Nova Ltd.
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(Translation of Registrant’s name into English)
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• |
Our business could be disrupted by catastrophic events, such as the outbreak of
COVID-19. |
• |
Increased information technology security threats and more sophisticated computer crime
could disrupt our business. |
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We are dependent on international sales, which expose us to foreign political and
economic risks that could impede our plans for expansion and growth. |
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Changes in Global trade policies and other factors beyond our control may adversely
impact our business, financial condition and results of operations. |
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Because of the technical nature of our business, our intellectual property is extremely
important to our business, and our inability to protect our intellectual property or our involvement in related litigation could harm
our competitive position. |
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We may incorporate open source technology in some of our software and products,
which may expose us to liability and have a material impact on our product development and sales. |
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We operate in an extremely competitive market, and if we fail to compete effectively
or to respond to the rapid technological changes, our revenues and market share will decline. |
• |
The ongoing consolidation in our industry may harm us if our competitors are able
to offer a broader range of products and greater customer support than we can offer. |
• |
The markets we target are cyclical and it is difficult to predict the length and
strength of any downturn or expansion period. |
• |
Our operations may be delayed or interrupted, and our business could suffer if we
violate environmental, safety and health, or ESH, regulations |
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Because most of our current sales are dependent on few specific product lines, factors
that adversely affect the pricing and demand for these product lines could reduce our sales. |
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We depend on a small number of large customers, and the loss of one or more of them
could significantly lower our revenues. |
• |
There can be no assurance that revenues from future products or product enhancements
will be sufficient to recover the development costs or to ensure the sale of related inventory. |
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New product lines that we may introduce in the future may contain defects, which
will require us to allocate time and financial resources to correct. |
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Our dependence on a single manufacturing facility per product line magnifies the
risk of an interruption in our production capabilities. |
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We may not be successful in our efforts to complete and integrate current and/or
future acquisitions, which could disrupt our current business activities and adversely affect our results of operations or future growth.
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We depend on a limited number of suppliers, and in some cases a sole supplier. Any disruption,
delay or termination of these supply channels may adversely affect our ability to manufacture our products and to deliver them to our
customers. |
• |
Our operations may be disrupted by loss of key personnel or failure to attract, recruit,
retain and develop qualified employees due to intense competition for highly skilled personnel. |
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Our lengthy sales cycle increases our exposure to customer delays in orders, which
may result in obsolete inventory and volatile quarterly revenues. |
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Political, economic, and military instability in Israel may impede our ability to
operate and harm our financial results. |
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Our convertible senior notes may impact our financial results, result in the dilution
of existing shareholders, create downward pressure on the price of our ordinary shares, and restrict our ability to take advantage of
future opportunities. We may not have the ability to raise the funds necessary to settle conversions, and the accounting method for
the Convertible Notes could adversely affect our reported financial condition and results |
• |
Our profit margin may be seriously harmed by currency fluctuations. |
• |
We participate in government programs under which we receive research and development
grants. Some of these programs impose restrictions on our ability to use the technologies developed under these programs. The reduction
or termination of these programs would increase our costs. |
• |
We experience quarterly fluctuations in our operating results, which may adversely
impact our share price. |
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Our investment portfolio may be adversely affected by market conditions and interest
rates. |
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instability in political or economic conditions, including but not limited to inflation,
recession, foreign currency exchange restrictions and devaluations, restrictive governmental controls on the movement and repatriation
of earnings and capital, and actual or anticipated military or political conflicts, particularly in emerging markets; Rising inflation
and elevated U.S. budget deficits and overall debt levels, including as a result of federal pandemic relief and stimulus legislation and/or
economic or market and supply chain conditions, can put upward pressure on interest rates and could be among the factors that could lead
to higher interest rates in the future. Higher interest rates could adversely affect our overall business or reduce our liquidity.
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intergovernmental conflicts or actions, including but not limited to armed conflict,
trade wars and acts of terrorism or war, including current war between Russia and the Ukraine; and |
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interruptions to the Company’s business with its largest customers, distributors
and suppliers resulting from but not limited to, strikes, and financial instabilities. For instance, trade restrictions, changes in tariffs
and import and export license requirements could adversely affect our ability to sell our products in the countries adopting or changing
those restrictions, tariffs or requirements. This could reduce our sales by a material amount. |
• |
pending patent applications will be approved; or |
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any patents will be broad enough to protect our technology, will provide us with
competitive advantages or will not be challenged or invalidated by third parties. We also cannot assure that others will not independently
develop similar products, duplicate our products or, if patents are issued to us, design around these patents. Furthermore, because patents
may afford less protection under foreign law than is available under U.S. law, we cannot assure that any foreign patents issued to us
will adequately protect our proprietary rights. |
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result in our loss of proprietary rights; |
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subject us to significant liabilities, including triple damages in some instances;
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require us to seek licenses from third parties, which licenses may not be available
on reasonable terms or at all; or |
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prevent us from selling our products. |
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the contribution and value our solutions bring to our customers; |
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our product innovation, quality and performance; |
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our global technical service and support; |
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the return on investment (ROI) of our equipment and its cost of ownership;
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the breadth of our product line; |
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our success in developing and marketing new products; and |
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the extendibility of our products. |
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our continuing need to invest in research and development; |
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our continuing need to market our new products; and |
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our extensive ongoing customer service and support requirements worldwide.
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Any acquisition may involve many risks, including the risks of: |
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diverting management’s
attention and other resources from our ongoing business concerns; |
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entering markets in which we have no direct prior experience; |
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improperly evaluating
new services, products and markets; |
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being unable to maintain uniform standards, controls, procedures and policies;
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failing to comply with governmental requirements pertaining to acquisitions of local
companies or assets by foreign entities; |
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being unable to
integrate new technologies or personnel; |
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incurring the expenses of any undisclosed or potential liabilities; and |
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the departure of key management and employees. |
Technology |
Product Line |
Key applications |
Product families | |
•
• •
• |
Broadband Spectrophotometry
Scatterometry
Spectral Reflectometry
Imaging and Image Processing
|
Dimensional Optical CD Integrated Metrology |
Critical Dimensions
Thin films
|
Nova i Platform
Nova 3090
Nova 2040
Nova ASTERA |
Dimensional Optical CD Stand-Alone Metrology |
Nova T-platform
Nova MMSR | |||
• |
Spectral Interferometry
|
Nova PRISM | ||
•
• |
X-Ray Photoelectron Spectroscopy
X-Ray Fluorescence |
X-Ray
Materials
Metrology |
Thin film
Composition
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Nova VERAFLEX |
•
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Secondary Ion Mass Spectrometry
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SIMS Materials
Metrology |
Composition depth-profiling
|
Nova METRION |
• |
Raman Spectroscopy |
Optical Materials
Metrology |
Strain
Crystallinity |
Nova ELIPSON |
• |
Computational Modeling for |
Physical modeling (Modeling Software Solutions) |
Nova Mars | |
Metrology Platforms | ||||
•
• |
Machine Learning
Advanced Algorithms |
Mathematical modeling algorithms (Software solutions) |
Nova FIT | |
•
• |
Big Data Analytics
High Power Computing
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Fleet Management
(Software solutions)
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Nova FM
Nova HPC
QED |
1. |
Dimensional Metrology |
2. |
Modeling and Software |
• |
Nova MARS - Nova MARS software package is a multi-channel metrology modeling engine
designed for the most advanced 3D structures in advanced process nodes of semiconductor manufacturing. It’s a complete modeling
solution for scatterometry and interferometry models’ development, material characterization and recipe optimization which is crucial
for facing increasing challenges in semiconductor metrology. The Nova MARS also injects physical and process related knowledge to solve
complex structures. |
• |
Nova FIT - Nova FIT modeling suite compliments traditional modeling of Optical Critical
Dimensions by machine learning and data driven algorithmic solutions. The algorithmic suite works in conjunction with Nova MARS physical
modeling engine and Nova’s fleet management solution to improve metrology performance, speed up time to solution and expand metrology
envelope for enriched process control. Nova FIT embeds advanced machine learning and big data architecture into optical modeling, enhancing
the way customers utilize metrology measurement data to tighten process windows, avoid process excursions and improve yield. |
• |
Nova’s Centralized Fleet Management and Control - Nova’s Fleet Management
and Performance Monitoring Center simplify the management and enhance the productivity of Nova tools in the fabrication site. The platform’s
ability to process and analyze large amounts of fleet and metrology data using advanced data analytic tools provides our customers with
intelligent and predictive insights on tool performance and process trends. |
• |
Nova HPC - The Nova HPC is a High-Performance Computing solution, which is designed
to accelerate Nova MARS and Nova FIT work processes. Nova HPC significantly expedites application development by accelerating library-building,
real time regression and recipe-setting processes. Its advanced computing hardware design enables optimization of Nova’s proprietary
algorithm performance, thus enabling the most calculation-demanding application development. |
3. |
Materials Metrology |
• |
VERAFLEX - Nova’s VERAFLEX combines enhanced XPS (X-Ray photoelectron spectroscopy)
capability with a unique low energy XRF (X-Ray fluorescence) channel to address logic and memory device fabrication challenges. This innovative
inline technology is a surface-sensitive quantitative spectroscopic technique that is used to determine the elemental composition of thin
films. |
• |
Nova METRION -
Nova METRION- targets process control of 3D logic and
memory semiconductor devices. The technology enables advanced materials profile measurements by bringing secondary ion mass spectrometry
(SIMS) into semiconductor production lines on both monitor and product wafer. The Nova METRION provides quantitative and actionable results
on depth profiling of compositional information with high-depth resolution and precision. |
• |
Nova ELIPSON - Nova ELIPSON utilizes Raman spectroscopy, a vibrational spectroscopy
technique, to detect multiple material properties such as strain, crystallinity, phases, grain size and composition. The combination of
a small spot and high speed of this non-destructive, optical method makes it a metrology of choice for both memory and logic segments.
|
2019 |
2020 |
2021 |
||||||||||
Total revenues from five largest customers |
67 |
% |
69 |
% |
70 |
% | ||||||
Range of revenues from five largest customers |
3%-27 |
% |
5%-26 |
% |
4%-31 |
% |
Environment |
Building a Sustainable Future
We strive to play our part in building a better future by protecting our environment and
making a positive impact on the planet for the next generations to inherit. |
Community Relations |
Lifting our Communities
We welcome members of the community into our family and provide them with the resources
required to promote equality, belonging and self-worth |
Diversity |
Expanding Cultural Diversity
We’re committed to building a diverse organization with a unique sense of belonging.
We strive to expand our multidisciplinary platform with diverse talents and inspire the various segments of society. |
Inclusion |
Empowering Every Voice
Our organization fosters an inclusive, open-minded and accepting environment. We respect
all individuals and ensure everyone is seen, heard, feel valued and respected. |
Ethics & Governance |
Championing our Employees
People at Nova always come first. We strive to create an ethical, safe and motivational
workplace for our employees, one in which they belong, while their privacy, interests and well-being are protected. |
• |
Communicating with business leaders across all Nova departments and sites on ESG
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Developing and coordinating the strategies which underpin the company's ESG objectives
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Conducting research into best practices to further ensure Nova’s positive
impact on local communities and the environment, and |
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Representing and raising public awareness regarding our ESG commitment |
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The company is at an ESG medium-high maturity level with Business Continuity Plan
indicating high level understanding of risk management and preparedness |
• |
The Company demonstrates wide range of Social and Governance activities, including
employees’ trainings on code of ethics, promoting gender equality, supporting of employees and suppliers during COVID19, putting
emphasis on product quality, and more. |
1. |
Environment: |
2. |
Social: |
• |
We set a goal to increase the number of our female recruits by 10 percent during
the year, a goal we have successfully achieved worldwide. As a result, the absolute number of female recruits in 2021 was doubled from
2020 and tripled from 2019. |
• |
We implemented inclusive language across several companywide documents and procedures
|
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We conducted training to our leadership and HR teams on DE&I challenges and
opportunities |
• |
We established employee resource groups devoted to the issue of DE&I |
• |
We nominated a Disability Services and Compliance Officer to provide care and support
for individuals with disabilities and assist them to integrate into the organization, and |
• |
We adjusted Nova’s website to the latest accessibility requirements and standards.
|
• |
Supporting youth at risk - through working with our partners, we have reached approximately
500 youths around Israel, supporting them with a unique program that runs “Night Vans" equipped with professional counsels who meet
youths and provides support to the youths on their “own territory", helping them integrate into society. |
• |
Keeping our communities physically safe from harm - we have supported the addition
of a new mobile bomb shelter in the heavily bombarded City of Ashkelon in Israel. |
• |
We offered Nova employees opportunities to volunteer and contribute to supporting youth via private tutoring
in English and STEM (science, technology, engineering and mathematics) professions or other endeavors and topics which are close to their
hearts and can help and inspire the youth. |
• |
We have strategically partnered with organizations in Taiwan and the U.S., that
are best connected to the local communities and can help us promote aspects of STEM education among children and youth and empowering
women. |
3. |
Governance: |
• |
Board Practices: |
• |
Our board of directors consists of seven (7) members, of whom six (6) are independent and three (3) are women. In 2021, 26 meetings
of our board of directors and its committees were held, with the directors’ attendance rate being higher than 90%. |
• |
The Audit Committee of our board of directors
currently consists of four (4) members, all independent directors, three (3) of whom are women and two (2) of whom hold deep financial
expertise. The primary function of the committee is to assist the board of directors in fulfilling its oversight responsibilities by reviewing
financial information, internal controls and the audit process. In addition, the committee is responsible for oversight of the work of
our independent auditors, as well as the implementation of our internal enforcement plan and governance policies. The committee meets
at regularly scheduled quarterly meetings. |
• |
The function of our Nominating Committee
of the board of directors’ includes responsibility for identifying individuals qualified to become board members and recommending
that the board of directors consider the director nominees for election at the general meeting of shareholders. The Committee currently
consists of three (3) members, two (2) of whom are independent directors. |
• |
The committee overseeing our pay practices is the Compensation Committee
of our board of directors, whose function includes assisting the board of directors in discharging its responsibilities relating to compensation
of the Company’s officers, directors and executives and the overall compensation programs and reviewing and approving, or if required
by law, approving, and recommending for approval by the board of directors, grants and awards under the Company’s equity incentive
plans. The primary objective of the committee is to oversee the development and implementation of the compensation policies and plans
that are appropriate for the Company in light of all relevant circumstances, and which provide incentives that fit the Company’s
long-term strategic plans and are consistent with the culture of the Company and the overall goal of enhancing shareholder’s value.
The Committee currently consists of four (4) members, all independent directors and two (2) of whom are women. |
• |
Compensation Policy: |
• |
Shareholder Control & Ownership: |
• |
Ethical Business Conduct: |
• |
Code of Conduct. All of our directors,
officers, service providers and employees must conduct themselves in accordance with our Code and seek to avoid even the appearance of
improper behavior. The code is intended to promote the following:Compliance with Laws, Regulations and Company Policies; Avoiding conflict
of interests and personal exploitation of corporate opportunities; Competition and Fair Dealing, handling of business inducements, and
preventing anti-trust violations; Prevention of Discrimination and Harassment and promoting healthy and safe work environment; Preserving
complete and accurate business information and records and engaging in an accurate accounting practices, and confidentiality of the company’s
information; handling of public fillings and Protection and Proper Use of Company Assets; The Code sets principals and standards for:
Insider trading policies, Anti-fraud, Anti-corruption policies, Whistleblower Policy. The Code is available on our employees portal, and
each employee must familiarize with upon joining the company, and on an annual basis. The code is also posted on Nova’s website.
Employees are clearly encouraged to report violations to the compliance team, senior management, or other officers as deemed appropriate.
If matters concern accounting or auditing issues, employees can directly report to the Audit committee of the board of directors. Whistleblowers
who make reports in good faith of suspected violations are protected from retaliation such as demotion or termination of employment because
of reporting. Any Employee who wants to bring an ethical issue to light, can also write an anonymous complaint to the Corporate Secretary.
|
• |
Insider Trading Policy. Nova has adopted
an Insider Trading Policy that all employees must be familiar with and adhere to. Officers and employees may not trade in Nova’s
securities while in the possession of “material non-public information” concerning Nova, its customers and suppliers, or during
any quarterly or special blackout periods. Officers, Employees, and their immediate family members may trade in Nova’s securities
only outside of the clearly defined blackout periods. A failure to comply with the Policy could result in a serious violation of the securities
laws and may involve both civil and criminal penalties. |
• |
Anti-Fraud and Anti Bribery Policies.
We are committed to ethical behavior and values. It is amongst our first priorities to establish a corporate and working culture that
enhances the value of ethics and promote the individual responsibility as well. To this effect, the Company has established an Anti-Fraud
and Anti-Bribery Policies and Guidelines and a Complaint Procedure, which set the highest standards for personnel conduct related to ethical
behavior and alertness. The cornerstone in preventing fraud is the creation of an environment that fosters morality, integrity and business
conduct. Our Anti-Fraud policy outlines the responsibilities of all the involved parties with respect to fraud prevention, the actions
to be taken if fraud is suspected and the mechanism of verifying suspicion of fraud, the reporting process and the recovery action plan.
Our Anti-Bribery sets forth rules governing the giving, offering or receiving of anything of value to or from any non-Nova personnel with
the intention of obtaining, securing, promoting or retaining any business activity. The purpose of the policy is to make sure that Nova
and its employees do not violate applicable corruption laws and to protect the reputation of the Company. In addition to the anti-fraud
policy, in 2021, we implemented an anti-fraud steering committee and forum which oversees and identifies fraud risks across the Company,
and implemented an anti-fraud program which is tested and verified on a yearly basis. |
• |
Accounting and Tax Transparency:
Our approach to global taxation for all types of taxes is to consistently comply with
legal, regulatory, and internal control requirements as well as support our business and commercial strategy. We are committed to adhere
to all applicable global tax laws, filings, and reporting disclosures. We account for tax risks in accordance with the applicable accounting
standards and have internal controls in place over our tax reporting processes. Our transfer pricing policies are aligned with the guidelines
of the Organization of Economic Co-operation and Development (OECD), as well as with all of the jurisdictions in which we operate. We
apply the arm’s length principle when conducting intercompany transactions. We have an established network of internal and external
tax and finance professionals who are knowledgeable in various direct and indirect taxes and who monitor ongoing tax law and business
changes, so that we may adapt processes and deliverables accordingly. This network, along with our framework regarding internal policies
and controls, seeks to ensure the complete and accurate communication of tax positions and risks, through established governance and reporting
processes to our management and board of directors. Further details on our accounting and tax practices can be found in Items 10.E of
this Annual Report. |
• |
Considering the relevance of social development goals for our ESG overall strategy, as
well as the wider community in which we operate |
• |
Further exploring how a broader ESG approach can underpin good practice for our
company and its impact |
• |
Documentation, standardization and publication of company policies |
• |
Setting KPI’s and goals for the following years to assess company’s
progress |
• |
Further investigating ESG priorities such as safety, belonging of our employees,
sustainability development and collaborating with the local community. |
Name of Subsidiary | Country of Incorporation |
Nova Measuring Instruments, Inc. |
Delaware, U.S. |
Nova Measuring Instruments K.K. |
Japan |
Nova Measuring Instruments Taiwan Ltd. |
Taiwan |
Nova Measuring Instruments Korea Ltd. |
Korea |
Nova Measuring Instruments GmbH |
Germany |
Nova Measuring Instruments (Shanghai) Co.,Ltd |
China |
Name of Subsidiary
|
Country
of Incorporation |
Ownership |
ancosys GmbH |
Germany |
100% owned by Nova Measuring Instruments GmbH |
ancosys Korea LLC |
Korea |
100% owned by ancosys GmbH |
ancosys Instrument Taiwan Ltd |
Taiwan |
100% owned by ancosys GmbH |
ancosys Inc. |
Delaware |
100% owned by ancosys GmbH |
• |
Significant business growth |
• |
Meaningful growth in both Products and Service sales |
• |
Growth in systems’ production and deliveries by all our global sites.
|
• |
Diversified customer mix, including several major leading customers. |
• |
Further market adoption of Nova’s advanced portfolio by wafer fabrication
customers: |
o |
Hardware and Software coupling |
o |
Unique Optical and X-Ray solutions |
o |
Holistic offering, including Integrated and Standalone metrology |
o |
Materials and Dimensions solutions |
• |
Continuous proliferation of Nova’s recent optical solutions – PRISM
and ELIPSON. |
• |
Continued investments in research and development programs aimed to generate new
organic growth engines for advanced process control. |
• |
Introduction of Nova METRION®. Nova METRION® targets process control of
3D logic and memory semiconductor devices. The technology enables advanced materials profile measurements by bringing secondary ion mass
spectrometry (SIMS) into semiconductor production lines and provides quantitative and actionable results on depth profiling of compositional
information with high-depth resolution and precision. |
• |
Introduction of several new generations of Dimensional and Materials metrology platforms.
Introduction of Machine Learning solutions (NovaFIT) to enhance metrology measurements and to complement the traditional Physical modeling
(NovaMARS). |
• |
Deepening collaboration with several research institutes and customers' development
centers, utilizing a variety of our products, leading to our positioning as a long-term technology development and high-volume manufacturing
partner. |
• |
The acquisition of ancosys, a privately held company headquartered in Germany, closed
in January 2022. ancosys is a leading provider of chemical analysis and metrology solutions for advanced semiconductor manufacturing.
|
• |
ESG (Environment, Social and Governance) – during 2021 the company has built
& embraced an enhanced Corporate Social Responsibility Strategy. We are determined as a company to play a vital role in creating a
world that values equality, safety and environmental health for the benefit of future generations to come. We are committed to proactively
invest in embedding social responsibility as part of our culture and business management to support our values. |
• |
Investing in the organization development to enhance the human capital and the strength
of the global teams based on our values and culture. |
• |
Continue to strengthen our competitive and market position, through unique innovation
and technical leadership. |
• |
Continue executing our innovation and development plans for meeting future industry
challenges. |
• |
Expand our total available markets by addressing new emerging metrology applications
and market segments, through solutions delivery to the challenging buildup of advanced Logic technology nodes, memory scaled VNAND nodes
and DRAM scaled devices at leading edge customers. |
• |
Continue delivery of advanced metrology systems to the trailing edge technology
nodes to support new applications ramp up. |
• |
Executing our plans to meet Nova’s long-term strategy, which defines the Company’s
growth path in revenue, customers, technology and financial performance, to support our profitable growth. |
• |
Continue leading the emerging metrology markets with innovative and disruptive solutions.
|
• |
Continue the collaborations and joint research programs with leading semiconductor
manufacturers and relevant leading research institutes. |
• |
Continue our products innovation and diversification through several new product
introductions to extend the Company’s market leadership and total available market. |
• |
Continue our plans to generate revenues and competitive edge through SW algorithm
and Machine Learning solutions. |
• |
Strengthening the partnership with our customers and build a “Customer Centric”
approach to accommodate and deliver customers’ requirements along the semiconductor lifecycle. |
• |
Build an extensive roadmap for ancosys' chemical metrology products in order to
enhance Nova's existing product's offering. |
• |
Create synergy between Nova and ancosys' technologies towards a combined offering
for advanced applications, which require dimensional, material and chemical metrology. |
• |
Grow our clean room and production facilities to meet the semiconductor demand cycle
around the globe. |
• |
Elevate our investment in ESG programs in order to promote social responsibilities
programs through our five pillars program (for details refer to Environmental, Social and Governance (ESG) chapter in Item
4.B in this Annual Report). |
• |
Meeting strategic, development, operational and delivery targets in light of the
COVID-19 global pandemic and the various influences across the world. |
• |
Overcoming supply chain challenges in light of shortage, demand and cost.
|
• |
On time delivery of the required solutions to meet the current and future needs
of our existing and new customers. |
• |
Correctly understanding the market trends and competitive landscape to ensure our
products retain proper differentiation to win customer confidence. |
• |
Creating aggressive, innovative and competitive roadmap deliverables at reasonable
costs in order to properly control expenses. |
• |
Identifying the metrology evolution roadmap for future industry needs to meet process
control requirements and lead the market. |
• |
Achieving long-term growth targets while supporting extensive growth in all our
activities. |
• |
Building a solid global infrastructure to accommodate further growth. |
• |
Optical metrology has become an enabler for the entire industry over the last few
years, sometimes on the account of other metrology capabilities. |
• |
Material Metrology has been widely adopted by leading memory and logic/foundry customers.
|
• |
Nova’s unique metrology portfolio, combining Optical and X-Ray metrology for
both dimensions and materials, provide the most advanced solution, combining the best innovative metrology capabilities with the best
reliability and return on investment. |
• |
The ability to provide a unique and differentiated technology portfolio sets Nova
apart from the competition and adding a competitive edge to our offering. |
• |
Our solutions are well accepted by leading customers that allow us to gain more
market share with additional process steps and new applications. |
• |
Our ability to closely team with our customers allows us to predict the industry
evolution and process control challenges and by that introduce innovative and advanced metrology solutions to solve industry needs.
|
• |
Our diversified portfolio, which is a result of continuous investment in research
and development, is becoming more attractive to our customers. |
• |
Extending our solutions’ base to include hardware and software elements in
a coupled offering. |
• |
Successful track record in completing and integrating inorganic products , as a
result of M&A, which allows us to diversify our product offering to expand our addressable markets. |
• |
Well controlled P&L and operating model to support our profitable growth and
operational resiliency. |
2019 |
2020 |
2021 |
||||||||||
Revenues from product |
74.3 |
% |
77.7 |
% |
81.0 |
% | ||||||
Revenues from services |
25.7 |
% |
22.3 |
% |
19.0 |
% | ||||||
Total revenues |
100.0 |
% |
100.0 |
% |
100.0 |
% | ||||||
Cost of revenues products |
29.9 |
% |
29.2 |
% |
31.1 |
% | ||||||
Cost of revenues services |
15.9 |
% |
14.1 |
% |
11.9 |
% | ||||||
Total cost of revenues |
45.8 |
% |
43.2 |
% |
43.0 |
% | ||||||
Gross profit |
54.2 |
% |
56.8 |
% |
57.0 |
% | ||||||
Operating expenses: |
||||||||||||
Research and development, net |
19.8 |
% |
19.7 |
% |
15.8 |
% | ||||||
Sales and marketing |
12.5 |
% |
10.9 |
% |
9.5 |
% | ||||||
General and administrative |
4.5 |
% |
4.6 |
% |
4.2 |
% | ||||||
Amortization of intangible assets |
1.2 |
% |
0.9 |
% |
0.5 |
% | ||||||
Total operating expenses |
38.0 |
% |
36.1 |
% |
30.0 |
% | ||||||
Operating income |
16.2 |
% |
20.6 |
% |
27.0 |
% | ||||||
Financial income (expenses), net |
1.4 |
% |
0.3 |
% |
(0.8 |
)% | ||||||
Income before income taxes |
17.6 |
% |
21.0 |
% |
26.2 |
% | ||||||
Income tax expenses |
1.9 |
% |
3.2 |
% |
3.8 |
% | ||||||
Net income |
15.6 |
% |
17.8 |
% |
22.4 |
% |
2019 |
2020 |
2021 |
||||||||||||||||||||||
Domestic |
Abroad |
Domestic |
Abroad |
Domestic |
Abroad |
|||||||||||||||||||
Electronic equipment |
3,975 |
418 |
2,742 |
431 |
2,356 |
1,134 |
||||||||||||||||||
Office furniture and equipment |
2,192 |
604 |
28 |
510 |
22 |
283 |
||||||||||||||||||
Leasehold improvements |
11,231 |
2,849 |
1,865 |
867 |
371 |
650 |
||||||||||||||||||
Total |
17,398 |
3,871 |
4,635 |
1,808 |
2,749 |
2,067 |
• |
Local Manufacturing Obligation.
The terms of the grants under the Innovation Law require that we manufacture the products developed with these grants in Israel. Under
the regulations promulgated under the Innovation Law, the products may be manufactured outside Israel by us or by another entity only
if prior approval is received from the IIA (such approval is not required for the transfer of less than 10% of the manufacturing capacity
in the aggregate, as declared to be manufactured out of Israel in the applications for funding, in which case a notice should be provided
to the IIA). This approval may be given only if we abide by all the provisions of the Innovation Law and related regulations. Ordinarily,
as a condition to obtaining approval to manufacture outside Israel, we would be required to pay royalties at an increased rate (usually
1% in addition to the standard rate and increased royalties cap between 120% and 300% of the grants, depending on the manufacturing volume
that is performed outside Israel). We note that a company also has the option of declaring in its IIA grant application an intention to
exercise a portion of the manufacturing capacity abroad, thus, if the grant application is approved by IIA, such company will avoid the
need to obtain additional approvals and pay the increased royalties cap for manufacturing outside of Israel at portions which were mentioned
in such approved grant applications. |
• |
Know-How transfer limitation. The
Innovation Law restricts the ability to transfer know-how funded by the IIA outside of Israel, including by way of a license to a non-Israeli
entity. Transfer of IIA funded know-how outside of Israel requires prior approval of the IIA. The IIA approval to transfer know-how created,
in whole or in part, in connection with an IIA-funded project to third party outside Israel is subject to payment of a redemption fee
to the IIA calculated according to a formula provided under the Innovation Law that is based, in general, on the ratio between the aggregate
IIA grants to the company’s aggregate investments in the project that was funded by these IIA grants, multiplied by the transaction
consideration, taking into account depreciation mechanism, and less royalties already
paid to the IIA. The regulations promulgated under the Innovation Law establish a maximum payment of the redemption fee paid to
the IIA under the above mentioned formulas and differentiates between two situations: (i) in the event that the company sells its IIA
funded know-how, in whole or in part, or is sold as part of an M&A transaction, and subsequently ceases to conduct business in Israel,
the maximum redemption fee under the above mentioned formulas will be no more than six times the total grants received (plus accrued interest)
for development of the know-how being transferred, or the entire amount received from the IIA, as applicable; (ii) in the event that following
the transactions described above (i.e., asset sale of IIA funded know-how or transfer as part of an M&A transaction) the company undertakes
to continue its R&D activity in Israel (for at least three years following such transfer and maintain at least 75% of its R&D
staff employees it had for the six months before the know-how was transferred, while keeping the
same scope of employment for such R&D staff), then the company is eligible for a reduced cap of the redemption fee of no more
than three times the amounts received (plus accrued interest) for the applicable know-how being transferred, or the entire amount received
from the IIA, as applicable. No assurance can be given that approval to any such transfer, if requested, will be granted and what will
be the amount of the redemption fee payable. |
• |
Licensing arrangements. Under the
terms of the Innovation Law, licensing know how developed under the IIA programs outside of Israel, requires prior consent of IIA and
payment of license fees to IIA, calculated in accordance with the licensing rules promulgated under the Innovation Law. The payment of
the license fees does not discharge the company from the obligation to pay royalties or other payments due to IIA in accordance with Innovation
Law. |
Name |
Age |
Position |
Michael Brunstein
(3) |
78 |
Chairman of the Board of Directors
|
Avi Cohen
(1)(2) |
68 |
Director |
Raanan Cohen (2)(3) |
66 |
Director |
Zehava Simon (1)(2) |
63 |
Director (External Director until May 2018)
|
Dafna Gruber (1)(3) |
56 |
Director (External Director until May 2018)
|
Sarit Sagiv (1)(2) |
53 |
Director |
Eitan Oppenhaim
|
56 |
Director, President and Chief Executive Officer |
Dror David
|
52 |
Chief Financial Officer |
Shay Wolfling
|
50 |
Chief Technology Officer |
Adrian S. Wilson |
50 |
President of US subsidiary & General
Manager Material Metrology Division |
Effi Aboody |
51 |
Corporate VP and General Manager Dimensional
Metrology Division |
(1) |
Member of the audit committee |
(2) |
Member of the compensation committee |
(3) |
Member of the Nominating committee |
As of December 31, |
2019(*)
|
2020(*)
|
2021(*)
|
|||||||||
Total Personnel |
646 |
713 |
819 |
|||||||||
Located in Israel |
349 |
385 |
428 |
|||||||||
Located abroad |
297 |
328 |
391 |
|||||||||
In operations |
108 |
129 |
176 |
|||||||||
In research and development |
251 |
300 |
328 |
|||||||||
In global business |
247 |
263 |
240 |
|||||||||
In general and administration |
40 |
49 |
75 |
Name |
Number of Ordinary
Shares Beneficially
Owned |
Percentage of Ordinary
Shares
Beneficially Owned |
||||||
Wasatch Advisors Inc.
(1) |
2,651,946 |
9.28 |
% | |||||
Migdal Insurance & Financial Holdings Ltd.
(2) |
1,939,093 |
6.78 |
% | |||||
Harel Insurance Investments & Financial Services Ltd.
(3) |
1,890,099 |
6.61 |
% | |||||
Menora Mivtachim Holdings Ltd.
(4) |
1,730,937 |
6.06 |
% | |||||
FMR LLC (5)
|
1,514,015 |
5.30 |
% |
(1) |
The information is based upon Amendment
no. 2 Schedule 13G filed with the SEC by Wasatch Advisors Inc. on February 10, 2022 regarding holdings as of December 31, 2021.
|
(2) |
The information is based upon Schedule 13G filed with the
SEC by Migdal Insurance & Financial Holdings Ltd. on February 2, 2022 regarding
holdings as of December 31, 2021. |
(3) |
The information is based upon Amendment no. 8 to Schedule
13G filed with the SEC by Harel Insurance
Investments & Financial Services Ltd. on January 31, 2022 regarding
holdings as of December 31, 2021. |
(4) |
The information is based upon Amendment no. 4 to Schedule
13G filed with the SEC by Menora Mivtachim Holdings Ltd., Menora Mivtachim Pensions and Gemel Ltd., Menora Mivtahim Insurance Ltd., Menora
Mivtachim Vehistadrut Hamehandesim Nihul Kupot Gemel Ltd. and Shomera Insurance Company Ltd. on February 10, 2022 regarding
holdings as of December 31, 2021. |
(5) |
The information is based upon Schedule 13G filed with the
SEC by FMR LLC, its subsidiaries and Abigail P. Johnson on February 10, 2022 regarding
holdings as of December 31, 2021. |
Tax Year |
Development Region “A” |
Other Areas within Israel |
2011-2012 |
10% |
15% |
2013 |
7% |
12.5% |
2014-2016 |
9% |
16% |
2017 onwards |
7.5% |
16% |
• |
An individual citizen or resident of the U.S. (as determined under U.S. federal
income tax rules); |
• |
a corporation (or another entity taxable as a corporation for U.S. federal income
tax purposes) created or organized in or under the laws of the U.S., any state thereof, or the District of Columbia; |
• |
an estate, the income of which is subject to U.S. federal income taxation regardless
of its source; or |
• |
a trust, if (a) a U.S. court is able to exercise primary supervision over its administration
and one or more U.S. persons have the authority to control all of its substantial decisions; or (b) the trust has in effect a valid election
in effect under applicable Treasury Regulations (as defined below) to be treated as a United States person. |
• |
persons who own, directly, indirectly or constructively, 10% or more (by voting
power or value) of our outstanding voting shares; |
• |
persons who hold the ordinary shares as part of a hedging, straddle or conversion
transaction; |
• |
persons whose functional currency is not the U.S. dollar; |
• |
persons who acquire their ordinary shares in a compensatory transaction; |
• |
broker-dealers; |
• |
insurance companies; |
• |
regulated investment companies; |
• |
real estate investment companies; |
• |
qualified retirement plans, individual retirement accounts and other tax-deferred
accounts; |
• |
traders who elect to mark-to-market their securities; |
• |
tax-exempt organizations; |
• |
banks or other financial institutions; |
• |
persons subject to special tax accounting rules as a result of any item of gross
income with respect to ordinary shares being taken into account in an applicable financial statement; |
• |
U.S. expatriates and certain former citizens and long-term residents of the United
States; and |
• |
persons subject to the alternative minimum tax. |
• |
fails to furnish its taxpayer identification number, or TIN, which, for an individual,
is ordinarily his or her social security number; |
• |
furnishes an incorrect TIN; |
• |
is notified by the IRS that it is subject to backup withholding because it has previously
failed to properly report payments of interest or dividends; or |
• |
fails to certify, under penalties of perjury, that it has furnished a correct TIN
and that the IRS has not notified the U.S. holder that it is subject to backup withholding. |
• |
pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect our transactions and asset dispositions; |
• |
provide reasonable assurance that transactions are recorded as necessary to permit
the preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures
are being made only in accordance with authorizations of our management and directors; and |
• |
provide reasonable assurance regarding the prevention or timely detection of unauthorized
acquisition, use or disposition of assets that could have a material effect on our financial statements. |
2020 |
2021 |
|||||||
Audit Fees |
586,000 |
570,000 |
||||||
Tax Fees |
89,000 |
64,000 |
||||||
Other Fees |
125,000 |
314,000 |
||||||
Total |
800,000 |
948,000 |
|
Page
|
F-3 - F-5
|
|
F-6
|
|
F-7
|
|
F-8
|
|
F-9
|
|
F-10
|
|
F-11 - F-35
|
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
F - 3
|
|
Valuation of excess and obsolete inventory reserve
|
|
|
|
Description of the Matter
|
|
The Company’s inventories totaled $78.7 million as of December 31, 2021. As described in Note 2i to the consolidated financial statements, the Company assesses the value of inventories, including raw materials, service inventory, work-in-process and finished goods, in each reporting period, and values its inventories at the lower of cost or net realizable value. Reserves for potential excess and obsolete inventory are made based on management's analysis of inventory levels, future sales forecasts, the expected consumption of service spare parts, and market conditions.
