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PERION NETWORK LTD.

FORM 20-F

(Annual and Transition Report (foreign private issuer))

Filed 04/29/13 for the Period Ending 12/31/12

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

Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

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PERION NETWORK LTD. FORM 20-F (Annual and Transition Report (foreign private issuer)) Filed 04/29/13 for the Period Ending 12/31/12 Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 972-3-769-6100 0001338940 PERI 7371 - Computer Programming Services Computer Services Technology 12/31 ...

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...OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR 1 SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF 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...

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As of December 31, 2012, the Registrant had outstanding 12,064,510 ordinary shares, par value NIS 0.01 per share.

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...the Exchange Act (Check one): Large accelerated filer 1 Accelerated filer 1 Non-accelerated filer 3 Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP 3 International Financial Reporting Standards as issued...

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PRELIMINARY NOTES Terms As used herein, and unless the context suggest otherwise, the terms "Perion", "Company", "we", "us" or "ours" refer to Perion Network Ltd. References to "dollar" and "$" are to U.S. dollars, the lawful currency of the United States, and references to "NIS" are to New Israeli ...

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... Securities by the Issuer and Affiliated Purchasers Changes in Registrant's Certifying Accountant Corporate Governance Mine Safety Disclosure 77 77 77 78 78 78 78 78 78 79 79 Identity of Directors, Senior Management and Advisers Offer Statistics and Expected Timetable Key Information Information...

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...- Operating and Financial Review and Prospects" and our consolidated financial statements and related notes appearing elsewhere in this annual report. We derived the selected operations data below for the years ended December 31, 2010, 2011 and 2012 and the selected balance sheet data as of December...

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... of Perion and SweetIM, a consumer internet company we acquired in November 2012 (see "Recent Developments" under Item 4A below) into one agreement and replaces both of the existing agreements with Google. The new agreement, as in past agreements, enables termination by either side after one year...

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... resets, installing toolbars and default search resets to Google services when providing downloadable applications have recently changed, as compared to the previous agreement, and this may have negative revenue implications. Should Google or other companies providing internet browsers, effectively...

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... clients and accounts, many of which are likely provided to them free of charge by large Internet and software companies, positively affects the potential market demand for our enhanced email software products. The growing popularity of web based mail and its increased functionality and mobility...

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...they may not offer features similar to IncrediMail Â® . For example, consumers may choose to receive an extensive package of Internet and email services from a more dominant and recognized company, such as Google (Gmail), Microsoft Corporation (Outlook), Facebook, or Yahoo! (Yahoo Mail). Should this...

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...of applicable regulations. 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...

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... result in product failures, lost revenues and loss of market share. Our software may contain undetected errors, failures or defects, especially when the products are first introduced or when new versions are released. Our customers' computer environments are often characterized by a wide variety of...

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... access the Internet through devices other then personal computers, such as mobile phones, tablets, etc., has increased dramatically. While we have begun introducing mobile based products, such as Smilebox for the iPhone and most recently IncrediMail for the iPad, our products for the most part are...

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...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...

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... our products or other third party violations of existing legal protections or reductions in the legal protection for intellectual property rights of software developers or use of open source software could adversely affect our distribution and revenue. The software products that we sell incorporate...

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... for free. Internet based companies have established a new trend and are providing an increasing number of services for free, including email clients and anti-spam software and services. A substantial part of our revenues comes from selling software products and services, currently accounting for...

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... cover taxation, user privacy, data collection and protection, pricing, content, copyrights, electronic contracts and other communications, Internet advertising (including monitoring and tracking consumer behavior), consumer protection, the provision of online payment services, broadband residential...

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...of accountability. We may incur substantial expenses in implementing such security measures. Although decisions of the U.S. Supreme Court restrict the imposition of obligations to collect state and local sales and use taxes with respect to sales made over the Internet, the U.S. Congress and a number...

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...our directors or asserting U.S. securities laws claims in Israel. We are incorporated under the laws of the State of Israel. Service of process upon us, our Israeli subsidiaries, our directors and officers and the Israeli experts, if any, named in this annual report, substantially all of whom reside...

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... on your investment 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. We are...

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... financial reporting is adequate in future periods. In connection with our compliance with Section 404 and the other applicable provisions of the Sarbanes-Oxley Act, our management and other personnel devote a substantial amount of time, and we may need to hire additional accounting and financial...

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... to, among other things, amendments to a company's articles of association, increases in a company's authorized share capital, mergers and actions and transactions involving interests of officers, directors or other interested parties which require shareholders' approval. There is little case law...

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... Street, Tel-Aviv 69710, Israel. Our phone number is (972-3) 769-6100. Our website address is www.perion.com . The information on our websites does not constitute a part of this annual report. We completed the initial public offering of our ordinary shares in the United States on February 3, 2006...

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... 7, 2012 we signed a definitive agreement to acquire SweetIM Ltd., a Belize company that wholly owns SweetIM Technologies Ltd., an Israeli consumer internet company, or SweetIM. SweetIM produces a variety of free, fun, easy to use and safe applications and downloadable content for everyday use under...

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...the term "registered user" in this annual report, we mean a user who has downloaded at least one of our products and completed the registration process. Registrations are not necessarily indicative of the number of individuals using our products or services, as a user may register more than one time...

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... end, we introduced a mobile version of our Smilebox application for the iPhone in 2012 and introduced our IncrediMail email client for the iPad in the first quarter of 2013 Finally, in order to reduce our dependency on a limited number of products and to better serve our users and their needs, we...

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... which may be downloaded over the Internet through a personal computer running on a Microsoft Windows operating system: Communication vertical: â€¢ IncrediMail is our communication client, available over the Internet it its basic version free of charge, used for managing email messages and Facebook...

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... upgraded software and, new features and enabling new platforms for our existing product suite. In 2012 we increased our development investment effort, focusing on enhancing our product pipeline in general and on mobile platforms in particular. These efforts produced the mobile Smilebox application...

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... offering search services and other software in conjunction with changing user's default search provider. Perion was among the first companies to offer to the consumer email market a solution that combines an easy to use and intuitive email product with a gallery of creative content. Providing this...

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...such as Yahoo! Mail. Many of the large Internet and software companies offer their email software programs free of charge. Competition with these products, reliance on viral marketing and technical difficulties have resulted in a reduction of the number of downloads, market share, prices and margins...

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... visit our website or install and use our software, certain "cookies" (pieces of information sent by a web server to a user's browser) may be generated by us and third parties with whom we cooperate, including our advertisers, and may be placed on our customers' computers. While we believe that our...

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...of the following conditions are met: (i) the recipient provided his contact information to the advertiser in the course of purchasing goods or services or negotiations for the purchase of goods or services, and the advertiser provided notice that the details so provided would be used for purposes of...

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...California Online Privacy Protection Act which applies to any Internet website and mobile application that can be accessed or downloaded by California residents regulates information collected about users. The Massachusetts Office of Consumer Affairs and Business Regulation established data security...

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... rior directives affecting online service providers respecting the processing of personal data and the protection of...types of services and revenue we can derive from cookie use and the information such use can derive. However, there are a number of industry-led initiatives leveraging browser settings...

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... include primarily, customized and entertaining email software products, software for sharing digital photo creations, instant messaging enhancement software and a variety of free, fun, easy to use and safe application and downloadable expression content. We believe we are unique in addressing our...

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... million IncrediMail emails and our Smilebox users shared 1.5 million creations each month. Included in our "installed base" are users who have our software installed on their computer on the measurement date. The length of use varies dramatically based on the product, whether it's the free version...

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... number of product downloads, users, search queries generated by those downloading our software and, subsequently, revenue from search, premium subscriptions and advertising. Customer acquisition costs were $1.8 million, $8.0 million and $22.1 million in 2010, 2011 and 2012, respectively. The number...

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... 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...

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... was six years, based on historical data collected. We no longer offer that service, offering all users who had purchased the service in the past to download to their local computer all the premium content previously included in the service. Any user not having downloaded the content may still...

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...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...

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... review goodwill for impairment annually in October each year, and whenever events or changes in circumstances indicate its carrying value may not be recoverable in accordance with ASC 350 "Intangibles - Goodwill and other". Goodwill impairment is deemed to exist if the carrying value of a reporting...

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... company in 2012. On January 31, 2013, we signed an amendment to our agreement with Google extending the term of the agreement to May 31 2013, to coincide with the expiration date of the agreement between SweetIM and Google. On April 23, 2013, we entered into a new agreement with Google, effective...

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... in income tax was primarily a result of a number of tax credits received in 2011 with respect to past years, a tax refund due to the settlement of a tax audit with the Israeli tax authorities and the discontinuation of our dividend distribution policy. In 2012, we did not benefit from these credits...

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... the number of downloads and subsequently the number of users using our search service. As the number of downloads of our IncrediMail products increased, while the number of downloads of our Magentic and HiYo products decreased, search generated revenues through our partnership with Google accounted...

