Incredimail 2014 Annual Report Download

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PERION NETWORK LTD.
FORM 20-F
(Annual and Transition Report (foreign private issuer))
Filed 04/16/15 for the Period Ending 12/31/14
Telephone 972-73-398-1572
CIK 0001338940
Symbol PERI
SIC Code 7371 - Computer Programming Services
Industry Computer Services
Sector Technology
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2015, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ... Symbol SIC Code Industry Sector Fiscal Year 972-73-398-1572 0001338940 PERI 7371 - Computer Programming Services Computer Services Technology 12/31 http://www.edgar-online.com © Copyright 2015, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR...

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

  • Page 3
    Annual Report. As of December 31, 2014, the Registrant had outstanding 69,202,431 ordinary shares, par value ILS 0.01 per share.

  • Page 4
    ... registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 3 No 1 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be...

  • Page 5
    ... or projections include certain risks, including but not limited to the risks and uncertainties relating to our; business, intellectual property, industry and operations in Israel, as described in this annual report under Item 3.D. - "Key Information - Risk Factors." Assumptions relating to...

  • Page 6
    ...'s Certifying Accountant Corporate Governance Mine Safety Disclosure 83 83 83 84 84 84 85 85 85 85 86 Identity of Directors, Senior Management and Advisers Offer Statistics and Expected Timetable Key Information Information on the Company Unresolved Staff Comments Operating and Financial Review and...

  • Page 7
    ... ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. ITEM 3. A. KEY INFORMATION SELECTED FINANCIAL DATA On January 2, 2014, we purchased all of the outstanding shares of ClientConnect Ltd. ("ClientConnect"), which received the ClientConnect business of Conduit...

  • Page 8
    ... Operations Data: (in thousands, except shares and per share data) 2011 Revenues: Search Advertising and other Total Revenues Costs and Expenses: Cost of revenues Customer acquisition costs Research and development Selling and marketing General and administrative Impairment and restructuring charges...

  • Page 9
    ... of operations. We are highly dependent on our search services agreement with Microsoft Online Inc. ("Microsoft"), which covers all of our search business with Microsoft and has a term from January 1, 2015 until December 31, 2017. In 2014, our search services agreement with Microsoft accounted for...

  • Page 10
    ... 2015, and Google's Chrome accounting for over 48% on its own, based on StatCounter reports. In December 2013, Google announced that it will restrict the ability to install multi-purpose extensions onto its Chrome Internet browser starting in June 2014. As most of our products and services offer...

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

  • Page 12
    ... have acquired Grow Mobile, Inc. ("Grow Mobile"), and Make Me Reach SAS ("Make Me Reach"), our services, for the most part, are not yet compatible with these alternative platforms and devices and substantially all our revenue to date has come from PCs. If this trend towards using the Internet on non...

  • Page 13
    ... could result in customer dissatisfaction, performance problems with an acquired product, technology or company. Paying the purchase price for acquisitions in the form of cash, debt or equity securities could weaken our cash position, increase our leverage or dilute our existing shareholders, as the...

  • Page 14
    ...to issue ordinary shares or effect significant corporate transactions with respect to ClientConnect until the end of 2015. As a result of the Israeli tax ruling obtained by Conduit in connection with the Conduit Split and the ClientConnect Acquisition, from January 2014, the date of acquisition, and...

  • Page 15
    ... on a third party Internet and telecommunication providers to operate our websites and web-based services. Temporary failure of these services, including catastrophic or technological interruptions, would materially reduce our revenues and damage our reputation, and securing alternate sources for...

  • Page 16
    ... our user base. Finally, although we constantly monitor the compatibility of our Internet search services and related solutions with such new versions and upgrades, we may not be able to make the required adjustments to ensure constant availability and compatibility of such solutions. Exchange rate...

  • Page 17
    ... or acquire new users could be adversely affected. Although we have established programs to attract new employees and provide incentives to retain existing employees, particularly senior management, we cannot be assured that we will be able to retain the services of senior management or other key...

  • Page 18
    ... information, our clients might decide not to allow us to collect some or all of this data or might limit our use of this data. For example, advertisers of mobile applications may not agree to provide us with the data generated by interactions with the content on their apps, or device users...

  • Page 19
    ... or exchange from working with our competitors or from offering competing services. The tools that we provide to advertisers of mobile applications allow them to make decisions as to how to allocate advertising inventory among advertising networks. Ad networks and exchanges may change the price at...

  • Page 20
    ... significant accounts receivable for the services that we provide to our key advertisers, which could expose that business to substantial and potentially unrecoverable costs if we do not receive payment from them. Sales efforts with advertisers of mobile applications require significant time and...