Auditing management's estimates for valuation of inventories involved subjective auditor judgment due to the significant assumptions made by management about the future salability of the inventories. These assumptions include the assessment, by inventory category (finished goods, work-in-process, service inventory and raw materials), of future usage and market demand for the Company's products.
|
|
|
|
How We Addressed the Matter in Our Audit
|
|
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's excess and obsolete inventory reserve process, including management's assessment of the underlying assumptions and data.
Our substantive audit procedures included, among others, evaluating the significant assumptions stated above and the accuracy and completeness of the underlying data management used to value excess and obsolete inventory. We compared the cost of on-hand inventories to historical sales and evaluated adjustments to sales forecasts for specific product considerations, such as technological changes or alternative uses. We also assessed the historical accuracy of management's estimates and performed sensitivity analyses over the significant assumptions to evaluate the changes in the obsolete and excess inventory estimates that would result from changes in the underlying assumptions.
|
/s/ KOST FORER GABBAY & KASIERER
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
|
|
||||||
Short-term interest-bearing bank deposits
|
|
|
||||||
Marketable securities (Note 3)
|
|
|
||||||
Trade accounts receivable, net of allowance of $
|
|
|
||||||
Inventories (Note 4)
|
|
|
||||||
Other current assets (Note 5)
|
|
|
||||||
Total current assets
|
|
|
||||||
Non-current assets
|
||||||||
Marketable securities (Note 3)
|
|
|
||||||
Interest-bearing bank deposits
|
|
|
||||||
Restricted interest-bearing bank deposits
|
|
|
||||||
Deferred tax assets (Note 14)
|
|
|
||||||
Severance pay funds (Note 9)
|
|
|
||||||
Operating lease right-of-use assets (Note 11)
|
|
|
||||||
Property and equipment, net (Note 6)
|
|
|
||||||
Intangible assets, net (Note 7)
|
|
|
||||||
Goodwill
|
|
|
||||||
Other long-term assets
|
|
|
||||||
Total non-current assets
|
|
|
||||||
TOTAL ASSETS
|
|
|
||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Convertible senior notes, net (Note 10)
|
|
|
||||||
Trade accounts payable
|
|
|
||||||
Deferred revenues
|
|
|
||||||
Operating lease current liabilities (Note 11)
|
|
|
||||||
Other current liabilities (Note 8)
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Non-Current liabilities
|
||||||||
Convertible senior notes, net (Note 10)
|
|
|
||||||
Accrued severance pay (Note 9)
|
|
|
||||||
Operating lease long-term liabilities (Note 11)
|
|
|
||||||
Other long-term liabilities
|
|
|
||||||
Total non-current liabilities
|
|
|
||||||
Commitments and contingencies (Note 12)
|
||||||||
TOTAL LIABILITIES
|
|
|
||||||
SHAREHOLDERS’ EQUITY (Note 13)
|
||||||||
Ordinary shares (Note 1):
December 31, 2021, no par value - Authorized
December 31, 2020, NIS
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated other comprehensive income (loss)
|
(
|
)
|
|
|||||
Retained earnings
|
|
|
||||||
Total shareholders’ equity
|
|
|
||||||
Total liabilities and shareholders’ equity
|
|
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Revenues:
|
||||||||||||
Products
|
|
|
|
|||||||||
Services
|
|
|
|
|||||||||
Total revenues
|
|
|
|
|||||||||
Cost of revenues:
|
||||||||||||
Products
|
|
|
|
|||||||||
Services
|
|
|
|
|||||||||
Total cost of revenues
|
|
|
|
|||||||||
Gross profit
|
|
|
|
|||||||||
Operating expenses:
|
||||||||||||
Research and development, net (Note 2R)
|
|
|
|
|||||||||
Sales and marketing
|
|
|
|
|||||||||
General and administrative
|
|
|
|
|||||||||
Amortization of intangible assets (Note 7)
|
|
|
|
|||||||||
Total operating expenses
|
|
|
|
|||||||||
Operating income
|
|
|
|
|||||||||
Financial income (expense), net (Note 17)
|
(
|
)
|
|
|
||||||||
Income before taxes on income
|
|
|
|
|||||||||
Income tax expenses
|
|
|
|
|||||||||
Net income
|
|
|
|
|||||||||
Earnings per share:
|
||||||||||||
Basic
|
|
|
|
|||||||||
Diluted
|
|
|
|
|||||||||
Shares used in calculation of earnings per share:
|
||||||||||||
Basic
|
|
|
|
|||||||||
Diluted
|
|
|
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Net income
|
|
|
|
|||||||||
Other comprehensive income, net of tax:
|
||||||||||||
Available-for-sale investments (Note 3):
|
||||||||||||
Unrealized gain (loss) on available-for-sale marketable securities, net
|
(
|
)
|
|
|
||||||||
Cash flow hedges (Note 16):
|
||||||||||||
Unrealized gain from cash flow hedges
|
|
|
|
|||||||||
Less: reclassification adjustment for net loss included in net income
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Other comprehensive income (loss)
|
(
|
)
|
|
|
||||||||
Total comprehensive income
|
|
|
|
|
|
Ordinary Shares
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated Other
Comprehensive Income (Loss)
|
|
|
Retained
Earnings
|
|
|
Total Shareholders'
Equity
|
|
|||||||||
|
|
Number
|
|
|
Amount
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(
|
)
|
|
$
|
|
|
|
$
|
|
|
Issuance of shares upon exercise of options
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Issuance of shares upon vesting of RSU
|
|
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share repurchase at cost
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
Other comprehensive income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares upon exercise of options
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares upon vesting of RSU
|
|
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity component of convertible senior notes, net of issuance costs and tax
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Share repurchase at cost
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
Other comprehensive income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Issuance of shares upon exercise of options
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares upon vesting of RSU
|
|
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination of the par value of the Ordinary shares (Note 1)
|
-
|
(
|
) |
|
|
|
|
|||||||||||||||||
Other comprehensive income (loss)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
(
|
)
|
Net income
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|||||||||
|
|
2 0 2 1
|
|
|
2 0 2 0
|
|
|
2 0 1 9
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of premium and accretion of discount on marketable securities, net
|
|
|
|
|||||||||
Amortization of debt discount and issuance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of exchange rate fluctuation
|
(
|
)
|
(
|
)
|
(
|
) | ||||||
Changes in assets and liabilities:
|
|
|
||||||||||
Trade accounts receivables, net
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
Inventories
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Other current and long-term assets
|
|
|
|
|
|
|
|
|
|
(
|
)
|
|
Deferred tax assets, net
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Operating lease right-of-use assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payables
|
|
|
|
|
|
|
|
|
|
|
||
Deferred revenues
|
|
|
|
(
|
)
|
|||||||
Operating lease liabilities
|
(
|
) |
|
|
||||||||
Other current and long-term liabilities
|
|
|
|
|
||||||||
Accrued severance pay, net
|
(
|
) |
|
|
||||||||
Net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investment activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in short-term and long-term interest-bearing bank deposits
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Investment in marketable securities
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
Proceed from maturities of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Net cash used in investing activities
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
(
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of convertible senior notes, net of issuance costs
|
|
|
|
|||||||||
Purchases of treasury shares
|
|
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
Proceeds from exercise of options
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
|
|
|
|
|
(
|
)
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
|
|
||||||||
Increase (decrease) in cash and cash equivalents
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - end of year
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating right-of-use assets recognized with corresponding operating lease liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
A. |
Principles of Consolidation and Basis of Presentation
|
B. |
Use of Estimates in the Preparation of Financial Statements
|
C. |
Financial Statements in U.S. Dollars
|
D. |
Cash and Cash Equivalents
|
E. |
Short Term Bank Deposit
|
F. |
Marketable Securities
|
G. |
Trade Accounts Receivables
|
H. |
Business Combination
|
I. |
Inventories
|
• |
Raw materials - based on the moving average cost method.
|
• |
Service inventory, work in process and finished goods - based on actual production cost basis (materials, labor and indirect manufacturing costs).
|
J. |
Property and Equipment
Property and equipment are presented at cost, net of accumulated depreciation. Annual depreciation is calculated based on the straight-line method over the estimated useful lives of the related assets. Estimated useful life is as follows:
|
Years
|
|
Electronic equipment
|
|
Office furniture and equipment
|
|
Leasehold improvements
|
|
K. |
Goodwill and Intangible Assets
|
Weighted Average Useful Life (Years)
|
|
Technology (*)
|
|
Customer relationships
|
|
IPR&D (*)
|
|
L. |
Impairment of Long-Lived Assets
|
M. |
Accrued Warranty Costs
|
N. |
Derivative Financial Instruments
|
O. |
Leases
|
P. |
Convertible Senior Notes
|
See note 2X regarding the adoption of a new accounting pronouncement as of January 1, 2022.
Q. |
Revenue Recognition
|
R. |
Research and Development
|
S. |
Income Taxes
|
T. |
Share-Based Compensation
|
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
|||
Risk-free interest rate
|
|
|
|
||
Expected term of options
|
|
|
|
||
Expected volatility
|
|
|
|
||
Expected dividend yield
|
|
|
|
U. |
Earnings per Share
|
V. |
Concentrations of Credit Risk
|
W. |
Fair Value Measurements
|
X. |
New Accounting Pronouncements
|
The following is a summary of marketable securities amortized cost, unrealized gains, unrealized losses and fair value as of December 31, 2021:
Marketable securities
|
Amortized Cost
|
Unrealized gains
|
Unrealized losses*
|
Fair Value
|
||||||||||||
Matures within one year:
|
||||||||||||||||
Corporate bonds
|
|
|
(
|
)
|
|
|||||||||||
Governmental bonds
|
|
|
(
|
)
|
|
|||||||||||
|
|
(
|
)
|
|
||||||||||||
Matures after one year:
|
||||||||||||||||
Corporate bonds
|
|
|
(
|
)
|
|
|||||||||||
Governmental bonds
|
|
|
(
|
)
|
|
|||||||||||
|
|
(
|
)
|
|
||||||||||||
|
|
(
|
)
|
|
*
Proceeds from maturity of available-for-sale marketable securities during the year ended December 31, 2021, were $
The Company had no proceeds from sales of available-for sale, marketable securities during the year ended December 31, 2021, therefore no realized gains or losses from the sale of available for sale marketable securities were recognized.
NOTE 4 - INVENTORIES
A. |
Composition:
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Raw materials
|
|
|
||||||
Service inventory
|
|
|
||||||
Work in process
|
|
|
||||||
Finished goods
|
|
|
||||||
|
|
B. |
In the years ended December 31, 2021, 2020 and 2019, the Company wrote down inventories in a total amount of $
|
NOTE 5 - OTHER CURRENT ASSETS
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Governmental institutions
|
|
|
||||||
Prepaid expenses
|
|
|
||||||
Other
|
|
|
||||||
|
|
NOTE 6 - PROPERTY AND EQUIPMENT, NET
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Cost:
|
||||||||
Electronic equipment
|
|
|
||||||
Office furniture and equipment
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
|
|
|||||||
Accumulated depreciation:
|
||||||||
Electronic equipment
|
|
|
||||||
Office furniture and equipment
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
|
|
|||||||
Net book value
|
|
|
Depreciation expenses amounted to $
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Original amount:
|
||||||||
Technology
|
|
|
||||||
Customer relationships
|
|
|
||||||
|
|
|||||||
Accumulated amortization:
|
||||||||
Technology
|
|
|
||||||
Customer relationships
|
|
|
||||||
|
|
|||||||
Net book value
|
|
|
|
Year ended December 31,
|
|||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Technology
|
|
|
|
|||||||||
Customer relationships
|
|
|
|
|||||||||
|
|
|
NOVA LTD.
Annual amortization expenses are expected as follows:
Year ending December 31,
|
||||
2022
|
|
|||
2023
|
|
|||
2024
|
|
|||
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Accrued salaries and fringe benefits
|
|
|
||||||
Accrued warranty costs (See B below)
|
|
|
||||||
Governmental institutions
|
|
|
||||||
Other
|
|
|
||||||
|
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Other current liabilities
|
|
|
||||||
Other long-term liability
|
|
|
||||||
|
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Balance as of beginning of year
|
|
|
||||||
Services provided under warranty
|
(
|
)
|
(
|
)
|
||||
Changes in provision
|
|
|
||||||
Balance as of end of year
|
|
|
NOVA LTD.
1. |
During any calendar quarter commencing after the calendar quarter ending on March 31, 2021 (and only during such calendar quarter), if the last reported sale price of the Company’s ordinary shares for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to
|
2. |
During the five business day period after any 10 consecutive trading day period (“measurement period”) in which the trading price, determined pursuant to the terms of the Convertible Notes, per $
|
3. |
If the Company calls such Convertible Notes for redemption in certain circumstances, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
|
4. |
Upon the occurrence of specified corporate events.
|
NOVA LTD.
As of December 31,
|
||||||||
Liability component:
|
2 0 2 1
|
2 0 2 0
|
||||||
Principal amount
|
|
|
||||||
Unamortized discount
|
(
|
)
|
(
|
)
|
||||
Unamortized issuance costs
|
(
|
)
|
(
|
)
|
||||
Net carrying amount
|
|
|
||||||
Equity component, net of issuance costs of $
|
|
|
Interest expense related to the Convertible Notes was as follows:
Year ended December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Amortization of debt discount
|
|
|
||||||
Amortization of debt issuance costs
|
|
|
||||||
Total financial expense recognized
|
|
|
NOVA LTD.
Year
|
||||
2022
|
|
|||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027 and thereafter
|
|
|||
Total lease payments
|
|
|||
Less imputed interest
|
(
|
)
|
||
Total
|
|
Operating cash flows for operating leases amounted to $
A. |
Rights of Shares: |
B. |
Share Repurchase: |
C. |
Equity Based Incentive Plans: |
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Cost of Revenues:
|
||||||||||||
Product
|
|
|
|
|||||||||
Service
|
|
|
|
|||||||||
Research and Development
|
|
|
|
|||||||||
Sales and Marketing
|
|
|
|
|||||||||
General and Administrative
|
|
|
|
|||||||||
Total
|
|
|
|
Shares Options
Summary of the status of the Company’s share option plans as of December 31, 2021, as well as changes during the year then ended, is presented below:
2021
|
||||||||
Share
Options
|
Weighted Average
Exercise Price
|
|||||||
Outstanding - beginning of year
|
|
|
||||||
Granted
|
|
|
||||||
Exercised
|
(
|
)
|
|
|||||
Expired and forfeited
|
(
|
)
|
|
|||||
Outstanding - year end
|
|
|
||||||
Options exercisable at year end
|
|
|
The aggregate intrinsic value represents the total intrinsic value (the difference between the Company's closing share market price on the last trading day of the fiscal year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of the fiscal year. This amount changes based on the fair market value of the Company's shares.
NOVA LTD.
Range of Exercise Prices
|
Number Outstanding
|
Weighted Average Remaining Contractual Life
|
Weighted Average Exercise Price
|
Number Exercisable
|
Weighted Average Exercise Price
|
|||||||||||||||||
(US dollars)
|
(in years)
|
(US dollars)
|
(US dollars)
|
|||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
2021
|
||||||||
Number of RSUs
|
Weighted average grant date fair value (USD)
|
|||||||
Unvested - beginning of year
|
|
|
||||||
Granted
|
|
|
||||||
Vested
|
(
|
)
|
|
|||||
Canceled
|
(
|
)
|
|
|||||
Unvested at year end
|
|
|
The total intrinsic value of RSUs vested during the years 2021, 2020 and 2019 was $
A. |
Income Tax Regulations (Rules on Bookkeeping by Foreign Invested Companies and Certain Partnerships and Determination of their Taxable Income), 1986:
|
As a "Controlled Foreign Cooperation" (as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the Company's management has elected to apply Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and Determining Their Taxable Income)-1986. Accordingly, its taxable income or loss is calculated in US Dollars.
NOVA LTD.
B. |
Law for the Encouragement of Capital Investments-1959:
|
Part of the Company’s investment in equipment has received approvals in accordance with the Law for the Encouragement of Capital Investments, 1959 (“Approved Enterprise” status) in three separate investment plans. The Company has chosen to receive its benefits through the “Alternative Benefits” track, and, as such, is eligible for various benefits. These benefits include accelerated depreciation of fixed assets used in the investment program, as well as a full tax exemption on undistributed income in relation to income derived from the first plan for a period of
On April 1, 2005, an amendment to the Investment Law came into effect (“the Amendment”) and has significantly changed the provisions of the Investment Law. The Amendment limits the scope of enterprises which may be approved by the Investment Center by setting criteria for the approval of a facility as a Privileged Enterprise, such as provisions generally requiring that at least
In 2008, the Company submitted a request to approve a new plan (fourth plan) as a Privileged Enterprise in accordance with the Amendment to the Investment Law. The commencing year was 2010, and the expiration year was 2021.
NOVA LTD.
In 2011, new legislation amending to the Investment Law was adopted. Under this new legislation, a uniform corporate tax rate will apply to all qualifying income of certain Industrial Companies (Requirement of a minimum export of
In August 2013 "The Arrangements Law" (hereinafter—"the Law") was officially published. The following significant changes affecting taxation were approved:
1. The tax rate on a company in Development area A, effective January 1, 2014 is
2. The tax rate on dividend distributed, generated from "preferred income" or by a company that has an approved enterprise increased effective January 1, 2014 from
C. |
The New Technological Enterprise Incentives Regime - Amendment 73 to the Investment Law
|
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includes Amendment 73 to the Law for the Encouragement of Capital Investments ("the 2017 Amendment") was published. According to the 2017 Amendment, Technological preferred enterprise, as defined in the Law for the Encouragement of Capital Investments, 1959 ("the Encouragement Law"), with total consolidated revenues of less than NIS
D. |
The Tax Cuts and Jobs Act, 2017:
|
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “US Tax Act”) that instituted fundamental changes to the taxation of multinational corporations. The Tax Act includes significant changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from
F - 30
NOVA LTD.
E. |
Deferred Taxes:
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred tax assets are as follows:
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards
|
|
|
||||||
Tax credits carryforward
|
|
|
||||||
Reserve and allowances
|
|
|
||||||
Operating lease liabilities, net
|
|
|
||||||
Deferred tax assets before valuation allowance
|
|
|
||||||
Valuation Allowance
|
(
|
)
|
(
|
)
|
||||
Deferred tax assets after valuation allowance
|
|
|
||||||
Deferred tax liabilities:
|
||||||||
Convertible senior notes
|
(
|
)
|
(
|
)
|
||||
Intangible assets
|
(
|
)
|
(
|
)
|
||||
Reserve and allowances
|
(
|
)
|
|
|||||
Deferred tax liabilities
|
(
|
)
|
(
|
)
|
||||
Deferred tax assets
|
|
|
Long-term deferred tax assets:
Year ended December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Domestic
|
|
|
||||||
Foreign
|
|
|
||||||
|
|
Under ASC 740-10, deferred tax assets are to be recognized for the anticipated tax benefits associated with net operating loss and tax credits carry-forwards and deductible temporary differences; unless it is more-likely-than-not that some or all of the deferred tax assets will not be realized.
F - 31
NOVA LTD.
F. |
Income before taxes on income included in the consolidated statements of operations:
|
|
Year ended December 31,
|
|||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Domestic
|
|
|
|
|||||||||
Foreign (mainly US)
|
|
|
|
|||||||||
|
|
|
G. |
Income tax expenses (tax benefits) included in the consolidated statements of operations:
|
|
Year ended December 31,
|
|||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Domestic
|
|
|
|
|||||||||
Foreign (mainly US)
|
|
|
(
|
)
|
||||||||
|
|
|
||||||||||
Current
|
|
|
|
|||||||||
Deferred
|
(
|
)
|
(
|
)
|
|
|||||||
|
|
|
H. |
Tax Reconciliation:
|
The following is a reconciliation of the theoretical tax expense, assuming that all income is taxed at the ordinary statutory average corporate tax rate in Israel and the actual tax expense in the statement of operations, is as follows:
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Income before taxes on income
|
|
|
|
|||||||||
Statutory tax expenses
|
|
|
|
|||||||||
Effect of non-benefited income New Technological or Preferred Enterprises statuses in Israel
|
|
|
|
|||||||||
Permanent differences, including difference between the basis of measurement of income reported for tax purposes and the basis of measurement of income for financial reporting purposes, net
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Change in tax reserve for uncertain tax positions
|
(
|
)
|
|
|
||||||||
Effect of foreign operations taxed at various rates
|
|
|
|
|||||||||
Foreign Derived Intangible Income benefit
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Tax credits
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Trapped Profits agreement net effect
|
|
|
|
|||||||||
Adjustments for previous year’s tax
|
(
|
)
|
|
(
|
)
|
|||||||
Change in valuation allowance
|
|
|
|
|||||||||
Other
|
|
|
|
|||||||||
|
|
(
|
)
|
|||||||||
Actual tax expenses
|
|
|
|
F - 32
NOVA LTD.
I. |
Effective Tax Rates:
|
The Company’s effective tax rates differ from the statutory rates applicable to the Company for tax year 2021, primarily due to stock-based compensation deductible expenses, tax credits and foreign derived intangible income benefit in the US.
The Company’s effective tax rates differ from the statutory rates applicable to the Company for tax year 2020, primarily due to tax credits and foreign derived income benefit in the US.
J. |
Tax Assessments:
|
In December 2021 the Parent Company has received final tax assessments for the years 2016-2019 from the Israeli Tax Authorities.
K. |
Undistributed earnings of foreign subsidiaries:
|
The Company considers the earnings of certain subsidiaries to be indefinitely invested outside Israel on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company’s specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a deferred tax liability of approximately $
L. |
Uncertain Tax Positions:
|
The taxation of the Company's business is subject to the application of multiple and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
Balance at the beginning of the year
|
|
|
||||||
Increase related to prior year tax positions
|
|
|
||||||
Decrease related to prior year tax positions
|
(
|
)
|
(
|
)
|
||||
Increase related to current year tax positions
|
|
|
||||||
Balance at the end of the year*
|
|
|
F - 33
NOVA LTD.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expenses.
M. |
Income from Other Sources in Israel:
|
Income not eligible for benefits under the New Technological Enterprise Laws mentioned in ”C” above are taxed at the corporate tax rate of
A. |
Sales by Geographic Area (as Percentage of Total Sales):
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
%
|
%
|
%
|
||||||||||
Taiwan, R.O.C.
|
|
|
|
|||||||||
USA
|
|
|
|
|||||||||
China
|
|
|
|
|||||||||
Korea
|
|
|
|
|||||||||
Other
|
|
|
|
|||||||||
Total
|
|
|
|
B. |
Sales by Major Customers (as Percentage of Total Sales): |
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
%
|
%
|
%
|
||||||||||
Customer A
|
|
|
|
|||||||||
Customer B
|
|
|
|
|||||||||
Customer C
|
|
|
|
C. |
Long-lived assets by geographic location:
|
As of December 31,
|
||||||||
2 0 2 1
|
2 0 2 0
|
|||||||
%
|
%
|
|||||||
Israel
|
|
|
||||||
US
|
|
|
||||||
Other
|
|
|
||||||
Total long-lived assets (*)
|
|
|
NOVA LTD.
A. |
Hedging Activities
|
B. |
Derivative Instruments
|
Derivative Assets Reported in Other Current Assets
|
Derivative Liabilities Reported in Other Current Liabilities
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 2 1
|
2 0 2 0
|
|||||||||||||
Derivatives designated as hedging instruments in cash flow hedge
|
|
|
|
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Loss (gain) on derivative instruments
|
$
|
|
$
|
|
$
|
|
Year ended December 31,
|
||||||||||||
2 0 2 1
|
2 0 2 0
|
2 0 1 9
|
||||||||||
Interest income
|
|
|
|
|||||||||
Financial expense related to the Convertible Senior Notes (Note 10)
|
(
|
)
|
(
|
)
|
|
|||||||
Exchange rate loss, net
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Bank charges
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Total
|
(
|
)
|
|
|
F - 35
Number | Description |
101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
101.SCH | Inline XBRL Taxonomy Extension Schema |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase |
104 | Cover page formatted as Inline XBRL and contained in Exhibit 101 |
NOVA LTD. By: /s/ Eitan Oppenhaim Eitan Oppenhaim President and Chief Executive Officer |
INTERPRETATION
|
1
|
NAME OF THE COMPANY
|
2
|
PURPOSE
|
2
|
PUBLIC COMPANY
|
2
|
LIMITED LIABILITY
|
2
|
CAPITAL, SHARES AND RIGHTS
|
3
|
SHARE CERTIFICATES
|
3
|
REGISTERED HOLDER
|
3
|
TRANSFER OF SHARES
|
3
|
TRANSMISSION OF SHARES
|
4
|
ALTERATIONS OF THE REGISTERED CAPITAL
|
4
|
MODIFICATION OF CLASS RIGHTS
|
5
|
BORROWING POWERS
|
5
|
GENERAL MEETINGS
|
5
|
Notice of General Meetings
|
6
|
PROCEEDINGS AT GENERAL MEETINGS
|
6
|
Quorum
|
6
|
Chairman of the General Meeting
|
6
|
VOTE OF SHAREHOLDERS
|
6
|
DIRECTORS
|
7
|
Powers, Number of Directors, Composition & Election
|
7
|
Remuneration
|
8
|
Chairman of the Board
|
8
|
PROCEEDINGS OF THE DIRECTORS
|
8
|
Quorum
|
8
|
Methods of Attending Meetings
|
8
|
Alternate Director
|
9
|
Committees
|
9
|
Records & Validity of Acts
|
9
|
Chief Executive Officer
|
10
|
INSURANCE, EXCULPATION, AND INDEMNITY
|
10
|
Insurance of Office Holders
|
10
|
Indemnity of Office Holders
|
10
|
Advance Indemnity
|
10
|
Retroactive Indemnity
|
11
|
Exculpation
|
11
|
Insurance, Exculpation and Indemnity – General
|
11
|
APPOINTMENT OF AN AUDITOR
|
11
|
INTERNAL AUDITOR
|
12 |
MERGER AND REORGANIZATION
|
12
|
SIGNATORIES
|
12
|
DISTRIBUTIONS
|
12
|
REDEEMABLE SECURITIES
|
12
|
DONATIONS
|
12
|
NOTICES
|
13 |
JURISDICTION
|
13
|
1. |
In these Articles the following terms shall bear the meanings set opposite to them, unless inconsistent with the subject or context:
|
Articles |
These Amended and Restated Articles of Association as may be amended from time to time.
|
Auditor |
As defined under the Law.
|
Board |
The Board of Directors of the Company.
|
CEO |
Chief Executive Officer, also referred to under the Law as the general manager.
|
Class Meeting |
A meeting of the holders of a class of shares.
|
Chairman |
Chairman of the Board.
|
Company |
Nova Ltd.
|
Companies Regulations |
All regulations promulgated from time to time under the Companies Law.
|
Distribution |
As defined under the Law.
|
External Director |
As defined under the Law.
|
The Law or the Companies Law |
The Israeli Companies Law, 5759 - 1999 and the Companies Regulations.
|
NIS |
New Israeli Shekel
|
The Office |
The registered office of the Company as may be re-located from time to time.
|
Office Holder |
As defined under the Law.
|
Ordinary Shares |
The Company’s Ordinary Shares, with no par value.
|
Register |
Shareholders Register maintained by or on behalf of the Company.
|
Shareholder |
As defined under the Law.
|
Simple Majority |
A majority of more than fifty percent (50%) of the votes cast by those Shareholders present and voting, not taking into consideration abstaining votes.
|
The Statutes |
The Law, the Israeli Companies Ordinance (New Version) 1983, the Securities Law, 5738 - 1968 (the “Securities Law”) and all applicable laws and regulations applicable in any relevant jurisdiction (including without limitation U.S. Federal
laws and regulations), and rules of any stock market in which the Company’s shares are registered for trading as shall be in force from time to time and to the extent applicable to the Company.
|
2. |
Words importing the singular shall include the plural, and vice-versa. Words importing the masculine gender shall include the feminine gender; and words importing persons shall include corporate bodies.
|
3. |
The name of the Company is Nova Ltd.
|
4. |
The purposes of the Company shall be to engage in the types of pursuits specified below:
|
4.1. |
To invent, design, plan, develop, manufacture, market and trade in the field of measuring instruments in electronics, micro-electronics, medicine, chemistry, metallurgy, ceramics, and any other field.
|
4.2. |
To initiate, participate, manage, execute, import and export any kind of project within the boarders of the State of Israel and/or outside Israel.
|
4.3. |
To register patents, trademarks, trade names, intellectual property rights marketing rights and any other right of any kind whatsoever, both in Israel and abroad.
|
4.4. |
To engage in any legal activity, both in Israel and abroad.
|
4A. |
The Company’s headquarters shall be located in Israel, unless the Board shall otherwise resolve, by a resolution approved by at least 75% of the members of the Board then in office.
|
5. |
The Company is a public company pursuant to the Companies Law.
|
6. |
The liability of each Shareholder for the Company's debts is limited to the full payment of the original issue price of the shares first allotted to such Shareholder or his predecessors. Once such price is paid by the original owner of
shares, there is no further liability of the holder and such holder’s transferees for the Company’s debts.
|
7. |
The registered share capital of the Company shall consist of 60,000,000 (sixty million) Ordinary Shares with no par value.
|
8. |
All issued and outstanding shares of the Company of the same class are of equal rights between them for all intents and purposes concerning the rights set forth below.
|
9. |
Each issued Ordinary Share entitles its holder to the rights as described below:
|
9.1. |
The equal right to participate in and vote at the Company's general meetings, whether ordinary meetings or special meetings, and each of the shares in the Company shall entitle the holder thereof, who is present at the meeting and
participating in the vote, whether in person, or by proxy, to one vote.
|
9.2. |
The equal right to participate in any Distribution.
|
9.3. |
The equal right to participate in the distribution of assets available for distribution in the event of liquidation of the Company.
|
10. |
If two or more persons are registered as joint holders of any shares, any one of such persons may give effectual receipts for any dividend or other monies in respect of such share and his or her confirmation will bind all holders of such
share.
|
11. |
[Reserved].
|
12. |
A Shareholder shall not be entitled to rights as a Shareholder, including the right to dividends, unless said Shareholder fully paid all sums in accordance with the conditions of the allocation, including interest, linkage and expenses, if
any, and all unless otherwise determined in the conditions of the allocation.
|
13. |
A shareholder who is registered in the Register is entitled to receive from the Company, without payment and at such shareholder’s request, within a period of three months after the allocation or registration of the transfer, one share
certificate with respect to all the shares registered in his name, which shall specify the aggregate number of the shares held by such shareholder. In the event of a jointly held share, the Company shall issue one share certificate for all
the joint holders of the share, and the delivery of such certificate to one of the joint holders shall be deemed to be delivery to all of them. Every certificate shall bear the Company’s seal or a facsimile copy thereof and be signed by two
Office Holders of the Company, or one director and the Company's secretary or by any other person appointed by the Board for such purpose.
|
14. |
The Company may issue a new certificate in lieu of a certificate that was issued and was lost, defaced, or destroyed, on the basis of such proof and guarantees as the Company may require, and after
payment of an amount that shall be prescribed by the Company, and the Company may also replace existing certificates with new certificates, free of charge, subject to such conditions as the Company shall stipulate.
|
15. |
Except as otherwise provided in these Articles, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof, and, accordingly, shall not, except as ordered by a court of competent jurisdiction,
or as required by statute, be bound to recognize any equitable or other claim to, or interest in such share on the part of any other person.
|
16. |
To the extent required by the Law a trustee must inform the Company of the fact that such trustee is holding shares of the Company in trust for another person at such time as may be required by the Law. The Company shall register that fact
in the Register in respect of such shares. The trustee shall be deemed to be the sole holder of said shares.
|
17. |
Subject to the Statutes, and subject to any applicable agreements or undertakings of any specific shareholder, the shares shall be freely transferable.
|
18. |
Transfer of registered shares shall be made in writing or any other manner, in a form specified by the Board or the transfer agent appointed by the Company, and such transfer form should be signed by both the transferee and the transferor
and delivered to the Office or to such transfer agent, together with the certificates of the shares due to be transferred, if such certificates have been issued. The transferee shall be deemed to be the shareholder with respect to the
transferred shares only from the date of registration of his name in the Register.
|
19. |
The Board may close the Register and suspend the registration of transfers for such period of time as the Board shall deem fit, provided that the period of closure of any such book shall not exceed 30 days each year. The Company shall
notify the shareholders of such decision.
|
20. |
In the case of the death, liquidation, bankruptcy, dissolution, winding-up or a similar occurrence of a Shareholder, the legal successors of such Shareholder shall be the only persons recognized by the Company as having any title to such
shares, but nothing herein contained shall release the estate of the predecessor from any liability in respect of such shares.
|
21. |
The legal successors may, upon producing such evidence of title as the Board shall require, be registered themselves as holders of the shares, or subject to the provisions as to transfers herein contained, transfer the same to some other
person.
|
22. |
(a) Subject to the Statutes, a general meeting of shareholders may from time to time resolve to:
|
(1) |
Alter or add classes of shares that shall constitute the Company's authorized capital, including shares with preference rights, deferred rights, conversion rights or any other special rights or limitations.
|
(2) |
Increase the Company's registered share capital by creating new shares either of an existing class or of a new class.
|
(3) |
Consolidate and/or split all or any of its share capital.
|
(4) |
Cancel any registered shares not yet allocated, provided that the Company has made no commitment to allocate such shares.
|
(5) |
Reduce the Company’s share capital and any reserved fund for redemption of capital.
|
(1) |
Determine that fractions of shares that do not entitle their owners to a whole Share, will be sold by the Company and that the consideration for the sale be paid to the beneficiaries, on terms the Board may determine;
|
(2) |
Allot to every Shareholder, who holds a fraction of a Share resulting from a consolidation and/or split, shares of the class that existed prior to the consolidation and/or split, in a quantity that, when consolidated with the fraction,
will constitute a whole Share, and such allotment will be considered valid immediately prior to the consolidation or split;
|
(3) |
Determine the manner for paying the amounts to be paid for shares allotted in accordance with Article 22(c)(2) above, including on account of bonus shares; and/or
|
(4) |
Determine that the owners of fractions of shares will not be entitled to receive a whole Share in respect of a Share fraction.
|
23. |
Except as otherwise provided by or pursuant to these Articles or by the conditions of issue, any new share capital shall be considered as part of the original share capital, and shall be subject to the same provisions of these Articles
with reference to payment of calls, lien, transfer, transmission, forfeiture and otherwise, which applies to the original share capital.
|
24. |
If at any time the share capital is divided into different classes of shares, any change to the rights and privileges of the holders of any such class of shares shall require the approval of a Class Meeting of such class of shares by a
Simple Majority (unless otherwise provided by the Statutes or by the terms of issue of the shares of that class).
|
25. |
The rights and privileges of the holders of any class of shares shall not be deemed to have been altered by creating or issuing shares of any class, including a new class (unless otherwise provided by the terms of issue of the shares of
that class).
|
26. |
The Company may, by resolution of the Board, from time to time, raise or borrow or secure the payment of any sum or sums of money for the purposes of the Company. The Company, by resolution of the Board, may also raise or secure the
payment or repayment of such sum or sums in such manner and upon such terms and conditions in all respects as it deems fit, and in particular by the issue of debentures or debenture stock of the Company charged upon all or any part of the
property of the Company (both present and future) including its unissued and/or its uncalled capital for the time being. Issuance of any series of debentures shall require Board approval.
|
27. |
Annual general meetings shall be held at least once a calendar year, at such place and time as determined by the Board, but not later than fifteen (15) months after the last annual general meeting. Such general meetings shall be called
"Annual Meetings" and all other general meetings of the Company shall be called "Special Meetings". The Annual Meeting shall review the Company's financial statements and shall transact any other business required pursuant to these Articles
or to the Law, and any other matter as shall be determined by the Board. Annual Meetings and Special Meetings shall be convened in Israel, unless the Company’s headquarters shall have been transferred to another country in accordance with the
provisions of these Articles.
|
28. |
The Board may convene a Special Meeting by its resolution, and is required to convene a Special Meeting should it receive a request, in writing, from a person or persons entitled, under the Companies Law, to request such meeting.
|
29. |
In addition, subject to the Law, the Board may accept a request of a shareholder holding not less than 1% of the voting rights at the general meeting to include a subject in the agenda of a general meeting, provided that such subject is a
proper subject for action by shareholders under the Law and these Articles and only if the request also sets forth: (a) the name and address of the Shareholder making the request; (b) a representation that the Shareholder is a holder of
record of shares of the Company, holding not less than 1% of the voting rights at the general meeting and intends to appear in person or by proxy at the meeting; (c) a description of all arrangements or understandings between 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 connection with such subject, if any, has been provided. In addition, if such subject includes a nomination to the Board in accordance with the Articles, the request shall also set forth the
consent of each nominee to serve as a director of the Company if so elected and a declaration signed by each nominee declaring that there is no limitation under the Law for the appointment of such nominee. Furthermore, the Board, may, in its
discretion to the extent it deems necessary, request that the Shareholders making the request provide additional information necessary so as to include a subject in the agenda of a general meeting, as the Board may reasonably require.
|
30. |
Subject to applicable law, the Board shall determine the agenda of any general meeting.
|
31. |
Unless otherwise required by the Law and these Articles, the Company is not required to give notice under section 69 of the Companies Law.
|
32. |
No business shall be transacted at any general meeting of the Company unless a quorum of Shareholders is present at the opening of the Meeting.
|
33. |
If within half an hour from the time appointed for the holding of a general meeting a quorum is not present, the general meeting shall stand adjourned one day thereafter at the same time and place or to such other day, time and place as
the Board may indicate in a notice to the Shareholders. At such adjourned Meeting any number of Shareholders shall constitute a quorum for the business for which the original Meeting was called.