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... a first 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...

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..., Yahoo! Mail and Google's Gmail. Facebook Mail is a relatively new addition to this market, having a lot of potential based on its social network popularity. While our IncrediMail product is based on the use of these email products, and there is still a vast market for PCbased email clients, there...

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...increasing user data available through these sites. We have begun to invest in systems and products that could possibly leverage this trend in 2014 and beyond. The downloadable software market and the way it interacts with search providers have been changing. With its market leading position, Google...

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...,639 More than 5 Years - $ (*) 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 only...

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... President, General Counsel Mark Ziering 46 Vice President, Corporate Development Yuval Hamudot 39 General Manger, Smilebox Ron Harari 41 General Manager, Incredimail Tomer Pascal 34 General Manager, Utilities _____ * "Independent" for NASDAQ Stock Market purposes; (1) Member of the audit committee...

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... to 2001, Mr. Jutkowitz served as the Chief Financial Officer of Etz Lavud Ltd. Avichay Nissenbaum has been an external director of the Company since July 2009, and in September 2012, he was reelected to serve a second three year term. In 2012, Mr. Nissenbaum co-founded Lool Ventures L.P. and has...

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... to attend board or committee meetings. In the year ended December 31, 2012, we granted options to purchase 617,500 ordinary shares to our directors and officers, at a weighted average exercise price of $7.18 per share, and the latest expiration date for such options is December 2017. These options...

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... of the Company, receives for each year of service, options to purchase 10,000 ordinary shares of the Company (the "Annual Grant"), pursuant to the following terms: (a) the Annual Grant shall be made immediately following the annual meeting of shareholders in the relevant year, commencing with...

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... 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 meeting of shareholders at which the term...

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...favor 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...

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50

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... 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 Law, the board...

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... of any interested party or office holder, and may not be a member of the company's independent 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...

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...his services as our Chief Executive Officer (the "CEO Agreement"). The CEO Agreement does not provide for a specified term and may be terminated by either party upon 180 days' prior notice. The CEO Agreement provides for a one-time grant of options upon commencement of employment and an annual grant...

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... employee contributes approximately 12% and the employer contributes approximately 6.5%. E. SHARE OWNERSHIP Security Ownership of Directors and Executive Officers The following table sets forth information regarding the beneficial ownership of our ordinary shares as of April 24, 2013 by all of our...

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... in this annual report for information on the options issued under the 2003 Plan. Under the 2003 Plan, we may grant to our directors, officers, employees, consultants, advisers, service providers and controlling shareholders options to purchase our ordinary shares. As of December 31, 2012 a total of...

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...not substituted or exchanged by a successor company, then the vesting of the options shall accelerate. Adjustments to the number of options or exercise price shall not be made by reason of the distribution of subscription rights (rights offering) on outstanding shares. In December 2012, our board of...

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..., as of such date, the holders of record of approximately 82% of our outstanding shares, including shares held through the Depository Trust Company. B. RELATED PARTY TRANSACTIONS It is our policy that transactions with office holders or transactions in which an office holder has a personal interest...

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...months April 2013 (through April 24) March 2013 February 2013 January 2013 December 2012 November 2012 October 2012 * Since our listing on the Tel Aviv Stock Exchange on December 4, 2007. The closing prices of our ordinary shares, as reported on the NASDAQ and on the TASE on April 24, 2013, were $11...

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... 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 I NF ORMATION SHARE CAPITAL Not applicable B. MEMORANDUM AND ARTICLES OF ASSOCIATION Registration Number and...

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... to a vote of shareholders. This right may be changed if shares with special voting rights are authorized in the future. Our articles of association and the laws of the State of Israel do not restrict the ownership or voting of ordinary shares by non-residents of Israel. Under the Companies Law, an...

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... 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. â€¢ See "Item...

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require the approval of the compensation committee and the board of directors. 61

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... of personal interest. The Companies Law requires that an office holder promptly disclose to the company any personal interest that he or she may have and all related material information known to him or her, in connection with any existing or proposed transaction by the company. "Personal interest...

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... association; an increase in the company's authorized share capital; a merger; or approval of related party transactions that require shareholder approval. A shareholder has a general duty to refrain from depriving any other shareholder of their rights as a shareholder. In addition, any controlling...

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... both of the existing agreements with Google. Our agreement with Google relates to our participation in Google's AdSense program, which allows us to receive a portion of the amount paid to Google by advertisers for the activity performed through our applications. The new agreement, as in past...

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... 100% of the issued and outstanding shares of SweetIM Ltd. These companies operate under the "SweetPacks" trade name. Under the terms of the agreement, we paid $10 million in cash and 1.99 million of our ordinary shares at closing, which occurred on November 30, 2012. A second payment of up to...

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...benefits available to an Approved Enterprise are conditioned upon terms stipulated in the Investment Law and the regulations thereunder and the criteria set forth in the applicable certificate of approval. If we do not fulfill these conditions in whole or in part, the benefits can be canceled and we...

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... foreign investors. Furthermore, such definition now also includes the purchase of shares of a company from another shareholder, provided that the company's outstanding and paid-up share capital exceeds NIS 5 million. Such changes to the aforementioned definition will take effect retroactively from...

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... the new preferred Enterprise benefits. Pursuant to a recent amendment to the Investments Law which became effective on November 12, 2012, a company that elects by November 11, 2013 to pay a corporate tax rate as set forth in that amendment (rather than the regular corporate tax rate applicable to...

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...of shares issued by a company in which he or she is a substantial shareholder. The determination of whether the individual is a substantial shareholder will be made on the date on which the securities are sold. In addition, the individual will be deemed to be a substantial shareholder if at any time...

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... relationship between the parties (including but not limited to family relationship or a relationships of control between companies), and due to this relationship the price set for an asset, right, service or credit was determined or other conditions for the transaction were set such that a smaller...

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...U.S. federal income tax law, including insurance companies; dealers in stocks, securities or currencies; financial institutions and financial services entities; real estate investment trusts; regulated investment companies; persons that receive ordinary shares as compensation for the performance of...

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... person who is or was a 10-Percent Shareholder at any time during the five-year period ending with the sale or exchange is treated as dividend income to the extent of earnings and profits of the company attributable to the stock sold or exchanged. Under certain circumstances, a corporate shareholder...

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... investment company for the current taxable year until after the close of the year. In the future, in calculating the value of our intangible assets, we will value our total assets, in part, based on our total market value determined using the average of the selling price of our ordinary shares on...

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... a specified foreign financial asset includes not only a financial account (as defined by the Code and applicable Treasury Regulations ) maintained by a foreign financial institution, but also any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment...

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... to in this annual report on Form 20-F, is available for public view (subject to confidential treatment 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...

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... affect our income before tax by 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, 2010 2011 2012 3.733 3.578 3.855 3.549 3.821 3.733 Average rate for period...

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... our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control - Integrated Framework." On November 30, 2012, we completed the acquisition of SweetIM. Due to the limited time between the closing date and the fiscal year...

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... such services are in compliance with the policy. ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES None. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS Not applicable. ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT Not applicable. 78

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... event the required quorum shall consist of any number of shareholders present 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...

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...report are filed as part of this annual report: Page F-2 F-3 - F-4 F-5 F-7 F-8 F-10 Report of Independent Registered Public Accounting Firm Balance Sheets as of December 31, 2011 and 2012 Statements of Income for the Years Ended December 31, 2010, 2011 and 2012 Statements of Changes in Shareholders...

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... Services Agreement, dated April 23, 2013, between the Company and Google Ireland Limited.* Share Purchase Agreement by and among Perion Network Ltd., SweetIM Ltd., SweetIM Technologies Ltd., the Shareholders of SweetIM Ltd. and Nadav Goshen as Shareholders' Agent, dated as of November 7, 2012...

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...Rule 406T of Regulation S-T, the information in Exhibit 101 is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise...

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PERION NETWORK LTD. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2012 IN U.S. DOLLARS INDEX Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2011 and 2012 Consolidated Statements of Income for the Years Ended ...

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of PERION NETWORK LTD. We have audited the accompanying consolidated balance sheets of Perion Network Ltd. ("the Company") and its subsidiaries as of December 31, 2011 and 2012, and the related ...

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...ASSETS: Cash and cash equivalents Restricted cash Trade receivables (net of allowance for doubtful accounts and sales reserves in a total amount of $ 57 and $ 108 in 2011 and 2012, respectively) Other receivables and prepaid expenses Total current assets LONG-TERM ASSETS: Property and equipment, net...

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... purchase consideration Deferred revenues Other long term liabilities Total long-term liabilities COMMITMENTS AND CONTINGENT LIABILITIES SHAREHOLDERS' EQUITY: Share capital Ordinary shares of NIS 0.01 par value Authorized: 40,000,000 shares at December 31, 2011 and 2012, respectively; Issued...