  • Page 21
    ... the patent applications that we have filed will result in a patent being issued, or that any existing or future patents will afford adequate protection against competitors and similar technologies. We use certain "open source" software tools that may be subject to intellectual property infringement...

  • Page 22
    ...Our failure to obtain a license for key intellectual property rights such as these from a third party for technology or content, sound or graphic used by us could cause us to incur substantial liabilities and to suspend the development and sale of our products. Alternatively, we could be required to...

  • Page 23
    ...-term advertising commitments with search providers or advertisement networks. A decrease in overall advertising may adversely affect our results of operations. In addition, the rates advertisers pay for each click on a sponsored link on a cost-per-click (CPC) basis or for each time an advertisement...

  • Page 24
    ... may cover user privacy, data collection and protection, content, use of "cookies," access changes, "net neutrality," pricing, advertising, distribution of "spam," intellectual property, distribution of products, protection of minors, consumer protection, taxation and online payment services. Many...

  • Page 25
    ... negatively affect business conditions and harm our results of operations. Our operations may be disrupted by the obligations of our personnel to perform military service. All non-exempt male adult citizens and permanent residents of Israel under the age of 40, or older for reserves officers or...

  • Page 26
    ... Information" under the caption "Israeli taxation, foreign exchange regulation and investment programs" and in note 10 to our Financial Statements. If we are characterized as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences. Non-U.S. corporations...

  • Page 27
    Risks Related to our Ordinary Shares Future sales of our ordinary shares could reduce our stock price. At the closing of the ClientConnect Acquisition on January 2, 2014, we issued 54.75 million of our ordinary shares to ClientConnect's shareholders. The ordinary shares were issued pursuant to an ...

  • Page 28

  • Page 29
    ... subject to ongoing costs and risks associated with complying with extensive corporate governance and disclosure requirements. We were unable to perform an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2014. As an Israeli public company, we incur...

  • Page 30
    ... Companies Law in Israel, rather than comply with the NASDAQ requirements, in certain matters, including with respect to the quorum for shareholder meetings, sending annual reports to shareholders, and shareholder approval with respect to certain issuances of securities. See "Item 16.G - Corporate...

  • Page 31
    ...operate under the laws of the State of Israel. Our headquarters are located at 26 HaRokmim Street, Holon 5885849, Israel. Our phone number is 972-73-3981000. Our website address is www.perion.com . The information on our website does not constitute a part of this annual report. Our agent for service...

  • Page 32
    ... post-closing, certain key employees may be entitled to receive the remaining balance of the retention payment, which shall be paid as follows: up to $359,552 in cash and $208,168 in ordinary shares. Make Me Reach has become part of Perion's mobile marketing business which was recently created to...

  • Page 33
    ..., customers can access their performance data and revenue information in one place, enabling them to make better, quicker, and more intelligent decisions and help mobile application advertisers improve user acquisition, maximize their return on investment and ultimately meet their business goals...

  • Page 34
    ... services agreements with our search partners. Search-generated revenues accounted for 96%, 85% and 85% of our revenues in 2012, 2013, and 2014, respectively. Through our search technology, including syndication, we offer end users the ability to search the Internet via easily embedded search boxes...

  • Page 35
    ... per user, or implement traffic acquisition with positive return on investment. Our analytics platform enables clients to manage their distribution and monetization activities and better optimize their offerings. Through the platform, we provide our clients with real-time analytics, custom reports...

  • Page 36
    ... and closed down product support in December 2014. Users that downloaded the application prior to the phase out can continue to use the application, but certain features are no longer available and we will no longer release any further updates. • Smilebox is an Internet photo sharing service...

  • Page 37
    ...have six issued patents in the United States and one in Israel, as well as several patent applications pending in the United States, Israel the European Union. We enter into licensing arrangements with third parties for the use of software components, graphic, sound and multimedia content integrated...

  • Page 38
    ... other companies offering solutions for online publishers and developers, including search services and other software in conjunction with changing a user's default search settings. As a major part of our revenues stem from our offering of search properties, we compete with search engine providers...

  • Page 39
    ... servers located around the world, mainly through Amazon Web Services. Our servers include mainly web servers, application servers, data collection servers, data storage servers, data processing servers, mail servers and database servers. Bezeq and Cellcom Israel Ltd. provide our Internet and...

  • Page 40
    ... this annual report. A. Overview Perion is a global performance-based media and Internet company, providing online publishers and app developers advanced technology and a variety of intelligent, data-driven solutions to monetize their application or content and expand their reach to larger audiences...

