UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number 000-28584
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
(Exact name of Registrant as specified in its charter)
ISRAEL
(Jurisdiction of incorporation or organization)
5 Shlomo Kaplan Street Tel Aviv 6789159, Israel
(Address of principal executive offices)
Shira Yashar, Adv.
General Counsel
Check Point Software Technologies Ltd.
5 Shlomo Kaplan Street Tel Aviv 6789159, Israel
Tel: (+972) 3-753-4555 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
Ordinary shares, NIS 0.01 nominal value
Trading symbol(s)
CHKP
Name of each exchange on which registered
NASDAQ Global Select Market
Securities registered or to be registered pursuant to Section 12(g) of the Act. None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2021. 129,065,690 ordinary
shares, nominal value NIS 0.01 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes ☒ No ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934: Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.
See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected
not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of
the Exchange Act. ☐
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☒
International Financial Reporting Standards as issued
by the International Accounting Standards Board ☐
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act): Yes ☐ No ☒
Auditor Firm Id:
1281
Auditor Name:
Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global
Currency of Presentation and Certain Defined Terms
In this Annual Report on Form 20-F, or the Annual Report, references to “U.S.” or “United States” are to the United States of America, its
territories and possessions; and references to “Israel” are to the State of Israel. References to “$”, “dollar” or “U.S. dollar” are to the legal currency of
the United States of America; references to “NIS” or “Israeli shekel” are to the legal currency of Israel and references to “Euro” are to the legal currency
of the European Union. Our financial statements are presented in U.S. dollars and are prepared in conformity with accounting principles generally
accepted in the United States of America, or U.S. GAAP.
All references to “we,” “us,” “our” or “Check Point” shall mean Check Point Software Technologies Ltd., and, unless specifically indicated
otherwise or the context indicates otherwise, our consolidated subsidiaries.
Forward-Looking Statements
In addition to historical fact, this Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-
looking statements are subject to risks and uncertainties, and include information about possible or assumed future results of our business, financial
condition, results of operations, liquidity, plans and objectives. In some cases you can identify forward-looking statements by terminology such as
“may,” “will,” “could,” “would,” “should,” “expects,” “plans,” “anticipates,” “believes,” “intends,” “estimates,” “predicts,” “potential,” or “continue” or
the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements concerning the
following:
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our expectations for our business, trends related to our business and the markets in which we operate and into which we sell products;
uncertain macro-economic and industry trends (such as inflation and fluctuations in supply chains), which may impact demand and supply
of our products;
the effects of increased competition in our market;
our ability to timely and effectively scale and adapt our existing technology and infrastructure to meet current and future market demands;
the effects on our business of the global COVID-19 pandemic;
our ability to develop or acquire new and more technologically advanced products, and to successfully commercialize these products;
our ability to protect our proprietary technology and intellectual property;
our ability to increase adoption of our products and to maintain or increase our market share;
our ability to maintain our growth;
future amounts and sources of our revenue;
our future costs and expenses;
the adequacy of our capital resources;
our expectations to provide security for all organizations;
our expectations with respect to share repurchases by us and dividend payments by us;
the effects on our business of evolving laws and regulations, including government export or import controls and U.S. tax regulations and
the potential economic effects of “Brexit”;
the impact of the significant military action against Ukraine launched by Russia and any related political or economic responses and
counter-responses or otherwise by various global actors;
our ongoing relationships with our current and future customers and channel partners, suppliers, contract manufacturers and distributors;
and
our other expectations, beliefs, intentions and strategies.
These statements are subject to known and unknown risks, uncertainties and other factors, which are difficult to predict and which may cause our
actual results to differ materially and adversely from those implied by the forward-looking statements. Many of these risks, uncertainties and
assumptions are described in the risk factors set forth in “Item 3 – Key Information – Risk Factors” and elsewhere in this Annual Report. All forward-
looking statements included in this Annual Report are based on information available to us on the date of the filing. While we may elect to update
forward-looking statements in the future, we specifically disclaim any obligation to update or revise any of the forward-looking statements after the date
of the filing, except as required by applicable law.
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TABLE OF CONTENTS
PART I
Item 1.
Item 2.
Item 3.
Item 4.
Identity of Directors, Senior Management and Advisers
Offer Statistics and Expected Timetable
Key Information
Information on Check Point
Item 4A.
Unresolved Staff Comments
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Operating and Financial Review and Prospects
Directors, Senior Management and Employees
Major Shareholders and Related Party Transactions
Financial Information
The Offer and Listing
Additional Information
Quantitative and Qualitative Disclosures about Market Risk
Description of Securities Other than Equity Securities
Defaults, Dividend Arrearages and Delinquencies
Material Modifications to the Rights of Security Holders and Use of Proceeds
Controls and Procedures
PART II
Item 16A.
Audit Committee Financial Expert
Item 16B.
Code of Ethics
Item 16C.
Principal Accountant Fees and Services
Item 16D.
Exemptions from the Listing Standards for Audit Committees
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16F.
Change in Registrant’s Certifying Accountant
Item 16G.
Corporate Governance
Item 16H.
Mine Safety Disclosure
Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 17.
Item 18.
Item 19.
Financial Statements
Financial Statements
Exhibits
PART III
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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
PART I
Not applicable.
ITEM 3. KEY INFORMATION
Risk Factors
An investment in our ordinary shares involves a high degree of risk. The risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, also may become important factors that affect
us. If any of the following risks materialize, our business, financial condition, results of operations and prospects could be materially harmed. In that
event, the market price of our ordinary shares could decline and you could lose part or all of your investment.
Risks Related to Our Business and Our Market
If the market for information and network security solutions does not continue to grow, our business will be adversely affected
The market for information and network security solutions may not continue to grow. Continued growth of this market will depend, in large part,
upon:
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the continued expansion of Internet usage and the number of organizations adopting or expanding intranets;
the continued adoption of “cloud” infrastructure by organizations;
the ability of the infrastructures implemented by organizations to support an increasing number of users and services;
the continued development of new and improved services for implementation across the Internet and between the Internet and intranets;
the adoption of data security measures as it pertains to data encryption and data loss prevention technologies;
continued access to mobile API’s, APPs and application stores with Apple, Google and Microsoft;
government regulation of the Internet and governmental and non-governmental requirements and standards with respect to data security
and privacy; and
general economic conditions in either domestic or international markets, including inflation and fluctuations in supply chains and
conditions resulting from geopolitical uncertainty and instability or war, including the significant military action against Ukraine launched
by Russia.
In 2021, global and regional economies around the world and financial markets remained volatile as a result of a multitude of factors, including
economic and political uncertainty, the COVID-19 pandemic, terrorism, governmental instability and other factors. During this period, many
organizations limited their expenditures and a significant portion of such organizations have remained reluctant to increase expenditures. Global supply
chain disruptions as of the second half of 2021 also impact the availability and pricing of raw products and results in prolonged shipping and delivery
times. If challenging conditions continue or worsen, it may cause our customers to reduce or postpone their technology spending significantly, which
could result in reductions in sales of our products, longer sales cycles, slower adoption of new technologies and increased price competition.
Further, if the necessary infrastructure or complementary products and services are not developed in a timely manner and, consequently, the
enterprise security, data security, Internet or intranet markets fail to grow or grow more slowly than we currently anticipate, our business, results of
operations and financial condition may be materially adversely affected. Additional details are provided in “Item 4 – Information on Check Point”.
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We may not be able to successfully compete, which could adversely affect our business and results of operations
The market for information and network security solutions is intensely competitive and we expect that competition will continue to increase in the
future. Our competitors include Cisco Systems, Inc., Fortinet Inc., Palo Alto Networks, Inc. and SonicWall Inc. and other companies in the network
security space. We also compete with several other companies, including Zscaler, Inc., McAfee, Inc., Trend Micro Inc., NortonLifeLock Inc., Lookout,
Inc., Zimperium, Inc, CrowdStrike Holdings, Inc., SentinelOne, Inc., Sophos Group plc, Proofpoint, Inc., Broadcom, Inc. Mimecast Limited and
Mandiant, Inc., with respect to specific products that we offer.
In addition, there are hundreds of small and large companies that offer security products and services that we may compete with from time to time.
Some of our current and potential competitors have various advantages over us, including longer operating histories; access to larger customer
bases; significantly greater financial, technical and marketing resources; a broader portfolio of products, applications and services; and larger patent and
intellectual property portfolios. As a result, they may be able to adapt better than we can to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the promotion and sale of their products. Furthermore, some of our competitors with more diversified
product portfolios and larger customer bases may be better able to withstand a reduction in spending on information and network security solutions, as
well as a general slowdown or recession in economic conditions in the markets in which they operate. In addition, some of our competitors have greater
financial resources than we do, and they have offered, and in the future may offer, their products at lower prices than we do, or may bundle security
products with their other offerings, which may cause us to lose sales or to reduce our prices in response to competition.
In addition, consolidation in the markets in which we compete may affect our competitive position. This is particularly true in circumstances
where customers are seeking to obtain a broader set of products and services than we are able to provide.
The markets in which we compete also include many niche competitors, generally smaller companies at a relatively early stage of operations,
which are focused on specific Internet and data security needs. These companies’ specialized focus may enable them to adapt better than we can to new
or emerging technologies and changes in customer requirements in their specific areas of focus. In addition, some of these companies can invest
relatively large resources on very specific technologies or customer segments. The effect of these companies’ activities in the market may result in price
reductions, reduced gross margins and loss of market share, any of which will materially adversely affect our business, results of operations and
financial condition.
Further, vendors of operating system software, networking hardware or central processing units, or CPUs, may enhance their products to include
functionality that is currently provided by our products. The widespread inclusion of similar functionality to that which is offered by our solutions, as
standard features of operating system software and networking hardware could significantly reduce the demand for our products, particularly if the
quality of such functionality were comparable to that of our products. Furthermore, even if the network or application security functionality provided as
standard features by operating systems software and networking hardware is more limited than that of our solutions, a significant number of customers
may elect to accept more limited functionality in lieu of purchasing additional products.
We may not be able to continue competing successfully against our current and future competitors, and increased competition within the market
may result in price reductions, reduced gross margins and operating margins, reduced net income, and loss of market share, any or all of which may
materially adversely affect our business, results of operations and financial condition. For additional information, see “Item 4 – Information on Check
Point”.
If we fail to enhance our existing products, develop or acquire new and more technologically advanced products, or fail to successfully commercialize
these products, our business and results of operations will suffer
The information and network security industry is characterized by rapid technological advances, changes in customer requirements, frequent new
product introductions and enhancements, and evolving industry standards in computer hardware and software technology. In particular, the markets for
data security, Internet and intranet applications are rapidly evolving. As a result, we must continually change and improve our products in response to
changes in operating systems, application software, computer and communications hardware, networking software, programming tools, and computer
language technology. We must also continually change our products in response to changes in network infrastructure requirements, including the
expanding use of cloud computing. Further, we must continuously improve our products to protect our customers’ data and networks from evolving
security threats.
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Our future results of operations will depend upon our ability to enhance our current products and to develop and introduce new products on a
timely basis; to address the increasingly sophisticated needs of our customers; and to keep pace with technological developments, new competitive
product offerings, and emerging industry standards. Our competitors’ introduction of products embodying new technologies and the emergence of new
industry standards may render our existing products obsolete or unmarketable. While we have historically been successful in developing, acquiring, and
marketing new products and product enhancements that respond to technological change and evolving industry standards, we may not be able to
continue to do so. In addition, we may experience difficulties that could delay or prevent the successful development, introduction, and marketing of
these products, as well as the integration of acquired products. Furthermore, our new products or product enhancements may not adequately meet the
requirements of the marketplace or achieve market acceptance. In some cases, a new product or product enhancements may negatively affect sales of
our existing products. If we do not respond adequately to the need to develop and introduce new products or enhancements of existing products in a
timely manner in response to changing market conditions or customer requirements, our business, results of operations and financial condition may be
materially adversely affected.
For additional information, see “Item 4 – Information on Check Point” and under the caption “We may not be able to successfully compete, which
could adversely affect our business and results of operations” in this “Item 3 – Key Information – Risk Factors”.
We may need to change our pricing models to compete successfully
The intense competition we face in the sales of our products and services and general economic and business conditions can put pressure on us to
change our prices. If our competitors offer deep discounts on certain products or services or develop products that the marketplace considers more
valuable, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such changes may reduce margins and could
adversely affect results of operations. Additionally, the increasing prevalence of cloud and SaaS delivery models offered by us and our competitors may
unfavorably impact pricing in both our on-premise enterprise software business and our cloud business, as well as overall demand for our on-premise
software product and service offerings, which could reduce our revenues and profitability. Our competitors may offer lower pricing on their support
offerings, which could put pressure on us to further discount our product or support pricing.
Our business, results of operations and financial condition are subject to the risks of earthquakes, fire, floods, pandemics and other natural events, as
well as manmade problems such as power disruptions or terrorism or war, and have been and may continue to be adversely affected by the COVID-19
pandemic.
We operate our business primarily from Israel, we sell our products and have operations worldwide. For example, our headquarters in the United
States, as well as certain of our research and development operations, are located in the Silicon Valley area of Northern California, a region known for
seismic activity. We also have significant operations in other regions that have experienced natural disasters. A significant natural disaster occurring at
our facilities in Israel or the United States or elsewhere, or where our channel partners are located, could have a material adverse impact on our business,
results of operations and financial condition. In addition, acts of terrorism or war (including the significant military action against Ukraine launched by
Russia and any related political or economic responses and counter-responses or otherwise by various global actors or general effect on the global
economy) could cause disruptions to our or our customers’ businesses or the economy as a whole. Further, we rely on information technology systems to
communicate among our workforce located worldwide. Any disruption to our internal communications, whether caused by a natural disaster, pandemics
or by manmade problems, such as power disruptions or terrorism or war, could delay our research and development efforts. To the extent any of the
foregoing causes disruptions or result in delays or cancellations of customer orders, our research and development efforts or the deployment of our
products, our business and results of operations would be materially and adversely affected.
In addition, following Russia’s invasion of Ukraine, the United States and other countries imposed economic sanctions and severe export control
restrictions against Russia and Belarus, and the United States and other countries could impose wider sanctions and export restrictions and take other
actions should the conflict further escalate, which affect our exports or sales into Russia and Belarus, although such activities are not as significant
compared to our business in other countries. We take precautions to ensure that we and our partners comply with all relevant sanctions-related
regulations, any failure by us or our partners to comply with such laws and regulations could have negative consequences for us, including reputational
harm, government investigations and penalties.
Additionally, the COVID-19 pandemic continues to affect our business and operations. The COVID-19 pandemic and efforts to mitigate its impact
have significantly curtailed the movement of people, goods and services worldwide, including in the geographic areas in which we conduct our business
operations and from which we generate our revenue. It has also caused societal, economic and financial market volatility, resulting in business
shutdowns and reduced business activity. To the extent the COVID-19 pandemic continues or additional lock downs occur it may have additional
negative impacts on our business and results of operations, primarily as a result of:
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restricting our sales operations and marketing efforts, reducing the effectiveness of such efforts in some cases and delaying or lengthening
our sales cycles; and
delaying collections or resulting in an inability to collect accounts receivable, including as a result of customer insolvency.
In light of the continually evolving situation relating to the ongoing spread of COVID-19, we have taken precautionary measures intended to
reduce the risk of the virus spreading to our employees, our customers and the communities in which we operate, and we may take further actions as
required by government entities or that we determine are in the best interests of our employees, customers, partners and third-party service providers. In
particular, governmental authorities have instituted shelter-in-place policies or other restrictions in many jurisdictions in which we operate, which
policies required most of our employees to work remotely. As shelter-in-
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place policies or other governmental restrictions continue to be lifted, we expect to take a measured and careful approach to have employees returning to
offices and travel for business. These precautionary measures and policies could negatively impact product innovation and development and employee
and organizational productivity, training and collaboration or otherwise disrupt our business operations.
In addition, the COVID-19 pandemic has disrupted and may continue to disrupt the operations of our customers and partners, particularly our
customers in industries, including travel and entertainment that have been especially impacted by the pandemic. Other disruptions or potential
disruptions resulting from the COVID-19 pandemic include global supply chain disruptions which impacted the availability of raw products and resulted
in prolonged shipping and delivery times across a variety of industries, restrictions on our personnel and the personnel of our partners to travel and
access customers, delays in product development efforts and additional government requirements or other incremental mitigation efforts that may further
impact our business and results of operations. The extent to which the COVID-19 pandemic continues to impact our business and results of operations
will also depend on future developments that are highly uncertain and cannot be predicted, including new information which may emerge concerning the
severity of the disease, the duration and spread of the outbreak, the scope of travel restrictions imposed in geographic areas in which we operate,
mandatory or voluntary business closures, the impact on businesses and financial and capital markets and the extent and effectiveness of the
development of vaccines and other actions taken throughout the world to contain the virus or treat its impact. To the extent the COVID-19 pandemic
continues to adversely affect our business and financial condition, it is likely to also have the effect of heightening many of the other risks described in
this “Risk Factors” section.
If our products fail to protect against attacks and our customers experience security breaches, our reputation and business could be harmed
Hackers and other malevolent actors are increasingly sophisticated, often affiliated with organized crime and operate large scale and complex
attacks. In addition, their techniques change frequently and generally are not recognized until launched against a target. If we fail to identify and respond
to new and increasingly complex methods of attack and to update our products to detect or prevent such threats in time to protect our customers’ high-
value business data, our business and reputation will suffer.
In addition, an actual or perceived security breach or theft of the sensitive data of one of our customers, regardless of whether the breach is
attributable to the failure of our products, could adversely affect the market’s perception of our security products. Despite our best efforts, there is no
guarantee that our products will be free of flaws or vulnerabilities, and even if we discover these weaknesses we may not be able to correct them
promptly, if at all. Our customers may also misuse our products, which could result in a breach or theft of business data.
Product defects may increase our costs and impair the market acceptance of our products and technology
Our products are complex and must meet stringent quality requirements. They may contain undetected hardware or software errors or defects,
especially when new or acquired products are introduced or when new versions are released. In particular, the personal computer hardware environment
is characterized by a wide variety of non-standard configurations that make pre-release testing for programming or compatibility errors very difficult
and time-consuming. We may need to divert the attention of our engineering personnel from our research and development efforts to address instances
of errors or defects.
Our products are used to deploy and manage Internet security and protect information, which may be critical to organizations. As a result, the sale
and support of our products entails the risk of product liability and related claims. We do not know whether, in the future, we will be subject to liability
claims or litigation for damages related to product errors, or will experience delays as a result of these errors. Our sales agreements and product licenses
typically contain provisions designed to limit our exposure to potential product liability or related claims. In selling our products, we rely primarily on
“shrink wrap” licenses that are not signed by the end user, and for this and other reasons, these licenses may be unenforceable under the laws of some
jurisdictions. As a result, the limitation of liability provisions contained in these licenses may not be effective. Although we maintain product liability
insurance for most of our products, the coverage limits of these policies may not provide sufficient protection against an asserted claim. If litigation were
to arise, it could, regardless of its outcome, result in substantial expense to us, significantly divert the efforts of our technical and management
personnel, and disrupt or otherwise severely impact our relationships with current and potential customers. In addition, if any of our products fail to
meet specifications or have reliability, quality or compatibility problems, our reputation could be damaged significantly and customers might be
reluctant to buy our products, which could result in a decline in revenues, a loss of existing customers, and difficulty attracting new customers.
We are subject to risks relating to acquisitions
We have made acquisitions in the past, including the recent acquisitions of Spectral in early 2022, Avanan in 2021, Odo Security in 2020 and of
ForceNock, Cymplify and Protego in 2019, and we may make additional acquisitions in the future. The pursuit of acquisitions may divert the attention
of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are
consummated.
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Competition within our industry for acquisitions of businesses, technologies, assets and product lines has been, and may in the future continue to
be, intense. As such, even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on
commercially reasonable terms or because the target is acquired by another company. Furthermore, in the event that we are able to identify and
consummate any future acquisitions, we could:
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issue equity securities which would dilute the current shareholders’ percentage of ownership;
incur substantial debt;
assume contingent liabilities; or
expend significant cash.
These financing activities or expenditures could harm our business, results of operations and financial condition or the price of our ordinary
shares. Alternatively, due to difficulties in the capital and credit markets, we may be unable to secure capital on acceptable terms, or at all, to complete
acquisitions. In addition, with respect to the businesses we recently acquired and additional businesses we may acquire in the future, we may not be able
to integrate the acquired personnel, operations, and technologies successfully or effectively manage the combined business following the completion of
the acquisition. We may also not achieve the anticipated benefits from the acquired businesses due to a number of factors, including:
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unanticipated costs or liabilities associated with the acquisition;
incurrence of acquisition-related costs;
diversion of management’s attention from other business concerns;
harm to our existing business relationships with manufacturers, distributors and customers as a result of the acquisition;
the potential loss of key employees;
use of resources that are needed in other parts of our business;
use of substantial portions of our available cash to consummate the acquisition; or
unrealistic goals or projections for the acquisition.
Moreover, even if we do obtain benefits from acquisitions in the form of increased sales and earnings, there may be a delay between the time
when the expenses associated with an acquisition are incurred and the time when we recognize such benefits.
We are dependent on a limited number of product families
Currently, we derive the majority of our revenues from sales of integrated appliances and Internet security products, as well as related revenues
from security subscriptions and from software updates and maintenance. We expect that this concentration of revenues from a small number of product
families will continue for the foreseeable future. Endpoint security products and associated software updates, maintenance, and security subscriptions
represent an additional revenue source as well as our cloud initiatives. Our future growth depends heavily on our ability to effectively develop and sell
new and acquired products as well as add new features to existing products. For more details, see “Item 4 – Information on Check Point” and “Item 5 –
Operating and Financial Review and Prospects”.
Competition for highly skilled personnel is intense
We compete in a market marked by rapidly changing technologies and an evolving competitive landscape. In order for us to successfully compete
and grow, we must attract, recruit, retain and develop personnel, at an appropriate cost, with requisite qualifications to provide expertise across the entire
spectrum of our intellectual capital and business needs.
Our principal research and development as well as significant elements of our marketing and general and administrative activities are conducted at
our headquarters in Israel, where we face significant competition. In recent years, the industry has experienced record growth and activity, which has
caused a sharp increase in job openings in both Israeli high-tech companies and Israeli research and development centers of foreign companies, and
intensification of competition between these employers to attract qualified employees in Israel. As a result, the high-tech industry in Israel has
experienced significant levels of employee attrition and is currently facing a shortage of skilled human capital, including research and development,
operations and customer service professionals. Similar competition for highly skilled personnel exists in the U.S. and in other markets in which we
operate.
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We may not succeed in recruiting additional experienced or professional personnel, retaining personnel or effectively replacing current personnel
who may depart with qualified or effective successors. In addition, due to our rapid growth, which has raised the profile of our company, our employees
may be increasingly targeted for recruitment by other companies in the technology industry, which may make it more difficult for us to retain employees
and may increase retention costs.
Failure to retain or attract qualified personnel, at an appropriate cost, could have a material adverse effect on our business, financial condition and
results of operations.
Risks Related to Our Dependence on Third-Parties
We are dependent on a small number of distributors
We derive our sales primarily through indirect channels. During 2021, 2020 and 2019, we derived approximately 58%, 57% and 55%,
respectively, of our sales from our ten largest distributors. In 2021, 2020 and 2019, our two largest distributors accounted for approximately 40%, 39%
and 37% of our sales, respectively. We expect that a small number of distributors will continue to generate a significant portion of our sales.
Furthermore, there has been an industry trend toward consolidation among distributors, and we expect this trend to continue in the near future which
could further increase our reliance on a small number of distributors for a significant portion of our sales. If these distributors reduce the amount of their
purchases from us for any reason, including because they choose to focus their efforts on the sales of the products of our competitors, our business,
results of operations and financial condition could be materially adversely affected.
Our future success is highly dependent upon our ability to establish and maintain successful relationships with our distributors. In addition, we
rely on these entities to provide many of the training and support services for our products and equipment. Accordingly, our success depends in large
part on the effective performance of these distributors. Recruiting and retaining qualified distributors and training them in our technology and products
requires significant time and resources. Further, we have no minimum purchase commitments with any of our distributors, and our contracts with these
distributors do not prohibit them from offering products or services that compete with ours. Our competitors may be effective in providing incentives to
existing and potential distributors to favor their products or to prevent or reduce sales of our products. Our distributors may choose not to offer our
products exclusively or at all. Our failure to establish and maintain successful relationships with distributors would likely materially adversely affect our
business, results of operations and financial condition.
We purchase several key components and finished products from limited sources, and we are increasingly dependent on contract manufacturers for our
hardware products.
Many components, subassemblies, and modules necessary for the manufacture or integration of our hardware products are obtained from a limited
group of suppliers. Although we do not manufacture in China, some of our component parts are sourced from China. Our reliance on sole or limited
suppliers, particularly foreign suppliers, and our reliance on subcontractors involves several risks, including a potential inability to obtain an adequate
supply of required components, subassemblies, or modules and limited control over pricing, quality, and timely delivery of components, subassemblies
or modules. Such risks could become exacerbated to the extent such suppliers and subcontractors are materially disrupted by quarantines, factory
slowdowns or shutdowns, border closings, and travel restrictions resulting from the COVID-19 pandemic. For example, global supply chain disruptions
in the second half of 2021 impacted the availability of raw products and resulted in prolonged shipping and delivery times. While we continue to
monitor the global effects of the COVID-19 pandemic on the supply chains in which we rely, any material supply chain disruption could negatively
impact our business, financial condition and results of operations. Although we have been successful in the past, replacing suppliers may be difficult and
it is possible it could result in an inability or delay in producing designated hardware products. We are already seeing delays which could have a material
adverse impact on our business.
Managing our supplier and contractor relationships is particularly difficult during time periods in which we introduce new products and during
time periods in which demand for our products is increasing, especially if demand increases more quickly than we expect. We also have extended
support contracts with these suppliers and have been dependent on their ability to perform over a period of years.
We incorporate third-party technology in our products, which may make us dependent on the providers of these technologies and expose us to potential
intellectual property claims
Our products contain certain technology that we license from other companies. Third-party developers or owners of technologies may not be
willing to enter into, or renew, license agreements with us regarding technologies that we may wish to incorporate in our products, either on acceptable
terms or at all. If we cannot obtain licenses to these technologies, we may be at a disadvantage compared with our competitors who are able to license
these technologies. In addition, when we do obtain licenses to third-party technologies that we did not develop, we may have little or no ability to
determine in advance whether the technology infringes the intellectual property rights of others. Further, in the event significant numbers of employees
of our third-party developers
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or owners of technologies must miss work due to the COVID-19 pandemic or otherwise, and such third-party developers and owners are otherwise
unable to provide such technology or services to us, our ability to provide our products and services could be disrupted. This includes mandated
government shutdowns. Our suppliers and licensors may not be required or may not be able to indemnify us in the event that a claim of infringement is
asserted against us, or they may be required to indemnify us only up to a maximum amount, above which we would be responsible for any further costs
or damages. Any failure to obtain licenses to intellectual property or any exposure to liability as a result of incorporating third-party technology into our
products could materially and adversely affect our business, results of operations and financial condition.
Failures of the third-party servers, cloud service providers and other third-party hardware, software and infrastructure on which we rely could adversely
affect our business
We rely on servers, cloud service providers and other third-party hardware, software and infrastructure to support our operations. The owners and
operators of the data centers and cloud services with which we are engaged do not guarantee uninterrupted or error-free services. Problems faced by our
third-party hosting providers, including technological or business-related disruptions, could adversely impact our business and results of operations.
Our servers, data centers and other facilities are also vulnerable to damage or interruption from fires, natural disasters, terrorist attacks, power loss,
telecommunications failures, pandemics or similar catastrophic events. For example, the COVID-19 pandemic has caused many third-party service
providers to shut down their business, and it is possible that providers of our cloud infrastructure services could face similar disruptions in their business
or facility shutdowns. Disruptions to these servers or facilities could interrupt our ability to provide our products and services and materially adversely
affect our business and results of operations.
Risks Related to Tax, Legal and Regulatory Matters
We are the defendants in various lawsuits and have been subject to tax disputes and governmental proceedings, which could adversely affect our
business, results of operations and financial condition
As a global company we are subject to taxation in Israel, the United States and various other countries. We attempt to utilize an efficient operating
model and accordingly to pay taxes based on the laws in the countries in which we operate. Nonetheless, various tax authorities in different parts of the
world may disagree with our operating sale model. This may lead to disputes and to tax assessments, which can have a negative effect on our tax
liabilities.
In addition, we are subject to the continuous examination of our income tax returns by tax authorities around the world. It is possible that tax
authorities may disagree with certain positions we have taken and any adverse outcome of such a review or audit could have a negative effect on our
financial position and results of operations. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the
adequacy of our provision for income taxes, but the determination of our worldwide provision for income taxes and other tax liabilities requires
significant judgment by management, and there are transactions where the ultimate tax determination is uncertain. Although we believe that our
estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our consolidated financial statements and may materially
affect our financial results in the period or periods for which such determination is made. There can be no assurance that the outcomes from continuous
examinations will not have an adverse effect on our business, financial condition and results of operations.
We are the defendant in various other lawsuits, including employment-related litigation claims, construction claims and other legal proceedings in
the normal course of our business. Litigation and governmental proceedings can be expensive, lengthy and disruptive to normal business operations, and
can require extensive management attention and resources, regardless of their merit. While we currently intend to defend the aforementioned matters
vigorously, we cannot predict the results of complex legal proceedings, and an unfavorable resolution of a lawsuit or proceeding could materially
adversely affect our business, results of operations and financial condition. See also “Item 8 – Financial Information” under the caption “Legal
Proceedings”.
Uncertainties in the interpretation and application of worldwide tax reforms, complex tax laws and regulations could materially affect our tax
obligations and effective tax rate
The 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted on December 22, 2017 and significantly affected U.S. tax law by changing how the
U.S. imposes income tax on multinational corporations. The U.S. Department of Treasury has broad authority to issue regulations and interpretative
guidance that may significantly impact how we will apply the law and impact our results of operations. We address these tax changes by third-party
advices and tax opinions. Effective January 1, 2022, pursuant to the Tax Cuts and Jobs Act of 2017, R&D expenses are required to be capitalized and
amortized for US tax purposes, which will delay the deductibility of these expenses.
The base erosion and profit shifting (“BEPS”) initiative undertaken by the Organization for Economic Cooperation and Development (“OECD”)
may have adverse consequences to our tax liabilities. The BEPS initiative contains changes to numerous international tax principles, amongst for
example, by signing up to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the “MLI”) which currently has
been signed by over 95 jurisdictions, including Israel and the inclusion in tax treaties of one, or both, of a “limitation-on-benefit” (“LOB”) rule. These
changes, when adopted by individual countries, could adversely affect our provision for income taxes.
In October, 2021, more than 140 countries approved the OECD BEPS 2.0 Inclusive Framework. The first pillar is focused on the allocation of
taxing rights between countries for in-scope large multinational enterprises that sell goods and services into countries with minor or no local physical
presence. We do not expect to be within the scope of this first Pillar. The second pillar is focused on developing a global minimum tax rate of at least
15% applicable to in-scope multinational enterprises (with revenue in excess of €750 million). Israel is one of the jurisdictions that has agreed in
principle to the adoption of the global minimum tax rate, and it is unclear what would be the impact on preferred technological enterprises currently
eligible for reduced corporate tax rate of 12%.
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Indirect taxes including Digital Service tax (DST) measures as adopted unilaterally in certain countries could also adversely affect our tax
obligations.
Class action litigation due to stock price volatility or other factors could cause us to incur substantial costs and divert our management’s attention and
resources
In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been
instituted against that company. Companies such as ours in the technology industry are particularly vulnerable to this kind of litigation as a result of the
volatility of their stock prices. We have been named as a defendant in this type of litigation in the past. Any litigation of this sort in the future could
result in substantial costs and a diversion of management’s attention and resources.
We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets
Because we incorporate encryption technology into our products, certain of our products are subject to U.S. export controls and may be exported
outside the U.S. only with the required export license or through an export license exception. If we were to fail to comply with U.S. export licensing
requirements, U.S. customs regulations, U.S. economic sanctions, or other laws, we could be subject to substantial civil and criminal penalties, including
fines, incarceration for responsible employees and managers, and the possible loss of export or import privileges. Obtaining the necessary export license
for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, U.S. export control laws and
economic sanctions prohibit the shipment of certain products to U.S. embargoed or sanctioned countries, governments, and persons. Even though we
take precautions to ensure that we comply with all relevant regulations, any failure by us or any partners to comply with such regulations could have
negative consequences for us, including reputational harm, government investigations, and penalties.
In addition, various countries regulate the import of certain encryption technology, including through import permit and license requirements, and
have enacted laws that could limit our ability to distribute our products or could limit our end-customers’ ability to implement our products in those
countries. Changes in our products or changes in export and import regulations may create delays in the introduction of our products into international
markets, prevent our end-customers with international operations from deploying our products globally or, in some cases, prevent or delay the export or
import of our products to certain countries, governments, or persons altogether. Any change in export or import regulations, economic sanctions or
related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons, or technologies targeted
by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential
end-customers with international operations. Any decreased use of our products or limitation on our ability to export to or sell our products in
international markets would likely adversely affect our business, financial condition, and results of operations.
Risks Related to Our Intellectual Property
We may not be able to successfully protect our intellectual property rights, which could cause substantial harm to our business
We seek to protect our proprietary technology by relying on a combination of statutory as well as common law copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions as indicated below in the section entitled “Proprietary Rights” in “Item 4 –
Information on Check Point”. We have certain patents in the United States and in several other countries, as well as pending patent applications. We
cannot assure you that pending patent applications will be issued, either at all or within the scope of the patent claims that we have submitted. In
addition, someone else may challenge our patents and these patents may be found invalid. Furthermore, others may develop technologies that are similar
to or better than ours, or may work around any patents issued to us. Despite our efforts to protect our proprietary rights, others may copy aspects of our
products or obtain and use information that we consider proprietary. In addition, the laws of some foreign countries do not protect our proprietary rights
to the same extent as the laws of the United States and Israel. Our efforts to protect our proprietary rights may not be adequate and our competitors may
independently develop technology that is similar to our technology.
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In addition to patents, we rely on trade secret and other rights to protect our unpatented proprietary intellectual property and technology. Despite
our efforts to protect our proprietary technologies and our intellectual property rights, unauthorized parties, including our employees, consultants,
service providers or customers, may attempt to copy aspects of our products or obtain and use our trade secrets or other confidential information. We
generally enter into confidentiality agreements with our employees, consultants, and other service providers, and generally limit access to and
distribution of our proprietary information and proprietary technology through certain procedural safeguards. These agreements and arrangements may
not effectively prevent unauthorized use or disclosure of our intellectual property or technology and may not provide an adequate remedy in the event of
unauthorized use or disclosure of our intellectual property or technology. We cannot be certain that the steps taken by us will prevent misappropriation
of our intellectual property or technology or infringement of our intellectual property rights.
If we are unable to secure, protect and enforce our intellectual property rights, such failure could harm our brand and adversely impact our
business, financial condition and results of operations.
We incorporate open source technology in our products which may expose us to liability and have a material impact on our product development and
sales
Some of our products utilize open source technologies. These technologies are licensed to us under varying license structures, including the
General Public License. If we have improperly used, or in the future improperly use, software that is subject to such licenses with our products in such a
way that our software becomes subject to the General Public License, we may be required to disclose our own source code to the public. This could
enable our competitors to eliminate any technological advantage that our products may have over theirs. Any such requirement to disclose our source
code or other confidential information related to our products could materially and adversely affect our competitive position and impact our business,
results of operations and financial condition.
If a third-party asserts that we are infringing its intellectual property, whether successful or not, it could subject us to costly and time-consuming
litigation or expensive licenses, which could harm our business
There is considerable patent and other intellectual property development activity in our industry. Our success depends, in part, upon our ability not
to infringe upon the intellectual property rights of others. Our competitors, as well as a number of other entities and individuals, own or claim to own
intellectual property relating to our industry. From time to time, third parties have brought, and continue to bring, claims that we are infringing upon
their intellectual property rights, and we may be found to be infringing upon such rights. In addition, third-parties have in the past sent us
correspondence claiming that we infringe upon their intellectual property, and in the future we may receive claims that our products infringe or violate
their intellectual property rights. Furthermore, we may be unaware of the intellectual property rights of others that may cover some or all of our
technology or products. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that
we pay substantial damages or royalty payments, prevent us from selling our products, or require that we comply with other unfavorable terms. In
addition, we may decide to pay substantial settlement costs and/or licensing fees in connection with any claim or litigation, whether or not successfully
asserted against us. Even if we were to prevail, any disputes or litigation regarding intellectual property matters could be costly and time-consuming and
divert the attention of our management and key personnel from our business operations. As such, third-party claims with respect to intellectual property
may increase our cost of goods sold and operating expenses, reduce the sales of our products, and may have a material and adverse effect on our
business.
Due to the global nature of our business, we must comply with various anti-bribery regimes and any failure to do so could adversely affect our business
The global nature of our business creates various domestic and local regulatory challenges. The U.S. Foreign Corrupt Practices Act of 1977, as
amended (the “FCPA”), the U.K. Bribery Act 2010 (the “U.K. Bribery Act”), and similar anti-bribery laws in other jurisdictions generally prohibit
companies and their intermediaries from making improper payments to foreign government officials and other persons for the purpose of obtaining or
retaining business. In addition, companies are required to maintain records that accurately and fairly represent their transactions and have an adequate
system of internal accounting controls. Further, changes in laws could result in increased regulatory requirements and compliance costs which could
adversely affect our business, financial condition and results of operations.
As a result, we are exposed to a risk of violating anti-bribery laws in the countries where we operate. Although we have internal policies and
procedures, including a code of ethics and proper business conduct, reasonably designed to promote compliance with anti-bribery laws, we cannot
assure that our employees or other agents will not engage in prohibited conduct and render us responsible under the FCPA, the U.K. Bribery Act or any
similar anti-bribery laws in other jurisdictions. If we are found to be in violation of the FCPA, the U.K. Bribery Act or other anti-bribery laws (either due
to acts or inadvertence of our employees, or due to the acts or inadvertence of others), we could suffer criminal or civil penalties or other sanctions,
which could have a material adverse effect on our business, results of operations, cash flows, financial condition, reputation and ability to win future
business or maintain existing contracts.
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Other General Risks and Risks Related to the Ownership of Our Ordinary Shares
We are exposed to various legal, business, political, economic, health-related and other risks associated with our international operations; these risks
could increase our costs, reduce future growth opportunities and affect our results of operations
We operate our business primarily from Israel, we sell our products worldwide, and we generate a significant portion of our revenue outside the
United States. We intend to continue to expand our international operations, which will require significant management attention and financial resources.
In order to continue to expand worldwide, we will need to establish additional operations, hire additional personnel and recruit additional channel
partners internationally. For example, in the event of significant numbers of our employees or the employees of our channel partners having to miss
work due to a widespread health situation or pandemic such as the COVID-19 pandemic, we or our channel partners may not be able to quickly source
replacement or temporary workers, which could adversely affect our operations, particularly in regions where such health situations are most severe or
local regulations require a shut down. To the extent that we are unable to do so effectively, our growth is likely to be limited and our business, results of
operations and financial condition may be materially adversely affected.
Our international sales and operations subject us to many potential risks inherent in international business activities, including, but not limited to:
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technology import and export license requirements;
costs of localizing our products for foreign countries, and the lack of acceptance of localized products in foreign countries;
varying economic and political instability or war, including the significant military action against Ukraine launched by Russia;
potential tariffs, sanctions, fines or other trade restrictions, including any political or economic responses and counter-responses or
otherwise by various global actors to the significant military action against Ukraine launched by Russia;
imposition of or increases in tariffs or other payments on our revenues in these markets;
greater difficulty in protecting intellectual property;
difficulties in managing our overseas subsidiaries and our international operations;
declines in general economic conditions;
political instability and civil unrest which could discourage investment and complicate our dealings with governments;
widespread health emergencies or pandemics, such as the COVID-19 pandemic;
difficulties in complying with a variety of foreign laws and legal standards and changes in regulatory requirements;
expropriation and confiscation of assets and facilities;
difficulties in collecting receivables from foreign entities or delayed revenue recognition;
recruiting and retaining talented and capable employees;
differing labor standards;
increased tax rates;
potentially adverse tax consequences, including taxation of a portion of our revenues at higher rates than the tax rate that applies to us in
Israel;
fluctuations in currency exchange rates and the impact of such fluctuations on our results of operations and financial position; and
the introduction of exchange controls and other restrictions by foreign governments.
These difficulties could cause our revenues to decline, increase our costs or both. This is also specifically tied to currency exchange rates which
have an impact on our financial statements based on currency rate fluctuations.
Our actual or perceived failure to adequately protect personal data could subject us to sanctions and damages and could harm our reputation and
business
A variety of state, national, foreign, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer,
and other processing of personal data. These privacy and data protection related laws and regulations are, as demonstrated by the examples below,
evolving. New or modified laws and regulations are proposed and implemented frequently and existing laws and regulations subject to new or different
interpretations. Compliance with these laws and regulations can be costly and can delay or impede the development and offering of new products and
services.
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For example, the General Data Protection Regulation (“GDPR”) (which is applicable in both the EU and the UK), imposes stringent requirements
for data processors and controllers. Such requirements include amongst other things, obligations to: i) provide data subjects with fulsome disclosures
about the processing of personal information; ii) adhere to reasonable data retention limits; iii) comply with deletion requirements and requests; iv)
comply with mandatory notification requirements in the case of a data breach and v) adhere to elevated standards regarding valid consent in some
specific cases of data processing and vi) comply with stringent data transfer obligations. The GDPR also includes potentially severe penalties for failure
to comply, inter alia, a fine up to 20 million Euros or up to 4% of the annual worldwide turnover, whichever is greater, which can be imposed.