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PERION NETWORK LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands (except per share data) Year ended December 31, 2011 2012... income Net earnings per Ordinary share: Basic Diluted The accompanying notes are an integral part of the consolidated financial statements....

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PERION NETWORK LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME U.S. dollars in thousands Year ended December 31, 2011 $ 5,668 (100) (100) $ 5,568 $ $ 2010 Net income Other comprehensive income: Reclassification adjustments to income on marketable securities, net of tax ...

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...(100) $ $ Total shareholders' equity 27,002 761 209 375 (8,477) (107) 8,389 28,152 1,200 30 (3,885) 750 (100) 5,668 31,815 1,085 76 18,200 3,534 54,710 Share capital Balance as of January 1, 2010 $ Stock based compensation expense Excess tax benefit from share-based payment arrangements Exercise of...

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... from share-based payment arrangements Amortization of premium and accrued interest on marketable securities Loss (gain) from marketable securities, net Deferred taxes, net Accrued severance pay, net Net changes in operating assets and liabilities: Trade receivables Other receivables and prepaid...

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... the year for: Income taxes Interest paid Supplemental disclosure of non-cash investing activities: Purchase of property and equipment on credit Issuance of shares in connection with the acquisitions stock-based compensation that was capitalized as part of capitalization of software development...

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... November 2011, the Company changed its name from IncrediMail Ltd. to Perion Network Ltd. The Company has one major customer which accounted for 70%, 67% and 63% of total revenues, in 2010, 2011 and 2012, respectively. This customer represents 68% and 72% of total trade receivable as of December 31...

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...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...

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... if events or changes in circumstances indicate that the carrying value may be impaired. In accordance with ASC No. 350 the Company performs an annual impairment test at December 31 each year. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its...

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... upfront payments received from customers, for whom revenues have not yet been recognized. Finally, the Company offers advertisers the ability to place text-based ads on its home page and website and banners in its email clients. Advertisers are charged monthly based on the number of times a user...

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... of the software product, which is generally 3 - 5 years. l. Income taxes: The Company accounts for income taxes in accordance with ASC 740, "Income Taxes". This Statement prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on...

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...(except share and per share data) NOTE 2:SIGNIFICANT ACCOUNTING POLICIES (Cont.) In the year ended December 31, 2010 the Company accrued interest and penalties related to unrecognized tax benefits in its tax expenses. During 2010 interest expense amounted to $ 140. Starting 2011, the Company changed...

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... of diluted net earnings per Ordinary share, as these securities are anti-dilutive, was 922,069, 1,266,919 and 1,315,106 for the years ended December 31, 2010, 2011 and 2012, respectively. q. Accounting for stock-based compensation: The Company accounts for stock-based compensation under ASC 718...

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... U.S. dollars in thousands (except share and per share data) NOTE 2:SIGNIFICANT ACCOUNTING POLICIES (Cont.) The Company estimates the fair value of standard stock options granted using the Binomial option-pricing model. The option-pricing models require a number of assumptions, of which the...

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... liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in...

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...in thousands (except share and per share data) NOTE 2:SIGNIFICANT ACCOUNTING POLICIES (Cont.) â€¢ Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. As of December 31, 2012 and 2011, the Company had cash, cash equivalents and restricted...

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... on previously reported net income or shareholders' equity. NOTE 3:ACQUISITIONS a. Acquisition of Sweet IM Ltd. On November 30, 2012 ("Closing Date") the Company completed the acquisition of 100% of the shares of Sweet IM Ltd. ("Sweet IM"), an Israeli-based consumer internet company that produces...

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... assets based on their estimated fair values as set forth below. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. Cash Restricted cash Trade receivables Other receivables and prepaid expenses Property and equipment Long-term prepaid...

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... 2012). In connection with this consideration, the Company recorded a $ 6,474 liability at closing. This amount was paid in full in 2012, including $ 6,266 paid in cash and 65,720 shares issued at value of $ 337 and; â€¢ A milestone-based contingent cash and Ordinary shares of the Company payment...

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... based on market participant approach 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 Useful life 4.3-6.3 years 3 years...

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PERION NETWORK LTD. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 4:OTHER RECEIVABLES AND PREPAID EXPENSES December 31, 2011 2012 Government authorities Prepaid expenses Deferred tax asset, net Other $ 5,555 471 258 ...

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...and per share data) NOTE 6:GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Cont.) b. Other intangible assets, net Net other intangible assets consisted of the following: Useful life Original amount: Capitalized software development costs Capitalized content costs and domain Technology Trade name Customer...

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... commitments, typically contained in facility agreements of this type. As of December 31, 2012, the Company was in compliance with all covenants. The loans shall be repaid in 16 and 20 equal quarterly installments, respectively starting July 17, 2012. Interest rates applicable are 4.35% and 4.64...

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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, 2012, the aggregate principal annual maturities according to the loan agreement are as follows: ...

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...: 2010 - 25%, 2011 - 24%, 2012 - 25%. c. Income taxes of non-Israeli subsidiaries: Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence. d. Tax reports filed by the Company and its subsidiaries in Israel through the year ended December 31, 2008 are...

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... which will expire in the years starting from 2026 up to 2031. Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in...

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... FINANCIAL STATEMENTS U.S. dollars in thousands (except share and per share data) NOTE 10:INCOME TAXES (Cont.) Domestic: December 31, 2011 2012 Current deferred tax asset, net Current deferred tax liability Non-current deferred tax asset, net Long-term deferred tax liability $ 258 $ (12) 246...

Page 123
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.) h. Income taxes are comprised as follows: Year ended December 31, 2010 2011 2012 Deferred tax benefit Current taxes $ $ (385) $...

Page 124
... later than five years from the date of grant. A summary of the activity in the share options granted to employees, non-employees and directors for the year ended December 31, 2012 and related information is as follows: Weighted average Remaining contractual Exercise term price (in Years 5.87 6.19...

Page 125
...$ 580 and $ 555, respectively. The options outstanding under the Company's Stock Option Plans as of December 31, 2012 have been separated into ranges of exercise price as follows: Outstanding Weighted average remaining Number of contractual options life (years) 50,000 997,168 299,336 229,004 354,792...

Page 126
...marketable securities, net Exchange rate differences , net Accretion of payment obligation related to acquisitions Interest with respect to long-term loans Other 38 45 44 127 $ b. Research and development costs, net: Year ended December 31, 2010 2011 2012 Total costs Capitalized software development...

Page 127
... December 31, 2010 2011 2012 Net income available to Ordinary shareholders 2. Denominator: Year ended December 31, 2010 2011 2012 Weighted average number of Ordinary shares, net of treasury stock Effect of dilutive securities: Add - stock options Adjusted weighted average shares F - 35 9,622,181 209...

Page 128
...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. By: /s/ Josef Mandelbaum Josef Mandelbaum Chief Executive Officer Date: April 29, 2013 82

Page 129
..., B.M., dated April 15, 2012 (translated from Hebrew). Google Search and Advertising Services Agreement, dated April 23, 2013, between the Company and Google Ireland Limited.* Share Purchase Agreement by and among Perion Network Ltd., SweetIM Ltd., SweetIM Technologies Ltd., the Shareholders of...

Page 130
... any regulations promulgated thereunder. The "Office" shall mean the registered Office of the Company as it shall be from time to time. "Office Holder" shall have the meaning ascribed to such term under the Law . The "Ordinance" shall mean the Companies Ordinance (New Version) 1983, as amended, and...

Page 131
..., 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 and vote (one vote in respect of each Ordinary Share) in every vote at each general meeting of the Shareholders...

Page 132
... conferred upon the holders of any existing shares or class of shares, the Company may, by resolution of the Shareholders, from time to time, create shares with such preferential, deferred, qualified or other special rights, privileges, restrictions or conditions, whether in regard to dividends...

Page 133
... 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...

Page 134
... applicable to the shares of such class included in the existing share capital. 9.2. 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...

Page 135
...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 136
... 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 137
... Board. The Board may at any time cause the Company to repay all or any part of the money so advanced, without premium or penalty. Nothing in this Article 16 shall derogate from the right of the Board to make any call for payment before or after receipt by the Company of any such advance. 17...

Page 138
... 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 139
... 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...

Page 140
... 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...

Page 141
... to any adjournment of such meeting; provided, however , that the Board may fix a new record date for the adjourned meeting. 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...

Page 142
...least once in every year at such time, being not more than 15 months after the last preceding Annual General Meeting (as such term is defined hereunder),...Articles, applicable law and regulations, including the applicable laws and regulations of any stock market on which the Company's shares are ...

Page 143
...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 is not present, the meeting, if convened upon the request of the Shareholders, shall be dissolved; if the meeting is not convened...

Page 144
... 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 145
... 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 146
.... 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. - 17 - 43.2. 43...

Page 147
...such times and 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...

Page 148
.... 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. - 19 -

Page 149
...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...

Page 150
... 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...