|
34. |
The Chairman shall preside as the chairman at every general meeting, but if there shall be no such Chairman or if at any meeting the Chairman shall not be present within fifteen (15) minutes after the time appointed for holding the same,
or shall be unwilling to act as chairman, then the Board members present at the meeting shall choose one of the Board members as chairman of the meeting and if they shall not do so then the Shareholders present shall choose a Board member, or
if no Board member be present or if all the Board members present decline to take the chair, they shall choose any other person present to be chairman of the meeting.
|
35. |
The chairman may, with the consent of a general meeting at which a quorum is present, and shall if so directed by the general meeting, adjourn any meeting, discussion or the resolution with respect to a matter that is on the agenda, from
time to time and from place to place as the meeting shall determine. Except as may be required by the Law, no Shareholder shall be entitled to any notice of an adjournment or of the business to be transacted at an adjourned meeting. No
business shall be transacted at any adjourned meeting other than the business which might have been transacted at the meeting from which the adjournment took place.
|
36. |
A vote in respect of the election of the chairman of the meeting or regarding a resolution to adjourn the meeting shall be carried out immediately. All other matters shall be voted upon during the meeting at such time and order as decided
by the chairman.
|
37. |
All resolutions proposed at any general meeting will require a Simple Majority, unless otherwise required by the Statutes or these Articles. Except as otherwise required by the Statues or these Articles, alteration or amendment of these
Articles shall require a Simple Majority. Notwithstanding anything in these Articles to the contrary, the provisions of Articles 4A, 27 (last sentence), 37, 50, 60(i) and 94 may only be amended by a resolution at the general meeting of the
Company, provided however, that such amendment was also approved by a resolution of at least 75% of the members of the Board then in office, at a session of the Board which has taken place prior to the general meeting.
|
38. |
A declaration by the chairman of the meeting that a resolution has been carried, or has been carried unanimously or by a particular majority, or rejected, or not carried by a particular majority and an entry to that effect in the minutes
of the meeting shall be prima facie evidence thereof.
|
39. |
The chairman of the meeting will not have a second and/or a casting vote. If the vote is tied with regard to a certain proposed resolution such proposal shall be deemed rejected.
|
40. |
If two or more persons are jointly entitled to a share, the vote of the senior one who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other registered holders of the share, and for
this purpose seniority shall be determined by the order in which the names stand in the Register.
|
41. |
A proxy need not be a Shareholder of the Company.
|
42. |
The instrument appointing a proxy shall be in writing signed by the appointer or of his attorney-in-fact duly authorized in writing. A corporate entity shall vote by a representative duly appointed in writing by such entity.
|
43. |
Unless otherwise determined by the Board, the instrument of appointment must be submitted to the Office no later than 48 hours prior to the first general meeting to be attended by such proxy or representative. The instrument of appointment
shall automatically terminate and cease to be of any force or affect on the anniversary (12 months) of the date of the instrument of appointment, unless such instrument sets out a different expiry date.
|
44. |
A proxy may be appointed in respect of only some of the shares held by a Shareholder, and a Shareholder may appoint more than one proxy, each empowered to vote by virtue of a portion of the shares.
|
45. |
A Shareholder being of unsound mind or pronounced to be unfit to vote by a competent court of law may vote through a legally appointed guardian or any other representative appointed by a court of law to vote on behalf of such Shareholder.
|
46. |
A Shareholder entitled to vote may signify in writing his approval of, or dissent from, or may abstain from any resolution included in a proxy instrument furnished by the Company. A proxy instrument may include resolutions pertaining to
such issues which are permitted to be included in a proxy instrument according to the Statutes, and such other issues which the Board may decide, in a certain instance or in general, to allow voting through a proxy. A Shareholder voting
through a proxy instrument shall be taken into account in determining the presence of a quorum as if such Shareholder is present at the meeting.
|
47. |
The chairman of the general meeting shall be responsible for recording the minutes of the general meeting and any resolution adopted.
|
48. |
The provisions of these Articles relating to general meetings shall, mutatis mutandis, apply to Class Meetings.
|
49. |
The Board shall have and execute all powers and/or responsibilities allocated to the Board by the Statutes and these Articles, including setting the Company’s policies and supervision over the execution of the powers and responsibilities
of the CEO. The Board may execute any power of the Company that is not specifically allocated by the Statutes or by these Articles to another organ of the Company.
|
50. |
The number of directors on the Board shall be no less than five (5) but no more than nine (9) and, to the extent required under applicable law, shall include at least two External Directors. The majority of the members of the Board shall
be residents of Israel, unless the Company’s headquarters shall have been transferred to another country in accordance with the provisions of these Articles.
|
51. |
The directors of the Company shall be elected at each Annual Meeting by a Simple Majority and shall hold office until the end of the next Annual Meeting and so long as an Annual Meeting is not convened, unless their office is vacated prior
thereto in accordance with the provisions of these Articles and the Law. This Article shall not apply to the election and tenure of External Directors, in respect of whom the provisions of the Law shall apply.
|
52. |
As long as the number of directors serving on the Board is less than the maximal number of directors under Article 50, the Board can act to appoint directors to the Board.
|
53. |
Should a director cease serving the remaining directors may continue to act, provided that their number shall be not less than the minimal number of directors mentioned under Article 50
|
54. |
The appointment of a director by the Board shall be in effect until the next Annual Meeting or until he or she shall cease serving in office pursuant to the provisions of these Articles.
|
55. |
The term of office of a director shall commence on the date of such director’s election by the general meeting or by the Board or on a later date, should such date be determined in the resolution of appointment of the general meeting or of
the Board.
|
56. |
The Company shall determine the remuneration of the directors, if any, in accordance with the Law.
|
57. |
The Board shall appoint one of its members to serve as the Chairman and may replace the Chairman from time to time. The Chairman shall preside at meetings of the Board, but if at any meeting the Chairman is not present within fifteen (15)
minutes after the time appointed for holding the meeting, the present directors shall choose a present director to be chairman of such meeting.
|
58. |
The directors shall meet together for the dispatch of business, adjourn and otherwise regulate their meetings as they deem fit, subject to these Articles.
|
59. |
No business shall be transacted at any meeting of the Board unless a quorum of directors is present when a meeting is called to order. A quorum shall be deemed to exist when there are present personally or represented by an alternate
director at least half of the directors then in office.
|
60. |
(i) A majority of the sessions of the Board (not including sessions held by use of means of communication) each year, but not less than four (4) sessions each year, shall be convened in Israel, unless the Company’s headquarters shall have
been transferred to another country in accordance with the provisions of these Articles; (ii) without derogating from sub-section (i) of this Article, some or all of the directors may attend meetings of the Board through computer network,
telephone or any other media of communication, enabling the directors to communicate with each other, in the deemed presence of all of them, provided that due prior notice detailing the time and manner of holding a given meeting is served
upon all the directors. The directors may waive the necessity of such notice either beforehand or retrospectively.
|
61. |
A resolution in writing signed by all of the directors eligible to participate in the discussion and vote on such resolution, or in respect of which all such directors have agreed (in writing by mail, fax or electronic mail) not to
convene, shall be as valid and effective for all purposes as if passed at a meeting of the Board duly convened and held.
|
62. |
While exercising his/her voting right, each director shall have one vote. Resolutions of the Board will be decided by a simple majority of the directors present and voting, not taking into consideration abstaining votes, except as
otherwise provided in these Articles or by the Statutes. In the event the vote is tied, the Chairman of the Board shall not have a casting vote, and such resolution shall be deemed rejected.
|
63. |
Subject to the Law, a director shall be entitled at any time and from time to time to appoint in writing any person who is qualified to serve as a director, to act as his/her alternate and to terminate the appointment of such person. The
appointment of an alternate director does not negate the responsibility of the appointing director and such responsibility shall continue to apply to such appointing director - taking into account the circumstances of the appointment.
|
64. |
The Board may set up committees and appoint members to these committees subject to the Statutes. A resolution passed or an act done by such a committee pursuant to an authority granted to such committee by the Board shall be treated as a
resolution passed or act done by the Board, unless expressly otherwise prescribed by the Board or the Statutes for a particular matter or in respect of a particular committee.
|
65. |
Meetings of committees and proceedings thereat (including the convening of the meetings, the election of the chairman and the votes) shall be governed by the provisions herein contained for regulating the meetings and proceedings of the
Board so far as the same are applicable thereto and unless otherwise determined by the Board, including by an adoption of a charter governing the committee proceedings.
|
66. |
[Reserved]
|
67. |
The resolutions of the Board shall be recorded in the Company's Minutes Book, as required under the Statutes, signed by the Chairman or the chairman of a certain meeting. Such signed minutes shall be deemed prima facie evidence of the meeting and the resolutions resolved therein.
|
68. |
All acts done bona fide by any meeting of the Board or of a committee of the Board or by any person acting as a director, shall, notwithstanding it be afterwards discovered that there was some defect in the appointment of any such director
or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director.
|
69. |
The Board shall appoint at least one CEO, for such period and upon such terms as the Board deems fit.
|
70. |
The CEO shall have all managing and execution powers within the policies and guidelines set forth by the Board, and shall be under the supervision of the Board. The CEO may delegate any of his powers to his subordinates, subject to the
approval of the Board; (ii)
|
71. |
The Company may insure the liability of an Office Holder, to the fullest extent permitted under the Statutes.
|
72. |
Without derogating from the aforesaid, the Company may enter into a contract to insure the liability of an officer therein for an obligation imposed on him in consequence of an act done in his capacity as an Office Holder, in any of the
following cases:
|
72.1. |
A breach of the duty of care vis-a-vis the Company or vis-a-vis another person;
|
72.2. |
A breach of the fiduciary duty vis-a-vis the Company, provided that the Office Holder acted in good faith and had a reasonable basis to believe that the act would not harm the Company, or in connection with a financial sanction;
|
72.3. |
A monetary obligation imposed on him in favor of another person;
|
72.4. |
Any other matter in respect of which it is permitted or will be permitted under applicable law to insure the liability of an Office Holder in the Company, including, without limitation, matters referenced in Section 56H(b)(1) of the
Securities Law.
|
73. |
The Company may indemnify an Office Holder, to the fullest extent permitted under the Statutes. Without derogating from the aforesaid, the Company may indemnify an Office Holder for a liability or expense imposed on him in consequence of
an act done in his capacity as an Office Holder in the Company, as follows:
|
73.1. |
A monetary obligation imposed on him or incurred by him in favor of another person pursuant to a judgment, including a judgment given in settlement or a court approved settlement or arbitrator's award;
|
73.2. |
Reasonable legal fees, including attorney’s fees, incurred by an Office Holder in consequence of an investigation or proceeding filed against him by an authority that is authorized to conduct such investigation or proceeding, provided
that such investigation or proceeding (i) concludes without the filing of an indictment against the Office Holder or (ii) concluded with the imposition of a monetary payment on the Office Holder in lieu of criminal proceedings, but the
criminal offense in question does not require the proof of criminal intent, all within the meaning of the Law.
|
73.3. |
Reasonable litigation costs, including attorney’s fees, incurred by an Office Holder or which he is ordered to pay by a court, in proceedings filed against him by the Company or on its behalf or by another person, or in a criminal charge
of which he is acquitted, or in a criminal charge of which he is convicted of an offence that does not require proof of criminal intent.
|
73.4. |
Any other obligation or expense in respect of which it is permitted or will be permitted under the Statutes to indemnify an Office Holder, including, without limitation, matters referenced in Section 56H(b)(1) of the Securities Law.
|
74. |
The Company may give an advance undertaking to indemnify an Office Holder therein in respect of the following matters:
|
74.1. |
Matters as detailed in Article 73.1, provided however, that the undertaking is restricted to events, which in the opinion of the Board, are anticipated in light of the Company’s activities at the time of granting the obligation to
indemnify and is limited to a sum or measurement determined by the Board as reasonable under the circumstances. The indemnification undertaking shall specify such events and sum or measurement.
|
74.2. |
Matters as detailed in Articles 73.2, 73.3 and 73.4.
|
75. |
The Company may indemnify an Office Holder retroactively with respect of the matters as detailed in Article 73, subject to any applicable law.
|
76. |
The Company may exempt an Office Holder in advance for all or any of his liability for damage in consequence of a breach of the duty of care vis-a-vis the Company, to the fullest extent permitted under the Statutes. However, the Company
may not exempt a director in advance from his liability toward the Company due to the breach of his duty of care in the event of a Distribution, as defined in the Statutes.
|
77. |
The above provisions with regard to insurance, exemption and indemnity are not and shall not limit the Company in any way with regard to its entering into an insurance contract and/or with regard to the grant of indemnity and/or exemption
in connection with a person who is not an Office Holder of the Company, including employees, contractors or consultants of the Company, all subject to any applicable law.
|
78. |
Articles 71 through 76 shall apply mutatis mutandis in respect of the grant of insurance, exemption and/or indemnification for persons serving on behalf of the Company as Office Holders in companies controlled by the Company, or in which
the Company has an interest.
|
79. |
An undertaking to insure, exempt and indemnify an Office Holder in the Company as set forth above shall remain in full force and effect even following the termination of such Office Holder's service with the Company.
|
80. |
Subject to the Statutes, the Annual Meeting shall appoint an Auditor for a period ending at the next Annual Meeting, or for a longer period, but no longer than until the third Annual Meeting after the meeting at which the Auditor has been
appointed. The same Auditor may be reappointed.
|
81. |
So long as the Company is a public company, the Board shall appoint an Internal Auditor pursuant to the recommendation of the Audit Committee.
|
82. |
The organizational superior of the Internal Auditor shall be the Chairman. The Internal Auditor shall submit a proposed annual or periodic work plan to the Audit Committee, which will approve such plan with changes as it deems fit, at its
discretion.
|
83. |
Notwithstanding the provisions of section 327(a) of the Companies Law, the majority required for the approval of a merger by the general meeting or by a class meeting shall be an ordinary majority of the votes of the shareholders entitled
to vote and voting themselves.
|
84. |
Signatory rights on behalf of the Company shall be determined from time to time by the Board.
|
85. |
The Board may decide on a Distribution, subject to the provisions set forth under the Law and these Articles.
|
86. |
The Board will determine the method of payment of any Distribution. The receipt of the person whose name appears on the record date on the Register as the owner of any share, or in the case of joint holders, of any one of such joint
holders, shall serve as confirmation with respect to all the payments made in connection with that share and in respect of which the receipt was received. All dividends unclaimed after having been declared may be invested or otherwise used by
the Directors for the benefit of the Company until claimed, provided however that the Company shall not be required to accept any claim made following the 7th anniversary of the declaration date, or an earlier date as may be
determined by the Board. No unpaid dividend shall bear interest or accrue linkage differentials.
|
87. |
For the purpose of implementing any resolution concerning any Distribution, the Board may settle, as it deems fit, any difficulty that may arise with respect to the Distribution, including determining the value for the purpose of the said
Distribution of certain assets, and deciding that payments in cash shall be made to the Shareholders based on the value so determined, and determining provisions with respect to fractions of shares or with respect to the non-payment of small
sums.
|
88. |
The Company shall be entitled to issue redeemable securities which are, or at the option of the Company may be, redeemed on such terms and in such manner as shall be determined by the Board. Redeemable securities shall not constitute part
of the Company's capital, except as provided in the Law.
|
89. |
The Company may make donations of reasonable amounts of money for purposes which the Board deems to be worthy causes, even if the donations are not made in relation to business considerations for increasing the Company's profits.
|
90. |
Subject to the Statutes, notice or any other document which the Company shall deliver and which it is entitled or required to give pursuant to the provisions of these Articles and/or the Statutes shall be delivered by the Company to any
person, in any one of the following manners as the Company may choose: in person, by mail, transmission by fax or by electronic form.
|
91. |
Any notice to be given to the Shareholders shall be given, with respect to joint shareholders, to the person whose name appears first in the Register as the holder of the said share, and any notice so given shall be sufficient notice for
all holders of the said share.
|
92. |
Any notice or other document served upon or sent to any Shareholder in accordance with these Articles shall, notwithstanding that he be then deceased or bankrupt, and whether the Company received notice of his death or bankruptcy or not,
be deemed to be duly served or sent in respect of any shares held by him (either alone or jointly with others) until some other person is registered in his stead as the holder or joint holder of such shares, and such service or sending shall
be a sufficient service or sending on or to his heirs, executors, administrators or assigns and all other persons (if any) interested in such share.
|
93. |
The accidental omission to give notice to any Shareholder or the non-receipt of any such notice shall not cancel or annul any action made in reliance on the notice.
|
94. |
(a) Unless the Company consents in writing to the selection of an alternative forum, with respect to any causes of action arising under the U.S. Securities Act of 1933 as amended, against any person or entity, including such claims brought
against the Company, its directors, officers, employees, advisors, attorneys, accountants or underwriters, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting
a cause of action arising under the U.S. Securities Act of 1933, as amended; and (b) unless the Company consents in writing to the selection of an alternative forum, the competent courts in Tel Aviv, Israel shall be the exclusive forum for
(i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s
shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Securities Law. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of the Company shall be
deemed to have notice of and consented to these provisions. This Article 94 shall not apply to causes of action arising under the U.S. Exchange Act of 1934, as amended.
|
• |
the equal right to participate in and vote at general meetings of the shareholders, and each share entitles its holder thereof, who is present and participating in the vote, whether in person or by proxy, to one vote;
|
• |
the equal right to participate in any distribution; and
|
• |
the equal right to participate in the distribution of assets available for distribution in the event of liquidation of the company.
|
• |
alter or add classes of shares, including shares with preference rights, deferred rights, conversion rights or any other special rights or limitations;
|
• |
consolidate and/or split all or any of its share capital into shares of larger or smaller par value than the existing shares;
|
• |
cancel any registered shares not yet allocated, provided we have made no commitment to allocate such shares; and
|
• |
reduce our share capital and any reserved fund for redemption of capital.
|
1. |
The Company hereby undertakes to indemnify you for any obligation imposed on you or expense spent by you as a result of your capacity as an Officer of the Company, as defined under the Israeli Companies Law 5759-1999 (the “Companies Law”)
(hereinafter: the “Officer”), subject to the applicable law, the Company’s Amended and Restated Articles of Association and as follows:
|
1.1. |
A monetary obligation imposed on you or incurred by you in favor of another person pursuant to a judgment, including a judgment given in settlement or a court approved settlement or arbitrator’s award, subject to Section 1.6 below.
|
1.2. |
Reasonable litigation expenses, including attorney’s fees, incurred by you in consequence of an investigation or proceeding conducted or filed against you by an authority that is authorized to conduct such investigation or proceeding,
provided that such investigation or proceeding: (i) concludes without the filing of an indictment against you and without imposition of a monetary liability in lieu of criminal proceedings; (ii) concludes with the imposition of a monetary
payment on you in lieu of criminal proceedings, but the criminal offense in question does not require the proof of criminal intent; or (iii) in connection with a monetary sanction.
|
1.3. |
Reasonable litigation expenses, including attorney’s fees, incurred by you or which you were obligated to pay by a court, in proceedings filed against you by the Company or on its behalf or by another person, or in a criminal charge of
which you were acquitted, or in a criminal charge of which you were convicted of an offense that does not require proof of criminal intent.
|
1.4. |
Any monetary obligation imposed on you in favor of all the injured parties by a breach in an Administrative Procedure, as stated in Section 52(54)(a)(1)(a) to the Securities Law, 5728-1968 (the “Securities Law”). The term
“Administrative Procedure” shall have the following meaning: a procedure according to Chapter 8C (Financial Sanctions), 8D (Administrative Enforcement Measures Imposition by the Administrative Enforcement Committee) or 9A (Arrangement for
Avoidance from or Cessation of Procedures) to the Securities Law, as amended from time to time.
|
1.5. |
Expenses expended by you with respect to an Administrative Procedure (as defined in Section 1.4 above) relating to you, including reasonable litigation expenses, which include attorneys’ fees.
|
1.6. |
With regards to Section 1.1, this obligation to indemnify is limited to the events detailed in Annex A which according to the Board of Directors’ opinion, are foreseen in light of the Company’s actual activities, and which shall
not exceed the Maximum Indemnification Amount, as detailed below in Section 1.7. The Board of Directors has determined that such amounts and criteria set by the Board of Directors are reasonable under the circumstances.
|
1.7. |
The aggregate indemnification amount that the Company will pay to all of its Officers, whether in advance or post factum, under all the indemnification letters that shall be issued by the Company pursuant to this Letter of Indemnification,
shall not exceed the greater of (a) twenty-five percent (25%) of the Company’s total shareholders’ equity according to the Company’s most recent financial statements as of the time of the actual payment of indemnification; (b) US$200 million;
(c) ten percent (10%) of the Company Total Market Cap (which shall mean the average closing price of the Company’s ordinary shares over the 30 trading days prior to the actual payment of indemnification multiplied by the total number of
issued and outstanding shares of the Company as of the date of actual payment); and (d) in connection with or arising out of a public offering of the Company’s securities, the aggregate amount of proceeds from the sale by the Company and/or
any shareholder of Company’s securities in such offering (hereinafter the “Maximum Indemnification Amount”).
|
1.8. |
In the event the indemnification amount the Company is required to pay its Officers, as set forth above, exceeds the Maximum Indemnification Amount or its remaining balance (as existing at that time), the Maximum Indemnification Amount or
its remaining balance will be divided among the Officers entitled to indemnification, so that the amount of indemnification each of them will actually receive will be calculated in accordance with the ratio between the amount for which each
individual may be indemnified and the aggregate amount for which all the relevant Officers may be indemnified.
|
1.9. |
For the avoidance of doubt, it is hereby clarified that nothing contained in this Letter of Indemnification or in the above resolutions derogate from the Company’s right, subject to Board of Directors approval,
to indemnify you post factum for any amounts which you may be obligated to pay as set forth in Section 1 above without the limitations set forth in Section 1.7 above. The aforesaid shall however not be construed as an obligation of the
Company to indemnify you after the fact.
|
2. |
The Company shall act according to this Letter of Indemnification as detailed above in regards to any other company controlled, directly or indirectly, by the Company (a “Subsidiary”) with respect to the periods such other company
is a Subsidiary or in your capacity as a director, or observer at board of director meetings, of a company not controlled by the Company but where your appointment as a director or observer results from the Company’s holdings in such company
(“Affiliate”).
|
3. |
Notwithstanding the above, in no event will the Company indemnify you for the following events:
|
3.1. |
a breach of fiduciary duty, except for a breach of a fiduciary duty to the Company, a Subsidiary or an Affiliate while acting in good faith and having reasonable cause to assume that such act would not harm the Company’s interests;
|
3.2. |
a reckless or intentional breach of duty of care that was not done negligently;
|
3.3. |
an action taken with the intent of making personal gain unlawfully;
|
3.4. |
a fine, civil fine, a monetary sanction or forfeit imposed upon you for an offense;
|
3.5. |
a counterclaim made by the Company or in its name in connection with a claim against the Company filed by you.
|
4. |
The Company will make available all amounts needed in accordance with section 1 above on the date on which such amounts are first payable by you.
|
5. |
The Company shall advance to you all expenses incurred by you in connection with a claim on the date on which such amounts are first payable, but has no duty to advance payments within less than fourteen (14) days following delivery of a
written request therefor. The foregoing shall not apply in circumstances where the Company shall take upon itself to manage the proceedings as provided herein below.
|
6. |
As part of the aforementioned undertaking and subject to Sections 1.1 – 1.5 above, the Company will make available to you any security or guarantee that you may be required to post in accordance with an interim decision given by a court or
an arbitrator, including for the purpose of substituting liens imposed on your assets.
|
7. |
The Company will indemnify you, in accordance with this Letter of Indemnification, even if at the relevant time of indebtedness you are no longer an Officer of the Company or of a Subsidiary or a director or board observer of an Affiliate,
provided that the obligations are in respect of actions taken by you while you were an Officer and/or board observer, as aforesaid, and in such capacity, including if taken prior to the above resolutions.
|
8. |
No payment hereunder shall be made to you in connection with any event for which payment is actually paid to you under a valid and collectible insurance policy or under a valid and enforceable indemnity clause or agreement (excluding this
Letter of Indemnification), except in respect of any excess beyond the payment under such insurance, clause or agreement.
|
9. |
Additionally, it is emphasized that this Letter of Indemnification is not to be construed as an agreement for the benefit of any third party, including any insured party, and it is not transferable, and no insurer will have the right to
request that the Company participate in any payment for which the insurer is obligated under any insurance agreement to which it is a party, other than a deductible that is specified in such agreement.
|
10. |
Subject to this Letter of Indemnification, the indemnification will, in each case, cover all sums of money (100%) that you will be obligated to pay, in those circumstances for which indemnification is permitted under law and under this
Letter of Indemnification.
|
11. |
The Company will be entitled to any amount collected from a third party in connection with liabilities indemnified hereunder.
|
12. |
Indemnification by the Company as detailed in this Letter of Indemnification will also be subject to fulfilling the following procedures:
|
12.1. |
You will inform the Company of every legal or administrative proceeding that may be brought against you in connection with any event that may entitle you to indemnification, and of every warning made to you in writing, regarding legal or
administrative proceedings that may be commenced against you, and this will be done in a timely manner, immediately after you first become aware of such, and you will provide to the Company or to whom the Company will instruct you, all
documents in connection with such proceedings.
|
12.2. |
The Company will, within a reasonable period of time (or within a shorter period of time if the matter requires filing a statement of defense or a response to a proceeding), take upon itself the handling of your defense in the legal
proceeding and/or entrust such handling to any prominent attorney the Company may select at its discretion for this purpose, subject to the fulfillment of all the following conditions: (a) you have informed the Company as provided in
Section 12.1 above; and (b) the legal proceedings against you solely involves a claim for monetary damages. The Company and/or the above-mentioned attorney will be entitled to act within their exclusive discretion to bring the proceeding to
a close; the appointed attorney will owe his/her duty of loyalty to the Company and to you. In the event that a conflict of interests arises between you and the Company, the attorney will so inform the Company of any such conflict and you,
subject to the Company’s approval, which approval not to be unreasonably withheld, will have the right to appoint an attorney on your behalf, and the provisions of this Letter of Indemnification will apply to expenses you may incur as a
result of such appointment. If the Company decides to settle or arbitrate a monetary obligation, the Company will be entitled to do so, as long as the lawsuit or the threat of a lawsuit against you will be fully withdrawn. At the request of
the Company you will sign any document that will empower the Company and/or attorney as mentioned above, to act on your behalf with regard to your defense in the above-mentioned proceedings and to represent you in all matters relating to
these proceedings, as set forth above. Without derogating from the above provision with respect to a conflict of interests, in any event where, on reasonable grounds, the attorney chosen by the Company is unacceptable to you, you shall be
entitled to appoint your own attorney and the provisions of this Letter of Indemnification will apply to expenses you may incur as a result, provided, however, that the proposed appointment of such attorney including the identity and terms
of engagement of such attorney be brought immediately to the attention of the Company for its prior written approval, which approval not to be unreasonably withheld.
|
12.3. |
You will cooperate with the Company and/or with any attorneys as set forth above in every reasonable manner required of you by any of them in connection with the handling of such legal proceedings, all subject to this Letter of
Indemnification.
|
12.4. |
Whether or not the Company acts as specified in Section 12.2 above, the Company will cover all other expenditures and payments that are mentioned in this Letter of Indemnification, so that you will not be required to pay or to finance
them yourself.
|
12.5. |
Your indemnification in connection with any legal proceeding against you, as set forth in this Letter of Indemnification, will not be enforceable in connection with amounts you may be required to pay as a result of a settlement or
arbitration unless the Company agrees in writing to the settlement or to the entering into the arbitration proceeding, as the case may be.
|
12.6. |
If, for any reason, the Company has decided not to appoint an attorney, as detailed in Section 12.2 above, you will have the right to appoint an attorney of your choice, provided that the proposed appointment of such attorney including
the identity and terms of engagement of such attorney be brought immediately to the attention of the Company for its prior written approval, which approval not to be unreasonably withheld. If you do not inform the Company regarding your
choice of attorney in compliance with the above, the Company will have the right in its discretion to appoint an attorney on your behalf.
|
13. |
This Letter of Indemnification is issued after receipt by the Company of all required approvals under law and the Amended and Restated Articles of Association of the Company. Should any additional approval be required, the Company will
exert its best effort to obtain such approval.
|
14. |
If the Company pays to you, or on your behalf, any amount in connection with a legal proceeding as provided in this Letter of Indemnification, and thereafter it is determined that you are not entitled to such indemnification from the
Company as detailed in this Letter of Indemnification, the sums paid by the Company will be considered a loan that was extended to you by the Company, which will be linked to the Consumer Price Index plus interest at the rate established in
the Income Tax Regulations (Establishment of Interest Rates) – 1985, as may be in effect from time to time, and you will be required to repay these sums to the Company when requested to do so in writing by the Company and in accordance with a
payment schedule that the Company determines.
|
15. |
In order to remove any doubt, in the event of death, this Letter of Indemnification will apply to your heirs.
|
16. |
No waiver, omission or grant of extension by the Company or by you will be interpreted in any manner as a waiver of rights pursuant to this Letter of Indemnification or under applicable law, and will not prevent either party from taking
all legal and other measures in order to enforce such rights.
|
17. |
If any undertaking included in this Letter of Indemnification is held invalid or unenforceable, such invalidity or unenforceability will not affect any of the other undertakings which will remain in full force and effect. Furthermore, if
such invalid or unenforceable undertaking may be modified or amended so as to be valid and enforceable as a matter of law, such undertakings will be deemed to have been modified or amended, and any competent court or arbitrator are hereby
authorized to modify or amend such undertaking, so as to be valid and enforceable to the maximum extent permitted by law. Notwithstanding the above, if this Letter of Indemnification shall be declared or found void for any reason whatsoever
then any previous undertaking of the Company for indemnification towards you, which this Letter of Indemnification is intended to replace, shall remain in full force and effect.
|
18. |
The terms contained in this Letter of Indemnification will be construed in accordance with the Companies Law, and in the absence of any definition in the Companies Law, pursuant to the Securities Law.
|
19. |
This Letter of Indemnification and the agreement herein shall be governed by and construed and enforced in accordance with the laws of the State of Israel. You should be aware, however, that, insofar as indemnification for liabilities
arising under the United States Securities Act of 1933, as amended (the “Securities Act”) may be permitted to the Officers of the Company, the Company has been advised that in the opinion of the U.S. Securities and Exchange Commission
(the “SEC”) such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event of a claim for such indemnification (other than the payment by the Company of expenses incurred
or paid by an Officer in the successful defense of any action, suit or proceeding), the Company will (in accordance with an undertaking given to the SEC), unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
|
20. |
Notwithstanding anything herein to the contrary, the Company shall have no obligation to provide indemnity hereunder if a court of competent jurisdiction determines that such indemnification is not lawful.
|
21. |
This Letter of Indemnification will enter into affect upon your signature in the space provided below and return of the signed copy to the Company.
|
22. |
This Letter of Indemnification replaces and substitutes any previous undertaking of the Company for indemnification, to the extent granted.
|
Respectfully,
|
||
|
Eitan Oppenhaim
President & Chief Executive Officer
on behalf of
Nova Ltd. |
Dror David
Chief Financial Officer
|
|
____________________
Name: _______________ Date: ________________ |
1. |
The issuance of securities including, but not limited to the public according to a prospectus, a private offering, sales offering, the issuance of bonus shares, issuance of securities and/or any other manner of security offering and also
tender offers for securities, the Company’s purchase of its own and it subsidiaries’ securities, as well as any action relating to any of the above.
|
2. |
A “Transaction” or “Activity” as defined in Article 1 of the Companies Law, including among others a negotiation regarding such Transaction and/or Activity, transfer, sale and/or purchase of assets and/or liabilities, including securities
and/or the granting and/or receiving of any right in any of the above, including among others, the acquisition, sale or merger of entities and/or any action connected directly or indirectly with such a Transaction.
|
3. |
The filing of a report and/or announcement required by the Companies Law and/or Securities Law, or U.S. Securities Laws, including the regulations pertaining to these laws, and/or according to rules and/or regulations adopted by the
Tel-Aviv Stock Exchange or The NASDAQ or any other stock exchange and/or any law of any other country pertaining to these issues and/or the failure to file such a report and/or announcement.
|
4. |
Any decision regarding a Distribution, as defined in the Companies Law including a Distribution pursuant to a court order.
|
5. |
Preparation of financial statements of the Company and its Subsidiaries and approval of such financials.
|
6. |
A change in the Company’s structure and/or a reorganization of the Company, including any arrangement between the Company and its shareholders and/or creditors according to the Companies Law, and/or any decision relating to these issues
including, but not limited to, a merger, a demerger, a change in the Company’s capital, the establishment of subsidiaries and/or their liquidation or sale, and/or all allotments or distributions.
|
7. |
Expressions, announcements, statements, including a position taken, and/or an opinion made in good faith by an Officer in the course of and/or in connection with his/her duties, including during negotiations and contracting with suppliers,
consultants and consumers and/or during a meeting of the Company’s management, Board of Directors and/or one of its committees.
|
8. |
An action made in good faith in contradiction to the Memorandum of Incorporation and/or the Amended and Restated Articles of Association.
|
9. |
An Action and/or decision relating to employer-employee relations including employment agreements, negotiations regarding employment agreements, salary and/or other employee benefits, including employee stock option plans and/or option
distributions to employees.
|
10. |
An action and/or decision relating to work safety and/or working conditions and/or employee activities and/or any event relating thereto.
|
11. |
An action or decision relating to insurance matters and/or risk management of the Company.
|
12. |
Actions relating to the Company’s commercial relations, including with employees, outside contractors, customers, suppliers, and service providers.
|
13. |
Preparation of work plans, including pricing, marketing, distribution, and instructions to employees, to customers and to suppliers and to cooperative arrangements, including with competitors.
|
14. |
Actions relating to product development, to the conduct of product testing, approvals, sales, distribution of licensing in their regard.
|
15. |
Decisions and/or actions relating to environmental compliance, including pollution, contamination, and hazardous materials.
|
16. |
Granting of liens on Company assets and granting guarantees on behalf of the Company.
|
17. |
Compliance with various governmental requirements in Israel and outside Israel, including a Ministry of Defense, Antitrust Authority, Securities Authority, Environmental Compliance Agency and Tax Authorities.
|
18. |
Investigations conducted against you by any governmental or quasi-governmental authority.
|
19. |
Establishment and management of financial policy, including credit policies, hedging against changes in currency exchange rates and utilization of cash reserves.
|
20. |
Actions taken (or alleged omissions) pursuant to or in accordance with the policies and procedures of the Company, its subsidiaries and/or its affiliates, whether such policies and procedures are published or not.
|
21. |
Causing damages, including bodily injury and property damage, partial or comprehensive loss, loss of use or disability, during any action or omission relating to the Company, or relating to its employees, agents or others who act or are
purported to act on behalf of the Company.
|
22. |
An event resulting from the Company being a publicly traded company or due to its shares being issued to the public.
|
23. |
Transfer of information required or permitted to be transferred under applicable law to an interested party of the Company.
|
24. |
An act that may be considered as an infringement of the intellectual property rights of a third party, or an act relating to the Company’s intellectual property, inter alia, by taking action and
filing lawsuits. Also, any action taken against Nanometrics, Inc., in regards to protection of intellectual property.
|
25. |
Any of the above specified events relating to an activity of an entity controlled by the Company or an entity affiliated with the Company or pursuant to the Officer’s position in an affiliated entity and/or in an entity controlled by the
Company.
|
26. |
The Company’s follow-on public offering completed in 2010.
|
27. |
Any other actions which can be anticipated for companies of the type of the Company, and which the Board of Directors may deem appropriate.
|
28. |
Any indemnifiable event and/or action pursuant to the Efficiency of Enforcement Procedures in the Securities Authority Law (Legislation Amendments), 2011.
|
29. |
Any of the above specified events, whether occurring in Israel or occurring outside of Israel.
