by us could cause us to incur substantial liabilities and to suspend the development and sale of...

  • Page 20
    ... in commercial use of the Internet (particularly outside of the United States), the extent to which web browsers, software programs and/or other applications that limit or prevent advertising from being displayed become commonplace and the extent to which the industry is able to effectively manage...

  • Page 21
    ... laws may cover user privacy, data collection and protection, content, use of "cookies", access changes, "net neutrality," pricing, advertising, distribution of "spam", intellectual property, distribution, protection of minors, consumer protection, taxation and online payment services. . Many areas...

  • Page 22
    ... cause volatility in interest rates, exchange rates and stock market quotes. The political and security situation in Israel may result in parties with whom we have contracts claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions...

  • Page 23
    ... of our male employees in Israel, including members of senior management, are obligated to perform up to 36 days of military reserve duty annually until they reach the relevant age of discharge from army service and, in the event of a military conflict, could be called to active duty. While we have...

  • Page 24
    ... only if our stock price appreciates between your date of purchase and your date of sale of our shares. See "Item 8.A Consolidated Statements and Other Financial Information - Policy on Dividend Distribution" for additional information regarding the payment of dividends. Several shareholders may be...

  • Page 25

  • Page 26
    ... subject to ongoing costs and risks associated with complying with extensive corporate governance and disclosure requirements. As an Israeli public company, we incur significant legal, accounting and other expenses. We incur costs associated with our public company reporting requirements as well as...

  • Page 27
    ...delay, prevent or make difficult an acquisition of our Company, which could prevent a change of control and therefore depress the price of our shares. Future sales of our ordinary shares could reduce our stock price. At the closing of the ClientConnect Acquisition on January 2, 2014, we issued 54.75...

  • Page 28
    ... are located at 4 HaNechoshet Street, Tel-Aviv 69710, Israel. Our phone number is (972-3) 769-6100. Our website address is www.perion.com . The information on our website does not constitute a part of this annual report. Our agent for service in the United States is Smilebox Inc., which is located...

  • Page 29
    ... third party content features or services that publishers decide to offer to end users, who can then choose to download and install the toolbars and the related features or services (as applicable). End users may also utilize the toolbars for Internet searches that are powered by search providers...

  • Page 30
    .... When we use the term "registered user" in this annual report, we mean a user who has downloaded a product and completed the registration process. Registrations are not necessarily indicative of the number of individuals using the product or services, as a user may register more than one time and...

  • Page 31
    ... from services agreements with our search partners. Search generated revenues accounted for 72%, 63% and 68% of our revenues in 2011, 2012 and 2013, respectively. Through our search syndication technology, we offer end users the ability to search the internet via easily embedded search boxes powered...

  • Page 32
    ... 1, 2013 for a term of two years, has historically been the second largest source of revenue for ClientConnect, accounting for 9%, 15% and 22% of ClientConnect's revenues in 2011, 2012 and 2013, respectively. Google serves as the main provider of ClientConnect of search services to end users of...

  • Page 33
    ... client. Its basic version can be downloaded free of charge. Incredimail is used for managing email messages and Facebook feeds, and offers various graphic and personalizing capabilities. In addition, it is safe, simple and easy to use. The premium version of this software offers, for an annual...

  • Page 34
    ... Smilebox provide their default search results. Smilebox is also available free of charge for the iPhone, making it easy to personalize and share photos in real time, directly from the device. Personalization options include captions, stickers and frames, and sharing options include email, Facebook...

  • Page 35
    ... other companies offering solutions for online publishers and developers, including search services and other software in conjunction with changing a user's default search settings. As a major part of our revenues stem from our offering of search properties, we compete with search engine providers...

  • Page 36
    ... the consent of the subscriber before accessing such information. Further, the European Commission is currently considering a data protection regulation that may include operational requirements for companies that receive personal data that are different than those currently in place in the European...

  • Page 37
    ... free version or the one for which users are required to pay, when the product was downloaded, and other factors. We believe our historical track record of our users accepting and utilizing the search properties we offer, as well as our history of converting registered users to purchasing customers...

  • Page 38
    ... the purchase of all the outstanding shares of SweetIM Ltd., a Belize company that wholly owns SweetIM Technologies Ltd., an Israeli consumer internet company ("SweetIM"). SweetIM produces a variety of free, fun, easy-to-use and safe applications and downloadable content for everyday use under...

  • Page 39
    ...as a percentage of sales, every year since 2011 and expect to continue increasing the rate of investment in customer acquisition even further in 2014. With this investment we aim to increase the number of product downloads, users, search queries generated by those downloading our software or that of...

  • Page 40
    ... email client, are recognized when we are entitled to receive the fee. Advertisers are charged and pay monthly, based on the number of clicks generated by users clicking on these ads. Persuasive evidence of an arrangement exists based upon a written agreement or purchase order with a search provider...

  • Page 41
    .... The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The fair value of restricted stock awards is based on the market value of the underlying shares at the date of grant. In November 2010, our board of directors changed our dividend policy...

  • Page 42
    ...existed at the acquisition date, are recorded as an adjustment to goodwill during the purchase price allocation period (generally within one year of the acquisition date) and as operating expenses, if otherwise. In connection with purchase price allocations, we estimate the fair value of the support...

  • Page 43
    ... in lower operating and net income margins in 2012 and 2013. We expect to further increase our customer acquisition costs in 2014, increasing our sales and marketing expenses, both nominally and as a percentage of sales. In addition, general and administrative expenses included expenses related to...

  • Page 44

  • Page 45
    ... was due to an increase in the number of downloads and subsequently the number of users using our search service. This increase was due to organic growth, as well as the acquisition in the latter part of 2012 of SweetIM's activity, which too was based on search generated revenues and which has since...

  • Page 46
    ... in the number of downloads and subsequently the number of users using our search service. We offer our search service in conjunction with our products and toolbar, with Google powering the search service for substantially all our users in such years. In addition, our SweetIM acquisition contributed...

  • Page 47
    ... in connection with the Conduit Commercial Agreement. Pursuant to the terms of the ClientConnect Acquisition, Conduit agreed to provide ClientConnect a short-term working capital loan of up to $20 million,as described below under " - Credit Facilities". As of December 31, 2013, we had cash and cash...

  • Page 48
    ...priority fixed charge on certain other immaterial assets (namely, rights for unpaid shares, securities and other deposits deposited with the banks from time to time, and rights for property insurance). The pledge agreements contain a number of customary restrictive terms and covenants that limit our...