Page 151
...be present in person at such meeting and shall ... be convened at any time by the chairperson of...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... duly received by the director on the date of delivery...

Page 152
... if applicable, deputy chairperson, is unwilling or unable to chair such meeting, the directors present shall choose one of their number to be chairperson of such meeting. The chairperson shall not have a second or casting vote at any Board meeting. The Chief Executive Officer of the Company may not...

Page 153
... 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...

Page 154
... 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...

Page 155
...that cash payments shall be made to any shareholder upon the footing of the value so fixed, or that fractions of less value than the nominal value of one share may be disregarded in order to adjust the rights of all parties, and may vest any such cash, shares, debentures, debenture stock or specific...

Page 156
... be open to inspection by all directors. Shareholders who do not serve as directors, shall only have such rights to inspect any account or book or other similar document of the Company as conferred by Law or authorized by the Board. 75. Audit At least once in every fiscal year the accounts of...

Page 157
... person(s) acted and signed within the scope of his or their authority. NOTICES 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...

Page 158
... 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 159
... 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...

Page 160
Exhibit 4.1 ISRAELI SHARE OPTION PLAN Perion Network Ltd. THE 2003 ISRAELI SHARE OPTION PLAN (*In compliance with Amendment No. 132 of the Israeli Tax Ordinance, 2002)

Page 161
... PURSUANT TO SECTION 102 TRUSTEE SHARES RESERVED FOR THE ISOP; RESTRICTION THEREON PURCHASE PRICE ADJUSTMENTS TERM AND EXERCISE OF OPTIONS VESTING OF OPTIONS SHARES SUBJECT TO RIGHT OF FIRST REFUSAL DIVIDENDS RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS EFFECTIVE DATE AND DURATION OF THE ISOP...

Page 162
... incorporated as part of this ISOP, effective as of the date that the Board adopts the Addendum (the "Addendum Date" ), and shall be coterminous with the ISOP. The purpose of the Addendum is to permit the Company to grant Options to employees and other service providers who are U.S. Persons (as...

Page 163
...Israeli Tax Authorities. "Non-Employee" means a consultant, adviser, service provider, Controlling Shareholder or any other person who is not an Employee. " Ordinary Income Option (OIO) " as defined in Section 5.5 below. "Option" means an option to purchase one or more Shares of the Company pursuant...

Page 164
... Non- Employee. "Optionee" means a person who receives or holds an Option under the ISOP. "Option Agreement" means the share option agreement between the Company and an Optionee that sets out the terms and conditions of an Option. " Ordinance" means the 1961 Israeli Income Tax Ordinance [New Version...

Page 165
... power and authority to: (i) designate participants; (ii) determine the terms and provisions of the respective Option Agreements, including, but not limited to, the number of Options to be granted to each Optionee, the number of Shares to be covered by each Option, provisions concerning the time and...

Page 166
..., to the extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the member may have as a director or otherwise under the Company's Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy...

Page 167
... shall be subject to the terms and conditions set forth in Section 102 of the Ordinance and the regulations promulgated thereunder. The provisions of the ISOP and/or the Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer's permit, and the said provisions...

Page 168
... among other matters, the number of Shares to which the Option relates, the type of Option granted thereunder (whether a CGI, OIO, Unapproved 102 Option or a 3(i) Option), the Vesting Dates, the Purchase Price per share, the Expiration Date and such other terms and conditions as the Committee or the...

Page 169
... distributed to the shareholders of the Company in connection and with respect to the Transaction. In the case of such assumption and/or substitution of Options, appropriate adjustments shall be made to the Purchase Price so as to reflect such action and all other terms and conditions of the Option...

Page 170
...Option confers the right to purchase or receive, for each Share underlying an Option immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by holders of shares held on the effective date of the Transaction...

Page 171
...payment of the Purchase Price at the Company's or the Representative's principal office. The notice shall specify the number of Shares with respect to which the Option is being exercised. Options, to the extent not previously exercised, shall terminate forthwith upon the earlier of: (i) the date set...

Page 172
... in the Optionee's Option Agreement, an Option may be exercised after the date of termination of Optionee's employment or service with the Company or any Affiliates during an additional period of time beyond the date of such termination, but only with respect to the number of Vested Options at the...

Page 173
... Option shall vest following the Vesting Dates and for the number of Shares as shall be provided in the Option Agreement. However, no Option shall be exercisable after the Expiration Date. An Option may be subject to such other terms and conditions on the time or times when it may be exercised, as...

Page 174
... of less than the number of Offered Shares, then the Optionee shall be entitled to sell such remaining Shares at any time during the ninety (90) days following the end of the Notice Period on terms not more favorable than those set out in the Notice, provided that the Proposed Transferee agrees...

Page 175
... thereof or restrict the right of the Company or an Affiliate thereof to terminate such employment or service at any time. 19. GOVERNING LAW & JURISDICTION The ISOP shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and...

Page 176
... made to the Optionee. The Company and/or, when applicable, the Trustee shall not be required to release any Share certificate to an Optionee until all required payments have been fully made. To the extent provided by the terms of an Option Agreement, the Optionee may satisfy any tax withholding...

Page 177
... 5. Terms and Conditions of Options Every Option granted to a U.S. Person shall be evidenced by a written Option Agreement in such form as the Board or the Committee shall approve from time to time, specifying the number of Shares that may be purchased pursuant to the Option, the Purchase Price, the...

Page 178
...percent of the Fair Market Value of the Shares on the date of grant of the ISO. (c) Notice of ISO Stock Disposition . The Optionee must notify the Company promptly in the event that the Optionee sells, transfers, exchanges or otherwise disposes of any Shares issued upon exercise of an ISO before the...

Page 179
... of any governmental authority. Specifically, in connection with the United States Securities Act of 1933, as amended from time to time (the " Securities Act "), upon the exercise of any Option, the Company shall not be required to issue Shares unless the Board or the Committee has received evidence...

Page 180
...the Agreement is extended until 31 May 2013. The parties agree that the "Special Terms and Conditions" section of the Order Form is amended as follows: a) Google may assign to Company, and modify the number of Client IDs and Channel IDs for each Service from time to time. Company will use Client IDs...

Page 181
...Company will take reasonable steps to ensure that an End User gives consent to the storing and accessing of cookies and other information on the End User's device where such activity occurs in connection with the Services and obtaining such consent is required by law. 6. Continuation The Agreement...

Page 182
... grant to Perion Network Ltd. (formerly IncrediMail Ltd.) (hereinafter the " Company ") a credit framework in the a total principal amount which shall not exceed USD12,000,000 on the terms and subject to the terms and conditions set out in the Commitment Letter; Whereas the Bank has received and/or...

Page 183
...any reason whatsoever, the shares of such corporation, in favour of any third party whomsoever, without receiving the Bank's prior written consent. 3.2.2 For the purpose of this Section the term "shares" shall include shares of the capital stock, partnership interests, membership rights and/or any...

Page 184
... 4.6 TRANSLATION FOR CONVENIENCE ONLY BINDING VERSION IS THE ORIGINAL HEBREW Date: April 15, 2012 To The First International Bank of Israel Ltd. Ramat Hachayal Branch (the " Bank ") Dear Sirs, Re: Amendment to Financial Covenants Whereas , Perion Network Ltd. (the " Company "), is and/or will be...

Page 185
... 2012, and will not exceed 3 in the financial statements of the third and the fourth quarter of 2012 ...Company acknowledges that this consent does not derogate from other undertakings of the Company towards the Bank, including any other covenant specified in the Undertaking. Sincerely, Perion Network...

Page 186
... period during the Term, revenues that are recognised by Google in connection with Company's use of the applicable AdSense Service and are attributed to Ads displayed to End Users in that period in accordance with the applicable Agreement; "AdSense Services" means the AdSense services listed on the...

Page 187
...Service; " Client-Managed Buyer " means a purchaser of advertising inventory on the Sites from whom Company is responsible for collection of payment and with whom Company has a separate contractual relationship, as indicated by Company through the ADX user interface (including, if applicable, Google...

Page 188
... set out for that Adsense Service in the Order Form; "End Users" means individual human end users of a Site, Approved Client Application or Feed; "Equivalent Ads" means any advertisements that are the same as or substantially similar in nature to the AFS Ads provided by Google under any Agreement...

Page 189
... 6.2a or b) until Google has notified Company that the implementation for that Site is approved (this approval not to be unreasonably withheld or delayed). Implementation Implementation of Services on a Site, Approved Client Application or through a Feed is conditional on Company or, in the case...

Page 190
... Ad Sets (as applicable) on the applicable Site or as part of the applicable Feed; and ensure that the Services are not implemented on any property other than a Site. (c) In clauses 2.3 (d) and (e): " Gambling Ad Enabled Countries" means the set of countries for which Google's AdWords program will...