Compliance with these stringent requirements on privacy user notifications and data handling (both as they apply to us but also our customers) could
increase our financial risk exposure, require us to adapt our business in order to comply with the GDPR requirements and incur additional costs.
Additionally, other countries have legislated to enhance protection of personal data and privacy. In the United States, the California Consumer
Privacy Act (“CCPA”) provides data privacy rights for consumers and privacy related operational requirements for companies. California voters also
passed the California Privacy Rights Act (“CPRA”) into law on November 3, 2020, which will not take substantial effect until January 1, 2023. The
CPRA will significantly modify the CCPA, including adding new privacy rights and increasing regulation on online advertising. Additionally, the CCPA,
eventually the CPRA, and other legal and regulatory changes are making it easier for certain individuals to opt-out of having their personal data
processed and disclosed to third parties through various opt-out mechanisms, which could result in an increase to our operational costs to ensure
compliance with such legal and regulatory changes. Additional US States are introducing comprehensive privacy laws including Virginia which enacted
the Virginia Consumer Data Protection Act (“VCDPA”) on March 2, 2021, becoming the second state to enact comprehensive legislation regarding data
privacy (behind California) which becomes effective on January 1, 2023. Following California and Virginia, Colorado enacted a comprehensive privacy
law with the passage of the Colorado Privacy Act (“CoPA”) on July 8, 2021 which becomes effective on July 1, 2023. In Latin America, Brazil’s Lei
Geral de Proteção de Dados (LGPD), Latin America’s first major data protection law, came into force in September 2020 although the penalties
provided by the law did not become enforceable until August 2021. The LGPD is largely aligned to the GDPR. In China, Personal Information
Protection Law of the People’s Republic of China (“PIPL”) was officially adopted by the National People’s Congress Standing Committee and took
effect on 01 November 2021. The PIPL has parallels with the GDPR given that is has extra-territorial effect, applying to data processing activities in
China and outside of China in certain circumstances.
Our actual or alleged failure to comply with applicable laws and regulations, relating to the protection of personal data, could result in
enforcement actions, significant penalties imposed by a regulator or data subject or other legal action against us or our customers or suppliers, which
could result in negative publicity, increased operating costs, and financial penalties which could have a material adverse effect on our business and
results of operations.
Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and
increases our costs of compliance
Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of
2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), new SEC regulations, amendments to the Israeli
Companies Law and Nasdaq Global Select Market rules are creating increased compliance costs and uncertainty for companies like ours. These new or
changed laws, regulations and standards may lack specificity and are subject to varying interpretations. The implementation of these laws and their
application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing
uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standard.
In addition, continuing compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required
assessment of our internal control over financial reporting requires the commitment of significant financial and managerial resources and the report of
an independent registered public accounting firm on the Company’s internal control over financial reporting.
In connection with our Annual Report for fiscal 2021, our management assessed our internal control over financial reporting, and determined that
our internal control over financial reporting was effective as of December 31, 2021, and our independent auditors have expressed an unqualified opinion
over the effectiveness of our internal control over financial reporting as of December 31, 2021. However, we will undertake management assessments of
our internal control over financial reporting in connection with each annual report, and any deficiencies uncovered by these assessments or any inability
of our auditors to issue an unqualified report could harm our reputation and the price of our ordinary shares.
A small number of shareholders own a substantial portion of our ordinary shares, and they may make decisions with which you or others may disagree
As of February 28, 2022, our directors and executive officers owned approximately 19.6% of the voting power of our outstanding ordinary shares,
or 22.7% of our outstanding ordinary shares if the percentage includes options currently exercisable or exercisable within 60 days of February 28, 2022.
The interests of these shareholders may differ from your interests and present a
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conflict. If these shareholders act together, they could exercise significant influence over our operations and business strategy. For example, although
these shareholders hold considerably less than a majority of our outstanding ordinary shares, they may have sufficient voting power to influence matters
requiring approval by our shareholders, including the election and removal of directors and the approval or rejection of mergers or other business
combination transactions. In addition, this concentration of ownership may delay, prevent or deter a change in control, or deprive a shareholder of a
possible premium for its ordinary shares as part of a sale of our company.
Our cash balances and investment portfolio have been, and may continue to be, adversely affected by market conditions and interest rates
We maintain substantial balances of cash and liquid investments, for purposes of general corporate purposes, which may include acquisitions,
share repurchases and other purposes. Our cash, cash equivalents, short-term bank deposits and fixed-income marketable securities totaled
$3,783 million as of December 31, 2021. The performance of the debt capital markets affects the market values of funds that are held in marketable
securities. These assets are subject to price fluctuations, changes in interest rates and credit spreads, market liquidity and various other factors, including,
without limitation, rating agency downgrades that may impair some or all of their value, or unexpected changes in the financial markets’ healthiness
worldwide.
We expect that market conditions will continue to fluctuate and the fair value of our investments may be affected accordingly. Moreover, in case
we would like to liquidate some of our investments into cash – we are dependent on market conditions and liquidity opportunities, which may be
impacted by global economic trends, including, without limitation, the economic effects of the COVID-19 pandemic.
Financial income is an important component of our net income. The outlook for our financial income is dependent on many factors, some of
which are beyond our control, and they include the future direction of interest rates, foreign exchange rates, amount of any share repurchases,
acquisitions that we may execute and the amount of cash flows from operations that are available for investment. We rely on third-party money
managers to manage the majority of our investment portfolio in a risk-controlled framework and subject to our investment policy. Our investment
portfolio is invested primarily in fixed-income securities and short term bank deposits, and is affected primarily by changes in interest rates and credit
spreads. Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and
political conditions, such as the significant military action against Ukraine launched by Russia and any related political or economic responses and
counter-responses or otherwise by various global actors or general effect on the global economy. We expect that the market-related effects of the
COVID-19 pandemic, as well as the relatively low interest rate environment, will continue to have an impact across our investment portfolio and
financial income. Any significant decline in our financial income or the value of our investments due to changes in interest rates, interest rate
expectations, credit spreads, deterioration in the credit rating of the securities in which we have invested, or general market conditions, could have an
adverse effect on our results of operations and financial condition.
We generally buy and hold our fixed income securities, while limiting credit risk by setting a maximum concentration limit per issuer as well as
setting minimum credit rating requirement. Our fixed income investment portfolio consists primarily of government bonds, securities issued by
government agencies and corporate debentures. Although we believe that we generally adhere to conservative investment guidelines, a turmoil in the
financial markets may result in impairments of the carrying value of our investment assets. We classify our investments in fixed maturity securities as
available-for-sale. Changes in the fair value of investments classified as available-for-sale are not recognized as income during the period, but rather are
recognized as a separate component of equity until realized. Realized losses in our investments portfolio may adversely affect our financial position and
results. Had we reported the cumulative changes in the fair value of our fixed income securities as part of our income, our reported net income for the
year ended December 31, 2021, would have decreased by $1 million.
Currency fluctuations may affect the results of our operations or financial condition
Our functional and reporting currency is the U.S. dollar. We generate a majority of our revenues and expenses in U.S. dollars. In 2021, we
incurred approximately 46% of our expenses in foreign currencies, primarily Israeli Shekels and Euros. As such, changes in exchange rates may have a
material adverse effect on our business, results of operations and financial condition. The exchange rates between the U.S. dollar and certain foreign
currencies have fluctuated substantially in recent years and may continue to fluctuate substantially in the future. We expect that a majority of our
revenues will continue to be generated in U.S. dollars for the foreseeable future and that a significant portion of our expenses, including payroll related
costs, as well as capital and operating expenditures, will continue to be denominated in the currencies referred to above. The results of our operations
may be adversely affected in relation to foreign exchange fluctuations. During 2021, we entered into forward contracts to hedge against some of the risk
of foreign currency exchange rates fluctuations resulting in changes in future cash flow from payments of payroll and related expenses denominated in
Israeli Shekels and Euros. As of December 31, 2021, our total outstanding forward contracts that hedge against these fluctuations in foreign currency
exchange rates was $155 million.
In addition, we entered into forward contracts to hedge the impact of fluctuations in exchange rates on assets and liabilities denominated in Israeli
Shekels and other currencies. As of December 31, 2021, the total amount of outstanding forward contracts that did not qualify for hedge accounting, was
$171 million. We may use derivative financial instruments, such as foreign exchange forward contracts, put and call options, and others, to mitigate the
risk of fluctuations changes in foreign exchange rates on assets, cash flows receivables and payables denominated in certain currencies. We may not be
able to purchase derivative instruments adequate to fully protect us from foreign currency exchange risks.
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Additionally, our hedging activities may also generate losses as a result of volatility in foreign currency markets. If foreign exchange markets
continue to be volatile, such fluctuations in foreign exchange rates could materially and adversely affect our profit margins and results of operations in
future periods. Also, the volatility in the foreign exchange markets may make it difficult to hedge our foreign currency exposures effectively.
The imposition of exchange or price controls or other restrictions on the conversion of foreign currencies could also have a material adverse effect
on our business, results of operations and financial condition.
Changes in foreign exchange rates around the globe, including, without limitation, the economic effects of the COVID-19 pandemic or “Brexit”
could have an adverse impact on our business and results of operations. These changes may have an impact on some of our expenses which are paid in
local currencies (non US dollar), as well as an impact on our non-US customers which have their financials in non-US dollar currencies.
On December 24, 2020, the European Union and the UK announced that they had reached a new bilateral trade and cooperation agreement
governing their future relationship (the “EU-UK Trade and Cooperation Agreement”) which was formally approved by the European Council on
December 29, 2020 and by the UK parliament on December 30, 2020. The EU-UK Trade and Cooperation Agreement became effective on a provisional
basis from January 1, 2021. It was announced on April 28, 2021, that the EU Parliament approved the EU-UK Trade and Cooperation Agreement with a
large majority meaning that the Agreement applied permanently from May 1, 2021. There is an ever-changing regulatory and legislative landscape in
relation to Brexit in both the UK and the EU. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K.
determines which E.U. laws to replace or replicate, and those laws and regulations may be cumbersome, difficult or costly in terms of compliance. Any
of these effects of Brexit, among other factors, could adversely affect our business, financial condition, results of operations and cash flows.
Third parties might attempt to gain unauthorized access to our network or seek to compromise our products and services
We regularly face attempts by others to gain unauthorized access through the Internet or to introduce malicious software to our information
technology (IT) systems. Additionally, malicious hackers may attempt to gain unauthorized access and corrupt the processes of hardware and software
products that we manufacture and services we provide. Currently, there are increased threats of attacks as retaliation for sanctions imposed against
Russia as a result of the significant military action against Ukraine launched by Russia. We or our products are a frequent target of computer hackers and
organizations that intend to sabotage, take control of, or otherwise corrupt our manufacturing or other processes and products. We are also a target of
malicious attackers who attempt to gain access to our network or data centers or those of our customers or end users; steal proprietary information
related to our business, products, employees, and customers; or interrupt our systems or those of our customers or others. We believe such attempts are
increasing in number. From time to time we encounter intrusions or attempts at gaining unauthorized access to our products and network. To date, none
have resulted in any material adverse impact to our business or operations. While we seek to detect and investigate all unauthorized attempts and attacks
against our network and products, and to prevent their recurrence where practicable through changes to our internal processes and tools and/or changes
or patches to our products, we remain potentially vulnerable to additional known or unknown threats. Such incidents, whether successful or
unsuccessful, could result in our incurring significant costs related to, for example, rebuilding internal systems, reduced inventory value, providing
modifications to our products and services, defending against litigation, responding to regulatory inquiries or actions, paying damages, or taking other
remedial steps with respect to third parties. Publicity about vulnerabilities and attempted or successful incursions could damage our reputation with
customers or users and reduce demand for our products and services.
Risks Related to Our Operations in Israel
Potential political, economic and military instability in Israel, where our principal executive offices and our principal research and development
facilities are located, may adversely affect our results of operations
We are incorporated under the laws of the State of Israel, and our principal executive offices and principal research and development facilities are
located in Israel. Accordingly, political, economic and military conditions in and surrounding Israel may directly affect our business. Since the State of
Israel was established in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. Terrorist attacks and hostilities within
Israel; the hostilities between Israel and Hezbollah and between Israel and Hamas; as well as tensions between Israel and Iran, have also heightened
these risks, including extensive hostilities along Israel’s border with the Gaza Strip, which included missiles being fired from the Gaza Strip into Israel.
Our principal place of business is located in Tel Aviv, Israel, which is approximately 40 miles from the nearest point of the border with the Gaza Strip.
There can be no assurance that attacks launched from the Gaza Strip will not reach our facilities, which could result in a significant disruption of our
business. In addition, there are significant ongoing hostilities in the Middle East, particularly in Syria and Iraq, which may impact Israel in the future.
Any hostilities involving Israel, a significant increase in terrorism or the interruption or curtailment of trade between Israel and its present trading
partners, or a significant downturn in the economic or financial condition of Israel, could materially adversely affect our operations. Ongoing and
revived hostilities or other Israeli political or economic factors could
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materially adversely affect our business, results of operations and financial condition. In addition, there have been increased efforts by activists to cause
companies and consumers to boycott Israeli goods based on Israeli government policies. Such actions, particularly if they become more widespread,
may adversely impact our ability to sell our products.
Uprisings and armed conflicts in various countries in the Middle East and North Africa are affecting the political stability of those countries. This
instability may lead to deterioration of the political and trade relationships that exist between Israel and these countries. In addition, this instability may
affect the global economy and marketplace, including as a result of changes in oil and gas prices.
Our operations may be disrupted by the obligations of our personnel to perform military service
Many of our employees in Israel are obligated to perform annual military reserve duty in the Israel Defense Forces, in the event of a military
conflict, could be called to active duty. Our operations could be disrupted by the absence of a significant number of our employees related to military
service or the absence for extended periods of military service of one or more of our key employees. Military service requirements for our employees
could materially adversely affect our business, results of operations and financial condition.
The tax benefits available to us require us to meet several conditions, and may be terminated or reduced in the future, which would increase our taxes
For the year ended December 31, 2021, our effective tax rate was 14%. We have benefited or currently benefit from a variety of government
programs and tax benefits that generally carry conditions that we must meet in order to be eligible to obtain any benefit. Our tax expenses and the
resulting effective tax rate reflected in our financial statements may increase over time as a result of changes in corporate income tax rates, other
changes in the tax laws of the countries in which we operate or changes in the mix of countries where we generate profit.
If we fail to meet the conditions upon which certain favorable tax treatment is based, we would not be able to claim future tax benefits and could
be required to refund tax benefits already received.
Any of the following could have a material effect on our overall effective tax rate:
•
•
•
•
Some programs may be discontinued,
We may be unable to meet the requirements for continuing to qualify for some programs,
These programs and tax benefits may be unavailable at their current levels, or
We may be required to refund previously recognized tax benefits if we are found to be in violation of the stipulated conditions.
Additional details are provided in “Item 5 – Operating and Financial Review and Products” under the caption “Taxes on income”, in “Item 10 –
Additional Information” under the caption “Israeli taxation, foreign exchange regulation and investment programs” and in Note 11 to our Consolidated
Financial Statements.
Your rights and responsibilities as a shareholder are, and will continue to be, governed by Israeli law which differs in some material respects from the
rights and responsibilities of shareholders of U.S. companies
The rights and responsibilities of the holders of our ordinary shares are governed by our articles of association and by Israeli law. These rights and
responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S.- based corporations. In particular, a
shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations
towards the company and other shareholders, and to refrain from abusing its power in the company, including, among other things, in voting at a general
meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital,
mergers and acquisitions and related party transactions requiring shareholder approval. In addition, a shareholder who is aware that it possesses the
power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a
duty of fairness toward the company. There is limited case law available to assist in understanding the nature of this duty or the implications of these
provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically
imposed on shareholders of U.S. corporations.
Provisions of Israeli law and our articles of association may delay, prevent or make difficult an acquisition of us, prevent a change of control, and
negatively impact our share price
Israeli corporate law regulates acquisitions of shares through tender offers and mergers, requires special approvals for transactions involving
directors, officers or significant shareholders, and regulates other matters that may be relevant to these types of transactions. Furthermore, Israeli tax
considerations may make potential acquisition transactions unappealing to us or to some of our shareholders. For
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example, Israeli tax law may subject a shareholder who exchanges his or her ordinary shares for shares in a foreign corporation, to taxation before
disposition of the investment in the foreign corporation. These provisions of Israeli law may delay, prevent or make difficult an acquisition of our
company, which could prevent a change of control and, therefore, depress the price of our shares.
In addition, our articles of association contain certain provisions that may make it more difficult to acquire us, such as the provision which
provides that our board of directors may issue preferred shares. These provisions may have the effect of delaying or deterring a change in control of us,
thereby limiting the opportunity for shareholders to receive a premium for their shares and possibly affecting the price that some investors are willing to
pay for our securities.
Additional details are provided in “Item 10 – Additional Information” under the caption “Articles of Association and Israeli Companies Law –
Anti-takeover measures”.
As a foreign private issuer we are not subject to the provisions of Regulation FD or U.S. proxy rules and are exempt from filing certain Exchange Act
reports
As a foreign private issuer, we are exempt from a number of requirements under U.S. securities laws that apply to public companies that are not
foreign private issuers. In particular, we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy
statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual and current reports and financial statements with
the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we are generally exempt
from filing quarterly reports with the SEC under the Exchange Act. We are also exempt from the provisions of Regulation FD, which prohibits issuers
from making selective disclosure of material nonpublic information to, among others, broker-dealers and holders of a company’s securities under
circumstances in which it is reasonably foreseeable that the holder will trade in the company’s securities on the basis of the information. For so long as
we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies, although pursuant to
the Companies Law, we disclose the annual compensation of our five most highly compensated office holders (as defined under the Israeli Companies
Law) on an individual basis, including in this Annual Report.
As a foreign private issuer whose shares are listed on the Nasdaq Global Select Market, we may follow certain home country corporate governance
practices instead of certain Nasdaq requirements
As a foreign private issuer whose shares are listed on the Nasdaq Global Select Market, we are permitted to follow certain home country corporate
governance practices instead of certain requirements of the Nasdaq Stock Market Rules. For example, we follow our home country law, instead of the
Nasdaq Stock Market Rules, which require that we obtain shareholder approval for the establishment or amendment of certain equity based
compensation plans and arrangements. Under Israeli law and practice, in general, the approval of the board of directors is required for the establishment
or amendment of equity based compensation plans and arrangements, unless the arrangement is for the benefit of a director or a controlling shareholder,
in which case compensation committee or audit committee and shareholder approval are also required. A foreign private issuer that elects to follow a
home country practice instead of Nasdaq requirements must submit to Nasdaq in advance a written statement from an independent counsel in such
issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign private issuer must
disclose in its annual reports filed with the Securities and Exchange Commission each such requirement that it does not follow and describe the home
country practice followed by the issuer instead of any such requirement. Accordingly, our shareholders may not be afforded the same protection as
provided under Nasdaq’s corporate governance rules.
ITEM 4.
INFORMATION ON CHECK POINT
Check Point History and Development
Since its inception, our sole focus has been on making the world a safer place to live and work. For 29 years, we worked to fulfill our vision to
provide any organization with the ability to conduct its business on the internet with advanced and comprehensive levels of security.
We pioneered the first commercially available firewall, followed by a steady stream of industry-first cyber security solutions. As an example, our
technology provides protection against both known and unknown cyber security threats across a wide range of environments: physical and virtual
networks, cloud and mobile surroundings, critical infrastructures, and the ‘Internet of Things’ (IoT). Today, the threat landscape is more complex than
ever, with organizations experiencing the 5th generation of cyber-attacks –large-scale and multi-vector mega attacks using advanced attack technologies,
while the security deployed by many businesses is generationally behind and incapable of protecting against such attacks.
Protecting the World from 5th Generation of Cyber Security Attacks and a Cyber Pandemic
Over the last 29 years, the technologies behind cyber-attacks and the ensuing preventative measures have advanced rapidly. During 2021, we
witnessed an unprecedented number of cyber-attacks against organizations across all industries carried out as large-scale, multi-vector mega attacks,
inflicting major damage on businesses and their reputations. As a result, heavy fines were levied in some cases where companies failed to protect
sensitive data.
We identified the evolving different generations of both cyber-attacks and security products. Today, we find ourselves in an increasingly complex
threat landscape with organizations experiencing the 5th generation of cyber-attacks. The security deployed by most businesses is generationally behind
and incapable of protecting against such attacks. Specifically, while we are facing the 5th generation of attacks, most businesses possess only 2nd or 3rd
generation security.
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Generation 1 – Late 1980s, virus attacks on stand-alone PCs affected all businesses and drove the rise of anti-virus products.
Generation 2 – Mid 1990s, attacks from the internet affected all business and drove the creation of the firewall.
Generation 3 – Early 2000s, exploiting vulnerabilities in applications affected most businesses and drove the rise in intrusion prevention
systems (IPS) products.
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Generation 4 – Approximately 2010, rise of targeted, unknown, evasive, polymorphic attacks affected most businesses and drove the
increase in behavior analysis technologies such as sandboxing products.
Generation 5 – Approximately 2018-2021, the large-scale and multi-vector mega attacks using advanced attack technologies. These are
fast-moving attacks so detection-only is not enough. These attacks targeted traditional attack vectors and expanded to mobile and cloud.
Advanced threat prevention is required.
Cyber-attacks are now a daily phenomenon with widespread news coverage, resulting often in lost data and privacy, and the complete halting of a
business’ operations. Organizations that presumed their security was good enough, are now discovering it was not.
Over the last two years, amid the COVID-19 pandemic, there have also been numerous significant cyber exploits, including ransomware attacks,
supply-chain attacks, nation state campaigns and software vulnerabilities. Year two of the COVID-19 pandemic required even more strengthening of
security measures.
The world is dependent on the internet, now more than ever, and as organizations rapidly digitalize their operations, we believe their cyber
security needs to be recalibrated to address the security of their corporate networks, hybrid-datacenters, cloud environments and lastly, securing their
employees – wherever they are located.
We address organizations’ most imminent cyber security needs based on four core principles:
1. Prevention-first approach – Deploy pre-emptive user protections to eliminate threats before they reach the users.
2. Strive for the Highest level of security – Utilize the most innovative technologies, threat intelligence and cyber experts to prevent in real-time
against the most sophisticated zero-day, 5th generation attacks.
3. Gold Standard Management – Single pane of glass to manage the entire security estate.
4. Consolidated Solution – Realize complete, preemptive protection against the most advanced threats while achieving better operational efficiency.
Check PointPoint’s Three Strategic Pillars
1. Quantum: Enterprise network security for perimeter and datacenter
Aimed to secure and effectively manage datacenter environments. Check Point Quantum Security Gateways deliver comprehensive security
beyond any Next Generation Firewall (NGFW) and are designed to manage the most complex policy requirements. Powered with over 60 security
services, these gateways are aimed at preventing the 5th generation of cyber-attacks. In order to serve the different needs and demands of our
customers, we offer a wide portfolio of security gateways and software platforms that support a wide range of small and medium sized business
(SMB) to large enterprise data center and telco-grade environments. On each security gateway, we offer the full expanse of Check Point’s network
security portfolio from industry-leading next generation firewall, IPS (Intrusion Prevention System), VPN (Virtual Private Network), WAF (Web
Application Firewall), SSL (Secure Sockets Layer), and DLP (Data Loss Prevention) to a wide set of threat prevention technologies blocking
known and unknown advanced 5th generation cyber-attacks. Check Point’s security gateways are available as a cloud service, software-only
products that can run on standard hardware, or dedicated security gateway hardware appliances.
Check Point’s cyber security platform (R81) introduces the industry’s first autonomous threat prevention system, which eliminates labor-intensive
manual threat classification and updates. All Quantum gateways are updated automatically by AI-based threat prevention for complete protection
against zero-day threats.
In 2022, we introduced a big revolution in network security, Quantum Lightspeed. enabling security for hyper-fast datacenters.
2. CloudGuard: Automatically secure your cloud
Check Point cloud native security, delivered through CloudGuard, provides automated security and advanced threat prevention to protect cloud
assets and workloads from cyber threats including sophisticated cyber-attacks and misconfigurations. CloudGuard secures cloud workloads in
multiple environments including Amazon AWS, Microsoft Azure, Google, VMWare and others providing relevant capabilities for each cloud
environment.
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1. Cloud Network Security: advanced threat prevention and network security through a virtual security gateway—automated and unified across all
multi-cloud and on-premises environments.
2. Security and Posture Management: prevent threats and achieve high fidelity posture management.
3. Cloud Workload Protection: seamless vulnerability assessment and runtime protection of modern cloud workloads, including serverless
functions and containers.
4. Cloud Web Application Protection: powered by contextual-AI, protects web applications and APIs from the most sophisticated types of threats.
3.
Harmony: Securing the User Environment
Check Point Harmony protects employees, devices, and internet connectivity from malicious attacks, while ensuring secure, remote zero-trust
access at any scale to any corporate application. Check Point Harmony provides endpoint and secure connectivity in various forms for easy and
comprehensive remote user access.
Harmony unifies five security products to deliver complete remote users security:
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Harmony Endpoint protects users’ PCs from ransomware, phishing, and malware, and minimizes breach impact with autonomous
detection and response capability.
Harmony Mobile protects employees’ mobile devices against malicious apps and network or operating systems attacks.
Harmony Email & Collaboration secures users’ email clients and gives complete protection for Microsoft Office 365, Exchange, Google
G Suite and others. In 2021, we extended Harmony with cloud-email security with the acquisition of Avanan – a leading cloud-email
security company.
Secure Internet Browsing: Provides secure, fast, and private web browsing by inspecting all SSL traffic directly on the endpoint.
Secure remote access to corporate applications: Harmony Connect provides Secure Access Service Edge (SASE) and provides secure
and easy access to any corporate application.
Check Point Infinity Architecture
Check Point Infinity is a consolidated cyber security architecture that protects against 5th generation of cyber-attacks. It supports 50 types of
assets across networks, endpoint, cloud, workloads, IoT and mobile, and secures them with over 60 threat prevention engines (50% of which are
AI-based). Through advanced threat prevention, business-oriented policy management, and cloud-based threat intelligence, Infinity delivers a
solid foundation for a sustainable, effective risk management strategy. This model allows organizations to use all of Check Point’s security
technologies to protect their networks, endpoint, mobile devices, cloud, and IoT through an annual security subscription based on the number of
enterprise users.
Check Point Threat Prevention Technologies & Products
ThreatCloud, is a centralized cloud based “brain” that combines the latest AI technologies with big data threat intelligence to prevent the advanced
attacks while reducing false positives.
1. AI technologies – Accurately block zero-day ransomware, sophisticated Trojans, and other advanced malware through a market leading malware
analysis technology leveraging 30+ AI based machine and deep learning engines.
2. Big data threat intelligence – Aggregates and analyzes big data telemetry and millions of Indicators of Compromise (IoCs) every day. Its threat
intelligence database is fed from 150,000 connected networks and millions of endpoint devices, as well as feeds from Check Point Research team
(CPR).
Check Point Technology Leadership in 2021
During 2021 we were endorsed by market analysts for our leadership position. Check Point was mentioned in over 110 analyst reports in 2021.
Below are some of the highlight reviews:
Gartner
● Leader for the 22nd time in Magic Quadrant for Network Firewalls
● Gartner Market Guide for Mobile Threat Defense
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IDC
Omdia
● Named a Worldwide Major Player in Modern Endpoint Security for Enterprise & SMB in latest IDC MarketScape Reports
● Harmony Mobile recognized as a Market Leader in Omdia’s Market Radar Mobile Security Management
Forrester
● Forrester Now Tech Industrial Control Systems (ICS) Security.
MITRE Evaluations
● Leadership in Endpoint Security with 100% Detection across All Tested Unique ATT&CK Techniques
G2.com
● Recognized as leader in nine Grid Reports for Firewall, Cloud, Endpoint and Mobile Data security
Acquisitions and other Corporate Information
In September 2021, we acquired 100% of the share capital of Avanan Inc., a privately-held US-based company providing cloud email security, and
the developer of a patented application-programming interface (API) solution to stop email threats before arriving to the inbox (inline), for both internal
and external emails using AI based engines.
In February 2022, we acquired 100% of the share capital of Spectral Cyber Technologies Ltd., a privately held Israeli company and key innovator
in developer-first security tools designed by developers for developers, to extend our cloud solution, Check Point CloudGuard.
Further details regarding the important events in the development of our business since the beginning of 2019 are provided in “Item 5 – Operating
and Financial Review and Prospects” under the caption “Overview”.
We incorporated as a company under the laws of the State of Israel in 1993 under the name of “Check Point Software Technologies Ltd.” Our
registered office and principal place of business is located at 5 Shlomo Kaplan Street Tel Aviv 6789159, Israel. The telephone number of our registered
office is 972-3-753-4555. Our company’s website is www.checkpoint.com. The contents of our website are not incorporated by reference into this
Annual Report.
This Annual Report is available on our website. If you would like to receive a printed copy via mail, please contact our Investor Relations
department at 959 Skyway Road, Suite 300, San Carlos, CA 94070, U.S.A., Tel.: 650-628-2040, email: ir@checkpoint.com.
Our agent for service of process in the United States is CT Corporation System, 818 West Seventh Street, Los Angeles, CA 90017 U.S.A.;
Tel: 213-627-8252.
Revenues by Category of Activity
The followig table presents our revenues for the last three fiscal years by category of activity:
Category of Activity:
Products and licenses
Security subscriptions
Software updates and maintenance
Total revenues
Sales and Marketing
2021
Year Ended December 31,
2020
(in millions)
2019
$ 513.9
755.2
897.7
$2,166.8
$ 513.6
671.1
880.2
$2,064.9
$ 510.8
610.3
873.7
$1,994.8
We mostly sell our products and services through a two-tier distribution model; distributors that sell to resellers and to service providers and
MSSPs, who sell to end-customers. We support our channel partners with a dedicated team of experienced sales professionals including account
managers, channel managers and sales engineers.
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Our marketing efforts include building our brand, product marketing, partner incentives and promotions, event marketing, digital marketing,
communications and public relations. In 2021, we continued to invest in sales and marketing resources.
As of December 31, 2021, we had 2,626 employees and subcontractors in our sales and marketing organization, with a majority of them dedicated
to pre sales and marketing support located in various jurisdictions.
Support and Services
We operate a worldwide technical services organization which provides a wide range of services including: (i) technical customer support
programs and plans; (ii) professional services in implementing, upgrading and optimizing Check Point products, such as design planning and security
implementation; and (iii) certification and educational training on Check Point products.
Our technical assistance centers in the United States, Israel, Canada, Japan, India, China and Australia offer support worldwide, 24-hour service,
seven days per week.
As of December 31, 2021, we had 913 employees and subcontractors in our technical services organization.
Research and Product Development
We believe that our future success will depend upon our ability to enhance our existing products, and to develop, acquire and introduce new
products to address the increasingly sophisticated needs of our customers.
As of December 31, 2021, we had 1,704 employees and subcontractors dedicated to research and development activities and quality assurance.
Competition
Information concerning competition is provided in “Item 3 – Key Information” under the caption “Risk Factors – Risks Related to Our Business
and Our Market – We may not be able to successfully compete, which could adversely affect our business and results of operations”.
Environmental, Social and Governance (ESG) Practices
Since Check Point’s inception, our sole focus has been on making the world a safer place to live and work. For over 25 years, we have worked to
fulfill our vision of making the Internet secure, reliable, and available for corporations and consumers. As a global brand with material social and
economic influence, we recognize that our success can only be built alongside the success of our stakeholders – including, our channel partners,
customers, suppliers and employees. We aim to achieve high ESG standards while continuing to develop our business and executing on our strategy.
Our Commitment. Check Point is committed to making the world a safer and more secure place. In the digital era, this commitment applies to our
work both on the internet and the physical world alike.
As we aspire to achieve a more sustainable future for all, we have set out the following practices and guidelines which our employees and
stakeholders are expected to adhere to:
Social Standards:
I.
Community – How we value each other – We believe in creating a more sustainable future for our stakeholders and for the world. We are
extremely involved in the community and we invest greatly in volunteering and donations activities in an attempt to make the world a
better place.
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Corporate Responsibility Policy – Check Point strongly believes that creating a positive economic, social and environmental
impact advances its mission of developing security solutions to protect business and consumer transactions, and creating a more
sustainable future for its stakeholders and the for the world. As part of Check Point’s corporate responsibility guidelines, Check
Point identified ESG issues that are of highest relevance to its business activity and its stakeholders. These essential issues are
addressed and managed constantly to ensure that they remain up to date and optimized to address the relevant concerns.
Social Investment and Volunteer Statement – Check Point invests in its worldwide volunteering and donations activities as it is
committed to making the world a safer and a better place in order to achieve a more sustainable future for all. Check Point is
extremely involved in the community and is committed to the social needs of the communities we live in and operate from.
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II.
Human Resources – How we value ourselves – The most important asset of our company is our human capital. We promote a safe,
healthy, and supportive work environment. Our goal is to create a diverse work environment and additionally we invest greatly in the
training and development of our employees.
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Human Rights and Labor Policy – Check Point strives to treat its employees, contractors and suppliers with dignity and respect.
Check Point promotes a safe, healthy, and supportive work environment and condemns modern slavery and human trafficking in any
form. Check Point’s commitment includes closely monitoring its compliance with international standards and local laws in all of our
locations around the world to ensure that the rights of our employees are protected.
Workforce Diversity and Equality Statement – As a global company headquartered in Israel, a country developed by the
contribution of individuals that emigrated from different countries with diverse backgrounds, Check Point’s goal is to create a
diverse work environment. Check Point’s wonderful employees are made up of all genders, colors, ages, ethnicities, religions, sexual
orientation, family status, social origin and some carry different types of disabilities. All Check Point employees are encouraged to
be themselves and contribute to its culture, growth and development as a world leading cyber security company. It’s the combination
of this diversity and uniqueness of each individual that leads and guides and helps us improve, develop, learn and succeed in being
an industry leading company.
Training and Employee Development Policy – The most important asset of Check Point is its human capital. Investing in the
training and development of our employees, managers and groups within the company contributes not only to them, but also to
Check Point as a whole. By providing our employees and managers with learning and development activities, we enable the
company to achieve its business targets, and the people to constantly grow professionally.
•
Anti-Slavery Policy – Check Point has zero tolerance towards modern slavery.
III.
Supply Chain – How we value the process – We assure the high standards of our supply chain conduct by ensuring that the working
conditions in our operations and supply chain are safe and that business operations are conducted ethically
•
Supply Chain Code of Conduct – Check Point assures the high standards of its supply chain conduct by ensuring that the working
conditions in Check Point’s operations and supply chain are safe and that business operations are conducted ethically. We demand
our suppliers of products and services to comply with our high standards and values.
•
Supply Chain Policy – Check Point assures the high standards and values of its supply chain conduct, as it considers honesty,
integrity, transparency and open communication core values of our business and operations.
Environmental Standards:
IV.
Environment – How we value our surroundings – We take an active part in helping to ensure the sustainability of the world’s resources
and environment.
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Environmental Policy – Check Point understands that climate change and the global warming have observable effects on the
environment. We therefore take an active part in helping to ensure the sustainability of the world’s resources and environment.
Check Point’s impact on the environment is generally through our products, services and facilities. We comply with the applicable
environmental laws and regulations and strive to be a leader in the environmental sustainability field.
Conflicts Minerals Policy – In certain conflict areas around the world, such as the Democratic Republic of the Congo and adjoining
countries, the trade of certain minerals and derivative metals can be used to support corruption, money laundering and human rights
abuses. In order to eradicate such behavior, Check Point has adopted a Conflicts Minerals Policy.
Governance Standards:
V.
Corporate Governance – How we value our method – We have adopted corporate governance guidelines to assist our Board in carrying
out its responsibilities and serving the interests of our company and its shareholders.
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Corporate Governance Guidelines – The Board of Directors of Check Point Software Technologies Ltd. has adopted the following
Corporate Governance Guidelines to assist the Board in carrying out its responsibilities and serving the interests of the Company and
its shareholders in a manner that is consistent with the Board’s fiduciary duties.
Committee Charters – We have adopted written charters specifying the duties and responsibilities of each of our Audit Committee,
Compensation Committee and Nominating, Sustainability and Corporate Governance Committee to assist the committee members in
carrying out their responsibilities.
VI.
Ethics – How we value what is right – Check Point promotes core values of honest and ethical conduct, integrity, open communication,
equal opportunity and diversity.
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Code of Ethics and Business Conduct – Check Point is a worldwide leader in developing security solutions to protect business and
consumer transactions, and communications over the internet. Our goodwill and reputation are affected by what we do every day. By
putting our commitment in writing we clearly set out the business practices that we follow and set clear standards of behavior for
everyone associated with our organization.
Privacy Policy – Our Privacy Policy explains how Check Point treats personal information that Check Point collects or generates
both in relation to the Check Point website (www.checkpoint.com) and our products and services.
Whistle Blower Procedure – Check Point strives to promote its values and establish uniformity within the company. Check Point’s
employees and business partners are expected to adhere to and follow the standards and principles we set. In order to support the
adherence to our Code of Ethics and Business Conduct as well as other policies, we provide different channels for reporting, which
include the Whistle Blower Procedure. This is crucial for our high standards and values.
Insider Trading Policy – This policy provides guidelines to employees, consultants, contractors, officers and directors of Check
Point with respect to transactions in Check Point’s securities.
Anti-Corruption, Bribery and Money Laundering Policy – Check Point’s goodwill and reputation are affected by what we do
every day. Check Point clearly sets out the business practices that we follow and set clear standards of behavior for everyone
associated with our organization. Our culture and values help us build trust with our customers, business partners, investors, other
organizations and governments, and trust and integrity is the core of our business and operations.
On the diversity side, a described in Item 6, the three senior executive officers reporting to the CEO are female executives.
Oversight of our risks, strategies, policies, programs and practices related to ESG matters is conducted by our nominating, sustainability and
corporate governance committee, and our ESG Manager leads the day-to-day management of ESG matters.
Proprietary Rights
Check Point relies on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The company relies on trade secret and copyright laws to protect its software, documentation, and other written materials.
Further, Check Point generally enters into confidentiality agreements with employees, consultants, customers and potential customers, and limits access
and distribution of materials and information that the company considers proprietary.
Check Point and its subsidiaries have 97 issued patents in the U.S. and in other regions and 12 pending patent applications worldwide. Our efforts
to protect our patent rights and other proprietary rights may not be adequate and our competitors may independently develop technology that is similar.
Additional details are provided in “Item 3 – Key Information” under the caption “Risk Factors – Risks Related to Our Business and Our Market – We
may not be able to successfully protect our intellectual property rights”.
Effect of Government Regulation on our Business
Information concerning regulation is provided in “Item 5 – Operating and Financial Review and Products” under the caption “Taxes on income”
and in “Item 10 – Additional Information” under the caption “Israeli taxation, foreign exchange regulation and investment programs”.
Organizational Structure
We are organized under the laws of the State of Israel. We wholly own the subsidiaries listed below, directly or through other subsidiaries, unless
otherwise specified in the footnotes below:
NAME OF SUBSIDIARY
Check Point Software Technologies, Inc.
Check Point Software (Canada) Technologies Inc.
Check Point Software Technologies (Japan) Ltd.
Check Point Software Technologies (Netherlands) B.V.
Check Point Holding (Singapore) PTE Ltd.
Check Point Holding (Singapore) PTE Ltd. (1)
COUNTRY OF INCORPORATION
United States of America (Delaware)
Canada
Japan
Netherlands
Singapore
Indonesia
Check Point Holding (Singapore) PTE Ltd. – U.S. Branch (2)
Israel Check Point Software Technologies Ltd. China (3)
Check Point Holding AB (4)
Check Point Advanced Threat Prevention Ltd.
Check Point Mobile Security Ltd.
Check Point Software Technologies South Africa PTY. Ltd
Check Point Software (Kenya) Ltd.
Check Point Software Technologies B.V Nigeria Ltd. (5)
Check Point Public Cloud Security Ltd.
Check Point Web Applications and API Protection Ltd.
Protego Labs, Inc.
Check Point IOT Security Ltd.
Check Point Serverless Security Ltd. (6)
Check Point Secure Remote Access Ltd.
Check Point Email Security Ltd. (7)
Avanan, Inc.
Check Point Developer Security Tools Ltd.
Spectral Cyber Technologies. Inc. (8)
Check Point Software Technologies (Sweden) AB. (9)
Zone Labs, L.L.C. (10)
United States of America (New York)
China
Sweden
Israel
Israel
South Africa
Kenya
Nigeria
Israel
Israel
United States of America (Delaware)
Israel
Israel
Israel
Israel
United States of America (Delaware)
Israel
United States of America (Delaware) (8)
Sweden
United States of America (California)
(1) Representative office of Check Point Holding (Singapore) PTE Ltd.
(2) Branch of Check Point Holding (Singapore) PTE Ltd.
(3) Representative office of Check Point Software Technologies Ltd.
(4)
Subsidiary of Check Point Holding (Singapore) PTE Ltd. (former name: Protect Data AB)
24
Subsidiary of Check Point Holding (Singapore) PTE Ltd. and Check Point Yazilim Teknolojileri Pazarlama A.S.
Subsidiary of Protego Labs, Inc
Subsidiary of Avanan, Inc.
Subsidiary of Spectral Cyber Technologies Ltd.