  • Page 49
    ...not offering toolbars to new users. In 2013, Google continued to institute further changes to its search partner policies, changing the way Google's partners (such as Perion) acquire and retain customers. Although these changes aim to improve the user experience (which is a goal that we share), they...

  • Page 50
    ...than 5 Years $ 1,093 1,093 $ (***) (****) Long-term debt obligations represent repayment of principal and do not include interest payments due thereunder. Severance pay obligations to our Israeli employees, as required under Israeli labor law and as set forth in employment agreements, are payable...

  • Page 51
    ... & Co. Investment Bankers Ltd. (1980 to 1991). From 1991 to 1994, Ms. Gottlieb served as the Founding Managing Director of Maalot - The Israeli Securities Rating Company Ltd., Israel's first credit rating agency. Ms. Gottlieb currently serves as a board member of several Israeli public and private...

  • Page 52
    ... 2010, Mr. Mandelbaum served in various positions at American Greetings Corporation (NYSE: AM), including as Chief Executive Officer of the AG Intellectual Properties group, from 2000 to 2010 and as Senior Vice President of the Sales and Business Development of the AG Interactive group, from 1998 to...

  • Page 53
    ... compensation we paid to our officers as a group (8 persons) for the year ended December 31, 2013, was approximately $2.6 million, which included approximately $0.3 million that was set aside or accrued to provide for pension, retirement, severance or similar benefits. This amount includes bonuses...

  • Page 54
    ... directors also receives an annual grant of options to purchase 10,000 ordinary shares under the Incentive Plan. Each option is exercisable for a term of five years at an exercise price per share equal to the closing price of our ordinary shares on the date of the annual meeting of shareholders on...

  • Page 55
    ...At our 2013 annual meeting of shareholders, held on September 2, 2013, Mr. Josef Mandelbaum was reelected as a director for an additional three-year term and Mr. Alan Gelman was reelected as a director for a three-year term. In connection, with the closing of the ClientConnect Acquisition on January...

  • Page 56

  • Page 57
    ...of election; or the total number of shares of non-controlling shareholders voted against the election of the external director does not exceed two percent of the aggregate voting rights in the company. • The initial term of an external director is three years and such director may be reappointed...

  • Page 58
    ... information see Item "16.C - Principal Accountant Fees and Services." Under the NASDAQ Listing Rules, the approval of the audit committee is also required to effect related-party transactions that would be required to be disclosed in our annual report. Companies Law Requirements Under the Companies...

  • Page 59
    ... accounting firm or its representative. The Companies Law defines an interested party as a substantial shareholder of 5% or more of the shares or voting rights of a company, any person or entity that has the right to nominate or appoint at least one director or the general manager of the company...

  • Page 60
    ... certain tax benefits in connection with share-based compensation under the tax laws of Israel and the United States. The term of the Incentive Plan will expire on December 9, 2022. Please also see Note 11 to our consolidated financial statements included in this annual report for information on the...

  • Page 61
    ... from the sale of shares issued pursuant to the Incentive Plan will generally be taxed at the capital gain rate of 25%, provided the trustee holds the securities for 24 months following the date of grant of the award. To the extent that the market price of the ordinary shares at the time of grant...

  • Page 62
    ...ownership of 70,520, or 0.7%, of our ordinary shares. Each of the Investment Manager, GC and Mr. Packer reported beneficial ownership of 535,617, or 5.3%, of our ordinary shares. On February 14, 2013, the Globis Reporting Persons jointly filed a Schedule 13G/A relating to the beneficial ownership of...

  • Page 63
    ...downloads or installs. Transition Services Agreement Pursuant to the Transition Services Agreement, dated December 31, 2013, between Conduit and ClientConnect, ClientConnect provides Conduit and its subsidiaries with certain business support services and systems, including data services, information...

  • Page 64
    ... Search Syndication Agreement, dated December 31, 2013, between Conduit and ClientConnect, ClientConnect undertook to provide Conduit and its affiliates with search monetization services on the most favorable terms that it gives to its other customers. The agreement has an initial term of two years...

  • Page 65
    ... statements for the year ended December 31, 2013 are included in this annual report pursuant to Item 18. Shortly after filing this annual report, we expect to submit with the SEC a report on Form 6-K containing the audited consolidated statements of income, change in shareholders' equity and cash...

  • Page 66
    ... Aviv Stock Exchange under the symbol "PERION". D. SELLING SHAREHOLDERS Not applicable. E. DILUTION Not applicable. F. EXPENSES OF THE ISSUE Not applicable. ITEM 10. A. ADDITIONAL INFORMATION SHARE CAPITAL Not applicable B. MEMORANDUM AND ARTICLES OF ASSOCIATION Registration Number and Purposes

  • Page 67
    Our registration number with the Israeli Companies Registrar is 51-284949-8. Pursuant to Section 3 of our articles of association, our objectives are the development, manufacture and marketing of software and any other objective as determined by our board of directors. 59

  • Page 68
    ... ownership or voting of ordinary shares by non-residents of Israel. Under the Companies Law, an annual meeting of our shareholders should be held once every calendar year, but no later than 15 months from the date of the previous annual meeting. The quorum required under our articles of association...

  • Page 69
    ... as a result of his connection with the controlling shareholder (excluding abstaining votes); or the total number of shares of non-controlling shareholders voted against the election of the external director does not exceed two percent of the aggregate voting rights in the company. • See "Item...

  • Page 70
    61

  • Page 71
    ... things, when voting in a general meeting of shareholders or in a class meeting on the following matters 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. 62

  • Page 72
    ... voting rights in the company will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer. The requirement to conduct a tender offer shall not apply to (i) the purchase of shares in a private placement, provided...

  • Page 73
    ... year of 2013 and the absence of certain changes in the industry in which we operate. We believe that that the terms of the Share Purchase Agreement will require us to pay $2.5 million with respect to the contingent payment. We funded the cash amount paid upon the closing of this acquisition using...

  • Page 74
    ... ClientConnect Acquisition Share Purchase Agreement On September 16, 2013, we entered into a Share Purchase Agreement among Perion, Conduit Ltd. and ClientConnect Ltd. providing for our acquisition of all the outstanding shares of ClientConnect in exchange for our ordinary shares. On the same date...

  • Page 75
    ... in connection with (x) an acquisition by us of any business, company or assets or (y) a private placement of ordinary shares, that are not subject to more strict or identical transfer restrictions as provided under the Contractual Lock-up, in which the aggregate number of ordinary shares issued...