Page 191
...data from: (i) (ii) Client-Managed Accounts (including by automated means); and Company's ADX account, and Company represents and warrants that it has all necessary rights and consents to authorise Google's access as contemplated by this clause 2.4(b). 3. Support Services For each Agreement, Google...

Page 192
... or in any non-transitory manner store or cache information obtained from the Services (including any Results); display on any Site, Approved Client Application or Feed, any content that violates or encourages conduct that would violate any applicable laws, any third party rights, the Google Program...

Page 193
...to which they are clickable; or the use of any Google Brand Features or other attribution or similar wording. (b) If Company wishes to make changes in relation to the display of: (i) AFS Ad Sets or AFS Ads on a Results Page, including changes to their number, colour, font, size or placement or the...

Page 194
... Property Rights belonging to the other party, or the other party's licensors. 9. 9.1 Trade mark licence Google grants to Company a non-exclusive and non-sublicensable licence during the Term to use the Google Brand Features solely to fulfil Company's obligations under the applicable Agreement...

Page 195
...obligations under this GSA and any Agreement(s). No conditions, warranties or other terms apply to any Services or to any other goods or services supplied by Google under this GSA or any Agreement unless expressly set out in this GSA or the applicable Agreement. Subject to clause 13.1(b), no implied...

Page 196
... content, information or data is in breach of the terms and conditions of this GSA or any Agreement. Google may (at its sole discretion) suspend Company's use of any Services or Google Brand Features which are alleged, or believed by Google, to infringe any third party's Intellectual Property Rights...

Page 197
... respect of ADX Services, as specified by Company's anonymity preferences selected in the ADX user interface, Google may: (i) share Site-specific statistics, the Site URL(s), and related information collected by Google through its provision of the Advertising Services to Company with advertisers or...

Page 198
... the existence of this Agreement and its material terms and conditions to the U.S Securities and Exchange Commission (the " Authority "). Company shall work with Google to agree which terms of this Agreement should be treated as confidential (" Confidential Terms ") and Company shall use best...

Page 199
....6, Company may continue to receive the applicable Google advertising services in relation to the relevant Site (or part of a Site) by entering into an online agreement with Google in respect of such services and Site. Upon the expiration or termination of this GSA for any reason: (a) (b) all rights...

Page 200
... party will be treated as having waived any rights by not exercising (or delaying the exercise of) any rights under this GSA or any Agreement. If any term (or part of a term) of this GSA or any Agreement is invalid, illegal or unenforceable, the rest of this GSA or that Agreement (as applicable...

Page 201
... TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS. Google Ireland Limited Gordon House Barrow Street Dublin 4 Ireland Google Search and Advertising Services Agreement ORDER FORM COMPANY: Perion Network, Ltd commercial...

Page 202
ADSENSE SERVICES ADSENSE FOR SEARCH ("AFS") [***] Percentage (%) of Net AdSense Revenues for AFS payable to Company [***] Payment Information Details currency : ï£³ US dollars [***] AFS Deduction Percentage -2-

Page 203
... the parties from time to time. 3. Additional termination rights a. b i. ii. ; or [***] [***] in each case, as reasonably determined by Google. 4. Google Brand Features Company may use the Google Brand Features only on the search.incredimail.com, search.incredibar.com and search.smilebox.com Sites...

Page 204
-3-

Page 205
...Google Brand Features; do not contain or refer to any pornographic, hate-related or violent content or contain or refer to any other material, products or services that violate or encourage conduct that would violate any criminal laws, any other applicable laws, or any third party rights; if Company...

Page 206
...of Company Provided Keywords into live use once Google's technical and account management personnel are satisfied that Company has properly implemented Company Provided Keywords on the Site in accordance with Google's technical and branding requirements and otherwise in accordance with the Agreement...

Page 207
-5-

Page 208
...Google and/or Google's advertiser(s). e. f. g. h. i. 8. Channel IDs Company shall promptly make such changes to its implementation of Channel IDs as Google may request from time to time. 9. Company's implementation of the Services [***] Signed by the parties on the dates shown below. Google...

Page 209
PORTIONS OF THIS ORDER FORM 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 A [***] -7-

Page 210
PORTIONS OF THIS ORDER FORM 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 [***] -8-

Page 211
PORTIONS OF THIS ORDER FORM 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 C [***] Exhibit C (continued) [***] -9-

Page 212
PORTIONS OF THIS ORDER FORM 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 D [***] - 10 -

Page 213
PORTIONS OF THIS ORDER FORM 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 E [***] - 11 -

Page 214
PORTIONS OF THIS ORDER FORM 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 F [***] Exhibit F (continued) [***] - 12 -

Page 215
PORTIONS OF THIS ORDER FORM 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. Schedule 1 [***] - 13 -

Page 216
PORTIONS OF THIS ORDER FORM 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. Schedule 2 [***] - 14 -

Page 217
PORTIONS OF THIS ORDER FORM 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. APPENDIX A [***] - 15 -

Page 218
PORTIONS OF THIS ORDER FORM 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. APPENDIX B[***] - 16 -

Page 219
PORTIONS OF THIS ORDER FORM 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. APPENDIX C-1 [***] APPENDIX C-2 [***] - 17 -

Page 220
... PERION NETWORK LTD. a company formed under the laws of Israel, SWEETIM LTD. an international business company formed under the laws of Belize, SWEETIM TECHNOLOGIES LTD. a company formed under the laws of Israel, THE SHAREHOLDERS OF SWEETIM LTD. and NADAV GOSHEN as Shareholders' Agent _____ Dated...

Page 221
...number of Company Shares (as defined below) set forth opposite such Company Shareholder's name on Schedule 2.2 of the Company Disclosure Letter. Purchaser desires, subject to the terms and conditions set forth in this Agreement, to, purchase from the Company Shareholders and each Company Shareholder...

Page 222
... purchase from such Company Shareholder, all of the Company Shares owned by such Company Shareholder as of immediately prior to the Closing, as set forth on the spreadsheet (the " Signing Spreadsheet ") attached hereto as Exhibit D , free and clear of all Encumbrances, in exchange for the applicable...

Page 223
... based on the US$:NIS exchange rate not lower than the rate at the Closing Date, the Deferred Payment Date or the Contingent Payment Date, as applicable) which amount (the " Tax Amount ") shall be delivered to the ITA by the Paying Agent and Purchaser shall pay to such Company Shareholder and/or non...

Page 224
... coordination with Purchaser and its Israeli counsel, to prepare and file with the ITA an application for a ruling in relation to the Company Shares subject to the provisions of Section 102(b) and in relation to Company Options held by Israeli tax residents confirming that: (A) the payment of the...

Page 225
... and file with the ITA an application for a ruling permitting any Company Shareholder and Company Option Holder who elect to become a party to such a tax pre-ruling (the " Electing Holder "), to defer any applicable Israeli tax with respect to any consideration in Purchaser Ordinary Shares that...

Page 226
.... (f) Aggregate Consideration . The maximum consideration payable as set forth in this Agreement in connection with the Share Purchase for all of the issued and outstanding capital stock of the Company on a Fully Diluted Basis as of the Closing Date shall be: (i) ten million U.S. Dollars ($10,000...

Page 227
... of the Closing Date, executed on behalf of Purchaser by a duly authorized officer of Purchaser to the effect that each of the conditions set forth in clause (a) of Section 7.2 have been satisfied. (iii) Registration Rights Agreement duly executed by Purchaser and the Company Shareholders listed in...

Page 228
...include all of the information specified in Section 6.9 in a form acceptable to Purchaser and a certificate executed by the Authorized Person, dated as of the Closing Date, certifying that such Closing Spreadsheet is true, correct and complete; (ix) the Company Net Working Capital Certificate, which...

Page 229
... Company Shareholder or Company Optionholder pursuant to this Agreement (after aggregating all fractional shares to be received by such Person) shall be rounded to the nearest whole share, and each of the Signing Spreadsheet and the Closing Spreadsheet shall be prepared accordingly. 1.3 Payment of...

Page 230
...the Closing Payment to be contributed hereunder to the Rep Reimbursement Amount shall be based on the respective Pro Rata Share of each Company Shareholder. In the event that the Shareholders' Agent has not used the entire Rep Reimbursement Amount at such time as the termination of the Set-off Right...

Page 231
... on the Contingent Payment Date to Company Shareholders and Company Optionholders, as applicable, holding Company Shares and Company Options pursuant to Section 102(b) shall be paid to the 102 Trustee. Any Set-off Amount shall be held by Purchaser and applied for the payment of indemnification...

Page 232
... Days prior to the Closing, the Company shall deliver to Purchaser a certificate executed by the Authorized Person detailing the Company's good faith best estimate, as prepared by Brooks Keret (the " Company Accountant "), of (i) Company Net Working Capital of the Closing Date, including a draft of...

Page 233
... accounts receivable of the Company from Google Inc. as of the close of business on the Closing Date. (b) Within 90 days after the Closing, Purchaser may object to the Company Net Working Capital calculations (including the amount of Cash and the Google Payments) included in the Company Net Working...