Subsidiary of Check Point Holding AB
(5)
(6)
(7)
(8)
(9)
(10) Subsidiary of Check Point Software Technologies Inc.
Check Point Software Technologies (Netherlands) B.V. acts as a holding company. It wholly owns all or substantially all of the share capital of the
principal operating subsidiaries listed below, unless otherwise indicated in the footnotes below:
NAME OF SUBSIDIARY
Check Point Software Technologies S.A.
Check Point Software Technologies (Australia) PTY Ltd.
Check Point Software Technologies (Austria) GmbH
Check Point Software Technologies (Belarus) LLC
Check Point Software Technologies (Belgium) S.A.
Check Point Software Technologies (Brazil) LTDA
Check Point Software Technologies (Hong Kong) Ltd. (Guangzhou office) (1)
Check Point Software Technologies (Hong Kong) Ltd. (Shanghai office) (1)
Check Point Software Technologies (Czech Republic) s.r.o.
Check Point Software Technologies (Denmark) ApS
Check Point Software Technologies (Finland) Oy
Check Point Software Technologies SARL
Check Point Software Technologies GmbH
Check Point Software Technologies (Greece) SA
Check Point Software Technologies (Hungary) Ltd.
Check Point Software Technologies (Hong Kong) Ltd.
Check Point Software Technologies (India) Private Limited
Check Point Software Technologies (Italia) Srl
Check Point Software Technologies Mexico S.A. de C.V.
Check Point Software Technologies (Beijing) Co., Ltd.
Check Point Software Technologies (New Zealand) Limited
Check Point Software Technologies Norway A.S.
Check Point Software Technologies (Philippines) Inc.
Check Point Software Technologies (Poland) Sp.z.o.o.
CPST (Portugal), Sociedade Unipessoal Lda.
Check Point Software Technologies (RMN) SRL.
Check Point Software Technologies (Russia) OOO
Check Point Software Technologies (Korea) Ltd.
Check Point Software Technologies (Spain) S.A.
Check Point Software Technologies (Switzerland) A.G.
Check Point Software Technologies (Taiwan) Ltd.
Check Point Yazilim Teknolojileri Pazarlama A.S.
Check Point Software Technologies (UK) Ltd.
(1) Representative office of Check Point Software Technologies (Hong Kong) Ltd.
25
COUNTRY OF INCORPORATION
Argentina
Australia
Austria
Belarus
Belgium
Brazil
China
China
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Hong Kong
India
Italy
Mexico
China
New Zealand
Norway
Philippines
Poland
Portugal
Romania
Russia
South Korea
Spain
Switzerland
Taiwan
Turkey
United Kingdom
Property and Equipment
We own our headquarters located in Tel Aviv, Israel and we lease offices in various locations throughout the world. The breakdown in the various
geographies is as follows:
Location
Israel
Americas
Europe, Middle East and Africa
Asia Pacific
Space (square feet)
362,000*)
132,000
62,730
41,850
*) We acquired ownership of our international headquarters located in Tel Aviv, Israel pursuant to a pre-paid 49 year long-term lease on the land with
the City of Tel Aviv – Jaffa. No additional payments are due under such long-term lease. Our international headquarters building contains
approximately 332,000 square feet of office space. In addition, we lease approximately 30,000 square feet of additional space substantially all in
Tel Aviv, Israel.
Principal Capital Expenditures and Divestitures
For more information regarding our principal capital expenditures currently in progress, see “Item 5 – Operating and Financial Review and Prospects”
under the caption “Liquidity and Capital Resources”.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
For discussion related to our financial condition, changes in financial condition, and the results of operations for 2020 compared to 2019, refer to
Part I, Item 5. Operating and Financial Review and Prospects, in our Annual Report on Form 20-F for the fiscal year ended December 31, 2020, which
was filed with the U.S. Securities and Exchange Commission on April 2, 2021.
The following discussion and analysis is based on our consolidated financial statements including the related notes, and should be read in
conjunction with them. Our consolidated financial statements are provided in “Item 18 – Financial Statements”.
Overview
We develop, market and support a wide range of products and services for IT security by offering a multilevel security architecture that defends
enterprises’ cloud, network, mobile devices, Endpoints information and IOT solutions. Our solutions operate under a unified security architecture,
Infinity, that enables end-to-end security with a single line of unified security gateways and allow a single agent for all endpoint security that can be
managed from a single unified management console. This unified management allows for ease of deployment and centralized control and is supported
by, and reinforced with, real-time threat intelligence and autonomous security updates. Our products and services are sold to enterprises, service
providers, small and medium sized businesses and consumers. Our open platform framework allows customers to extend the capabilities of our products
and services with third-party hardware and security software applications. Our products are sold, integrated and serviced by a network of channel
partners worldwide.
Our business is subject to the effects of general global economic conditions and, in particular, market conditions in the IT, Internet security and
data security industries. If general economic and industry conditions deteriorate, demand for our products could be adversely affected.
26
We derive our sales primarily through indirect channels. During 2021, 2020 and 2019, we derived approximately 58%, 57%, and 55%,
respectively, of our sales from our ten largest channel partners. In 2021, 2020 and 2019, our two largest distributors accounted for approximately 40%,
39% and 37% of our sales, respectively. The following table presents the percentage of total consolidated revenues that we derive from sales in each of
the regions shown:
Region:
Americas, principally U.S.
Europe, Middle East and Africa
Asia-Pacific
Year Ended December 31,
2020
2021
2019
43%
45%
12%
45%
43%
12%
46%
42%
12%
For information on the impact of foreign currency fluctuations, please refer to “Item 11 – Quantitative and Qualitative Disclosures about Market
Risk – Foreign Currency Risk”.
COVID-19 Pandemic
The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and
business practices. Federal, state and foreign governments have implemented measures to contain the virus, including social distancing, travel
restrictions, border closures, limitations on public gatherings, work from home, and closure of non-essential businesses. To protect the health and well-
being of our employees, partners, and third-party service providers, we have implemented work-from-home requirements, made substantial
modifications to employee travel policies, and cancelled or shifted marketing and other corporate events to virtual-only formats for the foreseeable
future. Our focus remains on the safety of our employees, striving to protect the health and well-being of the communities in which we operate, and
providing technology to our employees, end-customers and partners to help them do their best work while remote.
The ultimate duration and extent of the impact from the COVID-19 pandemic depends on future developments cannot be accurately forecasted at
this time. These developments include the severity and transmission rate of the disease, the actions of governments, businesses and individuals in
response to the pandemic, the extent and effectiveness of containment actions, the impact on economic activity and the impact of these and other
factors. See Risk Factors for further discussion of the possible impact of the COVID-19 pandemic on our business.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain
estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions that we make are reasonable based upon information
available to us at the time that these estimates, judgments and assumptions were made. These estimates, judgments and assumptions can affect the
reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the
periods presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our consolidated
financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we
believe are the most critical to aid in fully understanding and evaluating our reported financial results, include the following:
•
•
•
•
•
•
•
Revenue recognition (including sales reserves),
Realizability of long-lived assets (including intangible assets),
Accounting for income taxes,
Credit loss of trade receivables
Impairment of marketable securities; and
Loss Contingencies ; and
Manufacturing Partner and Supplier Liabilities.
27
In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s
judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a
materially different result. Our senior management has reviewed these critical accounting policies and related disclosures with the audit committee of
our board of directors. You can see a summary of our significant accounting policies in Note 2 to our consolidated financial statements, as set forth in
Item 18.
Revenue recognition
We derive our revenues mainly from sales of products and licenses, security subscriptions and software updates and maintenance. Our products
are generally integrated with software that is essential to the functionality of the product. We sell our products primarily through channel partners
including distributors, resellers, Original Equipment Manufacturers (“OEMs”), system integrators and Managed Security Service Providers (“MSPs”),
all of whom are considered end users.
Security subscriptions provide customers with access to its suite of security solutions and is sold as a service.
Software updates and maintenance provide customers with rights to unspecified software product upgrades released during the term of the
agreement and include maintenance services to end-user customers, through primarily telephone access to technical support personnel as well as
hardware support services.
We recognize revenues under the core principle that transfer of control to our customers should be depicted in an amount reflecting the
consideration we expect to receive in revenue. Therefore, we identify a contract with a customer, identify the performance obligations in the contract,
determine the transaction price, allocate the transaction price to each performance obligation in the contract and recognize revenues when (or as) we
satisfy a performance obligation.
We recognize revenues from sales of products and licenses, under Topic 606, upon shipment when control of the promised goods is transferred to
the customer, or upon electronic transfer of the Certificate Key to the customer.
We recognize revenues from security subscriptions and software updates and maintenance ratably over the term of the agreement due to the
continuous transfer of control to the customer over the period.
Our arrangements typically contain multiple deliverables, such as products and licenses, security subscriptions and software updates and
maintenance, which are generally capable of being distinct and accounted for as separate performance obligations. We evaluated the criteria to be
distinct under Topic 606, and concluded that the products and the licenses were distinct and distinct in the context of the contract from the security
subscription and the software updates and maintenance, as the customer can benefit from the products and licenses without the services and the services
are separately identifiable within the arrangement. We allocate the transaction price to each performance obligation based on relative standalone selling
price basis, by using the prices charged for a performance obligation when sold separately.
Deferred revenues represent mainly the unrecognized revenue billed for security subscriptions and for software updates and maintenance. Such
revenues are recognized ratably over the term of the related agreement.
We recognize revenues net of estimated amounts that may be refunded for sales returns, rebates, stock rotations and other rights provided to
customers on product and service related sales subject to varying limitations. We estimate and record these reductions based on our historical sales
returns experience, analysis of credit memo data, rebate plans, stock rotation and other known factors. In each accounting period, we use judgments and
estimates to determine potential future sales credits, returns and stock rotation, related to current period revenue. These estimates affect our “revenue”
line item on our consolidated statements of income and affect our “deferred revenues” and “accrued expenses and other liabilities” on our consolidated
balance sheets.
Realizability of long-lived assets (including intangible assets)
We are required to assess the impairment of tangible and intangible long-lived assets subject to amortization, under ASC 360 “Property, Plant and
Equipment”, on a periodic basis, when events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment
indicators include any significant changes in the manner of our use of the assets or the strategy of our overall business, significant negative industry or
economic trends and significant decline in our share price for a sustained period.
Upon determination that the carrying value of a long-lived asset may not be recoverable based upon a comparison of aggregate undiscounted
projected future cash flows from the use of the asset or asset group to the carrying amount of the asset, an impairment charge is recorded for the excess
of carrying amount over the fair value. We measure fair value using discounted projected future cash flows. We base our fair value estimates on
assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. If these estimates or their related assumptions change in the
future, we may be required to record impairment charges for our tangible and intangible long-lived assets subject to amortization. No impairment
charges were recognized during 2021, 2020 and 2019.
28
Accounting for income tax
We are subject to income taxes in Israel, the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our
uncertain tax positions and determining our taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome
of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of
changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate, or upon lapse of statute of limitations. To the extent
that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the
period in which such determination is made.
Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a
valuation allowance, we consider all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax
planning strategies. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our
valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
Credit loss of trade receivables
We make estimates of expected credit and collectability trends for the allowance for credit losses based upon our assessment of various factors,
including historical experience, the age of the trade receivable balances, credit quality of our customers, current economic conditions, reasonable and
supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers.
On January 1, 2020, we adopted Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, using the modified retrospective transition method. Upon adoption, we changed our impairment model to utilize
a current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost, including
our accounts receivables.
Impairment of marketable securities
We classify all of our debt securities as available-for-sale (“AFS”). Available-for-sale debt securities are carried at fair value, with the unrealized
gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on sale of
investments are included in financial income, net and are derived using the specific identification method for determining the cost of securities sold.
On January 1, 2020, we adopted Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, using the modified retrospective transition method. Upon adoption, we modified our impairment model for
available-for-sale (“AFS”) debt securities and discontinued using the concept of “other than temporary” impairment on AFS debt securities. Each
reporting period, we evaluate whether declines in fair value below amortized cost are due to expected credit losses, as well as our ability and intent to
hold the investment until a forecasted recovery occurs. Allowance for credit losses on AFS debt securities are recognized in our consolidated statements
of income, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders’ equity.
We measure our money market funds and marketable securities at fair value. Money market funds and marketable securities are classified within
Level 1 or Level 2. This is because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market
observable inputs.
Loss Contingencies
We are currently involved in various claims and legal proceedings. We review the status of each matter and assess its potential financial exposure.
If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the
estimated loss.
Manufacturing Partner and Supplier Liabilities
We purchase manufactured products from its original design manufacture (“ODM”). We generally do not own the manufactured products. ODM’s
provide services of design, manufacture, orders fulfillment and support with a full turn-key solution to meet our detailed requirements. If the actual
demand is significantly lower than forecast, we record a liability for its commitment in excess of the actual demand. As of December 31, 2021 and 2020,
we have not accrued any significant liability in respect with this exposure.
29
Results of Operations
The following table presents information concerning our results of operations in 2021 and 2020:
Revenues:
Products and licenses
Security subscriptions
Software updates and maintenance
Total revenues
Operating expenses (*):
Cost of products and licenses
Cost of security subscriptions
Cost of software updates and maintenance
Amortization of technology
Total cost of revenues
Research and development
Selling and marketing
General and administrative
Total operating expenses
Operating income
Financial income, net
Income before taxes on income
Taxes on income
Net income
Year Ended December 31,
2020
2021
(in millions)
$
513.9
755.2
897.7
2,166.8
110.7
35.9
103.0
8.5
258.1
292.7
597.8
110.7
1,259.3
907.5
42.1
949.6
134.0
815.6
$
$
513.6
671.1
880.2
2,064.9
96.8
26.4
96.7
6.6
226.5
252.8
569.9
111.5
1,160.7
904.2
66.6
970.8
124.2
846.6
$
(*)
Including pre-tax charges for stock-based compensation, amortization of intangible assets and acquisition related expenses in the following items:
Amortization of intangible assets and acquisition related expenses
Amortization of technology
Research and development
Selling and marketing
Total amortization of intangible assets and acquisition related expenses
Stock-based compensation
Cost of products and licenses
Cost of software updates and maintenance
Research and development
Selling and marketing
General and administrative
Total stock-based compensation
30
Year Ended December 31,
2021
2020
(in millions)
$
$
$
$
8.5
5.6
7.3
21.4
0.4
4.4
31.8
42.8
40.9
120.3
$
$
$
$
6.6
4.1
7.3
18.0
0.4
4.1
23.5
36.8
47.7
112.5
The following table presents information concerning our results of operations as a percentage of revenues for the periods indicated:
Revenues:
Products and licenses
Security subscriptions
Software updates and maintenance
Total revenues
Operating expenses:
Cost of products and licenses
Cost of security subscriptions
Cost of software updates and maintenance
Amortization of technology
Total cost of revenues
Research and development
Selling and marketing
General and administrative
Total operating expenses
Operating income
Financial income, net
Income before taxes on income
Taxes on income
Net income
Year Ended December 31,
2021
2020
24%
35
41
100%
5
2
5
—*)
12
13
28
5
58
42
2
44
6
38
25%
32
43
100%
5
1
5
—*)
11
12
28
5
56
44
3
47
6
41
*)
Less than 1%.
Revenues
We derive our revenues mainly from the sale of products and licenses, security subscriptions and software updates and maintenance. Our revenues
were $2,167 million in 2021 and $2,065 million in 2020.
Total revenues in 2021 increased by 5% compared to 2020. Product and license revenues were $514 million in each of the years 2021 and 2020.
We continued to deliver increasingly more of our latest security offerings as subscriptions resulting in increased sales of our security subscription
packages, including advance threat protection, Infinity CloudGuard, and Harmony. As a result, security subscription revenues increased by $84 million,
or 13%, from $671 million in 2020 to $755 million in 2021. Software updates and maintenance revenues increased by $18 million, or 2%, from
$880 million in 2020 to $898 million in 2021, primarily as a result of renewals of existing and sales of new maintenance contracts.
Cost of Revenues
Total cost of revenues was $258 million in 2021 and $227 million in 2020. Cost of revenues includes cost of product and licenses, cost of security
subscriptions and cost of software updates and maintenance and amortization of technology. Our cost of products and licenses includes mainly cost of
software and hardware production, packaging and shipping. In 2021 as a result of the shortages we have seen an increase of costs of raw materials,
resulting in an increase of the cost of products. We have succeeded during such period to expedite shipments and deliver products to our customers
despite the supply chain shortages. Our cost of security subscriptions is comprised of costs paid to third parties, hosting and infrastructure costs and cost
of customer support related to these services. Our cost of software updates and maintenance include mainly the cost of post-sale customer support.
Cost of products and licenses was $111 million in 2021 and $97 million in 2020.
Cost of security subscriptions was $36 million in 2021 and $26 million in 2020.
Cost of software updates and maintenance was $103 million in 2020 and $97 million in 2020.
In 2021, amortization of technology was $9 million compared to $7 million in 2020. The increase in 2021 is attributed to the acquisitions made
during 2021 and 2020.
31
Research and Development
Research and development expenses were $293 million in 2021 and $253 million in 2020, and represented 13% in 2021 and 12% in 2020.
Research and development expenses consist primarily of salaries and other related expenses for personnel as well as the cost of facilities and deprecation
of capital equipment.
The $40 million increase in 2021 consisted of $12 million due to U.S. dollar weakened against the Israeli Shekel, is primarily a result of an
increase in compensation and related expenses for personnel and in our cloud infrastructure expenses.
The majority of our personnel engaged in research and development are located in Israel, where compensation-related expenses are paid in Israeli
Shekels, while our research and development expenses are reported in U.S. dollars. Therefore, changes to the exchange rate between the Israeli Shekel
and the U.S. dollar have affected and may in the future affect our research and development expenses. We have forward contracts to hedge against a
certain portion of the exposure mentioned above.
Selling and Marketing
Selling and marketing expenses consist primarily of salaries, commissions, advertising, trade shows, seminars, public relations, co-op activities
with partners, travel and other related expenses. Selling and marketing expenses were $598 million in 2021 and $570 million in 2020, which represented
28% of revenues in each of the years 2021 and 2020.
The $28 million increase in 2021 consisted of $12 million due to fluctuations of various currencies against the U.S. dollar, is primarily a result of
an increase in compensation expenses for personnel.
Our selling and marketing expenses worldwide are paid in local currencies and are reported in U.S. dollars. Therefore, changes to the exchange
rates between the local currencies and the U.S. dollar have affected, and may in the future affect, our expense level.
General and Administrative
General and administrative expenses consist primarily of salaries and other related expenses for personnel, professional fees, insurance costs, legal
and other expenses. General and administrative expenses were $111 million in each of the years 2021 and 2020, and represented 5% of revenues in each
of the years 2021 and 2020.
Operating Income Margin
In 2021, our operating margin was 42% compared to 44% in 2020. The decrease in our operating margin was primarily due to headcount increase
and weakening of the US Dollar against the Israeli Shekel.
We may experience future fluctuations or declines in operating margins from historical levels due to several factors, as described above in “Item 3
– Key Information” under the caption “Risk Factors – Risks Related to Our Business and Our Market”.
Financial Income, Net
Net financial income consists primarily of interest earned on cash equivalents, Short-term deposits and marketable securities. Net financial income
was $42 million in 2021 and $67 million in 2020. As we generally hold debt securities until maturity, our current portfolio’s yield is derived primarily
from market interest rates and the yield of securities on the date of the investment. Since most of our investments are in U.S. dollars denominated
securities, our net financial income is heavily dependent on prevailing U.S. interest rates changes and the market expectations to such changes. The
decrease in net financial income in 2021 was primarily due to lower interest income on marketable securities. In 2021 and 2020 no impairment in our
marketable securities was recorded.
For further risk related to our portfolio see also Item 3, “Risk Factors – Risks Related to Our Business and Our Market – Our cash balances and
investment portfolio have been, and may continue to be, adversely affected by market conditions and interest rates”.
Taxes on Income
Total taxes on income were $134 million in 2021 and $124 million in 2020. Our effective tax rate was 14% in 2021 compared to 13% in 2020.
The higher effective tax rate in 2021 compared to 2020 is attributed substantially to higher indexation effect on the provisions for uncertain tax
positions. See Note 11 to our consolidated financial statements for further information on our statutory rates.
Additional details are provided in “Item 10 – Additional Information” under the caption “Israeli taxation, foreign exchange regulation and
investment programs” and “Item 3 – Key Information” under the caption “The tax benefits available to us require us to meet several conditions, and may
be terminated or reduced in the future, which would increase our taxes”.
Net Income
Net income decreased by $31 million to $815.6 million in 2021 compared to $846.1 million in 2020. The decrease in 2021 resulted primarily from
a decrease in our interest income and higher taxes on income.
32
Liquidity and Capital Resources
During 2021 and 2020, we financed our operations through cash generated from operations. Our total cash and cash equivalents, short-term
investments and long-term interest bearing investments, were $3,783 million as of December 31, 2021 and $4,000 million as of December 31, 2020. Our
cash and cash equivalents and short-term investments were $1,694 million as of December 31, 2021 and $1,688 million as of December 31, 2020. Our
long-term interest bearing investments were $2,090 million as of December 31, 2021 and $2,312 million as of December 31, 2020. Our financial assets
are held and managed through the parent company in Israel and our subsidiaries in Singapore, Canada and the U.S.
We generated net cash from operations of $1,204 million in 2021 and $1,161 million in 2020. Net cash from operations for 2021 and 2020
consisted primarily of net income adjusted for non-cash activity. The increase in our cash from operations derived mostly from the increase in our
deferred revenues compared to 2020.
We used net cash in investing activities of $75 million in 2021 compared to net cash used in investing activities of $98 million in 2020. In 2021,
net cash used for investing activities was decreased compared to 2020, primarily due to decrease in marketable securities investments offset by cash paid
in conjunction with acquisitions. Our net cash paid for acquisitions amounted to $220 million in 2021 and $23 million in 2020. Our capital expenditures
amounted to $16 million in 2021 and $19 million in 2020, and consisted primarily of computer equipment, software and leasehold improvements.
Net cash used in financing activities was $1,113 million in 2021 and $1,086 million in 2020. In 2021 and 2020, net cash used in financing
activities was attributed primarily to the repurchase of ordinary shares. Under the repurchase programs, we may purchase our ordinary shares from time
to time, depending on market conditions, share price, trading volume and other factors. In 2021 and 2020, we repurchased ordinary shares in the amount
of $1,300 million and $1,298 million, respectively. We re-issued the repurchased shares to settle exercises of options and restricted share unit awards to
our employees and directors. Proceeds from such activities were $194 million and $217 million in 2021 and 2020, respectively.
Our investments in marketable securities are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the
unrealized gains and losses, net of tax, recorded in other comprehensive income. Amortization of premium, discount and interest is recorded in our
statements of income.
Our liquidity could be negatively affected by a decrease in demand for our products and services, or increase in employment costs. Also, if the
financial system or the credit markets continue to deteriorate or remain volatile, our investment portfolio may be impacted and the values and liquidity
of our investments could be adversely affected.
Our principal sources of liquidity consist of our cash and cash equivalents, short-term bank deposits and marketable securities (which aggregated
$3,783 million as of December 31, 2021) and our cash flow from operations. We believe that these sources of liquidity will be sufficient to satisfy our
present capital expenditure requirements.
Research and Development, Patents and Licenses, etc.
Additional details are provided in this Item 5, under the caption “Results of Operations”.
Trend Information
Additional details are provided in this Item 5, under the caption “Results of Operations”.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
Our directors and executive officers as of March 31, 2022, were as follows:
Name
Gil Shwed
Jerry Ungerman
Tal Payne
Dorit Dor
Rupal Hollenbeck
Guy Gecht (3)
Yoav Chelouche (3)
Ray Rothrock (3)
Tal Shavit Shenhav
Eyal Waldman (1)
Shai Weiss
Outside
Director
(2)
Member
of Audit
Committee
Member of
Compensation
Committee
Member of
Nominating,
Sustainability
and
Corporate
Governance
Committee
Independent
Director (1)
Position
Chief Executive Officer
and Director
Chairman of the Board ✓
Chief Financial and
Operations Officer
Chief Product Officer
Chief Commercial
Officer
Lead Independent
Director
Director
Director
Director
Director
Director
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
(1)
(2)
(3)
“Independent Director” under the Nasdaq Global Select Market regulations and the Israeli Companies Law (see explanation below).
“Outside Director” as required by the Israeli Companies Law (see explanation below).
“Financial expert” as required by the Israeli Companies Law and Nasdaq requirements with respect to membership on the audit committee (see
“Item 16A – Audit Committee Financial Expert”).
34
Gil Shwed is the founder, Chief Executive Officer and Director. Mr. Shwed served as Chairman of our board of directors until September 2015.
Mr. Shwed is considered the inventor of the modern firewall and authored several patents, such as the company’s Stateful Inspection technology.
Mr. Shwed has received numerous accolades for his individual achievements and industry contributions, including an honorary Doctor of Science from
the Technion – Israel Institute of Technology, an honorary Doctor of Science from Tel Aviv University, the World Economic Forum’s Global Leader for
Tomorrow for his commitment to public affairs and leadership in areas beyond immediate professional interests, and the Academy of Achievement’s
Golden Plate Award for his innovative contribution to business and technology. Mr. Shwed is the Chairman of the Board of Trustees of the Youth
University of Tel Aviv University. Mr. Shwed is a Tel Aviv University Governor and founder of the University’s Check Point Institute for Information
Security. He is also Chairman of the Board of the board of directors of Yeholot Association Founded by the Rashi Foundation whose charter is, among
other things, to reduce the dropout rates in high schools. In 2018, Gil was awarded the prestigious Israel Prize for his contributions to the Israeli
technology industry.
Jerry Ungerman serves as the chairman of the board of directors since August 2020, after serving as Vice Chairman of our board of directors from
2005 until August 2020. From 2001 to 2005, Mr. Ungerman served as our President and before that, from 1998 until 2000, he served as our Executive
Vice President. Prior to joining us, Mr. Ungerman accumulated extensive experience in high-tech sales, marketing and management experience at
Hitachi Data Systems (HDS), a data storage company and a member of the Hitachi, Ltd. group. He began his career with International Business
Machines Corp. (IBM), a global technology products and services company, after earning a B.A. in Business Administration from the University of
Minnesota.
Tal Payne has been serving as Chief Financial Officer of Check Point since joining in 2008 and as Chief Financial and Operations Officer since
2015. Ms. Payne oversees Check Point’s global operations and finance, including investor relations, legal, treasury, purchasing and facilities. Prior to
joining Check Point, Ms. Payne served as Chief Financial Officer at Gilat Satellite Networks, Ltd., where she held the role of Vice President of Finance
for over five years. Ms. Payne began her career as a certified public accountant at PricewaterhouseCoopers. Ms. Payne holds a B.A. in Economics and
Accounting and an Executive M.B.A., both from Tel Aviv University. Ms. Payne is a certified public accountant. Ms. Payne is a board member of
SolarEdge Technologies, Inc. and ironSource Ltd.
Dr. Dorit Dor, Chief Product Officer at Check Point, manages all product and development functions from concept to delivery. Since joining the
company in 1995, Dr. Dor has served in several pivotal roles in Check Point’s R&D organization. She has been instrumental to the organization’s
growth and managed many successful product releases. Dr. Dor holds a Ph.D. and M.S degree in computer science from Tel-Aviv University, in addition
to graduating cum laude for her B.S. In 1993, she won the Israel National Defense Prize. In 2019 Dr. Dor was named as one of Israel’s most influential
women by Forbes Israel, for her leadership role in one of the world’s leading tech industries. Dr. Dor is a board member of Redis Ltd.
Rupal Hollenbeck Chief Commercial Officer at Check Point since March 2022, manages Check Point’s sales and marketing operations globally.
Ms. Hollenbeck served on our board of directors from January 2021 until March 2022. She was most recently Senior Vice President & Chief Marketing
Office at Oracle, a post which she held until January 2020. Prior to joining Oracle in 2018, Ms. Hollenbeck was with Intel Corporation for over 23
years, with her most recent role being Corporate Vice President and General Manager of Global Data Center Sales. Prior to that she was Vice President
and General Manager of Intel China and throughout her time at Intel has worked in Arizona, California, Singapore, and Beijing. An advocate for
professional women around the world, she started several women’s initiatives while at Intel, including serving as co-chair of the Board of Intel’s
Network of Executive Women in Asia. She is currently a Founding Circle Member of Neythri, a non-profit organization dedicated to enabling the
professional advancement of South Asian women. Ms. Hollenbeck is also an Adjunct Professor at California State University East Bay, teaching a
Women in Leadership course in the College of Business & Economics. Ms. Hollenbeck holds a BS in Finance and International Studies from Boston
College, and a Master of International Management from the Thunderbird School of Global Management in Arizona.
Yoav Z. Chelouche has served on our board of directors since 2006. Mr. Chelouche has also served as one of our outside directors under the Israeli
Companies Law since 2006. Mr. Chelouche has been Managing Partner of Aviv Venture Capital since August 2000. He serves on boards of directors of
certain Aviv companies. Prior to joining Aviv Venture Capital, Mr. Chelouche served as a President and Chief Executive Officer of Scitex Corp., a world
leader in digital imaging and printing systems, from December 1994 until July 2000. From August 1979 until December 1994, Mr. Chelouche held
various managerial positions with Scitex, including VP Strategy and Business Development, VP Marketing and VP Finance for Europe. Mr. Chelouche
is a member of the board of directors of a number of private companies. He was also a board member and until 2015 co-Chairman of IATI-Israel
Advanced Technology Industries, an Israeli nonprofit organization that researches, develops and advocates policies that promote Israel’s high tech
ecosystem through activities in training, tuition, business development, public relations and public policy advocacy. Mr. Chelouche is a board member
of Tower Semiconductor Ltd., Malam Team Ltd. and Shufersal Ltd., and an external director of the Tel Aviv Stock Exchange (TASE). Mr. Chelouche is
expected to resign from the board of directors of Tower Semiconductor Ltd. upon consummation of its acquisition by Intel Corporation, as announced in
February 2022. Mr. Chelouche earned B.A. in Economics and Statistics from Tel Aviv University, and an M.B.A. from INSEAD University in
Fontainebleau, France.
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Guy Gecht has served on our board of directors since 2006 and as our Lead Independent Director since August 2020. Mr. Gecht has also served as
one of our outside directors under the Israeli Companies Law since 2006. Mr. Gecht served as the Chief Executive Officer of Electronics For Imaging,
Inc. (EFI), a company that provides digital imaging and print management solutions for commercial and industrial applications and has served in this
position from January 2000 until October 2018. From October 1995 until January 2000, Mr. Gecht held various positions with EFI, including President
of the company. Prior to joining EFI, Mr. Gecht held various software engineering positions with technology companies. In 2019, Mr. Gecht joined the
board of directors of Logitech. He holds a B.S. in Computer Science and Mathematics from Ben-Gurion University in Israel.
Ray Rothrock has served on our board of directors since 1995. Mr. Rothrock has also served as one of our outside directors under the Israeli
Companies Law since 2000 and as a director under Roku, Inc. Mr. Rothrock is a Partner emeritus at Venrock, a venture capital firm, where he was a
member since 1988 and a general partner since 1995. He retired from Venrock in 2013. Presently, Mr. Rothrock is the Chairman of RedSeal, Inc., a
cybersecurity analytics company. Mr. Rothrock served as the Chief Executive Officer of RedSeal, Inc. from February 2014 until May 2020.
Mr. Rothrock is a director of Nasdaq-listed Roku, Inc, and a number of private companies. Mr. Rothrock is a member of the Massachusetts Institute of
Technology Corporation, and a Trustee of the University of Texas and Texas A&M Investment Management Company. Mr. Rothrock received a B.S. in
Engineering from Texas A&M University, an M.S. from the Massachusetts Institute of Technology and an M.B.A. from the Harvard Business School.
Dr. Tal Shavit Shenhav has served on our board of directors since 2000. Dr. Shavit Shenhav is an organizational consultant specializing in
international collaboration between Israeli and American companies, consulting in the management of cultural differences in order to forge effective
collaboration. Her work with leading management teams includes the definition of organizational culture as the engine of such company’s activities. She
consults with companies undergoing structural change with emphasis on organizational growth through effective mergers and acquisitions and a
redefining of management roles in order to meet market changes.
Eyal Waldman has served on our board of directors since November 2020. Mr. Waldman has been the Co-founder, President, CEO and Board
member of Mellanox Technologies since March 1999, up to it being acquired by NVIDIA in April 2020. Between March 1999 until June 2013,
Mr. Waldman served as Mellanox’s chairman of the board. From March 1993 to February 1999, Mr. Waldman served as Vice President of Engineering
and was a Co-founder of Galileo Technology, Ltd., a semiconductor company, which was acquired by Marvell Technology Group, Ltd. in January 2001.
From August 1989 to March 1993, Mr. Waldman held several design and architecture related positions at Intel Corporation, a manufacturer of computer,
networking and communications products, and was awarded with the “IAA Intel achievement” award and the “Employee of the year” award.
Mr. Waldman also serves and previously served on the board of directors of several private companies. Mr. Waldman holds a Bachelor of Science degree
in Computer Engineering and a Master of Science degree in Electrical Engineering from the Technion – Israel Institute of Technology. In June 2016,
Mr. Waldman was awarded an Honorary Doctorate by the Technion.
Shai Weiss has served on our board of directors since 2018. Mr. Weiss is the Chief Executive Officer of Virgin Atlantic, one of the most innovative
airlines in the world. Mr. Weiss joined Virgin Atlantic as Executive Vice President and Chief Financial Officer in July 2014 from Virgin Management
Ltd, where he had been an Investment Partner since 2012 and was a Founding Partner of Virgin Green Fund. Prior to joining Virgin Group, he held
several senior management positions at ntl:Telewest (now Virgin Media), the UK and Europe’s largest cable operator. Mr. Weiss was part of the turn-
around of ntl with roles including Managing Director of Consumer Products, Director of Operations, and Director of Financial Planning for the
Consumer division. Mr. Weiss was also behind the merger between Virgin Mobile UK and ntl:Telewest and the re-brand to Virgin Media. Prior to ntl,
Mr. Weiss established the European office of early-stage technology venture fund JVP and was a senior associate with Morgan Stanley. He holds an
M.B.A. degree from Columbia University and a BBA degree from City University of New York, Baruch College.
Of the individuals mentioned above, only Gil Shwed owned more than one percent of our outstanding shares as of December 31, 2021. Additional
details are provided in this Item 6, under the caption “Share ownership” and in “Item 7 – Major Shareholders and Related Party Transactions”.
Some of our directors are board members of multiple companies, some of which may be technology companies. The board of directors has
determined that there are no current conflicts of interest with respect to any of our directors.
The terms of Gil Shwed, Jerry Ungerman, Dr. Tal Shavit Shenhav, Eyal Waldman and Shai Weiss will expire at our 2022 annual meeting of
shareholders. The term of Ray Rothrock will expire at our 2023 annual meeting of shareholders and the terms of Yoav Chelouche and Guy Gecht will
expire at our 2024 annual meeting of shareholders.
There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any of the directors or
members of senior management are elected.
36
Compensation of Directors and Officers
The total direct cash compensation that we accrued for our directors and executive officers as a group during 2021 was approximately $2.7 million
for the year ended December 31, 2021. These amounts include $0.3 million that were set aside or accrued to provide for severance and retirement
insurance policies in 2021. These amounts do not include amounts accrued for expenses related to business travel, professional and business association
dues and other business expenses reimbursed to officers. We do not have any agreements with our director who is also an officer that provide for
benefits upon termination of employment, except for severance payments mandated by Israeli law for all employees employed in Israel.
Following is a summary of the salary and benefits paid in 2021 (i) to our five most highly compensated executive officers (including one former
executive officer) (referred to as the “Covered Executives”) and (ii) to our non-executive directors.
Cash Compensation
Mr. Gil Shwed, Chief Executive Officer and Director. Cash compensation expenses recorded in 2021 consisted of $21.9 thousands in salary
expenses, and $13.6 thousands in benefit costs. Mr. Shwed requested to forego his salary and bonus for 2021, as he has done for the past several years.
Following consideration of Mr. Shwed’s request, our compensation committee and board of directors have determined that Mr. Shwed will not receive a
bonus for 2021, and did not receive any cash compensation for 2021 except for an amount equal to the minimum wage required under Israeli law.
Dr. Dorit Dor, Chief Product Officer. Compensation expenses recorded in 2021 included $425.9 thousands in salary expenses and $101.0
thousands in benefit costs.
Ms. Tal Payne, Chief Financial Officer & Chief Operating Officer. Compensation expenses recorded in 2021 included $483.5 thousands in salary
expenses and $114.7 thousands in benefit costs.
Mrs. Sharon Schusheim, Vice President, Information Systems Compensation expenses recorded in 2021 included $306.0 thousands in salary
expenses and $76.1 thousands in benefit costs.
Mr. Dan Yerushalmi, Chief Customer Officer (former executive). Compensation expenses recorded in 2021 included $425.4 thousands in salary
expenses and $100.5 thousands in benefit costs.
The salary expenses summarized above include the gross salary paid to the Covered Executives, and the benefit costs include the social benefits
paid by us on behalf of the Covered Executives, including convalescence pay, contributions made by the company to an insurance policy or a pension
fund, work disability insurance, severance, educational fund and payments for social security. We do not lease vehicles for our Covered Executives.
In accordance with the company’s executive compensation policy, we also paid cash bonuses upon compliance with predetermined 2021
performance parameters set by the Compensation Committee and the Board of Directors. The 2021 cash bonus expenses for Dr. Dor, Ms. Payne,
Mr. Schusheim and Mr. Yerushalmi were $473.4 thousands, $514.5 thousands, $205.8 thousands and $411.6 thousands, respectively. As noted above,
Mr. Shwed did not receive a cash bonus for 2021. The cash compensation amounts paid were denominated in Israeli Shekels and converted into U.S.
Dollars at the exchange rate as of year-end.
We currently pay each of our non-executive directors an annual cash retainer of $40.0 thousands for the services provided to our board of directors
and an annual cash retainer of $7.5 thousands for each committee membership. In addition, we pay the chairman of our board of directors and the lead
independent director an annual cash retainer of $20.0 thousands, the chair of our audit committee an annual cash retainer of $7.5 thousands and the chair
of each of our nominating, sustainability and corporate governance committee and compensation committee an annual cash retainer of $2.5 thousands.
Only directors who are not officers receive compensation for serving as directors.
Equity-based Compensation
From time to time, we grant options and other awards under our equity incentive plans (described below) to our executive officers and directors.
See Item 10 “Additional Information – Compensation of Executive Officers and Directors; Executive Compensation Policy” for a detailed description of
the approval procedures we follow in compensating our directors and executive officers.
Our non-employee directors receive an automatic option grant and are also eligible for discretionary awards under the plans. Each non-employee
director who is first elected or appointed to the board of directors is granted an option to purchase 25,000 ordinary shares and restricted share units
(RSUs) with a value of $200.0 thousands on the date of the initial election or appointment, vesting in equal annual installments over a four-year period.
On the date of each annual general meeting of shareholders, each non-employee director who is to
37
continue to serve as a non-employee director after the annual meeting is granted an option to purchase an additional 15,000 ordinary shares and RSUs
with a value of $50.0 thousands, of which 50% vest six months after the grant date, 25% vest nine months after the grant date, and another 25% vest a
year after the grant date, provided that the director has served as a non-employee director for at least six months prior to the date of the annual meeting.
The directors in office immediately prior to the date of initial appointment or election, or of the annual meeting, as applicable, may determine to reduce
the initial or annual grant to all non-employee directors or specific non-employee directors.
On August 10, 2021, following the approval of our Compensation Committee, Board of Directors and the company’s shareholders at the 2021
Annual General Meeting, we granted Mr. Gil Shwed, our Chief Executive Officer and Director, options to purchase 0.5 million ordinary shares at an
exercise price equal to 100% of the closing price of the ordinary shares on the Nasdaq Global Select Market on the date of the grant, vesting gradually
over a period of four years.
During 2021, we granted our executive officers and directors options to purchase an aggregate of approximately 0.9 million shares and
approximately 0.15 million RSUs under our equity incentive plans. The exercise price of these options range between $118.85-$132.91, and their
expiration dates range between December 2027 and August 2028.
All options granted to directors and executive officers in 2021 were granted with an exercise price equal to 100% of the closing price of the
ordinary shares on the Nasdaq Global Select Market on the applicable date of grant.
We recorded equity-based compensation expenses in our financial statements for the year ended December 31, 2021 for Mr. Shwed, Dr. Dor,
Ms. Payne, Mr. Schusheim and Mr. Yerushalmi of $26.1 million, $5.2 million, $5.7 million, $1.2 million and $2.4 million, respectively. Assumptions
and key variables used in the calculation of such amounts are described in Note 2w to our audited consolidated financial statements included in Item 18
of this Annual Report. All equity-based compensation grants to our Covered Executives were made in accordance with the parameters of our company’s
executive compensation policy and were approved by the company’s Compensation Committee and Board of Directors, and, in the case of the equity-
based compensation granted to the Chief Executive Officer, also by the company’s shareholders in accordance with the Israeli Companies Law.
As of December 31, 2021, our executive officers and directors held options to purchase an aggregate of approximately 7.5 million shares and held
0.29 million RSUs under our equity incentive plans. The exercise prices of these options range between $72.76 and $132.91, and their expiration dates
range between June 2022 and August 2028.
Other than as specified in the share ownership table under the caption “Share ownership” below, none of our directors and executive officers holds
more than 1% of our outstanding shares.