  • Page 41
    ...'s mobile marketing business, which was recently created to address the advertising needs of advertisers of mobile applications, and will enable Perion to provide a more comprehensive technical and platform solution for app developers. On February 10, 2015, we consummated the acquisition of Make Me...

  • Page 42
    ... provider of our search. In 2014, revenues increased by 19% due to organic growth, as well as the acquisition of Perion's search activity. Advertising and other revenues increased in 2013, as a result of introducing and marketing other applications in our toolbar being distributed as part our search...

  • Page 43
    ... capable of managing constant change and new businesses, organic and acquired. G&A expenses, primarily salaries and share based compensation, increased nominally in 2012, 2013 and 2014. Looking forward, in 2015 we expect G&A expenses (excluding costs stemming from new acquisitions) to remain...

  • Page 44
    ... price movements of our stock. The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The fair value of RSUs is based on the market value of the underlying shares at the date of grant. Taxes on Income We are subject to income taxes in Israel...

  • Page 45
    ... in valuing certain intangible assets include but are not limited to future expected cash flows from customer relationships and acquired patents and developed technology; and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are...

  • Page 46
    ... 31, 2012 2013 2014 Revenues: Search Advertising and Other Total revenues Costs and expenses: Cost of revenues Customer acquisition costs Research and development Selling and marketing General and administrative Impairment and restructuring charges Total costs and expenses Operating income Financial...

  • Page 47
    ... in 2014. This increase was due to an increase in the number of downloads and consequently the number of users using our search service. This increase is attributable to organic growth, as well as the acquisition of Perion's activity, which too was based on search-generated revenues. In 2013, Perion...

  • Page 48
    ... costs, managing organic activity as well as being an active acquirer of other businesses. In 2013, Perion's G&A expenses were in the amount of $15.1 million. We expect G&A expense in 2015 to continue at a level similar to that of 2014. Impairment and restructuring charges. Impairment charges...

  • Page 49
    ...ads into the download and installation process of their software, thereby further increasing monetization opportunities. The following table shows costs and expenses by category (in thousands of U.S. dollars): Year ended December 31, 2012 2013 Cost of revenues Customer acquisition costs Research and...

  • Page 50
    ... of property and equipment, $4.3 million in cash used for the acquisition of Grow Mobile and a deposit of $15.0 million in short term bank deposits, partially offset by cash acquired through the acquisition of Perion in the amount of $23.4 million. In 2013, our continuing investing activities used...

  • Page 51
    ...a conversion price of ILS 33.605 per share (approximately $8.6 per share as of December 31, 2014). The principal of the Bonds are repayable in five equal annual installments commencing on March 31, 2016, with a final maturity date of March 31, 2020. The Bonds bear interest at the rate of 5% per year...

  • Page 52
    .... In 2014, our efforts were focused on maintaining our software products to adapt with changes to operating systems, browsers or other underlying platforms. Additionally, we focused our research and development efforts on developing the new mobile advertising platform-based solutions that will offer...

  • Page 53
    ... multiple threats and changes regarding the long-term ability to grow search-generated revenues, we are refocusing our core competencies and investing internal development efforts as well as focusing our acquisition efforts towards creating mobile advertising platform for app developers. There has...

  • Page 54
    ... 48 External Director Michael Vorhaus* 57 Director Josef Mandelbaum 48 Chief Executive Officer Yacov Kaufman 57 Chief Financial Officer Limor Gershoni Levy 44 Senior Vice President, General Counsel Shai Gottesdiener 38 General Manager, Perion Mobile Marketing Division Yuval Hamudot 41 General...

  • Page 55
    ... Mobile. In 1987, he founded Vorhaus Investments. Mr. Vorhaus holds a B.A. in Psychology from Wesleyan University and completed the Management Development Program at the University of California, Berkeley's Haas School of Business. Josef Mandelbaum has been the Chief Executive Officer of the Company...

  • Page 56
    ... 31, 2014, was approximately $7.1 million, which included approximately $0.9 million that was set aside or accrued to provide for pension, retirement, severance or similar benefits. This amount includes bonuses paid to our officers pursuant to our executive bonus plan based on company performance...

  • Page 57
    ... is exercisable for a term of five years at an exercise price per share equal to the closing price of our ordinary shares on the date of the annual meeting of shareholders on which such option was granted, as reported by the NASDAQ Stock Market. The options vest in three equal installments on each...

  • Page 58
    ... for the year ended December 31, 2014. Such numbers are based on the option or RSU grant date fair value in accordance with accounting guidance for equity-based compensation and does not necessarily reflect the cash proceeds to be received by the applicable officer upon the vesting and sale of the...