Page 234
...derogating from the right of the Purchaser to receive the Negative Adjustment Amount pursuant to Section (g), Purchaser shall pay the lower of (i) the amount by which the Company Net Working Capital is higher than the Cash as of the Closing Date, and (ii) the Google Payments actually received by the...

Page 235
...between cash and Purchaser Ordinary Shares, including the possibility to receive only cash without any Purchaser Ordinary Shares), other than as specifically set forth in the Closing Spreadsheet and in such Person's Closing Allocation Certificate and applicable to such Company Shareholder; (iii) any...

Page 236
...the Company Shares which are outstanding as of the Agreement Date and the Closing Date), rights of first offer, co-sale and no-sale rights, any other participation, first refusal or similar rights, rights to any liquidation preference (except for payment as part of the Aggregate Consideration as set...

Page 237
... may have with any of the Released Parties; (v) for indemnity by officers, employees and directors of the Company in their capacity as such in accordance with Section 6.15; and (vi) of any Company Shareholder as of the Record Date to receive its applicable portion of the Special Cash Dividend in...

Page 238
... as of the Agreement Date, as follows: 2.1 Organization, Standing and Power . (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of Belize. The Company has the requisite corporate power and authority to own, lease, license and use its properties and...

Page 239
...Israeli Subsidiary's directors and officers were duly appointed in accordance with applicable law. (c) Schedule 2.1 (c) of the Company Disclosure Letter sets forth a true, correct and complete list of: (i) the names of the members of the Company Board of Directors (or similar body) and any committee...

Page 240
...case as set forth on the Signing Spreadsheet and as updated in the Closing Spreadsheet. Schedule 2.2 (a) of the Company Disclosure Letter accurately sets forth, as of the Agreement Date, the name of each Person that is the registered owner of any Company Shares and the number of such shares so owned...

Page 241
... in connection with the Share Purchase. A detailed capitalization table showing the numbers of outstanding shares or options held by each Company Shareholder and Company Optionholder, and the applicable vesting schedule, if any, is set forth in the Signing Spreadsheet. Each grant of Company Options...

Page 242
... into, or exchangeable for, securities having such right) or (ii) the value of which is any way based upon or derived from capital or voting stock of the Company or the Israeli Subsidiary, is issued or outstanding as of the Agreement Date (collectively, " Company Voting Debt "). (e) Except...

Page 243
... The Signing Spreadsheet accurately sets forth as of the date hereof, and the Closing Spreadsheet will accurately set forth, as of the Closing, the name of each Person that is the registered owner of any shares of Company Share Capital and/or Company Options and the number and kind of such shares so...

Page 244
(c) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or any other Person is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation of the transactions ...

Page 245
..., and the names of all persons authorized to make withdrawals therefrom. (e) Schedule 2.4 (e) of the Company Disclosure Letter sets forth the amounts and an accurate aging of the Company's and the Israeli Subsidiary's accounts receivable in the aggregate and by customer, and indicates the amounts of...

Page 246
... Cash ") as of the Agreement Date (the " Company Cash Statement "). (g) Neither the Company, the Israeli Subsidiary, nor, to the knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or the Israeli Subsidiary, has received or otherwise had or...

Page 247
... complied with all of the terms of the Company Authorizations and none of the Company Authorizations will be terminated or impaired, or will become terminable, in whole or in part, as a result of the consummation of the transactions contemplated by this Agreement. (c) Except as set forth in Schedule...

Page 248
..., commercially available software and (i) is not material to the Company or the Israeli Subsidiary; (ii) has not been modified or customized for the Company or the Israeli Subsidiary; and (iii) is licensed for a one time fee or an annual fee under $1,000 for a single user or work station, or...

Page 249
..., Internet and World Wide Web URLs or addresses, copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto and any similar or equivalent rights to any of the foregoing, and all tangible embodiments of the foregoing. 29 " Intellectual Property...

Page 250
... use, aggregation, holding or management is restricted under any applicable law, including, but not limited to, an individual person's: (a) personally identifiable information (e.g. name, street address, telephone number, e-mail address, photograph, social security number, driver's license number...

Page 251
... to receive any royalties or other payments from the Company or the Israeli Subsidiary. No consent of any Governmental Entity or other Person is required to be obtained prior to the consummation of the Share Purchase pursuant to the terms of this Agreement in order to comply with any applicable law...

Page 252
... and historically used by the Company and the Israeli Subsidiary, as applicable, and each proprietary information and invention disclosure and Intellectual Property assignment executed by each Author conforms to the forms the Company has made available to Purchaser. (ii) The Company has secured from...

Page 253
...Subsidiary, as applicable, a written legally binding agreement regarding the protection of such Confidential Information. The Company and the Israeli Subsidiary have implemented and maintains a reasonable security plan consistent with industry practices of companies offering similar services. To the...

Page 254
..., termination, suspension of, or acceleration of any payments, rights, obligations, or remedies with respect to any material Company Intellectual Property Agreements, or give any non-Company party to any Company Intellectual Property Agreement the right to do any of the foregoing; (ii) Immediately...

Page 255
... to grant, to any third party, any rights or immunities under any Company Owned Intellectual Property (including using any Open Source Materials that require, as a condition of use, modification and/or distribution of such Open Source Materials that other software incorporated into, derived from or...

Page 256
... containing (in whole or in part) Personal Data maintained by or for the Company or the Israeli Subsidiary at any time (" Company Databases "), the types of Personal Data in each such database, the means by which the Personal Data was collected, and the security policies that have been adopted and...

Page 257
...Closing Date as a result of any change in method of accounting, closing agreement, installment sale or prepaid amount received for a taxable period ending on or prior to the Closing Date. Neither the Company nor the Israeli Subsidiary is a party to or bound by any Tax allocation or sharing agreement...

Page 258
... Tax Ordinance. (k) Tax Agreements and Rulings . Except as set forth in Schedule 2.10(k) of the Company Disclosure Letter and as contemplated under this Agreement, no closing agreements, rulings or similar agreements or rulings relating to Taxes have been entered into or issued by any Governmental...

Page 259
...scope of their position (full-time, part-time or temporary status), each Company Employee's classification as either exempt or non exempt from the overtime requirements under any applicable law; (iii) their current monthly salary (divided into base salary and global overtime payment, if relevant) or...

Page 260
..., as applicable; (ii) has received an offer to join a business that may be competitive with the Company's or the Israeli Subsidiary's business; or (iii) is a party to or is bound by any confidentiality agreement, noncompetition agreement or other Contract (with any Person other than the Company or...

Page 261
... . As applicable with respect to each Company Employee Plan (excluding any Company Employee Plan of a type of pension arrangement and any other provident fund), the Company has delivered to Purchaser: (i) correct and complete copies of all documents setting forth the terms of each Company Employee...

Page 262
... any court or other Governmental Entity respecting employment, employment practices, terms and conditions of employment, wages, maximum hours of work, overtime, sick leave, annual leave, prior notice, severance payment, notice to employees or other labor-related matters, including Legal Requirements...

Page 263
... is entitled to any rights under the applicable labor law. All the current and former Consultants have received all their rights to which they are and were entitled to according to any applicable law or agreement with the Company or the Israeli Subsidiary. Except as set forth in Schedule 2.11...

Page 264
... or any payment of Company Share Capital or Israeli Subsidiary Share Capital, in addition to what such Company Employee is entitled to by applicable law or under the terms of such Company Employee's employment agreement or any other binding source (including unwritten customs or practices, including...

Page 265
... of the Company or the Israeli Subsidiary, any payment or commitment to pay any commission, fee or other amount to, or to purchase or obtain or otherwise Contract to purchase or obtain any goods or services from, any other Person of which any officer, director or shareholder of the Company or the...

Page 266
... other records reflecting all share issuances and transfers and all share option grants and agreements of the Company and the Israeli Subsidiary and a document setting forth all transfers and issuances of any capital stock of the Company from incorporation to the Agreement Date, attached hereto as...

Page 267
... or authorize any third party to manufacture or reproduce any of the Company Products or Company Intellectual Property; (xiii) any agreement containing any support, maintenance or service obligation or cost on the part of the Company or the Israeli Subsidiary providing for payments by the Company or...

Page 268
...of applicable bankruptcy and other similar laws affecting the rights of creditors generally and rules of law governing specific performance, injunctive relief and other equitable remedies. There exists no default or event of default or event, occurrence, act or condition, with respect to the Company...

Page 269
... execution of any employment agreements or service Contracts or the extension of the term of any existing employment agreement or service Contract with any Person in the employ or service of the Company or the Israeli Subsidiary; (i) there has not occurred any change in title, office or position, or...