Composition of Board of Directors
Our board of directors currently consists of eight members, including three outside directors in accordance with the requirements of the Israeli
Companies Law. See “Outside and Independent Directors”. Under our articles of association, the number of directors on our board is to be no less than
six and no more than twelve. Each director (other than an outside director as described below) is elected to serve until the next annual general meeting
of shareholders and until his or her successor has been elected. Each executive officer is elected by the board of directors and serves at the discretion of
the board. All of our executive officers and directors, other than non-employee directors, devote substantially all of their working time to our business.
There are no family relationships among any of our directors, officers or key employees.
As permitted under the Israeli Companies Law, our articles of association provide that any director may, by written notice to us, appoint another
person to serve as an alternate director or may cancel the appointment of an alternate director. Any person eligible to serve as a director, other than a
person who is already a director or an alternate director, may act as an alternate director. The term of appointment of an alternate director may be for one
meeting of the board, for a specified period of time, a specified meeting or action of the board or until notice is given of the cancellation of the
appointment. No director has appointed, and, to our knowledge, no director currently intends to appoint, any other person as an alternate director. We do
not have any service contracts with our directors providing for benefits upon termination of service.
Outside and Independent Directors
Outside directors. In accordance with the Israeli Companies Law and the relevant regulations, we must have at least two outside directors who
meet the Israeli statutory requirements of independence. At least one of the outside directors is required to have “financial and accounting expertise” and
the other outside director or directors are required to have “professional expertise,” all as defined under the Israeli Companies Law. Our board of
directors has determined that each of Yoav Chelouche, Guy Gecht and Ray Rothrock has “financial and accounting expertise,” and each of Guy Gecht
and Ray Rothrock has “professional expertise”.
38
An outside director serves for a term of three years, which may be extended for additional three-year terms. An outside director can be removed
from office only under very limited circumstances. All of the outside directors must serve on the company’s audit committee and compensation
committee (including one outside director serving as the chair of the audit committee and the compensation committee), and at least one outside director
must serve on each committee of the board of directors. As of December 31, 2021, Yoav Chelouche, Guy Gecht and Ray Rothrock are our outside
directors under the Israeli Companies Law. Yoav Chelouche’s and Guy Gecht’s term of office will expire in 2024, and Ray Rothrock’s term of office will
expire in 2023.
In 2016, the Israeli Companies Law Regulations were amended to reduce certain duplicative regulatory burden to which Israeli companies
publicly-traded on Nasdaq, such as Check Point, are subject to. Generally, pursuant to the amended regulations, an Israeli company traded on Nasdaq
that does not have a “controlling shareholder” (as defined in the Israeli Companies Law) will be able to elect not to appoint Outside Directors to its
Board of Directors and not to comply with the Audit Committee and Compensation Committee composition and chairman requirements of the Israeli
Companies Law (as described above); provided, that the company complies with the applicable Nasdaq independent director requirements and the
Nasdaq Audit Committee and Compensation Committee composition requirements. Accordingly, Check Point is eligible to adopt the relief provided by
the amended Israeli regulations. To date, Check Point has not elected to adopt such relief.
Independent directors. The Sarbanes-Oxley Act of 2002, as well as related rules subsequently implemented by the Securities and Exchange
Commission and the Nasdaq Global Select Market, requires issuers to comply with various corporate governance practices. Under the rules applicable to
us as a foreign private issuer, we are required to have a majority of independent directors within the meaning of the applicable Nasdaq regulations. Our
board of directors complies with these requirements by including a majority of members who are independent directors within the meaning of the
applicable Nasdaq regulations.
Pursuant to the Israeli Companies Law, an Israeli company whose shares are publicly traded may elect to adopt a provision in its articles of
association pursuant to which a majority of its board of directors (or a third of its board of directors in case the company has a controlling shareholder)
will consist of individuals complying with certain independence criteria prescribed by the Israeli Companies Law, as well as certain other recommended
corporate governance provisions. Although we have not included these provisions in our articles of association because our board of directors already
complies with the independence requirements and the corporate governance rules of the Nasdaq Global Select Market, as described below, a majority of
our board of directors and all the members of our audit committee, compensation committee and nominating, sustainability and corporate governance
committee are directors who comply with the independence criteria prescribed by the Israeli Companies Law.
39
Our board of directors has determined that each of Yoav Chelouche, Guy Gecht, Ray Rothrock, Tal Shavit Shenhav, Jerry Ungerman, Eyal
Waldman and Shai Weiss is an independent director under the applicable Nasdaq regulations and the Israeli Companies Law. Our independent directors
have regularly held meetings at which only independent directors are present.
Committees of the Board of Directors
Our articles of association provide that the board of directors may delegate all of its powers to committees of the board as it deems appropriate,
subject to the provisions of Israeli law. Our board of directors has established an audit committee, a compensation committee and a nominating,
sustainability and corporate governance committee.
Audit Committee. Under the Israeli Companies Law, the board of directors of any public company must establish an audit committee. The audit
committee must consist of at least three directors, must include all of the outside directors (including one outside director serving as the chair of the
audit committee), and a majority of the committee members must comply with the director independence requirements prescribed by the Israeli
Companies Law.
The audit committee may not include the chairman of the board, or any director employed by us, by a controlling shareholder or by any entity
controlled by a controlling shareholder, or any director providing services to us, to a controlling shareholder or to any entity controlled by a controlling
shareholder on a regular basis, or any director whose income is primarily dependent on a controlling shareholder, and may not include a controlling
shareholder or any relatives of a controlling shareholder. Individuals who are not permitted to be audit committee members may not participate in the
committee’s meetings other than to present a particular issue at the request of the chair of the committee. However, an employee who is not a controlling
shareholder or relative may participate in the committee’s discussions but not in any vote, and the company’s legal counsel and corporate secretary (if
they are not a controlling shareholder or relative) may participate in the committee’s discussions and votes if requested by the committee.
In addition, the Nasdaq regulations also require us to maintain an audit committee consisting of at least three directors, all of whom must be
independent under the Nasdaq regulations applicable to audit committee members and each of whom is financially literate and one of whom has
accounting or related financial management expertise. Yoav Chelouche is the chairman of the audit committee. Guy Gecht and Ray Rothrock serve as
the other members of our audit committee. The audit committee has adopted a written audit committee charter as required by the Nasdaq regulations.
The audit committee’s duties include providing assistance to the board of directors in fulfilling its legal and fiduciary obligations in matters
involving our accounting, auditing, financial reporting, internal control and legal compliance functions. In this respect the audit committee approves the
services performed by our independent accountants and reviews their reports regarding our accounting practices and systems of internal accounting
controls. The audit committee also oversees the audits conducted by our independent accountants and takes those actions, as it deems necessary, to
satisfy itself that the accountants are independent of management. Under the Israeli Companies Law, the audit committee is also required to monitor
whether there are any deficiencies in the administration of our company, including by consulting with the internal auditor and independent accountant,
to review, classify and approve related party transactions and extraordinary transactions, to review the internal auditor’s audit plan and to establish and
monitor whistleblower procedures.
Under the Israeli Companies Law, a meeting of the audit committee is properly convened if a majority of the committee members attend the
meeting and, in addition, a majority of the attending committee members are independent directors within the meaning of the Israeli Companies Law,
and include at least one outside director.
Compensation Committee. Under the Israeli Companies Law, the board of directors of any public company must establish a compensation
committee. The compensation committee must consist of at least three directors, include all of the outside directors (including one outside director
serving as the chair of the compensation committee), and a majority of the committee members must comply with the director independence
requirements prescribed by the Israeli Companies Law.
Similar to the rules that apply to the audit committee, the compensation committee may not include the chairman of the board, or any director
employed by us, by a controlling shareholder or by any entity controlled by a controlling shareholder, or any director providing services to us, to a
controlling shareholder or to any entity controlled by a controlling shareholder on a regular basis, or any director whose primary income is dependent on
a controlling shareholder, and may not include a controlling shareholder or any of its relatives. Individuals who are not permitted to be compensation
committee’s members may not participate in the committee’s meetings other than to present a particular issue; provided, however, that an employee that
is not a controlling shareholder or its relative may participate in the committee’s discussions but not in any vote. The company’s legal counsel and
corporate secretary may participate in the committee’s discussions and votes if requested by the committee.
40
In addition, the Nasdaq rules also require us to maintain a compensation committee consisting of at least two independent directors. Each of the
members of the compensation committee is required to be independent under Nasdaq rules relating to compensation committee members, which are
different from the general test for independence of board and committee members. Each of the members of our compensation committee satisfies those
requirements. Ray Rothrock is the chairman of the compensation committee. Yoav Chelouche and Guy Gecht serve as the other members of our
compensation committee. The compensation committee has adopted a written compensation committee charter.
The compensation committee’s duties include recommending to the board of directors a compensation policy for executives and monitor its
implementation, approve compensation terms of executive officers, directors and employees affiliated with controlling shareholders, make
recommendations to the board of directors regarding the issuance of equity incentive awards under our equity incentive plans, and exempt certain
compensation arrangements from the requirement to obtain shareholder approval under the Israeli Companies Law.
Nominating, Sustainability and Corporate Governance Committee. The nominating, sustainability and corporate governance committee identifies
prospective board candidates, recommends nominees for election to our board of directors, develops and recommends board member selection criteria,
considers committee member qualification, supervises the selection and composition of committees of our board of directors, provides oversight in the
evaluation of our board of directors and each committee, oversees our policies, programs and strategies related to environmental, social and governance
(ESG) matters and develops and recommends to the board a set of corporate governance guidelines. Shai Weiss is the chairman of the nominating,
sustainability and corporate governance committee. Ray Rothrock and Tal Shavit Shenhav serve as the other members of our nominating, sustainability
and corporate governance committee. The nominating, sustainability and corporate governance committee has adopted a written nominating committee
charter.
Employees
As of December 31, 2021, we had 5,805 employees which includes 163 subcontractors (116 subcontractors in 2020 and 106 subcontractors in
2019). Over the past three years, the number of our employees by function was as follows:
Function:
Research, development and quality assurance
Marketing, pre sale, sales and business development
Customer support
Information systems, administration, finance and operation
Total
Over the past three years, the number of our employees by geographic area was as follows:
Function:
Israel
Americas
Rest of the World
Total
As of December 31,
2021
2020
2019
1,677 1,500 1,515
2,509 2,317 2,335
905 851 789
551 530 513
5,642 5,198 5,152
As of December 31,
2021
2020
2019
2,416 2,259 2,260
1,660 1,580 1,211
1,566 1,359 1,681
5,642 5,198 5,152
We are subject to Israeli labor laws and regulations with respect to our Israeli employees. The Israeli labor laws differ materially from U.S. labor
laws and, in some cases, impose material obligations on us (such as severance pay and mandatory cost of living increases). We are also subject to the
labor laws and regulations of other jurisdictions in the world where we have employees.
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Share Ownership
The following table shows information regarding beneficial ownership by our directors and executive officers as of February 28, 2022. Beneficial
ownership is determined in accordance with rules of the Securities and Exchange Commission.
All information with respect to the beneficial ownership of any principal shareholder has been furnished by such shareholder and, unless
otherwise indicated below, we believe that persons named in the table have sole voting and sole investment power with respect to all of the shares shown
as beneficially owned, subject to community property laws, where applicable. All shares shown as beneficially owned have identical rights in all
respects. The shares beneficially owned by the directors include the shares owned by their family members to which such directors disclaim beneficial
ownership.
The share numbers and percentages listed below are based on shares outstanding as of February 28, 2022.
Name
Gil Shwed
All directors and officers as a group (11
persons including Mr. Shwed)(4)
Number of
shares
beneficially
owned (1)
28,369,752
% of
class of
shares (2)
Title of securities
covered by the
options
Number of
options
and RSUs (3)
Exercise price of
options
Date of expiration of
options
21.6% Ordinary shares 3,420,000 $114.23 - $123.05 06/06/2022-08/09/2028
30,172,811
22.7% Ordinary shares 5,052,189 $ 83.59 - $132.91 06/08/2022-08/09/2028
(1)
(2)
The number of ordinary shares shown includes shares that each shareholder has the right to acquire pursuant to stock options that are exercisable
and restricted share units that vest within 60 days after February 28, 2022.
If a shareholder has the right to acquire shares by exercising stock options (as determined in accordance with footnote (1)), these shares are
deemed outstanding for the purpose of computing the percentage owned by the specific shareholder (that is, they are included in both the
numerator and the denominator), but they are disregarded for the purpose of computing the percentage owned by any other shareholder.
(3) Number of options immediately exercisable or exercisable and restricted share units that vest within 60 days from February 28, 2022.
(4) Other than Mr. Shwed, none of our executive officers and directors beneficially own more than 1% of our outstanding ordinary shares.
Equity Incentive Plans
The following table summarizes our equity incentive plans, which have outstanding awards as of December 31, 2021:
Plan
2005 United States Equity Incentive Plan
2005 Israel Equity Incentive Plan
Dome9 Equity Incentive Plan
Outstanding
options &
RSUs
Options
outstanding
exercise price
Options
exercisable
1,444,559 $82.01-$132.91 06/08/2022-08/09/2028 545,118
9,055,789 $72.76-$123.05 06/08/2022-11/17/2028 4,730,587
1,080
1,080 $ 4.98-$ 21.97 05/03/2026-06/27/2028
Date of expiration of
options
In 2005, we adopted our 2005 United States Equity Incentive Plan and our 2005 Israel Equity Incentive Plan, which were subsequently amended
in January 2014, July 2018 and August 2020. We refer to the plans, as amended, as the U.S. Equity Plan and the Israel Equity Plan, and, together, as the
Equity Plans.
Number of Ordinary Shares Reserved for Future Grants under the Equity Plans
Following the amendments to the Equity Plans in July 2018, commencing December 31, 2018, on December 31st of each year, the number of
Reserved and Authorized Shares (as defined below) under both Equity Plans together shall be automatically reset on such date to equal 10% of the sum
of (i) the number of ordinary shares issued and outstanding on such date and (ii) the number of ordinary shares reserved and authorized under the Equity
Plans for outstanding awards granted under the Equity Plans as of such date (provided, however, that in no event shall the number of Reserved and
Authorized Shares be less than the number of ordinary shares reserved and authorized under the Equity Incentive Plans for outstanding awards granted
under the Equity Incentive Plans as of such date). The number of “Reserved and Authorized Shares” under the Equity Plans shall equal the sum of (i) the
number of ordinary shares reserved and authorized under the Equity Plans for outstanding awards granted under the Equity Plans as of such date, and
(ii) the number of ordinary shares reserved, authorized and available for issuance under the Equity Plans on such date.
42
Accordingly, as of December 31, 2021, the number of Reserved and Authorized Shares under both Equity Plans together was reset to equal
13,956,707.
As of December 31, 2021, options to purchase 8,160,625 ordinary shares were outstanding under the Equity Plans and the Dome9 Equity
Incentive Plan combined. The option exercise prices of the outstanding options as of December 31, 2021 range between $4.98 and $132.91 per share. As
of December 31, 2021, 2,340,755 RSUs and PSUs were outstanding under the Equity Plans combined.
Administration
Both Equity Plans are administered by our board of directors or a committee of our board. The compensation committee of our board of directors
currently operates as the administrator of the Equity Plans. The administrator has full power to determine the persons to whom awards shall be granted
and the other terms of the awards granted, including (a) the number of shares subject to each award, (b) the duration of the related award agreement,
(c) the time, manner and form of payment upon the exercise of an award, and (d) other terms and provisions governing the awards. The administrator
also establishes the vesting schedule of awards that are granted.
2005 United States Equity Incentive Plan, as Amended
Awards. The U.S. Equity Plan provides for the following kinds of awards, which we refer to generically as awards: (i) Incentive Stock Options
(ISOs), (ii) Non-statutory Stock Options (NSOs), (iii) Restricted Stock, (iv) Restricted Stock Units (RSUs), (v) Performance Shares, (vi) Performance
RSUs (“PSUs”) and (vii) Deferred Stock Units. All of these awards can vest based on time or performance milestones.
Granting of options, price and duration. Our U.S. Equity Plan provides that each option will expire on the date stated in the notice of grant, which
will not be more than seven years from its date of grant (or five years, in the case of an ISO granted to a person who on the date of grant owns 10% or
more of our voting power). The exercise price of an option cannot be less than 100% of the fair market value per share on the date of grant (or 110% of
the fair market value, in the case of an ISO granted to a person who on the date of grant owns 10% or more of our voting power). The administrator will
fix the period within which the award can be exercised and the exercise price. No option award can vest until at least six months after the grant date.
Granting of awards, other than options, and price. The administrator can determine the conditions that must be satisfied, which typically will be
based principally or solely on the recipient’s continuing to provide services to us, but conditions may also include a performance-based component. We
can issue ordinary shares under grants of Restricted Stock, RSUs, Performance Shares and PSUs upon payment of their nominal value. No such award
can vest until at least one year after the grant date. Deferred Stock Units consist of Restricted Stock, RSUs, Performance Shares, or PSUs that the
administrator permits to be paid out in installments or on a deferred basis.
2005 Israel Equity Incentive Plan, as Amended
Awards. The Israel Equity Plan provides for the following kinds of awards, which we refer to generically as awards: (i) “Approved 102
Options/Shares,” which are grants to directors, employees and officers that are eligible for favorable tax treatment in Israel and which must be held by a
trustee for a minimum period as prescribed by Israeli law; (ii) “Non-approved 102 Options/Shares,” which are grants of options or shares that are not
eligible for favorable tax treatment in Israel and which may be held directly by the participants; (iii) Restricted Stock; (iv) RSUs; (v) Performance
Shares; (vi) PSUs; and (vii) Deferred Stock Units. All of these awards can vest based on time or performance milestones.
Trustee. A trustee designated by our board of directors and approved by the Israel Tax Authority must hold any shares allocated or issued upon
exercise of Approved 102 Options or other shares subsequently received following any realization of rights, including bonus shares (stock dividends),
for at least the period of time specified by Section 102 of Israel’s Income Tax Ordinance.
43
Granting of options, price and duration. Our Israel Equity Plan provides that each option will expire on the date stated in the option agreement,
which will not be more than seven years from its date of grant. The exercise price of an option cannot be less than 100% of the fair market value per
share on the date of grant. The administrator will fix the period within which the award can be exercised and the exercise price. No option award can
vest until at least six months after the grant date.
Granting of awards, other than options, and price. The administrator can determine the conditions that must be satisfied, which typically will be
based principally or solely on the recipient’s continuing to provide services to us, but conditions may also include a performance-based component. We
can issue ordinary shares under grants of Restricted Stock, RSUs, Performance Shares and PSUs upon payment of their nominal value. No such award
can vest until at least one year after the grant date. Deferred Stock Units consist of Restricted Stock, RSUs, Performance Shares, or PSUs that the
administrator permits to be paid out in installments or on a deferred basis.
Change of control arrangements. Upon a change of control of us, if the acquirer refuses to assume or provide substitute awards, then the
administrator of the equity plans, which is currently the compensation committee of our board of directors, can either terminate all unvested awards or
accelerate the vesting period of any award under our Equity Plans. The administrator also has the authority to accelerate the vesting of the ordinary
shares subject to outstanding awards held by our directors, officers and employees in connection with the subsequent termination of some officers’
employment following a change of control event
Dome9 Security Ltd. 2011 Share Option Plan and the 2016 Equity Incentive Subplan
In connection with our acquisition of Dome9 Security Ltd. in October 2018, we assumed certain outstanding Dome9 share options under the
Dome9 Security Ltd. 2011 Share Option Plan and the 2016 Equity Incentive Subplan, or the Dome9 Equity Plan, which were converted into options to
purchase 47,816 of our ordinary shares.
As of December 31, 2021, options to purchase 1,080 ordinary shares were outstanding under the Dome9 Equity Plan on that date. The options
generally have terms of between seven and ten years. The option exercise prices range from $4.98-$21.97 per share. No further options can be granted
under the Doem9 Equity Plan.
Employee Stock Purchase Plans
In 1996, we adopted an Employee Stock Purchase Plan, which was subsequently amended and restated in 2015, and further amended in May
2019. We refer to the Employee Stock Purchase Plan, as amended and restated, as the US ESPP, and the Employee Stock Purchase Plan (Non-U.S.
Employees), as the ROW ESPP, and together with the US ESPP, as the “ESPPs”. The ESPPs permit full time employees and employees employed on a
part-time employment basis of 80% or more (as well as employees of some of our subsidiaries) to purchase ordinary shares through payroll deductions.
According to the amendments, 750,000 ordinary shares are authorized for issuance under the US ESPP (out of which 565,431 ordinary shares had
been issued through December 31, 2021) and 2,000,000 ordinary shares are authorized for issuance under the rest of the world (ROW) ESPP (out of
which 1,313,194 ordinary shares had been issued through December 31, 2021).
Each ESPP has six-month offering periods, with purchases occurring in January and July. Each of the ESPPs will terminate on the earliest of
(i) the last business day in January 2036, (ii) when no more shares are available for issuance under the applicable ESPP, or (iii) when all purchase rights
under the applicable ESPP are granted or exercised in connection with a “Corporate Transaction” as defined in the applicable ESPP.
An eligible employee can purchase ordinary shares at a price of 85% of the fair market value of the ordinary shares at the beginning of the
six-month offering period (or 85% of the fair market value of the ordinary shares on the semi-annual purchase date, if that is lower). Each eligible
employee can elect to purchase ordinary shares under the ESPP in an amount of up to 15% of the employee’s compensation, but not more than 1,250
shares per participant on any purchase date. Employees may terminate their participation in the ESPP at any time during the offering period, and
participation ends automatically on termination of employment with us. Each outstanding purchase right will be exercised immediately prior to our
merger or consolidation with another company. Our board of directors may amend or terminate each of the ESPPs immediately after the close of any
purchase date.
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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
The following table shows information as of December 31, 2021, 2020 and 2019, for each person who, to the best of our knowledge, beneficially
owned more than 5% of our outstanding ordinary shares as December 31, 2021:
Name of Five Percent Shareholders
Gil Shwed
Massachusetts Financial Services Company (3)
% of
class of
No. of shares
shares
beneficially
held (1)
(2)
December 31, 2021
% of
class of
No. of shares
shares
beneficially
held (1)
(2)
December 31, 2020
% of
class of
No. of shares
shares
beneficially
held (1)
(2)
December 31, 2019
28,369,738
7,470,150
21.4%
5.79%
28,704,010
8,084,127
20.4%
5.89%
29,163,983
8,764,230
19.5%
5.76%
(1)
(2)
The amount includes ordinary shares owned by each of the individuals, directly or indirectly, and options immediately exercisable or that are
exercisable within 60 days from December 31st, of each of the years shown in this table.
If a shareholder has the right to acquire ordinary shares by exercising stock options exercisable within 60 days from December 31st, of each of the
years shown in this table, these Ordinary shares are deemed outstanding for the purpose of computing the percentage owned by the specific
shareholder (that is, they are included in both the numerator and the denominator), but they are disregarded for the purpose of computing the
percentage owned by any other shareholder.
(3) As of December 31, 2021, based on information contained in a Schedule 13G/A filed by Massachusetts Financial Services Company with the
Securities and Exchange Commission on February 2, 2022, as of December 31, 2020, based on information contained in a Schedule 13G/A filed
by Massachusetts Financial Services Company with the Securities and Exchange Commission on February 11, 2021, and as of December 31,
2019, based on information contained in a Schedule 13G/A filed by Massachusetts Financial Services Company with the Securities and Exchange
Commission on February 14, 2020. The address for Massachusetts Financial Services Company is 111 Huntington Avenue, Boston, Massachusetts
02199.
Our major shareholders do not have different voting rights from other shareholders with respect to our ordinary shares.
According to our transfer agent, as of December 31, 2021, there were 117 holders of record of our ordinary shares in the United States,
representing approximately 84.85% of our outstanding shares. The number of record holders in the United States is not representative of the number of
beneficial holders nor is it representative of where such beneficial holders are resident since many of these ordinary shares were held by brokers or other
nominees.
We are not controlled by another corporation or by any foreign government, directly or through any other entity. Each of our outstanding ordinary
shares has identical rights in all respects.
ITEM 8. FINANCIAL INFORMATION
Consolidated Financial Statements
You can find our financial statements in “Item 18 – Financial Statements”.
Dividend policy
We currently do not intend to distribute any amounts as dividend in the near-term. During 2013, we entered into a settlement agreement with the
Israel Tax Authority, resulting in the full release of the profits we generated under the Israeli Law for the Encouragement of Capital Investments (the
“Investment Law”) through the year ended December 31, 2011 (known in Israel as “trapped profits”), provided that in accordance with the Investment
Law and the regulations thereunder, during the five years commencing 2013, we were obligated to meet certain conditions which included investment in
(i) production assets (as defined therein), (ii) research and development activities in Israel and (iii) employment payments for certain new employees
(other than office holders) added after 2011. We believe we met those conditions. For amounts distributed as dividends from earnings from 2012
onwards, we are exempt from additional taxes
Legal Proceedings
We operate our business in various countries, and accordingly attempt to utilize an efficient operating model to structure our tax payments based
on the laws in the countries in which we operate. This can cause disputes between us and various tax authorities in different parts of the world.
We are the defendant in various other lawsuits, including employment-related litigation claims, lease termination claims and other legal
proceedings in the normal course of our business. Litigation and governmental proceedings can be expensive, lengthy and disruptive to normal business
operations, and can require extensive management attention and resources, regardless of their merit.
45
While we currently intend to defend the aforementioned matters vigorously, we cannot predict the results of complex legal proceedings, and an
unfavorable resolution of a lawsuit or proceeding could materially adversely affect our business, results of operations and financial condition.
ITEM 9. THE OFFER AND LISTING
Our ordinary shares are traded publicly on the Nasdaq Global Select Market under the symbol “CHKP” and on the Frankfurt Stock Exchange
under the symbol “CPW”.
ITEM 10. ADDITIONAL INFORMATION
We were incorporated in Israel in July 1993, and we are registered with the Israeli Registrar of Companies as public company number
52-004282-1.
The objectives and purposes stated in our memorandum of association are to engage in any lawful activity. We develop, market and support a wide
range of products and services for IT security, and offer our customers an extensive portfolio of network security, endpoint security, data security and
management solutions. A broad range of our network security solutions operate under a unified security architecture, with central management and
enforcement of security policy, and with centralized real-time security updates. Our products and services are sold to enterprises, service providers,
small and medium-sized businesses and consumers.
Articles of Association and Israeli Companies Law
The following is a summary of the material provisions of our articles of association and related provisions of the Israeli Companies Law. For the
complete text of our articles of association, see “Item 19 – Exhibits”.
Description of shares
Our authorized share capital consists of the following: (i) 500,000,000 ordinary shares, NIS 0.01 nominal value; (ii) 5,000,000 preferred shares,
NIS 0.01 nominal value; and (iii) 10 deferred shares, NIS 1.00 nominal value. As of February 28, 2022, 128,113,564 ordinary shares were issued and
outstanding.
Please refer to Exhibit 2.1 for Items 10.B.3, B.4, B.6, B.7, B.8, B.9 and B.10.
Approval of certain transactions; obligations of directors, officers and shareholders
Officers and directors. The Israeli Companies Law codifies the fiduciary duties that office holders, which under the law, includes our directors and
executive officers, owe to a company.
Fiduciary duties. An office holder’s fiduciary duties consist of a duty of loyalty and a duty of care.
The duty of loyalty requires an office holder to act in good faith and for the benefit of the company, including to avoid any conflict of interest
between the office holder’s position in the company and personal affairs, and proscribes any competition with the company or the exploitation of any
business opportunity of the company in order to receive personal advantage for himself or herself or for others. This duty also requires an office holder
to reveal to the company any information or documents relating to the company’s affairs that the office holder has received due to his or her position as
an office holder. A company may approve any of the acts mentioned above; provided, however, that all the following conditions apply: the office holder
acted in good faith; neither the act nor the approval of the act prejudices the good of the company; and the office holder disclosed the essence of his or
her personal interest in the act, including any substantial fact or document, in a reasonable time before the date for discussion of the approval. A director
is required to exercise independent discretion in fulfilling his or her duties and may not be party to a voting agreement with respect to his or her vote as a
director. A violation of these requirements is deemed a breach of the director’s duty of loyalty.
The duty of care requires an office holder to act with a level of care that a reasonable office holder in the same position would employ under the
same circumstances. This includes the duty to use reasonable means to obtain information regarding the advisability of a given action submitted for his
or her approval or performed by virtue of his or her position and all other relevant information material to these actions.
Disclosure of personal interest. The Israeli Companies Law requires that an office holder promptly disclose to the company any personal interest
that he or she may have and all related material information or documents known to him or her, in connection with any existing or proposed transaction
by the company. “Personal interest,” as defined by the Israeli Companies Law, includes a personal interest of any person in an act or transaction of the
company, including a personal interest of his relative or of a corporation: (i) in which that person or a relative of that person holds 5% or more of the
shares, a holder of 5% or more of the voting rights, or a
46
director or general manager, or (ii) in which he or she has the right to appoint at least one director or the general manager, and includes shares for which
the person has the right to vote pursuant to a power-of-attorney. “Personal interest” does not apply to a personal interest stemming merely from holding
shares of the company.
The office holder must immediately make the disclosure of his or her personal interest and no later than the first meeting of the company’s board
of directors that discusses the particular transaction. This duty does not apply to the personal interest of a relative of the office holder in a transaction
unless it is an “extraordinary transaction”. The Israeli Companies Law defines an “extraordinary transaction” as a transaction that is not in the ordinary
course of business of a company, or that is not on market terms, or which is likely to have a material impact on the company’s profitability, assets or
liabilities. The Israeli Companies Law defines a “relative” as a spouse, sibling, parent, grandparent, descendant and the descendant, sibling or parent of a
spouse, as well as the spouse of any of the foregoing.
Approvals. The Israeli Companies Law provides that a transaction with an office holder or a transaction in which an office holder has a personal
interest requires the board approval, unless the transaction is an extraordinary transaction or the articles of association provide otherwise. The
transaction shall not be approved if it is adverse to the company’s interest. If the transaction is an extraordinary transaction, or if it concerns exculpation,
indemnification, insurance or compensation of an office holder, then the approval of the company’s compensation committee and the board of directors
is required, except if the compensation arrangement is an immaterial amendment to an existing compensation arrangement of an officer who is not a
director (in which case the approval of the compensation committee is sufficient). Exculpation, indemnification, insurance or compensation of a director
or the Chief Executive Officer also requires shareholder approval.
A person who has a personal interest in a matter that is considered at a meeting of the board of directors or the audit committee generally may not
attend that meeting or vote on that matter, unless a majority of the board of directors or the audit committee also has a personal interest in the matter or
if such person is invited by the chairman of the board of directors or audit committee, as applicable, to present the matter being considered. If a majority
of the board of directors has a personal interest in the transaction, all directors may attend that meeting and vote, and a shareholder approval would be
required as well.
Shareholders. The Israeli Companies Law imposes the same disclosure requirements described above on a controlling shareholder of a public
company that it imposes on an office holder. For this purpose, a “controlling shareholder” is defined as any shareholder who has the ability to direct the
company’s actions, including any shareholder holding 25% or more of the voting rights, if no other shareholder owns more than 50% of the voting rights
in the company. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder.
Under the Israeli Companies Law, a shareholder has a duty to act in good faith toward the company and the other shareholders, and to refrain from
abusing his or her power in the company, which includes, among other things, voting in the general meeting of shareholders on the following matters:
•
•
•
•
any amendment to the articles of association,
an increase of the company’s authorized share capital,
a merger, or
approval of interested party transactions that require shareholder approval.
In addition, any controlling shareholder, any shareholder who can determine the outcome of a shareholder vote, and any shareholder who can
appoint or prevent the appointment of an office holder under the company’s articles of association, is under a duty to act with fairness towards the
company. The Israeli Companies Law provides that a breach of the duty of fairness will be governed by the laws governing breach of contract. The
Israeli Companies Law does not describe the substance of this duty.
Compensation of Executive Officers and Directors; Executive Compensation Policy
In accordance with the Israeli Companies Law, we have adopted a compensation policy for our executive officers and directors. The purpose of
the policy is to describe our overall compensation strategy for our executive officers and directors and to provide guidelines for setting their
compensation, as prescribed by the Israeli Companies Law. In addition, according to the Israeli Companies Law, the policy must be reviewed and
readopted at least once every three years.
47
The adoption of the compensation policy requires the approval of the compensation committee, the board of directors and our shareholders, in that
order. The shareholder’s approval must include the majority of shares voted at the meeting. In addition to the majority vote, the shareholder approval
must satisfy either of two additional tests:
•
•
the majority includes at least a majority of the shares voted by shareholders other than our controlling shareholders or shareholders
who have a personal interest in the adoption of the compensation policies; or
the total number of shares held by non-controlling shareholders and disinterested shareholders that voted against the adoption of the
compensation policies, does not exceed 2% of the aggregate voting rights of our company.
In accordance with the Israeli Companies Law, our policy was last readopted in June 2019 by the compensation committee, the board of directors
and our shareholders.
Under the Israeli Companies Law, the compensation arrangements for officers (other than the Chief Executive Officer) who are not directors
require the approval of the compensation committee and the board of directors; provided, however, that if the compensation arrangement is not in
compliance with our executive compensation policy, the arrangement may only be approved by the compensation committee and the board of directors
for special reasons to be noted, and the compensation arrangement shall also require a special shareholder approval. If the compensation arrangement is
an immaterial amendment to an existing compensation arrangement of an officer who is not a director and is in compliance with our executive
compensation policy, the approval of the compensation committee is sufficient.
Arrangements regarding the compensation of the Chief Executive Officer and directors require the approval of the compensation committee, the
board and the shareholders, in that order. In certain limited cases, the compensation of a new Chief Executive Officer who is not a director may be
approved without approval of the shareholders.
Indemnification and insurance of directors and officers; limitations on liability
Our articles of association allow us to indemnify, exculpate and insure our office holders to the fullest extent permitted under the Israeli
Companies Law.
Under the Israeli Companies Law, we may indemnify an office holder for any of the following liabilities or expenses that they may incur due to an
act performed or failure to act in his or her capacity as our office holder:
•
•
Monetary liability imposed on the office holder in favor of a third party in a judgment, including a settlement or an arbitral award
confirmed by a court.
Reasonable legal costs, including attorneys’ fees, expended by an office holder as a result of an investigation or proceeding instituted
against the office holder by a competent authority, provided that such investigation or proceeding concludes without the filing of an
indictment against the office holder, and either:
•
•
no financial liability was imposed on the office holder in lieu of criminal proceedings, or
financial liability was imposed on the office holder in lieu of criminal proceedings, but the alleged criminal offense does not require
proof of criminal intent.
•
Reasonable legal costs, including attorneys’ fees, expended by the office holder or for which the office holder is charged by a court:
•
•
•
in an action brought against the office holder by us, on our behalf or on behalf of a third party,
in a criminal action in which the office holder is found innocent, or
in a criminal action in which the office holder is convicted, but in which proof of criminal intent is not required.
A company may indemnify an office holder in respect of these liabilities either in advance of an event or following an event. If a company
undertakes to indemnify an office holder in advance of an event, the indemnification, excluding litigation expenses, must be limited to foreseeable
events in light of the company’s actual activities when the company undertook such indemnification, and reasonable amounts or standards, as
determined by the board of directors.
A company may obtain insurance for an office holder against liabilities incurred in his or her capacity as an office holder. These liabilities include:
a breach of duty of care to the company or a third party including a breach arising out of negligence of the office holder; and a breach of duty of loyalty
and any monetary liability imposed on the office holder in favor of a third party. A company may also exculpate an office holder from a breach of duty
of care in advance of that breach. Our articles of association provide that the exculpation can be made, either in advance or retroactively, to the extent
permitted under Israeli law. A company may not exculpate an office holder from a breach of duty of loyalty towards the company or from a breach of
duty of care concerning dividend distribution or a purchase of the company’s shares by the company or other entities controlled by the company.
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Under the Israeli Companies Law, a company may indemnify or insure an office holder against a breach of duty of loyalty only to the extent that
the office holder acted in good faith and had reasonable grounds to assume that the action would not prejudice the company. In addition, a company may
not indemnify, insure or exculpate an office holder against a breach of duty of care if the act or omission were committed intentionally or recklessly
(excluding mere negligence), or with the intent to derive an unlawful personal gain, or for a fine or forfeit levied against the office holder in connection
with a criminal offense.
We have resolved to indemnify our directors and officers, to the extent permitted by law and by our articles of association, for liabilities not
covered by insurance, that are of certain enumerated types of events, and subject to limitations as to amount.
We have also entered into indemnification, insurance and exculpation agreements with our directors and officers undertaking to indemnify, insure
and exculpate them to the full extent permitted by the Israeli Companies Law.
Charitable Contributions
Our articles of association authorize the company to contribute reasonable amounts to worthy causes. In accordance with our charitable
contribution policy, we contribute from time to time to various worthy causes.
During 2021, the list of entities to which we contributed included, among others, the Tel Aviv University and the Yeholot Association. Gil Shwed,
our founder and Chief Executive Officer, is a Governor of the Board of Governors of Tel Aviv University, the Chairman of the Board of Trustees of the
Youth University of Tel Aviv University, the founder of Tel-Aviv University’s Check Point Institute for Information Technology and the Chairman of the
Board of Directors of Yeholot Association Founded by the Rashi Foundation whose charter is, among other things, to reduce the dropout rates in high
schools.
Borrowing power
Our articles of association grant broad powers to the board of directors to have us borrow, repay borrowings, make guarantees and grant security
interests in borrowings.
49
Availability of Annual Report on Form 20-F
In accordance with our articles of association and Nasdaq rules, we post our Annual Report on Form 20-F on our website (www.checkpoint.com),
rather than mail it to shareholders.
Material Contracts
None.
Israeli Taxation, Foreign Exchange Regulation and Investment Programs
The following is a summary of the principal Israeli tax laws applicable to us, the Israeli Government programs from which we benefit, and Israeli
foreign exchange regulations. This section also contains a discussion of material Israeli tax consequences to our shareholders who are not residents or
citizens of Israel. This summary does not discuss all aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal
investment circumstances, or to some types of investors subject to special treatment under Israeli law. Examples of investors subject to special treatment
under Israeli law include residents of Israel, traders in securities, or persons who own, directly or indirectly, 10% or more of our outstanding voting
capital, all of whom are subject to special tax regimes that are not covered in this discussion. Some parts of this discussion are based on new tax
legislation that has not been subject to judicial or administrative interpretation. The discussion should not be construed as legal or professional tax
advice and does not cover all possible tax consequences.
You are urged to consult your own tax advisor as to the Israeli and other tax consequences of the purchase, ownership and disposition of
our shares, including, in particular, the effect of any non-Israeli, state or local taxes.
General corporate tax structure in Israel
Taxable income of Israeli companies is subject to tax at the rate of 23% since 2018.
However, as discussed below, the rate is effectively reduced for income derived from our Technological preferred enterprise.
Law for the Encouragement of Capital Investments, 1959 (“Investment Law”)
We elected to apply the Preferred Enterprise regime under the Law for the Encouragement of Capital Investment (the “Investment Law”). Under
the Preferred Enterprise regime, our entire preferred income is subject to tax rates as follows: 2013—12.5% and 2014 and thereafter—16%. The election
is irrevocable.
The benefits available to a Preferred Enterprise are conditioned upon terms stipulated in the Investment Law and the related regulations. If we do
not fulfill these conditions, in whole or in part, the benefits can be cancelled, and we may be required to refund the benefits in an amount linked to the
Israeli consumer price index plus interest. We believe that our Preferred Enterprise program currently operates, in compliance with all applicable
conditions and criteria, but we cannot assure you that it will continue to do so.
Among other changes, the new Law includes, Amendment 73 to the Investment Law (“Amendment 73”). Amendment 73 prescribes special tax
tracks for technological enterprises. One of the tracks is for Technological preferred enterprise—an enterprise for which total consolidated revenues of
its parent company and all subsidiaries are less than NIS 10 billion. A technological preferred enterprise, as defined in the Law, which is located in the
center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectual property. The special tax tracks under Amendment 73 are
subject to rules issued by the Minister of Finance. On May 1, 2017, the Israeli Finance Minister signed tax regulations implementing the Organisation
for Economic Co-operation and Development’s (OECD’s) “nexus approach,” a base erosion and profit shifting (BEPS) requirement for intellectual
property (IP) preferential tax regimes. The proposed regulations are subject to approval by the Parliament’s Finance Committee. On May 16, 2017 the
Knesset Finance Committee approved the regulations effective as of January 1, 2017.
We have derived, and expect to continue to derive, a substantial portion of our operating income from our Technological preferred enterprise. We
are, therefore, eligible for reduced tax rates for an unlimited period.
To prepare our consolidated financial statements, we estimate our income taxes in each of the jurisdictions in which we operate. This process
involves estimating our potential tax exposure together with assessing temporary differences resulting from the differing treatment of certain items for
tax and accounting purposes.
50
These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet.
Prior to 2012, most of our income was exempt from tax or subject to reduced tax rates under the Investment Law. Upon distribution of exempt
income, the distributing company will be subject to corporate reduced tax rates ordinarily applicable to such income under the Investment Law.
Reduced income under the Investment Law including the Preferred Enterprise/Technological preferred enterprise Regime will be freely
distributable as dividends, subject to a 15% or 20% withholding tax (or at lower rate, under an applicable tax treaty). However, upon the distribution of a
dividend from Preferred/ Technological preferred Income to an Israeli company, no withholding tax will be remitted.
Our tax assessments through the 2015 tax year are considered final.
