Incredimail 2014 Annual Report Download - 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 exception from registration under the Securities Act and are not subject to any
resale restrictions under U.S. law, except for the volume limitations under Rule 144 applicable to our affiliates. While the resale of such ordinary
shares are subject to the Contractual Lock-up scheduled to expire on January 2, 2016, such lock-
up restrictions could be relaxed earlier in certain
circumstances, as described in Item 10.C "Material Contracts—Agreements Relating to the ClientConnect Acquisition—Lock-
up
Arrangements." According to the terms of the Contractual Lock-
up, on July 3, 2014 approximately 5.48 million ordinary shares were released
from the Contractual Lock-
up, subject to an ongoing limitation on resales in excess of 33% of each applicable holder's released shares in any
consecutive four-week period. The Tax Lock-
up applicable to our three largest individual shareholders until December 31, 2015, as described in
Item 10.C "Material Contracts—Agreements Relating to the ClientConnect Acquisition—Tax-
related Restrictions," might be insufficient to
protect the market price of our ordinary shares. Pursuant to a registration rights undertaking described in Item 10.C "Material Contracts
—
Agreements Relating to the ClientConnect Acquisition—
Registration Rights Undertaking," on August 7, 2014, we completed the registration
with the Securities and Exchange Commission of 44.9 million of such ordinary shares, which may be resold by the holders thereof from time to
time, subject to the Contractual Lock-up and the Tax Lock-up.
As of April 13, 2015, there were outstanding an aggregate of 5,607,421 RSUs and options to purchase our ordinary shares. As these
securities vest, the holders thereof could sell the underlying shares without restrictions, except for the volume limitations under Rule 144
applicable to our affiliates.
In addition, in 2014, as part of the consideration for the acquisition of Grow Mobile, we issued 600,100 ordinary shares to the security
holders of Grow Mobile. During a period ending on June 30, 2016, we could be required to issue to the former Grow Mobile security holders up
to an additional $11.8 million in ordinary shares, contingent upon achieving certain revenue and profit milestones. Such shares generally will
become freely tradable under U.S. law six months following issuance.
In addition, on February 10, 2015, as part of the consideration for the acquisition of Make Me Reach, we issued 1,437,510 ordinary
shares to the security holders of Make Me Reach. In the subsequent 12 months, we could be required to issue to the former Make Me Reach
security holders an additional $0.4 million in ordinary shares. Such shares are generally not subject to any resale restrictions under U.S. law.
Finally, our Series L Bonds are convertible into an aggregate of approximately 4.27 million ordinary shares, at a conversion price of
ILS 33.605 per share (approximately $8.64 per share as of December 31, 2014). These shares were issued pursuant to an exception from
registration under the Securities Act and will not be subject to any resale restrictions under U.S. law, except for the volume limitations under
Rule 144 applicable to our affiliates.
Sales by shareholders of substantial amounts of our ordinary shares, or the perception that these sales may occur in the future, could
materially and adversely affect the market price of our ordinary shares. Furthermore, the market price of our ordinary shares could drop
significantly if our executive officers, directors, or certain large shareholders sell their shares, or are perceived by the market as intending to sell
them.
We do not intend to pay cash dividends.
Although we have paid cash dividends in the past, our current policy is to retain future earnings, if any, for funding growth. If we do not
pay dividends, you will generate a return 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.
Several shareholders may be able to control us.
As a result of the ClientConnect Acquisition, several shareholders of Conduit became significant shareholders of Perion, including three
shareholders that each beneficially own approximately 14% of our outstanding shares. See Item 7.A for more information. To our knowledge,
these shareholders are not party to a voting agreement with respect to our shares. However, should they decide to act together, they may have the
power to control the outcome of matters submitted for the vote of shareholders. In addition, such share ownership may make certain transactions
more difficult and result in delaying or preventing a change in control of us unless approved by them. Each of these three shareholders has
signed a standstill agreement with us providing that until the earlier of (i) the last business day preceding our 2015 annual shareholder meeting or
(ii) December 30, 2015, such shareholder will not vote in favor of any proposal to change the size or structure of our board of directors or to
shorten or terminate the term of service of any member of our board of directors, unless such proposal is recommended by our board of directors.
The standstill agreements will expire if any person (other than a Conduit shareholder as of September 16, 2013 or a person who is subject to
similar standstill provisions) becomes the beneficial owner of 24.9% or more of our outstanding shares or if there occurs a change in our board
of directors of the type described in the standstill agreements despite the compliance of the parties to the standstill agreements with the
provisions thereof.
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