Page 270
..., officers or shareholders (other than Liabilities to pay compensation or benefits in connection with services rendered in the ordinary course of business, consistent with past practice); (m) neither the Company nor the Israeli Subsidiary has made any deferral of the payment of any accounts payable...

Page 271
..., influence payment, kickback or other payment to any Person, private or public, regardless of form, whether in money, property or services, (i) to obtain favorable treatment for any Company Shareholder, the Company, the Israeli Subsidiary or any affiliate of the Company in securing business, (ii...

Page 272
... by such Company Shareholder of this Agreement does not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation...

Page 273
... Legal Requirement, right of first refusal or similar right or limitation, including those set forth in the Charter Documents, and, at Closing, shall deliver to Purchaser good and valid title to such Company Shares and any Company Shares received upon exercise of Company Options, free and clear of...

Page 274
...the purpose of investing in securities not registered under the Securities Act, (3) on the Agreement Date, the Regulation S Investor is outside the United States, (4) the Company Shareholder is not acquiring the Purchaser Ordinary Shares for the account or benefit of any U.S. Person, (5) it will not...

Page 275
...and reviewed information about Purchaser, including the reports filed by Purchaser with the SEC, and has had an opportunity to discuss Purchaser's business, management and financial affairs with its management. Such Company Shareholder is aware of Purchaser's business affairs and financial condition...

Page 276
... promulgated under the Securities Act), has such knowledge and experience in financial and business matters that such Company Shareholder is capable of evaluating the merits and risks of the Share Purchase, has the capacity to protect such Company Shareholder's own interests in connection with this...

Page 277
... with applicable law (including Israeli and United States federal and state securities laws). 4.4 4.5 Cash Resources . Purchaser has sufficient cash resources to pay the Closing Payment. Purchaser SEC Documents; Purchaser Financial Statements. (a) Purchaser has timely filed all forms, reports and...

Page 278
... for the preparation of Purchaser's filings with the SEC. Purchaser maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded...

Page 279
... (including Taxes) when due, (B) collect accounts receivable when due and not extend credit outside of the ordinary course of business, (C) sell Company Products consistent with past practices as to license, service and maintenance terms, incentive programs, and revenue recognition and (D) preserve...

Page 280
... or consent in connection with the Share Purchase, or violate, terminate, amend, or otherwise modify (including by entering into a new Contract with such party or otherwise) or waive any of the material terms of any of its Material Contracts, other than as required for the Company or the Israeli...

Page 281
... Contract with respect to the foregoing; (j) Indebtedness; (k) Payment of Obligations. Pay, discharge or satisfy (i) any Liability to any Person who is an officer, director or Company Shareholder of the Company (other than compensation due for services as an officer or director) or (ii) any claim or...

Page 282
... of Taxes, adopt or change any accounting method in respect of Taxes, file any federal, state, or foreign income Tax Return or any other material Tax Return, file any amendment to any Tax Return, enter into any Tax sharing or similar agreement or closing agreement, settle any claim or assessment...

Page 283
... consent of such Person is or may be required in connection with the Share Purchase or this Agreement; (b) any notice or other communication from any Governmental Entity (i) delivered in connection with the Share Purchase or this Agreement, or (ii) indicating that a Company Authorization is revoked...

Page 284
... is provided with all certificates, opinions and other information it may reasonably request in connection with such request. 6.2 Filings and Consents . (a) Filings . Each party shall use reasonable best efforts to file, as soon as practicable after the date of this Agreement, all notices, reports...

Page 285
... delay the Share Purchase. Each of the Company Shareholders, the Company and the Israeli Subsidiary will immediately cease and cause to be terminated any and all existing activities, discussions or negotiations with any Persons conducted prior to or on the date of this Agreement with respect...

Page 286
... for nonpublic information relating to the Company or the Israeli Subsidiary or for access to any of the properties, books or records of the Company or the Israeli Subsidiary by any Person or Persons other than Purchaser. Such notice shall describe (1) the material terms and conditions of such...

Page 287
... to the Shareholders' Agent, as used in the Confidentiality Agreement the term " Confidential Information " shall include information relating to the Share Purchase or this Agreement received by the Shareholders' Agent after the Closing or relating to the period after the Closing; provided however...

Page 288
... conduct of the defense of any New Litigation Claim. 6.8 Access to Information . (a) During the period commencing on the Agreement Date and continuing until the earlier of the termination of this Agreement and the Closing, (i) the Company shall afford Purchaser and its accountants, counsel and other...

Page 289
...to the other required data and information specified therein), as of the Closing Date and immediately prior to the Closing: (a) the names of all the Company Shareholders and Company Optionholders and their respective street and email addresses (if available), telephone number (if available), Israeli...

Page 290
..., in each case without any further liability to the Purchaser. 6.15 Indemnification of Officers and Directors . (a) If the Share Purchase is consummated, then until the seventh anniversary of the Closing Date, Purchaser shall, or shall cause the Company to, fulfill and honor in all respects the...

Page 291
... the Closing. 6.17 Domiciliation Ruling . The Company has filed the Domiciliation Application with the ITA on August 14, 2012, a true and correct copy thereof is attached as Schedule 6.17 hereto. The parties will cause their respective Israeli counsel and their respective advisors and accountants to...

Page 292
... Israeli bank approved by Purchaser over which (i) one individual approved by Purchaser and (ii) the Shareholders' Agent shall have the joint signing authority (the " Dividend Account "). Following the Closing, the Shareholders' Agent shall follow the instructions of Purchaser and enable the Israeli...

Page 293
... place prior to the Closing Date (but including the transfer of the Company Intellectual Property from the Company to the Israeli Subsidiary) as a result of the terms and conditions of the Domiciliation Ruling, or as a result of its not being received prior to the payment of the Special Tax Dividend...

Page 294
... Agent for distribution to the Company Shareholders as of the Record Date, subject to applicable withholding Taxes. ARTICLE 7 CONDITIONS TO THE SHARE PURCHASE 7.1 Conditions to Obligations of Each Party to Effect the Share Purchase . The respective obligations of each party hereto to consummate the...

Page 295
... documents set forth in Section 1.2(a) . (c) Receipt of Closing Payment . The Paying Agent shall have received the Closing Payment from Purchaser and shall have provided the parties written evidence thereof. 7.3 Additional Conditions to the Obligations of Purchaser . The obligations of Purchaser to...

Page 296
... or rights to acquire any Company Share Capital, Israeli Subsidiary Share Capital, Company Options, or any other securities under any circumstances. (f) Employees . (i) At least the number of employees as set forth on Schedule 7.3(f)(i) shall have signed and delivered to Purchaser the executed...

Page 297
... prepared by the Company's certified accounting firm, balance sheet and income statement of the Company for every complete month following September 30, 2012 up and until the Closing Date,(collectively, the " Closing Financial Statements ") in each case, certified by the Authorized Persons that such...

Page 298
...than the Working Capital Target. (l) Accounts Receivable . The Company shall have delivered a certificate signed by the Authorized Person setting forth the amounts and an accurate aging of the Company's and the Israeli Subsidiary's accounts receivable in the aggregate and by customer, and indicating...

Page 299
...compliance with any of the covenants, agreements or conditions for the benefit of such Person contained herein. Any agreement on the part of a party hereto or the Shareholders' Agent to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such...

Page 300
...limitations set forth in this ARTICLE 9 , from and after the Closing, the Company Shareholders and Company Optionholders (the " Indemnifying Parties "), shall severally and not jointly, in proportion to each such Indemnifying Party's Pro Rata Share, indemnify and hold harmless Purchaser, the Company...

Page 301
... Indemnifying Party or any such director, officer, or controlling person in connection with any loss, claim, damage, liability or action, as incurred by them as a result of such a breach). (c) From and after the Closing Date and until the first anniversary of the Closing Date, Purchaser shall hold...

Page 302
...Set-off Right (after taking into account all other claims made by way of the Set-off Right) (in the case of a Fundamental Claim during the Setoff Period), each Indemnifying Party shall be liable for such Person's Pro Rata Share of the amount of any Indemnifiable Damages resulting therefrom; provided...

Page 303
... . (a) On or before the last day of the applicable Set-off Period, Purchaser may in good faith deliver to the Shareholders' Agent a certificate signed by any officer of Purchaser (a " Claim Certificate "): (i) stating that an Indemnified Person has incurred, paid, reserved or accrued (in accordance...

Page 304
... promptly prepare and sign a memorandum setting forth such agreement. If Purchaser and the Shareholders' Agent reach an agreement with respect to any claim brought by Purchaser, the Shareholders' Agent shall instruct each Indemnifying Party to pay Purchaser such Person's Pro Rata Share of the amount...

Page 305
... after the resolution of all such objections following the applicable Set-off Period shall be paid to the Paying Agent and distributed to the Company Securityholders in accordance with their respective Pro Rata Shares. (c) Should Purchaser and the Shareholders' Agent be unable to agree as to any...