  • Page 76
    ... event within the earlier of (i) 30 days following the filing of this annual report and (ii) May 30, 2014, 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...

  • Page 77
    ... such obligations. For information regarding our credit facilities, see Item 5.B "Operating and Financial Review and Prospects - Liquidity and Capital Resources - Credit Facilities." D. EXCHANGE CONTROLS Non-residents of Israel who hold our ordinary shares are able to receive any dividends, and any...

  • Page 78
    ...will be entitled to distribute a dividend from such income without being required to pay additional corporate tax with respect to such dividend. A company that has so elected must make certain qualified investments in Israel over the five-year period commencing in 2013. A company that has elected to...

  • Page 79
    ... our shares and taxable income from dividend distributions. Israeli corporations are generally subject to the corporate tax rate (25% in 2013, and 26.5 % in 2014) on capital gains derived from the sale of shares. Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders. Shareholders that...

  • Page 80
    ... being distributed in a way that will reduce shareholders' tax liability. A non-resident of Israel who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of such income, provided such income was not derived from a business conducted...

  • Page 81
    ... a short sale or otherwise) to make related payments with respect to positions in property substantially similar or related to the ordinary share with respect to which the dividend is paid. In addition, a non-corporate U.S. Holder will be able to take a qualified dividend into account in determining...

  • Page 82
    ...Holders who hold ordinary shares during a period when we are a PFIC will be subject to the foregoing rules even if we cease to be a PFIC. Unless otherwise provided by the IRS, if a non-U.S. corporation is a PFIC, a U.S. Holder generally is required to file an annual informational return with the IRS...

  • Page 83
    ... year. The rules applicable to owning shares of a PFIC are complex, and each prospective purchaser who would be a U.S. Holder should consult with its own tax advisor regarding the consequences of investing in a PFIC. Medicare Tax For tax years beginning after December 31, 2012, certain non-corporate...

  • Page 84
    ... of agreements pursuant to applicable law) at our principal executive offices at Perion Network Ltd., 4 HaNechoshet Street, Tel-Aviv 69710, Israel. I. SUBSIDIARY INFORMATION Not applicable. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Exchange Rate Risk. A significant...

  • Page 85
    ... less than one percent (1%). The exchange rate of the U.S. dollar to the New Israeli Shekel, based on exchange rates published by the Bank of Israel, was as follows: Year Ended December 31, 2011 2012 2013 3.578 3.855 3.610 3.821 3.733 3.471 Average rate for period Rate at year-end Since 2006 we've...

  • Page 86
    ... of changes in conditions, the effectiveness of internal control over financial reporting may vary over time. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth...

  • Page 87
    ... and assistance with review of documents filed with the SEC. The fee for 2013 includes the audit of internal control over financial reporting. Audit-related fees principally include due diligence in connection with acquisitions and accounting consultation. Tax fees include services related to tax...

  • Page 88
    ... in person or by proxy. Annual Reports. While the NASDAQ Listing Rules generally require that companies send an annual report to shareholders prior to the annual general meeting, we follow the generally accepted business practice for companies in Israel. Specifically, we file annual reports on...

  • Page 89
    ... . The NASDAQ Listing Rules require a listed company to have a compensation committee composed entirely of independent directors that operates pursuant to a written charter addressing its purpose, responsibilities and membership qualifications and may receive counseling from independent consultants...

  • Page 90
    ... III ITEM 17. FINANCIAL STATEMENTS Not applicable. ITEM 18. FINANCIAL STATEMENTS The following financial statements and related auditors' report are filed as part of this annual report: Page Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2012...

  • Page 91
    ...of Standstill Agreement between Perion Network Ltd. and certain shareholders thereof, dated as of September 16, 2013. (3) Form of Registration Rights Undertaking of the Company dated January 2, 2014. (3) Search Services Agreement by and between Conduit Ltd. and Microsoft Online, Inc., dated November...

  • Page 92
    reference in such filing. * Confidential treatment was requested with respect to certain portions of this exhibit pursuant to 17.C.F.R. §§ 230.406 and 200.83. Omitted portions were filed separately with the SEC. 82

  • Page 93
    PERION NETWORK LTD. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2013 IN U.S. DOLLARS INDEX Page Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2012 and 2013 Consolidated Statements of Income for the Years Ended ...

  • Page 94
    ... consolidated balance sheets of Perion Network Ltd. ("the Company") and its subsidiaries as of December 31, 2012 and 2013, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended...

  • Page 95
    ... PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of PERION NETWORK LTD. We have audited Perion Network Ltd.'s ("the Company") internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by...

  • Page 96
    ...consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2013 and our report dated April 10, 2014 expressed an unqualified opinion thereon. Tel-Aviv, Israel April 10, 2014 F-4 / s / KOST FORER...

  • Page 97
    PERION NETWORK LTD. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands As of December 31, 2012 2013 Assets Current assets: Cash and cash equivalents Restricted cash Trade receivables (net of allowance for doubtful accounts and sales reserves in a total amount of $ 108 and $ ...

  • Page 98
    ... Long-term debt Contingent purchase consideration Other long term liabilities Total liabilities Commitments and contingent liabilities Shareholders' equity: Ordinary shares of NIS 0.01 par value - Authorized: 40,000,000 and 120,000,000 shares at December 31, 2012 and 2013, respectively; Issued and...

  • Page 99
    PERION NETWORK LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands (except per share data) Year ended December 31, 2012 2013 2011 Revenues: Search Products Advertising and other $ 25,466 7,191 2,816 35,473 2,840 32,633 $ 38,061 17,574 4,588 60,223 5,230 54,993...

  • Page 100
    PERION NETWORK LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME U.S. dollars in thousands Year ended December 31, 2012 2013 $ 3,534 $ 3,534 $ $ 310 310 2011 Net income Other comprehensive income: Reclassification adjustments to income on marketable securities, net of tax ...

  • Page 101
    ... $ Total shareholders' equity 28,152 1,200 30 (3,885) 750 (100) 5,668 31,815 1,085 76 18,200 3,534 54,710 1,550 310 56,570 Share Capital Balance as of December 31, 2010 Stock based compensation expense Exercise of share options Dividends Issuance of shares related to acquisition Other Comprehensive...

  • Page 102
    ... Investing activities: Purchase of property and equipment Proceeds from sale of property and equipment Restricted cash Capitalization of software development and content costs Cash paid by employees on previously exercised options of acquired company Cash paid in connection with acquisitions, net...