U.S. Tax Cuts and Jobs Act
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which among other provisions, reduced the U.S. corporate tax
rate from 35% to 21%, limited the tax deduction for interest expense to 30% of adjusted taxable income, implemented a “base erosion anti-abuse tax”,
repealed the alternative minimum tax, or AMT, for corporations, and limited the deduction for net operating losses carried forward from taxable years
beginning after December 31, 2017 to 80% of current year taxable income and eliminates net operating loss carrybacks. At December 31, 2017, we
re-measured certain of our U.S. deferred tax assets and liabilities, based on the new rates at which they are expected to reverse in the future.
See also Item 3 “Key Information – Risk factors” – Risks Related to Our Business and Our Market – We are the defendants in various lawsuits
and have been subject to tax disputes and governmental proceedings, which could adversely affect our business, results of operations and financial
condition”.
U.S. Coronavirus Aid, Relief, and Economic Security Act
On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to provide economic relief to
companies and individuals through changes in the U.S. Tax Code. The only impact to financial statements for CARES Act the year ended December 31,
2020 relates to the acceleration of the Alternative Minimum Tax Credit. The CARES Act allows taxpayers with alternative minimum tax credits to claim
a refund for the entire remaining balance of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by
the Tax Act. The company claimed the remaining $3.2 million of Alternative Minimum Tax Credits as a refund on its 2019 U.S. Corporate income tax
return.
Foreign Exchange Regulations
Under the Foreign Exchange Regulations, an Israeli company calculates its tax liability in U.S. dollars according to certain orders. The tax
liability, as calculated in U.S. dollars is translated into NIS according to the exchange rate as of December 31 of each year.
Dividends, if any, paid to the holders of our shares, and any amounts payable upon our dissolution, liquidation or winding up, as well as the
proceeds of any sale in Israel of our shares to an Israeli resident, may be paid in non-Israeli currency. If these amounts are paid in Israeli currency, they
may be converted into freely repatriable U.S. dollars at the rate of exchange prevailing at the time of conversion. In addition, the statutory framework for
the potential imposition of exchange controls has not been eliminated, and may be restored at any time by administrative action.
Equity Based Compensation
The Israeli tax legislation enables a company to grant options/shares through one of three tax tracks:
(a) the income tax track through a trustee pursuant to which the employee pays income tax rate (according to the marginal tax rate of the
employee), up to 47% tax in 2019, 2020 and in 2021, plus payments to the National Insurance Institute and health tax on the profit gained upon the
earlier to occur of the transfer of the options/shares or the underlying shares from the trustee to the employee or the sale of the options/shares or the
underlying shares by the trustee, and the company may deduct expenses pertaining to the options/shares for tax purposes. The shares/options (or upon
their exercise, the underlying shares), must be held by a trustee for a period of 12 months commencing from the date of which the options/shares were
issued and deposited with the trustee. As of January 1, 2013, an additional tax was imposed in a rate of 3% (“the surtax”). Accordingly, and as of
December 31, 2021 the marginal tax rate of an individual can reach 50% if the employee’s taxable income for the year exceeded NIS 647,640.
(b) the capital gains tax track through a trustee pursuant to which the employee pays capital gains tax at a rate of 25% on the capital profit portion
and marginal tax rate (including payments to the National Insurance Institute and health tax) on the income portion (in general, the income portion is the
profit derived from the difference between the average market value of the share 30 days before the allotment date and the exercise price of the
option/share) upon the earlier to occur of the transfer of the options/shares or the underlying shares from the trustee to the employee or
51
the sale of the options/shares or the underlying shares by the trustee. (On the capital profit, the employee is not required to make payments to the
National Insurance Institute and health tax). In this track, on the capital profit, we may not deduct expenses pertaining to the options/shares for tax
purposes but may do so on the income portion. The shares/options (or upon their exercise, the underlying shares), must be held by a trustee for a period
of 24 months commencing from the date of which the options/shares were issued and deposited with the trustee (with respect to options/shares granted
before January 1, 2006, a period of 30 months commencing from the date of which the options/shares were granted or a period of 24 months
commencing from the date of which the options/shares were issued and deposited with the trustee, whichever route is selected). As of January 1, 2013,
an additional tax was imposed in a rate of 3% (“the surtax”). Accordingly, and as of December 31, 2021 the marginal tax rate of an individual can reach
50% if the employee’s taxable income for the year exceeded NIS 647,640.
(c) the income tax track without a trustee pursuant to which the employee pays income tax rate (according to the marginal tax rate of the employee
up to 47% in 2019, 2020 and in 2021, plus payments to the National Insurance Institute and health tax on the profit at the allotment date, and pays
capital gains tax at a rate of 25% or 30% on the capital profit upon the sale of the underlying shares/shares, and we may not deduct expenses pertaining
to the capital gain for tax purposes but may deduct expenses pertaining to the profit at the allotment date. As of January 1, 2013, an additional tax was
imposed in a rate of 3% (“the surtax”). Accordingly, and as of December 31, 2021 the marginal tax rate of an individual can reach 50% if the employee’s
taxable income for the year exceeded NIS 647,640.
In accordance with the provisions of the Israeli Tax Ordinance, if a company has selected the capital gains track, the company must continue
granting options/shares under the selected capital gains track until the end of the year following the year in which the first grant of options/shares under
that trustee track will be made.
We implement the capital gain track on RSUs, PSUs and stock options granted to our employees and directors and the income tax track without a
trustee on our ESPP.
Notwithstanding the above, the company may at any time also grant options/shares under the provisions of the income tax track without a trustee.
The above rules apply only to employees, including officeholders but excluding controlling shareholders.
Controlling shareholders will be taxable under section 3(i) to the tax ordinance, according to which, the individual pays income tax rate (according
to the marginal tax rate of the individual, up to 47% in 2019, 2020 and in 2021) on the profit upon the sale of the underlying shares/shares. As of
January 1, 2013, the surtax is imposed. Accordingly, the marginal tax rate of an individual increased by 3% if the employee’s taxable income in 2019
exceeded NIS 649,560 , and is increased by 3% if the employee’s annual taxable income in 2020 exceeds NIS 651,600 and is increased by 3% if the
employee’s annual taxable income in 2021 exceeds NIS 647,640 (as updated from time to time). Hence, the employee’s marginal tax rate can reach
50%.
52
Taxation of Non-Israeli Subsidiaries
Non-Israeli subsidiaries are generally taxed based upon tax laws applicable in their countries of residence. In accordance with the provisions of
Israeli-controlled foreign corporation rules, certain income of a non-Israeli subsidiary, if the subsidiary’s primary source of income is passive income
(such as interest, dividends, royalties, rental income or income from capital gains), which are subject to tax at a rate which does not exceed 15% in the
foreign corporation’s jurisdictions may be deemed distributed as a dividend to the Israeli parent company and consequently is subject to Israeli taxation.
This tax regime will not apply where the subsidiary’s dividend income is derived from taxable profits that were subject to tax exceeding 15%. An Israeli
company that is subject to Israeli taxes on such deemed dividend income of its non-Israeli subsidiaries may generally receive a credit for non-Israeli
income taxes paid by the subsidiary in its country of residence.
Taxation of Non-Israeli Shareholders on Receipt of Dividends
Under Israeli tax law, a distribution of dividends from income attributable to an Approved Enterprise, Privileged Enterprise, Preferred Enterprise
or Technological preferred enterprise will be subject to tax in Israel at the rate of 15%/20%, which is withheld and paid by the company paying the
dividend (,(apply on Approved Enterprise or Privileged Enterprise which are not considered Foreign Investors Company only if the dividend is
distributed during the benefits period or within the following 12 years). However, if the dividend is attributable partly to income derived from an
Approved and Privileged Enterprise, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions of
the two types of income. Any distribution of dividends from income that is not attributable to an Approved Enterprise, Privileged Enterprise Preferred
Enterprise or Technological preferred enterprise will be subject to tax in Israel at the rate of 25% (or to a reduced tax rate if is distributing to a foreign
shareholder based on an applicable tax treaty), except that dividends distributed to an individual who is deemed “a substantial shareholder” will be
subject to tax at the rate of 30% ( or at a lower rate based on an applicable tax treaty).
Under the United States-Israel tax treaty, the maximum tax on dividends paid to a holder of shares of our capital stock who is a United States
resident is 25%.
Dividends received by a United States company that holds at least 10% of our voting rights, will be subject to withholding tax at the rate of 12.5%
or 15%, depends on the nature of the taxable income, provided that certain other conditions in the tax treaty are met. Dividends distributed to other
foreign shareholders may be subject to different withholding tax rates based on the applicable tax treaty.
A non-resident of Israel who has interest or dividend income derived from or accrued in Israel, from which tax was withheld at the source, is
generally exempt from the duty to file tax returns in Israel in respect of such income, provided such income was not derived from a business conducted
in Israel by the taxpayer.
Capital Gains Taxes Applicable to Non-Israeli Shareholders
According to Israeli domestic tax law, capital gains from the sale of our shares by non-Israeli shareholders (including United States residents) are
exempt from Israeli taxation under the Israeli domestic tax law, provided that the capital gain is not derived from a permanent establishment in Israel.
A non-resident of Israel who has interest or dividend income derived from or accrued in Israel, from which tax was withheld at the source, is
generally exempt from the duty to file tax returns in Israel in respect of such income, provided such income was not derived from a business conducted
in Israel by the taxpayer.
United States Federal Income Tax Considerations
The following discussion describes certain material U.S. federal income tax considerations relating to the direct or indirect ownership or
disposition of our shares by a shareholder who is:
•
•
•
•
An individual citizen or resident (as defined for U.S. federal income tax purposes) of the United States;
A domestic partnership;
A corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any of its states;
An estate, if the estates income is subject to U.S. federal income taxation; or
53
A trust, if a U.S. court is able to exercise primary supervision over its administration and one or more U.S. persons (e.g., a U.S. citizen, resident, or
corporation) have the authority to control all of its substantial decisions or the trust has a valid election in effect under U.S. Treasury Regulations to be
treated as a “United States person”. We refer to any of the above as a “U.S. Shareholder”.
This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended, referred to as the “Code”, U.S. Treasury
Regulations promulgated under the Code and administrative and judicial interpretations of the Code, all as in effect as of the date of this Annual Report.
This discussion generally considers only U.S. Shareholders who will hold our shares as capital assets.
This summary discussion does not address tax considerations applicable to a U.S. Shareholder that may be subject to special tax rules including,
without limitation, the following:
•
•
•
•
•
•
•
•
•
•
•
Aspects of U.S. federal income taxation relevant to U.S. Shareholders by reason of their particular circumstances (including potential
application of the alternative minimum tax);
U.S. Shareholders subject to special treatment under the U.S. federal income tax laws, such as banks, financial institutions, insurance
companies, broker-dealers or traders in securities;
U.S. Shareholders that are tax-exempt organizations and pension funds;
U.S. Shareholders that are former citizens or long-term residents of the United States;
U.S. Shareholders that are partnerships or entities treated as partnerships or other pass-through entities and persons who own our shares
through such entities, and non-U.S. individuals or entities;
U.S. Shareholders that are real estate investment trusts or regulated investment companies;
U.S. Shareholders who own 10% or more of our outstanding voting shares, either directly or by attribution;
U.S. Shareholders who hold our shares as part of a hedging, straddle, integrated, or conversion transaction;
U.S. Shareholders who acquire their shares of our capital stock in a “compensatory transaction”;
U.S. Shareholders whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar; and
Any aspect of U.S. estate, gift, state, or local tax law, or any non-U.S. tax law.
The following summary does not address all of the tax consequences of owning or disposing of our shares to you based on your individual
tax circumstances. Accordingly, you should consult your own tax advisor as to the particular tax consequences to you of owning or disposing of
our shares, including the effects of applicable state, local, or non-U.S. tax laws and possible changes in the tax laws.
Dividends Paid on the Company’s Shares
Subject to the discussion below under “Passive Foreign Investment Company Status,” a U.S. Shareholder, as defined above, may be required to
include in gross income the amount of any distributions made with respect of our shares (and any Israeli taxes withheld on such distributions) to the
extent that the distributions are paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. We do
not calculate earnings and profits under United States federal income tax principles.
Certain non-corporate U.S. Shareholders may qualify for preferential rates of taxation with respect to dividends on our capital stock if the
dividends are “qualified dividend income”. Qualified dividend income generally includes dividends paid by a U.S. corporation or a “qualified foreign
corporation”. A non-U.S. corporation, such as ours, generally will be considered to be a qualified foreign corporation if (i) our shares are readily tradable
on an established securities market in the United States, or (ii) we are eligible for the benefits of a comprehensive U.S. income tax treaty determined to
be satisfactory to the U.S. Department of the Treasury for purposes of this provision and which includes an exchange of information provision. The U.S.
Department of the Treasury and the Internal Revenue Service have determined that the United States-Israel tax treaty is satisfactory for this purpose. In
addition, the U.S. Department of the Treasury and the Internal Revenue Service have determined that our shares are considered readily tradable on an
established securities market if they are listed on an established securities market in the United States, such as the Nasdaq Global Select Market. The
information returns, reporting the dividends paid to U.S. Shareholders, will identify the amount of dividends eligible for the reduced rates.
54
U.S. Income Tax Treatment of Dividends
Any distributions in excess of earnings and profits will be treated first as non-taxable return of capital, reducing a U.S. Shareholder’s tax basis in
our shares to the extent of the distributions, and then as capital gain from a sale or exchange of our shares. Any capital gain so realized will generally be
taxable to the U.S. Shareholder as either long-term or short-term capital gain depending upon whether the U.S. Shareholder has held our shares for more
than one year as of the time such distribution is received. Our dividends will generally not qualify for the dividends received deduction available to
corporations. Any cash distribution paid in Israeli Shekels will equal the U.S. dollar value of the distribution, calculated based on the spot exchange rate
in effect on the date of the distribution, regardless of whether the foreign currency is converted into U.S. dollars at that time. Any foreign currency gain
or loss a U.S. Shareholder realizes on a subsequent conversion of foreign currency into U.S. dollars will be U.S. source ordinary income or loss. A 10%
or more U.S. shareholder may have additional concerns not noted here.
Credit for Israeli Taxes
Subject to certain conditions and limitations, a U.S. Shareholder of an Israeli corporation may be eligible for a foreign tax credit to offset a portion
of the U.S. tax liability assessed on Israeli sourced income when repatriated to the U.S. The U.S. Internal Revenue Code provides a foreign tax credit
limitation on the amount of foreign tax credits that may be used during each taxable year. This limitation requires detailed knowledge of the mechanics
of the rules proscribed in the code and support regulations. Under no circumstances, can foreign tax credits be used to offset a U.S. tax assessment on
U.S. source income, and the credit may not exceed the U.S. tax assessment on foreign income.
A U.S. Shareholder may elect to claim a foreign tax credit on its U.S. federal income tax return for foreign taxes paid or accrued, alternatively, the
U.S. Shareholder may elect to claim a deduction for Israeli income tax withheld or paid, but only if the shareholder elects to do so for all foreign income
taxes of the same year. Special rules for determining a U.S. Shareholder’s foreign tax credit limitation apply in the case of qualified dividend income.
Rules similar to those concerning adjustments to the foreign tax credit limitation to reflect any capital gain rate differential also apply to any qualified
dividend income. The rules relating to foreign tax credits are complex and each U.S. Shareholder should consult his, her, or its own tax advisor to
determine whether and if the specific shareholder would be entitled to this credit.
Sale, Exchange, or Other Disposition of Our Shares
The sale or exchange of our shares may result in the recognition of capital gain or loss for the U.S. Shareholder. The amount of gain or loss is the
difference between the U.S. dollar value of the amount realized on the sale or exchange and the tax basis in our shares. If a U.S. Shareholder’s holding
period for our shares exceeds one year at the time of the disposition, the amount of the shareholder’s gain or loss generally will be long-term capital gain
or loss. Long-term capital gains of non-corporate U.S. Shareholders realized upon a sale or exchange of shares generally will be eligible for a
preferential rate of taxation. The deductibility of capital losses may be subject to limitation. Gain or loss recognized by a U.S. Shareholder on a sale or
exchange of shares generally will be treated as U.S. source income or loss for U.S. foreign tax credit purposes.
Additional Tax on Investment Income
U.S. Shareholders that are individuals, estates or trusts and whose income exceeds certain thresholds may be subject to a 3.8% tax on all or a
portion of their “net investment income”, including, among other things, dividends on and capital gains from the sale or other disposition of our shares,
subject to certain limitations and exceptions.
Passive Foreign Investment Company Status
Based upon our income, assets and activities, we believe that we are not currently, and have not been in prior years, a passive foreign investment
company (PFIC) for U.S. federal income tax purposes. We do not currently anticipate that we will be a PFIC for any subsequent year. We would be
classified as a PFIC if, for any taxable year, either:
•
•
75% or more of our gross income in the taxable year is passive income, or
50% or more of the average percentage of our assets held during the taxable year produce or are held for the production of passive income.
For this purpose, passive income includes dividends, interest, royalties, rents, annuities and the excess of gain over losses from the disposition of
assets that produce passive income.
55
If we were a PFIC for any taxable year during which you held shares as a U.S. Shareholder and you did not timely elect to treat us as a “qualified
electing fund” under Section 1295 of the Code or elect to mark our shares to market, you would be subject to special tax rules that have a penalizing
effect on the receipt of an “excess distribution” on our shares. Generally, a distribution is considered an excess distribution to the extent it exceeds 125%
of the average annual distributions in the prior three years (or, if shorter, your holding period of our shares before the taxable year). You would also be
subject to special tax rules that have a penalizing effect on the gain from the disposition of our shares, including the treatment if any such gain as
ordinary income, not capital gain.
A U.S. Shareholder may be able to mitigate certain adverse tax consequences of holding shares in a PFIC by making a “qualified electing fund,”
“deemed sale” or “mark-to-market” election. However, these elections require specific conditions to be met, for example, as a U.S. Shareholder you may
make a qualified electing fund election only if we agree to furnish certain tax information annually. We do not presently prepare or provide this
information, and this information may not be available to you if we are subsequently determined to be a PFIC. A number of specific rules and
requirements apply to a U.S. Shareholder under any of the elections available to owners of a PFIC. You are advised to consult your tax advisor
concerning these elections.
Information Reporting and Back up Withholding
Dividend payments and proceeds from the sale or disposal of shares may be subject to information reporting to the Internal Revenue Service and
possible U.S. federal withholding tax. However, withholding taxes may not apply to a holder, in the event they furnish a valid taxpayer identification
number or certificate of foreign status and makes any other required certification, or who is otherwise exempt from withholding (for example, a
corporation). Amounts withheld as withholding taxes may be credited against a U.S. Shareholder’s federal income tax liability.
Other Reporting Requirements
Certain U.S. Shareholders who are individuals are required to report information relating to an interest in our shares, subject to certain exceptions
(including an exception for shares held in accounts maintained by U.S. financial institutions) by filing IRS Form 8938 (Statement of Specified Foreign
Financial Assets) with their federal income tax return. U.S. Shareholders are urged to consult their tax advisors regarding their information reporting
obligations, if any, with respect to their ownership and disposition of our shares.
Documents on Display
This report and other information filed or to be filed by us with the Securities and Exchange may be accessed at the Securities and Exchange
Commission’s website, www.sec.gov. We intend to post our Annual Report on our website (www.checkpoint.com) promptly following the filing of our
Annual Report with the Securities and Exchange Commission.
Additionally, documents referred to in this Annual Report may be inspected at our principal executive offices located at 5 Shlomo Kaplan Street,
Tel Aviv 6789159, Israel.
56
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks that result primarily from weak economic conditions in the markets in which we sell our products, and from
changes in exchange rates or in interest rates.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our investment in fixed maturity marketable securities. Our
marketable securities portfolio includes mainly government and government agencies debt instruments (U.S., European and other) and corporate debt
instruments, which are exposed to changes in short-term interest rates. By policy, we limit the amount of credit exposure to any single issuer.
Investments in both fixed rate and floating rate interest bearing securities carry a degree of interest rate risk. Fixed rate securities may have their
fair market value adversely impacted due to a rise or fall in interest rates, while floating rate securities may produce less income than predicted if interest
rates fall. Due in part to these factors, our income from investments may change in the future in the event that interest rates fluctuate.
The COVID-19 Pandemic, and its effect on financial markets, have adversely affected the yield in our investment portfolio and may continue to
do so. Low, zero, or negative interest rates, reduced liquidity and a slowdown in U.S. or global economic conditions, as well as COVID-19 Pandemic-
related actions, have affected the values of assets in our investment portfolio, and may continue to do so, especially if prolonged.
As of December 31, 2021 securities representing 5% of our investments portfolios are rated as AAA; securities representing 53% of the portfolio
are rated between AA- and AA+; securities representing 41% of the portfolio are rated between A- and A+; securities representing 1% of the portfolio
are rated as BBB+ or below.
The table below provides information regarding our investments in cash equivalents and marketable securities, as of December 31, 2021:
Marketable securities:
Government and corporate debentures—fixed interest
rate
Government-sponsored enterprises debentures
Government and corporate debentures—floating interest
rate
Cash equivalents:
Money market funds
Short term deposits
Total
2022
2023
Maturity
2024
(in millions)
2025
2026
Total
Par Value
Fair
Value at
Dec. 31, 2021
$
727.8 $
164.6
585.5 $
181.9
568.5 $
167.3
187.2 $
122.5
152.1 $ 2,221.0 $
6.8
643.2
2,262.5
641.4
31.2
53.8
23.9
4.5
1.0
114.4
115.1
6.6
94.5
$ 1,024.7 $
-
-
821.2 $
-
-
759.7 $
-
-
314.2 $
-
-
6.6
94.5
159.9 $ 3,079.7 $
6.6
94.5
3,120.1
57
Foreign Currency Risk
Most of our sales are denominated in U.S. dollars, and we incur majority of our expenses in U.S. dollar, Israeli Shekel and Euro. According to the
factors indicated in ASC 830, “Foreign Currency Matters,” our cash flow, sale price, sales market, expense, financing and inter-company transactions,
and arrangement indicators, are predominantly denominated in U.S. dollars. In addition, the U.S. dollar is the primary currency of the economic
environment in which we operate, and thus, the U.S. dollar is our functional and reporting currency.
On our balance sheet, we convert into U.S. dollars all monetary accounts (principally liabilities) that are held in other currencies. For this
conversion, we use the relevant foreign currency exchange rate at the balance sheet date. Any gain or loss that results from this conversion is reflected in
the statement of income as financial income or financial expense, as appropriate.
We measure and record non-monetary accounts in our balance sheet in U.S. dollars. For this measurement, we use the U.S. dollar value in effect at
the date that the asset or liability was initially recorded in our balance sheet (the date of the transaction).
We entered into forward contracts to hedge the foreign currency exchange impacts on assets and liabilities denominated in various foreign
currencies. As of December 31, 2021, the total amount of outstanding forward contracts that did not qualify for hedge accounting was $171.1 million.
These contracts were for a period of up to twelve months. The net amount of gains and losses recognized in “financial income, net” during 2021 was a
loss of $0.6 million.
During 2021, we entered into forward contracts to hedge against the risk of overall changes in foreign currency exchange rates on future cash flow
from payments of payroll and related expenses denominated in Israeli Shekel and Euro. These contracts qualified for cash flow hedge accounting and as
such the net amount of gains and losses of $1.8 million in gain was recognized when the related expense were incurred, and classified in operating
expenses during 2021. As of December 31 2021, the notional amount of outstanding forward contracts that qualified for cash flow hedge accounting was
$155.0 million and their fair value gain amount was $0.7 million.
Our operating expenses may be affected by fluctuations in the value of the U.S dollar as it relates to foreign currencies; with Israeli Shekel and
Euro having the greatest potential impact. In managing our foreign exchange risk, we periodically enter into foreign exchange hedging contracts. Our
goal is to mitigate the potential exposure with these contracts. By way of example, a 10% weakening in the value of the dollar relative to the currencies
in which our operating expenses are denominated in 2021 would result in an increase in operating expenses of $58 million for the year ended
December 31, 2021. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar.
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
There are no defaults, dividend arrearages, or delinquencies that are required to be disclosed.
PART II
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
There are no material modifications to, or qualifications of, the rights of security holders that are required to be disclosed.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of December 31, 2021, we performed an evaluation under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Our management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our
management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 31, 2021, to
provide reasonable assurance that the information required to be disclosed in filings and submissions under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information
related to us and our consolidated subsidiaries is accumulated and communicated to management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions about required disclosure.
58
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed 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. Our internal control over financial reporting includes those policies and procedures that:
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our
assets,
provide reasonable assurance that transactions are recorded as necessary to permit preparation of 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 prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on the financial statements.
Our management recognizes that there are inherent limitations in the effectiveness of any system of internal control over financial reporting,
including the possibility of human error and the circumvention or override of internal control.
Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement
preparation, and may not prevent or detect all misstatements. Further, because of changes in conditions, the effectiveness of internal control over
financial reporting may vary over time.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In conducting its assessment
of internal control over financial reporting, management used the framework and criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (the 2013 Framework) as of the end of the period
covered by this report. Based on that evaluation, our management has concluded that our internal control over financial reporting was effective as of
December 31, 2021.
Our financial statements and internal control over financial reporting have been audited by Kost, Forer, Gabbay & Kasierer (A Member of EY
Global), an independent registered public accounting firm, which has issued an attestation report on our internal control over financial reporting
included elsewhere in this Annual Report.
Changes in Internal Control over Financial Reporting
During the period covered by this Annual Report, no changes in our internal control over financial reporting have occurred that materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
59
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Mr. Yoav Chelouche is an “audit committee financial expert” and that he is independent under the
applicable Securities and Exchange Commission and Nasdaq Global Select Market rules.
ITEM 16B. CODE OF ETHICS
Our board of directors adopted a Code of Ethics that applies to all of our employees, directors and officers, including the Chief Executive Officer, Chief
Financial Officer, principal accounting officer or controller and other individuals who perform similar functions as well as to contractors working on a
regular basis with Check Point. The Code of Ethics is updated from time to time and was last updated in 2022. The Code of Ethics and Business
Conduct is available on our website. You can obtain a copy of our Code of Ethics without charge, by sending a written request to our investor relations
department at Check Point Software Technologies, Inc., Attn: Investor Relations, 959 Skyway Road, Suite 300, San Carlos, California 94070 U.S.A;
Tel: 650-628-2000; Email: ir@us.checkpoint.com
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees and Services
The following table sets forth the aggregate fees for the audit and other services provided by Kost, Forer, Gabbay & Kasierer, a member of EY
Global and other members of EY Global during the years ended December 31, 2021 and 2020:
Year Ended December 31, 2021 Year Ended December 31, 2020
Amount
Percentage
Percentage
(in millions, except percentages)
Amount
Audit fees (1)
Audit related fees (2)
Tax fees (3)
Total
$
0.8
0.2
1.0
$
77% $
3%
20%
100% $
0.8
*)
0.2
1.0
77%
3%
20%
100%
*)
(1)
(2)
(3)
Represents an amount lower than $0.1 million.
“Audit fees” are fees for audit services for each of the years shown in this table, including fees associated with the annual audit (including audit of
our internal control over financial reporting) and reviews of our quarterly financial results submitted on Form 6-K, consultations on various
accounting issues and audit services provided in connection with other statutory or regulatory filings.
“Audit-related fees” are fees for professional services related to information systems audits.
“Tax fees” are fees for professional services rendered by our auditors for tax compliance, tax planning and tax advice on actual or contemplated
transactions, tax consulting associated with international transfer prices and employee benefits.
Audit committee’s pre-approval policies and procedures
Our audit committee chooses and engages our independent auditors to audit our financial statements, with the approval of our shareholders as
required by Israeli law. Our audit committee adopted a policy requiring our management to obtain the audit committee’s approval before engaging our
independent auditors to provide any audit or permitted non-audit services to us or our subsidiaries. This policy, which is designed to assure that such
engagements do not impair the independence of our auditors, requires pre-approval from the audit committee on an annual basis for the various audit
and non-audit services that may be performed by our auditors. In addition, the audit committee limited the aggregate amount of fees our auditors may
have received during 2021 and 2020, and will receive during 2022 for non-audit services in certain categories.
60
Our Chief Financial Officer reviews all management requests to engage our auditors to provide services and approves a request if the requested
services are of those that have received pre-approval from our audit committee. We inform our audit committee of these approvals at least quarterly and
prior to the commencement of the related services. If the services are not included in those categories that were pre-approved by our audit committee,
then specific approval is needed from our audit committee before these services are commenced. Our audit committee is not permitted to approve the
engagement of our auditors for any services that would be inconsistent with maintaining the auditors’ independence or that are not permitted by
applicable law.
61
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
None.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
As of December 31, 2021 and since we started repurchases programs, we repurchased Check Point’s ordinary shares for an aggregate amount of
$11,785 million. On August 5, 2021, we announced the extension of our on-going share repurchase program by an additional $2 billion. Under the
current plan, the Board of Directors authorized repurchases of ordinary shares at the pace of up to $325 million a quarter. Under the repurchase
programs, share purchases may be made from time to time depending on market conditions, share price, trading volume and other factors and will be
funded from available working capital.
During 2021, we used $1,300 million to repurchase approximately 10.9 million ordinary shares, which were repurchased under our repurchase
program. The table below provides detailed information.
Period
January 1 – January 31
February 1 – February 28
March 1 – March 31
April 1 – April 30
May 1 – May 31
June 1 – June 30
July 1 – July 31
August 1 – August 31
September 1 – September 30
October 1 – October 31
November 1 – November 30
December 1 – December 31
Total
Total Number
of Ordinary
Shares
Purchased (1)
0.6
1.6
0.5
0.9
1.2
0.7
0.8
1.3
0.5
0.8
1.4
0.6
10.9
Average Price
per Ordinary
Share
$128
$119
$114
$118
$118
$118
$122
$125
$121
$119
$116
$112
$119
Approximate
Dollar Amount
Available for
Repurchase
under the Plans
or Programs
$1,004
$820
$760
$656
$513
$435
$341
$2,175
$2,110
$2,010
$1,850
$1,785
(1) All the Ordinary Shares were purchased as part of publicly announced plans or programs.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
As a foreign private issuer whose shares are listed on the Nasdaq Global Select Market, we are permitted to follow certain home country corporate
governance practices instead of certain requirements of the Nasdaq Marketplace Rules.
We do not comply with the Nasdaq requirement that an issuer listed on the Nasdaq Global Select Market have a quorum requirement that in no
case be less than 33 1/3% of the outstanding shares of the company’s common voting stock. Our articles of association, consistent with the Israeli
Companies Law, provide that the quorum requirements for an adjourned meeting are the presence of a minimum of two shareholders present in person.
As such, our quorum requirements for an adjourned meeting do not comply with the Nasdaq requirements and we instead follow our home country
practice.
In addition, we follow our home country law, instead of the Nasdaq Marketplace Rules, which require that we obtain shareholder approval for the
establishment or amendment of certain equity based compensation plans and arrangements. Under Israeli law and practice, in general, the approval of
the board of directors is required for the establishment or amendment of equity based compensation plans and arrangements, unless the arrangement is
for the benefit of a director or a controlling shareholder, in which case compensation committee or audit committee and shareholder approval are also
required.
62
As a foreign private issuer listed on the Nasdaq Global Select Market, we may also follow home country practice with regard to, among other
things, composition of the board of directors, compensation practices and compensation committee practices, director nomination process and regularly
scheduled meetings at which only independent directors are present. In addition, we may follow our home country practice, instead of the Nasdaq
Global Select Market rules, which require that we obtain shareholder approval for certain dilutive events, such as for an issuance that will result in a
change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and
certain acquisitions of the stock or assets of another company. A foreign private issuer that elects to follow a home country practice instead of Nasdaq
rules must submit to Nasdaq in advance a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s
practices are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports filed with the Securities
and Exchange Commission or on its website each such requirement that it does not follow and describe the home country practice followed by the issuer
instead of any such requirement. Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq’s corporate
governance rules.
See Item 3.D. “Key Information – Risk factors – Risks Related to Our Operations In Israel – As a foreign private issuer whose shares are listed on
the Nasdaq Global Select Market, we may follow certain home country corporate governance practices instead of certain Nasdaq requirements,” Item 6
“Directors, Senior Management and Employees – Board Practices” and Item 10 “Additional Information – Articles of Association and Israeli Companies
Law” for a detailed description of the significant ways in which the registrant’s corporate governance practices differ from those followed by U.S.
companies under the listing standards of the Nasdaq Global Select Market.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
PART III
ITEM 17. FINANCIAL STATEMENTS
Check Point has responded to Item 18.
ITEM 18. FINANCIAL STATEMENTS
See beginning on page F-1 below.
ITEM 19. EXHIBITS
1 Articles of Association of Check Point Software Technologies Ltd. (1)
2.1 Description of the rights of each class of securities registered under Section 12 of the Securities Exchange Act of 1934 (2)
4.1
Form of Director Insurance, Indemnification and Exculpation Agreement between Check Point Software Technologies Ltd. and its directors (3)
4.2 Check Point Software Technologies Ltd. 2005 Israel Equity Incentive Plan, as amended
4.3 Check Point Software Technologies Ltd. 2005 United States Equity Incentive Plan, as amended
4.4 Check Point Software Technologies Ltd. Employee Stock Purchase Plan, as Amended and Restated (4)
4.5 Check Point Software Technologies Ltd. Employee Stock Purchase Plan (Non-U.S. Employees) (5)
4.6
A translation of an agreement between Tzlil Ad Ltd. and Check Point Software Technologies Ltd., for the purchase of the leasing rights of a
building in Tel Aviv, Israel, dated as of March 19, 2006 (6)
63
4.7 Dome9 Security Ltd. 2011 Share Option Plan and the 2016 Equity Incentive Subplan (7)
4.8 Check Point Software Technologies Ltd. Executive Compensation Plan (8)
8
List of subsidiaries (9)
12.1 Certification of the Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002
12.2 Certification of the Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002
13.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
13.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
15 Consent of Kost, Forer, Gabbay & Kasierer, a Member of EY Global
101
(i)
Inline XBRL (Extensible Business Reporting Language) The following materials from Check Point Software Technologies Ltd.’s Annual Report
on Form 20-F for the fiscal year-ended December 31, 2020, formatted in Inline XBRL:
Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Shareholders’ Equity/(Deficit) and
Comprehensive Income/(Loss) (iv) Consolidated Statements of Cash Flows, (v) Notes to the Consolidated Financial Statements, (vi) Schedule II
— Valuation and Qualifying Accounts and Reserves, and (vii) Cover Page
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Incorporated by reference to Exhibit 1 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2005.
Incorporated by reference to Exhibit 2.1 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2019.
Incorporated by reference to Exhibit 4.1 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2005.
Incorporated by reference to Exhibit 4.1 of Check Point’s Registration Statement on Form S-8 (No. 333-207355) filed with the Securities and
Exchange Commission on October 8, 2015.
Incorporated by reference to Exhibit 4.5 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2017.
Incorporated by reference to Exhibit 4.11 of Check Point’s Annual Report on Form 20-F for the year ended December 31, 2006.
Incorporated by reference to Exhibit 4.2 of Check Point’s Registration Statement on Form S-8 (No. 333-228075) filed with the Securities and
Exchange Commission on October 31, 2018.
Incorporated by reference to Annex A of Check Point’s Report on Form 6-K filed with the Securities and Exchange Commission on May 16, 2019.
Incorporated by reference to “Item 4 – Information on Check Point – Organizational Structure” in this Annual Report on Form 20-F.
64
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to
sign this annual report on its behalf.
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
SIGNATURES
By: /s/ Gil Shwed
Gil Shwed
Chief Executive Office
By: /s/ Tal Payne
Tal Payne
Chief Financial Officer
Date: April 14, 2022
65
CHECK POINT SOFTWARE TECHNOLOGIES LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021
IN U.S. DOLLARS
INDEX
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 1281)
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
- - - - - - - - - -
F-1
Page
F-2 - F-6
F-7 - F-8
F-9
F-10
F-11
F-12 - F-13
F-14 - F-44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Check Point Software Technologies Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Check Point Software Technologies Ltd. and subsidiaries (the
Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in
shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated
April 14, 2022, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
F-2
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures
to which they relate.
Revenue from Contracts with Customers—Estimate of Standalone Selling Price
Description of the Matter
As described in Note 2 to the consolidated financial statements, the Company primarily derives
revenues from sales of products and licenses, security subscriptions and software updates and
maintenance. The Company’s contracts with customers often contain multiple goods and services
which are accounted for as separate performance obligations when they are distinct. The Company
allocates the transaction price to the distinct performance obligations on a relative standalone
selling price.
Auditing the Company’s revenue recognition required challenging and subjective auditor
judgment due to the subjective assumptions used to establish the standalone selling price for each
performance obligation. Standalone selling price for goods and services can evolve over time due
to changes in the Company’s pricing practices that are influenced by intense competition, changes
in demand for products and services, and economic factors, among others. This in turn led to
significant auditor judgment, subjectivity and effort in performing procedures and evaluating audit
evidence related to management’s determination of the standalone selling price.
How We Addressed the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of the
Company’s revenue process, including controls over the development and review of assumptions
used to estimate standalone selling prices.
Our substantive audit procedures included testing management’s determination of standalone
selling prices for each performance obligation, including, among others, assessing the
appropriateness of the methodology applied, testing mathematical accuracy of the underlying data
and evaluated the sources of the historical data and assumptions that the Company used by
considering their reliability. We also performed sensitivity analyses over key assumptions to
assess the impact on revenue recognition that could result from changes to the Company’s
assumptions. We also evaluated the Company’s disclosures included in notes to the consolidated
financial statements.
F-3
Uncertain Tax Positions
Description of the Matter
How We Addressed the Matte in Our
Audit
As discussed in Note 11 to the consolidated financial statements, the Company operates its
business in various countries, and accordingly attempts to utilize an efficient operating model to
structure its tax payments based on the laws in the countries in which the Company operates. This
can cause disputes between the Company and various tax authorities in different parts of the
world. The Company uses significant judgment in (1) determining whether a tax position’s
technical merits are more-likely-than-not to be sustained and (2) measuring the amount of tax
benefit that qualifies for recognition.
Auditing management’s analysis of the Company’s uncertain tax positions was especially
subjective and complex due to the significant judgments made by management to determine the
provisions for tax uncertainties. These provisions are based on interpretations of complex tax laws
and determination of arm’s length pricing for certain intercompany transactions. The assumptions
underlying the provisions for uncertain tax positions include the potential tax exposure resulting
from management’s interpretations and the determination of the cumulative probability that the
uncertain tax position will be upheld upon regulatory examination.
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s process to assess and review their uncertain tax positions. For
example, we tested the controls over the review of assumptions used in the estimation calculation
such as the Company’s review over existing and potential tax controversies and tax audit results,
and the computation of the impact to uncertain tax positions and tax reserves.
Our audit procedures included, among others, evaluating the assumptions the Company used to
develop its uncertain tax positions and related unrecognized income tax benefit amounts by
jurisdiction and testing the completeness and accuracy of the underlying data used by the
Company to calculate its uncertain tax positions. Our audit procedures also included, with the
assistance of our tax professionals, evaluating the technical merits of the Company’s tax positions
and the amounts recorded for uncertain tax positions. This included assessing the Company’s
correspondence with the relevant tax authorities and evaluating income tax opinions or other
third-party advice obtained by the Company based on our knowledge of, and experience with, the
application of international and local income tax laws by the relevant income tax authorities. We
also evaluated the Company’s financial statement disclosures related to these tax matters.
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
We have served as the Company’s auditor since 1994.
Tel-Aviv, Israel
April 14, 2022
F-4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Check Point Software Technologies Ltd.
Opinion on Internal Control Over Financial Reporting
We have audited Check Point Software Technologies Ltd. and subsidiaries’ internal control over financial reporting as of December 31,
2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Check Point Software Technologies Ltd. and
subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31,
2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income,
comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021,
and the related notes and our report dated April 14, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our
audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
F-5
Definition and Limitation of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
Tel-Aviv, Israel
April 14, 2022
F-6
CONSOLIDATED BALANCE SHEETS
In millions
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term bank deposits
Marketable securities
Trade receivables, net
Prepaid expenses and other assets
Total current assets
LONG-TERM ASSETS:
Marketable securities
Property and equipment, net
Deferred tax asset, net
Intangible assets, net
Goodwill
Other assets
Total long-term assets
Total assets
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
December 31,
2021
2020
$
271.9 $
492.5
929.3
597.8
46.4
255.7
214.5
1,217.5
540.8
50.1
2,337.9
2,278.6
2,089.7
83.4
51.7
61.0
1,196.2
80.3
2,311.9
88.1
34.4
38.5
1,002.2
85.5
3,562.3
3,560.6
$ 5,900.2 $ 5,839.2
The accompanying notes are an integral part of the consolidated financial statements.
F-7
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT’D)
In millions (except per share data)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables
Employees and payroll accruals
Deferred revenues
Accrued expenses and other liabilities
Total current liabilities
LONG-TERM LIABILITIES:
Deferred revenues
Income tax accrual
Other liabilities
Total long-term liabilities
Total liabilities
SHAREHOLDERS’ EQUITY:
Ordinary shares, NIS 0.01 par value, 500.0 shares authorized at December 31, 2021 and 2020;
261.3 shares issued at December 31, 2021 and 2020; 129.1 and 137.2 shares outstanding at
December 31, 2021 and 2020, respectively
Additional paid-in capital
Treasury shares at cost, 132.2 and 124.1 ordinary shares at December 31, 2021 and 2020,
respectively
Accumulated other comprehensive (loss) income
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of the consolidated financial statements.