  • Page 59
    ... health insurance, life insurance and a mobile phone. Mr. Mandelbaum has agreed not to compete with us during his term of employment and for a period of 180 days thereafter. His employment agreement also contains customary confidentiality and intellectual property assignment provisions. We also have...

  • Page 60
    ...2013 annual meeting of shareholders, held on September 2, 2013, Mr. Josef Mandelbaum was reelected as a director for an additional three-year term and Mr. Alan Gelman was reelected as a director for a three-year term. In connection with the closing of the ClientConnect Acquisition on January 2, 2014...

  • Page 61
    ... shareholders, provided that the aggregate votes cast in favor of the reelection by such non-excluded shareholders constitute more than 2% of the voting rights in the company. An external director may be removed only in a general meeting, by the same percentage of shareholders as is required...

  • Page 62
    ... accounting firm or its representative. The Companies Law defines an interested party as a substantial shareholder of 5% or more of the shares or voting rights of a company, any person or entity that has the right to nominate or appoint at least one director or the general manager of the company...

  • Page 63
    ...14 is calculated pursuant to Israel's Severance Pay Law based on the employees' most recent monthly salaries, multiplied by the number of years of their employment, or a portion thereof, as of the balance sheet date. This liability is provided for by monthly deposits into accounts for the benefit of...

  • Page 64
    ... that the market price of the ordinary shares at the time of grant exceeds the exercise price of the award or if the conditions of Section 102 are not met, tax will be payable at the time of sale at the marginal income tax rate applicable to the employee or director (up to 50% in 2014). We are not...

  • Page 65
    ... with reference to, a Schedule 13D filed with the SEC on January 13, 2014, by Mr. Shilo. (3) Based upon information provided to us by Mr. Erez. Includes options to purchase 3,333 ordinary shares, that are vested or will vest within 60 days of April 13, 2015. (4) Based solely upon, and qualified in...

  • Page 66
    ... Party Transactions" for a discussion of the requirements of Israeli law regarding special approvals for transactions involving directors, officers or controlling shareholders. Agreements with Conduit As a condition precedent to the closing of ClientConnect Acquisition on January 2, 2014, Conduit...

  • Page 67
    ... Transition Services Agreement, dated December 31, 2013, between Conduit and ClientConnect, ClientConnect provided Conduit and its subsidiaries with certain business support services and systems, including data services, information technology, information security and management information systems...

  • Page 68
    ... in cash was due in May 2014, if certain milestones were 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 require us to pay only $2.5 million...

  • Page 69
    ... translated from ILS to dollars based on the exchange rate between the ILS and the dollar, as quoted by the Bank of Israel with respect to the date of the applicable high or low market price on the TASE. NASDAQ High ($) Low ($) Five most recent full financial years 2014 2013 2012 2011 2010 Financial...

  • Page 70
    ... 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. ADDITION AL INFORMATION SHARE CAPITAL Not applicable B. MEMORANDUM AND ARTICLES OF ASSOCIATION Registration Number and...

  • Page 71
    ... ownership or voting of ordinary shares by non-residents of Israel. Under the Companies Law, an annual meeting of our shareholders should be held once every calendar year, but no later than 15 months from the date of the previous annual meeting. The quorum required under our articles of association...

  • Page 72
    ... or the exploitation of any business opportunity of the company in order to receive personal advantage for himself or others. This duty also requires him or her to reveal to the company any information or documents relating to the company's affairs that the office holder has received due to his or...

  • Page 73
    ...tendered by shareholders. The tender offer generally may be consummated only if (i) at least 5% of the voting rights in the company will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer. The requirement to...

  • Page 74
    ... tax law treats some acquisitions, such as a stock-for-stock swap between an Israeli company and a foreign company, less favorably than U.S. tax law. For example, Israeli tax law may subject a shareholder who exchanges his ordinary shares for shares in a foreign corporation to immediate taxation...

  • Page 75
    ... Law and our articles of association. C. MATERIAL CONTRACTS Search Services Agreement with Microsoft Online Inc. On August 1, 2014, we announced the signing of a three-year agreement with Microsoft, extending our existing partnership, starting January 1, 2015 through December 31, 2017. Upon mutual...

  • Page 76
    ... of our ordinary shares or securities convertible into our ordinary shares in connection with (x) an acquisition by us of any business, company or assets or (y) a private placement of ordinary shares, that are not subject to more strict or identical transfer restrictions as provided under the...

  • Page 77
    ... Rights . We were required to file a "shelf" registration statement on Form F-3, as soon as practicable following the filing of our 2013 annual report, to register the resale from time to time by the holders thereof whose resale of shares would otherwise be subject to volume limitations set...