  • Page 103
    ... 31, 2012 2013 2011 Financing activities: Exercise of share options Payments made in connection with acquisitions Proceeds from long-term loans Repayment of long-term loans Dividend paid Net cash provided by (used in) financing activities Increase (decrease) in cash and cash equivalents Cash and...

  • Page 104
    ... primarily through search, the sale of premium products and services, and advertising. The Company's products include primarily: IncrediMail, a communication client; Smilebox, a photo sharing and social expression product and service; and Sweet IM, an instant messaging application. The Company was...

  • Page 105
    ...statements include the accounts of Perion and its subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation. d. Cash equivalents: The Company considers short-term unrestricted highly liquid investments that are readily convertible into cash, purchased with original...

  • Page 106
    ... the right to use its email software, content database, photo sharing and social expression product and e-mail antispam. Revenues from other services include search related advertising and other advertising. In accordance with ASC 605-50, "Customer Payments and Incentives", the Company accounts for...

  • Page 107
    ... evidence of an agreement exists, delivery of the product has occurred, the fee is fixed or determinable, and collectability is probable. Company's email product users may also purchase a license to its content database. This content database provides additional Perion Network content files in the...

  • Page 108
    PERION NETWORK LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 2:SIGNIFICANT ACCOUNTING POLICIES (Cont.) Due to the proximity of the business combination and the commercial agreement, the nature of the transactions...

  • Page 109
    ... risk with respect to sales of the Company's software products and content database, as these sales are primarily obtained through credit card sales. The Company's major customers are financially sound, and the Company believes low credit risk is associated with these customers. To date, the Company...

  • Page 110
    ...thousands (except share and per share data) NOTE 2:SIGNIFICANT ACCOUNTING POLICIES (Cont.) o. Severance pay: The Company's liability for severance pay is calculated pursuant to Israel's Severance Pay Law based on its employees' most recent monthly salaries, multiplied by the number of years of their...

  • Page 111
    .... The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The fair value of the RSU's is based on the market value of the underlying shares at the date of grant. In November 2010 the Company's Board decided to change its dividend policy so...

  • Page 112
    ... share and per share data) NOTE 2:SIGNIFICANT ACCOUNTING POLICIES (Cont.) The fair value of the Company's stock options granted to employees and directors was estimated using the following assumptions: Year ended December 31, 2012 0.75% 45.60%-61.90% 53.76% 4.09 0.00% 2011 Risk-free interest rate...

  • Page 113
    ...thousands (except share and per share data) NOTE 2:SIGNIFICANT ACCOUNTING POLICIES (Cont.) s. Fair value of financial instruments: The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, restricted cash, trade receivables, other receivables, trade payables...

  • Page 114
    ... measurements using input type Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds Other receivables and prepaid expenses: Derivative assets Total financial assets Payment obligation Sweet IM former shareholders : Total financial liabilities t. Treasury shares: In the past the Company...

  • Page 115
    ...,000 ordinary shares of the Company issued at closing for total value of $17,863, which considered the market restrictions on these shares; $ 7,500 in cash ("Second installment") subject to certain adjustments, payable within 12 months following the Closing Date (December 2013). In connection with...

  • Page 116
    ... to the acquisition of SweetIM Ltd. its board of directors approved a cash dividend of $ 13,000 (the "Dividend"). However, the Dividend was not distributed to the shareholders prior to closing of the transaction. As part of the Share Purchase Agreement (the "SPA") between the Company and SweetIM...

  • Page 117
    PERION NETWORK LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 3:ACQUISITIONS (Cont.) Intangible assets: In performing the purchase price allocation, the Company considered, among other factors, analysis of ...

  • Page 118
    ...people to connect with family and friends in a creative and personal way. Smilebox enable users to personalize hundreds of unique, multimedia designs with their photos, videos, and music and then share them via print, email, blog or DVD. The main reason for this acquisition was to enrich the Company...

  • Page 119
    ... to valuation, performed by a third party valuation firm using estimates and assumptions provided by management. The following table sets forth the components of intangible assets associated with Smilebox acquisition: Fair value 1,488 3,000 1,870 $ 6,358 Useful life 4.3-6.3 years 3 years 10.25...

  • Page 120
    PERION NETWORK LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 5:PROPERTY AND EQUIPMENT, NET December 31, 2012 2013 Cost: Computers and peripheral equipment Office furniture and equipment Leasehold improvements $ ...

  • Page 121
    ... share and per share data) NOTE 6:GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Cont.) b. Other intangible assets, net Useful Life Original amount: Capitalized software development costs Capitalized content costs and domain Technology Trade name Customer relationship Logo IP R&D December 31, 2012 2013...

  • Page 122
    ...are based on the Company's revenues in the fiscal year of 2013, and the absence of certain changes in the industry in which the Company operates. The Company believes that the terms of the SPA will require the Company to pay $2,500 with respect to the contingent payment. c. Legal Matters On November...

  • Page 123
    all covenants. The loans are repaid in 16 and 20 equal quarterly installments, respectively starting July 17, 2012. Interest rates applicable are 4.35% and 4.64%, payable monthly starting May 17, 2012. F - 30

  • Page 124
    PERION NETWORK LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 9:LONG-TERM LOAN (Cont.) b. As of December 31, 2013, the aggregate principal annual maturities according to the loan agreement are as follows: ...

  • Page 125
    PERION NETWORK LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 10:INCOME TAXES (Cont.) b. Corporate tax rates in Israel: Taxable income of Israeli companies is subject to tax at the rate of 25% in 2013 and in 2012 ...

  • Page 126
    PERION NETWORK LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 10:INCOME TAXES (Cont.) e. Tax loss carry-forwards: The Company has a Net operating loss carry-forwards in the United States as of December 31, 2013 of...

  • Page 127
    ... tax expenses resulting from: "Preferred Enterprise" benefits (*) Non-deductible expenses Previous years taxes Tax on previously distributed dividend from tax-exempt income Loss and timing differences for which no deferred taxes were recorded Change in statutory tax rate Tax adjustment in respect of...

  • Page 128
    ... their holders to voting rights, the right to receive cash dividend and the right to a share in excess assets upon liquidation of the Company. In November 18, 2013 the shareholders resolved to increase the authorized share capital of the Company to 120,000,000 ordinary shares with a nominal value of...