Page 306
... to this Agreement or to waive any terms and conditions of this Agreement providing rights or benefits to the Indemnifying Parties in accordance with the terms hereof and in the manner provided herein; (viii) instruct the Paying Agent as to the allocation of payments under this Agreement among the...

Page 307
...notice or communication given or received by, and any decision, action, failure to act within a designated period of time, agreement, consent, settlement, resolution or instruction of, the Shareholders' Agent that is within the scope of the Shareholders' Agent's authority under Section 9.6 (a) shall...

Page 308
... by the Shareholders' Agent in the performance or discharge of its rights and obligations under this Agreement (the " Rep Expenses "). The Rep Reimbursement Amount shall only be used for the payment of the Rep Expenses or as otherwise required by this Agreement. 9.7 Third-Party Claims . (a) In...

Page 309
...Set-off Right pursuant to this ARTICLE 9 , such Indemnifying Party may, in its sole discretion, satisfy a portion of such indemnification obligation (the " Equity Portion ") in the form of Purchaser Ordinary Shares issued to such Indemnifying Party pursuant to this Agreement. Such Indemnifying Party...

Page 310
... to the extent in connection with the Company, the Israeli Subsidiary, this Agreement, the Share Purchase and the other transactions contemplated hereby until the expiration of the applicable statute of limitations. If the Share Purchase is consummated, all covenants of the parties shall expire and...

Page 311
... the party to whom such information or material is to be provided. Unless the context of this Agreement otherwise requires: (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; and (iii) the terms...

Page 312
...otherwise except as otherwise specifically provided herein. 10.6 Assignment . Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior...

Page 313
...the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document 10.12 No Set-Off . Except as set forth in this Agreement, no party shall have the right to set...

Page 314
..., and the Shareholders' Agent have caused this Share Purchase Agreement to be executed and delivered by their respective officers thereunto duly authorized (or with respect to those Company Shareholders who are individuals, personally), all as of the date first written above. PERION NETWORK LTD. BY...

Page 315
..., the Company, the Company Shareholders, and the Shareholders' Agent have caused this Share Purchase Agreement to be executed and delivered by their respective officers thereunto duly authorized (or with respect to those Company Shareholders who are individuals, personally), all as of the date first...

Page 316
EXHIBIT A COMPANY SHAREHOLDERS Amir Amit Ben Garrun Dan Gotlieb Esti Selickter Gigi Levy Holine Finance Ltd. Ilan Weintrob Learnicom LLC Moshe Cohen Purple Martin Ltd. Roee Mor Rami ...

Page 317
... number of Purchaser Ordinary Shares payable to Company Shareholders pursuant to the Closing Spreadsheet. " Business " means (i) the development and distribution of client applications to enhance user communication by adding icons and emoticons to any communication service such as social networking...

Page 318
... options to purchase Company Ordinary Shares or Company Preferred Shares that are issued and outstanding as of the Closing (unless the context otherwise requires). " Company Ordinary Shares " means the Ordinary Shares of the Company, par value US$ 0.01 each. " Company Preferred Shares " means the...

Page 319
... into shares of capital stock in accordance with their terms, whether or not then currently vested, exercisable, exchangeable or convertible. " Fully-Diluted Company Ordinary Shares " means the sum, without duplication, of (i) the aggregate number of shares of Company Ordinary Shares that are issued...

Page 320
... following the first year anniversary of the Closing Date, the third sentence of the representation in section 2.9(j) shall be qualified by the Company's knowledge. " Israeli Subsidiary Share Capital " means the share capital of the Israeli Subsidiary. " Israeli Subsidiary Shareholder " means the...

Page 321
... like liens; (E) liens in favor of customs and revenue authorities arising as a matter of Legal Requirements to secure payments of customs duties in connection with the importation of goods, and (F) non-exclusive object code licenses of software by the Company or a Subsidiary in the ordinary course...

Page 322
... the issued and outstanding capital stock of the Company on a Fully-Diluted Basis as of the Closing Date. " Purchaser Ordinary Shares " or " Shares " means the Ordinary shares, par value NIS 0.01 per share, of Purchaser. " Representatives " of any Person shall mean such Person's directors, managers...

Page 323
... Certificate shall include a representation of the Company, certified by the Authorized Person, that such certificate includes all of the Transaction Expenses not yet paid as of the Closing Date. Other capitalized terms defined elsewhere in this Agreement and not defined in this Exhibit B shall...

Page 324
...derogating from the right of the Purchaser to receive the Negative Adjustment Amount pursuant to Section (g), Purchaser shall pay the lower of (i) the amount by which the Company Net Working Capital is higher than the Cash as of the Closing Date, and (ii) the Google Payments actually received by the...

Page 325
... to it from such other party, unless the party to whom a payment is due agrees to such set-off." 5. The following is hereby added as Section 6.19 of the Purchase Agreement: " Company Shareholder Registry . Immediately after the Closing, the Shareholders' Agent shall use his best efforts and fully...

Page 326
IN WITNESS WHEREOF , the Purchaser and the Shareholders' Agent have executed this Amendment on the date first above written. PERION NETWORK LTD. By: Name: Title: /s/ Josef Mandelbaum Josef Mandelbaum CEO SHAREHOLDERS' AGENT /s/ Nadav Goshen Nadav Goshen

Page 327
... REGISTRATION RIGHTS AGREEMENT (this " Agreement ") dated as of November 30, 2012, by and among PERION NETWORK LTD., an Israeli company (the " Company ") and the entities and individuals set forth on Schedule A attached hereto (referred to herein individually as an " Investor " and collectively as...

Page 328
... if, at any time after giving a notice of a Piggyback Registration and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its...

Page 329
... or supplements thereto and in any event no less than five (5) days prior to the expected filing date, the Company will furnish to the counsel selected by the holders of a majority of the Registrable Securities covered by such registration statement copies of all such documents proposed to be...

Page 330
... respect to the Ordinary Shares with the OTCQB or OTCBB; (h) registration statement; provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such (i) enter into such customary agreements (including underwriting agreements in customary form, if...

Page 331
... discount with respect to any shares being sold by any party other than the Company in connection with an underwritten public offering of any of the Company's securities pursuant to this Agreement, nor shall the Company be required to pay any transfer or similar tax in respect of Registrable...

Page 332
... use in connection with any such registration statement or prospectus and, severally but not jointly, agrees to indemnify the Company, each underwriter, and their respective, directors and officers and each Person who "controls" the Company and each underwriter (within the meaning of the Securities...

Page 333
... made by or on behalf of the Indemnified Party or any officer, director or controlling Person of such Indemnified Party. In addition, the indemnification will survive the completion of any offering of Registrable Securities pursuant to this Agreement and will survive the termination of this...

Page 334
... the securities referred to in clause (i) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. " Person " means any individual, partnership, joint venture, corporation, limited liability company, trust...

Page 335
... at least 0.5% of the outstanding Ordinary Shares; provided (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the securities with respect to which such registration rights are being assigned, and (ii) such...

Page 336
... would result in the application of any law other than the law of the State of Israel. The parties agree that venue for any dispute arising under this Agreement will lie exclusively in courts located in Tel Aviv, and the parties irrevocably waive any right to raise forum non conveniens or any other...

Page 337
...and supersedes all previous agreements. 10.11 Computation of Time . Whenever the last day for the exercise of any privilege or the discharge of any duty hereunder shall fall upon a Friday, Saturday, or any date on which banks in Israel, are authorized to be closed, the party having such privilege or...

Page 338
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the date first written above. COMPANY: PERION NETWORK LTD. /s/ Josef Mandelbaum Name: Josef Mandelbaum Title: CEO [Signature page to Registration Rights Agreement] 12 /s/ Yacov Kaufman Yacov Kaufman CFO

Page 339
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the date first written above. INVESTORS: /s/ Moshe Cohen Moshe Cohen /s/ Ben Garrun Ben Garrun HOLINE FINANCE LTD. By: Name: Title: /s/ Kees-Jan A vis Kees-Jan Avis Director /s/ ...

Page 340
Exhibit 8 List of all subsidiaries 1. 2. 3. 4. 5. 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

Page 341
EXHIBIT 12.1 CERTIFICATIONS I, Josef Mandelbaum, Chief Executive Officer of Perion Network Ltd., 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 ...

Page 342
EXHIBIT 12.2 CERTIFICATIONS I, Yacov Kaufman, Chief Financial Officer of Perion Network Ltd., 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 ...

Page 343
... 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, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Josef Mandelbaum, Chief Executive Officer of the Issuer, certify...

Page 344
...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, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Yacov Kaufman, Chief Financial Officer of the Issuer, certify...

Page 345
...Statements on Form S-8 (File Nos. 333-171781, 333-152010, 333133968), of our report dated April 29, 2013, with respect to the consolidated financial statements of the Company and its subsidiaries, which appears in this Annual Report on Form 20-F for the year ended December 31, 2012. Tel Aviv, Israel...

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