|
Table of Contents
|
||
Table of Contents
|
II
|
|
Index of Definitions
|
III
|
|
Index of Schedules
|
IV
|
|
Recitals
|
2 | |
1
|
Corporate Structure
|
2 |
2
|
Sale and Assignment of the Shares; Right to Profits
|
3 |
3
|
Purchase Price; Conditions of Payment
|
4 |
4
|
Commercial effect
|
13
|
5
|
Cooperation and Conduct of Business until Closing
|
13 |
6
|
Closing Conditions; Long Stop Date
|
15 |
7
|
Closing
|
17 |
8
|
Sellers Guarantees
|
19 |
9
|
Remedies
|
32 |
10
|
Taxes
|
37
|
11
|
Purchaser Guarantees
|
41 |
12
|
Additional Obligations of the Parties post-Closing
|
42 |
13
|
Escrow
|
43
|
14
|
Parent Undertaking
|
44 |
15
|
Confidentiality and Press Releases
|
44 |
16
|
Power of Attorney in Favour of the Purchaser
|
45
|
17
|
Assignment of Rights and Transfer of Obligations
|
45 |
18
|
Transfer Taxes and Costs
|
45 |
19
|
Appointment of Representative
|
46 |
20
|
Notices
|
46 |
21
|
Miscellaneous
|
48 |
Term
|
Page |
Accounting Principles
|
7 |
Accounts Receivable
|
21 |
Adjustment Amount
|
10 |
Affiliate
|
14
|
Agreement
|
1
|
AWV
|
15 |
Base Amount
|
4 |
BGB
|
4 |
BMWi
|
15 |
Business Day
|
48 |
Business Know-How
|
22
|
Clearance
|
15
|
Closing
|
15
|
Closing Actions
|
18
|
Closing Conditions
|
15 |
Closing Date
|
19 |
Closing Date Balance Sheet
|
7 |
Closing Date Cash
|
6 |
Closing Date Financial Debt
|
6 |
Closing Date Necessary Liquidity
|
6 |
Closing Date Statement
|
7 |
Closing Date Working Capital
|
6 |
Closing Memorandum
|
18 |
Company
|
2 |
Company Privacy Commitments
|
30
|
Damages
|
32 |
Data Room
|
34
|
Deductible
|
33 |
Disputed Amount
|
5 |
Earn-out Financial Statements
|
11 |
Earn-out Financial Statements Part 1
|
10
|
Earn-out Financial Statements Part 2
|
11
|
Earn-out Payment
|
10
|
Environmental Contamination
|
31 |
Environmental Laws
|
31
|
Escrow Account
|
10 |
Escrow Agent
|
18
|
Escrow Agreement
|
18 |
Escrow Amount
|
10 |
Estimate Notice
|
5 |
Excess Cash Distribution Costs
|
4 |
Exchange Rate
|
12
|
FDI Requests
|
16
|
Final Closing Date Statement
|
9 |
Financial Statements
|
20 |
Fundamental Guarantees
|
33 |
GDPR
|
30
|
German FDI Clearance Certificate
|
15 |
German GAAP
|
21
|
Governmental Authority
|
20
|
Group
|
3 |
Group Companies
|
3 |
Group Company
|
3 |
Group Company Shares
|
3 |
Hazardous Materials
|
31 |
Indemnifiable Taxes
|
37 |
Term | Page |
Information Technology
|
24 |
IP Rights
|
22 |
Key Customers
|
26 |
Key Employees
|
27 |
Know-How
|
23 |
Leased Real Estate
|
22 |
Liability Cap
|
33
|
Long Stop Date
|
17 |
Material Adverse Change
|
15 |
Material Agreements
|
24 |
Neutral Auditor
|
8 |
Neutral Auditor Firm
|
8 |
Notices
|
46 |
Objection Statement
|
7 |
Open Source Software
|
24
|
Overall Deductible
|
33
|
Owned IP Rights
|
22 |
Owned Real Estate
|
22 |
Owned Registered IP
|
22
|
Party/ies
|
1
|
Paying Agent’s Account
|
12
|
Permits
|
28 |
Privacy Laws
|
30 |
Pro-Forma Consolidated Financial Statements
|
21 |
Purchase Price
|
5 |
Purchase Price Estimate
|
5 |
Reference Pro-Forma Balance Sheet
|
7
|
Registered IP Rights
|
23 |
Related Person
|
14 |
Representative
|
46
|
(-------)
|
4 |
Review Period
|
7 |
Scheduled Closing Date
|
17 |
Seller
|
1
|
Sellers
|
1
|
Sellers Guarantee(s)
|
19 |
Sellers' Knowledge
|
32 |
Shares
|
3 |
Signing Date
|
1
|
Software
|
23 |
South Korean Subsidiary
|
3 |
Subsidiaries
|
3 |
Subsidiary
|
3 |
Taiwanese Subsidiary
|
3 |
Tax Authority
|
37 |
Tax Guarantee(s)
|
37
|
Tax Indemnification Claim
|
38
|
Taxes
|
37 |
Third Party Claim
|
35 |
Total Purchase Price
|
5 |
Transaction
|
2 |
USA Subsidiary
|
3 |
VAT
|
12 |
VAT Option Right
|
12
|
Withdrawing Party
|
17
|
Working Capital Adjustment Amount
|
6 |
− Schedule 2.2.1
|
Declarations of consent to the sale of the Shares by the Company
|
− Schedule 2.2.2
|
Declarations of consent to the sale of the Shares by the Sellers' spouses
|
− Schedule 3.1
|
Sample Calculation of Purchase Price
|
− Schedule 3.3
|
Definition of Closing Date Cash, Closing Date Financial Debts, Closing Date Necessary Liquidity, Closing Date Working Capital
|
− Schedule 3.4.1 b)
|
Reference Pro-Forma Balance Sheet as of 31 December 2020
|
− Schedule 3.6.2 b)
|
Definition of the Group's EBITDA
|
− Schedule 3.7
|
Principles for allocation of the Purchase Price
|
− Schedule 3.8
|
Paying Agent's Account
|
− Schedule 7.2b)
|
Escrow Agreement
|
− Schedule 7.2d)
|
Confirmation of each Seller regarding payment obligations towards any Group Company and claims against any Group Company
|
− Schedule 7.2e)
|
Confirmation of Jürg Stahl on behalf of all Sellers that no Material Adverse Change has occurred
|
− Schedule 7.4
|
Closing Memorandum
|
− Schedule 8.1.1a)
|
Copies of articles of association of all Group Companies
|
− Schedule 8.1.2a)
|
(Audited) Financial Statements of the Group Companies 2018-2020 and Pro-Forma Consolidated Financial Statements of the Group 2019-2020
|
− Schedule 8.1.2e)-1
|
Accounts Receivables as of 31 December 2020 not collected or not collectible
|
− Schedule 8.1.2e)-2
|
Accounts Receivables after 31 December 2020 not collected or not collectible
|
− Schedule 8.1.2e)-3
|
List of encumbrances, discount or agreement for deduction regarding Account Receivables
|
− Schedule 8.1.4a)
|
Real Estate owned by the Group Companies
|
− Schedule 8.1.4b)
|
Real Estate leased-in by the Group Companies
|
− Schedule 8.1.5a)
|
List of IP-Rights and Technical Know How of the Group Company
|
− Schedule 8.1.5c)
|
List of pending judicial or regulatory proceedings regarding IP Rights
|
− Schedule 8.1.5f)
|
List of Software and scope of Software
|
− Schedule 8.1.5g)
|
List of employee inventors under German Law
|
− Schedule 8.1.7a)
|
List of not completely fulfilled material agreements between a Group Company and a third party
|
− Schedule 8.1.7b)
|
List of contracts that will terminate because of the Agreement
|
− Schedule 8.1.7c)
|
List of key customers (sales > EUR 500,000)
|
− Schedule 8.1.7d)
|
List of countries for which external distribution persons are used
|
− Schedule 8.1.8
|
List of contracts regarding arrangements with Sellers or Sellers' affiliates
|
− Schedule 8.1.9a)-1
|
List of employees
|
− Schedule 8.1.9a)-2
|
List of leased employees
|
− Schedule 8.1.9a)-3
|
List of freelancers
|
− Schedule 8.1.9b)
|
Standard employment agreement
|
− Schedule 8.1.9e)
|
List of managing directors and employees entitled to remuneration more than EUR 100,000 p.a.
|
− (-------)
|
(-------)
|
− (-------)
|
(-------)
|
− (-------)
|
(-------)
|
− (-------)
|
(-------)
|
− (-------)
|
(-------)
|
− (-------)
|
(-------)
|
− (-------)
|
(-------)
|
− (-------)
|
(-------)
|
(1) |
Arnold Cziurlok, (-------)
|
(2) |
Dr. Ursula Tinner, (-------)
|
(3) |
Nikolaus Maser, (-------)
|
(4) |
Glück-Industrie-Elektronik GmbH,a limited liability company (Gesellschaft mit beschränkter Haftung) incorporated under the laws of Germany with registered
business address Im Kalten Brunnen 29, 72666 Neckartailfingen, Germany, registered with the commercial register (Handelsregister) of the local court of Stuttgart under HRB 223119,
|
(5) |
Carsten Wagner, (-------)
|
(6) |
Jürg Stahl, (-------)
|
(7) |
Brigitta Stahl, (-------)
|
(8) |
Nova Measuring Instruments GmbH, a limited liability company (Gesellschaft mit beschränkter Haftung) incorporated under the laws of Germany with registered
business address Gebäude Ensemble Deutsche Werkstätten Hellerau, Bruno-Paul-Haus, 1 OG, Moritzburger Weg 67, 01109 Dresden, Germany, registered with the commercial register (Handelsregister) of the
local court of Dresden under HRB 32966,
|
(9) |
Nova Ltd., 5 David Fikes Street, 10th Floor P.O. Box 266, Rehovot 7610201, Israel
|
1 |
Corporate Structure
|
1.1 |
Corporate Structure of the Company
|
1.1.1 |
The Company is a limited liability company (Gesellschaft mit beschränkter Haftung) incorporated under the laws of Germany and registered with the commercial register (Handelsregister) of the local court of Stuttgart under number HRB 382195, having its registered seat in Pliezhausen, and with registered business address at Siemensstraße 8, 72124 Pliezhausen, Germany.
|
1.1.2 |
The registered share capital (Stammkapital) of the Company equals EUR 131,210.00 (in words: one hundred thirty-one thousand two hundred ten euros) and is divided into the following shares:
|
a) |
one share with a par value (Nennbetrag) of EUR 13,000.00 (in words: thirteen thousand euros) (consecutive no. 1 of the shareholder list filed with the commercial register of the Company dated 10
July 2015), held by Seller 1;
|
b) |
one share with a par value (Nennbetrag) of EUR 8,000.00 (in words: eight thousand euros) (consecutive no. 2 of the shareholder list filed with the commercial register of the Company dated 10 July
2015), held by Seller 2;
|
c) |
one share with a par value (Nennbetrag) of EUR 14,000.00 (in words: fourteen thousand euros) (consecutive no. 3 of the shareholder list filed with the commercial register of the Company dated 10
July 2015) held by Seller 3;
|
d) |
one share with a par value (Nennbetrag) of EUR 13,350.00 (in words: thirteen thousand three hundred fifty euros) (consecutive no. 4 of the shareholder list filed with the commercial register of
the Company dated 10 July 2015) held by Seller 4;
|
e) |
one share with a par value (Nennbetrag) of EUR 8,000.00 (in words: eight thousand euros) (consecutive no. 5 of the shareholder list filed with the commercial register of the Company dated 10 July
2015) held by Seller 5;
|
f) |
one share with a par value (Nennbetrag) of EUR 28,000.00 (in words: twenty eight thousand euros) (consecutive no. 6 of the shareholder list filed with the commercial register of the Company dated
10 July 2015) and one share with a par value (Nennbetrag) of EUR 10,000.00 (in words: ten thousand euros) (consecutive no. 8 of the shareholder list filed with the commercial register of the Company
dated 10 July 2015) both held by Seller 6; and
|
g) |
one share with a par value (Nennbetrag) of EUR 36,860.00 (in words: thirty-six thousand eight hundred sixty euros) (consecutive no. 7 of the shareholder list filed with the commercial register of
the Company dated 10 July 2015) held by Seller 7.
|
1.1.3 |
In this Agreement, all shares which the Sellers hold in the Company, are collectively referred to as the Shares, regardless of whether the number, nominal amounts and consecutive numbering of the
shares or the registered share capital of the Company correspond to the aforementioned details.
|
1.2 |
Subsidiaries and branch
|
1.2.1 |
The Company holds directly all shares (on a fully diluted basis) in the following companies:
|
a) |
Ancosys Instrument Taiwan Ltd, having its legal seat at Rm. 2, 10F, No 8, Ziqiang S. Road, Zhubei City, Hsinchu County, Taiwan (Taiwanese Subsidiary), which has a registered share capital of TWD
1,500,000, divided into 150,000 shares,
|
b) |
ancosys Inc, having its registered office at 874 Walker Road, Suite C, City of Dover, County of Kent, Delaware 19904, USA (USA Subsidiary), which has a registered share capital of USD 150,000,
divided into 150 shares,
|
c) |
ancosys Korea LLC, having its principal office at Yongin-si, Gyeonggi-do, South Korea (South Korean Subsidiary), which has a registered share capital of KRW 100,000,000 divided into 20,000 shares,
|
1.2.2 |
The USA Subsidiary operates a branch (Zweigniederlassung) in Taiwan with business address No 33, 7th Floor, Sec 1 Zhong Xiao West End, 100 Taipei, Taiwan.
|
2 |
Sale and Assignment of the Shares; Right to Profits
|
2.1 |
Sale and Assignment of the Shares; Right to Profits
|
2.1.1 |
Subject to the terms and conditions of this Agreement, the Sellers hereby sell (verkaufen), and subject to the condition precedent (aufschiebende Bedingung)
of the payment of the Preliminary Purchase Price to the Paying Agent and the Escrow Amount to the Escrow Account assign (abtreten) to the Purchaser the Shares. The Purchaser accepts such sale and
assignment of the Shares.
|
2.1.2 |
The sale of the Shares shall include any and all rights associated with, or otherwise pertaining to, the Shares as of the Closing Date, including the rights to any undistributed profits for the current business year and for any prior
business years of the Company.
|
2.2 |
Consent of the Company; Consent of spouses
|
2.2.1 |
The Company and the meeting of shareholders of the Company have already consented to the sale and assignment of the Shares. A copy of the declaration of consent of the Company and of the shareholders' resolution of the Company, also
containing a waiver by each of the Sellers on any rights of first refusal and all other pre-emptive rights or similar rights, including drag and tag along rights such Sellers might have in relation to the Shares held by the other Sellers,
are attached hereto as Schedule 2.2.1.
|
2.2.2 |
By way of precaution, the spouses of each Seller who lives in the German property regime of community of accrued gains (Güterstand der Zugewinngemeinschaft) have consented to the sale and transfer
of the respective Shares in the Company in accordance with Section 1365 German Civil Code (Bürgerliches Gesetzbuch – BGB). Copies of the respective declarations of consent are attached as Schedule 2.2.2.
|
3 |
Purchase Price; Conditions of Payment
|
3.1 |
Purchase Price
|
a) |
the balance of the following amounts:
|
(i) |
A fixed amount of EUR 75,000,000 (in words: seventy-five million euros) (the Base Amount)
|
(ii) |
minus the aggregate amount of the Closing Date Financial Debt;
|
(iii) |
plus the amount of the Closing Date Cash;
|
(iv) |
minus the Necessary Liquidity Adjustment Amount, if any;
|
(v) |
minus the Working Capital Adjustment Amount, if any;
|
(vi) |
minus an amount of (-------);
|
(vii) |
minus an amount of 5% of the Excess Cash Amount (the Excess Cash Distribution Costs);
|
b) |
plus the Earn-out (if and to the extent applicable) (together with the Purchase Price the Total Purchase Price).
|
3.2 |
Preliminary purchase price
|
3.2.1 |
The preliminary purchase price for the Shares to be paid by the Purchaser on the Closing (the Preliminary Purchase Price) shall amount to the balance of
|
(i) |
the Base Amount;
|
(ii) |
plus the estimated Closing Date Cash;
|
(iii) |
minus the estimated Closing Date Financial Debt;
|
(iv) |
minus the estimated Necessary Liquidity Adjustment Amount, if any;
|
(v) |
minus the estimated Working Capital Adjustment Amount, if any;
|
(vi) |
minus(-------);
|
(vii) |
minus the Excess Cash Distribution Costs; and
|
(viii) |
minus the Escrow Amount, which shall be paid by the Purchaser to the Escrow Account at Closing.
|
3.2.2 |
No later than ten (10) Business Days prior to the Scheduled Closing Date, Sellers shall deliver to Purchaser a notice (the Estimate Notice) that sets forth Sellers’ good faith estimate of the
Preliminary Purchase Price, together with all required supporting documentation (including, but not limited to, bank statements supporting the estimated Closing Date Cash) (the Purchase Price Estimate).
The Purchaser may raise objections to the Purchase Price Estimate within five (5) Business Days after receipt of the Estimate Notice by providing the Sellers with a written statement of objections specifying the relevant items, sufficient
reasons for each objection and the amounts in dispute in reasonable detail. If and to the extent Parties are not able to settle the disagreement until the end of the second (2nd) Business Day prior to the Scheduled Closing Date,
|
a) |
and if the Disputed Amount amounts to not more than EUR 2,500,000 (in words: two million five hundred thousand euros), the Purchaser shall deduct the amount in dispute (the Disputed Amount) from the Preliminary Purchase Price (which shall therefore be reduced accordingly) to be paid to the Paying Agent at Closing and pay such Disputed Amount to the Escrow Account instead. The Disputed
Amount paid to the Escrow Account, if any, shall (i) not be part of the Escrow Amount and (ii) be released to the respective Party as per clause 3.4.5.
|
b) |
and if the Disputed Amount exceeds EUR 2,500,000 (in words: two million five hundred thousand euros), the Scheduled Closing Date shall be deferred until the Purchase Price Estimate and accordingly the Preliminary Purchase Price has
become final and binding between the Parties according to clause 3.4.3 and 3.4.4, which shall apply mutadis mutandis (whereby the following shortened deadlines shall apply for the purpose of this
clause 3.2.2b): the Parties shall have five (5) Business Days to agree on the Preliminary Purchase Price and, if applicable, five (5) further Business Days to agree on the Neutral Auditor and the Neutral Auditor shall have thirty (30)
Business Days to determine the Preliminary Purchase Price). In this case, the Purchaser shall, at Closing, pay to the Paying Agent the Preliminary Purchase Price determined by the Neutral Auditor, without paying any amount (in addition to
the Escrow Amount) to the Escrow Account. The Long Stop Date shall be postponed for as many calendar days as the procedure to determine the Preliminary Purchase Price according to this clause 3.2.2b) is running.
|
3.3 |
Closing Date Cash, Closing Date Financial Debt, Necessary Liquidity Amount
|
3.3.1 |
For the purpose of this Agreement
|
a) |
Closing Date Cash means the consolidated amount of cash and cash equivalents of the Group Companies that can be converted into cash within a period of three (3) months after the Closing Date,
including in any case the line items set forth in Schedule 3.3 under the heading “Closing Date Cash”, all in euro as per the Closing Date, as determined on the basis of the Final Closing Date
Balance Sheet.
|
b) |
Closing Date Financial Debt means the consolidated amount of the line items set forth in Schedule 3.3, in euro as per the Closing Date, as determined on the basis of the Final Closing Date
Balance Sheet.
|
c) |
Closing Date Necessary Liquidity means the Group Companies’ cash on bank accounts as set forth in Schedule 3.3 (however, for the avoidance of doubt, without deducting the Closing Date
Financial Debt) which the Group Companies need to run their operations in the ordinary course of business for five (5) Business Days after the Closing Date.
|
d) |
Necessary Liquidity Adjustment Amount means the amount (if any) by which, as per the Closing Date each of the Group Companies’ cash on bank accounts falls short of the Closing Date Necessary
Liquidity.
|
e) |
Closing Date Working Capital means the consolidated amount of the line items set forth in Schedule 3.3 under the heading “Closing Date Working
Capital” of the Group Companies in euro as per the Closing Date, as determined on the basis of the Final Closing Date Balance Sheet.
|
f) |
The Working Capital Adjustment Amount shall be the amount by which the Closing Date Working Capital falls below EUR 8,727,000 (in words: eight million seven hundred twenty-seven thousand euros).
|
g) |
The Excess Cash Amount shall be the amount by which the Closing Date Cash exceeds the Closing Date Necessary Liquidity.
|
3.4 |
Purchase Price Adjustment
|
3.4.1 |
Preparation of the Closing Date Balance Sheet
|
a) |
After the Closing Date, the Purchaser shall prepare a consolidated balance sheet of the Group based on the individual balance sheet of the Company according to German GAAP (as defined below) and the individual balance sheets of the
Subsidiaries as per the relevant local GAAPs, all as applied for the establishment of the respective financial statements 2020 (together Accounting Principles) as of the Closing Date showing all
balance sheet items required for the determination of the Closing Date Cash, the Closing Date Financial Debt, the Closing Date Necessary Liquidity and the Closing Date Working Capital (the Closing Date
Balance Sheet).
|
b) |
The Closing Date Balance Sheet shall be prepared in the English language on a going concern basis in the same format as the pro-forma balance sheet as of 31 December 2020 attached as Schedule 3.4.1 b) (Reference Pro-Forma Balance Sheet); applying the Accounting Principles.
|
c) |
The Purchaser shall deliver the Closing Date Balance Sheet together with a calculation of the Purchase Price and the Adjustment Amount derived therefrom (together the Closing Date Statement) to
the Sellers within forty (40) Business Days after the Closing Date. Upon the Sellers' reasonable request, the Purchaser shall make available to the Sellers copies of the documents reasonably required for the review of the Closing Date
Balance Sheet.
|
3.4.2 |
Review by the Sellers
|
a) |
The Sellers shall be entitled to review the Closing Date Statement within a period of twenty (20) Business Days after the receipt from the Purchaser (Review Period). The review of the Closing Date
Statement shall be limited to the compliance of the Closing Date Statement with this Agreement and, in particular, the provisions of clause 3.4.1. The Sellers shall notify to the Purchaser in writing any objection they may have against the
Closing Date Statement, specifying the relevant items, the reasons for their objections and the amounts in dispute in reasonable detail (Objection Statement).
|
b) |
If and to the extent the Sellers do not submit an Objection Statement in accordance with lit. a) above, the Sellers shall be deemed to have agreed to the positions set forth in the Closing Date Statement and the Closing Date Statement
shall become final and binding on such positions upon the Parties upon expiry of the Review Period.
|
3.4.3 |
Expert Proceeding
|
a) |
If and to the extent the Sellers have submitted an Objection Statement in accordance with clause 3.4.2, the Parties shall discuss the disputed items in order to reach an agreement.
|
b) |
If and to the extent the Sellers and the Purchaser cannot settle the disagreement within twenty (20) Business Days after the Purchaser has received the Objection Statement, the Sellers or the Purchaser may present the matter to a neutral
auditor (Neutral Auditor) who is a partner of PwC, Deloitte, KPMG or BDO and must be in sufficient command of the English language (such firm the Neutral Auditor Firm),
which firm shall be jointly designated by the Sellers and the Purchaser. If the Sellers and the Purchaser cannot agree on the Neutral Auditor Firm within fifteen (15) Business Days after the respective request for such designation, the
Neutral Auditor Firm and the Neutral Auditor shall be appointed by the Chairman of the Board of German Institute of Public Accountants (Vorsitzer des Vorstandes des Institut der Wirtschaftsprüfer in
Deutschland e. V.) at the request of the Sellers or the Purchaser after consideration of the proposals and comments by the Sellers and the Purchaser; the Neutral Auditor to be appointed must satisfy the following criteria: (i) The
Neutral Auditor must have fifteen (15) years of professional experience in the area of audit services; (ii) the Neutral Auditor must have been a partner of the Neutral Auditor Firm for a period of at least five (5) years; and (iii) the
Neutral Auditor must confirm that he and his firm are not conflicted from accepting the assignment and have the necessary resources to perform the required services in a timely manner. If and to the extent the Parties have not reached an
agreement pursuant to lit. a) and neither Party requests that the matter in dispute is to be decided by the Neutral Expert in accordance with and within the time limit set forth in sentence 1, clause 3.4.2 b) shall apply mutatis mutandis.
|
c) |
The Sellers and the Purchaser shall jointly instruct the Neutral Auditor Firm to decide the issues in dispute in accordance with the provisions of this clause 3.4.3. To that end, the Sellers and the Purchaser agree to use commercially
reasonable efforts to formalize the engagement of the Neutral Auditor Firm as promptly as practicable. The Parties in particular agree to execute, if requested by the Neutral Auditor Firm, an engagement letter with the Neutral Auditor Firm
reflecting the terms of this Agreement and otherwise containing reasonable terms.
|
d) |
Unless instructed otherwise by the Sellers and the Purchaser jointly, the Neutral Auditor shall limit his decisions to the issues in dispute, but shall on the basis of such decisions and the undisputed parts of the Closing Date Statement
determine the definitive content of the Closing Date Statement and in particular the definitive amount of the Purchase Price. In respect of the issues in dispute the decisions of the Neutral Auditor shall be limited to, and may not fall
beyond or outside, the positions taken by the Sellers and the Purchaser. To the extent necessary for the decisions, the Neutral Auditor shall also be entitled to decide on the interpretation of this Agreement, but not upon legal issues
(unless such legal issues specifically pertain to the applicable accounting and valuation standards and principles). The Neutral Auditor shall act as an expert (Schiedsgutachter) and not as an
arbitrator (Schiedsrichter).
|
e) |
Before making the decision, the Neutral Auditor shall grant the Sellers and the Purchaser the opportunity to present their positions in writing.
|
f) |
The Neutral Auditor shall use best efforts to deliver its written opinion with reasons for the decisions as soon as reasonably practical and shall endeavor to do so not later than sixty (60) Business Days after the issues in dispute have
been referred to the Neutral Auditor.
|
g) |
Subject to Section 319 BGB, the Neutral Auditor’s decision and the Closing Date Statement as determined by the Neutral Auditor shall be final and binding upon the Parties.
|
h) |
The Neutral Auditor shall decide upon the allocation of its costs and expenses between the Parties by applying the principles of Sections 91 et seqq. German Code of Civil Procedures (ZPO).
|
3.4.4 |
Final Closing Date Statement
|
a) |
in accordance with clause 3.4.2, if and to the extent the Sellers have not submitted an Objection Statement within the time period set forth therein;
|
b) |
if and to the extent the Sellers and the Purchaser have reached an agreement concerning the disputed items;
|
c) |
in accordance with clause 3.4.3 b), if and to the extent the Parties have not reached an agreement and neither Party requests within the time limit set forth in clause 3.4.3 b) that the matter in dispute shall be decided by the Neutral
Auditor; and
|
d) |
in accordance with clause 3.4.3 g), if and to the extent the Neutral Auditor has decided about the unresolved disputed items;
|
3.4.5 |
Adjustment Amount
|
a) |
if and to the extent the Purchase Price falls short of the Preliminary Purchase Price:
|
(i) |
if any Disputed Amount remains on the Escrow Account, the Parties shall jointly instruct the Escrow Agent to release the amount from the Disputed Amount to the Purchaser; and
|
(ii) |
if, taking into account the initially deposited Disputed Amount, any difference by which the Purchase Price falls short of the Preliminary Purchase Price remains, the Sellers shall pay to the Purchaser an amount equal to such difference;
or
|
b) |
if and to the extent the Purchase Price exceeds the Preliminary Purchase Price:
|
(i) |
if any Disputed Amount remains on the Escrow Account, the Parties shall jointly instruct the Escrow Agent to release (i) an amount equal to the portion of the Disputed Amount by which the Purchase Price exceeds the Preliminary Purchase
Price to the Sellers and (ii) an amount equal to the remaining portion of the amount equal to the Disputed Amount, if any, to the Purchaser; and
|
(ii) |
if, taking into account the initially deposited Disputed Amount, any difference by which the Purchase Price exceeds the Preliminary Purchase Price remains, the Purchaser shall pay to the Sellers an amount equal to such difference
|
3.5 |
Escrow Amount
|
3.6 |
Earn-out
|
3.6.1 |
Earn-out Payment
|
a) |
with respect to clause 3.6.2a) and b), based on the Group Companies' pro-forma consolidated financial statements for the calendar year 2021, which in turn shall be based on and consolidate (i) the Company's audited financial statements
for the calendar year 2021 and (ii) the financial statements of all Subsidiaries for the calendar year 2021 (Earn-out Financial Statements Part 1), and
|
b) |
with respect to clause 3.6.2c), based on the Group Companies' pro-forma consolidated interim financial statements as per 30 June 2022, which in turn shall be based on and consolidate (i) the Company's interim financial statements as per
30 June 2022 and (ii) the interim financial statements of all Subsidiaries as per 30 June 2022 (Earn-out Financial Statements Part 2; Earn-out Financial Statements Parts 1 and 2 together Earn-out Financial Statements),
|
a) |
(-------) under clause 12.2, or
|
b) |
intragroup fees or charges paid or owed (for the period until 31 December 2021) by any Group Company to any Affiliate of the Purchaser (excluding the Group Companies) if and to the extent such intragroup fees or charges exceed (i) any
existing intragroup fees or charges and/or (ii) any fees or costs for external services received by Group Companies in the past and which are substituted by services rendered or contracted by the Purchaser or Affiliates of the Purchaser,
|
3.6.2 |
Conditions for the Earn-out Payment
|
a) |
The Group's consolidated revenues for calendar year 2021 amount to (-------) or more; and
|
b) |
The Group's EBITDA (as defined in Schedule 3.6.2b)) constitutes more than 19% of such calendar year 2021 revenues; and
|
c) |
The Group's consolidated revenues for the first half of calendar year 2022 amount to (-------) or more.
|
3.6.3 |
Review by the Sellers, Expert Proceedings
|
3.7 |
Allocation of the Purchase Price and Total Purchase Price
|
3.8 |
Payment Terms
|
3.8.1 |
Payments by the Purchaser to the Sellers based on this Agreement must, except as otherwise provided in this Agreement, be paid by the Purchaser in USD via bank transfer to be credited on the same day, free of charges and fees, with same
day value to the account of MLL Meyerlustenberger Lachenal Froriep AG (Paying Agent's Account) as specified in Schedule 3.8 with debt discharging effect (mit
schuldbefreiender Wirkung) towards each of the Sellers. Payments by the Purchaser shall be deemed to have been timely made only upon the irrevocable and unconditional crediting of the amount payable to the Paying Agent's Account or
the Escrow Account, as the case may be, on the relevant date with a value date (Wertstellungsdatum) as of the same date.
|
3.8.2 |
Any payment under in connection with this Agreement, although expressed in euros in this Agreement, shall be paid in the equivalent amount of United States Dollars. The respective amount shall be converted into United States Dollars at a
fixed exchange rate of USD 1.19 per 1 euro (the Exchange Rate).
|
3.9 |
No Set-Off
|
3.10 |
Value Added Tax
|
4 |
Commercial effect
|
5 |
Cooperation and Conduct of Business until Closing
|
5.1 |
Conduct in ordinary course
|
5.2 |
Specific measures and activities outside ordinary course
|
a) |
Sale, purchase, transfer or acquisition of any shares or any other equity interests in companies, including the Subsidiaries;
|
b) |
Disposal of, in whole or in material parts, the business operations of the Group Companies;
|
c) |
Opening of new divisions, branches of business or regional offices, or closure of existing divisions and/or permanent establishments;
|
d) |
Entering into or amending of any loan agreements or any other agreement resulting in financial debt exceeding a principal amount of EUR 100,000 (in words: hundred thousand euros) in the individual case;
|
e) |
Making of any capital expenditures in excess of EUR 200,000 (in words: two hundred thousand euros) in the individual case;
|
f) |
Sale, purchase or encumbrance of any real property or rights similar to real property (grundstücksgleiche Rechte);
|
g) |
Entering into, termination or amendment of Material Agreements other than in the ordinary course of business;
|
h) |
Assignment or transfer for security purposes, pledge, encumbering or otherwise burden tangible and intangible fixed assets (Gegenstände des Anlagevermögens) – whether to be shown in the balance
sheet or not – in each case except (i) in the fulfilment of respective obligations entered into before the Signing Date and or (ii) in the ordinary course of business and consistent with past practice;
|
i) |
Entering into, assumption of, indemnification from, any guarantee, indemnity or other agreement to secure any obligation of a third party or creation of any encumbrance over any assets – in each case except (i) in the fulfilment of
respective obligations entered into before the Signing Date and or (ii) in the ordinary course of business and consistent with past practice;
|
j) |
Entering into, amending or termination of any agreement with a labor union or collective bargaining agreement;
|
k) |
Entering into any agreement or transaction with any Sellers or any affiliate in the meaning of Sections 15 et seqq. German Stock Corporation Act (Aktiengesetz - AktG) (Affiliate) or related person in the meaning of Section 138 German Insolvency Code (Insolvenzordnung) of a Seller (Related Person);
|
l) |
(i) Making, changing or rescinding any Tax election; (ii) amending any Tax return, except as required by applicable law, (iii) changing any method of accounting for Tax purposes, (iv) change any annual Tax accounting period or (v)
entering into a contractual obligation or request any binding ruling in respect of Taxes with any Governmental Authority;
|
m) |
Entering into, amending or terminating any employment, service or consultancy contracts providing for an annual gross base salary or remuneration (excluding bonus payments) exceeding EUR 80,000 (in words: eighty-thousand euros) in the
individual case.
|
5.3 |
Corporate measures outside ordinary course
|
a) |
Sell, purchase, transfer, encumber or otherwise dispose of any shares;
|
b) |
Resolution of any change in the articles of association or any other material shareholder resolution, including with respect to a reorganization, dissolution or liquidation;
|
c) |
Creation or issuance of any shares (including any options, warrants or conversion rights with respect to such shares);
|
d) |
Repurchase or redemption (Einziehung) of any shares;
|
e) |
Enter into company agreements within the meaning of Sections 291 et seqq. of the German Stock Corporation Act (AktG) or similar agreements;
|
f) |
Appointment or dismissal of managing directors (Geschäftsführer), except for dismissal for cause (aus wichtigem Grund).
|
5.4 |
General cooperation between the Parties
|
6 |
Closing Conditions; Long Stop Date
|
6.1 |
Closing Conditions
|
a) |
The Purchaser has received a compliance certificate pursuant to Section 58 (1) German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, AWV) or, to the extent applicable, an approval (Freigabe) pursuant to Section 58a (1) AWV or another binding decision of the German Federal Ministry for Economic Affairs and Energy
(Bundesministerium für Wirtschaft und Energie, BMWi) confirming that the transactions contemplated in this Agreement do not raise concerns with respect to the
public order or security of the Federal Republic of Germany, another European Union member state or with regard to projects or programs of union interest (the German FDI Clearance Certificate), or
(ii) a German FDI Clearance Certificate is deemed to have been issued pursuant to Section 58 (2) or Section 58a (2) AWV or restrictions (Beschränkungen) and obligations (Handlungspflichten) cannot be imposed anymore due to the expiry of the time periods set out in Section 14a German Foreign Trade and Payments Act (Außenwirtschaftsgesetz - AWG), in
each case because the relevant time periods have expired without the BMWi initiating a formal foreign investment control review or imposing restrictions or obligations, or (iii) the BMWi has, within the time period set out in Section 14a
AWG, issued binding orders (Anordnungen) or any other restrictions or obligations in relation to the transactions contemplated in this Agreement without prohibiting them and Purchaser has agreed,
without being obliged to, to accept such orders, restrictions or obligations in writing and after having consulted the Sellers (Clearance).
|
b) |
No Material Adverse Change has occurred. Material Adverse Change shall mean an event or series of events which are negatively affecting the Group Companies, taken as a whole, and lead to damages
(including, for the avoidance of doubt, costs and losses) of at least EUR 5,000,000 (in words: five million euros), such as a major industrial accident on their premises, but excluding events arising out of, resulting from, or attributable
to, the Covid-19 pandemic, changes in general economic conditions, changes in conditions in the financial markets, credit markets or capital markets, general changes in conditions in the industries in which the Group Companies conduct
business, changes in regulatory, legislative or political conditions, any geopolitical conditions, outbreak of hostilities, acts of war, sabotage, terrorism or military actions, earthquakes, hurricanes, tsunamis, tornadoes, floods,
mudslides, wild fires or other natural disasters, weather conditions, changes or proposed changes in any GAAP applicable to any Group Company; provided that the above carve-outs shall be taken into account to assess if a Material Adverse
Change occurred, if and to the extent the Group Companies, taken as a whole, are specifically and directly affected by such events.
|
c) |
No Governmental Authority or other Person has commenced any legal action in front of any competent court, arbitration tribunal or Governmental Authority seeking to prohibit or limit the exercise of any material right pertaining to the
ownership by the Purchaser of the Shares or by the Company of the shares in the Subsidiaries and no respective order or decision issued by any competent court, arbitration tribunal or Governmental Authority shall be in effect.
|
6.2 |
Cooperation with respect to FDI filing
|
a) |
The Purchaser has, before the Signing Date, proceeded to any filings, requests or notifications required to obtain the Clearance (together FDI Requests) with the competent Governmental
Authorities. The Parties shall cooperate to answer any questions from, and to provide any further documents and information which need to be provided to, the competent Governmental Authorities regarding the FDI Requests.
|
b) |
In particular, the Sellers shall and shall procure that the Group Companies cooperate with the Purchaser for the purpose of the Clearance by providing the relevant information concerning the Group Companies as may be requested by the
BMWi and/or as reasonably requested by Purchaser.
|
6.3 |
Notification with respect to fulfilment or definitive failure of any Closing Condition
|
6.4 |
Waiver of Closing Conditions
|
6.5 |
Long Stop Date
|
6.6 |
Withdrawal
|
7 |
Closing
|
7.1 |
Scheduled Closing Date
|
7.2 |
Closing Actions
|
a) |
Purchaser shall pay the Preliminary Purchase Price to the Paying Agent’s Account, as evidenced by a confirmation from the Paying Agent's bank.
|
b) |
The Parties shall execute the Escrow Agreement substantially in the form attached hereto as Schedule 7.2b) duly signed by the escrow agent appointed by the Parties (Escrow Agent).
|
c) |
Purchaser shall pay the Escrow Amount to the Escrow Agent, as evidenced by a confirmation from the Escrow Agent's bank.
|
d) |
Each Seller shall deliver to the Purchaser a confirmation substantially in the form set out in Schedule 7.2d) confirming that (i) there are no payment obligations of any Group Company to such Seller due and unpaid and (ii) that
such Seller has no claims against any Group Company, subject to employment or consultancy agreements in force on the Closing Date.
|
e) |
Seller 6 or the Representative shall, on behalf of all Sellers, deliver a written confirmation that no Material Adverse Change has occurred until the Scheduled Closing Date, substantially in the form set out in Schedule 7.2e).
|
7.3 |
Waiver of Closing Actions
|
7.4 |
Closing Memorandum
|
7.5 |
Closing Date
|
8 |
Sellers Guarantees
|
8.1 |
Form and Scope of Sellers Guarantees
|
8.1.1 |
Corporate Status and Authority of the Sellers
|
a) |
The statements in clause 1 regarding the Group and the Group Companies are correct and complete. The Group Companies have been duly established and validly exist under their laws of incorporation. Schedule 8.1.1 a) contains
correct and complete copies of the articles of association of the Group Companies. The Group Companies have all requisite (corporate or other) power and authority to conduct their business as currently conducted. No Group Company holds any
interest in any company or entity other than provided in clause 1.
|
b) |
The Group Company Shares were validly issued, the contributions (Einlagen) thereon have been paid in full, either in cash or in kind, and were not repaid, neither in full nor in part, or otherwise
returned and (there are no obligations to make further contributions regarding the Group Company Shares and/or the Group Companies (keine Nachschusspflichten). The Group Company Shares are free and
clear of any encumbrances or other third party rights. There are no pending assignments, enterprise agreements (Unternehmensverträge), trust arrangements (Treuhandverträgen),
silent partnership agreements (stillen Beteiligungen), subparticipations (Unterbeteiligungen), rights of first refusal, pre-emptive rights, option, voting
arrangements or other rights of third parties to acquire any of the Group Company Shares, and there are no agreements or commitments obligating any Seller or the Company (with respect to the shares in the Subsidiaries) to create any of the
aforementioned rights, in each case except under statutory law or under the articles of association.
|
c) |
The Sellers are entitled without restriction to dispose of the Shares without thereby infringing the rights of a third party. This Agreement has been duly executed by the Sellers and constitutes legal, valid, and binding obligations of
the Sellers, enforceable against the Sellers in accordance with its terms. The Sellers are fully authorized to execute this Agreement and to perform their obligations hereunder. Subject to the Clearance being obtained, (i) no Seller
requires an approval or consent or waiver from any Governmental Authority to enter into this Agreement and to consummate the Transaction, (ii) the execution and consummation of this Agreement by the Sellers and the performance of the
Transaction do not violate any judicial or governmental order (gerichtliche oder behördliche Verfügung) by which any Seller is bound. There are no proceedings or investigations pending or, to the
Sellers’ Knowledge, threatened against any Seller which seek to prevent or materially delay the consummation of the Transaction. Governmental Authority means any: (i) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any nature, (ii) federal, state, local, municipal, foreign or other government, (iii) governmental authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or entity, and any court or other tribunal), or (iv) entity to whom a Governmental Authority has assigned or delegated
any authority or oversight responsibilities.
|
d) |
No Seller or Group Company is required under the applicable law to take any action as a result of being illiquid (zahlungsunfähig), nor to the Sellers' Knowledge threatened by illiquidity (drohend zahlungsunfähig) or overindebted (überschuldet). No insolvency proceedings have been applied for or initiated against any of the Sellers or Group Company.
