Incredimail 2012 Annual Report Download - page 74

On July 31, 2011, we signed an Agreement and Plan of Merger with Smilebox Inc., Andrew Wright and Shareholders Representative
LLC (the “Acquisition Agreement”),
according to which we have purchased 100% of the issued and outstanding equity of Smilebox Inc. The
closing of that transaction occurred on August 31, 2011. Following the closing, Smilebox Inc. became a wholly owned subsidiary of Perion
Network Ltd., through its Delaware Subsidiary.
On November 7, 2012, we entered into a Share Purchase Agreement with SweetIM Ltd., SweetIM Technologies Ltd., the shareholders
of SweetIM and Nadav Goshen, as Shareholders' Agent, according to which we purchased 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 $7.5 million in cash is due 12
months after closing, and a third payment of up to $7.5 million in cash is due 18 months after closing, if certain achievements are met. The
second payment will be subject to acceleration if we publish a consolidated balance sheet reflecting an aggregate amount of cash, cash
equivalents and marketable securities of less than $4.0 million, unless we present evidence of an available credit line in an amount that, together
with the foregoing balance, exceeds $4.0 million or we have otherwise remedied the shortfall.
We funded the cash amount paid upon the closing of this acquisition using cash on hand and expect to fund the follow-
on payments
from operating cash flow. The Share Purchase Agreement includes customary representations, warranties, covenants and indemnification
provisions.
On November 30, 2012, we entered into a Registration Rights Agreement with four former shareholders of SweetIM, with respect to the
registration with the SEC of an aggregate of 1,537,546 of our ordinary shares issued for the several benefit of such individuals upon the closing
of the acquisition. If we initiate a registered offering of securities, such holders would be entitled to include their registerable shares in the
registration statement effected pursuant to such offering, subject to certain limitations. We are subject to customary indemnification undertakings
with respect to any registration effected on behalf of such individuals. The agreement includes an undertaking by the holders not to sell any
shares during the 7-day period before, and the 90-day period after, the effective date of an underwritten public offering.
For information regarding our credit facilities, see Item 5.B “Operating and Financial Review and Prospects –
Liquidity and Capital
Resources – Credit Facilities.”
The employment agreements with our principal officers are described under "Item 6.C Board Practices — Employment Agreements".
D. EXCHANGE CONTROLS
Non-
residents of Israel who hold our ordinary shares are able to receive any dividends, and any amounts payable upon the dissolution,
liquidation and winding up of our affairs, freely repatriable in non-
Israeli currency at the rate of exchange prevailing at the time of conversion.
However, Israeli income tax is required to have been paid or withheld on these amounts. In addition, the statutory framework for the potential
imposition of exchange controls has not been eliminated, and may be restored at any time by administrative action.
E. TAXATION
The following is a general summary only and should not be considered as income tax advice or relied upon for tax planning purposes.
ISRAELI TAXATION
THE FOLLOWING DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX
CONSEQUENCES RELATING TO THE OWNERSHIP OR DISPOSITION OF OUR ORDINARY SHARES. YOU SHOULD CONSULT
YOUR OWN TAX ADVISOR CONCERNING THE TAX CONSEQUENCES OF YOUR PARTICULAR SITUATION, AS WELL AS ANY
TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING
JURISDICTION.
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