  • Page 78
    ... Acquisition, several large shareholders of Conduit, including Ronen Shilo, Dror Erez and Benchmark Israel II, have each entered into a Standstill Agreement providing that for a period commencing on January 2, 2014 and ending on the earlier of (i) the last business day preceding our 2015 annual...

  • Page 79
    ...will be entitled to distribute a dividend from such income without being required to pay additional corporate tax with respect to such dividend. A company that has so elected must make certain qualified investments in Israel over the five-year period commencing in 2013. A company that has elected to...

  • Page 80
    ... part of the income from such transaction is to be taxed abroad as well as in Israel) there is a special 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...

  • Page 81
    ... did not acquire their shares prior to our initial public offering, (2) the shares are listed for trading on the Tel Aviv Stock Exchange and/or a foreign exchange, and (3) such gains did not derive from a permanent establishment of such shareholders in Israel. However, non-Israeli corporations will...

  • Page 82
    ... tax laws, including insurance companies; dealers in stocks, securities or currencies; financial institutions and financial services entities; regulated investment companies or real estate investment trusts; grantor trusts; S corporations; persons that acquire ordinary shares upon the exercise of...

  • Page 83
    77

  • Page 84
    ... a short sale or otherwise) to make related payments with respect to positions in property substantially similar or related to the ordinary share with respect to which the dividend is paid. In addition, a non-corporate U.S. Holder will be able to take a qualified dividend into account in determining...

  • Page 85
    ... shares during a period when we are a PFIC will be subject to the foregoing rules even if we cease to be a PFIC. Unless otherwise provided by the IRS, if a non-U.S. corporation is a PFIC, a U.S. Holder generally is required to file an annual informational return with the IRS. As an alternative...

  • Page 86
    ... statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed. Holders should consult their own tax advisors regarding their tax reporting obligations...

  • Page 87
    ... treatment of agreements pursuant to applicable law) at our principal executive offices at Perion Network Ltd., 26 HaRokmim Street, Holon 5885849, Israel. I. SUBSIDIARY INFORMATION Not applicable. ITEM 11. QUANTITATIVE AN D QUALITATIVE DISCLOSURES ABOUT MARKET RISK Exchange Rate Risk. A portion of...

  • Page 88
    ...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, 2012 2013 2014 3.858 3.609 3.733 3.471 Average rate for period Rate at year-end 3.577 3.889 Since 2006 we...

  • Page 89
    ..., as of such date, our disclosure controls and procedures were effective and ensured that information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial...

  • Page 90
    ... by March 31, 2015. We then plan to document new processes and controls based on the risk assessment, update current controls where necessary and perform controls testing to evaluate effectiveness. (c) Attestation Report of Registered Public Accounting Firm This annual report does not include an...

  • Page 91
    ... services rendered by our principal accountant in connection with the annual audit, review of quarterly consolidated financial data, internationally required statutory audits, consents and assistance with review of documents filed with the SEC. The fee for 2013 includes the audit of Perion...

  • Page 92
    ... require that companies send an annual report to shareholders prior to the annual general meeting, we follow the generally accepted business practice for companies in Israel. Specifically, we file annual reports on Form 20-F, which contain financial statements audited by an independent accounting...

  • Page 93
    P AR T III ITEM 17. FINANCIAL STATEMENTS Not applicable. ITEM 18. FINANCIAL STATEMENTS The information required by this item is set forth in our current report on Form 6-K filed with the SEC on April 6, 2015, and is incorporated by reference herein. 87

  • Page 94
    ... Form of Standstill Agreement between Perion Network Ltd. and certain shareholders thereof, dated as of September 16, 2013. (3) Form of Registration Rights Undertaking of the Company dated January 2, 2014. (3) Perion 2003 Israeli Share Option Plan and U.S. Addendum. (2) Perion Equity Incentive Plan...

  • Page 95
    ...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...

  • Page 96
    ... 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 16 , 2015 89

  • Page 97
    ...Terms and Conditions of Series L Convertible Notes. Search Distribution Agreement by and between Microsoft Online, Inc. and Perion Network Ltd., dated July 29, 2014, as amended on September 15, 2014.* List of subsidiaries. Certification required...Omitted portions were filed separately with the SEC. 90

  • Page 98
    ... COMPANIES LAW, 5759-1999 A COMPANY LIMITED BY SHARES AMENDED AND RESTATED ARTICLES OF ASSOCIATION OF PERION NETWORK LTD. PRELIMINARY 1. In these Articles, unless the context otherwise requires: "Articles" shall mean the Articles of Association of the Company as shall be in force from time to time...

  • Page 99
    ..., 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 100
    ... 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, voting, return of...