To the Sellers` Knowledge there are no circumstances that would require a petition for the institution of insolvency proceedings, nor are there any circumstances which would justify any actions seeking to void or challenge this Agreement.
|
8.1.2 |
Financial Statements
|
a) |
The audited financial statements of the Company and the non-audited financial statements of the Subsidiaries for the fiscal years 2018, 2019 and 2020 (Financial Statements), certified with an
unqualified audit opinion, as well as pro-forma consolidated financial statements of the Group for the fiscal years 2019 and 2020 (Pro-Forma Consolidated Financial
Statements) are attached as Schedule 8.1.2 a).
|
b) |
The Financial Statements present, considering the principles of proper accounting, a true and fair view of the assets and liabilities, the financial position and the results of business operations (vermitteln
unter Beachtung der Grundsätze ordnungsgemäßer Buchführung ein den tatsächlichen Verhältnissen entsprechendes Bild der Vermögens-, Finanz- und Ertragslage) of the Group Companies.
|
c) |
The Financial Statements for the Company were prepared in accordance with the German generally accepted accounting principles (GoB) (German GAAP). The
Financial Statements for the Subsidiaries were prepared in accordance with local GAAP.
|
d) |
The Group Companies have no liabilities of any nature other than (i) those set forth or adequately shown in the Financial Statements and (ii) those incurred in the conduct of the business since the 31 December 2020 in the ordinary course
of business consistent with past practice at arms’ length terms. Except for liabilities reflected in the Financial Statements, the Group Companies have no off-balance sheet liability of any nature to, or any financial interest in, any third
parties or entities, the purpose or effect of which is to defer, postpone, reduce or otherwise avoid or adjust the recording of expenses incurred by the Group Companies under the applicable local GAAP.
|
e) |
The accounts receivable of the Group Companies (the Accounts Receivable) as reflected in the Financial Statements arose in the ordinary course of business and represent bona fide claims against
debtors for sales and other charges. Except as disclosed in Schedule 8.1.2 e)-1 the Accounts Receivables as reflected in the Financial Statements have been collected or to the Sellers’ Knowledge are in all material respects
collectible in the book amounts, less an amount not in excess of the allowance for doubtful accounts provided for in the Financial Statements. The Accounts Receivable arising after 31 December 2020 and until the Signing Date arose in the
ordinary course of business and represent bona fide claims against debtors for sales and other charges. Except as disclosed in Schedule 8.1.2 e)-2 the Accounts Receivables arising after 31 December 2020 until the Signing Date have
been collected or to the Sellers’ Knowledge are in all material respects collectible in the book amounts, less allowances for doubtful accounts and warranty returns determined in accordance with relevant local GAAP consistently applied and
the Group Companies’ past practice that are or shall be sufficient to provide for any losses that may be sustained on realization of the applicable Accounts Receivable. To the Sellers` Knowledge and except as disclosed in Schedule 8.1.2
e)-3 no person has any encumbrance on any Accounts Receivable, and no agreement for deduction or discount has been made with respect to any such Accounts Receivable.
|
8.1.3 |
Other Assets
|
8.1.4 |
Real Estate
|
a) |
Schedule 8.1.4 a) contains a complete and accurate list of all real estate owned by the Group Companies (Owned Real Estate). To the Sellers` Knowledge the Owned Real Estate is free of any
charges and encumbrances as well as rights of third parties of any kind, except as registered in the respective sections of the respective land registers.
|
b) |
Schedule 8.1.4 b) contains a list of all real estate leased-in (gemietet) by the Group Companies that has an annual net rental fee in excess of EUR 25,000 (in words: twenty-five thousand
euros) in the individual case (exclusive of any ancillary costs and VAT) (Leased Real Estate).
|
c) |
Each Group Company is the unrestricted legal owner of the Owned Real Estate as set out in Schedule 8.1.4 a) and to the Sellers` Knowledge no Owned Real Estate is
|
(i) |
subject to any encumbrances or other third party rights except as set out in Schedule 8.1.4 a);
|
(ii) |
subject to any priority notices (Vormerkungen), any unregistered or otherwise pending conveyance (Auflassung) or other disposal;
|
(iii) |
subject to any lease.
|
d) |
The Owned Real Estates and the Leased Real Estates, the premises, constructions and fixtures thereon are free of material defects in term of construction or condition, expect for wear and tear due to normal use.
|
8.1.5 |
Intellectual Property Rights
|
a) |
Schedule 8.1.5 a) contains a list of all Registered IP Rights owned or co-owned by and registered on behalf of any Group Company (Owned Registered IP) and a list of all technical Know-How
owned or co-owned by any Group Company which is material for the conduct of the business (Business Know-How), together with the Owned Registered IP, the Owned IP
Rights)), specifying as to each Owned IP Right: (x) the type, nature and subject matter of such Owned IP Right, (y) the legal and commercial owner(s) of such Owned IP Right, and (z) if applicable, the jurisdictions in which such
Owned IP Right has been registered, or in which an application for such issuance or registration has been filed, and the registration or application numbers (as the case may be). IP Rights means any
patents, utility models (Gebrauchsmuster), registered designs (eingetragene Designs), other design rights or design patents (whether registered or not),
trademarks, trade names, service marks, copyrights, internet domains and applications for any of the foregoing rights and renewals of such rights, rights in unpatented technical and other Know-How (whether patentable or not), any other
intellectual or industrial property rights of any nature whatsoever in any part of the world, whether registered or unregistered. For the purpose of this definition, Know-How shall include any
invention, discovery, development, data, information, process, method, technique, trade secret, composition of matter, formulation, article of manufacture or other know-how, and any physical (including electronic) embodiments of any of the
foregoing, in each case unless part of the public domain. Registered IP Rights means all IP Rights which are registered in an appropriate register anywhere in the world, including applications for
such registrations (such as, for example, registered patents and patent applications).
|
b) |
The Group Companies are the full and unrestricted owners of the Owned IP Rights and these rights are not subject to any pledges or other security rights of any third party. No Group Company has granted an exclusive license with respect
to any IP Rights to any third party (other than to any other Group Company).
|
c) |
To the Sellers’ Knowledge, except as set out in Schedule 8.1.5 c), the IP Rights are not subject to any pending judicial or regulatory proceedings in which the validity of the IP Rights is being challenged and which could
adversely affect the business operations of any of the Group Companies. To the Sellers' Knowledge, all fees necessary to maintain, protect and enforce the Owned Registered IP have been paid, all necessary applications for renewal have been
filed.
|
d) |
To the Sellers' Knowledge, there is no infringement, misuse, or other violation by any third party of any IP Rights, and no Group Company has made any claim, whether for infringement, damages or otherwise, against any third party
regarding the use of IP Rights. No Group Company infringes any third party's rights in IP Rights. There has been no, and there are no litigation, opposition, cancellation or revocation proceedings, challenge, claims or actions pending or,
threatened in writing against any Group Company relating to IP Rights of any third party which relates to the operation of the business of the Group Companies as formerly or currently conducted. To the Sellers` Knowledge no opposition,
cancellation or revocation proceedings are pending against any Group Company with regard to any Owned Registered IP. No third party has challenged any Owned IP Right in writing towards the Company.
|
e) |
No Group Company has granted, and is not obliged to grant, any licence, assignment or, to the Sellers' Knowledge, other right in respect of any IP Rights, and to the Sellers` Knowledge is not obliged to disclose any IP Rights to any
person.
|
f) |
The Group Companies have obtained exclusive, sublicensable, transferrable, worldwide, perpetual and unrestricted rights of use and exploitation with respect to the software listed and with a scope as disclosed in Schedule 8.1.5 f)
(Software) from its (current and former) shareholders, directors, employees, freelancers, service providers, contractors or any other third parties, to the extent that the foregoing persons were
involved in the development of the Software. The preceding sentence does not apply to Open Source Software (as defined below), and legally mandatory rights, which remain with the above persons due to mandatory law. To Sellers' Knowledge,
the Software does not contain any third-party components, except for Open Source Software. Open Source Software means any software – including its source code – which is freely available to the
public under license conditions which permit any person to use, copy, study, improve, modify or change such software – in modified or unmodified form. To the Sellers' Knowledge, the Software does not contain any Open Source Software
components in a way that the current use of the Software would (a) impose a requirement or condition that the Software or any proprietary portion thereof be (i) disclosed, distributed, or made available in source code form; (ii) licensed
for the purpose of making modifications or derivative works; or (iii) redistributable at no charge; or (b) otherwise impose any other material limitation, restriction, or condition on the right or ability of the Group Companies to use the
Software.
|
g) |
Schedule 8.1.5 g) contains a complete list of individuals that would qualify as employee inventors under German law.
|
8.1.6 |
Information Technology
|
a) |
Each Group Company either owns or holds valid leases and/or licenses to all computer hardware, software, networks and other information technology (collectively Information Technology) which is
used by or necessary for the respective Group Company to conduct its business.
|
b) |
During the last thirty-six (36) months prior to the Signing Date, there have been no material interruptions, data losses, malfunctions or similar incidents attributable to the Information Technology owned or used by such Group Company.
To the Sellers` Knowledge the Information Technology is in usable condition and no material service or maintenance work outside the ordinary course of business is required.
|
8.1.7 |
Material Agreements
|
a) |
Schedule 8.1.7 a) contains a list of all material agreements between a Group Company and a third party (i.e., intra-group agreements shall not qualify as Material Agreements) which have not been completely fulfilled (the Material Agreements):
|
(i) |
agreements relating to the acquisition or sale of shares or interests in other companies or any business (Betrieb) or parts thereof (Betriebsteil);
|
(ii) |
joint venture agreements, cooperation agreements, partnership agreements or similar agreements that has involved, or is reasonably expected to involve, a sharing of revenues, profits, cash flows, expenses or losses with any other party
or a payment of royalties to any other party;
|
(iii) |
loan agreements, bonds, notes or any other instruments of debt with any Group Company as borrower or lender, in each case with outstanding amount (including interest accrued) in excess of EUR 100,000 (in words: one hundred thousand
euros);
|
(iv) |
guarantees, suretyships (Bürgschaften), indemnities, letters of comfort (Patronatserklärungen), performance or warranty bonds or similar instruments (x)
issued by any of the Group Companies or (y) issued by any third party securing to any liability of any Group Company;
|
(v) |
any service, purchase or other agreements (not including purchase orders) with any customer or supplier providing for payments (whether fixed, contingent or otherwise) by or to any of the Group Companies in an aggregate annual amount of
EUR 100,000 (in words: one hundred thousand euros);
|
(vi) |
rental and lease agreements relating to assets or real estate with a Group Company as lessor or lessee which provide for annual rental payments (without ancillary costs) in excess of EUR 50,000 (in words: fifty thousand euros)) per annum
in the individual case and which cannot be terminated within twelve (12) months; and
|
(vii) |
other long-term agreements (Dauerschuldverhältnisse) which cannot be terminated within twelve (12) months and provide for obligations of a Group Company in excess of EUR 100,000 (in words: one
hundred thousand euros) per annum in the individual case.
|
(viii) |
any contract (i) relating to an indemnity of any managing director (Geschäftsführer) of the Group Companies, (ii) relating to the engagement by any of the Group Companies of any consultant or
contractor or any other type of contract with any of its consultants that is not terminable within three (3) months as of the Signing Date by the Group Companies without cost or other liability and having total future annual payment
commitments of EUR 25,000 (in words: twenty five thousand euros) or more, (iii) requiring any of the Group Companies to make a payment to any current or former managing director (Geschäftsführer),
employee, consultant or contractor on account of the purchase of the Shares.
|
(ix) |
any contract between any of the Group Companies and their managing directors (Geschäftsführer) or shareholders or any of their Affiliates or a Related Person.
|
(x) |
any contract pursuant to which any of the Group Companies has (i) acquired a business or entity, or assets of a business or entity, or (ii) disposed of any material assets or properties, in each case whether by way of merger, purchase of
stock, purchase of assets or otherwise; or
|
(xi) |
any contract under which a Group Company’s entering into this Agreement or the consummation of the transactions under this Agreement shall give rise to, or trigger the application of, any rights of any third party or any obligations of
any of the Group Companies that would come into effect upon the consummation of the transactions under this Agreement.
|
b) |
Except as disclosed in Schedule 8.1.7 b), no Material Agreement will terminate solely as a result of the execution or performance of this Agreement or the Transaction (change of control) and no party to any Material Agreement
(other than the Group Companies) is entitled to terminate or materially amend any Material Agreement solely as a result of the execution or performance of this Agreement or the Transaction (change of control). Each of the Material
Agreements is in full force and effect. To the Sellers’ Knowledge, there exists no material default or event of default or event, occurrence, condition or act, with respect to the Group Companies. In the last thirty-six (36) months prior to
the Signing Date, the Group Companies have not received any written notice regarding any actual material breach or default under, or intention to cancel or modify, any Material Agreement.
|
c) |
Schedule 8.1.7 c) sets forth the customers with which the Group Companies generated sales in the financial year ended on 31 December 2020 of no less than EUR 500,000 (in words: five hundred thousand euros) (the Key Customers).
|
d) |
Schedule 8.1.7 d) correctly and completely lists all countries for which the Group Companies use external distribution persons (i.e. agents, dealers, distributors, etc.), including the name of the respective distribution person,
the territory and information on exclusivity arrangements, if any.
|
8.1.8 |
Arrangements with Sellers or Sellers' Affiliates
|
a) |
There are no services necessary for the conduct of the business in the ordinary course as presently conducted which have been provided by a Seller or any of its Affiliates to any Group Company, other than as set out in Schedule 8.1.8.
|
b) |
No Group Company is under any obligation to make any payments of any kind, including, but not limited to, management charges, to any Seller or its Affiliates or any Related Person, save for payments under agreements or arrangements made
on an arm's length basis and identified in Schedule 8.1.8.
|
c) |
There are no agreements or arrangements between any Group Company (on the one hand) and Sellers or their Affiliates (on the other hand), other than as set out in Schedule 8.1.8.
|
d) |
None of the Group Companies has granted an indemnification and/or hold harmless to the Sellers for claims based on the respective Seller’s capacity as shareholder, managing director or employee of the Group Companies.
|
8.1.9 |
Employment Matters
|
a) |
Schedule 8.1.9 a)-1 contains for each Group Company an anonymized list all of employees (Arbeitnehmer) as well as managing directors and officers employed by the respective Group Company as
of 31 October 2021 on the basis of full time equivalents (FTEs), setting out the start date of the relevant employment or service agreement, the position of the relevant employee, the fixed term (if any), the annual gross base salary
(including bonus payments at target), part-time status, special protection from dismissal and old age part time agreement (Altersteilzeitvertrag). Schedule 8.1.9 a)-2 contains an anonymized
list of all temporary employees (Leiharbeitnehmer) currently deployed by the Group Companies, setting forth the department, provider, fees and services rendered. Schedule 8.1.9 a)-3 contains
an anonymized list of all freelancers who are currently active for the Group Companies, setting out the monthly fees and service rendered. There are no and have not been in the last five (5) years prior to the Signing Date temporary
employees (Leiharbeitnehmer) or freelancers carrying out research and development in any of the Group Companies. All temporary employees (Leiharbeitnehmer)
have been engaged in compliance with the respective labour laws.
|
b) |
Schedule 8.1.9 b) contains the standard employment agreements of the Group Companies.
|
c) |
No Group Company has a works council (Betriebsrat) or similar employee representation body (including a labor union in the United States), and, to the Sellers’ Knowledge, no Group Company is in
the process of establishing a works council or similar employee representation body in any of the Group Companies where none exists.
|
d) |
None the Group Companies is bound by any collective bargaining agreements or other material agreements with unions, works councils and similar organizational bodies.
|
e) |
Schedule 8.1.9 e) contains a complete and accurate list of all managing directors and employees of the Group Companies who are entitled to an annual remuneration (gross salary including bonus and further salary components, but
excluding social security contributions) in excess of EUR 100,000 (in words: one hundred thousand euros) (all such employees listed in Schedule 8.1.9 e), the Key Employees). To the Sellers` Knowledge and except as set forth in
Schedule 8.1.9 e), no Key Employee has given notice of termination of his or her employment. No Key Employee is entitled to (i) receive any payment as a result of the transaction contemplated herein from a Group Company or (ii) terminate
his/her employment solely as a result of the transaction contemplated herein (Sonderkündigungsrecht). No Group Company has terminated the employment relationship with any Key Employee and no Key
Employee has given written notice of termination.
|
f) |
Until the Signing Date, to and except as set forth in Schedule 8.1.9 f), the Group Companies are and have at all time in the last five (5) years been in compliance in all material aspects with all applicable laws as well as any
national, industry or company collective agreement, order or award, employment, pension and social security (including as required by severance deposits and pension funds), employment practices, terms and conditions of employment (including
individual employment agreements), wages and hours and workplace safety and fair labor practices. Every person employed or engaged by the Company has current and appropriate permission to work in Germany and to the Sellers' Knowledge, every
person employed or engaged by any other Group Companies has current and appropriate permission to work in the country in which he/she is employed.
|
g) |
During the past five (5) years there have not been any legal disputes, strikes, work stoppages, work slowdowns, lockouts or other similar labour activities and no such activities or disputes are pending or, to the Sellers’ Knowledge,
threatened against or involve any of the Group Companies.
|
h) |
No employee or consultant engaged in the business is or will be entitled to any compensation, bonus, severance pay or any other benefits or entitlements on account of or resulting from any action taken by any of the Group Companies in
connection with any of the transactions contemplated under this Agreement except as set forth in Schedule 8.1.9 h).
|
i) |
Except as set forth in Schedule 8.1.9 i), no Group Company is bound by any contracts or has entered into other forms of commitments regarding pensions (betriebliche Altersversorgung.
|
j) |
No Group Company has implemented or been subject to, at any time, an employee stock option or similar plan, whether with respect to virtual or actual shares.
|
8.1.10 |
Insurance Policies
|
8.1.11 |
Legal Disputes
|
8.1.12 |
Conduct of Business
|
8.1.13 |
Permits and Compliance
|
a) |
The Company and the Subsidiaries have obtained all governmental approvals, licenses, permits and other governmental authorizations that are required by applicable law for the business (Permits). To
the Sellers' Knowledge, the business is conducted and, in the last three (3) years prior to the Signing Date, has been conducted in accordance with the Permits. To the Sellers' Knowledge, all Permits are in full force and effect (bestandskräftig) and there are no indications of a withdrawal, revocation, expiration, restriction or subsequent alteration of any Permit.
|
b) |
To the Sellers` Knowledge the Group Companies are not subject to any pending administrative or criminal investigation regarding alleged infringements of applicable laws.
|
c) |
The Group Companies are, and have in the last three (3) years been, in compliance with and have operated their respective business in all material respects in compliance with all applicable laws relevant to conduct their business.
|
d) |
In particular, the business of the Group Companies is currently, and has been within the last three (3) years prior to the Signing Date, conducted, in accordance with sanctions and export control laws.
|
e) |
None of the Group Companies or the Sellers nor any of their employees, has (i) taken any action directly or indirectly in furtherance of an offer, payment, promise to pay, or authorization or approval of any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any person (including any Governmental Authority (or employee or representative thereof), government owned or controlled enterprise, public international organization,
political party and candidate for public office) private or public, regardless of what form, whether in money, or services (α) to obtain favorable treatment for business or a contracts, (β) to pay for favorable treatment for business or
contracts secured, (γ) to obtain special concessions or for special concessions already obtained, (δ) to improperly influence or induce any act or decision, (ε) to secure any improper advantage, or (ζ) in violation of applicable law, or
(ii) established or maintained any fund or asset that has not been accurately recorded in the books and records of the Group Companies. The Group Companies have in particular complied with the provisions of the United States Foreign Corrupt
Practices Act (FCPA) and the UK Bribery Act.
|
f) |
None of the Group Companies, nor any of its advisory board members, managing directors , or to the Sellers’ Knowledge, other employees: (i) has been or is designated on the OFAC Specially Designated Nationals and Blocked Persons List,
Commerce’s Denied Persons List or Entity List, and the State Department’s Debarred List, United Nations Security Council Consolidatred List, EU Sanctions List and HM Treasury Sanctions List or other similar lists maintained by applicable
jurisdictions, (ii) has participated in any transaction involving such designated person or entity, or any country subject to an embargo or substantial restrictions on trade under the United States sanctions administered by OFAC, or (iii)
has exported (including deemed exportation) or re-exported, directly or indirectly, any commodity, software, technology, or services in violation of any applicable export control legislation of the European Union (or any state thereof) or
the United States, or (iv) has participated in any transaction connected with any purpose prohibited by United States or European Union (or any state thereof) export control and economic sanctions laws, including, without limitation,
support for international terrorism and nuclear, chemical, or biological weapons proliferation. The Group Companies have conducted its export transactions in accordance in all respects with applicable provisions of all applicable export and
re-export controls in all countries in which the Group Companies conduct business. Without limiting the foregoing: (a) the Group Companies have obtained all material export and import licenses, license exceptions and other material
consents, notices, waivers, approvals, orders, authorizations, registrations, declarations and filings with any Governmental Authority required for the export, import and re-export of products, services, software and technologies in context
with the Group Companies’ business (collectively, “Export Approvals”), (b) to the Sellers` Knowledge the Group Companies are in compliance with the terms of all applicable Export Approvals. The
foregoing statements of this Section 8.1.13f), to the extent they relate to the Signing Date or the time thereafter, shall not be represented and warranted to the extent the representation and warranty of, or compliance with, such
statements, inevitably results in a violation of, conflict with, or liability under, EU Regulation (EC) 2271/96, Section 7 AWV (each as amended from time to time) or any other similar applicable anti-boycott laws or regulations.
|
g) |
to the Sellers` Knowledge the Group Companies are and have always been in compliance, with Privacy Laws including as they relate to the collection, storage, processing and transfer of personal data related to the use of the products or
services collected by the Group Companies. The Group Companies provide adequate notice of privacy practices in their privacy policies. A list of the policies (and the periods the policies have been in effect) is attached as Schedule
8.1.13 g) to the Sellers` Knowledge the Group Companies’ privacy practices conform and has conformed at all times to its privacy policies. To the Sellers` Knowledge the Group Companies have been and are in compliance with all
contracts pursuant to which the Group Companies process or have processed personal data of end users of the products or services of the Group Companies (the Company Privacy Commitments). In addition,
to the Sellers` Knowledge where and when required by Privacy Laws, the Group Companies have provided all notices and obtained any necessary consents from data subjects required for the processing of personal data as conducted by or for the
Group Companies. To the Sellers` Knowledge the execution of this Agreement will not cause, constitute, or result in a breach or violation of any Privacy Laws or Company Privacy Commitments. No claims have been asserted or, to the Sellers’
Knowledge, are threatened against the Group Companies by any person alleging a violation of such person’s privacy, personal or confidentiality rights under the privacy policies of the Group Companies. With respect to the security of
personal data collected, received or processed by the Group Companies, the Group Companies have taken and take all steps reasonably necessary (including implementing and monitoring compliance with adequate technical and organizational
measures) to ensure that the information is protected against loss and against unauthorized access, use, modification, disclosure or other misuse. To the Sellers’ Knowledge, there has been no unauthorized access to or other misuse of that
information. Privacy Laws shall mean all laws applicable to the Group Companies that relate to personal data, including, without limitation, related to data or information security, data transfer
(including cross-border transfer), the protection or processing of personal data, data breach notification; laws regarding unsolicited email, telephone, or text message communications, and the European Union General Data Protection
Regulation (GDPR) and European Union member state implementing laws and regulations related to the GDPR.
|
8.1.14 |
Environmental Matters
|
a) |
The Company is and has been in compliance in all material aspects with German Environmental Laws relating to it or to any of its property, activity or asset currently or formerly owned, leased, operated, carried out or used by or in
connection with its business. Environmental Laws means all applicable German laws and, to the extent that they are legally binding, German ordinances, rules, orders (Bescheide),
public law agreements (öffentlich-rechtliche Verträge) relating to environmental matters, which are matters relating to pollution or contamination or protection of the soil, subsurface, air,
groundwater, surface water, soil vapor, land surface (including constructions, facilities and buildings and remains thereof) or human life or human health (including occupational safety). An on-site inspection in this regard by the
Reutlingen District Office ("Landratsamt Reutlingen") took place on 10 November 2021, as recorded in Schedule 8.14a).
|
b) |
The Group Companies have not received any order (bestandskräftiger Bescheid) from any public authority imposing investigation (Untersuchungsmaßnahmen),
remediation (Sanierungsmaßnahmen), securing (Sicherungsmaßnahmen) or protective containment measures (Schutz- und
Beschränkungsmaßnahmen) regarding an environmental contamination, and (ii) to the Sellers` Knowledge no legal or administrative proceeding is pending against any of the Group Companies that alleges a violation of any Environmental
Law. To the Sellers` Knowledge no Environmental Contamination exists on any of the Owned Real Estate or Leased Real Estate. Environmental Contamination means any Hazardous Materials that exist in the
soil, groundwater or surface water. Hazardous Materials means any pollutant, contaminant or other substance identified or designated as hazardous radioactive or toxic, including solid or hazardous
waste including any admixture or solution thereof, and including petroleum and all derivatives thereof or synthetic substitutes and asbestos or asbestos-containing materials, which may contaminate inter alia groundwater and soil, under
applicable law.
|
8.1.15 |
Finders’ Fee
|
8.1.16 |
Public Subsidies
|
8.1.17 |
Data Room Accuracy
|
8.2 |
No other Sellers Guarantees
|
8.2.1 |
The Purchaser explicitly acknowledges to purchase and acquire the Shares and the business associated therewith in the condition they are in on the Closing Date based upon its own inspection and assessment of all the facts and
circumstances, and to undertake the purchase based upon its own decision, inspection and assessment without reliance upon any express or implied representations, warranties or guarantees of any nature made by the Sellers, except for the
guarantees expressly provided by the Sellers under this Agreement.
|
8.2.2 |
Without limiting the generality of the foregoing, the Purchaser acknowledges that the Sellers give no representation, warranty or guarantee with respect to
|
a) |
any projections, estimates or budgets delivered or made available to the Purchaser regarding future revenues, earnings, cash flow, the future financial condition or the future business operation of the Company or the Group;
|
b) |
any other information or documents that were delivered or made available to the Purchaser or its counsel, accountants or other advisors with respect to the Company or its business operation, except as expressly set forth in this
Agreement; or
|
c) |
any Tax matters, except as provided for in clause 10.
|
8.3 |
Sellers’ Knowledge
|
9 |
Remedies
|
9.1 |
Recoverable Damages
|
9.1.1 |
In the event that a Sellers Guarantee is breached, the Sellers shall be obligated to put the Purchaser or, at the election of the Purchaser, the relevant Group Company or Group Companies in such position as the Purchaser, respectively
the Group Company, would have been in, had the Sellers Guarantee not been breached (restitution in kind – Naturalrestitution). If the Sellers are unable to achieve such restitution in kind within
four (4) weeks after having been notified by the Purchaser of the breach or if restitution in kind is either impossible, not permitted by nature or not suitable to compensate the loss, then the Purchaser may claim monetary damages with the
meaning of Sections 249 et seqq. BGB (Schäden) to be paid to the Purchaser or, at the election of the Purchaser, to the relevant Group Company. Nevertheless, such compensation for damages shall cover
only the actual damages incurred by the Purchaser or any Group Company, including (i) reasonably foreseeable consequential damages (Folgeschäden), (ii) reasonably foreseeable indirect damages (mittelbare Schäden) (ii) reasonably foreseeable loss of profits (entgangener Gewinn), and will specifically not cover the internal administrative or overhead
costs, and the Purchaser may not claim that the Total Purchase Price was calculated based on incorrect assumptions (the damages potentially to be compensated pursuant to this clause 9.1.1 the Damages).
|
9.1.2 |
The Sellers shall not be liable for, and the Purchaser shall not be entitled to claim for, any breach of a Sellers Guarantee, if and to the extent that:
|
a) |
the fact upon which the claim is based, (i) is covered by any specific provision, specific reserve or specific valuation allowance made in the Financial Statements for the calendar year 2020 or (ii) has reduced the Purchase Price; and /
or
|
b) |
either any of the Group Companies and/or the Purchaser actually recovers such claim from third parties, including insurance carriers; if and to the extent, the Sellers are held liable, the Purchaser and/or relevant Group Company shall
(i) assign to the Representative any relevant claims against third parties, including insurance carriers, and (ii) use commercially best efforts to assist the Sellers in pursuing such claims.
|
9.2 |
Deductible; Overall-Deductible
|
9.3 |
Overall Scope of the Sellers' Liability pursuant to this Agreement
|
9.4 |
Exclusion of Certain Provisions
|
9.5 |
Exclusion of Claims due to Purchaser`s Knowledge
|
9.6 |
Notification to Sellers; Procedure in Case of Third Party Claims
|
9.6.1 |
In the event of an actual or potential breach of a Sellers Guarantee, the Purchaser shall, without undue delay after becoming aware of the matter, provide the Sellers with written notice of such alleged breach, describing the potential
claim in reasonable detail and, to the extent practical, stating the estimated amount of such claim and shall give the Sellers the opportunity to cure the breach within the period of time indicated in clause 9.1.1.
|
9.6.2 |
Furthermore, if, in connection with a breach of a Sellers Guarantee, any claim or demand of a third party is asserted against the Purchaser or any of the Group Companies (Third Party Claim), then
the Purchaser shall make available to the Sellers a copy of the Third Party Claim or demand and of all time-sensitive documents.
|
9.6.3 |
If the Sellers generally accept the full responsibility for the Third Party Claim in question (Anspruch dem Grunde nach anerkannt), the Purchaser shall give the Sellers the opportunity to defend
the Purchaser or the relevant Group Company against the Third Party Claim. In such case, to the extent this does not have a materially detrimental effect on the Group Companies or their business, the Sellers will have the right to defend
against the claims by instituting all appropriate proceedings and will have the sole power to direct and control such defense, in particular, the Sellers have the unconditional right to
|
a) |
participate in and lead all negotiations and correspondence with the third party,
|
b) |
appoint and instruct legal counsel to act for and on behalf of the Purchaser or the Company, and
|
c) |
request that a claim be litigated or settled out of court in accordance with the Sellers` instructions.
|
9.6.4 |
If the Sellers do not elect to defend a Third Party Claim in accordance with the process set forth in clause 9.6.3, the Purchaser shall (i) afford the Sellers and their representatives the opportunity to comment on and review any reports
and documents and to participate in all relevant audits, court hearings and any meetings (including video or telephone conference), (ii) deliver to the Sellers and their representatives without undue delay (unverzüglich)
copies of all relevant orders (Bescheide), decisions, filings, motions and other documents of any court or party to the conflict or dispute, and (iii) diligently conduct the defense in order to
mitigate the losses.
|
9.6.5 |
In no event shall the Purchaser or the Company be entitled to acknowledge or settle a claim or permit any such acknowledgement or settlement without the Sellers` prior written consent (not to be unreasonably withheld or delayed), to the
extent that such claims may result in the Sellers’ liability under this Agreement. The Purchaser and the Company shall cooperate with the Sellers in the defense of any third party claim, provide the Sellers and their representatives
(including their advisory) reasonable access to the relevant business records and documents reasonably required, and permit the Sellers and its representatives to reasonably consult with the directors, officers, employees and
representatives of the Purchaser or the Company. To the extent that the Sellers are in breach of a Sellers Guarantee, all costs and expenses incurred by the Sellers in defending such claim shall be borne by the Sellers. If it later emerges
that the Sellers were not in breach, then any costs and expenses reasonably incurred by the Sellers in connection with the defense (including advisors’ fees) shall be borne by the Purchaser and the Company. The Purchaser shall ensure that
the Company fully complies with its obligations under this clause 9.5.
|
9.6.6 |
The Sellers shall not be liable under clause 8 if and to the extent the Purchaser has not complied with its obligations under clause 9.6 and if and to the extent such incompliance has (i) caused or increased the Damages of the Purchaser,
or (ii) materially affected the Sellers’ ability to defend against the Third Party Claim .
|
9.7 |
Mitigation
|
9.8 |
Time Limits
|
9.9 |
Exclusion of Further Remedies
|
9.10 |
No Double Dip
|
9.11 |
Treatment of Payments
|
9.12 |
Intent; Fraudulent Misrepresentation
|
10 |
Taxes
|
10.1 |
Definitions
|
10.2 |
Tax Guarantees
|
a) |
all Tax returns required to be filed with any Tax Authority by or on behalf of the Group Companies have been duly prepared, have been filed when due (considering all extensions granted) and are to Sellers’ Knowledge true and correct;
|
b) |
the Group Companies have timely paid when due all Taxes owed by it;
|
c) |
as of the date hereof, no Tax audit, investigation, dispute or other proceeding is pending in respect of the Group Companies, and the Group Companies have not been notified in writing by any Tax Authority that such authority intends to
commence any such proceeding;
|
d) |
the Group Companies have not obtained a binding ruling and have not entered into any agreements, waivers or arrangements with any Tax Authority;
|
e) |
the Group Companies keep books of accounts as required by applicable law, and the application thereof by the competent Tax Authority, and have sufficient records (including and required transfer pricing documentation) relating to past
events during all times prior to and including the Closing Date and any Tax-related records, files and documents, including electronically stored data, which are under any applicable Tax law required to be available, have been stored on the
respective Group Company's premises and are readily accessible in a manner as required under, and in full compliance with, all applicable Tax laws.
|
f) |
To Sellers’ Knowledge the Group Companies have not taken any measures or entered into any transaction which may be regarded as resulting in a constructive dividend (verdeckte Gewinnausschüttung)
(or comparable instrument in any jurisdiction other than Germany) by the relevant Taxing Authorities, or which could result in adjustments pursuant to Section 1 Foreign Tax Act (Außensteuergesetz),
and all transactions entered into by the Group Companies with each other and the Sellers or any other person (as applicable) have been carried out at arm’s length terms and have been properly and timely documented in accordance with
applicable law.
|
g) |
No written claim has ever been made by a Governmental Authority in a jurisdiction where any Group Company does not pay Taxes or file Tax Returns asserting that the respective Group Company is or may be subject to Taxes assessed by such
jurisdiction or required to file a Tax Return in such jurisdiction. In addition, no Group Company has or had employees or premises in any jurisdiction other than its jurisdiction of incorporation.
|
h) |
No Group Company has written down any asset to its going concern value (keine Teilwertabschreibung), has been involved in any reorganization that could lead to blocking periods (Haltefristen) or any other restrictions including without limitation those contained in the former Section 8b(4) Corporate Income Tax Act (Körperschaftsteuergesetz,
KStG), Sections 6(5) and 16(3) Personal Income Tax Act (Einkommensteuergesetz, EStG), Sections 15(2) and 22 Reorganization Tax Act (Umwandlungssteuergesetz, UmwStG) or in the former Sections 21(2) and 26 UmwStG.
|
i) |
The Group Companies have obtained the required exemption certificates (Freistel-lungsbescheinigungen) to execute payments (including, without limitation,
dividends, interest payments or royalties) prior to Closing Date without withholding Tax or at a lower withholding Tax rate as provided for in the applicable Income Tax Treaty.