  • Page 129
    F - 35

  • Page 130
    ... 3 years from the date of grant. The rights of the ordinary shares obtained from the exercise of options or RSUs are identical to those of the other ordinary shares of the Company. The contractual term of these options is five years. The maximum number of ordinary shares currently authorized to...

  • Page 131
    PERION NETWORK LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 11:SHAREHOLDERS' EQUITY (Cont.) The weighted-average grant-date fair value of options granted during the years 2011, 2012 and 2013 was $ 2.3, $ 1.8 and...

  • Page 132
    PERION NETWORK LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 11:SHAREHOLDERS' EQUITY (Cont.) The following table summarizes information relating to RSUs, as well as changes to such awards during 2013: Year ended ...

  • Page 133
    ... or more of the Company's total revenues in each of the periods set forth below: Year ended December 31, 2011 2012 2013 67% 63% 46% *) *) 11% Customer A Customer B *) Less than 10% The following is a summary of customers that accounted for at least 10% of the total trade receivables as of December...

  • Page 134
    ... securities, net Exchange rate differences , net Interest from government authorities, net Financial expenses: Accretion of payment obligation related to acquisitions Interest with respect to long-term loans Other $ 304 71 102 988 1,465 100 72 172 $ b. Research and development costs, net: Year...

  • Page 135
    ...is as follows: 1 Numerator: Year ended December 31, 2011 2012 2013 Net income available to Ordinary shareholders 2 Denominator: Year ended December 31, 2011 2012 2013 Weighted average number of Ordinary shares, net of treasury stock Effect of dilutive securities: Add - stock options and RSU Adjusted...

  • Page 136
    ...Upon closing , the Company was owned 81% by the existing Conduit shareholders and option holders and 19% by existing Perion shareholders and option holders, on a fully diluted basis using the treasury stock method as defined in the agreement . The transaction has been accounted for as an acquisition...

  • Page 137
    ... are subject to changes and such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable, but no later than one year from the closing date. The preliminary allocation of the purchase price to assets acquired...

  • Page 138
    SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. Perion Network Ltd. /s/ Josef Mandelbaum Josef Mandelbaum Chief Executive Officer Date: April ...

  • Page 139
    ... Bank of Israel, B.M., dated September 6, 2011, from December 3, 2013 (translated from Hebrew ). Search Services Agreement by and between Conduit Ltd. and Microsoft Online, Inc., dated November 19, 2010, as amended on May 11, 2011.* List of subsidiaries. Certification required by Rule 13a-14...

  • Page 140
    ... 1. Name of the Company: Perion Network Ltd. 2. The objective for which the Company was formed: (a) (b) The development, manufacture and marketing of software. Any other objective determined by the Company's board of directors. 3. The liability of the shareholders is limited. 4. The share capital...

  • Page 141
    ... to such term under the Law . The "Ordinance" shall mean the Companies Ordinance (New Version) 1983, as amended, and any regulations promulgated thereunder, that are still in effect from time to time. "Seal" shall mean any of: (1) the rubber stamp of the Company; (2) the facsimile signature of the...

  • Page 142
    ... in all respects. Each Ordinary Share shall confer on the holder thereof the right to receive dividends in cash, shares or other securities or assets, the right to participate in a distribution of the Company's assets at the time of its winding-up and the right to receive notices to and to attend...

  • Page 143
    ... Company to grant to any person the option to acquire from the Company any unissued shares, in each case on such terms as the Board shall deem appropriate. 6. Bearer Shares The Company shall not issue bearer shares or exchange a share certificate for a bearer share certificate. 7. Special Rights...

  • Page 144
    ... action, such shares or fractional shares sufficient to preclude or remove fractional shareholdings; 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...

  • Page 145
    ..., 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. 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...

  • Page 146
    ...other person. 14. Payment in Installment If, pursuant to the terms of allotment or issue of any share and unless determined otherwise in such terms, all or any portion of the price thereof shall be payable in installments, every such installment shall be paid to the Company on the due date thereof...

  • Page 147
    ... 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. 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...

  • Page 148
    ...the right of the Board to make any call for payment before or after receipt by the Company of any such advance. 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...

  • Page 149
    ... stated against all persons claiming to be entitled to the share. 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...

  • Page 150
    ... 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...

  • Page 151
    ... and regulations issued thereunder, the Company may cause branch registers to be kept in any place outside Israel as the Board may think fit, and, subject to all applicable requirements of Law, the Board may from time to time adopt such rules and procedures as it may think fit in connection with the...

  • Page 152
    ... 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...

  • Page 153
    ...Subject to these Articles, applicable law and regulations, including the applicable laws and regulations of any stock market on which the Company's shares are listed or included for quotation, prior notice of at least 21 days of any general meeting, specifying the place, date and hour of the meeting...

  • Page 154
    ...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. If within 30 minutes from the time appointed for the meeting a quorum...

  • Page 155
    ... power of the issued and outstanding share capital of the Company. VOTES OF SHAREHOLDERS 35. Voting Power Subject to the provisions of Article 36 and subject to any provision in the Articles conferring special rights as to voting, or restricting the right to vote, every Shareholder shall have one...

  • Page 156
    ... 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. The Board may cause the Company to send, by mail or otherwise, instruments of proxy to Shareholders for use...

  • Page 157
    ... any other person as a director pursuant to Article 53, so that at least a majority of the number of directors set by the Board to hold office pursuant to Article 40 hereof are in office as a result of such meeting. 43. Vacation of Office ; Removal of Directors 43.1. The office of a director...

  • Page 158
    ... upon such terms and conditions in all respects as it thinks fit, and, in particular, by the issuance of bonds, perpetual or redeemable debentures, debenture stock, or any mortgages, charges, or other securities on the undertaking or the whole or any part of the property of the Company, both present...

  • Page 159
    ...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. A resolution in writing signed by all directors then in office...

  • Page 160
    ...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...

  • Page 161
    ... 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...

  • Page 162
    ... 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...

  • Page 163
    ... shall stand adjourned to the date, time, and place determined by the...person, or by telephone or similar communication equipment of two of the directors then in office...applicable, deputy chairperson, is unwilling or unable to chair such meeting, the directors present shall choose one of their number...

  • Page 164
    ...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...

  • Page 165
    ..., the Board may from time to time declare such dividends and cause the Company to pay such dividends. The Board shall have the full authority to determine the time for payment of such dividends, and the record date for determining the Shareholders entitled thereto, provided such date is not prior to...