  • Page 101
    ... action, such shares or fractional shares sufficient to preclude or remove fractional shareholdings; Notwithstanding Section 295 of the Law, making such arrangements for the sale or transfer of the fractional shares to such other shareholders of the Company at such times and at such price as the...

  • Page 102
    ... 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 103
    ...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 104
    ... or in part, extend the time fixed for payment thereof, or designate a different place of payment or person to whom payment is to be made. In the event of a call payable in installments, only one notice thereof need be given. If, pursuant to the terms of allotment or issue of a share or otherwise...

  • Page 105
    ..., at such rate and time(s) as may be approved by the 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 1 16 shall derogate from the right of the Board to make any call for payment before or after...

  • Page 106
    ... the date stated in the declaration shall be conclusive evidence of the facts therein stated against all persons claiming to be entitled to the share. 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...

  • Page 107
    ... 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 108
    ..., manager, receiver, liquidator or similar official appointed in bankruptcy or in connection with the reorganization of, or similar proceeding with respect to, a Shareholder or its properties, as being entitled to the shares registered in the name of such Shareholder. Any such receiver, liquidator...

  • Page 109
    ... the Shareholder and any other person or persons (naming such person or persons) in connection with the subject which is requested to be included in the agenda; and (d) a declaration that all the information that is required under the Law and any other applicable law to be provided to the Company in...

  • Page 110
    ... of any stock market on which the Company's shares are listed or included for quotation, prior notice of at least 21 days of any general meeting, specifying the place, date and hour of the meeting, the agenda, proposed resolutions and voting arrangements shall be given as, hereinafter provided, to...

  • Page 111
    ...quorum shall be at least two Shareholders present in person, or by proxy, holding in the aggregate at least 33 1/3% (thirty three percent and one-third of a percent) of the voting rights in the issued share capital of the Company. If within 30 minutes from the time appointed for the meeting a quorum...

  • Page 112
    ...power of the issued and outstanding share capital of the Company. VOTES OF SHAREHOLDERS 35. Voting Power Subject to the provisions of Article 1 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 113
    ... with applicable law) not less than the close of business on the business day preceding the time fixed for the meeting at which the person named in the instrument proposes to vote, or presented to the chairperson at such meeting. The Board may cause the Company to send, by mail or otherwise...

  • Page 114
    .... 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 115
    ..., and may secure or provide for the repayment of such sum or sums in such manner, at 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...

  • Page 116
    ..., shall think fit, and may invest any sum so set aside in any manner and from time to time deal with and vary such investments, and dispose of all or any part thereof, and employ any such reserve or any part thereof in the business of the Company without being bound to keep the same separate from...

  • Page 117
    ..., as well as the salaries and emoluments, of all such persons, and may require security in such cases and in such amounts as it thinks fit. The Board may from time to time, by power of attorney or otherwise, appoint any person, company, firm or body of persons to be the attorney or attorneys of the...

  • Page 118
    ... holding at least five percent of the voting rights in the issued share capital of the Company may nominate one or more persons for election as directors at a general meeting only if a written notice of such Shareholder's intent to make such nomination or nominations has been given to the...

  • Page 119
    ... by hand, post, facsimile or electronic mail to a director at the address, facsimile number or electronic mail address given by such director to the Company for such purpose. Any such notice shall be deemed duly received, if sent by post, three days following the day when any such notice was duly...

  • Page 120
    ... 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 121
    ... made upon such conditions and subject to such limitations and restrictions as the Board may, from time to time, determine. In addition, the Board may from time to time (subject to the provisions of any applicable law or the rules of any stock exchange upon which securities of the Company are listed...

  • Page 122
    ..., the Board may from time to time declare such dividends and cause the Company to pay such dividends. The Board shall have the full authority to determine the time for payment of such dividends, and the record date for determining the Shareholders entitled thereto, provided such date is not prior to...

  • Page 123
    ... the rights of all parties, and may vest any such cash, shares, debentures, debenture stock or specific assets in trustees upon such trusts for the persons entitled to the dividend or capitalized fund as may seem expedient to the Board. Where required, a proper contract shall be filed in accordance...

  • Page 124
    ... 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 125
    ..., authorities, rights and duties of the auditor(s) of the Company, shall be regulated by applicable law; provided, however , that in exercising authority to fix the remuneration of the auditor(s), the Shareholders in a general meeting may act (and in the absence of any action in connection therewith...

  • Page 126
    ... 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 127
    ... of the foregoing, such expenses will include a payment imposed on the Office Holder in favor of an injured party as set forth in Section 52(54)(a)(1)(a) of the Israeli Securities Law, and expenses that the Office Holder incurred in connection with a proceeding under Chapters H'3, H'4 or I'1 of the...