F-8
December 31,
2021
2020
$
9.8
206.3
1,257.4
238.6
$
17.5
220.9
1,108.6
196.8
1,712.1
1,543.8
449.7
454.9
26.4
931.0
373.3
422.8
33.1
829.2
2,643.1
2,373.0
0.8
2,276.7
0.8
2,028.4
(10,550.7)
(0.6)
11,530.9
(9,319.0)
40.7
10,715.3
3,257.1
3,466.2
$
5,900.2
$
5,839.2
CONSOLIDATED STATEMENTS OF INCOME
In millions (except per share data)
Revenues:
Products and licenses
Security subscriptions
Software updates and maintenance
Total revenues
Operating expenses:
Cost of products and licenses *)
Cost of security subscriptions *)
Cost of software updates and maintenance *)
Amortization of technology
Total cost of revenues
Research and development
Selling and marketing
General and administrative
Total operating expenses
Operating income
Financial income, net
Income before taxes on income
Taxes on income
Net income
Basic earnings per ordinary share
Diluted earnings per ordinary share
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
Year ended
December 31,
2021
2020
2019
$ 513.9
755.2
897.7
$ 513.6
671.1
880.2
$ 510.8
610.3
873.7
2,166.8
2,064.9
1,994.8
110.7
35.9
103.0
8.5
96.8
26.4
96.7
6.6
90.7
24.6
94.5
5.6
258.1
226.5
215.4
292.7
597.8
110.7
252.8
569.9
111.5
239.2
552.7
105.7
1,259.3
1,160.7
1,113.0
907.5
42.1
949.6
134.0
904.2
66.6
970.8
124.2
881.8
80.6
962.4
136.7
$ 815.6
$ 846.6
$ 825.7
$
$
6.13
6.08
$
$
6.03
5.96
$
$
5.48
5.43
*)
Not including amortization of technology shown separately.
The accompanying notes are an integral part of the consolidated financial statements.
F-9
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In millions (except per share data)
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
Net income
Other comprehensive income (loss)
Change in unrealized gains (losses) on marketable securities:
Unrealized gains (losses) arising during the period, net of tax
Gains reclassified into earnings, net of tax
Change in unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) arising during the period, net of tax
Gains reclassified into earnings, net of tax
Other comprehensive income (loss), net of tax
Year ended
December 31,
2020
2019
2021
$
815.6
$
846.6
$
825.7
(38.5)
(1.7)
21.2
(3.4)
45.8
(0.6)
(40.2)
17.8
45.2
(0.1)
(1.0)
(1.1)
6.4
(5.2)
1.2
2.2
(1.2)
1.0
(41.3)
19.0
46.2
Comprehensive income
$ 774.3
$ 865.6
$ 871.9
The accompanying notes are an integral part of the consolidated financial statements.
F-10
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
In millions
Ordinary
shares
Additional
paid-in
capital
Accumulated
other
Treasury
shares
at cost
comprehensive Retained
earnings
income (loss)
Total
shareholders’
equity
Balance as of January 1, 2019
$
0.8 $ 1,597.8 $ (6,844.7) $
(24.5)
$ 9,043.0 $
3,772.4
Issuance of treasury shares under stock purchase plans, upon exercise of
options and vesting of restricted stock units (1.3 ordinary shares)
Treasury shares at cost (11.2 ordinary shares)
Stock-based compensation
Other comprehensive income, net of tax
Fair value of awards attributable to pre-acquisition services
Net income
-
-
-
-
-
-
65.3
-
106.7
-
0.5
-
30.0
(1,278.0)
-
-
-
-
Balance as of December 31, 2019
0.8
1,770.3
(8,092.7)
Issuance of treasury shares under stock purchase plans, upon exercise of
options and vesting of restricted stock units (3.1 ordinary shares)
Treasury shares at cost (11.4 ordinary shares)
Stock-based compensation
Other comprehensive income, net of tax
Fair value of awards attributable to pre-acquisition services
Net income
-
-
-
-
-
-
145.4
-
112.5
-
0.2
-
71.4
(1,297.7)
-
-
-
-
Balance as of December 31, 2020
0.8
2,028.4
(9,319.0)
Issuance of treasury shares under stock purchase plans, upon exercise of
options and vesting of restricted stock units (2.8 ordinary shares)
Treasury shares at cost (10.9 ordinary shares)
Stock-based compensation
Other comprehensive income, net of tax
Fair value of awards attributable to pre-acquisition services
Net income
-
-
-
-
-
-
126.2
-
120.3
-
1.8
-
67.8
(1,299.5)
-
-
-
-
-
-
-
46.2
-
-
21.7
-
-
-
19.0
-
-
40.7
-
-
-
(41.3)
-
-
-
-
-
-
-
825.7
95.3
(1,278.0)
106.7
46.2
0.5
825.7
9,868.7
3,568.8
-
-
-
-
-
846.6
216.8
(1,297.7)
112.5
19.0
0.2
846.6
10,715.3
3,466.2
-
-
-
-
-
815.6
194.0
(1,299.5)
120.3
(41.3)
1.8
815.6
Balance as of December 31, 2021
$ 0.8 $ 2,276.7 $(10,550.7) $
(0.6)
$ 11,530.9 $ 3,257.1
The accompanying notes are an integral part of the consolidated financial statements.
F-11
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
In millions
Year ended
December 31,
2020
2019
2021
Cash flows from operating activities:
Net income
Adjustments required to reconcile net income to net cash provided by operating activities:
$
815.6
$
846.6
$
825.7
Depreciation of property and equipment
Amortization of premium and accretion of discount on marketable securities, net
Realized gain on sale of marketable securities, net
Amortization of intangible assets
Stock-based compensation
Deferred income tax
Increase in trade receivables, net
Decrease in prepaid expenses and other assets
Increase (decrease) in trade payables
Increase (decrease) in employees and payroll accruals
Increase in income tax accrual and accrued expenses and other liabilities
Increase in deferred revenues
Other
20.6
21.0
(1.4)
10.1
120.3
(4.0)
(51.6)
1.2
(7.7)
(8.9)
66.4
216.8
5.5
18.9
9.4
(4.5)
8.2
112.5
10.5
(45.0)
20.2
1.6
36.1
46.1
95.2
5.2
16.7
2.0
(0.7)
7.3
106.7
9.5
(0.4)
15.5
(4.8)
39.8
34.6
48.7
3.7
Net cash provided by operating activities
1,203.9
1,161.0
1,104.3
Cash flows from investing activities:
Proceeds from short-term bank deposits
Proceeds from maturity of marketable securities
Proceeds from sale of marketable securities
Investment in marketable securities
Investment in short-term bank deposits
Cash paid in conjunction with acquisitions, net of acquired cash
Purchase of property and equipment
214.5
1,551.7
184.1
(1,297.5)
(492.5)
(219.7)
(15.9)
-
2,299.7
318.6
(2,460.2)
(213.9)
(23.1)
(19.3)
4.9
2,140.1
167.4
(2,188.9)
-
(37.6)
(25.9)
Net cash provided by (used in) investing activities
$
(75.3)
$
(98.2)
$
60.0
The accompanying notes are an integral part of the consolidated financial statements.
F-12
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT’D)
In millions
Cash flows from financing activities:
Proceeds from issuance of treasury shares upon exercise of options
Purchase of treasury shares at cost
Payments related to shares withheld for taxes
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
Year ended
December 31,
2020
2019
2021
$
194.0
(1,299.5)
(6.9)
$
216.8
(1,297.7)
(5.4)
$
95.3
(1,278.0)
(6.0)
(1,112.4)
(1,086.3)
(1,188.7)
16.2
255.7
(23.5)
279.2
(24.4)
303.6
Cash and cash equivalents at the end of the year
$
271.9
$
255.7
$
279.2
Supplemental disclosure of cash flow information:
Cash paid during the year for taxes on income
$
101.0
$
90.8
$
87.3
Non-cash investing activity
Fair value of awards attributable to pre-acquisition services
Operating lease liabilities arising from obtaining right of use assets
1.8
1.4
$
0.2
10.3
$
0.5
33.4
$
The accompanying notes are an integral part of the consolidated financial statements.
F-13
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 1:-
GENERAL
a.
b.
Check Point Software Technologies Ltd., an Israeli corporation (“Check Point Ltd.”), and subsidiaries (collectively,
the “Company” or “Check Point”), develop, market and support wide range of products and services for IT security,
by offering a multilevel security architecture that defends enterprises’ cloud, network and mobile device held
information.
The Company operates in one operating and reportable segment and its revenues are mainly derived from the sales
of its network and data security products, including licenses, related software updates, maintenance and security
subscriptions. The Company sells its products worldwide primarily through multiple distribution channels (“channel
partners”), including distributors, resellers, system integrators, Original Equipment Manufacturers (“OEMs”) and
Managed Security Service Providers (“MSPs”).
During 2021, 2020 and 2019, approximately 40%, 39% and 37% of the Company’s revenues were derived from two
channel partners, respectively. Revenues derived from one channel partner in 2021, 2020 and 2019 were 24%, 22%
and 19%, respectively, and revenues derived from the other channel partner in 2021, 2020 and 2019 were 16%, 17%,
and 18%, respectively, of the Company’s revenues in such years. Trade receivable balances from these two channel
partners aggregated to $271.8 and $236.6 as of December 31, 2021 and 2020, respectively.
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in conformity with United States generally accepted accounting
principles (“U.S. GAAP”).
a.
Use of estimates:
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to
make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments
and assumptions used are reasonable based upon information available at the time they are made. These estimates,
judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
b.
Financial statements in United States dollars:
Most of the Company’s revenues and costs are denominated in United States dollar (“dollar”). The Company’s
management believes that the dollar is the primary currency of the economic environment in which the Company
and each of its subsidiaries operate. Thus, the dollar is the Company’s functional and reporting currency.
Accordingly, non-dollar denominated transactions and balances have been re-measured into the functional currency
in accordance with Accounting Standard Code (“ASC”) No. 830, “Foreign Currency Matters”.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
All transaction gains and losses from the re-measured monetary balance sheet items are reflected in the statements of
income as financial income or expenses, as appropriate.
c.
Principles of consolidation:
The consolidated financial statements include the accounts of Check Point Ltd. and subsidiaries. Intercompany
transactions and balances have been eliminated upon consolidation.
d.
Cash equivalents:
Cash equivalents are short-term unrestricted highly liquid investments that are readily convertible to cash and with
original maturities of three months or less at investment.
e.
Short-term bank deposits:
Bank deposits with maturities of more than three months at investment but less than one year are included in short-
term bank deposits. Such deposits are stated at cost which approximates fair values.
f.
Trade Receivables:
Trade receivables are recorded and carried at the original invoiced amount less an allowance for any potential
uncollectible amounts.
The Company makes estimates of expected credit and collectability trends for the allowance for credit losses 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.
Starting January 1, 2020, the Company is utilizing a current expected credit losses (CECL) model for financial
instruments measured at amortized cost, including its accounts receivables.
As of December 31, 2021 and 2020, trade receivable, net, were $597.8 and $540.8, respectively, and the allowances
of trade receivable were insignificant.
The Company writes off receivables when they are deemed uncollectible, having exhausted all collection efforts.
Actual collection experience may not meet expectations and may result in increased bad debt expense. Bad debt and
total write offs expenses during 2021, 2020 and 2019 were insignificant.
F-15
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g.
Investments in marketable securities:
The Company accounts for investments in marketable securities in accordance with ASC No. 320, “Investments -
Debt and Equity Securities”.
Management determines the appropriate classification of its investments at the time of purchase and reevaluates such
determinations at each balance sheet date. The Company classifies all of its debt securities as available-for-sale
(“AFS”). Available-for-sale debt securities are carried at fair value, with the unrealized gains and losses, net of tax,
reported in accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on
sale of investments are included in financial income, net and are derived using the specific identification method for
determining the cost of securities sold.
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization together with interest on securities is included in financial income, net.
Starting January 1, 2020, in accordance with Accounting Standards Update No. 2016-13, Financial Instruments-
Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, each reporting period, the
Company evaluates whether declines in fair value below amortized cost are due to expected credit losses, as well as
the company’s ability and intent to hold the investment until a forecasted recovery occurs. Allowance for credit
losses on AFS debt securities are recognized in the Company’s consolidated statements of income, and any
remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in
stockholders’ equity.
No credit losses were recorded for the years ended December 31, 2021 and 2020.
h.
Property and equipment, net:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets at the following annual rates:
Computers and peripheral equipment
Office furniture and equipment
Building
Leasehold improvements
%
33 - 50
10 - 20
4
The shorter of term of the lease or the
useful life of the asset
F-16
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
i.
Leases:
The company’s operating leases comprised of offices and equipment leases.
The Company determines if an arrangement is a lease and the classification of that lease at inception based on:
(1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to
substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company
has a right to direct the use of the asset. The Company elected to not recognize a lease liability or right-of-use
(“ROU”) asset for leases with a term of twelve months or less. The Company also elected the practical expedient to
not separate non-lease components for its leases.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the
obligation to make minimum lease payments arising from the lease. ROU assets are initially measured at amounts,
which represents the discounted present value of the lease payments over the lease, plus any initial direct costs
incurred. The lease liability is initially measured at lease commencement date based on the discounted present value
of minimum lease payments over the lease term. The implicit rate within the operating leases is generally not
determinable, therefore the Company uses its Incremental Borrowing Rate (“IBR”) based on the information
available at commencement date in determining the present value of lease payments. The Company’s IBR is
estimated to approximate the interest rate on similar terms and payments and in economic environments where the
leased asset is located. Certain leases include options to extend or terminate the lease. An option to extend the lease
is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the
Company will exercise that option. An option to terminate is considered unless it is reasonably certain that the
Company will not exercise the option.
As of December 31, 2021 the Company recognized total ROU assets of $22.0, with corresponding liabilities of
$23.3 on the consolidated balance sheets.
Rent expenses for the years ended December 31, 2021, 2020 and 2019, were $8.1, $13.1 and $11.1 respectively.
j.
Business combination:
The Company applies the provisions of ASC 805, “Business Combination” and allocates the fair value of purchase
consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their
estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable
assets and liabilities is recorded as goodwill.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
When determining the fair values of assets acquired and liabilities assumed, management makes significant
estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain
intangible assets include, but are not limited to future expected cash flows from acquired technology and acquired
trademarks and tradenames from a market participant perspective, useful lives and discount rates. Management’s
estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and
unpredictable and, as a result, actual results may differ from estimates. Acquisition-related expenses are recognized
separately from the business combination and are expensed as incurred (see also Note 3).
k.
Goodwill:
Goodwill has been recorded as a result of acquisitions. Goodwill represents the excess of the purchase price in a
business combination over the fair value of identifiable net tangible and intangible assets acquired. Goodwill is not
amortized, but rather is subject to an impairment test.
ASC No. 350, “Intangibles—Goodwill and other” (“ASC No. 350”) requires goodwill to be tested for impairment at
the reporting unit level at least annually or between annual tests in certain circumstances, and written down when
impaired.
ASC No. 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the
quantitative goodwill impairment test. If the qualitative assessment does not result in a more likely than not
indication of impairment, no further impairment testing is required. If it does result in a more likely than not
indication of impairment, the quantitative goodwill impairment test is performed. Alternatively, ASC No. 350
permits an entity to bypass the qualitative assessment for any reporting unit and proceed directly to performing the
quantitative goodwill impairment test. If the carrying value of a reporting unit exceeds its fair value, the Company
recognizes an impairment of goodwill for the amount of this excess, in accordance with the guidance in FASB
Accounting Standards Update (“ASU”) No. 2017-04, Intangibles—Goodwill and Other (Topic 350), Simplifying the
Test for Goodwill Impairment.
The Company operates in one operating segment, and this segment is the only reporting unit. The Company
performs the quantitative goodwill impairment test during the fourth quarter of each fiscal year, or more frequently if
impairment indicators are present and compares the fair value of the reporting unit with its carrying value.
During the years 2021, 2020 and 2019, no impairment losses have been identified.
F-18
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
l.
Intangible assets, net:
Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful
lives, which range from 4 to 20 years. These intangible assets consist of core technology, customer relationship,
trademarks and trade names which are amortized over their estimated useful lives.
m.
Impairment of long-lived assets including intangible assets subject to amortization:
The Company’s long-lived assets are reviewed for impairment in accordance with ASC No. 360, “Property, Plant
and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of
the assets to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. During the years 2021, 2020 and 2019, no impairment losses have been
identified.
n.
Manufacturing partner and supplier liabilities:
The Company purchases manufactured products from its original design manufacture (“ODM”). The Company
generally does not own the manufactured products. ODM’s provide services of design, manufacture, orders
fulfillment and support with a full turn-key solution to meet the Company’s detailed requirements. If the actual
demand is significantly lower than forecast, the Company records a liability for its commitment in excess of the
actual demand. As of December 31, 2021 and 2020, the Company has not accrued any significant liability in respect
with this exposure.
o.
Research and development costs:
Research and development costs are charged to the statements of income as incurred. ASC No. 985-20, “Software—
Costs of Software to Be Sold, Leased, or Marketed”, requires capitalization of certain software development costs
subsequent to the establishment of technological feasibility.
Based on the Company’s product development process, technological feasibility is established upon completion of a
working model. Costs incurred by the Company between completion of the working models and the point at which
the products are ready for general release, have been insignificant. Therefore, all research and development costs are
expensed as incurred.
F-19
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
p.
Revenue recognition:
The Company derives its revenues mainly from sales of products and licenses, security subscriptions and software
updates and maintenance. The Company’s products are generally integrated with software that is essential to the
functionality of the product. The Company sells its products primarily through channel partners including
distributors, resellers, OEMs (Original Equipment Manufacturers), system integrators and MSPs (Managed Service
Providers), all of whom are considered end-users.
The Company’s security subscriptions provide customers with access to its suite of security solutions and is sold as a
service.
The Company’s software updates and maintenance provide customers with rights to unspecified software product
upgrades released during the term of the agreement and include maintenance services to end-user customers, through
primarily telephone access to technical support personnel as well as hardware support services.
The Company recognizes revenues in accordance with ASC No. 606, “Revenue from Contracts with Customers”. As
such, the Company identifies a contract with a customer, identifies the performance obligations in the contract,
determines the transaction price, allocates the transaction price to each performance obligation in the contract and
recognizes revenues when (or as) the Company satisfies a performance obligation.
Revenues from sales of products and licenses are recognized upon shipment when control of the promised goods is
transferred to the customer, or upon electronic transfer of the Certificate Key to the Customer. Revenues from
security subscriptions and from software updates and maintenance are recognized ratably over the term of the
agreement.
The Company’s arrangements typically contain various combinations of its products and licenses, security
subscriptions and software updates and maintenance, which are distinct and are accounted for as a separate
performance obligations. The Company allocates the transaction price to each performance obligation based on its
relative standalone selling price using the prices charged for a performance obligation when sold separately.
Deferred revenues represent mainly the unrecognized revenue billed for security subscriptions and for software
updates and maintenance. Such revenues are recognized ratably over the term of the related agreement. The amount
of revenues recognized in the period that was included in the opening deferred revenues balance was $1,108.6 and
$1,011.9 for the year ended December 31, 2021 and December 31, 2020, respectively.
Revenues expected to be recognized from remaining performance obligations were $2,013.6 and $1,679.8 as of
December 31, 2021 and December 31, 2020, respectively. Of the balance as of December 31, 2021 the Company
expects to recognize approximately $1,366.5 over the next 12 months and the remainder thereafter.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
The Company records a provision for estimated sales returns, rebates, stock rotations and other rights provided to
customers on product and services based on historical sales returns, analysis of credit memo data, rebate plans, stock
rotation arrangements and other known factors. This provision is accounted for as variable consideration that is
deducted from revenue in the period in which the revenue is recognized. Such provision amounted to $10.4 and $6.9
as of December 31, 2021 and 2020, respectively, and is included in accrued expenses and other liabilities in the
consolidated balance sheets.
Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of
obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit which is
typically over the term of the customer contracts as initial commission rates are commensurate with the renewal
commission rates. Amortization expense is included in sales and marketing expenses in the accompanying
consolidated statements of income. If the amortization period of those costs is one year or less, the costs are
expensed as incurred. As of December 31, 2021 and 2020, the amount of deferred commission was $17.1 and $18.1,
respectively, and is included in other long term assets on the balance sheets. During the years ended on
December 31, 2021, 2020 and 2019 the Company recorded amortization expenses in connection with deferred
commissions in the amount of $11.6, $15.3 and $13.1, respectively.
For information regarding disaggregated revenues, please refer to Note 14 below.
q.
Cost of revenues:
Cost of products and licenses is comprised of cost of software and hardware production, manuals, packaging and
shipping.
Cost of security subscriptions is comprised of costs paid to third parties, hosting and infrastructure costs and cost of
customer support related to these services.
Cost of software updates and maintenance is mainly comprised of cost of post-sale customer support.
Amortization of technology is comprised of amortization of core technology assets which are used in the Company’s
operations, and is presented separately as part of cost of revenues.
F-21
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
r.
Severance pay:
Effective January 1, 2007, the Company’s agreements with employees in Israel, are under Section 14 of the
Severance Pay Law, 1963. The Company’s contributions for severance pay have extinguished its severance
obligation. Upon contribution of the full amount based on the employee’s monthly salary for each year of service, no
additional obligation exists regarding the matter of severance pay and no additional payments is made by the
Company to the employee. Further, the related obligation and amounts deposited on behalf of the employee for such
obligation are not stated on the balance sheets, as the Company is legally released from the obligation to employees
once the required deposit amounts have been paid.
s.
Employee benefit plan:
The Company has a 401(K) defined contribution plan covering certain employees in the U.S. The Company matches
50% of employee contributions to the plan up to a limit of 6% of their eligible compensation. The Company’s
matching contribution to the plan were insignificant for the years ended December 31, 2021, 2020 and 2019.
t.
Income taxes:
The Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes” (“ASC No. 740”). ASC
No. 740 prescribes the use of the liability method whereby deferred tax asset and liability account balances are
determined for temporary differences between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The
Company provides a valuation allowance, if necessary, to reduce deferred tax assets to amounts more likely than not
to be realized. The Company accrues interest and indexation related to unrecognized tax benefits on its taxes on
income.
ASC No. 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The
first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of
available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax
position will be sustained on audit, including resolution of any related appeals or litigation processes.
The second step is to measure the tax benefit as the largest amount that is more than 50% (cumulative basis) likely to
be realized upon ultimate settlement. The Company classifies interest related to unrecognized tax benefits in taxes
on income.
F-22
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
u.
Advertising costs:
Advertising costs are expensed as incurred. Advertising expenses for the years ended December 31, 2021, 2020 and
2019, were $4.1, $3.7 and $5.2 respectively.
v.
Concentrations of credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash
and cash equivalents, short-term bank deposits, marketable securities, trade receivables and foreign currency
derivative contracts.
The majority of the Company’s cash and cash equivalents and short-term bank deposits are deposited in major banks
in the U.S., Israel and Europe. Deposits in the U.S. may be in excess of insured limits and are not insured in other
jurisdictions. Generally, these deposits may be withdrawn upon demand and therefore bear low risk. Marketable
securities are held mainly by Check Point Ltd., the Company’s Singaporean subsidiary, Canadian subsidiary and the
U.S. subsidiary, and are invested in securities denominated in dollar.
The Company’s marketable securities consist of investments in government, corporate and government sponsored
enterprises debentures. The Company’s investment policy, approved by the Board of Directors, limits the amount
that the Company may invest in any one type of investment, or issuer, thereby reducing credit risk concentrations.
The Company’s trade receivables are geographically dispersed and derived from sales to channel partners mainly in
the United States, Europe and Asia. Concentration of credit risk with respect to trade receivables is limited by credit
limits, ongoing credit evaluation and account monitoring procedures.
w.
Derivatives and hedging:
The Company accounts for derivatives and hedging based on ASC No. 815, “Derivatives and Hedging” (“ASC
No. 815”). ASC No. 815 requires the Company to recognize all derivatives on the balance sheets at fair value. The
accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship, as well as the type of hedging relationship. For those
derivative instruments that are designated and qualify as hedging instruments, the Company must designate the
hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a
net investment in a foreign operation. If the derivatives meet the definition of a hedge and are designated as such,
depending on the nature of the hedge, changes in the fair value of such derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in
accumulated other comprehensive income until the hedged item is recognized in earnings.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
The Company entered into forward contracts to hedge the fair value of assets and liabilities denominated in several
foreign currencies. As of December 31, 2021 and 2020, the Company had outstanding forward contracts that did not
meet the requirement for hedge accounting, in the notional amount of $171.1 and $396.2, respectively. The
Company measured the fair value of the contracts in accordance with ASC No. 820, “Fair Value Measurement”
(“ASC No. 820”) (classified as level 2 of the fair value hierarchy). The net gains (losses) resulting from these
forward contracts recognized in financial income, net during 2021, 2020 and 2019 were $(0.6), $24.8 and $16.7,
respectively. The change in fair value of the Company’s outstanding forward contracts vs. the notional amounts at
December 31, 2021 and 2020 was insignificant.
The Company entered into forward contracts to hedge against the risk of overall changes in future cash flow from
payments of payroll and related expenses denominated in New Israeli Shekel and in Euro. As of December 31, 2021
and 2020, the Company had outstanding forward contracts in the notional amount of $155.0 and $37.7, respectively.
These contracts were for a period of up to twelve months.
The Company measured the fair value of the contracts in accordance with ASC No. 820 (classified as level 2 of the
fair value hierarchy). These contracts met the requirement for cash flow hedge accounting and, as such, gains
(losses) on the contracts are recognized initially as component of Accumulated Other Comprehensive Income in the
balance sheets and reclassified to the statements of income in the period the related hedged items affect earnings.
During 2021, 2020 and 2019 gains in the amount of $1.1, $5.9 and $1.3, respectively, were reclassified when the
related expenses were incurred and recognized in operating expenses. The change in fair value of the Company’s
outstanding forward contracts vs. the notional amounts at December 31, 2021 and 2020 was insignificant.
x.
Basic and diluted earnings per share:
Basic earnings per share are computed based on the weighted average number of ordinary shares outstanding during
each year. Diluted earnings per share are computed based on the weighted average number of ordinary shares
outstanding during each year, plus dilutive potential ordinary shares outstanding during the year, in accordance with
ASC No. 260, “Earnings Per Share”.
The total weighted average number of shares related to the outstanding options excluded from the calculations of
diluted earnings per share, since it would have an anti-dilutive effect, was 4.9, 6.2 and 4.9 for 2021, 2020 and 2019,
respectively.
F-24
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
y.
Accounting for stock-based compensation:
The Company accounts for stock-based compensation in accordance with ASC No. 718, “Compensation-Stock
Compensation” (“ASC No. 718”). ASC No. 718 requires companies to estimate the fair value of equity-based
payment awards on the grant date using an option-pricing model.
The Company recognizes compensation expenses for the value of awards granted, based on the straight line method
for service based awards and based on the accelerated method for performance-based awards. Compensation
expense is recognized over the requisite service period of the awards. The Company recognizes forfeitures of
awards as they occur.
The Company selected the Black-Scholes-Merton option pricing model as the most appropriate model for
determining the fair value for its stock options awards and Employee Stock Purchase Plan, whereas the fair value of
restricted stock units is based on the closing market value of the underlying shares at the date of grant. The option-
pricing model requires a number of assumptions, the most significant of which are the expected stock price volatility
and the expected option term. Expected volatility was calculated based upon actual historical stock price movements
over the most recent periods ending on the grant date, equal to the expected term of the options.
The expected term of options granted is based upon historical experience and represents the period of time between
when the options are granted and when they are expected to be exercised. The risk-free interest rate is based on the
yield from U.S. treasury bonds with an equivalent term to the expected term of the options. The Company has
historically not paid dividends and has no plans to pay dividends in the foreseeable future.
The fair value of options granted and Employee Stock Purchase Plan in 2021, 2020 and 2019 is estimated at the date
of grant using the following weighted average assumptions:
Employee Stock Options
Employee Stock Options
Expected volatility
Risk-free interest rate
Dividend yield
Expected term (years)
Employee Stock Purchase Plan
Expected volatility
Risk-free interest rate
Dividend yield
Expected term (years)
F-25
Year ended December 31,
2019
2020
2021
25.28%
0.65%
0.0%
4.22
23.63%
0.32%
0.0%
4.15
20.78%
1.98%
0.0%
4.11
22.44%
0.24%
0.0%
0.5
36.58%
0.05%
0.0%
0.5
18.59%
0.8%
0.0%
0.5
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
z.
Fair value of financial instruments:
The Company measures its investments in money market funds (classified as cash equivalents), short-term bank
deposits, marketable securities and its foreign currency derivative contracts at fair value. Fair value is an exit price,
representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. A three-tier fair value hierarchy is established as a basis for considering such
assumptions and for inputs used in the valuation methodologies in measuring fair value:
Level 1 -
Level 2 -
Level 3 -
Valuations based on quoted prices in active markets for identical assets that the Company has the
ability to access. Since valuations are based on quoted prices that are readily and regularly available
in an active market, valuation of these products does not entail a significant degree of judgment.
Valuations based on one or more quoted prices in markets that are not active or for which all
significant inputs are observable, either directly or indirectly.
Valuations based on inputs that are unobservable and significant to the overall fair value
measurement.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value.
aa.
Comprehensive income:
The Company accounts for comprehensive income in accordance with ASC No. 220, “Comprehensive Income”.
Comprehensive income generally represents all changes in shareholders’ equity during the period except those
resulting from investments by, or distributions to, shareholders. The Company determined that its items of other
comprehensive income relate to gains and losses on hedging derivative instruments and unrealized gains and losses
on available-for-sale debt securities.
ab.
Treasury shares:
The Company repurchases its ordinary shares from time to time on the open market and holds such shares as
treasury shares. The Company presents the cost to repurchase treasury stock as a separate component of
shareholders’ equity.
The Company reissues treasury shares under the stock purchase plan, upon exercise of options and upon vesting of
restricted stock units. Reissuance of treasury shares is accounted for in accordance with ASC No. 505-30 whereby
gains are credited to additional paid-in capital and losses are charged to additional paid-in capital to the extent that
previous net gains are included therein; otherwise to retained earnings.
F-26
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
ac.
Legal contingencies:
The Company is currently involved in various claims and legal proceedings. The Company reviews the status of
each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is
considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated
loss.
ad.
Recently Adopted Accounting Pronouncements:
In October 2021, the FASB issued ASU No. 2021-08, Business Combination (Topic 805): Accounting for Contract
Assets and Liabilities from Contracts with Customers, which requires an acquirer to recognize and measure contract
assets and liabilities acquired in a business combination in accordance with Revenue from ASC 606 rather than
adjust them to fair value at the acquisition date. The Company early adopted this guidance in the fourth quarter of
2021, retroactively applying it to all business combinations since January 1, 2021. The adoption did not have a
material effect on its consolidated financial statements.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 3:-
ACQUISITIONS
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
On September 17, 2020 the Company completed the acquisition of all outstanding shares of Odo Security Ltd., a
privately-held Israeli-based company, and a developer of a cloud-based, clientless Secure Access Service Edge
(SASE) technology that delivers secure remote access.
On September 1, 2021, the Company completed the acquisition of all outstanding shares of Avanan Inc. (“Avanan”),
a privately-held US-based company providing cloud email security, and the developer of a patented application-
programming interface (API) solution to stop email threats before arriving to the inbox (inline), for both internal and
external emails using AI based engines. The Company acquired Avanan for total consideration of approximately
$227.1.
The purchase price for all the acquisitions mentioned was allocated to tangible and intangible assets acquired and
liabilities assumed based on their respective fair values.
In addition, the transactions included additional consideration related to compensation for post combination services
which were recorded as prepaid expenses and other long term assets and will be recognized over the requisite
service period.
The Company accounted for this transaction as a business combination and allocated the purchase consideration to
assets acquired and liabilities assumed based on their estimated fair values, as presented in the following table:
Goodwill
Core technology
Customer relationship
Net assets assumed
Total
F-28
Weighted
Average
Useful Life
8 Years
4 Years
Amount
$ 194.2
26.7
5.8
0.4
$
227.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 4:-
CASH AND CASH EQUIVALENTS, SHORT-TERM BANK DEPOSITS AND MARKETABLE SECURITIES
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
Cash and cash equivalents:
Cash
Money market funds
Short term deposits
Total Cash and cash equivalents
Short-term bank deposits:
Marketable securities:
Government and corporate debentures—fixed interest rate
Government-sponsored enterprises debentures
Government and corporate debentures—floating interest rate
Total Marketable securities
December 31,
2021
2020
$
170.8 $
6.6
94.5
204.4
14.5
36.8
271.9
255.7
492.5
214.5
2,262.5
641.4
115.1
2,626.9
714.7
187.8
3,019.0
3,529.4
Total Cash and cash equivalents, short-term bank deposits and marketable
securities
$ 3,783.4 $ 3,999.6
The gross unrealized gains on the Company’s marketable securities were $14.2 and $51.4 as of December 31, 2021
and 2020, respectively. The gross unrealized losses on the Company’s marketable securities were $15.7 and $0.4 as
of December 31, 2021 and 2020, respectively. All marketable securities in unrealized loss position are in continuous
loss of less than 12 months or insignificant.
The following table classifies the Company’s marketable securities by contractual maturities:
Contractual maturity year:
Within one year
After one year through five years
Total
December 31,
2021
2020
Fair Value
Amortized
Cost
Fair Value
Amortized
Cost
$
$
929.3
2,089.7
3,019.0
$
$
925.8
2,094.7
3,020.5
$
$
1,217.5
2,311.9
3,529.4
$
$
1,211.8
2,266.6
3,478.4
As of December 31, 2021 and 2020, interest receivable amounted to $15.3 and $19.5, respectively, and is included
within prepaid expenses and other assets in the balance sheets.
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 5:-
FAIR VALUE MEASUREMENTS
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
In accordance with ASC No. 820, the Company measures its money market funds, short-term bank deposits, marketable securities
and foreign currency derivative contracts at fair value. Money market funds and marketable securities are classified within Level 1
or Level 2. This is because these assets are valued using quoted market prices or alternative pricing sources and models utilizing
market observable inputs. Foreign currency derivative contracts are classified within Level 2 as the valuation inputs are based on
quoted prices and market observable data of similar instruments.
The Company’s financial assets measured at fair value on a recurring basis, excluding accrued interest components, consisted of the
following types of instruments as of the following dates:
December 31,
2021
Fair value measurements using input type
Level 1
Level 2
Total
2020
Fair value measurements using input type
Level 2
Level 1
Total
Cash equivalents
Money market funds
Short term deposits
Short-term bank deposits
Marketable securities:
Government and corporate
debentures - fixed
interest rate
Government-sponsored
enterprises debentures
Government and corporate
debentures - floating
interest rate
Foreign currency derivative
$
6.6 $
94.5
492.5
$
-
-
-
$
6.6
94.5
492.5
$
14.5
36.8
214.5
$
-
-
-
14.5
36.8
214.5
-
2,262.5
2,262.5
-
641.4
641.4
-
115.1
115.1
-
-
-
2,626.9
2,626.9
714.7
714.7
187.8
187.8
contracts
Total financial assets
-
$ 593.6 $
0.7
3,019.7
$
0.7
3,613.3
-
$ 265.8
$
2.5
3,531.9
$
2.5
3,797.7
NOTE 6:-
PROPERTY AND EQUIPMENT, NET
Cost:
Computers and peripheral equipment
Office furniture and equipment
Building
Leasehold improvements
Accumulated depreciation
Property and equipment, net
F-30
December 31,
2021
2020
$
66.8
7.4
78.5
28.5
$
61.3
8.4
78.9
26.4
181.2
97.8
175.0
86.9
$
83.4
$
88.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 7:-
GOODWILL AND INTANGIBLE ASSETS, NET
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
a.
Goodwill:
Balance as of January 1
Acquisitions
Balance as of December 31
b.
Intangible assets, net:
Original amount:
Core technology
Trademarks and trade names
Customer relationship
Accumulated amortization:
Core technology
Trademarks and trade names
Customer relationship
Intangible assets, net:
Core technology
Trademarks and trade names
Customer relationship
2021
2020
$ 1,002.2 $ 981.9
20.3
1,196.2 $ 1,002.2
194.0
$
Useful
Life
December 31,
2021
2020
$
8
15 – 20
4
82.2 $
25.5
5.8
55.4
25.5
-
113.5
80.9
28.0
24.0
0.5
52.5
54.2
1.5
5.3
20.0
22.4
-
42.4
35.4
3.1
-
$ 61.0 $ 38.5
Intangible assets which were fully amortized as of the prior year, are disposed from the original amount and the
accumulated amortization balances.
The estimated future amortization expense of Intangible assets as of December 31, 2021 is as follows:
2022
2023
2024
2025
2026
Thereafter
$
12.1
10.5
10.2
9.7
7.6
10.9
$ 61.0
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 8:-
DEFERRED REVENUES
Deferred revenues consisted of the following:
Security subscriptions
Software updates and maintenance
Other
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
December 31,
2021
2020
$
801.1 $
869.2
36.8
678.5
775.4
28.0
$ 1,707.1 $ 1,481.9
The majority of the deferred revenues are recognized within one year or less and presented as current deferred revenues in
the balance sheets. Substantially all of the remaining deferred revenues are presented as long term deferred revenues and
are recognized for a period greater than one year and up to five years.
NOTE 9:-
ACCRUED EXPENSES AND OTHER LIABILITIES
The components of accrued expenses and other liabilities are as follows:
Accrued products and licenses costs
Marketing expenses payable
Income tax payable
Legal accrual
Other accrued expenses
$
December 31,
2021
2020
102.5 $
9.8
28.1
39.5
58.7
96.4
7.1
11.9
32.6
48.8
$ 238.6 $ 196.8
NOTE 10:- COMMITMENTS AND CONTINGENT LIABILITIES
Litigations:
The Company is the defendant in various lawsuits, including employment-related litigation claims, construction claims and
other legal proceedings in the normal course of its business. Litigation and governmental proceedings can be expensive,
lengthy and disruptive to normal business operations, and can require extensive management attention and resources,
regardless of their merit. While the Company intends to defend the aforementioned matters vigorously, it believes that a
loss in excess of its accrued liability with respect to these claims is not probable.
F-32
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 11:-
TAXES ON INCOME
a.
Israeli taxation:
1.
Corporate tax:
Pursuant to Amendment 73 to the Investment Law adopted in 2017, a Company located in the Center of
Israel that meets the conditions for “Preferred Technological Enterprises”, is subject to tax rate of 12% tax
rate. The Company believes it meets those conditions.
Income not eligible for Preferred Enterprise benefits is taxed at a regular rate of 23%.
Prior to 2012, most of the Company’s income was exempt from tax or subject to reduced tax rates under the
Investment Law. Upon distribution of exempt income, the distributing company will be subject to corporate
reduced tax rates ordinarily applicable to such income under the Investment Law.
Reduced income under the Investment Law including the Preferred Enterprise Regime and Preferred
Technological Enterprise Regime will be freely distributable as dividends, subject to a 15% or 20%
withholding tax (or lower rate for non-Israeli resident shareholder, under an applicable tax treaty). However,
upon the distribution of a dividend from Preferred Income and Technological Preferred Enterprise to an
Israeli company, no withholding tax will be remitted.
Pursuant to a temporary tax relief initiated by the Israeli government, a company that elected by
November 11, 2013, to pay a reduced corporate tax rate as set forth in the temporary tax relief with respect
to undistributed exempt income generated under the Investment Law accumulated by the Company until
December 31, 2011 (“Trapped Earnings”) is entitled to distribute a dividend from such income without
being required to pay additional corporate tax with respect to such dividend. A company that has so elected
must make certain qualified investments in Israel over five-year period. A company that has elected to apply
the temporary tax relief cannot withdraw from its election. The Company has elected to apply the temporary
tax relief by the respective date and believes it meets those conditions.
Company’s tax assessments through 2015 tax year are considered final.
2.
Foreign Exchange Regulations:
Under the Foreign Exchange Regulations, Check Point Ltd. and its Israeli subsidiaries calculate their tax
liability in dollar according to certain orders.
The tax liability, as calculated in dollar is translated into New Israeli Shekels according to the exchange rate
as of December 31 of each year.
F-33
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 11:-
TAXES ON INCOME (Cont.)
b.
Income taxes of non-Israeli subsidiaries:
Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.
The Company does not provide deferred tax liabilities when it intends to reinvest earnings of foreign subsidiaries
indefinitely or if distributed, no tax liability will be imposed. Undistributed earnings of foreign subsidiaries that are
not distributed amounted to $467.9 and unrecognized deferred tax liability related to such earning amounted to
$83.6 as of December 31, 2021.
c.
Deferred tax assets and liabilities:
Deferred 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. As of December 31, 2021
and 2020, the Company’s deferred taxes were in respect of the following:
Carry forward tax losses
Employee share based compensation
Deferred revenues
Tax credits
Other
Deferred tax assets before valuation allowance
Valuation allowance – mainly in respect to carryforward losses
Deferred tax asset
Intangible assets
Undistributed earnings of subsidiary
Other
Deferred tax liability
Deferred tax asset, net
$
December 31,
2021
2020
$
83.7
29.2
5.6
23.9
23.5
165.9
(56.7)
109.2
(31.3)
(9.9)
(1.7)
81.5
27.6
10.5
23.2
15.9
158.7
(59.2)
99.5
(21.0)
(9.9)
(14.2)
(42.9)
(45.1)
$ 66.3
$ 54.4
*) As of December 31, 2021 and 2020 unrecognized tax benefit in the amounts of $14.6 and $20.0 was presented net
from deferred tax asset.