  • Page 166
    ... the rights of all parties, and may vest any such cash, shares, debentures, debenture stock or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalized fund as may seem expedient to the Board. Where required, a proper contract shall be filed in accordance...

  • Page 167
    ... the rules of any stock exchange upon which the Ordinary Shares are listed or included for quotation. Such books of account shall be kept at the Office, or at such other place or places as the Board may think fit, and they shall always be open to inspection by all directors. Shareholders who...

  • Page 168
    ..., authorities, rights and duties of the auditor(s) of the Company, shall be regulated by applicable law; provided, however , that in exercising authority to fix the remuneration of the auditor(s), the Shareholders in a general meeting may act (and in the absence of any action in connection therewith...

  • Page 169
    ... 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. Subject to applicable law, any Shareholder, director or any other person entitled to receive notice in accordance with...

  • Page 170
    ... 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; 79.2.3. provided...

  • Page 171
    ... FOR CONVENIENCE ONLY BINDING VERSION IS THE HEBREW ORIGINAL Date: December 3, 2013 To The First International Bank of Israel Ltd. Ramat Hachayal Branch (the " Bank ") Dear Sirs, Re: Amendment to Financial Covenants Whereas , Perion Network Ltd. (hereinafter the " Company "), is and/or will...

  • Page 172
    Exhibit 4.8 Search Services Agreement by and between Conduit Ltd. and Microsoft Online, Inc., dated November 19, 2010, as amended on May 11, 2011.

  • Page 173
    ...HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. EXECUTION VERSION SEARCH SERVICES AGREEMENT This Search Services Agreement (this "Agreement") is made...

  • Page 174
    ... Publisher" means a third party with whom Conduit has contracted to provide Algorithmic Search Services or Paid Search Services on or in connection with Conduit's or such third party's Web sites, applications, software and other digital properties. 1.16 "Confidential Information" has the meaning...

  • Page 175
    EXECUTION VERSION 1.21 "Effective Date" has the meaning given in the preamble of this Agreement. 1.22 "End User" means an individual, human end user who visits or uses a Property or a Source (i.e. , not bots, macro programs, Internet agents, crawlers or any other automated means). 1.23 "Event" ...

  • Page 176
    ... Affiliates during the Term. 1.37 "Microsoft Partner" means a third party that has entered into an arrangement or agreement with Microsoft to receive Microsoft's Paid Search Services and/or Algorithmic Search Services. 1.38 "Mobile Device" means (a) a mobile telephony device used for any computing...

  • Page 177
    ... not include the automatic, real-time transmission by Microsoft or Conduit of suggested search terms during manual typing in a search box occurring prior to a click or prior to any other affirmative act to submit the Internet Search request. 1.54 1.55 1.56 "Receiving Party" has the meaning given in...

  • Page 178
    .... Conduit will use commercially reasonable efforts to prevent the use of the Services or the enablement of Sources on or in connection with New Properties (and Properties supported by Conduit as of the Commencement Date that materially change after the Commencement Date (a "Changed Property")) that...

  • Page 179
    ... resume providing Services to the affected Property. If the Parties are unable to resolve such issues after using such good faith efforts, [***] Microsoft will consider such request promptly and in good faith. Such [***] as may be agreed by the Parties. Any [***] will be subject to all of the terms...

  • Page 180
    ...or as otherwise agreed by the Parties. The content and applications that are included in the [***] will be determined by Conduit in its sole discretion; provided, however that Microsoft may object in good faith to the association of content or applications with a particular Results Page on relevance...

  • Page 181
    ...) by an End User with an installed active [***] . 2.3 General . 2.3.1 Improvements and Successive or Substitute Services . For avoidance of doubt, the Services provided by Microsoft under this Agreement will include each such service as it exists as of the Effective Date, all improvements thereto...

  • Page 182
    ...Programs . Microsoft will use good faith efforts to enable End Users to obtain and the benefit of other similar Microsoft programs (to the extent Microsoft makes them available other than on a test basis) from Internet Searches conducted through the Sources, subject to the generally applicable terms...

  • Page 183
    ...programs, Internet agents; (B) blind links (where End Users do not know that they will be performing a Query or clicking on a Result; (C) requiring an End User to click to receive some other benefit, obtain some other result or perform another function (such as leaving a Web page or closing a window...

  • Page 184
    ..., then Conduit may raise the issue to Microsoft and the Parties work together in good faith to resolve to resolve the issue. Microsoft may or may not implement functionality on Results Pages that enables End Users to change their default search provider settings for the Sources. If Microsoft...

  • Page 185
    ...) that Microsoft makes generally available to other Microsoft Partners in connection with the Services. 3. 3.1 on be circumvent foregoing to: [***] Search Services Exclusivity . Except as otherwise provided for in this Agreement, commencing [***] and continuing throughout the Term, Microsoft will...

  • Page 186
    EXECUTION VERSION 4. [***] CONFIDENTIAL -14COMPENSATION AND PAYMENT 4.1 Payments

  • Page 187
    ... revenues received from the Services to arrive at [***] All information contained in Microsoft's reports under this Section 4.2.1 shall be deemed Confidential Information (as defined in the NDA) of each Party and will be used and disclosed by the Parties only as expressly provided in this Agreement...

  • Page 188
    ...shall pay to Conduit any Transaction Taxes that are required to be collected from Microsoft by Conduit under applicable law. Conduit shall be responsible for the payment of all Taxes arising in connection with any payment received from Microsoft pursuant to this Agreement as well as any Taxes on any...

  • Page 189
    ... Rights. 5.1.2 Conduit Rights . Except as expressly set forth in Sections 5.2.3 and 5.3 of this Agreement, Conduit, the [***] , and each of their respective licensors and other applicable third-party providers reserve all of their Intellectual Property Rights in and to the Properties and the content...

  • Page 190
    ...updated guidelines following notice thereof). The current version of such guidelines as of the Effective Date are attached hereto as Exhibit F. 5.2.3 License to Conduit Brand Features . Subject to the terms and conditions of this Agreement, Conduit grants to Microsoft a limited, nonexclusive and non...

  • Page 191
    ... acquirers (collectively, "Individual Recipients"), who have signed a non-disclosure agreement or are otherwise subject to confidentiality obligations that that are no less stringent with respect to the Disclosing Party's Confidential Information than the terms set forth in this Section 6.2; (b) use...