  • Page 128
    ... a court in proceedings filed against the Office Holder by the Company or in its name or by any other person or in a criminal charge on which the Office Holder was acquitted or in a criminal charge on which the Office Holder was convicted for an offense which did not require proof of criminal intent...

  • Page 129
    ...On September 23, 2014, Perion Network Ltd. (the "Company ") concluded a public offering in Israel of its Series L Convertible Bonds (the "Bonds") pursuant to a shelf offering report dated September 22, 2014, issued pursuant to the Company's Israeli shelf prospectus dated May 19, 2014, as amended on...

  • Page 130
    ... 23, 2014) from the date of issuance and until March 15, 2020. The ordinary shares issued upon conversion of the Bonds will be listed on the TASE and the NASDAQ Stock Market, to extent that the Company's ordinary shares are generally listed thereon at the time of conversion. The conversion price is...

  • Page 131
    ... THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS SEARCH DISTRIBUTION AGREEMENT THIS SEARCH DISTRIBUTION AGREEMENT ( "Agreement" ) is made effective as of January 1, 2015 (" Effective Date" ) by and between Microsoft Online, Inc. , a Nevada corporation (" Microsoft " ) and Perion Network...

  • Page 132
    ...: 4 Hanechoshet Street Tel Aviv 69701 Agreed and accepted: Microsoft Signature: /s/ Terri Beidle Name: Terri Beidle Title: Contract Execution (MOI) Date: 7/29/2014 Company Signature: /s/ Josef Mandelbaum, Yacov Kaufman Name: Josef Mandelbaum, Yacov Kaufman Title: CEO, Date: July 27, 2014 CFO -2-

  • Page 133
    ... unless mutually agreed otherwise by the Parties. "Company User Data" means User Data collected by Company. " Default Browser Search " means Users setting Company as the default internet search provider in a User's web browser and set as default search in the User's browser and actually Redirects to...

  • Page 134
    ... the Bing Search Service, or may be set to the Bing Site, during the Term. Exhibit 4 illustrates, without limitation, examples of how the Default Search Homepages will appear during the Term, unless mutually agreed otherwise by the Parties. "Execution Date" means the date this Agreement is executed...

  • Page 135
    ...from New Tabs, other applications or search access points permitted pursuant to Section 4.2.1 . below, and the applications, products and services listed in Exhibit 5 , as such Exhibit may be updated from time to time in accordance with this Agreement. [***] "Redirect" means redirection of a User to...

  • Page 136
    ... to the requirements set forth in Exhibit 3 . "User" means a person who initiates an internet search query through a Search Access Point set with the Tracking Codes, under this Agreement. "User Data" means information provided by or obtained from Users by accessing the Bing Search Service. Other...

  • Page 137
    ...Redirects from Search Access Points within the Company Network, pursuant to the terms of this Agreement. 3.1.2. Microsoft Brand Features . Microsoft grants Company and its Affiliates a limited, non-exclusive, nontransferable (except as provided herein), non-sublicensable, royalty-free license during...

  • Page 138
    ... Date under the Original Agreements) to the Bing Search Service; and (ii) enable Default Browser Search. Company may distribute each of the foregoing independently of each other to each respective user, in Company's discretion and through the distribution activities and entry points set forth...

  • Page 139
    ... provide any access to the Tracking Codes or Tracking Tags to a third party unless authorized in writing by Microsoft. 4.3.3 No Altering of Redirections . Company will have the right to [***]. Company undertakes that any Company User Data collected and used in connection therewith will, at all times...

  • Page 140
    ... may raise the issue to Company and the Parties will work together in good faith to resolve the issue. Except for offer screens existing as of the Effective Date ("Existing Offer Screens ") , which are deemed approved (versions of which are set forth on Exhibit 7 ), the Parties will work together to...

  • Page 141
    ...without limitation those companies operating the [***] branded search distribution services. (e) Company must not directly or indirectly offer the Redirect functionality to [***]. (f) During the Term, Microsoft will not actively solicit a commercial relationship to provide the Bing Search Service to...

  • Page 142
    ... provide Company with [***] reporting [***], reflecting the most recent data that [***]. As of the Execution Date, Microsoft has provided Company with the ability to generate up to [***], or such higher number as the Parties may agree, [***]. Without limiting the foregoing, Microsoft will provide...

  • Page 143
    ... will make all payments to Company in U.S. Dollars by wire transfer in accordance with the instructions set forth in Exhibit 9 or otherwise as instructed by Company in writing. All currency conversions made under this Agreement will be made using the applicable average daily exchange rate for...