Through December 31, 2021, the U.S. subsidiaries had a U.S. federal loss carry-forward of approximately $307.1
expiring gradually beginning 2022, mainly resulting from tax benefits related to employees’ stock option exercises
that can be carried forward and offset against taxable income. Through December 31, 2021, the U.S. subsidiaries
had a U.S. state net loss carry forward of approximately $73.1, which expires between fiscal years 2022 and fiscal
2040, and is subject to limitations on their utilization.
F-34
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 11:-
TAXES ON INCOME (Cont.)
Through December 31, 2021, the U.S. subsidiaries had federal and states research and development tax credits of
approximately $24.2, which expire between fiscal years 2022 and fiscal 2040 and are subject to limitations on their
utilization.
d.
Income before taxes on income is comprised as follows:
Domestic
Foreign
e.
Taxes on income are comprised of the following:
Domestic taxes:
Current
Deferred
Foreign taxes:
Current
Deferred
Year ended
December 31,
2020
2019
2021
$
917.9
31.7
$
896.8
74.0
$
881.1
81.3
$ 949.6
$ 970.8
$ 962.4
Year ended
December 31,
2020
2021
2019
$
130.9
(1.1)
$
112.0
0.8
$
111.9
2.0
129.8
112.8
113.9
7.1
(2.9)
4.2
1.7
9.7
11.4
15.3
7.5
22.8
Taxes on income
$ 134.0
$ 124.2
$ 136.7
f.
The Company operates its business in various countries, and accordingly attempts to utilize an efficient operating
model to structure its tax payments based on the laws in the countries in which the Company operates. This can
cause disputes between the Company and various tax authorities in different parts of the world.
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 11:-
TAXES ON INCOME (Cont.)
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
A reconciliation of the beginning and ending amount of unrecognized tax benefits related to uncertain tax positions
is as follows:
Beginning balance
Increases related to tax positions taken during prior years
Decreases related to statute of limitations
Increases related to tax positions taken during the current year
Ending balance
December 31,
2021
2020
$ 442.8 $ 412.9
49.4
(72.8)
53.3
47.2
(77.2)
56.7
$ *)469.5 $ *)442.8
*) As of December 31, 2021 and 2020 unrecognized tax benefit in the amounts of $14.6 and $20.0 was presented net
from deferred tax asset.
Substantially all the balance of unrecognized tax benefits, if recognized, would reduce the Company’s annual
effective tax rate.
The Company adjusts the unrecognized tax benefit liability and income tax expense in the period in which the
uncertain tax position is effectively settled, the statute of limitations expires or when new information is available.
There is a reasonable possibility that $61.1 out of the unrecognized tax benefit liability will be adjusted within 12
months due to statute of limitations.
During the years ended December 31, 2021, 2020 and 2019, the Company recorded $9.7, $(0.6) and $4.2,
respectively for interest expense (income) related to uncertain tax positions. As of December 31, 2021 and 2020, the
Company had accrued interest liability related to uncertain tax positions in the amounts of $44.1 and $34.3,
respectively, which is included within income tax accrual on the balance sheets. The Company did not accrue
penalties during the years ended December 31, 2021 and 2020.
The Company files federal and state income tax returns in the U.S. All of the U.S subsidiaries’ tax years are subject
to examination by the U.S. federal and most U.S. state tax authorities due to their carry-forward tax losses and
overall credit carry-forward position, except for Check Point Software Technologies Inc. that the assessment statue
period for tax years throughout 2016 have expired.
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 Company believes it had adequately provided for all of its uncertain tax positions, including those items
currently under dispute.
F-36
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 11:-
TAXES ON INCOME (Cont.)
g.
Reconciliation of the theoretical tax expenses:
Reconciliation between the theoretical tax expenses, assuming all income is taxed at the statutory rate in Israel and
the actual income tax as reported in the statements of income is as follows:
Year ended December 31,
2020
2019
2021
Income before taxes as reported in the statements of income
$ 949.6
$ 970.8
$ 962.4
Statutory tax rate in Israel
23%
23%
23%
Decrease in taxes resulting from:
Effect of “Preferred Enterprise” status *)
Others, net
Effective tax rate
(11%)
2%
(11%)
1%
(11%)
2%
14%
13%
14%
*) Basic earnings per share amounts of the benefit resulting from
the “Technological preferred or Preferred Enterprise” status
$
0.80
$
0.73
$
0.66
*) Diluted earnings per share amounts of the benefit resulting
from the “Technological preferred or Preferred Enterprise”
status
$
0.80
$
0.72
$
0.65
NOTE 12:-
SHAREHOLDERS’ EQUITY
a.
General:
Ordinary shares confer upon their holders the right to receive notice to participate and vote in general meetings of
the Company, and the right to receive dividends if declared.
Dividends declared on ordinary shares will be paid in New Israeli Shekels. Dividends paid to shareholders outside
Israel will be converted into dollars, on the basis of the exchange rate prevailing at the date of payment.
F-37
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 12:-
SHAREHOLDERS’ EQUITY (Cont.)
b.
Share repurchase:
On August 5, 2021 the Company announced the expansion of the Company’s on-going share repurchase program by
an additional $2,000. Under the share repurchase program, as extended, the Company is authorized to continue to
repurchase up to $325 each quarter.
As of December 31, 2021, the Company repurchased ordinary shares for an aggregate amount of $11,785.1. During
2021, 2020 and 2019 the Company repurchased 10.9, 11.4, and 11.2 shares for an aggregate amount of $1,299.5,
$1,297.7 and $1,278.0, respectively.
c.
Stock Options, RSUs and PSUs:
In 2005, the Company adopted two new equity incentive plans, which were subsequently amended in January 2014
and in July 2018: the 2005 United States Equity Incentive Plan and the 2005 Israel Equity Incentive Plan together
are referred to as the Equity Incentive Plans.
Under the Equity Incentive Plans, the Company may grant options to employees, officers and directors at an
exercise price equal to at least the fair market value of the ordinary shares at the date of grant and are granted for
periods not to exceed seven years. The Company grants under the Equity Incentive Plans options, Restricted Stock
Units (“RSUs”) and Performance RSUs (“PSUs”) and can also grant a variety of other equity incentives. Options
granted under the Equity Incentive Plans generally vest over a period of four years of employment. Options, RSUs
and PSUs that are cancelled or forfeited before expiration become available for future grants. The number of PSUs
granted to sales employees is equal to the amount of compensation earned (based on the employee’s level) divided
by the fair value of the ordinary share at the grant date. RSUs generally vest over a four years period of employment
from the grant date while PSUs generally vest over a two years period of employment from the grant date. PSUs 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.
Under the Equity Incentive Plans, the Company’s non-employee directors receive on an annual basis options and
RSUs grant. Following the amendments to the Equity Incentive Plans in July 2018, commencing December 31,
2018, on December 31st of each year, the number of Reserved and Authorized Shares (as defined below) under both
Equity Incentive Plans together shall be annually reset on such date to equal 10% of the sum of (i) the number of
ordinary shares issued and outstanding on such date and (ii) the number of ordinary shares reserved and authorized
under the Equity Incentive Plans for outstanding awards granted under the Equity Incentive Plans as of such date
(provided, however, that in no event shall the number of Reserved and Authorized Shares be less than the number of
ordinary shares reserved and authorized under the Equity Incentive Plans for outstanding awards granted under the
Equity Incentive Plans as of such date).
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 12:-
SHAREHOLDERS’ EQUITY (Cont.)
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
The number of “Reserved and Authorized Shares” under the Equity Plans shall equal the sum of (i) the number of
ordinary shares reserved and authorized under the Equity Incentive Plans for outstanding options, RSUs, PSUs and
other awards granted under the Equity Incentive Plans as of such date, and (ii) the number of ordinary shares
reserved, authorized and available for issuance under the Equity Incentive Plans on such date.
As of December 31, 2021, the number of Reserved and Authorized Shares under the Equity Incentive Plans is as
detailed below:
Stock Options outstanding
RSU outstanding
PSU outstanding
Ordinary shares available for issuance under the Equity Incentive Plans
Total Reserved and Authorized Shares as of December 31, 2021
2021
8.2
2.2
0.1
3.4
13.9
As of December 31, 2021 the aggregate amount of shares, stock options, RSU and PSU outstanding is 139.6.
A summary of the Company’s stock option activity and related information is as follows:
Outstanding at beginning of year
Granted
Exercised
Forfeited
Outstanding at December 31, 2021
Exercisable at December 31, 2021
Weighted
average
exercise
price
2021
Aggregate
intrinsic
value
Options
9.4 $
1.0 $
(1.9) $
(0.3) $
106.99 $
121.59
88.20
112.99
8.2 $
113.07 $
5.3 $
111.67 $
244.3
37.1
27.6
The weighted average fair values at grant date of options granted for the years ended December 31, 2021, 2020 and
2019 with an exercise price equal to the market value at the date of grant were $25.9, $22.0 and $22.8 per share,
respectively.
The total intrinsic value of options exercised during the years 2021, 2020 and 2019 was $65.1, $81.7 and $25.4,
respectively.
F-39
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 12:-
SHAREHOLDERS’ EQUITY (Cont.)
The aggregate intrinsic value of the outstanding stock options as of December 31, 2021 and 2020, represents the
intrinsic value of 6.5 and 9.4 outstanding options that are in-the-money as of such dates. The remaining 1.7 and 5.8
outstanding options are out-of-the-money as of December 31, 2021 and 2020, and their intrinsic value was
considered as zero.
A summary of the Company’s RSUs and PSUs activity is as follows:
Year ended December 31, 2021
PSUs
RSUs
Total
Unvested at beginning of year
Granted
Vested
Forfeited
*) Represents an amount lower than 0.1
1.7
1.5
(0.6)
(0.4)
2.2
-
0.1
*)
*)
0.1
1.7
1.6
(0.6)
(0.4)
2.3
The weighted average fair values at grant date of RSUs granted for the years ended December 31, 2021, 2020 and
2019 were $120.1, $105.3 and $113.3 per share, respectively.
The total fair value of shares vested during the years 2021, 2020 and 2019 was $66.8, $49.6 and $47.0, respectively.
As of December 31, 2021, the Company had approximately $281.6 of unrecognized compensation expense related
to non-vested stock options and non-vested RSU’s and PSU’s, expected to be recognized over a weighted average
period of 2.0 years.
d.
Employee Stock Purchase Plan (“ESPP”):
In 1996, the Company adopted an ESPP, which was subsequently amended in 2015. According to the amendments,
commencing the purchase period that begins February 1, 2017, 0.5 ordinary shares are authorized for issuance under
the US ESPP, and Commencing June 19, 2019 the Pool of shares for the US ESPP was set on 0.8 shares and 2.0
ordinary shares are authorized for issuance under the rest of the world (ROW).
As of December 31, 2021, 1.9 ordinary shares had been issued under the amended ESPP plan.
Eligible employees may use up to 15% of their salaries to purchase ordinary shares but no more than 1,250 single
shares per participant on any purchase date. The ESPP is implemented through an offering every six months. The
price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the
ordinary share on the subscription date of each offering period or on the purchase date
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 12:-
SHAREHOLDERS’ EQUITY (Cont.)
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
During 2021, 2020 and 2019, employees purchased 0.4, 0.4 and 0.3 ordinary shares at average prices of $105.3,
$95.4 and $95.2 per share, respectively.
In accordance with ASC No. 718, the ESPP is compensatory and as such results in recognition of compensation
cost. For the years ended December 31, 2021, 2020 and 2019, the Company recognized $10.9, $10.2 and $8.0,
respectively, of compensation expense in connection with the ESPP.
e.
Stock-Based Compensation:
Stock-based compensation expense related to stock options, RSUs and PSUs is included in the consolidated
statements of income as follows:
Cost of revenues
Research and development
Selling and marketing
General and administrative
Year ended
December 31,
2020
2019
2021
$
$
4.8
31.8
42.8
40.9
$
4.5
23.5
36.8
47.7
4.4
18.9
28.8
54.6
$ 120.3
$ 112.5
$ 106.7
NOTE 13:- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
Net income
Year ended
December 31,
2020
2019
2021
$ 815.6
$ 846.6
$ 825.7
Weighted average ordinary shares outstanding
133.1
140.5
150.6
Dilutive effect:
Employee stock options, RSUs and PSUs
1.0
1.5
1.5
Diluted weighted average ordinary shares outstanding
134.1
142.0
152.1
Basic earnings per ordinary share
Diluted earnings per ordinary share
$ 6.13
$ 6.03
$ 5.48
$ 6.08
$ 5.96
$ 5.43
F-41
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 14:- GEOGRAPHIC INFORMATION AND SELECTED STATEMENTS OF INCOME DATA
a.
Summary information about geographical areas:
The Company operates in one reportable segment (see Note 1 for a brief description of the Company’s business).
The total revenues are attributed to geographic areas based on the location of the Company’s channel partners which
are considered as end customers, as well as direct customers of the Company.
The following table presents total revenues and property and equipment, net for the years ended December 31, 2021,
2020 and 2019, by geographic area:
1.
Revenues based on the channel partners’ location:
Year ended
December 31,
2020
2019
2021
Americas
Europe, Middle East and Africa
Asia Pacific
$
922.8 $
980.8
263.2
912.7
849.9
232.2
$ 2,166.8 $ 2,064.9 $ 1,994.8
929.8 $
891.4
243.7
*)
2.
Starting 2019, Middle East and Africa are part of the “Europe Middle East and Africa” region, while before
it was part of “Asia Pacific, Middle East and Africa” region.
Property and equipment, net:
Israel
U.S.
Rest of the world
F-42
December 31,
2021
2020
$ 73.2 $ 76.8
5.4
5.3
5.9
4.9
$
83.4 $
88.1
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 14:- GEOGRAPHIC INFORMATION AND SELECTED STATEMENTS OF INCOME DATA (Cont.)
b.
Summary information about product lines:
The Company’s products can be classified by three main product lines. The following table presents total revenues
for the years ended December 31, 2021, 2020 and 2019 by product lines:
Product and licenses:
Network security Gateways
Other*)
Security subscriptions
Software updates and maintenance
Total revenues
Year ended
December 31,
2020
2019
2021
$ 480.5
33.4
$ 472.4
41.2
$ 455.9
54.9
513.9
755.2
897.7
513.6
671.1
880.2
510.8
610.3
873.7
$2,166.8
$2,064.9
$1,994.8
*)
Comprised of Endpoint security, Mobile security and Security management products, each comprising of
less than 10% of products and licenses revenues.
c.
Financial income, net:
Financial income:
Interest income
Financial expense:
Amortization of marketable securities premium and accretion of
discount, net
Realized (gain) on sale of marketable securities, net
Foreign currency re-measurement (gain) loss
Others
F-43
Year ended
December 31,
2020
2019
2021
$
66.1
$
78.2
$
93.3
21.0
(1.4)
(0.2)
4.6
24.0
9.4
(4.5)
4.5
2.2
2.0
(0.7)
8.9
2.5
11.6
12.7
$
42.1
$
66.6
$
80.6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In millions (except per share data)
NOTE 15:-
SUBSEQUENT EVENTS
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
AND SUBSIDIARIES
On February 3, 2022, the Company completed the acquisition of Spectral Cyber Technologies Ltd. (“Spectral”), a
privately-held lightning-fast, developer-first cybersecurity solution that acts as a control-plane over source code and
other developer assets
— — — ——
F-44
Exhibit 4.2
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
2005 ISRAEL EQUITY INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Israel Equity Incentive Plan are:
•
•
•
to attract and retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Service Providers, and
to promote our employees’ interest in the success of the Company’s business.
Awards granted under the Plan may be Options, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Deferred Stock
Units or Dividend Equivalents, as determined by the Administrator at the time of grant.
Furthermore, the Plan is designed to benefit from, and is made pursuant to, the provisions of Section 102 of the Ordinance, with respect to Awards
granted to Employees pursuant to the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) “Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the
Plan.
itself.
(b) “Affiliate” means an “employing company” as such term is defined in Section 102(a) of the Ordinance, other than the Company
(c) “Applicable Laws” means the requirements relating to the administration of, or otherwise affecting, equity compensation plans
under the Companies Law, the Securities Law, other applicable laws of Israel, U.S. federal and state securities laws, any stock exchange or quotation
system on which the Shares are listed or quoted, U.S. state corporate laws, and any other country or jurisdiction where Awards are granted under the
Plan or a sub-plan or addendum hereto.
(d) “Approved 102 Award” means an Award granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for
the benefit of the Participant.
Performance Shares, Performance Units, Deferred Stock Units or Dividend Equivalents.
(e) “Award” means, individually or collectively, a grant under the Plan of Options, Restricted Stock, Restricted Stock Units,
granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(f) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award
(g) “Awarded Stock” means the Shares subject to an Award.
(h) “Board” means the Board of Directors of the Company.
tax treatment in accordance with Section 102(b)(2) of the Ordinance.
(i) “Capital Gains Award (CGA)” means an Approved 102 Award elected and designated by the Company to qualify for capital gains
(j) “Change of Control” means the occurrence of any of the following events, in one or a series of related transactions:
(i) any individual or entity, other than the Company, a subsidiary of the Company or a Company employee benefit plan, including
any trustee of such plan acting as trustee, is or becomes the “beneficial owner”, directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors;
or
(ii) a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation;
or
(iii) the sale or disposition by the Company of all or substantially all the Company’s assets.
(k) “Committee” means a Committee appointed by the Board in accordance with Section 4 of the Plan.
(l) “Companies Law” means the Israeli Companies Law, 5759-1999.
(m) “Company” means Check Point Software Technologies Ltd.
compensated for such services.
(n) “Consultant” means any person, other than an Employee, engaged by the Company or any Affiliate to render services and who is
(o) “Continuous Status as a Director” means that the Director relationship is not interrupted or terminated.
(p) “Controlling Shareholder” shall have the meaning ascribed to such term in Section 32(9) of the Ordinance.
(q) “Deferred Stock Unit” means a deferred stock unit Award granted to a Participant pursuant to Section 13.
(r) “Director” means a member of the Board.
- 2 -
(s) “Disability” means total and permanent disability as determined by the Administrator.
(t) “Dividend Equivalent” means a credit, payable in cash, made at the discretion of the Administrator, to the account of a Participant
in an amount equal to the cash dividends paid on one Share for each Share represented by an Award held by such Participant. The Dividend Equivalent
for each Share subject to an Award shall only be paid to a Participant on the vesting date for such Share.
(u) “Election” means the Company’s election of the type of Approved 102 Awards as set forth in Section 19(b)(iii).
(v) “Employee” means any person employed by the Company or any Affiliate of the Company, and includes Officers and Directors.
A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, any Subsidiary, or any successor.
(w) “Fair Market Value” means, as of any date, the value of Shares determined as follows:
(i) If the Shares are listed on any established stock exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc. Automated Quotation (“Nasdaq”) System, the Fair Market Value of a Share shall
be the closing sales price for such shares (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Shares) on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Shares are quoted on the Nasdaq System (but not on the Nasdaq National Market thereof) or are regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share shall be the mean between the high bid and low asked
prices for the Shares on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(iii) In the absence of an established market for the Shares, the Fair Market Value shall be determined in good faith by the
Administrator.
Trustee.
(x) “ITA” means the Israeli Tax Authorities.
(y) “Non-approved 102 Award” means an Award granted pursuant to Section 102(c) of the Ordinance and not held in trust by a
(z) “Non-employee Director” means a Director who is neither an Employee nor a Consultant, and who is a resident of Israel.
- 3 -
Notice of Grant is part of the Award Agreement.
(aa) “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Award. The
(bb) “Officer” means, with respect to the Company and Affiliates that are Israeli companies, a person who is a “nosei misra” within
the meaning of the Companies Law but is not a Director, and with respect to Affiliates that are not Israeli companies means a person who is an officer
within the meaning of the applicable corporate law of the jurisdiction of incorporation of such Affiliate.
(cc) “Option” means an option to purchase Shares granted pursuant to the Plan.
conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.
(dd) “Option Agreement” means a written or electronic agreement between the Company and a Participant evidencing the terms and
(ee) “Ordinance” means the Israeli Income Tax Ordinance (New Version), 1961 as now in effect and as hereafter amended.
(ff) “Ordinary Income Award (OIA)” means an Approved 102 Award elected and designated by the Company to qualify for ordinary
income tax treatment in accordance with Section 102(b)(1) of the Ordinance.
(gg) “Ordinary Shares” shall mean the Ordinary Shares of the Company, NIS 0.01 nominal value.
(hh) “Participant” means the holder of an outstanding Award granted under the Plan.
(ii) “Performance Share” means a performance share Award granted to a Participant pursuant to Section 11.
(jj) “Performance Unit” means a performance unit Award granted to a Participant pursuant to Section 12.
(kk) “Plan” means this 2005 Israel Equity Incentive Plan.
(ll) “Restricted Stock” means Shares granted pursuant to Section 9 of the Plan.
(mm) “Restricted Stock Unit” means an Award granted pursuant to Section 10 of the Plan.
the Ordinance.
(nn) “Section 3(i) Award” means an Award granted to a Consultant or a Controlling Shareholder in accordance with Section 3(i) of
as now in effect or as hereafter amended.
(oo) “Section 102” means Section 102 of the Ordinance and any regulations, rules, and orders of procedures promulgated thereunder
- 4 -
(pp) “Section 102 Shares” means Shares issued under a Section 102 Award pursuant to Section 19(c)(i) below.
(qq) “Section 102 Period” shall have the meaning ascribed to such term in Section 19(c)(i) below.
(rr) “Securities Law” means the Israeli Securities Law, 5728–1968.
(ss) “Service Provider” means an Employee or Consultant.
(tt) “Share” means one Ordinary Share, as adjusted in accordance with Section 21 of the Plan.
trust agreement to be entered into and between the Company and such Trustee and approved by the ITA.
(uu) “Trustee” means a trustee designated by the Board and approved by the ITA, pursuant to the requirements of Section 102 and a
3. Shares Subject to the Plan.
(a) Subject to the provisions of Section 21 of the Plan, the maximum aggregate number of Shares which may be issued under the
Plan and the Company’s 2005 U.S. Equity Incentive Plan, as amended (the “U.S. Plan”, and collectively with the Plan, the “Equity Plans”)), is
19,000,000 Shares; provided, however, that on December 31st of each year, commencing December 31, 2018, the number of Reserved and Authorized
Shares (as defined below) under the Equity Plans shall be automatically reset on such date to equal 10% of the sum of (A) the number of Shares issued
and outstanding on such date and (B) the number of Shares reserved and authorized under the Equity Plans for outstanding Awards granted under the
Equity Plans as of such date; provided, however, that in no event shall the number of Reserved and Authorized Shares be less than the number of Shares
reserved and authorized under the Equity Plans for Awards granted under the Plans that are outstanding as of such date. The number of “Reserved and
Authorized Shares” under the Equity Plans shall equal the sum of (i) the number of Shares reserved and authorized under the Equity Plans for
outstanding Awards granted under the Equity Plans as of such date, and (ii) the number of Shares reserved, authorized and available for issuance under
the Equity Plans on such date.
(b) The Shares may be authorized but unissued, or reacquired, Shares.
(c) Intentionally omitted.
(d) If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to Restricted Stock,
Performance Shares or Restricted Stock Units, is forfeited to or repurchased by the Company at its original purchase price due to such Award failing to
vest, the unpurchased Shares (or for Awards other than Options, the forfeited or repurchased shares) which were subject thereto shall become available
for future grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan under any Award shall not
be returned to the Plan and shall not become available for future distribution under the Plan; provided, however, that if Shares of Restricted Stock,
Performance Shares or Restricted Stock Units are repurchased by the Company at their original purchase price
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or are forfeited to the Company due to such Awards failing to vest, such Shares shall become available for future grant under the Plan. Shares used to
pay the exercise price of an Option shall not become available for future grant or sale under the Plan. Shares used to satisfy tax withholding obligations
shall not become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than shares, such cash
payment shall not reduce the number of Shares available for issuance under the Plan. Any payout of Dividend Equivalents or Performance Units,
because they are payable only in cash, shall not reduce the number of Shares available for issuance under the Plan. Conversely, any forfeiture of
Dividend Equivalents or Performance Units shall not increase the number of Shares available for issuance under the Plan.
4. Administration of the Plan.
Applicable Laws. The Plan may be administered by different Committees with respect to different groups of Service Providers.
(a) Procedure. The Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy
delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties
(i) to determine the Fair Market Value of the Shares, in accordance with Section 2(w) of the Plan;
(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine whether and to what extent Awards or any combination thereof, are granted hereunder;
(iv) to determine the number of Shares or equivalent units to be covered by each Award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder. Such terms
and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised or other Awards vest (which may be
based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or
Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;
(vii) to construe and interpret the terms of the Plan and Awards;
or Plan addendums, established for the purpose of qualifying for preferred tax treatment (e.g., Section 102);
(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans
- 6 -
termination exercisability period of Options longer than is otherwise provided for in the Plan;
(ix) to modify or amend each Award (subject to Section 23(c) of the Plan), including the discretionary authority to extend the post-
(x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously
granted by the Administrator;
(xi) to allow Participants to satisfy withholding tax obligations by electing to have the Company and/or its Affiliates and/or the
Trustee withhold taxes in accordance with the Applicable Laws. The Fair Market Value of any Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares or cash withheld for this purpose shall be made in
such form and under such conditions as the Administrator may deem necessary or advisable;
(xii) to determine whether Dividend Equivalents will be granted in connection with another Award;
(xiii) to determine the terms and restrictions applicable to Awards;
(xiv) to determine the price per each Share to be issued under the Awards (excluding the Option exercise price to be set in
accordance with Section 8(b) below). Shares to be issued under grants of Restricted Stock, RSUs, Performance Shares and Performance Units may be
issued upon payment of their nominal value;
(ix) to make an election as to the type of 102 Approved Award; and
(xv) to make all other determinations deemed necessary or advisable for administering the Plan.
on all Participants and any other holders of Awards.
(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding
5. Eligibility. Awards may be granted to Service Providers, provided that Section 102 Awards may be granted only to Employees.
6. No Employment Rights. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the
Participant’s employment with the Company or its Affiliates, nor shall they interfere in any way with the Participant’s right or the Company’s or
Affiliate’s right, as the case may be, to terminate such employment at any time, with or without cause or notice.
7. Term of Plan. The Plan will become effective upon its adoption by the Board and will remain in effect until terminated pursuant to
Section 23 of the Plan.
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8. Options.
seven (7) years from the date of grant or such shorter term as may be provided in the Notice of Grant.
(a) Term. The term of each Option shall be stated in the Notice of Grant; provided, however, that the term shall be no more than
determined by the Administrator and shall be no less than 100% of the Fair Market Value per share on the date of grant.
(b) Option Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be
(c) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the
Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. In so doing, the Administrator
may specify that an Option may not be exercised until the completion of a service period or until performance milestones are satisfied. In any event, no
Option granted hereunder shall vest until at least six months following the Option grant date.
(d) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option,
including the method of payment. In the case of a Section 102 Award, the Administrator shall determine the acceptable form of consideration at the time
of grant. Subject to Applicable Laws, such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Participant for more
than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;
(iv) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to the Company or Affiliate of the sale proceeds required to pay the exercise
price;
(v) any combination of the foregoing methods of payment; or
(vi) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.
Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement.
(e) Exercise of Option; Rights as a Shareholder. Any Option granted hereunder shall be exercisable according to the terms of the
An Option may not be exercised for a fraction of a Share.
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An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the name of the Participant, provided however that Shares issued following the exercise of
Options granted under Section 102(b) to the Ordinance shall be issued under the name of the Trustee for the benefit of the Participant and shall be held
in trust by the Trustee. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect
to the optioned stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after
the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 21 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares thereafter available for sale under the Option, by the number of Shares as
to which the Option is exercised.
9. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and conditions of the Plan, Restricted Stock may be granted to Participants at any
time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the number of
Shares subject to a Restricted Stock award granted to any Participant, and (ii) the conditions that must be satisfied, which typically will be based
principally or solely on continued provision of services but may include a performance-based component, upon which is conditioned the grant, vesting
or issuance of Restricted Stock; provided, however that no Restricted Stock Award shall vest until at least one year following the grant date.
(b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and
conditions of Restricted Stock granted under the Plan. Restricted Stock grants shall be subject to the terms, conditions, and restrictions determined by
the Administrator at the time the stock or the restricted stock unit is awarded. The Administrator may require the recipient to sign a Restricted Stock
Award agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined
by the Administrator.
(c) Restricted Stock Award Agreement. Each Restricted Stock grant shall be evidenced by an agreement that shall specify the
purchase price (if any) and such other terms and conditions as the Administrator, in its sole discretion, shall determine; provided; however, that if the
Restricted Stock grant has a purchase price, such purchase price must be paid no more than ten (10) years following the date of grant.
10. Restricted Stock Units.
(a) Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. The
Administrator shall have complete discretion to determine (i) the number of Shares subject to a Restricted Stock Unit award granted to any Participant,
and (ii) the conditions that must be satisfied, which typically will be based principally
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or solely on continued service but may include a performance-based component, upon which is conditioned the grant or vesting of Restricted Stock
Units. Restricted Stock Units shall be granted in the form of units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of
determining the number of Shares subject to an Award. Until the Shares are issued, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the units to acquire Shares.
(b) Vesting Criteria and Other Terms. The Administrator shall set vesting criteria in its discretion, which, depending on the extent to
which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set
vesting criteria based upon the achievement of Company-wide, Affiliate-wide, business unit, or individual goals (including, but not limited to, continued
employment), or any other basis determined by the Administrator in its discretion; provided, however that no Restricted Unit Award shall vest until at
least one year following the grant date.
(c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant shall be entitled to receive a payout
as specified in the Restricted Stock Unit Award Agreement. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.
forth in the Restricted Stock Unit Award Agreement. The Administrator shall pay earned Restricted Stock Units in Shares.
(d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall be made as soon as practicable after the date(s) set
(e) Cancellation. On the date set forth in the Restricted Stock Unit Award Agreement, all unearned Restricted Stock Units shall be
forfeited to the Company.
11. Performance Shares.
(a) Grant of Performance Shares. Subject to the terms and conditions of the Plan, Performance Shares may be granted to Participants
at any time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the
number of Shares subject to a Performance Share award granted to any Participant, and (ii) the conditions that must be satisfied, which typically will be
based principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant
or vesting of Performance Shares. Performance Shares shall be granted in the form of units to acquire Shares. Each such unit shall be the equivalent of
one Share for purposes of determining the number of Shares subject to an Award. Until the Shares are issued, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the units to acquire Shares.
(b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and
conditions of Performance Shares granted under the Plan. Performance Share grants shall be subject to the terms, conditions, and restrictions determined
by the Administrator at the time the stock is awarded, which may include such performance-based milestones as are determined appropriate by the
Administrator; provided, however that no Performance Share Award shall vest until at least one year following the grant date. The Administrator may
require the recipient to sign a Performance Shares agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall
bear such legends as shall be determined by the Administrator.
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other terms and conditions as the Administrator, in its sole discretion, shall determine.
(c) Performance Share Award Agreement. Each Performance Share grant shall be evidenced by an agreement that shall specify such
12. Performance Units.
(a) Grant of Performance Units. Performance Units are similar to Performance Shares, except that they shall be settled in a cash
equivalent to the Fair Market Value of the underlying Shares, determined as of the vesting date. Subject to the terms and conditions of the Plan,
Performance Units may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion.
The Administrator shall have complete discretion to determine the conditions that must be satisfied, which typically will be based principally or solely
on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or vesting of Performance
Units. Performance Units shall be granted in the form of units to acquire Shares. Each such unit shall be the cash equivalent of one Share. No right to
vote or receive dividends or any other rights as a shareholder shall exist with respect to Performance Units or the cash payable thereunder.
(b) Number of Performance Units. The Administrator will have complete discretion in determining the number of Performance Units
granted to any Participant.
(c) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and
conditions of Performance Units granted under the Plan. Performance Unit grants shall be subject to the terms, conditions, and restrictions determined
by the Administrator at the time the grant is awarded, which may include such performance-based milestones as are determined appropriate by the
Administrator. The Administrator may require the recipient to sign a Performance Unit agreement as a condition of the award. Any certificates
representing the units awarded shall bear such legends as shall be determined by the Administrator.
terms and conditions as the Administrator, in its sole discretion, shall determine.
(d) Performance Unit Award Agreement. Each Performance Unit grant shall be evidenced by an agreement that shall specify such
13. Deferred Stock Units. Deferred Stock Units shall consist of a Restricted Stock, Restricted Stock Unit, Performance Share or
Performance Unit Award that the Administrator, in its sole discretion permits to be paid out in installments or on a deferred basis, in accordance with
rules and procedures established by the Administrator. Deferred Stock Units shall remain subject to the claims of the Company’s general creditors until
distributed to the Participant.
14. Automatic Stock Option and RSU Grants to Non-employee Directors.
(a) Procedure for Grants. All grants of Options and RSU to Non-employee Directors under this Section 14 shall be automatic
and non-discretionary and shall be made strictly in accordance with the following provisions:
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(i) Each Non-employee Director shall be automatically granted (i) an Option to purchase 25,000 Shares, or a lesser
amount determined by the Board, in its sole discretion (the “First Option”), and (ii) RSUs with a value of $200,000, or a lesser amount
determined by the Board, in its sole discretion (the “First RSU”, and, together with the First Option, the “First Awards”), upon the date on
which such person first becomes a Director, whether through election by the shareholders of the Company or appointment by the Board of
Directors to fill a vacancy; provided, however, that a Non-employee Director who has previously been employed by the Company (or any
Affiliate) shall not be eligible to receive a First Option or a First RSU.
(ii) At each of the Company’s annual shareholder meetings, and commencing in 2020, each Non-employee Director shall
be automatically granted (i) an Option to purchase 15,000 Shares, or a lesser amount determined by the Board, in its sole discretion (the
“Annual Option”), and (ii) RSUs with a value of $50,000, or a lesser amount determined by the Board, in its sole discretion (the “Annual
RSU”, and, together with the Annual Option, the “Annual Awards”), provided that such individual has served as an Non-employee
Director for at least six months prior to the date of such annual meeting.
(iii) Notwithstanding the provisions of subsections (i) and (ii) hereof, in the event that an automatic grant hereunder
would cause the number of Shares subject to outstanding Awards plus the number of Shares previously purchased upon exercise of
Options or the vesting of other Awards to exceed the number of Shares available for issuance under the Plan, then each such automatic
grant shall be for that number of Shares determined by dividing the total number of Shares remaining available for grant by the number of
Non-employee Directors on the automatic grant date. Any further grants shall then be deferred until such time, if any, as additional Shares
become available for grant under the Plan.
(iv) The terms of an Award granted hereunder shall be as follows:
(A) The term of the Option shall be seven (7) years.
Company, except as set forth in subsection (c) hereof.
(B) The Option shall be exercisable only while the Non-employee Director remains a Director of the
(C) The exercise price per Share shall be 100% of the fair market value per Share on the date of grant of the
Option.
(D) The First Option shall become exercisable as to 25% of the covered Shares each year on the day prior to
each year’s normally scheduled annual shareholders’ meeting, so as to become 100% vested on the day prior to the normally
scheduled annual shareholders’ meeting occurring approximately four years following the grant date, subject to the Participant
maintaining Continuous Status as a Director on each vesting date.
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(E) The First RSU shall vest as to 25% of the covered Shares each year on the day prior to each year’s
normally scheduled annual shareholders’ meeting, so as to become 100% vested on the day prior to the normally scheduled annual
shareholders’ meeting occurring approximately four years following the grant date, subject to the Participant maintaining
Continuous Status as a Director on each vesting date.
(F) The Annual Option shall become exercisable as to 50% of the covered Shares six months following the
grant date, and as to an additional 25% of the covered Shares each three months thereafter, so as to be 100% vested on the first
anniversary of the grant date, subject to the Participant maintaining Continuous Status as a Director on each vesting date.
(G) The Annual RSU shall vest as to 50% of the covered Shares six months following the grant date, and as
to an additional 25% of the covered Shares each three months thereafter, so as to be 100% vested on the first anniversary of the grant
date, subject to the Participant maintaining Continuous Status as a Director on each vesting date.
(b) Consideration for Exercising Non-employee Director Stock Options. The consideration to be paid for the Shares to be
issued upon exercise of an automatic Non-employee Director Option shall consist of any consideration permitted under Section 8(d) hereof
and as set forth in the Award Agreement.
(c) Post-Directorship Exercisability. If a Non-employee Director ceases to serve as a Director, he or she may, but only within
one year after the date he or she ceases to be a Director, exercise his or her Option to the extent that he or she was entitled to exercise it at
the date of such termination. To the extent that he or she was not entitled to exercise an Option at the date of such termination, or if he or
she does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate.
(d) Limitation on Automatic Award Grants. The Directors serving immediately prior to the appointment or election of a new
Non-employee Director, or prior to an annual shareholders’ meeting, as the case may be, shall determine as to each new Non-employee
Director whether he or she shall be granted an Award under this Section 14 or under the comparable provisions of another incentive plan of
the Company. A new Non-employee Director who receives an Award under this Plan shall not be eligible to receive a comparable
automatic stock option or RSU grant under any other incentive plan of the Company. A Non-employee Director who receives an Award of
an Annual Option under this Plan shall not be eligible to receive a comparable automatic stock option or RSU grant under any other
incentive plan of the Company with respect to such fiscal year of the Company.
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15. Termination of Relationships, Death or Disability.
(a) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the
Participant’s death or Disability, then (i) in the case of an Award that is an Option, the Participant may exercise any Options within such period of time
as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement), and (ii) in the case of any Award other than an Option, the Participant shall be entitled to the
benefit conferred by such Award during such period of time as is specified in the Award Agreement to the extent that the Award is vested on the date of
termination (but in no event later than the expiration of the term of such Award, if any, as set forth in the Award Agreement). In the absence of a
specified time in the Award Agreement, an Option shall remain exercisable, and the Participant shall be entitled to the benefit conferred by an Award
other than an Option, for three months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her
entire Award, the Shares covered by the unvested portion of the Award shall revert to the Plan. If, after termination, the Participant does not exercise his
or her Option, or receive the benefit conferred by an Award other than an Option, within the time specified herein, the Award shall terminate, and the
Shares covered by such Award shall revert to the Plan.
(b) Disability. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, then (i) in the case of an
Award that is an Option, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent
the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement),
and (ii) in the case of any Award other than an Option, the Participant shall be entitled to the benefit conferred by such Award during such period of time
as is specified in the Award Agreement to the extent that the Award is vested on the date of termination (but in no event later than the expiration of the
term of such Award, if any, as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, an Option shall remain
exercisable, and the Participant shall be entitled to the benefit conferred by an Award other than an Option, for twelve (12) months following the
Participant’s termination due to Disability. If, on the date of termination, the Participant is not vested as to his or her entire Award, the Shares covered by
the unvested portion of the Award shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option, or receive the benefit
conferred by an Award other than an Option, within the time specified herein, the Award shall terminate, and the Shares covered by such Award shall
revert to the Plan.
(c) Death of Participant. If a Participant dies while a Service Provider, then (i) in the case of an Award that is an Option, the Option
may be exercised following the Participant’s death within such period of time as is specified in the Option Agreement to the extent the Option is vested
on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Option
Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable
to the Administrator, and (ii) in the case of any Award other than an Option, the Participant’s designated beneficiary, provided such beneficiary has been
designated prior to Participant’s death in a form acceptable to the Administrator, shall be entitled to the benefit conferred by such Award during such
period of time as is specified in the Award Agreement to the extent that the Award is vested on the date of death (but in no event later than the expiration
of the term of such Award, if any, as set forth in the Award Agreement). If no such beneficiary has been designated by the Participant, then such Option
may be exercised by, or the benefit conferred by such Award shall be provided to, the personal representative of the Participant’s estate or by
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the person(s) to whom the Award is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the
absence of a specified time in the Award Agreement, the Option shall remain exercisable, or the benefit conferred by such Award shall be provided, for
twelve (12) months following Participant’s death. If the Option is not so exercised or the benefit conferred by such Award is not provided within the
time specified herein, the Award shall terminate, and the Shares covered by such Award shall revert to the Plan.
16. Leaves of Absence. Unless the Administrator provides otherwise or except as otherwise required by Applicable Laws, vesting of
Awards granted hereunder shall cease commencing on the first day of any unpaid leave of absence and shall only recommence upon return to active
service.
17. Part-Time Service. Unless the Administrator provides otherwise or except as otherwise required by Applicable Laws, any service-
based vesting of Awards granted hereunder shall be extended on a proportionate basis in the event an Employee transitions to a work schedule under
which they are customarily scheduled to work on less than a full-time basis, or if not on a full-time work schedule, to a schedule requiring fewer hours
of service. Such vesting shall be proportionately re-adjusted prospectively in the event that the Employee subsequently becomes regularly scheduled to
work additional hours of service.
18. Non-Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the
lifetime of the recipient, only by the recipient. If the Administrator makes an Award transferable, it may only be transferable for no consideration to
transferees permitted pursuant to a Form S-8 Registration Statement (such as family members or pursuant to a settlement of marital property rights) and
such Award shall contain such additional terms and conditions as the Administrator deems appropriate.
19. Grant of Approved 102 Awards and Non-approved 102 Awards.
(a) Participants. Approved 102 Awards may only be granted to Employees who are residents of the State of Israel. Except as
otherwise specifically approved by the ITA, a Controlling Shareholder or a Consultant shall not be eligible for grant of Approved 102 Awards or
Non-approved 102 Awards, and shall only be eligible for grant of Section 3(i) Awards.
(b) Grant of Section 102 Awards.
102 Awards.
(i) The Company may designate Awards granted to Employees pursuant to Section 102 as Non-approved 102 Awards or Approved
(ii) The grant of Approved 102 Awards under the Plan shall be conditioned upon the approval of the Plan by the ITA.