  • Page 192
    EXECUTION VERSION 6.4 Confidentiality of Agreement . Each Party agrees that the terms and conditions of this Agreement shall be deemed Confidential Information of the other Party and will be disclosed only as set forth in this Section 6 or as otherwise provided in Section 14 (Public Relations and ...

  • Page 193
    ... allegation that any Result provided by Microsoft in the performance of Services or Other Platform Services under this Agreement (a) infringes, misappropriates or otherwise violates any third-party Intellectual Property Rights or violates any Law, (b) breaches any third-party rights of publicity or...

  • Page 194
    ... in the Microsoft Network, except to the extent such breach was caused by a breach of this Agreement by Conduit or any of its Affiliates or Conduit Publishers; or 10.1.5 any allegation that a Microsoft Brand Feature infringes any third-party trademark, service mark, domain name or trade dress...

  • Page 195
    ... or material; or (b) provide a non-infringing substitute with at least the same features, functions and performance as the allegedly infringing service, technology, content or material (a "Non-Infringing Alternative"), in which case the Indemnified Party will use commercially reasonable efforts to...

  • Page 196
    ... knowledge about the Internet industry and about the particular products or services at issue. If required to act in accordance with this Section to appoint a single arbitrator in lieu of a Party, JAMS will appoint an arbitrator within 15 days of such application. 12.2.2 Larger Claims . (a) For all...

  • Page 197
    ... with the terms and conditions of this Agreement. The arbitrators will have no jurisdiction to, and are not empowered to, modify or amend the exclusions and limitations of liability or the termination rights set forth in this Agreement. The arbitration panel will be authorized in its discretion...

  • Page 198
    ... the authority to act for the appointing Party in connection with all day to day aspects of this Agreement. Microsoft's Account Manager shall be available to Conduit as reasonably required and will assist Conduit, as reasonably requested by Conduit, in all aspects of implementing the Services. The...

  • Page 199
    ...Conduit's election prior to the end of the Term, Microsoft will continue to provide Services to Conduit and the Conduit Publishers under the applicable terms and conditions of this Agreement for a period of time not to exceed 90 days from the date of Conduit's election so that Conduit may transition...

  • Page 200
    ... with its terms and conditions pursuant to the governing Law selected by the Parties pursuant to Section 12.2.3 without application of any rules of construction relating to which Party drafted this Agreement in favor of, or against, either Party. Unless otherwise expressly provided herein or...

  • Page 201
    ... networks with whom the non-performing Party does not have a direct contractual relationship, failure of suppliers with whom the non-performing Party does not have a direct contractual relationship, or other similar occurrences which are beyond such Party's reasonable control; provided...

  • Page 202
    ...are dealing with each other as independent contractors. Neither this Agreement nor any terms and conditions contained in this Agreement may be construed to: (a) give any Party the power to direct and control the day-to-day activities of any of the other; (b) create or constitute a partnership, joint...

  • Page 203
    ..., and such textually identical counterparts together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. For purposes hereof, a facsimile or scanned copy of this Agreement, including the signature pages hereto...

  • Page 204
    IN WITNESS WHEREOF, the Parties to this Agreement by their duly authorized representatives have executed this Agreement as of the Effective Date. CONDUIT LTD. MICROSOFT ONLINE, INC. By: Name: Title: By: Name:J. McCLAMROCH, JR. Title: GM, OSD, MICROSOFT [Signature Page to Search Services Agreement]

  • Page 205
    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit A [***]

  • Page 206
    ... WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. EXHIBIT B SOURCES Conduit enables search opportunities through a variety of Sources...

  • Page 207
    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit C-1 [***]

  • Page 208
    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit C-2 [***]

  • Page 209
    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit C-3 [***]

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    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit C-4 [***]

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    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit C-5 [***]

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    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit D [***]

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    EXHIBIT E MICROSOFT BRAND FEATURES Logos in different sizes can be found at https://brandtools.partners.extranet.Microsoft.com/ CONFIDENTIAL Exhibit E - Page 1

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    E XAMPLE OF USE OF BING BRAND ON CONDUIT.COM WEBSITE: CONFIDENTIAL Exhibit E - Page 2

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    EXAMPLE OF USE OF BING BRAND ON PUBLISHER INSTALL PAGES: CONFIDENTIAL Exhibit E - Page 3

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    EXAMPLE OF USE OF BING BRAND IN TOOLBAR INSTALLATION PROCESS: CONFIDENTIAL Exhibit E - Page 4

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    EXAMPLES OF USE OF BING BRAND ON SEARCH BOX (TOOLBAR AND CUSTOM HOMEPAGE: CONFIDENTIAL Exhibit E - Page 5

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    EXHIBIT F MICROSOFT BRAND GUIDELINES CONFIDENTIAL Exhibit F - Page 1

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    Bing product guidelines - External June 2010

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    ...Usage Guidelines Bing Text Brand Signature Guidelines Logo Usage Guidelines Brand the User Interface with the Bing Searchbox Bing Searchbox Details Searchbox Design Options Simple Searchbox Site Search Searchbox Third Party Searchbox Options Attribution on the Search Results Page Font guidelines for...

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    Document Overview The purpose of this guideline document is to provide guideline and usage specifications for using and syndicating Bing Search on Bing partner sites. These guidelines contain the information you need to include the Bing branded searchbox, assets and behaviors of the searchbox on ...

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    ...do not use BG, B Search, and so on. Never use Microsoft or Bing in the possessive form, such as "Microsoft's Bing features are excellent." Instead, use the company name as an adjective. For example, you can say "Microsoft Bing features are excellent." In-depth information regarding use of Microsoft...

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    ... or graphics to create new artwork. Use the artwork as it is provided from the Bing branding team. The Bing logo brand signature should also not be used by third parties without obtaining written permission from Microsoft, and obtaining approval from the Legal and Corporate Affairs (LCA) department...

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    ... should never be used as a supporting graphic (non working search box) on a Web site. â- The Bing brand should be easy to see and easy to read. â- Only full color versions are allowed â- The Bing brand signature must appear on the same UI screen that is used for submitting category queries. Bing...

  • Page 225
    ... that want to do direct transfers to bing.com when a user implements a search. â- When used with the searchbox the Bing Logo should be on either the left or right of the searchbox. â- The logo should be within a 10 px proximity of the box when incorporating the brand. â- Logo - Bing Logo, either...

  • Page 226
    ...performed better than those in a drop down. Therefore we make the following recommendations: â- Highlight the scope state as illustrated below. â- Use optional helper text in the search box that reflects the state of the scope o Search o Search with Bing or Search the Web â- If a user...