  • Page 144
    5.4 Audit Rights. The Parties shall maintain, during the Term and for a period of one (1) year after termination or expiration of the Agreement (the " Audit Term "), records reasonably relating to payment rights or payment obligations under this Agreement ( "Business Records" ). Upon reasonable ...

  • Page 145
    ...to the other Party that: (i) all of its collection and use of User Data during or resulting from Users' use of Bing Search Service or Products, Default Search Homepages, Default Browser Search, or Search from New Tabs or any other Search Access Point will comply with all applicable federal and state...

  • Page 146
    ...'s representations, warranties, or obligations in the Agreement; (b) an infringement claim based on any intellectual property or other proprietary rights of a third party resulting from products or services provided by the indemnifying Party hereunder, except to the extent that such infringement...

  • Page 147
    ...'s request for equitable or provisional relief or to otherwise protect its intellectual property rights, or Confidential Information provided under this Agreement; or [***], no civil action, proceeding as set forth below with respect to any dispute, controversy or claim arising out of, or relating...

  • Page 148
    ... page to this Agreement, unless, by notice, a Party changes or supplements the addressee and addresses for giving notice. All notices are deemed given: (i) if given personally or by overnight courier, on the date personally delivered; or (ii) if given by first class mail, five days after placed in...

  • Page 149
    ... for the operation of the Bing Search Service. 12.11 Event of Force Majeure. Neither Party will be in violation of any of the requirements of this Agreement to the extent that its performance is impaired as a result of any delay, failure in performance, or interruption of service, resulting directly...

  • Page 150
    ... payment of all taxes arising in connection with the Services, including all sales, use or value added taxes (" Transaction Taxes ") and withholding taxes. Additionally, Microsoft shall pay to Company any Transaction Taxes that are required to be collected from Microsoft by Company under applicable...

  • Page 151
    ... identifies the location of the Microsoft Brand Features, Microsoft Trademark Usage, Microsoft Editorial Guidelines. Company acknowledges that the terms of the guidelines may change at any time at Microsoft's sole but reasonable discretion (provided that such changes shall apply consistently...

  • Page 152
    EXHIBIT 2 Company Brand Features and Trademark Usage Guidelines The Company's Brand and Trademark Usage Guidelines can be found here: http://uxguidelines.perion.com -22-

  • Page 153
    ... THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS EXHIBIT 3 Traffic Quality Requirements Company will, and will ensure that Company Partners comply with the following requirements (Traffic Quality Requirements) in connection with Company's distribution and use of the Bing Search Service...

  • Page 154
    ...OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS EXHIBIT 4 Default Search Homepage, Browser Search, Company Toolbar and Search From New Tabs Displays...

  • Page 155
    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH TH E 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 5 Approved Company Products [***] -25-

  • Page 156
    ... THIS EXHIBIT 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 6 COUNTRY LIST Platform Personal Computer Mobile Device -26-

  • Page 157
    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS EXHIBIT 7 Pre-Approved Offer Screens [***] -27-

  • Page 158
    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS EXHIBIT 8 [***] -28-

  • Page 159
    THIS EXHIBIT WAS OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS EXHIBIT 9 WIRE INSTRUCTIONS [***] -29-

  • Page 160
    ... of 29 July 2014 (the " Agreement "), is made as of 15 September 2014 (the " Amendment Effective Date ") between Microsoft Online Inc, a Nevada, USA corporation (" Microsoft ") and Perion Network Ltd., an Israeli corporation (" Company "). Microsoft and Company, for good and valuable consideration...

  • Page 161
    ... SECURITIES EXCHANGE ACT OF 1934; [***] DENOTES OMISSIONS EXHIBIT 6 COUNTRY LIST Platform Personal Computer Mobile Device This amendment is agreed: Microsoft Signature: /s/ Brandon Osborn Name: Brandon Osborn Title: Contract Execution (MOI) Date: 10/16/2014 Company Signature: /s/ Josef Mandelbaum...

  • Page 162
    Exhibit 8 1. 2. 3. IncrediMail Inc., a Delaware corporation Smilebox Inc., a Washington corporation ClientConnect Ltd., an Israeli company

  • Page 163
    ... and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: April 16 , 2015 /s/ Josef Mandelbaum Josef Mandelbaum, Chief Executive Officer

  • Page 164
    ... summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: April 16 , 2015 /s/ Yacov Kaufman Yacov Kaufman, Chief Financial Officer (b)

  • Page 165
    ... 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, 2014, 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 166
    ...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, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Yacov Kaufman, Chief Financial Officer of the Issuer, certify...