|
10.3 |
Tax Indemnity
|
a) |
the respective Tax has been paid until the Closing Date;
|
b) |
a specific liability (Verbindlichkeit) or provision (Rückstellung) for the Indemnifiable Tax is included in the Final Closing Date Statement and has
reduced the Total Purchase Price;
|
c) |
the Group Companies or the Purchaser realizes a concrete cash effective Tax saving in the form of "reversal effect" as a direct consequence of the respective Tax or the circumstances underlying such Tax, respectively (e.g., resulting
from the lengthening of any amortization or depreciation periods, higher depreciation allowances, a step up in the Tax basis of assets, the non-recognition of generally tax deductible liabilities or provisions (Phasenverschiebungen)). In such case the claim of the Purchaser pursuant to clause 10.3 will be reduced by the net present value of the respective Tax saving which shall be calculated as a lump sum on the basis of (i) a
presumed uniform tax rate of 30%, (ii) a discount factor of three (3)% p.a. and (iii) the assumption that it will have been realized within five (5) years from the Closing Date;
|
d) |
Tax results from (i) any change in the accounting practices of the Group Companies introduced after the Closing Date or (ii) from any change in the exercise of any Tax election rights introduced after the Closing Date or (iii) a measure
under the German Reorganization Tax Act (Umwandlungssteuergesetz) or equivalent laws under foreign jurisdictions initiated and implemented after the Closing Date, provided in each case of (i) – (iii)
that the change or measure has a direct impact under statutory Tax law on the Pre-Closing-Date-Period and unless such change is requested by the Tax Authorities, made with Sellers’ written consent or required under mandatory Law.
|
e) |
the amount of the respective Tax has been recovered by the Group Companies from a third party, or
|
f) |
the respective Tax is directly caused by the Purchaser's non-compliance with its obligations set forth in clauses 10.4 and 10.5.
|
10.4 |
Tax Returns after the Signing Date
|
10.5 |
Cooperation
|
10.5.1 |
After the Closing Date, the Purchaser and the Sellers shall reasonably cooperate, and shall cause their representatives to reasonably cooperate, with each other in connection with all Tax matters relating to any Taxes payable by the
Group Companies for any period ending on or before the Closing Date, including the preparation and filing of any Tax return or the conduct of any Tax audits, investigations or other proceedings. Following the Closing Date, the Purchaser
shall without undue delay notify the Sellers of any Tax audits or administrative or court proceedings that are announced or commenced and that might constitute a basis for a Tax Indemnification Claim under this clause 10 (Tax Disputes). Such notice shall be made in writing and shall describe the object of the Tax Dispute or the asserted Tax liability and shall include copies of any notice or other documents received from
the Tax Authority or the courts in respect of any such Tax Dispute or asserted Tax liability. The Purchaser shall further ensure that the respective Group Company allows the Sellers to participate in such Tax Disputes and keeps the Sellers
fully informed about such Tax Dispute.
|
10.5.2 |
The Purchaser shall procure, upon written request of the Sellers and at Sellers’ expense, that objections are filed, and legal proceedings are instituted and conducted against any Tax assessment notices or judgments, in each case, if and
to the extent relating to Indemnifiable Taxes, in accordance with the Sellers’ reasonable directions. The Sellers shall bear all fees of external counsel and other external costs of the relevant
proceeding, e.g., costs of the Tax court etc. Otherwise, the Purchaser or the respective Group Company may pay, settle or formally challenge the validity of such asserted Tax liability.
|
10.5.3 |
If and to the extent that the Purchaser or its legal successor reasonably require information or documents for tax purposes from the Sellers or legal successors in connection with the Tax matters of one of the Group Companies, in
particular but not limited to section 20 et seq. of the German Reorganization Tax Act (UmwStG), Section 4h of the German Income Tax Act (EStG) or Section 8a of the German Corporate Income Tax Act (KStG), the Sellers shall procure that on
written request of the Purchaser or one of the Group Companies such information or documents will be provided to them without undue delay. The Purchaser shall bear all reasonable fees of external counsel and other reasonable external costs
which incur in connection with the provision of such information or documents.
|
10.6 |
Tax Refund
|
10.7 |
As-If-Agreement; Pro-Rata Share and Treatment of Payments, Miscellaneous
|
10.7.1 |
In the event Taxes relate to a Tax period beginning before the Closing Date and ending thereafter such Tax period shall deemed to be split in one Tax period ending on the Closing Date and another Tax period starting after the Closing
Date and to the extent not reasonably feasible based on a pro rata temporis basis for the purpose of determining claims under this clause 10.
|
10.7.2 |
All payments to be made by the Sellers to the Purchaser or by the Purchaser to the Sellers under clauses 9, 10, 11 and 12 shall constitute a reduction or an increase of the Purchase Price for Tax purposes, as the case may be. If and to
the extent payments are made by the Sellers directly to the Group Companies, such payments shall be construed and deemed as contributions (Einlagen) made by the Purchaser into the Group Companies and
shall be treated as a reduction of the Purchase Price as between the Parties.
|
10.7.3 |
Clause 9.2, 9.3, 9.5, 9.10, 9.12 shall apply to the Tax Guarantees accordingly; otherwise clause 9 shall not apply to the Tax Guarantees. For the avoidance of doubt, except for claims based on a breach of the Tax Guarantees, clause 9
shall not apply to claims under this clause 10.
|
10.8 |
Time Limits
|
11 |
Purchaser Guarantees
|
11.1 |
Purchaser Guarantees
|
11.1.1 |
The Purchaser is duly incorporated and validly existing under the laws of Germany.
|
11.1.2 |
The Purchaser has all requisite corporate power and authority and has been duly authorized by all necessary corporate actions to enter into and perform this Agreement and the legal transactions (Rechtsgeschäfte)
contemplated herein.
|
11.1.3 |
Subject to the Clearance being obtained, the execution and performance by the Purchaser of this Agreement and the consummation of the legal transactions contemplated herein do not violate the Purchaser’s articles of association, by-laws
or internal rules of management and do not violate any applicable statutory provision, judgment, injunction or other rule binding upon the Purchaser, and there are no legal, investigation or other proceedings pending against, or to the
Purchaser’s knowledge threatened against, the Purchaser before any court, arbitration tribunal or Governmental Authority which in any manner challenges or seeks to prevent, alter or delay the legal transaction contemplated in this
Agreement.
|
11.1.4 |
Based on its due diligence exercise, the Purchaser is not aware of any facts or circumstances that could give rise to claims against the Sellers pursuant to clause 8 through 10.
|
11.1.5 |
The Purchaser has sufficient, immediately available funds or binding financing commitments to pay the Total Purchase Price and to make all other payments required to be made under or in connection with this Agreement.
|
11.2 |
Indemnification
|
12 |
Additional Obligations of the Parties post-Closing
|
12.1 |
Access to Financial Information
|
12.2 |
(-------)
|
12.3 |
Non-Compete
|
12.4 |
Non-Solicit
|
12.5 |
Renaming Ancosyslab
|
12.6 |
Indemnification for Third Party Claims
|
12.7 |
Shareholders' meetings
|
12.8 |
Indemnification
|
13 |
Escrow
|
a) |
According to a concurrent (übereinstimmenden) written instruction of the Purchaser and the Representative,
|
b) |
According to a final, non-appealable (rechtskräftig) decision of a competent court, an enforceable award (für vollstreckbar erklärt gemäß § 1060 German Code of
Civil Procedures) of an arbitration tribunal or a definitive expert decision, or
|
c) |
To the Sellers if, twenty one (21) months after the Closing Date, the Purchaser has not initiated arbitration proceedings according to clause 21.2 against the Sellers for breaches of this Agreement by the Sellers (whereby if the
Purchaser has initiated such arbitration proceedings, the amount in dispute shall be deducted from the amount to be released to the Sellers and released upon resolution of the claims subject to the arbitration proceedings).
|
14 |
Parent Undertaking
|
15 |
Confidentiality and Press Releases
|
15.1 |
Confidentiality
|
15.2 |
Post-Closing confidentiality
|
16 |
Power of Attorney in Favour of the Purchaser
|
17 |
Assignment of Rights and Transfer of Obligations
|
18 |
Transfer Taxes and Costs
|
18.1 |
Transfer Taxes and Costs
|
18.2 |
Costs of Advisors
|
19 |
Appointment of Representative
|
20 |
Notices
|
20.1 |
Form of Notices
|
20.2 |
Notices to the Sellers
|
20.3 |
Notices to the Purchaser and the Parent
|
20.4 |
Change of Address
|
20.5 |
Language
|
21 |
Miscellaneous
|
21.1 |
Governing Law
|
21.2 |
Arbitration
|
21.2.1 |
All disputes or claims arising out of or in connection with this Agreement shall be finally settled under the rules of the German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit e.V. – DIS) by three (3) arbitrators appointed in accordance with such rules.
|
21.2.2 |
The place of arbitration is Frankfurt am Main, Germany.
|
21.2.3 |
The language of the arbitral proceedings is English. Documents already existing in the German language may be submitted without an English translation.
|
21.3 |
Business Day
|
21.4 |
Interest
|
21.5 |
Amendments to this Agreement
|
21.6 |
Headings; References to Clauses
|
21.6.1 |
The headings and sub-headings of the clauses and sub-clauses and Schedules contained in this Agreement are for convenience and reference purposes only. They shall be disregarded for purposes of interpreting or construing this Agreement.
|
21.6.2 |
Any reference made in this Agreement to any clauses without further indication of a law or an agreement shall mean the clauses of this Agreement.
|
21.7 |
Schedules
|
21.8 |
Entire Agreement
|
21.9 |
Severability
|
21.10 |
Instructions of the notary
|
- |
The acting notary is obliged to submit an amended list of shareholders to the Commercial Register without undue delay after the transfer of the Shares has become effective.
|
- |
The buyer of a share assumes the unlimited liability, if any, (jointly with his legal predecessor in the share) for contributions on shares not fully paid up, for differences between the nominal value of contributions in kind theron and
for repayment of contributions on shares.
|
- |
The Sellers shall be secondarily liable for any non-fulfilled contribution obligations of excluded shareholders who are the Sellers legal successors.
|
- |
The acting notary has not reviewed the economic and tax-related consequences of the above agreements and has not provided any advice in this respect. The persons appearing were advised of the possibility to have the agreements reviewed
by a tax adviser in advance.
|
- |
The notary is obliged pursuant to section 54 German Income Tax Implementation Ordinance (EStDV) to submit one copy of this deed to the tax authorities.
|
- |
The parties are jointly liable for the costs of this deed, regardless of the provisions therein.
|
As of the end of 2021:
|
|
Name of Subsidiary
|
Country of Incorporation
|
Nova Measuring Instruments, Inc.
|
Delaware, U.S.
|
Nova Measuring Instruments K.K.
|
Japan
|
Nova Measuring Instruments Taiwan Ltd.
|
Taiwan
|
Nova Measuring Instruments Korea Ltd.
|
Korea
|
Nova Measuring Instruments GmbH
|
Germany
|
Nova Measuring Instruments (Shanghai) Co., Ltd
|
China
|
Added in January 2022:
|
|
ancosys GmbH*
|
Germany
|
ancosys Korea LLC**
|
Korea
|
ancosys Instruments Taiwan Ltd**
|
Taiwan
|
Ancosys Inc.**
|
Delaware
|
1. |
I have reviewed this Annual Report of Nova Ltd.
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the company as of, and for, the periods presented in this report;
|
4. |
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to
the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected,
or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
|
5. |
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit
committee of company’s board of directors (or persons performing the equivalent function):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s
ability to record, process, summarize 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.
|
1. |
I have reviewed this Annual Report of Nova Ltd.
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the company as of, and for, the periods presented in this report;
|
4. |
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to
the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected,
or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
|
5. |
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit
committee of company’s board of directors (or persons performing the equivalent function):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s
ability to record, process, summarize 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.
|
1. |
This Annual Report on Form 20-F of Nova Ltd. (the “Company”) for the period ended December 31, 2021 (the “Report”) fully complies with the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended; and
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Eitan Oppenhaim
Eitan Oppenhaim
President and Chief Executive Officer |
1. |
This Annual Report on Form 20-F of Nova Ltd. (the “Company”) for the period ended December 31, 2021 (the “Report”) fully complies with the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended; and
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Dror David
Dror David
Chief Financial Officer |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Trade accounts receivable, allowance for doubtful accounts | $ 37 | $ 70 |
CONSOLIDATED BALANCE SHEETS (Parentheticals) - ₪ / shares |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Ordinary shares, par value | ₪ 0.01 | |
Ordinary shares, shares authorized | 60,000,000 | 40,000,000 |
Ordinary shares, shares issued | 28,579,044 | 28,176,862 |
Ordinary shares, shares outstanding | 28,579,044 | 28,176,862 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Revenues: | |||
Total revenues | $ 416,113 | $ 269,396 | $ 224,909 |
Cost of revenues: | |||
Total cost of revenues | 178,752 | 116,473 | 103,089 |
Gross profit | 237,361 | 152,923 | 121,820 |
Operating expenses: | |||
Research and development, net (Note 2R) | 65,857 | 53,015 | 44,508 |
Sales and marketing | 39,336 | 29,321 | 28,213 |
General and administrative | 17,324 | 12,514 | 10,066 |
Amortization of intangible assets (Note 7) | 2,458 | 2,503 | 2,625 |
Total operating expenses | 124,975 | 97,353 | 85,412 |
Operating income | 112,386 | 55,570 | 36,408 |
Financial income (expense), net (Note 17) | (3,133) | 926 | 3,078 |
Income before taxes on income | 109,253 | 56,496 | 39,486 |
Income tax expenses | 16,152 | 8,589 | 4,315 |
Net income | $ 93,101 | $ 47,907 | $ 35,171 |
Earnings per share: | |||
Basic | $ 3.28 | $ 1.71 | $ 1.26 |
Diluted | $ 3.12 | $ 1.65 | $ 1.23 |
Shares used in calculation of earnings per share: | |||
Basic | 28,371,610 | 28,096,814 | 27,895,096 |
Diluted | 29,816,066 | 28,949,739 | 28,574,202 |
Product [Member] | |||
Revenues: | |||
Total revenues | $ 337,026 | $ 209,320 | $ 167,200 |
Cost of revenues: | |||
Total cost of revenues | 129,535 | 78,555 | 67,300 |
Service [Member] | |||
Revenues: | |||
Total revenues | 79,087 | 60,076 | 57,709 |
Cost of revenues: | |||
Total cost of revenues | $ 49,217 | $ 37,918 | $ 35,789 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 93,101 | $ 47,907 | $ 35,171 |
Available-for-sale investments (Note 3): | |||
Unrealized gain (loss) on available-for-sale marketable securities, net | (1,016) | 0 | 0 |
Cash flow hedges (Note 16): | |||
Unrealized gain from cash flow hedges | 74 | 1,351 | 236 |
Less: reclassification adjustment for net loss included in net income | (442) | (796) | (33) |
Other comprehensive income (loss) | (1,384) | 555 | 203 |
Total comprehensive income | $ 91,717 | $ 48,462 | $ 35,374 |
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Cash flows from operating activities: | |||
Net income | $ 93,101 | $ 47,907 | $ 35,171 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation of property and equipment | 6,475 | 5,875 | 5,401 |
Amortization of intangible assets | 2,458 | 2,503 | 2,625 |
Amortization of premium and accretion of discount on marketable securities, net | 1,708 | 0 | 0 |
Amortization of debt discount and issuance costs | 4,229 | 868 | 0 |
Share-based compensation | 10,488 | 6,949 | 5,092 |
Net effect of exchange rate fluctuation | (745) | (1,584) | (510) |
Changes in assets and liabilities: | |||
Trade accounts receivables, net | (5,132) | (11,711) | 1,928 |
Inventories | (18,457) | (16,271) | (7,518) |
Other current and long-term assets | 192 | 6,878 | (6,161) |
Deferred tax assets, net | (2,989) | (193) | (681) |
Operating lease right-of-use assets | 1,680 | 1,351 | 2,372 |
Trade accounts payables | 11,697 | 3,255 | 1,691 |
Deferred revenues | 10,621 | 2,461 | (1,728) |
Operating lease liabilities | (904) | 91 | 2,685 |
Other current and long-term liabilities | 17,919 | 11,520 | 65 |
Accrued severance pay, net | (79) | 354 | 260 |
Net cash provided by operating activities | 132,262 | 60,253 | 40,692 |
Cash flows from investment activities: | |||
Change in short-term and long-term interest-bearing bank deposits | (31,456) | (36,016) | (4,181) |
Investment in marketable securities | (215,091) | 0 | 0 |
Proceed from maturities of marketable securities | 12,862 | 0 | 0 |
Purchase of property and equipment | (4,816) | (6,443) | (21,269) |
Net cash used in investing activities | (238,501) | (42,459) | (25,450) |
Cash flows from financing activities: | |||
Proceeds from the issuance of convertible senior notes, net of issuance costs | 0 | 193,588 | 0 |
Purchases of treasury shares | 0 | (12,549) | (7,159) |
Proceeds from exercise of options | 11 | 367 | 492 |
Net cash provided by (used in) financing activities | 11 | 181,406 | (6,667) |
Effect of exchange rate fluctuations on cash and cash equivalents | 622 | 1,356 | 296 |
Increase (decrease) in cash and cash equivalents | (105,606) | 200,556 | 8,871 |
Cash and cash equivalents - beginning of year | 232,304 | 31,748 | 22,877 |
Cash and cash equivalents - end of year | 126,698 | 232,304 | 31,748 |
Supplemental disclosure of non-cash activities: | |||
Operating right-of-use assets recognized with corresponding operating lease liabilities | 3,198 | 2,367 | 31,465 |
Supplemental disclosure of cash flow information: | |||
Cash paid during the year for income taxes | $ 13,275 | $ 3,981 | $ 8,342 |
GENERAL |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GENERAL |
NOTE 1 - GENERAL
Business Description:
Nova Ltd. (”Nova” or the “Parent Company”) was incorporated and commenced operations in 1993 in the design, development and production of process control systems, used in the manufacturing of semiconductors. Nova has wholly owned subsidiaries in the United States of America (the “U.S.”), Japan, Taiwan, Korea, China and Germany (together defined as the “Company”).
On July 25, 2021 the Company changed its name from Nova Measuring Instruments Ltd. to Nova Ltd.
The Company continues research and development for the next generation of its products and additional applications for such products. The Company operates in one operating segment.
On April 2, 2015, the Company completed the acquisition of 100% shares of ReVera Inc. (hereinafter – ReVera) a privately-held U.S. company. On December 31, 2017, ReVera, merged into Nova Measuring Instruments, Inc.
The ordinary shares of the Company are traded on the NASDAQ Global Market since April 2000 and on the Tel-Aviv Stock Exchange since June 2002.
On June 24, 2021, the Company increased its authorized share capital to 60,000,000 Ordinary Shares and eliminated the par value of the Ordinary shares.
|
SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES |
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The Company’s consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America.
The following is a summary of the significant accounting policies, which were applied in the preparation of these financial statements, on a consistent basis:
The Company’s consolidated financial statements include the financial statements of Nova Ltd. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The Company's management evaluates its estimates on an ongoing basis, including those related to, but not limited to income taxes and tax uncertainties, collectability of trade accounts receivable, inventory accruals, fair value and useful lives of intangible assets, lease discount rate, lease period, convertible senior notes borrowing rate and revenue recognition. These estimates are based on management's knowledge about current events and expectations about actions the Company may undertake in the future. Actual results could differ from those estimates.
The novel coronavirus (“COVID-19”) pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions, and the extent of its impact on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and the impact on the Company’s customers and its sales cycles. The Company considered the impact of COVID-19 on the estimates and assumptions and determined that there were no material adverse impacts on the consolidated financial statements for the period ended December 31, 2021. As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change materially in future periods.
The currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is the U.S. dollar (the “dollar”). Accordingly, the Company uses the dollar as its functional and reporting currency. Certain of the dollar amounts in the financial statements may represent the dollar equivalent of other currencies, including the New Israeli Shekel (“NIS”). Transactions and balances denominated in dollars are presented at their dollar amounts. Non-dollar transactions and balances are re-measured into dollars in accordance with the principles set forth in ASC 830, “Foreign Currency Translation”.
All transaction gains and losses of the re-measured monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.
Cash and cash equivalents represent short-term highly liquid investments (mainly interest-bearing deposits) with maturity dates not exceeding three months from the date of deposit.
Short-term bank deposits consist of bank deposits with original maturities of more than three months and up to twelve months.
The Company accounts for marketable securities in accordance with ASC Topic 320, “Investments – Debt and Equity Securities”. The Company’s investments in marketable securities consist of high-grade treasury, corporate and municipal bonds.
Investments in marketable securities are classified as available for sale at the time of purchase. Available for sale securities are carried at fair value based on quoted market prices, with unrealized gains and losses, reported in accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on sales of marketable securities, are included in financial income (expenses), net. The amortized cost of marketable securities is adjusted for amortization of premium and accretion of discount to maturity, both of which, together with interest, are included in financial income (expenses), net.
The Company classifies its marketable securities as either short term or long term based on each instrument’s underlying contractual maturity date. Marketable securities with maturities of 12 months or less are classified as short-term and marketable securities with maturities greater than 12 months are classified as long-term.
The Company accounts for Credit losses in accordance with ASU 2016-13, Topic 326 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments” which modified the other than temporary impairment model for available for sale debt securities. The guidance requires the Company to determine whether a decline in fair value below the amortized cost basis of an available for sale debt security is due to credit related factors or noncredit related factors. A credit related impairment should be recognized as an allowance on the balance sheet with a corresponding adjustment to earnings, however, if the Company intends to sell an impaired available for sale debt security or more likely than not would be required to sell such a security before recovering its amortized cost basis, the entire impairment amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis.
The Company’s allowance for credit losses on marketable securities was not material for the year ended on December 31, 2021.
Trade accounts receivables are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts, in accordance with ASC 326. The Company makes estimates of expected credit losses for based upon its assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.
The Company accounts for business combination in accordance with ASC No, 805, “Business Combination” (ASC 805). ASC 805 requires recognition of assets acquired and liabilities assumed at the acquisition date, measured at their fair values as of that date. Any access of the fair value of net assets acquired over purchased price and any subsequent changes in estimated contingencies are to be recorded in the consolidated statements of operations.
Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are provided to cover risks arising from slow-moving items, technological obsolescence, excess inventories, discontinued products, and for market prices lower than cost, if any. The Company periodically evaluates the quantities on hand relative to historical and projected sales volume (which is determined based on an assumption of future demand and market conditions), the age of the inventory and the expected consumption of service spare parts. At the point of the loss recognition, a new lower cost basis for that inventory is established. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.
Inventory includes costs of products delivered to customers and not recognized as cost of sales, where revenues in the related arrangements were not recognized.
To support the Company’s service operations, the Company maintains service spare parts inventory and reduce the net carrying value of this inventory over the service life.
Cost is determined as follows:
Depreciation methods, useful lives and residual values are reviewed at the end each reporting year and adjusted if appropriate.
Goodwill and other purchased intangible assets have been recorded as a result of the acquisition of ReVera. Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired, and related liabilities.
Goodwill is not amortized, but rather is subject to an impairment test, in accordance with ASC 350, “Intangibles – Goodwill and Other”, at least annually (in the fourth quarter), or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Company has an option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value prior to performing the quantitative goodwill impairment test. The Company operates in one operating segment, and this segment comprises its only reporting unit.
Following the adoption of ASU 2017-04, "Simplifying the Test for Goodwill Impairment", any excess of the carrying value of the reporting unit over its fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to the fair value of the reporting unit.
Intangible assets with finite life (refer to note 2L for impairment assessment of intangible assets with finite life) are amortized over their useful lives using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used, or, if that pattern cannot be reliably determined, using a straight-line amortization method.
(*) During 2021 a completion of the development and successful launch of the IPR&D related product was determined. The useful life of the IPR&D technology was determined to be 3 years and amortizing was initiated, subject to annual impairment assessment as described in Note 2L
Long-lived assets (tangible and intangible assets with finite life), held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets (or asset Group) may not be recoverable. In the event that the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment charge would be recognized, and the assets (or asset Group) would be written down to their estimated fair values. During the years 2021, 2020 and 2019, no impairment losses have been identified.
IPR&D is tested for impairment annually or more frequently when indicators of impairment exist. The Company first assesses qualitative factors to determine if it is more likely than not that the IPR&D is impaired and whether it is necessary to perform a quantitative impairment test. The qualitative assessment considers various factors, including changes in demand, the abandonment of the IPR&D or significant economic slowdowns in the semiconductor industry and macroeconomic environment. If adverse qualitative trends are identified that could negatively impact the fair value of the asset, then quantitative impairment test is performed to compare the carrying value of the asset to its undiscounted expected future cash flows.
If this test indicates that there is impairment, the impaired asset is written down to fair value, which is typically calculated using discounted expected future cash flows utilizing an appropriate discount rate.
No impairment losses have been identified during 2021, 2020 and 2019 relating to goodwill and intangible assets.
Accrued warranty costs are calculated with respect to the warranty period on the Company’s products and are based on the Company’s prior experience and in accordance with management’s estimate. The estimated future warranty obligations are affected by the warranty periods, install base, labor and other related costs incurred in correcting a product failure.
ASC 815 requires the presentation of all derivatives as either assets or liabilities on the balance sheet and the measurement of those instruments at fair value.
For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. See Note 16 for disclosure of the derivative financial instruments in accordance with such pronouncements.
Under ASC 842, a contract is or contains a lease when the Company has the right to control the use of an identified asset for a period of time. The Company determines if an arrangement is a lease at inception of the contract, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. The commencement date of the lease is the date that the lessor makes an underlying asset available for the Company’s use. On the commencement date leases are evaluated for classification and assets and liabilities are recognized based on the present value of lease payments over the lease term.
The lease term used to calculate the lease liability includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The right-of-use (“ROU”) asset is initially measured as the amount of lease liability, adjusted for any initial lease costs, prepaid lease payments and any lease incentives. Costs incurred for common area maintenance, real estate taxes, and insurance are not included in the lease liability and are recognized as they are incurred.
The Company's leases include office buildings for its facilities and car leases, which are all classified as operating leases. Certain lease agreements include rental payments that are adjusted periodically for the consumer price index ("CPI"). The ROU and lease liability were calculated using the CPI as of the adoption date and will not be subsequently adjusted, unless the liability is reassessed for other reasons. Certain leases include renewal options that are under the Company's sole discretion. The renewal options were included in the ROU and liability calculation if it was reasonably assured that the Company will exercise the option.
As the Company’s lease arrangements do not provide an implicit rate, the Company uses its incremental estimated borrowing rate at lease commencement to measure ROU assets and lease liabilities. Operating lease expense is generally recognized on a straight-line basis over the lease term. For leases with a term of one year or less, the Company elected not to record the ROU asset or liability.
The Company accounts for its convertible senior notes in accordance with ASC 470-20 "Debt with Conversion and Other Options". Pursuant to ASC Subtopic 470-20, issuers of certain convertible debt instruments, such as the Notes, that may be settled wholly or partially in cash upon conversion are required to separately account for the liability (debt) and equity (conversion option) components of the instrument. The liability component at issuance is recognized at fair value, based on the fair value of a similar instrument of similar credit rating and maturity that does not have a conversion feature. The equity component is based on the excess of the principal amount of the convertible senior notes over the fair value of the liability component and is recorded in additional paid-in capital. The equity component, net of issuance costs and deferred tax effects is presented within additional paid-in-capital and is not remeasured as long as it continues to meet the conditions for equity classification. The difference between the principal amount and the liability component represents a debt discount that is amortized to financial expense over the respective terms of the Notes using an effective interest rate method. The Company allocated the total issuance costs incurred to the liability and equity components of the convertible senior notes based on their relative values.
Issuance costs attributable to the liability and equity components were $5,894 and $518, respectively. Issuance costs attributable to the liability are netted against the principal balance and will be amortized to financial expense using the effective interest method over the contractual term of the notes. The effective borrowing rate of the liability component of the notes (after deduction of the abovementioned issuance costs attributed to the liability component) is 2.365%. This borrowing rate was based on Company's synthetic credit risk rating.
Revenue Recognition Policy
The Company enters into revenue arrangements that include products and services which are distinct and accounted for as separate performance obligations. The Company determines whether promises are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether the Company's commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract.
The Company derives revenue from sales of advanced process control systems, spare parts, labor hours (mainly related to installation) and service contracts.
Revenues derived from sales of advanced process control systems, spare parts and labor hours are recognized at a point in time, when control of the promised goods or services is transferred to the customers, upon fulfillment of the contractual terms (typically upon shipment of the systems and spare parts or when the service is completed for labor hours).
Revenues derived from service contracts, are recognized ratably over time in accordance with the term of the contract since the Company has a stand-ready obligation to provide the service. Such contracts generally include a fixed fee.
Revenues from sales which were not yet determined to be final sales due to certain acceptance provisions are deferred.
Contracts with Multiple Performance Obligations
Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative Standalone Selling Price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount to be allocated based on the relative SSP of the various products and services.
Remaining Performance Obligations
Remaining performance obligations (RPOs) represent contracted revenues that had not yet been recognized and include deferred revenues and invoices that have been issued to customers but were uncollected and have not been recognized as revenues. As of December 31, 2021, the aggregate amount of the RPOs was $41,055 comprised of $15,338 deferred revenues and $25,717 of uncollected amounts that were not yet recognized as revenues. The Company expects the RPO to be recognized as revenues over the next year.
Contract Balances
Contract balances are presented separately on the consolidated balance sheets.
Revenues recognized during 2021, 2020 and 2019 from deferred revenues amounts included in current liabilities at the beginning of the period amounted to $3,651, $1,544 and $3,481 respectively.
In certain arrangements, the Company receives payment from a customer either before or after the performance obligation has been satisfied. The expected timing difference between the payment and satisfaction of performance obligations for the Company’s contracts is one year or less; therefore, the Company applies a practical expedient and does not consider the effects of the time value of money.
Research and development costs are charged to operations as incurred. Amounts received or receivable from the Government of Israel through the Israeli Innovation Authority (“IIA”, formerly known as the Office of the Chief Scientist) or from the European Community as participation in certain research and development programs are offset against research and development costs. The accrual for grants receivable is determined based on the terms of the programs, provided that the criteria for entitlement are expected to be met. Research and development grants recognized during the years ended December 31, 2021, 2020 and 2019 were $4,395, $5,645 and $6,932 respectively.
The Company accounts for income taxes utilizing the asset and liability method in accordance with ASC 740, “Income Taxes”. Current tax liabilities are recognized for the estimated taxes payable on tax returns for the current year. Deferred tax liabilities or assets are recognized for the estimated future tax effects attributable to temporary differences between the income tax bases of assets and liabilities and their reported amounts in the financial statements, and for tax loss carryforwards.
Measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax laws, and deferred tax assets are reduced, if necessary, by the amount of tax benefits, the realization of which is not considered more likely than not based on available evidence.
ASC 740-10 requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.
The Company accounts for equity-based compensation using ASC 718 “Compensation - Stock Compensation,” which requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant-date fair value of those awards.
Share Options
Under ASC 718, the fair market value of each option grant is estimated on the date of grant using the “Black-Scholes option pricing” method with the following weighted-average assumptions:
Expected volatility was calculated based on actual historical share price movements over a term that is equivalent to the expected term of granted options. The expected term of options granted is based on historical experience and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The Company recognizes compensation expenses for the value of awards granted, based on the accelerated method. The Company account for forfeitures as they occur.
Earnings per share are presented in accordance with ASC 260-10, “Earnings per Share”. Pursuant to which, basic earnings per share excludes the dilutive effects of convertible securities and is computed by dividing income (loss) available to ordinary shareholders by the weighted-average number of ordinary shares outstanding for the period, net of treasury shares. Diluted earnings per share reflect the potential dilutive effect of options and RSUs. The number of potentially dilutive options and RSUs excluded from diluted earnings per share due to the anti-dilutive effect of out of the money options amounted to 336,857 in 2021, 492,963 in 2020, 438,999 in 2019.
Additionally, 2,055,641 in 2021 (2,680,965 in 2020) shares underlying the conversion option of the Convertible Senior Notes are not considered in the calculation of diluted net income per share as the effect would be anti-dilutive. The Company intends to settle the principal amount of Convertible Senior Notes in cash and therefore will use the treasury stock method for calculating any potential dilutive effect on diluted net income per share, if applicable. The conversion will have a dilutive impact on diluted net income per share when the average market price of an ordinary share for a given period exceeds the conversion price of $74.6 per share.
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, bank deposits, trade accounts receivable and foreign currency derivative contracts.
The majority of the Company’s cash and cash equivalents and bank deposits are invested in dollar instruments with major banks in Israel. Management believes that the financial institutions that hold the Company's investments are corporations with high credit standing. Accordingly, management believes that low credit risk exists with respect to these financial investments.
The trade accounts receivable of the Company are derived from sales to customers located primarily in Taiwan R.O.C., Korea, China and USA. The management of the Company performed risk assessment on an ongoing basis and believes it bears low risk.
The Company entered into options and forward contracts to hedge against the risk of overall changes in future cash flow from payments of payroll and related expenses as well as other expenses denominated in NIS. The derivative instruments hedge a portion of the Company's non-dollar currency exposure. Counterparty to the Company’s derivative instruments is major financial institution.
The fair values of the Company’s cash and cash equivalents, short-term interest-bearing bank deposits, trade accounts receivable, and accounts payable approximate their carrying amounts due to their short-term nature.
The Company follows the provisions of ASC No. 820, “Fair Value Measurement” (“ASC 820”), which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
In determining a fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability, based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect assumptions that market participants would use in pricing an asset or liability, based on the best information available under given circumstances.
The hierarchy is broken down into three levels, based on the observability of inputs and assumptions, as follows:
Level 1 - Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.
Level 2 - Other inputs that are directly or indirectly observable in the market place.
Level 3 - Unobservable inputs which are supported by little or no market activity.
In accordance with ASC 820, the Company measures its marketable securities, at fair value using the market approach valuation technique. Marketable securities are classified within Level 2 because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.
The estimated fair values of the derivative instruments are determined based on market rates to settle the instruments. The fair value of the Company’s derivative contracts (including forwards and options) is determined using standard valuation models. The significant inputs used in these models are readily available in public markets or can be derived from observable market transactions and, therefore, the Company’s derivative contracts have been classified as Level 2.
Inputs used in these standard valuation models include the applicable spot, forward, and discount rates. The standard valuation model for the Company options contracts also includes implied volatility, which is specific to individual options and is based on rates quoted from a widely used third-party resource.
The Company’s cash and cash equivalents, Interest-bearing bank deposits and restricted interest-bearing bank deposits are classified within level 1. Marketable securities, Derivative instruments and Convertible senior notes classified within Level 2 (see Note 3, Note 16 and Note 10, respectively).
Recently issued accounting pronouncements not yet adopted:
In August 2020, the FASB issued Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. This guidance will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.
The Company will adopt this new guidance using the modified retrospective method as of January 1, 2022. The adoption of this new guidance is estimated to result in an increase of approximately $12.1 million to short-term convertible senior notes, in the consolidated balance sheets, to reflect the full principal amount of the convertible notes outstanding net of issuance costs, a reduction of approximately $13.8 million to additional paid-in capital, net of estimated income tax effects, to remove the equity component separately recorded for the conversion features associated with the convertible notes, an increase to deferred tax assets, net of approximately $1.4 million, and a cumulative-effect adjustment of approximately $3.1 million, net of estimated income tax effects, to the beginning balance of retained earnings as of January 1, 2022. The adoption of this new guidance is anticipated to reduce interest expense by approximately $3.1 million during the year ended December 31, 2022. In addition, the required use of the if-converted method by the new guidance in calculating diluted earnings per share is expected to increase the number of potentially dilutive shares in 2022 by up to 2.1 million shares.
In October 2021, the FASB issued ASU 2021-08, ASC Topic 805 “Business Combinations”. The standard create an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers acquired in a business combination. Under this exception, an acquirer applies ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities on the acquisition date. ASC 805 generally requires the acquirer in a business combination to recognize and measure the assets it acquires and the liabilities it assumes at fair value on the acquisition date. The standard will become effective for fiscal years beginning after December 15, 2022. Early application of the amendments is permitted, and the Company is currently assessing such early adoption. See also Note 18.
In November 2021, the FASB issued ASU 2021-10, ASC Topic 832 “Disclosures by Business Entities about Government Assistance”. The standard require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy: (1) Information about the nature of the transactions and the related accounting policy used to account for the transactions (2) The line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item (3) Significant terms and conditions of the transactions, including commitments and contingencies. The standard will become effective for fiscal years beginning after December 15, 2021. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
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MARKETABLE SECURITIES |
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MARKETABLE SECURITIES |
NOTE 3 - MARKETABLE SECURITIES
The following is a summary of marketable securities amortized cost, unrealized gains, unrealized losses and fair value as of December 31, 2021:
* All of the unrealized losses have been accumulated during 2021 and are for less than 12 months. Proceeds from maturity of available-for-sale marketable securities during the year ended December 31, 2021, were $12,862.
The Company had no proceeds from sales of available-for sale, marketable securities during the year ended December 31, 2021, therefore no realized gains or losses from the sale of available for sale marketable securities were recognized.
