Incredimail 2013 Annual Report Download - page 73

Under the Companies Law, only if and to the extent provided by its articles of association, a company may indemnify an office holder
against the following liabilities or expenses incurred in his or her capacity as an office holder:
Under the Companies Law, a company may obtain insurance for an office holder against liabilities incurred in his or her capacity as an
office holder, if and to the extent provided for in its articles of association. These liabilities include a breach of duty of care to the company or a
third-party, a breach of duty of loyalty and any monetary liability imposed on the office holder in favor of a third-party.
A company may, in advance only, exculpate an office holder for a breach of the duty of care, except in connection with a distribution of
dividends or a repurchase of the company’
s securities. A company may not exculpate an office holder from a breach of the duty of loyalty
towards the company.
Under the Companies Law, however, an Israeli company may only indemnify or insure an office holder against a breach of duty of
loyalty to the extent that the office holder acted in good faith and had reasonable grounds to assume that the action would not prejudice the
company. In addition, an Israeli company may not indemnify, insure or exculpate an office holder against a breach of duty of care if committed
intentionally or recklessly, or an action committed with the intent to derive an unlawful personal gain, or for a fine or forfeit levied against the
office holder.
We have purchased liability insurance and entered into indemnification and exculpation agreements for the benefit of our office holders
in accordance with the Companies Law and our articles of association.
C. MATERIAL CONTRACTS
Agreements Relating to the SweetIM acquisition
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 $5.6 in cash was paid in December
2013, and a third payment of up to $7.5 million in cash is due in May 2014, if certain milestones are met. The milestones are based on our
revenues in the fiscal year of 2013 and the absence of certain changes in the industry in which we operate. We believe that that the terms of the
Share Purchase Agreement will require us to pay $2.5 million with respect to the contingent payment.
We funded the cash amount paid upon the closing of this acquisition using 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 registrable shares (as defined in
such agreement) 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.
•
any monetary liability whether imposed on him or her in favor of another person pursuant to a judgment, a settlement or an
arbitrator
’
s award approved by a court;
• reasonable litigation expenses, including attorneys’
fees, incurred by him or her as a result of an investigation or proceedings
instituted against him or her by an authority empowered to conduct an investigation or proceedings, which are concluded either (i)
without the filing of an indictment against the office holder and without the levying of a monetary obligation in lieu of criminal
proceedings upon the office holder, or (ii) without the filing of an indictment against the office holder but with levying a
monetary obligation in substitute of such criminal proceedings upon the office holder for a crime that does not require proof of
criminal intent; and
• reasonable litigation expenses, including attorneys’
fees, in proceedings instituted against him or her by the company, on the
company’s behalf or by a third-
party, or in connection with criminal proceedings in which the office holder was acquitted, or as a
result of a conviction for a crime that does not require proof of criminal intent.
64