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    Site Search Above the Box - Logo on the Left Site Search Above the Box - Logo on the Right

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    Site Search in a Dropdown - Logo on the Left

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    Site Search in a Dropdown - Logo on the Right

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    ... and should transfer a user to http://www.bing.com . â- If there is a query term in the searchbox, clicking the logo would execute a search on bing.com. â- If the scope is set to 'web' and a user clicks the spyglass the box would execute a search and transfer the user to bing.com. â- Tool Tip...

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    Third Party Searchbox Behaviors â- â- If there is a query term in the searchbox, clicking the spyglass would execute a search on bing.com. If there is no query term in the searchbox, clicking the spyglass would take a user to http://www.bing.com . Attribution on the Search Results Page The logos ...

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    ... is the second choice. â- When possible, avoid using italic fonts to ensure clarity and readability in the UI. Tag Lines Short Name Bing. Search by Microsoft. Long Name Bing For Decisions that Matter. Bing and Decide. For Search Provider Bing Bing. Search by Microsoft. Space Constrained Bing...

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    ...it is provided â- Don't change the favicon colors. Don't modify the favicon in any way. Do use the artwork as provided â- Don't "lock up" or combine the favicon with the logo â- Don't provide this asset or allow partners to use the favicon in any marketing material â- If space is limited and you...

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    ... hardcode the path itself, but rather use the value of the element as the value will change when the asset is updated at Bing launch. By doing this you can work with the asset files before launch, and the assets will automatically change when the new files are published at Bing launch. We recommend...

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    Appendix 1 - Sample Usage

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    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit G [***]

  • Page 239
    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit H [***]

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    EXHIBIT I TECHNICAL REQUIREMENTS FOR BRANDED FOOTER Size Dimensions Iframe width - 350px Text color = #737373 Font = 8pt unbolded Logo = max height 15px (increasing to 20px within a reasonable period of time as determined by mutual agreement) CONFIDENTIAL Exhibit I - Page 1

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    ...BEEN FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. EXECUTION VERSION AMENDMENT TO SEARCH SERVICES AGREEMENT This Amendment to Search Services Agreement (this...

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    EXECUTION VERSION 1.7 The Agreement is amended to include new Section 1.71 as follows: [***] 2. [***] 2.1 Section 3.1 of the Agreement is hereby amended and restated in its entirety as follows: "3.1 Search Services . Conduit will, subject only to the exceptions set forth in Section 3.1.2 below, ...

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    EXECUTION VERSION 3.1.4 3.1.5 Reporting Related to [***] Exception . [***] Violation of [***] Exception . [***] -3-

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    ... User Location . Conduit will use good faith, commercially reasonable efforts to determine where 3.1.8 Use of Other Services . For clarity, subject to Sections 3.1.1, 3.1,2, 3.1.3 and 3.1.4 (each of which is applies to Conduit in accordance with its terms), no obligation, restriction or requirement...

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    EXECUTION VERSION 2.2 Section 3.2 of the Agreement is hereby amended and restated in its entirety as follows: [***] 3. Compensation and Payment . [***] Following 2 pages reducted in full -5-

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    EXECUTION VERSION 3.4 Exhibit J . Exhibit J attached hereto is added to the Agreement. -8-

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    ... with and contain all material information required by this Agreement. 4.3.2 Failures to Report . In the event that Microsoft fails to provide a timely and materially complete and accurate [***] report in accordance with Section 4.2.1, then without limiting Conduit's other rights and remedies and on...

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    ... VERSION (a) the provisions of Sections 12.1.1 and 12.1.2 will not apply; (b) the Nonpayment Dispute will immediately after written notice thereof be escalated to an officer of each Party and they will have 15 days from the date of escalation to attempt to resolve the dispute, acting in good...

  • Page 249
    ... arbitration to be overdue in payment by one Party to the other Party. 4.3.5 If either Party does not pay all amounts due to the other Party under an interim or final arbitral award within ten (10) days of such award being issued in writing in connection with a Dispute, then notwithstanding anything...

  • Page 250
    ... does not know or suspect to exist in his or her favor at the time of executing the release, which if known to him or her must have materially affected his or her settlement with the debtor. Each Party hereby irrevocably waives and relinquishes all rights and benefits which it has or may have...

  • Page 251
    ...parties hereto and their respective personal and legal representatives, successors, and permitted assigns. Except as expressly set forth herein, the Agreement remains in full force and effect and this Amendment shall not be construed to alter, amend or change any of the other terms or conditions set...

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    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Exhibit J [***]

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    EXECUTION VERSION IN WITNESS WHEREOF, the Parties by their duly authorized representatives have executed this Amendment as of the Amendment Effective Date. CONDUIT LTD. By: Name: DROR EREZ Title: LTO MICROSOFT ONLINE, INC. By: Name: Title: By: Name: Ronen Shilo Title: CEO [Signature Page to ...

  • Page 254
    ...5. 6. 7. 8. IncrediMail Inc., a Delaware corporation Perion Interactive Ltd., an Israeli corporation (under voluntary liquidation) Smilebox Inc., a Washington corporation SweetIM Ltd., a Belize company SweetIM Technologies Ltd., an Israeli company ClientConnect Ltd., an Israeli company ClientConnect...

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    EXHIBIT 12.1 CERTIFICATIONS I, Josef Mandelbaum, certify that: 1. 2. I have reviewed this annual report on Form 20-F of Perion Network Ltd.; 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 ...

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    EXHIBIT 12.2 CERTIFICATIONS I, Yacov Kaufman, certify that: 1. 2. I have reviewed this annual report on Form 20-F of Perion Network Ltd.; 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...

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    ... ACT OF 2002 In connection with the Annual Report on Form 20-F of Perion Network Ltd., (the "Issuer"), for the period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Josef Mandelbaum, Chief Executive Officer of the Issuer, certify...

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    ...OXLEY ACT OF 2002 In connection with the Annual Report on Form 20-F of Perion Network Ltd., (the "Issuer"), for the period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Yacov Kaufman, Chief Financial Officer of the Issuer, certify...

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    .... and its subsidiaries and (ii) the effectiveness of internal control over financial reporting of Perion Network Ltd., which appears in this Annual Report on Form 20-F for the year ended December 31, 2013. Tel Aviv, Israel April 10, 2014 / s/ KOST FORER GABBAY & KASIERER KOST FORER GABBAY & KASIERER...