(iii) Approved 102 Awards may either be classified as Capital Gains Awards (CGAs) or Ordinary Income Awards (OIAs). No
Approved 102 Award may be granted under the Plan unless and until the Company’s election of the type of Approved 102 Awards as CGA or OIA
granted to Employees (the “Election”) is appropriately filed
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with the ITA. Such Election shall become effective beginning the first date of grant of an Approved 102 Award and shall remain in effect until the end of
the year following the year during which Employees were first granted Approved 102 Awards. The Election shall obligate the Company to grant only the
type of Approved 102 Awards it has elected, and shall apply to all Participants who were granted such Approved 102 Awards during the period indicated
herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the
Administrator from granting Employees Approved 102 Awards and Non-approved 102 Awards simultaneously.
(iv) All Approved 102 Awards must be held in trust by a Trustee, as described in subsection (c) below.
(v) For the avoidance of doubt, the designation of Non-approved 102 Awards and Approved 102 Awards shall be subject to the terms
and conditions of Section 102.
(vi) With respect to Non-approved 102 Award, if the Employee ceases to be employed by the Company or any Affiliate, the
Employee shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of Shares, all in
accordance with the provisions of Section 102.
(c) Trustee.
(i) All Approved 102 Awards granted under the Plan and any Shares allocated or issued upon exercise of such Approved 102 Awards
(“Section 102 Shares”) or other shares received subsequently following any realization of rights, including bonus shares, shall be allocated or issued to
the Trustee, and shall be held by the Trustee for the benefit of the Participants for such period of time as required by Section 102 (the “Section 102
Period”). In case the requirements for Approved 102 Awards are not met, then the Approved 102 Awards shall be regarded as Non-approved 102
Awards, all in accordance with the provisions of Section 102.
(ii) Notwithstanding anything to the contrary, the Trustee shall not release any Section 102 Shares or other Shares received
subsequently following any realization of the Participant’s rights prior to the full payment of the Participant’s tax liabilities arising from the grant,
exercise, release or transfer of the Approved 102 Award and any Section 102 Shares or other Shares received subsequently following any realization of
rights.
(iii) With respect to any Approved 102 Awards, subject to the provisions of Section 102, a Participant shall not sell or release from
trust any Section 102 Shares or any Shares received subsequently following any realization of rights, including bonus shares, until the lapse of the
Section 102 Period. Notwithstanding the above, if any such sale or release occurs during the Section 102 Period, the sanctions under Section 102 shall
apply to, and be borne by, such Participant.
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(iv) Upon receipt of an Approved 102 Award, the Participant will sign an Award Agreement under which the Participant will agree to
be subject to the trust agreement between the Company and the Trustee, stating, among others, that the Trustee will be released from any liability in
respect of any action or decision duly taken and bona fide executed in relation with the Plan, or any Approved 102 Award or Section 102 Share granted
to him or her thereunder.
(v) As long as Approved 102 Awards granted, or Section 102 Shares are held by the Trustee, then all rights the Participant possesses
over such Awards or Shares may not be transferred, assigned, pledged or mortgaged by the Participant, other than by will or laws of descent and
distribution.
(vi) If dividends, whether cash, property or stock dividends, are declared on Section 102 Shares held by the Trustee, such dividends
shall also be subject to the provisions of Section 102 and the provisions of this Section 19. The Section 102 Period for any such additional shares shall
be equal to the Section 102 Period for the original Section 102 Shares.
(vii) At any time after the end of the Section 102 Period with respect to any Section 102 Awards or Section 102 Shares, the
Participant may order (but shall not be obligated to order) the Trustee to sell or transfer to the Participant such Section 102 Awards or Section 102
Shares, provided that no securities shall be sold or transferred until all required payments have been fully made: (i) such Participant has deposited with
the Trustee an amount of money which, in the Trustee’s opinion, is necessary to discharge such Participant’s tax obligations with respect to such
Section 102 Awards or Section 102 Shares, or (ii) the receipt by the Trustee of an acknowledgment from the ITA that the Participant has paid any
applicable tax due pursuant to the Ordinance, or (iii) the Company has made other arrangements for the deduction of tax at source acceptable to the
Trustee, or (iv) upon the sale by the Trustee of any securities held in trust from the proceeds of which the Company or the Trustee has withheld all
applicable taxes and has remitted the amount withheld to the appropriate Israeli tax authorities, has paid the balance thereof directly to such Participant,
and has reported to such Participant the amount so withheld and paid to such tax authorities.
(d) Integration of Section 102 and Tax Assessing Officer’s Permit.
With regards to Approved 102 Awards, the provisions of the Plan and the Award Agreement shall be subject to the provisions of Section 102 of the
Ordinance and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the Plan and of the Award
Agreement.
(e) Tax Consequences.
(i) Any and all tax consequences arising from the grant, exercise transfer, or sale of an Award or from the payment for Shares
covered thereby or from any other event or act under the Plan (whether of a Participant and/or of the Company and/or a Affiliate and/or the Trustee)
shall be borne solely by the Participant. The Company and/or its Affiliates and/or the Trustee shall withhold taxes according to the requirements under
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the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Participant shall agree to indemnify the Company
and the Trustee, if applicable, and hold them harmless against and from any and all liability for any tax or interest or penalty thereon, including (without
limitation) liabilities relating to the necessity to withhold, or to have withheld, any tax from any payment made to the Participant.
(ii) The Company, or where applicable, the Trustee, shall not be required to release any share certificate to a Participant until all
requirement payment have been fully made.
(iii) Without derogating from Section 2 above and solely for the purpose of determining the tax liability pursuant to Section 102(b)
(3) of the Ordinance, if at the date of grant the Company’s shares are listed on any established stock exchange or a national market system or if the
Company’s shares will be registered for trading within ninety (90) days following the date of grant of the Approved 102 Award, the Fair Market Value of
the Shares at the date of grant shall be determined in accordance with the average value of the Company’s Shares on the thirty trading days preceding
the date of grant or the thirty trading days following the date of registration for trading, as the case may be.
20. Grant of Section 3(i) Awards. In the event that grants are made under Section 3(i) of the Ordinance, the Company may elect to enter
into an agreement with a trustee concerning the administration of the exercise of Options, the purchase and sale of Shares, and the arrangements for
payment of or withholding of taxes due in connection with such exercise, purchase and sale. The trust agreement may provide that the Company will
issue the Shares to such trustee for the benefit of the Participants. The type of Section 3(i) Awards to be granted under the Plan shall be subject to the
provisions of Section 3(i) to the Ordinance.
21. Adjustments Upon Changes in Capitalization, Dissolution or Liquidation or Change of Control.
(a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Ordinary
Shares covered by each outstanding Award, the number of shares of Ordinary Shares which have been authorized for issuance under the Plan but as to
which no Awards have yet been granted (including the automatic annual replenishment of three million Shares) or which have been returned to the Plan
upon cancellation or expiration of an Award, as well as the price per Ordinary Shares covered by each such outstanding Award shall be proportionately
adjusted for any increase or decrease in the number of issued Ordinary Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Ordinary Shares, or any other increase or decrease in the number of issued Ordinary Shares effected without
receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have
been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Ordinary Shares
subject to an Award.
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(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify
each Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a
Participant to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Awarded Stock covered thereby,
including Shares as to which the Award would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase
option or forfeiture rights applicable to any Award shall lapse 100%, and that any Award vesting shall accelerate 100%, provided the proposed
dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised (with respect to
Options) or vested (with respect to other Awards), an Award will terminate immediately prior to the consummation of such proposed action.
(c) Change of Control.
(i) Options. In the event of a Change of Control, each outstanding Option shall be assumed or an equivalent option substituted by the
successor corporation or a parent or Affiliate of the successor corporation. In the event that the successor corporation refuses to assume or substitute for
the Option, the Administrator, in its sole discretion, may provide that either (i) all Options shall terminate immediately prior to the consummation of the
Change of Control, or (ii) Participants shall fully vest in and have the right to exercise their Options as to all of the Awarded Stock, including Shares as
to which it would not otherwise be vested or exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or substitution in the
event of a Change of Control, the Administrator shall notify the Participant in writing or electronically that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option shall be considered assumed if, following the Change of Control, the option confers the right to purchase or
receive, for each Share of Awarded Stock subject to the Option immediately prior to the Change of Control, the consideration (whether stock, cash, or
other securities or property) received in the Change of Control by holders of Ordinary Shares for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Ordinary Shares);
provided, however, that if such consideration received in the Change of Control is not solely stock of the successor corporation or its parent, the
Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each
Share of Awarded Stock subject to the Option, to be solely stock of the successor corporation or its parent equal in fair market value to the per share
consideration received by holders of Ordinary Shares in the Change of Control.
(ii) Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Deferred Stock Units. In the event of a
Change of Control, each outstanding Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit and Deferred Stock Unit award (and
any related Dividend Equivalent), shall be assumed or an equivalent Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit and
Deferred Stock Unit award substituted by the successor corporation or a parent or Affiliate of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit or Deferred Stock Unit
award, the
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Administrator, in its sole discretion, may provide either that (i) such Awards shall terminate immediately prior to the consummation of the Change of
Control, or (ii) Participants shall fully vest in the Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit or Deferred Stock Unit
Awards including as to Shares (or with respect to Performance Units, the cash equivalent thereof) which would not otherwise be vested. For the
purposes of this paragraph, a Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit and Deferred Stock Unit award shall be
considered assumed if, following the Change of Control, the award confers the right to purchase or receive, for each Share (or with respect to
Performance Units, the cash equivalent thereof) subject to the Award immediately prior to the Change of Control, the consideration (whether stock, cash,
or other securities or property) received in the Change of Control by holders of Ordinary Shares for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding
Ordinary Shares); provided, however, that if such consideration received in the Change of Control is not solely stock of the successor corporation or its
parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received, for each Share and each
unit/right to acquire a Share subject to the Award, to be solely stock of the successor corporation or its parent equal in fair market value to the per share
consideration received by holders of Ordinary Shares in the Change of Control.
22. Date of Grant. The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination
granting such Award, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Participant
within a reasonable time after the date of such grant.
23. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.
desirable to comply with the Applicable Laws and in such a manner and to such a degree as is required by the Applicable Laws.
(b) Shareholder Approval. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of
any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing (or electronic
format) and signed by the Participant and the Company or its Affiliate.
24. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of the Award or the
issuance and delivery of such Shares (or with respect to Performance Units, the cash equivalent thereof) shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to such compliance.
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(b) Investment Representations. As a condition to the exercise or receipt of an Award, the Company may require the person
exercising or receiving such Award to represent and warrant at the time of any such exercise or receipt that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is
required.
(c) Tax Consequences. Any and all tax consequences arising from the grant or exercise, or otherwise relating to, an Award or from
the payment for Shares covered thereby or from any other event or act under the Plan (whether of the Participant or of the Company or of a Affiliate)
shall be borne solely by the Participant. The Company or its Affiliates shall withhold taxes according to the requirements under the Applicable Laws,
including withholding taxes at source. Furthermore, the Participant shall agree to indemnify the Company and its Affiliates, if applicable, and hold them
harmless from and against any and all liability for any tax, or interest or penalty thereon, including liabilities relating to the necessity to withhold, or to
have withheld, any tax from any payment made to the Participant.
25. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company
of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Awarded Stock covered by an Award exceeds, as of the date of grant, the number of
Shares which may be issued under the Plan without additional shareholder approval, such Award shall be void with respect to such excess Awarded
Stock, unless shareholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance
with Section 23(b) of the Plan.
26. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares
as shall be sufficient to satisfy the requirements of the Plan.
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Exhibit 4.3
CHECK POINT SOFTWARE TECHNOLOGIES LTD.
2005 UNITED STATES EQUITY INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Unites States Incentive Plan are:
•
•
•
to attract and retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Service Providers, and
to promote the success of the Company’s business.
Awards granted under the Plan may be Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units, Deferred Stock Units or Dividend Equivalents, as determined by the Administrator at the time of grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) “Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) “Applicable Laws” means the requirements relating to the administration of, or otherwise affecting, equity compensation plans under
Israeli corporate laws, U.S. state corporate laws, Israeli securities laws, U.S. federal and state securities laws, the Code and foreign tax laws, any stock
exchange or quotation system on which the Shares are listed or quoted and the applicable laws of any other country or jurisdiction where Awards are
granted under the Plan or a sub-plan or addendum hereto.
(c) “Award” means, individually or collectively, a grant under the Plan of Options, Restricted Stock, Restricted Stock Units, Performance
Shares, Performance Units, Deferred Stock Units or Dividend Equivalents.
(d) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted
under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(e) “Awarded Stock” means the Ordinary Shares subject to an Award.
(f) “Board” means the Board of Directors of the Company.
(g) “Change of Control” means the occurrence of any of the following events, in one or a series of related transactions:
(i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Company, a subsidiary of the
Company or a Company employee benefit plan, including any trustee of such plan acting as trustee, is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined
voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors; or
(ii) a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting
power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or
(iii) the sale or disposition by the Company of all or substantially all the Company’s assets.
(h) “Code” means the Internal Revenue Code of 1986, as amended.
(i) “Committee” means a Committee appointed by the Board in accordance with Section 4 of the Plan.
(j) “Company” means Check Point Software Technologies Ltd.
(k) “Consultant” means any person, other than an Employee, engaged by the Company, or any Subsidiary to render services and who is
compensated for such services.
(l) “Continuous Status as a Director” means that the Director relationship is not interrupted or terminated.
(m) “Deferred Stock Unit” means a deferred stock unit Award granted to a Participant pursuant to Section 13.
(n) “Director” means a member of the Board.
(o) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.
(p) “Dividend Equivalent” means a credit, payable in cash, made at the discretion of the Administrator, to the account of a Participant in an
amount equal to the cash dividends paid on one Share for each Share represented by an Award held by such Participant. The Dividend Equivalent for
each Share subject to an Award shall only be paid to a Participant on the vesting date for such Share.
(q) “Employee” means any person, including Officers and Directors, employed by the Company or any Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety
days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company or its Subsidiary is not so guaranteed, then three (3) months following the 91st day of such leave any Incentive Stock Option
held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
-2-
(r) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(s) “Fair Market Value” means, as of any date, the value of Ordinary Shares determined as follows:
(i) If the Ordinary Shares are listed on any established stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc. Automated Quotation (“Nasdaq”) System, the Fair Market Value of a
Share of Ordinary Shares shall be the closing sales price for such shares (or the closing bid, if no sales were reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in Ordinary Shares) on the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Ordinary Shares are quoted on the Nasdaq System (but not on the Nasdaq National Market thereof) or are regularly quoted
by a recognized securities dealer but selling prices are not reported, the Fair Market Value of an Ordinary Share shall be the mean between the high bid
and low asked prices for the Ordinary Shares on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(iii) In the absence of an established market for the Ordinary Shares, the Fair Market Value shall be determined in good faith by the
Administrator.
(t) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(u) “Non-Employee Director” means a Director who is neither an Employee nor a Consultant and who is not a resident of Israel.
(v) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
(w) “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Award. The Notice of
Grant is part of the Award Agreement.
(x) “Officer” means a person who is an officer of the Company or a Subsidiary within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder.
(y) “Option” means a stock option granted pursuant to the Plan.
-3-
(z) “Option Agreement” means a written or electronic agreement between the Company and a Participant evidencing the terms and
conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.
(aa) “Ordinary Shares” shall mean the Ordinary Shares of the Company., NIS 0.01 nominal value.
(bb) “Participant” means the holder of an outstanding Award granted under the Plan.
(cc) “Performance Share” means a performance share Award granted to a Participant pursuant to Section 11.
(dd) “Performance Unit” means a performance unit Award granted to a Participant pursuant to Section 12.
(ee) “Plan” means this 2005 United States Equity Incentive Plan.
(ff) “Restricted Stock” means Shares granted pursuant to Section 9 of the Plan.
(gg) “Restricted Stock Unit” means an Award granted pursuant to Section 10 of the Plan.
(hh) “Service Provider” means an Employee, Consultant or Non-Employee Director.
(ii) “Share” means a share of the Ordinary Shares, as adjusted in accordance with Section 19 of the Plan.
(jj) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 19 of the Plan, the maximum aggregate number of Shares which may be issued under the Plan and
the Company’s 2005 Israel Equity Incentive Plan, as amended (the “Israel Plan”, and collectively with the Plan, the “Equity Plans”)), is 19,000,000
Shares; provided, however, that on December 31st of each year, commencing December 31, 2018, the number of Reserved and Authorized Shares (as
defined below) under the Equity Plans shall be automatically reset on such date to equal 10% the sum of (A) of the number of Shares issued and
outstanding on such date and (B) the number of Shares reserved and authorized under the Equity Plans for outstanding Awards granted under the Equity
Plans as of such date; provided, however, that in no event shall the number of Reserved and Authorized Shares be less than the number of Shares
reserved and authorized under the Equity Plans for Awards granted under the Plans that are outstanding as of such date. The number of “Reserved and
Authorized Shares” under the Equity Plans shall equal the sum of (i) the number of Shares reserved and authorized under the Equity Plans for
outstanding Awards granted under the Equity Plans as of such date, and (ii) the number of Shares reserved, authorized and available for issuance under
the Equity Plans on such date.
-4-
(b) The Shares may be authorized, but unissued, or reacquired Ordinary Shares.
(c) Intentionally omitted.
(d) If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to Restricted Stock, Performance
Shares or Restricted Stock Units, is forfeited to or repurchased by the Company at its original purchase price due to such Award failing to vest, the
unpurchased Shares (or for Awards other than Options, the forfeited or repurchased shares) which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan under any Award shall not be returned
to the Plan and shall not become available for future distribution under the Plan; provided, however, that if Shares of Restricted Stock, Performance
Shares or Restricted Stock Units are repurchased by the Company at their original purchase price or are forfeited to the Company due to such Awards
failing to vest, such Shares shall become available for future grant under the Plan. Shares used to pay the exercise price of an Option shall not become
available for future grant or sale under the Plan. Shares used to satisfy tax withholding obligations shall not become available for future grant or sale
under the Plan. To the extent an Award under the Plan is paid out in cash rather than stock, such cash payment shall not reduce the number of Shares
available for issuance under the Plan. Any payout of Dividend Equivalents or Performance Units, because they are payable only in cash, shall not reduce
the number of Shares available for issuance under the Plan. Conversely, any forfeiture of Dividend Equivalents or Performance Units shall not increase
the number of Shares available for issuance under the Plan.
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy
Applicable Laws. The Plan may be administered by different Committees with respect to different groups of Service Providers.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Ordinary Shares, in accordance with Section 2(s) of the Plan;
(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine whether and to what extent Awards or any combination thereof, are granted hereunder;
(iv) to determine the number of Ordinary Shares or equivalent units to be covered by each Award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
-5-
(vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder. Such terms
and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised or other Awards vest (which may be
based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the
Ordinary Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;
(vii) to construe and interpret the terms of the Plan and Awards;
or Plan addendums established for the purpose of qualifying for preferred tax treatment under foreign tax laws;
(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans
termination exercisability period of Options longer than is otherwise provided for in the Plan;
(ix) to modify or amend each Award (subject to Section 21(c) of the Plan), including the discretionary authority to extend the post-
(x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously
granted by the Administrator;
(xi) to allow Participants to satisfy withholding tax obligations by electing to have the Company or its Subsidiary withhold from the
Shares or cash to be issued upon exercise or vesting of an Award (or distribution of a Deferred Stock Unit) that number of Shares or cash having a Fair
Market Value equal to the minimum amount required to be withheld. The Fair Market Value of any Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares or cash withheld for this purpose shall be made in
such form and under such conditions as the Administrator may deem necessary or advisable;
(xii) to determine whether Dividend Equivalents will be granted in connection with another Award;
(xiii) to determine the terms and restrictions applicable to Awards; and
(xiv) to make all other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all
Participants and any other holders of Awards.
5. Eligibility. Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Deferred Stock Units, Dividend Equivalents and
Nonstatutory Stock Options may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.
6. No Employment Rights. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant’s
employment with the Company or its Subsidiaries, nor shall they interfere in any way with the Participant’s right or the Company’s or Subsidiary’s right,
as the case may be, to terminate such employment at any time, with or without cause or notice.
-6-
7. Term of Plan. The Plan will become effective upon its adoption by the Board and will remain in effect until terminated pursuant to Section 21 of
the Plan.
8. Stock Options.
(a) Term. The term of each Option shall be stated in the Notice of Grant; provided, however, that the term shall be no more than seven
(7) years from the date of grant or such shorter term as may be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock Option
granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Notice of Grant.
(b) Option Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by
the Administrator and shall be no less than 100% of the Fair Market Value per share on the date of grant; provided, however, that in the case of an
Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(c) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option
may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. In so doing, the Administrator may
specify that an Option may not be exercised until the completion of a service period or until performance milestones are satisfied. In any event, no
Option granted hereunder shall vest until at least six months following the Option grant date.
(d) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of
grant. Subject to Applicable Laws, such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Participant for more
than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;
(iv) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to the Company or Subsidiary of the sale proceeds required to pay the exercise
price;
-7-
(v) any combination of the foregoing methods of payment; or
(vi) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.
(e) Exercise of Option; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and
at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the name of the Participant. Until the stock certificate evidencing such Shares is issued (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the optioned stock, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued, except as provided in Section 19 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares thereafter available for sale under the Option, by the number of Shares as
to which the Option is exercised.
(f) ISO $100,000 Rule. Each Option shall be designated in the Notice of Grant as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value:
(i) of Shares subject to a Participant’s Incentive Stock Options granted by the Company or any Subsidiary, which
(ii) become exercisable for the first time during any calendar year (under all plans of the Company or any Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 8(i), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the time of grant.
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9. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and conditions of the Plan, Restricted Stock may be granted to Participants at any time
as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the number of
Shares subject to a Restricted Stock award granted to any Participant, and (ii) the conditions that must be satisfied, which typically will be based
principally or solely on continued provision of services but may include a performance-based component, upon which is conditioned the grant, vesting
or issuance of Restricted Stock; provided, however that no Restricted Stock Award shall vest until at least one year following the grant date.
(b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and
conditions of Restricted Stock granted under the Plan. Restricted Stock grants shall be subject to the terms, conditions, and restrictions determined by
the Administrator at the time the stock or the restricted stock unit is awarded. The Administrator may require the recipient to sign a Restricted Stock
Award agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined
by the Administrator.
(c) Restricted Stock Award Agreement. Each Restricted Stock grant shall be evidenced by an agreement that shall specify the purchase
price (if any) and such other terms and conditions as the Administrator, in its sole discretion, shall determine; provided; however, that if the Restricted
Stock grant has a purchase price, such purchase price must be paid no more than ten (10) years following the date of grant.
10. Restricted Stock Units.
(a) Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. The Administrator
shall have complete discretion to determine (i) the number of Shares subject to a Restricted Stock Unit award granted to any Participant, and (ii) the
conditions that must be satisfied, which typically will be based principally or solely on continued service but may include a performance-based
component, upon which is conditioned the grant or vesting of Restricted Stock Units. Restricted Stock Units shall be granted in the form of units to
acquire Shares. Each such unit shall be the equivalent of one Share for purposes of determining the number of Shares subject to an Award. Until the
Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the units to acquire Shares.
(b) Vesting Criteria and Other Terms. The Administrator shall set vesting criteria in its discretion, which, depending on the extent to which
the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting
criteria based upon the achievement of Company-wide, Subsidiary-wide, business unit, or individual goals (including, but not limited to, continued
employment), or any other basis determined by the Administrator in its discretion; provided, however that no Restricted Unit Award shall vest until at
least one year following the grant date.
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(c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant shall be entitled to receive a payout as
specified in the Restricted Stock Unit Award Agreement. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.
(d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall be made as soon as practicable after the date(s) set forth
in the Restricted Stock Unit Award Agreement. The Administrator shall pay earned Restricted Stock Units in Shares.
(e) Cancellation. On the date set forth in the Restricted Stock Unit Award Agreement, all unearned Restricted Stock Units shall be forfeited
to the Company.
11. Performance Shares.
(a) Grant of Performance Shares. Subject to the terms and conditions of the Plan, Performance Shares may be granted to Participants at
any time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the number
of Shares subject to a Performance Share award granted to any Participant, and (ii) the conditions that must be satisfied, which typically will be based
principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or
vesting of Performance Shares. Performance Shares shall be granted in the form of units to acquire Shares. Each such unit shall be the equivalent of one
Share for purposes of determining the number of Shares subject to an Award. Until the Shares are issued, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the units to acquire Shares.
(b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and
conditions of Performance Shares granted under the Plan. Performance Share grants shall be subject to the terms, conditions, and restrictions determined
by the Administrator at the time the stock is awarded, which may include such performance-based milestones as are determined appropriate by the
Administrator; provided, however that no Performance Share Award shall vest until at least one year following the grant date. The Administrator may
require the recipient to sign a Performance Shares agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall
bear such legends as shall be determined by the Administrator.
(c) Performance Share Award Agreement. Each Performance Share grant shall be evidenced by an agreement that shall specify such other
terms and conditions as the Administrator, in its sole discretion, shall determine.
12. Performance Units.
(a) Grant of Performance Units. Performance Units are similar to Performance Shares, except that they shall be settled in a cash equivalent
to the Fair Market Value of the underlying Shares, determined as of the vesting date. Subject to the terms and conditions of the Plan, Performance Units
may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator
shall have complete
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discretion to determine the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance
milestones but may include a service-based component, upon which is conditioned the grant or vesting of Performance Units. Performance Units shall
be granted in the form of units to acquire Shares. Each such unit shall be the cash equivalent of one Share of Ordinary Shares. No right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to Performance Units or the cash payable thereunder.
(b) Number of Performance Units. The Administrator will have complete discretion in determining the number of Performance Units
granted to any Participant.
(c) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and
conditions of Performance Units granted under the Plan. Performance Unit grants shall be subject to the terms, conditions, and restrictions determined
by the Administrator at the time the grant is awarded, which may include such performance-based milestones as are determined appropriate by the
Administrator. The Administrator may require the recipient to sign a Performance Unit agreement as a condition of the award. Any certificates
representing the units awarded shall bear such legends as shall be determined by the Administrator.
(d) Performance Unit Award Agreement. Each Performance Unit grant shall be evidenced by an agreement that shall specify such terms
and conditions as the Administrator, in its sole discretion, shall determine.
13. Deferred Stock Units. Deferred Stock Units shall consist of a Restricted Stock, Restricted Stock Unit, Performance Share or
Performance Unit Award that the Administrator, in its sole discretion permits to be paid out in installments or on a deferred basis, in accordance with
rules and procedures established by the Administrator. Deferred Stock Units shall remain subject to the claims of the Company’s general creditors until
distributed to the Participant.
14. Automatic Stock Option and RSU Grants to Non-employee Directors.
(a) Procedure for Grants. All grants of Options and RSU to Non-employee Directors under this Section 14 shall be automatic and
non-discretionary and shall be made strictly in accordance with the following provisions:
(i) Each Non-employee Director shall be automatically granted (i) an Option to purchase 25,000 Shares, or a lesser
amount determined by the Board, in its sole discretion (the “First Option”), and (ii) RSUs with a value of $200,000, or a lesser amount
determined by the Board, in its sole discretion (the “First RSU”, and, together with the First Option, the “First Awards”), upon the date on
which such person first becomes a Director, whether through election by the shareholders of the Company or appointment by the Board of
Directors to fill a vacancy; provided, however, that a Non-employee Director who has previously been employed by the Company (or any
Affiliate) shall not be eligible to receive a First Option or a First RSU.
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(ii) At each of the Company’s annual shareholder meetings, and commencing in 2020, each Non-employee Director shall
be automatically granted (i) an Option to purchase 15,000 Shares, or a lesser amount determined by the Board, in its sole discretion (the
“Annual Option”), and (ii) RSUs with a value of $50,000, or a lesser amount determined by the Board, in its sole discretion (the “Annual
RSU”, and, together with the Annual Option, the “Annual Awards”), provided that such individual has served as an Non-employee
Director for at least six months prior to the date of such annual meeting.
(iii) Notwithstanding the provisions of subsections (i) and (ii) hereof, in the event that an automatic grant hereunder
would cause the number of Shares subject to outstanding Awards plus the number of Shares previously purchased upon exercise of
Options or the vesting of other Awards to exceed the number of Shares available for issuance under the Plan, then each such automatic
grant shall be for that number of Shares determined by dividing the total number of Shares remaining available for grant by the number of
Non-employee Directors on the automatic grant date. Any further grants shall then be deferred until such time, if any, as additional Shares
become available for grant under the Plan.
(iv) The terms of an Award granted hereunder shall be as follows:
(A) The term of the Option shall be seven (7) years.
(B) The Option shall be exercisable only while the Non-employee Director remains a Director of the Company,
except as set forth in subsection (c) hereof.
(C) The exercise price per Share shall be 100% of the fair market value per Share on the date of grant of the
Option.
(D) The First Option shall become exercisable as to 25% of the covered Shares each year on the day prior to each
year’s normally scheduled annual shareholders’ meeting, so as to become 100% vested on the day prior to the normally scheduled
annual shareholders’ meeting occurring approximately four years following the grant date, subject to the Participant maintaining
Continuous Status as a Director on each vesting date.
(E) The First RSU shall vest as to 25% of the covered Shares each year on the day prior to each year’s normally
scheduled annual shareholders’ meeting, so as to become 100% vested on the day prior to the normally scheduled annual
shareholders’ meeting occurring approximately four years following the grant date, subject to the Participant maintaining
Continuous Status as a Director on each vesting date.
(F) The Annual Option shall become exercisable as to 50% of the covered Shares six months following the grant
date, and as to an additional 25% of the covered Shares each three months thereafter, so as to be 100% vested on the first
anniversary of the grant date, subject to the Participant maintaining Continuous Status as a Director on each vesting date.
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(G) The Annual RSU shall vest as to 50% of the covered Shares six months following the grant date, and as to an
additional 25% of the covered Shares each three months thereafter, so as to be 100% vested on the first anniversary of the grant date,
subject to the Participant maintaining Continuous Status as a Director on each vesting date.
(b) Consideration for Exercising Non-employee Director Stock Options. The consideration to be paid for the Shares to be issued
upon exercise of an automatic Non-employee Director Option shall consist of any consideration permitted under Section 8(d) hereof and as set
forth in the Award Agreement.
(c) Post-Directorship Exercisability. If a Non-employee Director ceases to serve as a Director, he or she may, but only within one
year after the date he or she ceases to be a Director, exercise his or her Option to the extent that he or she was entitled to exercise it at the date of
such termination. To the extent that he or she was not entitled to exercise an Option at the date of such termination, or if he or she does not
exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate.
(d) Limitation on Automatic Award Grants. The Directors serving immediately prior to the appointment or election of a new
Non-employee Director, or prior to an annual shareholders’ meeting, as the case may be, shall determine as to each new Non-employee Director
whether he or she shall be granted an Award under this Section 14 or under the comparable provisions of another incentive plan of the Company.
A new Non-employee Director who receives an Award under this Plan shall not be eligible to receive a comparable automatic stock option or RSU
grant under any other incentive plan of the Company. A Non-employee Director who receives an Award of an Annual Option under this Plan shall
not be eligible to receive a comparable automatic stock option or RSU grant under any other incentive plan of the Company with respect to such
fiscal year of the Company.
15. Termination of Relationships, Death or Disability.
(a) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s
death or Disability, then (i) in the case of an Award that is an Option, the Participant may exercise any Options within such period of time as is specified
in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement), and (ii) in the case of any Award other than an Option, the Participant shall be entitled to the benefit
conferred by such Award during such period of time as is specified in the Award Agreement to the extent that the Award is vested on the date of
termination (but in no event later than the expiration of the term of such Award, if any, as set forth in the Award Agreement). In the absence of a
specified time in the Award Agreement, an Option shall remain exercisable, and the Participant shall be entitled to the benefit conferred by an Award
other than an Option, for three months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her
entire Award, the Shares covered by the unvested portion of the Award shall revert to the Plan. If, after termination, the Participant does not exercise his
or her Option, or receive the benefit conferred by an Award other than an Option, within the time specified herein, the Award shall terminate, and the
Shares covered by such Award shall revert to the Plan.
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(b) Disability. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, then (i) in the case of an Award that
is an Option, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is
vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement), and (ii) in
the case of any Award other than an Option, the Participant shall be entitled to the benefit conferred by such Award during such period of time as is
specified in the Award Agreement to the extent that the Award is vested on the date of termination (but in no event later than the expiration of the term of
such Award, if any, as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, an Option shall remain exercisable,
and the Participant shall be entitled to the benefit conferred by an Award other than an Option, for twelve (12) months following the Participant’s
termination due to Disability. If, on the date of termination, the Participant is not vested as to his or her entire Award, the Shares covered by the unvested
portion of the Award shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option, or receive the benefit conferred by
an Award other than an Option, within the time specified herein, the Award shall terminate, and the Shares covered by such Award shall revert to the
Plan.
(c) Death of Participant. If a Participant dies while a Service Provider, then (i) in the case of an Award that is an Option, the Option may be
exercised following the Participant’s death within such period of time as is specified in the Option Agreement to the extent the Option is vested on the
date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Option Agreement), by
the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the
Administrator, and (ii) in the case of any Award other than an Option, the Participant’s designated beneficiary, provided such beneficiary has been
designated prior to Participant’s death in a form acceptable to the Administrator, shall be entitled to the benefit conferred by such Award during such
period of time as is specified in the Award Agreement to the extent that the Award is vested on the date of death (but in no event later than the expiration
of the term of such Award, if any, as set forth in the Award Agreement). If no such beneficiary has been designated by the Participant, then such Option
may be exercised by, or the benefit conferred by such Award shall be provided to, the personal representative of the Participant’s estate or by the
person(s) to whom the Award is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of
a specified time in the Award Agreement, the Option shall remain exercisable, or the benefit conferred by such Award shall be provided, for twelve
(12) months following Participant’s death. If the Option is not so exercised or the benefit conferred by such Award is not provided within the time
specified herein, the Award shall terminate, and the Shares covered by such Award shall revert to the Plan.
16. Leaves of Absence. Unless the Administrator provides otherwise or except as otherwise required by Applicable Laws, vesting of Awards
granted hereunder shall cease commencing on the first day of any unpaid leave of absence and shall only recommence upon return to active service.
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17. Part-Time Service. Unless the Administrator provides otherwise or except as otherwise required by Applicable Laws, any service-based
vesting of Awards granted hereunder shall be extended on a proportionate basis in the event an Employee transitions to a work schedule under which
they are customarily scheduled to work on less than a full-time basis, or if not on a full-time work schedule, to a schedule requiring fewer hours of
service. Such vesting shall be proportionately re-adjusted prospectively in the event that the Employee subsequently becomes regularly scheduled to
work additional hours of service.
18. Non-Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the
lifetime of the recipient, only by the recipient. If the Administrator makes an Award transferable, it may only be transferable for no consideration to
transferees permitted pursuant to a Form S-8 Registration Statement (such as family members or pursuant to a settlement of marital property rights) and
such Award shall contain such additional terms and conditions as the Administrator deems appropriate.
19. Adjustments Upon Changes in Capitalization, Dissolution or Liquidation or Change of Control.
(a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Ordinary Shares covered
by each outstanding Award, the number of Ordinary Shares which have been authorized for issuance under the Plan but as to which no Awards have yet
been granted (including the automatic annual replenishment of two million Ordinary Shares) or which have been returned to the Plan upon cancellation
or expiration of an Award, the number of Ordinary Shares subject to automatic option grants to Non-Employee Directors under Section 14 hereof, as
well as the price per Ordinary Share covered by each such outstanding Award shall be proportionately adjusted for any increase or decrease in the
number of issued Ordinary Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Ordinary Shares,
or any other increase or decrease in the number of issued Ordinary Shares effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such
adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price of Ordinary Shares subject to an Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each
Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a
Participant to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Awarded Stock covered thereby,
including Shares as to which the Award would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase
option or forfeiture rights applicable to any Award shall lapse 100%, and that any Award vesting shall accelerate 100%, provided the proposed
dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised (with respect to
Options) or vested (with respect to other Awards), an Award will terminate immediately prior to the consummation of such proposed action.
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(c) Change of Control.
(i) Stock Options. In the event of a Change of Control, each outstanding Option shall be assumed or an equivalent option substituted
by the successor corporation or a parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or
substitute for the Option, the Administrator, in its sole discretion, may provide that either (i) all Options shall terminate immediately prior to the
consummation of the Change of Control, or (ii) Participants shall fully vest in and have the right to exercise their Options as to all of the Awarded Stock,
including Shares as to which it would not otherwise be vested or exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a Change of Control, the Administrator shall notify the Participant in writing or electronically that the Option shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if, following the Change of Control, the option confers the right to purchase
or receive, for each Share of Awarded Stock subject to the Option immediately prior to the Change of Control, the consideration (whether stock, cash, or
other securities or property) received in the Change of Control by holders of Ordinary Shares for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Ordinary Shares);
provided, however, that if such consideration received in the Change of Control is not solely stock of the successor corporation or its parent, the
Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each
Share of Awarded Stock subject to the Option, to be solely stock of the successor corporation or its parent equal in fair market value to the per share
consideration received by holders of Ordinary Shares in the Change of Control.
(ii) Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Deferred Stock Units. In the event of a
Change of Control, each outstanding Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit and Deferred Stock Unit award (and
any related Dividend Equivalent) shall be assumed or an equivalent Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit and
Deferred Stock Unit award substituted by the successor corporation or a parent or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit or Deferred Stock Unit
award, the Administrator, in its sole discretion, may provide either that (i) such Awards shall terminate immediately prior to the consummation of the
Change of Control, or (ii) Participants shall fully vest in the Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit or Deferred
Stock Unit Awards including as to Shares (or with respect to Performance Units, the cash equivalent thereof) which would not otherwise be vested. For
the purposes of this paragraph, a Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit and Deferred Stock Unit award shall be
considered assumed if, following the Change of Control, the award confers the right to purchase or receive, for each Share (or with respect to
Performance Units, the cash equivalent thereof) subject to the Award immediately prior to the Change of Control, the consideration (whether stock, cash,
or other securities or property) received in the Change of Control by holders of Ordinary Shares for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding
Ordinary Shares); provided, however, that if such consideration received in the Change
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of Control is not solely stock of the successor corporation or its parent, the Administrator may, with the consent of the successor corporation, provide for
the consideration to be received, for each Share and each unit/right to acquire a Share subject to the Award, to be solely stock of the successor
corporation or its parent equal in fair market value to the per share consideration received by holders of Ordinary Shares in the Change of Control.
20. Date of Grant. The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Participant within a
reasonable time after the date of such grant.
21. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to
comply with Section 422 of the Code (or any successor rule or statute or other Applicable Law). Such stockholder approval, if required, shall be
obtained in such a manner and to such a degree as is required by Applicable Law.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any
Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing (or electronic format)
and signed by the Participant and the Company or its Subsidiary.
22. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of the Award or the issuance and
delivery of such Shares (or with respect to Performance Units, the cash equivalent thereof) shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise or receipt of an Award, the Company may require the person exercising or
receiving such Award to represent and warrant at the time of any such exercise or receipt that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
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23. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Awarded Stock covered by an Award exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional stockholder approval, such Award shall be void with respect to such excess Awarded Stock,
unless stockholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with
Section 21(b) of the Plan.
24. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
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Exhibit 12.1
I, Gil Shwed, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 20-F of Check Point Software Technologies Ltd.;
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;
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;
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)
and15d-15(f)) for the company and have:
(a)
(b)
(c)
(d)
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;
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;
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
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 the company’s board of directors (or persons performing the equivalent functions):
(a)
(b)
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
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
Date: April 14, 2022
By: /s/ Gil Shwed
Gil Shwed
Chief Executive Officer
Exhibit 12.2
I, Tal Payne, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 20-F of Check Point Software Technologies Ltd.;
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;
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;
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)
and15d-15(f)) for the company and have:
(a)
(b)
(c)
(d)
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;
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;
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
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 the company’s board of directors (or persons performing the equivalent functions):
(a)
(b)
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
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
Date: April 14, 2022
By: /s/ Tal Payne
Tal Payne
Chief Financial Officer
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF
TITLE 18, UNITED STATES CODE)
Exhibit 13.1
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code),
the undersigned Chief Executive Officer of Check Point Software Technologies Ltd., a company organized under the laws of the State of Israel (the
“Company”), does hereby certify that the Annual Report on Form 20-F for the year ended December 31, 2021 (the “Form 20-F”) of the Company fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Annual Report on
Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 14, 2022
By: /s/ Gil Shwed
Gil Shwed
Chief Executive Officer
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF
TITLE 18, UNITED STATES CODE)
Exhibit 13.2
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code),
the undersigned Chief Financial Officer of Check Point Software Technologies Ltd., a company organized under the laws of the State of Israel (the
“Company”), does hereby certify that the Annual Report on Form 20-F for the year ended December 31, 2021 (the “Form 20-F”) of the Company fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Annual Report on
Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 14, 2022
By: /s/ Tal Payne
Tal Payne
Chief Finance Officer
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference, in the Registration Statements (Form S-8 Nos.333-132954, 333-207335, 333-211113, 333-228075,
333-235322 and 333-240141) of our reports dated April 14, 2022, with respect to the consolidated financial statements of Check Point Software
Technologies Ltd. and the effectiveness of internal control over financial reporting of Check Point Software Technologies Ltd. included in this Annual
Report (Form 20-F) for the year ended December 31, 2021.
Tel Aviv, Israel
April 14, 2022
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
Exhibit 15