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES |
NOTE 4 - INVENTORIES
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OTHER CURRENT ASSETS |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER CURRENT ASSETS |
NOTE 5 - OTHER CURRENT ASSETS
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PROPERTY AND EQUIPMENT, NET |
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PROPERTY AND EQUIPMENT, NET |
NOTE 6 - PROPERTY AND EQUIPMENT, NET
Depreciation expenses amounted to $6,475, $5,875 and $5,401 for the years ended December 31, 2021, 2020 and 2019, respectively. |
INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS |
NOTE 7 - INTANGIBLE ASSETS
Intangible assets originated from the acquisition of ReVera on April 2, 2015. The following is a summary of intangible assets as of December 31, 2021 and 2020:
Amortization expenses amounted as following:
Annual amortization expenses are expected as follows:
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OTHER CURRENT LIABILITIES |
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Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER CURRENT LIABILITIES |
NOTE 8 - OTHER CURRENT LIABILITIES
A. Consists of:
B. Accrued Warranty Costs:
The Company provides standard warranty coverage on its systems. Parts and labor are covered under the terms of the warranty agreement. The Company accounts for the estimated warranty cost as a charge to costs of revenues when revenue is recognized.
Accrued warranty costs presented in:
The following table provides the changes in the product warranty accrual for the fiscal years ended December 31, 2021 and 2020:
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LIABILITY FOR EMPLOYEE SEVERANCE PAY, NET |
12 Months Ended |
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Dec. 31, 2021 | |
Postemployment Benefits [Abstract] | |
LIABILITY FOR EMPLOYEE SEVERANCE PAY, NET |
NOTE 9 - LIABILITY FOR EMPLOYEE SEVERANCE PAY, NET
Israeli law and labor agreements determine the obligations of the Company to make severance payments to dismissed employees and to employees leaving employment under certain other circumstances. The obligation for severance pay benefits, as determined by Israeli law, is based upon length of service and the employee’s most recent salary. The liability is partially covered through insurance policies purchased by the Company and deposits in a severance fund.
The deposited funds include profits accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israel's Severance Pay Law, 1963 or labor agreements.
Since July 2008, the Company's agreements with new Israeli employees are under Section 14 of the Israeli Severance Pay Law, 1963. The Company's contributions for severance pay have replaced its severance obligation.
Upon contribution of the full amount of the employee's monthly salary for each year of service, no additional calculations are conducted between the parties regarding the matter of severance pay and no additional payments are made by the Company to the employee.
Labor agreements in Taiwan determine the obligations of the Company to make severance payments to dismissed employees and to employees leaving employment under certain other circumstances. The obligation for severance pay benefits is based upon length of service and the employee’s average salary.
Severance pay expenses for the years ended December 31, 2021, 2020 and 2019, amounted to $818, $617 and $640, respectively (excluding the Company’s contributions for severance pay under section 14).
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CONVERTIBLE SENIOR NOTES, NET |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONVERTIBLE SENIOR NOTES, NET |
NOTE 10 - CONVERTIBLE SENIOR NOTES, NET
In October 2020, the Company issued $175,000 aggregate principal amount, 0% coupon rate, of convertible senior notes due 2025 and an additional $25,000 aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment option of the initial purchasers (collectively, “Convertible Notes” or “Notes”).
The Convertible Notes are convertible based upon an initial conversion rate of 13.4048 of the Company’s ordinary shares per $1,000 principal amount of Convertible Notes (equivalent to a conversion price of approximately $74.60 per ordinary share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events. The Convertible Notes are senior unsecured obligations of the Company.
The Convertible Notes will mature on October 15, 2025, (the "Maturity Date"), unless earlier repurchased, redeemed or converted. Prior to July 15, 2025, a holder may convert all or a portion of its Convertible Notes only under the following circumstances:
On or after July 15, 2025 until the close of business on the second scheduled trading day immediately preceding the Maturity Date, a holder may convert its Convertible Notes at any time, regardless of the foregoing circumstances.
Upon conversion, the Company can pay or deliver cash, ordinary shares or a combination of cash and ordinary shares, at the Company’s election.
The Company may not redeem the notes prior to October 20, 2023, except in the event of certain tax law changes. The Company may, at any time and from time to time, redeem for cash all or any portion of the notes, at the Company's option, on or after October 20, 2023, if the last reported sale price of the Company`s ordinary shares has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which it delivers notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, (plus accrued and unpaid special interest (if any) to, but excluding, the redemption date).
Upon the occurrence of a Fundamental Change as defined in the Indenture, holders may require the Company to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes, (plus accrued and unpaid special interest payable under certain circumstances set forth in the terms of the Convertible Notes (if any) to, but excluding, the fundamental change repurchase date). In addition, in connection with a make-whole fundamental change (as defined in the Indenture), or following our delivery of a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or redemption, as the case may be.
As of December 31, 2021, condition 1 as stated above has been met, as the Company share price exceeded the abovementioned threshold. The Notes are therefore convertible as of December 31, 2021 and are classified as current liability.
The net carrying amount of the liability and equity components of the Convertible Notes as of December 31, 2021 and December 31, 2020 are as follows:
Interest expense related to the Convertible Notes was as follows:
As of December 31, 2021, the total estimated fair value of the convertible senior notes was approximately $390,000. The fair value of the convertible senior notes is considered to be Level 2 within the fair value hierarchy and was determined based on quoted price of the convertible senior notes in an over-the-counter market.
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LEASES |
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Lessee Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
NOTE 11 - LEASES
The Company has operating leases for facilities and vehicles. The Company recognized leased assets of $30,627 and corresponding current liabilities of $4,452, and long-term liabilities of $33,450, as of December 31, 2021. The Company’s leases have remaining terms of 1 to 9 years, some of which include options to extend the leases for up to additional 10 years. The weighted average remaining lease term was 14.6 years and the weighted average discount rate was 4.5% as of December 31, 2021.
Lease expenses amounted to $3,935, $4,654 and $5,166 for the years ended December 31, 2021, 2020 and 2019, respectively. The expected discounted and undiscounted lease payments under non-cancelable leases as of December 31, 2021, excluding non-lease components, were as follows:
Operating cash flows for operating leases amounted to $4,134, $5,840 and $5,326 for the years ended December 31, 2021, 2020 and 2019, respectively. |
COMMITMENTS AND CONTINGENCIES |
12 Months Ended |
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Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES |
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company is obligated under certain agreements with its suppliers to purchase specified items of inventory which are expected to be utilized during the years 2022-2026. As of December 31, 2021, non-cancelable purchase obligations were approximately $190,000.
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SHAREHOLDERS' EQUITY |
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Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS' EQUITY |
NOTE 13 -
SHAREHOLDERS’ EQUITY
Holders of ordinary shares are entitled to participate equally in the payment of cash dividends and bonus shares (stock dividends) and, in the event of the liquidation of the Company, in the distribution of assets after satisfaction of liabilities to creditors. Each ordinary share is entitled to one vote on all matters to be voted on by shareholders.
On November 1, 2018, the Company announced $25,000 share repurchase program. In this framework, through December 31, 2021, the Company repurchased 556,603 ordinary shares for an aggregate amount of $14,509.
On October 11, 2020, as part of the authorization of the Senior Convertible Notes Offering (see note 10), the Company’s board of directors approved and authorized a share repurchase for an aggregate amount of up to $20,000. In this framework, on October 14, 2020, the Company repurchased 170,910 ordinary shares for an aggregate amount of $10,000.
All treasury shares have been canceled as of the end of each respective year.
The Company’s Board of directors approves, from time to time, equity-based incentive plans, the last of which was approved in August 2017. Equity-based incentive plans include stock options, restricted share units and restricted stock awards to employees, officers and directors.
Share-based compensation
The following table summarizes the effects of share-based compensation resulting from the application of ASC 718 included in the Statements of Operations as follows:
As of December 31, 2021, there was $610 of total unrecognized compensation cost related to non-vested employee options and $21,231 of total unrecognized compensation cost related to non-vested employee RSUs. These costs are generally expected to be recognized over a period of four years.
Shares Options
Share options vest over four years and their contractual term may not exceed 10 years. The exercise price is the market price at the date of each grant.
The weighted average fair value (in dollars) of the options granted during 2021, 2020 and 2019, according to Black-Scholes option-pricing model, amounted to $35.94, $15.46 and $8.18 per option, respectively.
Summary of the status of the Company’s share option plans as of December 31, 2021, as well as changes during the year then ended, is presented below:
The aggregate intrinsic value represents the total intrinsic value (the difference between the Company's closing share market price on the last trading day of the fiscal year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on the last trading day of the fiscal year. This amount changes based on the fair market value of the Company's shares.
The total intrinsic value of options outstanding as of December 31, 2021 and 2020 was $58,835 and $38,514, respectively. The total intrinsic value of options exercisable as of December 31, 2021 and 2020 was $41,117 and $24,428, respectively. The total intrinsic value of options exercised during the years 2021, 2020 and 2019 was $18,571, $10,463 and $4,570 respectively.
The following table summarizes information about share options outstanding as of December 31, 2021:
Restricted Share Units
Restricted Share Units (“RSU”) grants are rights to receive shares of the Company's ordinary shares on a one-for-one basis and are not entitled to dividends or voting rights, if any, until they are vested. RSU’s vesting schedules are 25% on each of the first, second, third and fourth anniversaries of the grant date, or, 33% on each of the first, second, and third anniversaries of the grant date. The fair value of such RSU grants is being recognized based on the accelerated method over the vesting period. Performance based RSU grants vest over a period of 3 years and are subject to certain performance criteria; accordingly, compensation expense is recognized for such awards when it becomes probable that the related performance condition will be satisfied.
The total intrinsic value of RSUs vested during the years 2021, 2020 and 2019 was $17,341, $6,344 and $3,513, respectively. |
INCOME TAXES |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES |
NOTE 14 - INCOME TAXES
As a "Controlled Foreign Cooperation" (as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the Company's management has elected to apply Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and Determining Their Taxable Income)-1986. Accordingly, its taxable income or loss is calculated in US Dollars.
Part of the Company’s investment in equipment has received approvals in accordance with the Law for the Encouragement of Capital Investments, 1959 (“Approved Enterprise” status) in three separate investment plans. The Company has chosen to receive its benefits through the “Alternative Benefits” track, and, as such, is eligible for various benefits. These benefits include accelerated depreciation of fixed assets used in the investment program, as well as a full tax exemption on undistributed income in relation to income derived from the first plan for a period of 4 years and for the second and third plans for a period of 2 years. Thereafter a reduced tax rate of 25% will be applicable for an additional period of up to 3 years for the first plan and 5 years for the second and third plans, commencing with the date on which taxable income is first earned but not later than certain dates. The benefit period of the second and third plan have commenced. On April 1, 2005, an amendment to the Investment Law came into effect (“the Amendment”) and has significantly changed the provisions of the Investment Law. The Amendment limits the scope of enterprises which may be approved by the Investment Center by setting criteria for the approval of a facility as a Privileged Enterprise, such as provisions generally requiring that at least 25% of the Privileged Enterprise’s Income will be derived from export. Additionally, the Amendment enacted major changes in the manner in which tax benefits are awarded under the Investment Law so that companies no longer require Investment Center approval in order to qualify for tax benefits.
However, the Investment Law provides that terms and benefits included in any certificate of approval already granted will remain subject to the provisions of the law as they were on the date of such approval. Therefore, the Israeli companies with Approved Enterprise status will generally not be subject to the provisions of the Amendment.
The entitlement to the above benefits is conditional upon the Company fulfilling the conditions stipulated by the above law, regulations published thereunder and the instruments of approval for the specific investments in "Approved Enterprises". In the event of failure to comply with these conditions, the benefits may be canceled, and the Company may be required to refund the amount of the benefits, in whole or in part, including interest.
In the event of distribution by the Company of a cash dividend out of retained earnings that were tax exempt due to its Approved Enterprise status, the Company would have to pay corporate tax of 10% - 25% on the income from which the dividend was distributed based on the extent to which non-Israeli shareholders hold Company’s shares. A 15% withholding tax may be deducted from dividends distributed to the recipients.
On November 15, 2021 a new amendment of the Investment Law (“the Amendment’) was enacted (i) providing a reduced corporate income tax on the Trapped Profits distributed within a year from such amendment. The reduced corporate income tax is based on a certain formula and subject to reinvestment of certain amounts in enumerated assets/activities; (ii) harshening the rules with respect to determining the profits from which a dividend was distributed and providing that part of any dividend distribution, will be deemed as distributed from the Trapped Profits, according to a certain formula.
During December 2021, as part of the Tax Assessment audit for the years 2016-2019, the Company entered into an agreement with the Israeli Tax Authorities and opted-in with the new Amendment. The reduced corporate income tax on the Trapped Profits resulted in income tax expenses (net of reductions of uncertain tax positions provisions) of approximately $3.7M, and was included in the 2021 consolidated statements of operations.
In 2008, the Company submitted a request to approve a new plan (fourth plan) as a Privileged Enterprise in accordance with the Amendment to the Investment Law. The commencing year was 2010, and the expiration year was 2021.
In 2011, new legislation amending to the Investment Law was adopted. Under this new legislation, a uniform corporate tax rate will apply to all qualifying income of certain Industrial Companies (Requirement of a minimum export of 25% of the company's total turnover), as opposed to the current law's incentives, which are limited to income from Approved Enterprises during their benefits period. Under the new law, the uniform tax rate will be 10% in areas in Israel designated as Development Zone A and 15% elsewhere in Israel during 2011-2012, 7% and 12.5%, respectively, in 2013-2014, and 6% and 12%, respectively thereafter. The profits of these Industrial Companies will be freely distributable as dividends, subject to a 15% withholding tax (or lower, under an applicable tax treaty).
Under the transition provisions of the new legislation, the Company may decide to irrevocably implement the new law while waiving benefits provided under the current law or to remain subject to the current law.
In August 2013 "The Arrangements Law" (hereinafter—"the Law") was officially published. The following significant changes affecting taxation were approved:
1. The tax rate on a company in Development area A, effective January 1, 2014 is 9% (instead of 7% in 2014 and 6% in 2015 and thereafter), and the tax rate for companies in all other areas will be 16% (instead of 12.5% in 2014 and 12% in 2015 and thereafter).
2. The tax rate on dividend distributed, generated from "preferred income" or by a company that has an approved enterprise increased effective January 1, 2014 from 15% to 20%.
In 2016, most of the Company’s taxable income in Israel was attributable to Preferred Enterprises, with a related tax rate of 16%. In 2015 and 2014, most of the Company’s taxable income in Israel was attributable to Approved Enterprise programs with zero tax.
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includes Amendment 73 to the Law for the Encouragement of Capital Investments ("the 2017 Amendment") was published. According to the 2017 Amendment, Technological preferred enterprise, as defined in the Law for the Encouragement of Capital Investments, 1959 ("the Encouragement Law"), with total consolidated revenues of less than NIS 10 billion, shall be subject to 12% tax rate on income deriving from intellectual property (in development area A - a tax rate of 7.5%).
Any dividends distributed deriving from income from the preferred technological enterprises will be subject to tax at a rate of 20%. The 2017 Amendment further provides that, in certain circumstances, a dividend distributed to a foreign corporate shareholder, would be subject to a 4% tax rate (if the percentage of foreign investors exceeds 90%).
The Company assessed the criteria for qualifying to a “Preferred Technological Enterprise,” status and concluded that the Israeli entity is entitled to the above-mentioned benefits. The Company implemented the new incentives in its tax calculations starting 2017.
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “US Tax Act”) that instituted fundamental changes to the taxation of multinational corporations. The Tax Act includes significant changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from 35% to 21%, adjustments to rules relating to limitations on the deductibility of interest expense and executive compensation, the transition of U.S. international taxation from a worldwide tax system to a territorial tax system, foreign derived intangible income deduction, rules that impact the utilization of US NOLs and other corporate tax provisions.
Foreign-Derived Intangible Income :
The 2017 Tax Act provides tax incentives to U.S. companies to earn income from the sale, lease or license of goods and services abroad (i.e., the portion of a domestic corporation’s intangible income that is derived from serving foreign markets) in the form of a deduction for foreign-derived intangible income (“FDII”). FDII is taxed at an effective rate of 13.125% for taxable years beginning after December 31, 2017 and at an effective rate of 16.406% for taxable years beginning after December 31, 2025. The accounting for the deduction for FDII is similar to a special deduction and should be accounted for based on the guidance in ASC 740-10-25-37. The tax benefits for special deductions ordinarily are recognized no earlier than the year in which they are deductible on a tax return.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred tax assets are as follows:
Long-term deferred tax assets:
Under ASC 740-10, deferred tax assets are to be recognized for the anticipated tax benefits associated with net operating loss and tax credits carry-forwards and deductible temporary differences; unless it is more-likely-than-not that some or all of the deferred tax assets will not be realized.
The following is a reconciliation of the theoretical tax expense, assuming that all income is taxed at the ordinary statutory average corporate tax rate in Israel and the actual tax expense in the statement of operations, is as follows:
The Company’s effective tax rates differ from the statutory rates applicable to the Company for tax year 2021, primarily due to stock-based compensation deductible expenses, tax credits and foreign derived intangible income benefit in the US.
The Company’s effective tax rates differ from the statutory rates applicable to the Company for tax year 2020, primarily due to tax credits and foreign derived income benefit in the US.
In December 2021 the Parent Company has received final tax assessments for the years 2016-2019 from the Israeli Tax Authorities.
For the US subsidiary, with regards to any tax years starting 2015 and any tax attributes carryforwards from prior periods remain subject to examination in future periods (under the standard US statute of limitation and subject to tax filing). The other subsidiaries received final tax assessments through tax years 2012 until 2016.
The Company considers the earnings of certain subsidiaries to be indefinitely invested outside Israel on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company’s specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a deferred tax liability of approximately $18,381 related to the Israel income taxes of undistributed earnings of foreign subsidiaries indefinitely invested outside Israel. Should the Company decide to repatriate the foreign earnings, the Company would need to adjust the Company’s income tax provision in the period the Company determined that the earnings will no longer be indefinitely invested outside Israel.
The taxation of the Company's business is subject to the application of multiple and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.
In addition, the Company classifies interest and penalties recognized in the financial statements relating to uncertain tax position under the income taxes line item.
Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against the Company that could materially impact its tax liability and/or its effective income tax rate.
The Company believes that it has adequately provided for any reasonably foreseeable outcomes related to tax audits and settlement. The final tax outcome of its tax audits could be different from that which is reflected in the Company’s income tax provisions and accruals. Such differences could have a material effect on the Company’s income tax provision and net income in the period in which such determination is made.
The following table summarizes the changes in uncertain tax positions:
* The amount for the year ended December 31, 2021 and 2020 includes $2,412 and $2,280 unrecognized tax benefits, respectively, which are presented as a reduction from deferred tax assets, see Note 14e.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expenses.
Income not eligible for benefits under the New Technological Enterprise Laws mentioned in ”C” above are taxed at the corporate tax rate of 23%. |
GEOGRAPHIC AREAS AND MAJOR CUSTOMERS |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GEOGRAPHIC AREAS AND MAJOR CUSTOMERS |
NOTE 15 - GEOGRAPHIC AREAS AND MAJOR CUSTOMERS
Revenues are attributed to countries based on the geographic location of the customer.
(*) Long-lived assets are comprised of property and equipment, net and operating lease right-of-use assets.
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FINANCIAL INSTRUMENTS |
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Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL INSTRUMENTS |
NOTE 16 - FINANCIAL INSTRUMENTS
The Company enters into forward contracts, and currency options to hedge its balance sheet exposure as well as certain future cash flows in connection with certain operating expenses (mainly payroll expense) and forecast transactions which are expected to be denominated mainly in New Israeli Shekel ("NIS"). The Company is exposed to losses in the event of non-performance by counterparties to financial instruments; however, as the counterparties are major Israeli banks, credit risk is considered immaterial. The Company does not hold or issue derivatives for trading purposes. The notional amounts of the hedging instruments as of December 31, 2021 and December 31, 2020 were $32,590, and $17,675 respectively. The terms of all of these currency derivatives are less than one year.
The fair value of derivative contracts as of December 31, 2020 and December 31, 2019 was as follows:
The impact of derivative instrument on total operating expenses in the year ended December 31, 2021, 2020 and 2019 was:
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FINANCIAL INCOME (EXPENSE), NET |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL INCOME (EXPENSE), NET |
NOTE 17 - FINANCIAL INCOME (EXPENSE), NET
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SUBSEQUENT EVENTS |
12 Months Ended |
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Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS |
NOTE 18 - SUBSEQUENT EVENTS
On January 25, 2022, the Company completed its acquisition of all of the outstanding common stock of ancosys GmbH, a provider of chemical analysis and metrology solutions for advanced semiconductor manufacturing. The Company’s total consideration is expected to be approximately $90 million in cash including a performance based contingent consideration of $10 million.
During the year ended December 31, 2021 the Company recognized $999 of acquisition-related costs in the consolidated statements of operations under general and administrative expenses.
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SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||
Principles of Consolidation and Basis of Presentation |
The Company’s consolidated financial statements include the financial statements of Nova Ltd. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
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Use of Estimates in the Preparation of Financial Statements |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The Company's management evaluates its estimates on an ongoing basis, including those related to, but not limited to income taxes and tax uncertainties, collectability of trade accounts receivable, inventory accruals, fair value and useful lives of intangible assets, lease discount rate, lease period, convertible senior notes borrowing rate and revenue recognition. These estimates are based on management's knowledge about current events and expectations about actions the Company may undertake in the future. Actual results could differ from those estimates.
The novel coronavirus (“COVID-19”) pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions, and the extent of its impact on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and the impact on the Company’s customers and its sales cycles. The Company considered the impact of COVID-19 on the estimates and assumptions and determined that there were no material adverse impacts on the consolidated financial statements for the period ended December 31, 2021. As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change materially in future periods.
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Financial Statements in U.S. Dollars |
The currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is the U.S. dollar (the “dollar”). Accordingly, the Company uses the dollar as its functional and reporting currency. Certain of the dollar amounts in the financial statements may represent the dollar equivalent of other currencies, including the New Israeli Shekel (“NIS”). Transactions and balances denominated in dollars are presented at their dollar amounts. Non-dollar transactions and balances are re-measured into dollars in accordance with the principles set forth in ASC 830, “Foreign Currency Translation”.
All transaction gains and losses of the re-measured monetary balance sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.
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Cash and Cash Equivalents |
Cash and cash equivalents represent short-term highly liquid investments (mainly interest-bearing deposits) with maturity dates not exceeding three months from the date of deposit.
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Short Term Bank Deposit |
Short-term bank deposits consist of bank deposits with original maturities of more than three months and up to twelve months.
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Marketable Securities |
The Company accounts for marketable securities in accordance with ASC Topic 320, “Investments – Debt and Equity Securities”. The Company’s investments in marketable securities consist of high-grade treasury, corporate and municipal bonds.
Investments in marketable securities are classified as available for sale at the time of purchase. Available for sale securities are carried at fair value based on quoted market prices, with unrealized gains and losses, reported in accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on sales of marketable securities, are included in financial income (expenses), net. The amortized cost of marketable securities is adjusted for amortization of premium and accretion of discount to maturity, both of which, together with interest, are included in financial income (expenses), net.
The Company classifies its marketable securities as either short term or long term based on each instrument’s underlying contractual maturity date. Marketable securities with maturities of 12 months or less are classified as short-term and marketable securities with maturities greater than 12 months are classified as long-term.
The Company accounts for Credit losses in accordance with ASU 2016-13, Topic 326 “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments” which modified the other than temporary impairment model for available for sale debt securities. The guidance requires the Company to determine whether a decline in fair value below the amortized cost basis of an available for sale debt security is due to credit related factors or noncredit related factors. A credit related impairment should be recognized as an allowance on the balance sheet with a corresponding adjustment to earnings, however, if the Company intends to sell an impaired available for sale debt security or more likely than not would be required to sell such a security before recovering its amortized cost basis, the entire impairment amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis.
The Company’s allowance for credit losses on marketable securities was not material for the year ended on December 31, 2021.
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Trade accounts receivables |
Trade accounts receivables are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts, in accordance with ASC 326. The Company makes estimates of expected credit losses for based upon its assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.
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Business Combination |
The Company accounts for business combination in accordance with ASC No, 805, “Business Combination” (ASC 805). ASC 805 requires recognition of assets acquired and liabilities assumed at the acquisition date, measured at their fair values as of that date. Any access of the fair value of net assets acquired over purchased price and any subsequent changes in estimated contingencies are to be recorded in the consolidated statements of operations.
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Inventories |
Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are provided to cover risks arising from slow-moving items, technological obsolescence, excess inventories, discontinued products, and for market prices lower than cost, if any. The Company periodically evaluates the quantities on hand relative to historical and projected sales volume (which is determined based on an assumption of future demand and market conditions), the age of the inventory and the expected consumption of service spare parts. At the point of the loss recognition, a new lower cost basis for that inventory is established. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.
Inventory includes costs of products delivered to customers and not recognized as cost of sales, where revenues in the related arrangements were not recognized.
To support the Company’s service operations, the Company maintains service spare parts inventory and reduce the net carrying value of this inventory over the service life.
Cost is determined as follows:
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Property and Equipment |
Depreciation methods, useful lives and residual values are reviewed at the end each reporting year and adjusted if appropriate.
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Goodwill and Intangible Assets |
Goodwill and other purchased intangible assets have been recorded as a result of the acquisition of ReVera. Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired, and related liabilities.
Goodwill is not amortized, but rather is subject to an impairment test, in accordance with ASC 350, “Intangibles – Goodwill and Other”, at least annually (in the fourth quarter), or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Company has an option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value prior to performing the quantitative goodwill impairment test. The Company operates in one operating segment, and this segment comprises its only reporting unit.
Following the adoption of ASU 2017-04, "Simplifying the Test for Goodwill Impairment", any excess of the carrying value of the reporting unit over its fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to the fair value of the reporting unit.
Intangible assets with finite life (refer to note 2L for impairment assessment of intangible assets with finite life) are amortized over their useful lives using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise used, or, if that pattern cannot be reliably determined, using a straight-line amortization method.
(*) During 2021 a completion of the development and successful launch of the IPR&D related product was determined. The useful life of the IPR&D technology was determined to be 3 years and amortizing was initiated, subject to annual impairment assessment as described in Note 2L
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Impairment of Long-Lived Assets |
Long-lived assets (tangible and intangible assets with finite life), held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets (or asset Group) may not be recoverable. In the event that the sum of the expected future cash flows (undiscounted and without interest charges) of the long-lived assets is less than the carrying amount of such assets, an impairment charge would be recognized, and the assets (or asset Group) would be written down to their estimated fair values. During the years 2021, 2020 and 2019, no impairment losses have been identified.
IPR&D is tested for impairment annually or more frequently when indicators of impairment exist. The Company first assesses qualitative factors to determine if it is more likely than not that the IPR&D is impaired and whether it is necessary to perform a quantitative impairment test. The qualitative assessment considers various factors, including changes in demand, the abandonment of the IPR&D or significant economic slowdowns in the semiconductor industry and macroeconomic environment. If adverse qualitative trends are identified that could negatively impact the fair value of the asset, then quantitative impairment test is performed to compare the carrying value of the asset to its undiscounted expected future cash flows.
If this test indicates that there is impairment, the impaired asset is written down to fair value, which is typically calculated using discounted expected future cash flows utilizing an appropriate discount rate.
No impairment losses have been identified during 2021, 2020 and 2019 relating to goodwill and intangible assets.
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Accrued Warranty Costs |
Accrued warranty costs are calculated with respect to the warranty period on the Company’s products and are based on the Company’s prior experience and in accordance with management’s estimate. The estimated future warranty obligations are affected by the warranty periods, install base, labor and other related costs incurred in correcting a product failure.
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Derivative Financial Instruments |
ASC 815 requires the presentation of all derivatives as either assets or liabilities on the balance sheet and the measurement of those instruments at fair value.
For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. See Note 16 for disclosure of the derivative financial instruments in accordance with such pronouncements.
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Leases |
Under ASC 842, a contract is or contains a lease when the Company has the right to control the use of an identified asset for a period of time. The Company determines if an arrangement is a lease at inception of the contract, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. The commencement date of the lease is the date that the lessor makes an underlying asset available for the Company’s use. On the commencement date leases are evaluated for classification and assets and liabilities are recognized based on the present value of lease payments over the lease term.
The lease term used to calculate the lease liability includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The right-of-use (“ROU”) asset is initially measured as the amount of lease liability, adjusted for any initial lease costs, prepaid lease payments and any lease incentives. Costs incurred for common area maintenance, real estate taxes, and insurance are not included in the lease liability and are recognized as they are incurred.
The Company's leases include office buildings for its facilities and car leases, which are all classified as operating leases. Certain lease agreements include rental payments that are adjusted periodically for the consumer price index ("CPI"). The ROU and lease liability were calculated using the CPI as of the adoption date and will not be subsequently adjusted, unless the liability is reassessed for other reasons. Certain leases include renewal options that are under the Company's sole discretion. The renewal options were included in the ROU and liability calculation if it was reasonably assured that the Company will exercise the option.
As the Company’s lease arrangements do not provide an implicit rate, the Company uses its incremental estimated borrowing rate at lease commencement to measure ROU assets and lease liabilities. Operating lease expense is generally recognized on a straight-line basis over the lease term. For leases with a term of one year or less, the Company elected not to record the ROU asset or liability.
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Convertible senior notes |
The Company accounts for its convertible senior notes in accordance with ASC 470-20 "Debt with Conversion and Other Options". Pursuant to ASC Subtopic 470-20, issuers of certain convertible debt instruments, such as the Notes, that may be settled wholly or partially in cash upon conversion are required to separately account for the liability (debt) and equity (conversion option) components of the instrument. The liability component at issuance is recognized at fair value, based on the fair value of a similar instrument of similar credit rating and maturity that does not have a conversion feature. The equity component is based on the excess of the principal amount of the convertible senior notes over the fair value of the liability component and is recorded in additional paid-in capital. The equity component, net of issuance costs and deferred tax effects is presented within additional paid-in-capital and is not remeasured as long as it continues to meet the conditions for equity classification. The difference between the principal amount and the liability component represents a debt discount that is amortized to financial expense over the respective terms of the Notes using an effective interest rate method. The Company allocated the total issuance costs incurred to the liability and equity components of the convertible senior notes based on their relative values.
Issuance costs attributable to the liability and equity components were $5,894 and $518, respectively. Issuance costs attributable to the liability are netted against the principal balance and will be amortized to financial expense using the effective interest method over the contractual term of the notes. The effective borrowing rate of the liability component of the notes (after deduction of the abovementioned issuance costs attributed to the liability component) is 2.365%. This borrowing rate was based on Company's synthetic credit risk rating.
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Revenue Recognition |
Revenue Recognition Policy
The Company enters into revenue arrangements that include products and services which are distinct and accounted for as separate performance obligations. The Company determines whether promises are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are readily available and whether the Company's commitment to transfer the product or service to the customer is separately identifiable from other obligations in the contract.
The Company derives revenue from sales of advanced process control systems, spare parts, labor hours (mainly related to installation) and service contracts.
Revenues derived from sales of advanced process control systems, spare parts and labor hours are recognized at a point in time, when control of the promised goods or services is transferred to the customers, upon fulfillment of the contractual terms (typically upon shipment of the systems and spare parts or when the service is completed for labor hours).
Revenues derived from service contracts, are recognized ratably over time in accordance with the term of the contract since the Company has a stand-ready obligation to provide the service. Such contracts generally include a fixed fee.
Revenues from sales which were not yet determined to be final sales due to certain acceptance provisions are deferred.
Contracts with Multiple Performance Obligations
Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative Standalone Selling Price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when it sells each of the products and services separately and needs to determine whether there is a discount to be allocated based on the relative SSP of the various products and services.
Remaining Performance Obligations
Remaining performance obligations (RPOs) represent contracted revenues that had not yet been recognized and include deferred revenues and invoices that have been issued to customers but were uncollected and have not been recognized as revenues. As of December 31, 2021, the aggregate amount of the RPOs was $41,055 comprised of $15,338 deferred revenues and $25,717 of uncollected amounts that were not yet recognized as revenues. The Company expects the RPO to be recognized as revenues over the next year.
Contract Balances
Contract balances are presented separately on the consolidated balance sheets.
Revenues recognized during 2021, 2020 and 2019 from deferred revenues amounts included in current liabilities at the beginning of the period amounted to $3,651, $1,544 and $3,481 respectively.
In certain arrangements, the Company receives payment from a customer either before or after the performance obligation has been satisfied. The expected timing difference between the payment and satisfaction of performance obligations for the Company’s contracts is one year or less; therefore, the Company applies a practical expedient and does not consider the effects of the time value of money.
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Research and Development |
Research and development costs are charged to operations as incurred. Amounts received or receivable from the Government of Israel through the Israeli Innovation Authority (“IIA”, formerly known as the Office of the Chief Scientist) or from the European Community as participation in certain research and development programs are offset against research and development costs. The accrual for grants receivable is determined based on the terms of the programs, provided that the criteria for entitlement are expected to be met. Research and development grants recognized during the years ended December 31, 2021, 2020 and 2019 were $4,395, $5,645 and $6,932 respectively.
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Income Taxes |
The Company accounts for income taxes utilizing the asset and liability method in accordance with ASC 740, “Income Taxes”. Current tax liabilities are recognized for the estimated taxes payable on tax returns for the current year. Deferred tax liabilities or assets are recognized for the estimated future tax effects attributable to temporary differences between the income tax bases of assets and liabilities and their reported amounts in the financial statements, and for tax loss carryforwards.
Measurement of current and deferred tax liabilities and assets is based on provisions of enacted tax laws, and deferred tax assets are reduced, if necessary, by the amount of tax benefits, the realization of which is not considered more likely than not based on available evidence.
ASC 740-10 requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.
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Share-Based Compensation |
The Company accounts for equity-based compensation using ASC 718 “Compensation - Stock Compensation,” which requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant-date fair value of those awards.
Share Options
Under ASC 718, the fair market value of each option grant is estimated on the date of grant using the “Black-Scholes option pricing” method with the following weighted-average assumptions:
Expected volatility was calculated based on actual historical share price movements over a term that is equivalent to the expected term of granted options. The expected term of options granted is based on historical experience and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The Company recognizes compensation expenses for the value of awards granted, based on the accelerated method. The Company account for forfeitures as they occur.
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Earnings per Share |
Earnings per share are presented in accordance with ASC 260-10, “Earnings per Share”. Pursuant to which, basic earnings per share excludes the dilutive effects of convertible securities and is computed by dividing income (loss) available to ordinary shareholders by the weighted-average number of ordinary shares outstanding for the period, net of treasury shares. Diluted earnings per share reflect the potential dilutive effect of options and RSUs. The number of potentially dilutive options and RSUs excluded from diluted earnings per share due to the anti-dilutive effect of out of the money options amounted to 336,857 in 2021, 492,963 in 2020, 438,999 in 2019.
Additionally, 2,055,641 in 2021 (2,680,965 in 2020) shares underlying the conversion option of the Convertible Senior Notes are not considered in the calculation of diluted net income per share as the effect would be anti-dilutive. The Company intends to settle the principal amount of Convertible Senior Notes in cash and therefore will use the treasury stock method for calculating any potential dilutive effect on diluted net income per share, if applicable. The conversion will have a dilutive impact on diluted net income per share when the average market price of an ordinary share for a given period exceeds the conversion price of $74.6 per share.
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Concentrations of Credit Risk |
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, bank deposits, trade accounts receivable and foreign currency derivative contracts.
The majority of the Company’s cash and cash equivalents and bank deposits are invested in dollar instruments with major banks in Israel. Management believes that the financial institutions that hold the Company's investments are corporations with high credit standing. Accordingly, management believes that low credit risk exists with respect to these financial investments.
The trade accounts receivable of the Company are derived from sales to customers located primarily in Taiwan R.O.C., Korea, China and USA. The management of the Company performed risk assessment on an ongoing basis and believes it bears low risk.
The Company entered into options and forward contracts to hedge against the risk of overall changes in future cash flow from payments of payroll and related expenses as well as other expenses denominated in NIS. The derivative instruments hedge a portion of the Company's non-dollar currency exposure. Counterparty to the Company’s derivative instruments is major financial institution.
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Fair Value Measurements |
The fair values of the Company’s cash and cash equivalents, short-term interest-bearing bank deposits, trade accounts receivable, and accounts payable approximate their carrying amounts due to their short-term nature.
The Company follows the provisions of ASC No. 820, “Fair Value Measurement” (“ASC 820”), which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
In determining a fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability, based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect assumptions that market participants would use in pricing an asset or liability, based on the best information available under given circumstances.
The hierarchy is broken down into three levels, based on the observability of inputs and assumptions, as follows:
Level 1 - Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.
Level 2 - Other inputs that are directly or indirectly observable in the market place.
Level 3 - Unobservable inputs which are supported by little or no market activity.
In accordance with ASC 820, the Company measures its marketable securities, at fair value using the market approach valuation technique. Marketable securities are classified within Level 2 because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.
The estimated fair values of the derivative instruments are determined based on market rates to settle the instruments. The fair value of the Company’s derivative contracts (including forwards and options) is determined using standard valuation models. The significant inputs used in these models are readily available in public markets or can be derived from observable market transactions and, therefore, the Company’s derivative contracts have been classified as Level 2.
Inputs used in these standard valuation models include the applicable spot, forward, and discount rates. The standard valuation model for the Company options contracts also includes implied volatility, which is specific to individual options and is based on rates quoted from a widely used third-party resource.
The Company’s cash and cash equivalents, Interest-bearing bank deposits and restricted interest-bearing bank deposits are classified within level 1. Marketable securities, Derivative instruments and Convertible senior notes classified within Level 2 (see Note 3, Note 16 and Note 10, respectively).
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New Accounting Pronouncements |
Recently issued accounting pronouncements not yet adopted:
In August 2020, the FASB issued Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. This guidance will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.
The Company will adopt this new guidance using the modified retrospective method as of January 1, 2022. The adoption of this new guidance is estimated to result in an increase of approximately $12.1 million to short-term convertible senior notes, in the consolidated balance sheets, to reflect the full principal amount of the convertible notes outstanding net of issuance costs, a reduction of approximately $13.8 million to additional paid-in capital, net of estimated income tax effects, to remove the equity component separately recorded for the conversion features associated with the convertible notes, an increase to deferred tax assets, net of approximately $1.4 million, and a cumulative-effect adjustment of approximately $3.1 million, net of estimated income tax effects, to the beginning balance of retained earnings as of January 1, 2022. The adoption of this new guidance is anticipated to reduce interest expense by approximately $3.1 million during the year ended December 31, 2022. In addition, the required use of the if-converted method by the new guidance in calculating diluted earnings per share is expected to increase the number of potentially dilutive shares in 2022 by up to 2.1 million shares.
In October 2021, the FASB issued ASU 2021-08, ASC Topic 805 “Business Combinations”. The standard create an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers acquired in a business combination. Under this exception, an acquirer applies ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities on the acquisition date. ASC 805 generally requires the acquirer in a business combination to recognize and measure the assets it acquires and the liabilities it assumes at fair value on the acquisition date. The standard will become effective for fiscal years beginning after December 15, 2022. Early application of the amendments is permitted, and the Company is currently assessing such early adoption. See also Note 18.
In November 2021, the FASB issued ASU 2021-10, ASC Topic 832 “Disclosures by Business Entities about Government Assistance”. The standard require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy: (1) Information about the nature of the transactions and the related accounting policy used to account for the transactions (2) The line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item (3) Significant terms and conditions of the transactions, including commitments and contingencies. The standard will become effective for fiscal years beginning after December 15, 2021. The Company is currently assessing the impact of the adoption of this standard on its consolidated financial statements.
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SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
Estimated Useful Lives of Fixed Assets |
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Schedule of estimated useful lives of the intangible assets |
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Weighted Average Assumptions Used in Determining Fair Market Value of Options |
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MARKETABLE SECURITIES (Tables) |
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Schedule of summarizes the amortized cost, unrealized gains, unrealized losses, and fair value of marketable securities |
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INVENTORIES (Tables) |
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Inventories |
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OTHER CURRENT ASSETS (Tables) |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Current Assets |
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PROPERTY AND EQUIPMENT, NET (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment, Net |
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INTANGIBLE ASSETS (Tables) |
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Schedule of Intangible Assets |
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Schedule of Amortization Expenses |
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Schedule of Annual Amortization Expenses |
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OTHER CURRENT LIABILITIES (Tables) |
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Schedule of Other Current Liabilities |
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Schedule of Accrued Warranty Costs |
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Changes in the Product Warranty Accrual |
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CONVERTIBLE SENIOR NOTES, NET (Tables) |
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Schedule of Net Carrying Amount of Convertible Notes |
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Schedule of Interest Expense Related to Convertible Notes |
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LEASES (Tables) |
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Schedule of Future Minimum Lease Payments |
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SHAREHOLDERS' EQUITY (Tables) |
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Effects of Stock-Based Compensation in the Statements of Operations |
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Status of the Company's Share Option Plans |
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Information about Share Options Outstanding |
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Schedule of Unvested Restricted Share Units |
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INCOME TAXES (Tables) |
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Significant Components of Deferred Tax Assets |
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Schedule of Presentation in Balance Sheets for Deferred Taxes |
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Schedule of Israel and International Components of Income before Taxes |
|
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Schedule of Israel and International Components of Income Taxes |
|
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Reconciliation of Theoretical and Actual Tax Expense |
|
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Schedule of Uncertain Tax Positions |
* The amount for the year ended December 31, 2021 and 2020 includes $2,412 and $2,280 unrecognized tax benefits, respectively, which are presented as a reduction from deferred tax assets, see Note 14e.
|
GEOGRAPHIC AREAS AND MAJOR CUSTOMERS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales by Geographic Area as Percentage of Total Sales |
|
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Sales by Major Customers as Percentage of Total Sales |
|
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Schedule of Long-lived assets by Geographic Location |
|
FINANCIAL INSTRUMENTS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair Value of Derivative Contracts |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Loss (gain) on derivative instruments |
|
FINANCIAL INCOME (EXPENSE), NET (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing Income, Net |
|
GENERAL (Narrative) (Details) - shares |
Dec. 31, 2021 |
Jun. 24, 2021 |
Dec. 31, 2020 |
Apr. 02, 2015 |
---|---|---|---|---|
Business Acquisition [Line Items] | ||||
Increased authorized ordinary share capital | 60,000,000 | 60,000,000 | 40,000,000 | |
Revera Inc [Member] | ||||
Business Acquisition [Line Items] | ||||
Percentage of shares acquired | 100.00% |
SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details) $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2021
USD ($)
Segment
shares
|
Dec. 31, 2020
USD ($)
shares
|
Dec. 31, 2019
USD ($)
shares
|
Dec. 31, 2021
₪ / shares
|
Dec. 31, 2021
USD ($)
|
|
Debt Instrument [Line Items] | |||||
Number of Operating Segments | Segment | 1 | ||||
Uncertain tax position, likelihood of being sustained, threshold for recognition | 50.00% | ||||
Dilutive securities excluded from diluted earnings per share | shares | 336,857 | 492,963 | 438,999 | ||
Remaining Performance Obligations | $ 41,055 | ||||
Deferred revenues | 15,338 | ||||
Uncollected amounts of deferred revenue | 25,717 | ||||
Revenues recognized from deferred revenues | $ 3,651 | $ 1,544 | $ 3,481 | ||
Research and development grants recognized | $ 4,395 | $ 5,645 | $ 6,932 | ||
Accounting standards update, estimated increase in convertible notes | 12,100 | ||||
Accounting standards update, estimated reduction in additional paid in capital | 13,800 | ||||
Accounting standards update, estimated increase in deferred tax assets | 1,400 | ||||
Accounting standards update, estimated adjustments to tax effects | 3,100 | ||||
Accounting standards update, estimated reduction in interest expense | $ 3,100 | ||||
Number of potentially dilutive shares | shares | 2,100,000 | ||||
Convertible senior notes [Member] | |||||
Debt Instrument [Line Items] | |||||
Dilutive securities excluded from diluted earnings per share | shares | 2,055,641 | 2,680,965 | |||
Issuance costs of liability | $ 5,894 | ||||
Issuance costs of equity components | $ 518 | ||||
Effective borrowing rate of liability component | 2.365% | ||||
Conversion price | ₪ / shares | ₪ 74.6 |
SIGNIFICANT ACCOUNTING POLICIES (Estimated Useful Lives of Property and Equipment) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Electronic equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
Electronic equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 7 years |
Office furniture and equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
Office furniture and equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 17 years |
Leasehold improvements [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | Over the shorter of the term of the lease (including its extension periods) or the useful life of the asset |
SIGNIFICANT ACCOUNTING POLICIES (Estimated Useful Lives of Intangible Assets) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Technology [Member] | Minimum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life | 3 years |
Technology [Member] | Maximum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life | 7 years |
Customer relationships [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life | 10 years |
IPR&D [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life | 3 years |
SIGNIFICANT ACCOUNTING POLICIES (Weighted-Average Assumptions Used in Determinig Fair Market Value of Options) (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Accounting Policies [Abstract] | |||
Risk-free interest rate | 0.89% | 0.38% | 1.87% |
Expected term of options | 4 years 11 months 19 days | 5 years 29 days | 4 years 8 months 8 days |
Expected volatility | 39.02% | 36.61% | 33.18% |
Expected dividend yield | 0.00% | 0.00% | 0.00% |
MARKETABLE SECURITIES (Narrative) (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2021
USD ($)
| |
Investments, Debt and Equity Securities [Abstract] | |
Proceeds from maturity of available for sale marketable securities | $ 12,862 |
MARKETABLE SECURITIES (Details) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
USD ($)
| ||||
Marketable Securities [Line Items] | ||||
Amortized Cost | $ 200,302 | |||
Unrealized gains | 1 | |||
Unrealized losses | (1,320) | [1] | ||
Fair Value | 198,983 | |||
Corporate bonds, Matures within one year [Member] | ||||
Marketable Securities [Line Items] | ||||
Amortized Cost | 53,238 | |||
Unrealized gains | 0 | |||
Unrealized losses | (67) | [1] | ||
Fair Value | 53,171 | |||
Governmental bonds, Matures within one year [Member] | ||||
Marketable Securities [Line Items] | ||||
Amortized Cost | 8,409 | |||
Unrealized gains | 0 | |||
Unrealized losses | (12) | [1] | ||
Fair Value | 8,397 | |||
Marketable Securities, Matures within one year [Member] | ||||
Marketable Securities [Line Items] | ||||
Amortized Cost | 61,647 | |||
Unrealized gains | 0 | |||
Unrealized losses | (79) | [1] | ||
Fair Value | 61,568 | |||
Corporate bonds, Matures after one year [Member] | ||||
Marketable Securities [Line Items] | ||||
Amortized Cost | 122,701 | |||
Unrealized gains | 0 | |||
Unrealized losses | (1,138) | [1] | ||
Fair Value | 121,563 | |||
Governmental bonds, Matures after one year [Member] | ||||
Marketable Securities [Line Items] | ||||
Amortized Cost | 15,954 | |||
Unrealized gains | 1 | |||
Unrealized losses | (103) | [1] | ||
Fair Value | 15,852 | |||
Marketable Securities, Matures after one year [Member] | ||||
Marketable Securities [Line Items] | ||||
Amortized Cost | 138,655 | |||
Unrealized gains | 1 | |||
Unrealized losses | (1,241) | [1] | ||
Fair Value | $ 137,415 | |||
|
INVENTORIES (Schedule of inventory) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Inventory Disclosure [Abstract] | |||
Raw materials | $ 22,953 | $ 17,511 | |
Service inventory | 19,838 | 16,860 | |
Work in process | 19,125 | 16,364 | |
Finished goods | 16,749 | 10,999 | |
Inventories | 78,665 | 61,734 | |
Write-offs | $ 5,126 | $ 5,664 | $ 4,435 |
OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Governmental institutions | $ 4,447 | $ 5,776 |
Prepaid expenses | 4,412 | 3,331 |
Other | 383 | 675 |
Other current assets | $ 9,242 | $ 9,782 |
PROPERTY AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Property, Plant and Equipment [Line Items] | |||
Cost: | $ 77,827 | $ 76,352 | |
Accumulated depreciation: | 43,367 | 42,184 | |
Net book value | 34,460 | 34,168 | |
Depreciation expense | 6,475 | 5,875 | $ 5,401 |
Electronic equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Cost: | 48,604 | 43,671 | |
Accumulated depreciation: | 35,040 | 32,019 | |
Office furniture and equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Cost: | 5,006 | 4,828 | |
Accumulated depreciation: | 2,755 | 1,554 | |
Leasehold improvements [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Cost: | 24,217 | 27,853 | |
Accumulated depreciation: | $ 5,572 | $ 8,611 |
INTANGIBLE ASSETS (Schedule of Intangible Assets) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Original amount | $ 19,423 | $ 19,423 |
Accumulated amortization | 16,822 | 14,364 |
Net book value | 2,601 | 5,059 |
Technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Original amount | 14,232 | 14,232 |
Accumulated amortization | 12,026 | 10,108 |
Customer relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Original amount | 5,191 | 5,191 |
Accumulated amortization | $ 4,796 | $ 4,256 |
INTANGIBLE ASSETS (Schedule of Amortization Expenses) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Finite-Lived Intangible Assets [Line Items] | |||
Amortization expenses | $ 2,458 | $ 2,503 | $ 2,625 |
Technology [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization expenses | 1,918 | 1,758 | 1,758 |
Customer relationships [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization expenses | $ 540 | $ 745 | $ 867 |
INTANGIBLE ASSETS (Schedule of Annual Amortization Expenses) (Details) $ in Thousands |
Dec. 31, 2021
USD ($)
|
---|---|
Year ending December 31 | |
2022 | $ 1,378 |
2023 | 726 |
2024 | 497 |
Net book value | $ 2,601 |
OTHER CURRENT LIABILITIES (Schedule of Other Current Liabilities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued salaries and fringe benefits | $ 28,176 | $ 17,773 |
Accrued warranty costs (See B below) | 8,287 | 4,839 |
Governmental institutions | 12,372 | 5,758 |
Other | 50 | 48 |
Other current liabilities | $ 48,885 | $ 28,418 |
OTHER CURRENT LIABILITIES (Schedule of Accrued Warranty Costs) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|---|
Payables and Accruals [Abstract] | |||
Other current liabilities | $ 8,287 | $ 4,839 | |
Other long-term liability | 598 | 313 | |
Accrued warranty costs | $ 8,885 | $ 5,152 | $ 5,132 |
OTHER CURRENT LIABILITIES (Changes in the Product Warranty Accrual) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Payables and Accruals [Abstract] | ||
Balance as of beginning of year | $ 5,152 | $ 5,132 |
Services provided under warranty | (8,798) | (6,752) |
Changes in provision | 12,531 | 6,772 |
Balance as of end of year | $ 8,885 | $ 5,152 |
LIABILITY FOR EMPLOYEE SEVERANCE PAY, NET (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Postemployment Benefits [Abstract] | |||
Severance-pay expenses | $ 818 | $ 617 | $ 640 |
CONVERTIBLE SENIOR NOTES, NET (Narrative) (Details) $ / shares in Units, $ in Thousands |
1 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Oct. 31, 2020
USD ($)
Rate
$ / shares
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2020
₪ / shares
|
Dec. 31, 2020
USD ($)
|
|
Debt Instrument [Line Items] | ||||||
Ordinary shares, par value | ₪ / shares | ₪ 0.01 | |||||
Deferred taxes | $ (3,159) | $ (1,031) | $ 975 | |||
Convertible Notes [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Principal amount | $ 175,000 | 200,000 | $ 200,000 | |||
Maturity date | Oct. 15, 2025 | |||||
Additional aggregate principal amount | $ 25,000 | |||||
Conversion rate | Rate | 13.4048 | |||||
Principal amount of convertible notes in conversion | $ 1,000 | $ 1,000 | ||||
Conversion price | $ / shares | $ 74.60 | |||||
Percentage of conversion price | 130.00% | 130.00% | ||||
Percentage of measurement period | 98.00% | |||||
Percentage of redemption price equal to principal amount | 100.00% | |||||
Percentage of repurchase price equal to principal amount | 100.00% | |||||
Equity component, net of issuance costs | $ 518 | |||||
Deferred taxes | 1,878 | |||||
Estimated fair value of convertible senior notes | $ 390,000 |
CONVERTIBLE SENIOR NOTES, NET (Schedule of Net Carrying Amount of Convertible Notes) (Details) - Convertible Notes [Member] - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
Oct. 31, 2020 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Principal amount | $ 200,000 | $ 200,000 | $ 175,000 |
Unamortized discount | (12,032) | (15,032) | |
Unamortized issuance costs | (4,931) | (6,160) | |
Net carrying amount | 183,037 | 178,808 | |
Equity component, net of issuance costs of $518 and deferred taxes of $1,878 | $ 13,770 | $ 13,770 |
CONVERTIBLE SENIOR NOTES, NET (Schedule of Interest Expense Related to Convertible Notes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Debt Instrument [Line Items] | |||
Total financial expense recognized | $ 4,229 | $ 868 | $ 0 |
Convertible Notes [Member] | |||
Debt Instrument [Line Items] | |||
Amortization of debt discount | 3,000 | 616 | |
Amortization of debt issuance costs | 1,229 | 252 | |
Total financial expense recognized | $ 4,229 | $ 868 |
LEASES (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Lessee, Lease, Description [Line Items] | |||
Recognized leased assets | $ 30,627 | $ 29,109 | |
Current liabilities | 4,452 | 3,703 | |
Long-term liabilities | $ 33,450 | 31,905 | |
Extend lease term | up to additional 10 years | ||
Remaining lease term | 14 years 7 months 6 days | ||
Weighted average discount rate | 4.50% | ||
Lease expense | $ 3,935 | 4,654 | $ 5,166 |
Operating cash flows for operating leases | $ 4,134 | $ 5,840 | $ 5,326 |
Minimum [Member] | |||
Lessee, Lease, Description [Line Items] | |||
Remaining lease term | 1 year | ||
Maximum [Member] | |||
Lessee, Lease, Description [Line Items] | |||
Remaining lease term | 9 years |
LEASES (Schedule of Future Minimum Lease Payments) (Details) $ in Thousands |
Dec. 31, 2021
USD ($)
|
---|---|
Lessee Disclosure [Abstract] | |
2022 | $ 4,508 |
2023 | 4,273 |
2024 | 4,248 |
2025 | 4,028 |
2026 | 3,661 |
2027 and thereafter | 33,436 |
Total lease payments | 54,154 |
Less imputed interest | (16,252) |
Total | $ 37,902 |
COMMITMENTS AND CONTINGENCIES (Narrative) (Details) $ in Thousands |
Dec. 31, 2021
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Non-cancelable purchase obligations amount | $ 190,000 |
SHAREHOLDERS' EQUITY (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | 38 Months Ended | |||||
---|---|---|---|---|---|---|---|
Oct. 14, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2021 |
Oct. 11, 2020 |
Nov. 30, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Weighted-average fair value of options granted | $ 35.94 | $ 15.46 | $ 8.18 | ||||
Share repurchase program | $ 20,000 | $ 25,000 | |||||
Ordinary share repurchased, shares | 170,910 | 556,603 | |||||
Ordinary share repurchased | $ 10,000 | $ 14,509 | |||||
Total intrinsic value of options outstanding | $ 58,835 | $ 38,514 | 58,835 | ||||
Total intrinsic value of options exercisable at year-end | 41,117 | 24,428 | 41,117 | ||||
Total intrinsic value of options exercised | $ 18,571 | $ 10,463 | $ 4,570 | ||||
Employee Stock Option [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 4 years | ||||||
Unrecognized compensation cost related to non-vested employee options | $ 610 | 610 | |||||
Unrecognized compensation cost, recognition period | 4 years | ||||||
Employee Stock Option [Member] | Maximum [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Options contractual term | 10 years | ||||||
Restricted Stock Units (RSUs) [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 3 years | ||||||
Unrecognized compensation cost related to unvested restricted shares | $ 21,231 | $ 21,231 | |||||
Total intrinsic value of RSU's vested | $ 17,341 | $ 6,344 | $ 3,513 | ||||
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche One [Member] | 25% on each of anniversaries of the grant date [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting percentage | 25.00% | ||||||
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche One [Member] | 33% on each of anniversaries of the grant date [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting percentage | 33.00% | ||||||
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche Two [Member] | 25% on each of anniversaries of the grant date [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting percentage | 25.00% | ||||||
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche Two [Member] | 33% on each of anniversaries of the grant date [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting percentage | 33.00% | ||||||
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche Three [Member] | 25% on each of anniversaries of the grant date [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting percentage | 25.00% | ||||||
Restricted Stock Units (RSUs) [Member] | Share-based Compensation Award, Tranche Three [Member] | 33% on each of anniversaries of the grant date [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting percentage | 33.00% | ||||||
Restricted Stock Units (RSUs) [Member] | Share Based Compensation Award Tranche Four [Member] | 25% on each of anniversaries of the grant date [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting percentage | 25.00% | ||||||
Restricted Stock Units (RSUs) [Member] | Share Based Compensation Award Tranche Four [Member] | 33% on each of anniversaries of the grant date [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting percentage | 33.00% |
SHAREHOLDERS' EQUITY (Effects of Stock-Based Compensation in the Statements of Operations) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Share-based compensation | $ 10,488 | $ 6,949 | $ 5,092 |
Product [Member] | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Share-based compensation | 1,358 | 927 | 534 |
Service [Member] | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Share-based compensation | 802 | 437 | 469 |
Research and Development [Member] | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Share-based compensation | 3,994 | 2,556 | 2,206 |
Sales and Marketing [Member] | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Share-based compensation | 2,221 | 1,531 | 1,121 |
General and Administrative [Member] | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Share-based compensation | $ 2,113 | $ 1,498 | $ 762 |
SHAREHOLDERS' EQUITY (Status of the Company's Share Option Plans) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2021
$ / shares
shares
| |
Share Options | |
Outstanding - beginning of year | shares | 797,279 |
Granted | shares | 9,615 |
Exercised | shares | (236,652) |
Expired and forfeited | shares | (84,700) |
Outstanding - year end | shares | 485,542 |
Options exercisable at year-end | shares | 327,859 |
Weighted Average Exercise Price | |
Outstanding - beginning of year | $ / shares | $ 22.29 |
Granted | $ / shares | 102.35 |
Exercised | $ / shares | 18.76 |
Expired and forfeited | $ / shares | 23.85 |
Outstanding - year end | $ / shares | 25.33 |
Options exercisable at year-end | $ / shares | $ 21.09 |
SHAREHOLDERS' EQUITY (Information About Share Options Outstanding) (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2021
₪ / shares
$ / shares
shares
|
Dec. 31, 2021
$ / shares
shares
|
|
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
Number Outstanding | shares | 485,542 | 485,542 |
Weighted Average Exercise Price, Outstanding | $ 25.33 | |
Number Exercisable, Exercisable | shares | 327,859 | 327,859 |
Weighted Average Exercise Price, Exercisable | $ 21.09 | |
10.08-20.00 [Member] | ||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
Exercise Prices, minimum | $ 10.24 | |
Exercise Prices, maximum | $ 20.00 | |
Number Outstanding | shares | 134,047 | 134,047 |
Weighted Average Remaining Contractual Life (in years), Outstanding | 1 year 1 month 13 days | |
Weighted Average Exercise Price, Outstanding | $ 11.53 | |
Number Exercisable, Exercisable | shares | 134,047 | 134,047 |
Weighted Average Exercise Price, Exercisable | $ 11.53 | |
20.01-35.00 [Member] | ||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
Exercise Prices, minimum | $ 20.01 | |
Exercise Prices, maximum | $ 35.00 | |
Number Outstanding | shares | 309,054 | 309,054 |
Weighted Average Remaining Contractual Life (in years), Outstanding | 3 years 7 months 9 days | |
Weighted Average Exercise Price, Outstanding | $ 26.59 | |
Number Exercisable, Exercisable | shares | 185,815 | 185,815 |
Weighted Average Exercise Price, Exercisable | $ 26.85 | |
35.01-50.00 [Member] | ||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
Exercise Prices, minimum | $ 35.01 | |
Exercise Prices, maximum | $ 50.00 | |
Number Outstanding | shares | 28,635 | 28,635 |
Weighted Average Remaining Contractual Life (in years), Outstanding | 5 years 5 months 4 days | |
Weighted Average Exercise Price, Outstanding | $ 46.08 | |
Number Exercisable, Exercisable | shares | 6,948 | 6,948 |
Weighted Average Exercise Price, Exercisable | $ 46.27 | |
50.01-70.00 [Member] | ||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
Exercise Prices, minimum | $ 50.01 | |
Exercise Prices, maximum | $ 70.00 | |
Number Outstanding | shares | 4,191 | 4,191 |
Weighted Average Remaining Contractual Life (in years), Outstanding | 5 years 7 months 17 days | |
Weighted Average Exercise Price, Outstanding | $ 54.67 | |
Number Exercisable, Exercisable | shares | 1,049 | 1,049 |
Weighted Average Exercise Price, Exercisable | ₪ / shares | $ 54.67 | |
70.01-102.35 [Member] | ||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||
Exercise Prices, minimum | $ 70.01 | |
Exercise Prices, maximum | $ 102.35 | |
Number Outstanding | shares | 9,615 | 9,615 |
Weighted Average Remaining Contractual Life (in years), Outstanding | 5 years 5 months 23 days | |
Weighted Average Exercise Price, Outstanding | $ 102.35 | |
Number Exercisable, Exercisable | shares | 0 | 0 |
Weighted Average Exercise Price, Exercisable | ₪ / shares | $ 0 |
SHAREHOLDERS' EQUITY (Schedule of Unvested Restricted Share Units) (Details) - Restricted Stock Units (RSUs) [Member] |
12 Months Ended |
---|---|
Dec. 31, 2021
$ / shares
shares
| |
Number of RSUs | |
Unvested - beginning of year | shares | 468,561 |
Granted | shares | 197,941 |
Vested | shares | (165,530) |
Canceled | shares | (37,771) |
Unvested - year end | shares | 463,201 |
Weighted average grant date fair value | |
Unvested - beginning of year | $ / shares | $ 39.14 |
Granted | $ / shares | 103.84 |
Vested | $ / shares | 35.88 |
Canceled | $ / shares | 41.55 |
Unvested - year end | $ / shares | $ 67.79 |
INCOME TAXES (Narrative) (Details) $ in Thousands, ₪ in Billions |
1 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Dec. 31, 2025 |
Dec. 31, 2021
ILS (₪)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2018 |
|
Required income from exports, percent | 25.00% | 25.00% | ||||
Withholding tax rate | 15.00% | 15.00% | ||||
Trapped Profits Agreement Net Effect | $ 3,716 | $ 0 | $ 0 | |||
Corporate tax rate | 23.00% | 23.00% | ||||
Taxable income in Israel is attributable to Preferred Enterprises tax rate | 16.00% | 16.00% | ||||
Unrecognized deferred tax liability related to the Israel income taxes of undistributed earnings of foreign subsidiaries indefinitely invested outside the Israel | $ 18,381 | |||||
Minimum [Member] | ||||||
Corporate tax on income if approved enterprise status earnings are distributed | 10.00% | 10.00% | ||||
Permanent reduction in corporate tax rate | 21.00% | 21.00% | ||||
The minimum holding rate by foreign investors for which the company will be entitled to a reduced tax rate on dividend | 15.00% | 15.00% | ||||
Maximum [Member] | ||||||
Corporate tax on income if approved enterprise status earnings are distributed | 25.00% | 25.00% | ||||
Permanent reduction in corporate tax rate | 35.00% | 35.00% | ||||
The minimum holding rate by foreign investors for which the company will be entitled to a reduced tax rate on dividend | 20.00% | 20.00% | ||||
Foreign-Derived Intangible Income [Member] | ||||||
Corporate tax rate | 13.125% | |||||
Law for the Encouragement of Capital Investments Investment First Plan [Member] | ||||||
Period of full tax exemption | 4 years | 4 years | ||||
Tax rate after full exemption period | 25.00% | 25.00% | ||||
Post exemption period | 3 years | 3 years | ||||
Law for the Encouragement of Capital Investments Investment Plan Second and Third Plans [Member] | ||||||
Period of full tax exemption | 2 years | 2 years | ||||
Tax rate after full exemption period | 25.00% | 25.00% | ||||
Post exemption period | 5 years | 5 years | ||||
Development Area A [Member] | ||||||
Tax rate applicable to approved industrial enterprise, 2015 and after | 6.00% | 6.00% | ||||
Tax rate applicable to approved industrial enterprise, 2013-2014 | 7.00% | 7.00% | ||||
Development Area A [Member] | Minimum [Member] | ||||||
Taxable income in Israel is attributable to Preferred Enterprises tax rate | 9.00% | 9.00% | ||||
Development Area A [Member] | Maximum [Member] | ||||||
Taxable income in Israel is attributable to Preferred Enterprises tax rate | 7.50% | 7.50% | ||||
Outside development area A [Member] | ||||||
Tax rate applicable to approved industrial enterprise, 2015 and after | 12.00% | 12.00% | ||||
Tax rate applicable to approved industrial enterprise, 2013-2014 | 12.50% | 12.50% | ||||
Preferred Area A [Member] | ||||||
Withholding tax rate | 15.00% | 15.00% | ||||
Tax rate applicable to approved industrial enterprise, 2015 and after | 6.00% | 6.00% | ||||
Required percentage of export of company' s total turnover | 25.00% | 25.00% | ||||
Tax rate applicable to approved industrial enterprise, 2011-2012 | 10.00% | 10.00% | ||||
Tax rate applicable to approved industrial enterprise, 2013-2014 | 7.00% | 7.00% | ||||
The minimum holding rate by foreign investors for which the company will be entitled to a reduced tax rate on dividend | 20.00% | 20.00% | ||||
Outside Preferred Area A [Member] | ||||||
Tax rate applicable to approved industrial enterprise during the current period and the next rolling twelve months following the latest balance sheet presented in other than Development Zone A | 15.00% | 15.00% | ||||
Tax rate applicable to approved industrial enterprise, 2015 and after | 12.00% | 12.00% | ||||
Required percentage of export of company' s total turnover | 25.00% | 25.00% | ||||
Tax rate applicable to approved industrial enterprise, 2011-2012 | 15.00% | 15.00% | ||||
Tax rate applicable to approved industrial enterprise, 2013-2014 | 12.50% | 12.50% | ||||
Taxable income in Israel is attributable to Preferred Enterprises tax rate | 16.00% | 16.00% | ||||
Preferred Technological Enterprises [Member] | ||||||
The limit of consolidated revenue for which the Company is entitled to be considered a preferred technology enterprise | ₪ | ₪ 10 | |||||
Technological preferred enterprise subject tax rate | 12.00% | 12.00% | ||||
Foreign Corporate [Member] | ||||||
The minimum holding rate by foreign investors for which the company will be entitled to a reduced tax rate on dividend | 4.00% | 4.00% | ||||
Foreign Investors [Member] | ||||||
The minimum holding rate by foreign investors for which the company will be entitled to a reduced tax rate on dividend | 90.00% | 90.00% | ||||
Subsequent Event [Member] | Foreign-Derived Intangible Income [Member] | ||||||
Corporate tax rate | 16.406% |
INCOME TAXES (Significant Components of Deferred Tax Assets) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Deferred tax assets: | ||
Net operating loss carryforwards | $ 501 | $ 505 |
Tax credits carryforward | 1,052 | 740 |
Reserve and allowances | 8,692 | 5,504 |
Operating lease liabilities, net | 328 | 344 |
Deferred tax assets before valuation allowance | 10,573 | 7,093 |
Valuation Allowance | (1,737) | (1,311) |
Deferred tax assets after valuation allowance | 8,836 | 5,782 |
Deferred tax liabilities: | ||
Convertible senior notes | (1,444) | (1,804) |
Intangible assets | (578) | (1,109) |
Reserve and allowances | (653) | 0 |
Deferred tax liabilities | (2,675) | (2,913) |
Deferred tax asset, net | $ 6,161 | $ 2,869 |
INCOME TAXES (Schedule of Balance Sheet Presentation of Deferred Taxes) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Income Taxes [Line Items] | ||
Long-term deferred tax assets | $ 6,161 | $ 2,869 |
Domestic [Member] | ||
Income Taxes [Line Items] | ||
Long-term deferred tax assets | 2,011 | 3,414 |
Foreign [Member] | ||
Income Taxes [Line Items] | ||
Long-term deferred tax assets | $ 2,747 | $ 858 |
INCOME TAXES (Schedule of Israel and International Components of Income before taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Schedule of Income Before Income Tax Domestic and Foreign [Line Items] | |||
Net income before taxes | $ 109,253 | $ 56,496 | $ 39,486 |
Domestic [Member] | |||
Schedule of Income Before Income Tax Domestic and Foreign [Line Items] | |||
Net income before taxes | 76,400 | 42,164 | 25,803 |
Foreign [Member] | |||
Schedule of Income Before Income Tax Domestic and Foreign [Line Items] | |||
Net income before taxes | $ 32,853 | $ 14,332 | $ 13,683 |
INCOME TAXES (Israel and International Components of Income Taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | |||
Domestic | $ 12,297 | $ 7,238 | $ 4,482 |
Foreign (mainly US) | 3,855 | 1,351 | (167) |
Income tax expenses (tax benefits) | 16,152 | 8,589 | 4,315 |
Current and deferred: | |||
Current | 19,311 | 9,620 | 3,340 |
Deferred | (3,159) | (1,031) | 975 |
Income tax expenses (tax benefits) | $ 16,152 | $ 8,589 | $ 4,315 |
INCOME TAXES (Reconciliation of the Theoretical and Actual Tax Expense) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | |||
Net income before taxes | $ 109,253 | $ 56,496 | $ 39,486 |
Statutory tax expenses | 13,110 | 6,780 | 5,042 |
Effect of non-benefited income New Technological or Preferred Enterprises statuses in Israel | 88 | 130 | 144 |
Permanent differences, including difference between the basis of measurement of income reported for tax purposes and the basis of measurement of income for financial reporting purposes, net | (448) | (199) | (131) |
Change in tax reserve for uncertain tax positions | (713) | 1,806 | 850 |
Effect of foreign operations taxed at various rates | 3,249 | 1,381 | 1,173 |
Foreign Derived Intangible Income benefit | (1,785) | (526) | (768) |
Tax credits | (1,592) | (1,526) | (777) |
Trapped Profits agreement net effect | 3,716 | 0 | 0 |
Adjustments for previous year's tax | (113) | 249 | (2,121) |
Change in valuation allowance | 601 | 413 | 898 |
Other | 39 | 81 | 5 |
Total reconciling items | 3,042 | 1,809 | (727) |
Actual tax expenses | $ 16,152 | $ 8,589 | $ 4,315 |
INCOME TAXES (Schedule of Unrecognized Tax Benefits) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
||||
Income Tax Disclosure [Abstract] | |||||
Balance at the beginning of the year | $ 11,080 | [1] | $ 7,738 | ||
Increase related to prior year tax positions, net | 271 | 1,950 | |||
Decrease related to prior year tax positions, net | (4,403) | (622) | |||
Increase related to current year tax positions | 1,187 | 2,014 | |||
Balance at the end of the year | [1] | 8,135 | 11,080 | ||
Unrecognized tax benefits presented as reduction from deferred tax assets | $ 2,412 | $ 2,280 | |||
|
GEOGRAPHIC AREAS AND MAJOR CUSTOMERS (Sales by Geographic Area as Percentage of Total Sales) (Details) - Percentage of Total Sales [Member] - Geographic Concentration Risk [Member] |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Revenue from External Customer [Line Items] | |||
Concentration percentage | 100.00% | 100.00% | 100.00% |
Taiwan, R.O.C. [Member] | |||
Revenue from External Customer [Line Items] | |||
Concentration percentage | 37.00% | 33.00% | 37.00% |
USA [Member] | |||
Revenue from External Customer [Line Items] | |||
Concentration percentage | 23.00% | 23.00% | 25.00% |
China [Member] | |||
Revenue from External Customer [Line Items] | |||
Concentration percentage | 21.00% | 19.00% | 18.00% |
Korea [Member] | |||
Revenue from External Customer [Line Items] | |||
Concentration percentage | 11.00% | 17.00% | 9.00% |
Other [Member] | |||
Revenue from External Customer [Line Items] | |||
Concentration percentage | 8.00% | 8.00% | 11.00% |
GEOGRAPHIC AREAS AND MAJOR CUSTOMERS (Sales by Major Customers as Percentage of Total Sales) (Details) - Percentage of Total Sales [Member] - Customer Concentration Risk [Member] |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Customer A [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration percentage | 31.00% | 26.00% | 27.00% |
Customer B [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration percentage | 21.00% | 24.00% | 16.00% |
Customer C [Member] | |||
Revenue, Major Customer [Line Items] | |||
Concentration percentage | 9.00% | 8.00% | 13.00% |
GEOGRAPHIC AREAS AND MAJOR CUSTOMERS (Long-lived Assets by Geographic Location) (Details) - Percentage of Long-lived Assets [Member] - Geographic Concentration Risk [Member] |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|||
Revenue from External Customer [Line Items] | ||||
Concentration percentage | [1] | 100.00% | 100.00% | |
Israel [Member] | ||||
Revenue from External Customer [Line Items] | ||||
Concentration percentage | 74.00% | 75.00% | ||
USA [Member] | ||||
Revenue from External Customer [Line Items] | ||||
Concentration percentage | 19.00% | 20.00% | ||
Other [Member] | ||||
Revenue from External Customer [Line Items] | ||||
Concentration percentage | 7.00% | 5.00% | ||
|
FINANCIAL INSTRUMENTS (Narrative) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Investments, All Other Investments [Abstract] | ||
Notional amount of the hedging instruments | $ 32,590 | $ 17,675 |
FINANCIAL INSTRUMENTS (Fair Value of Derivative Contracts) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Derivative Assets Reported in Other Current Assets [Member] | ||
Derivative [Line Items] | ||
Derivatives designated as hedging instruments in cash flow hedge | $ 249 | $ 644 |
Derivative Liabilities Reported in Other Current Liabilities [Member] | ||
Derivative [Line Items] | ||
Derivatives designated as hedging instruments in cash flow hedge | $ 0 | $ 0 |
FINANCIAL INSTRUMENTS (Impact of Derivative Instruments on Total Operating Expenses) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Investments, All Other Investments [Abstract] | |||
Loss (gain) on derivative instruments | $ 453 | $ 796 | $ 33 |
FINANCIAL INCOME (EXPENSE), NET (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Other Income and Expenses [Abstract] | |||
Interest income | $ 2,194 | $ 4,057 | $ 4,605 |
Financial expense related to the Convertible Senior Notes (Note 16) | (4,229) | (868) | 0 |
Exchange rate loss, net | (948) | (2,172) | (1,428) |
Bank charges | (150) | (91) | (99) |
Total | $ (3,133) | $ 926 | $ 3,078 |
SUBSEQUENT EVENTS (Narrative) (Details) - USD ($) $ in Thousands |
1 Months Ended | 12 Months Ended |
---|---|---|
Jan. 25, 2022 |
Dec. 31, 2021 |
|
Subsequent Event [Line Items] | ||
Acquisition-related costs | $ 999 | |
Subsequent event | Ancosys GmbH | ||
Subsequent Event [Line Items] | ||
Total consideration | $ 90,000 | |
Performance based earnout | $ 10,000 |