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Support.ComUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-KxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017ORoTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number: 0-25965j2 GLOBAL, INC.(Exact name of registrant as specified in its charter)Delaware47-1053457(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)6922 Hollywood Boulevard, Suite 500, Los Angeles, California 90028, (323) 860-9200(Address and telephone number of principal executive offices)Securities registered pursuant to Section 12(b) of the Act:NoneSecurities registered pursuant to Section 12(g) of the Act:Common Stock, $0.01 par value(Title of class)Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes xNo oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes oNo xIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes xNo oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405) during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files). Yes xNo oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and willnot be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer xAccelerated filer oNon-accelerated filer oSmaller reporting company oEmerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x As of the last business day of the registrant’s most recently completed second fiscal quarter, the approximate aggregate market value of the commonstock held by non-affiliates, based upon the closing price of the common stock as quoted by the NASDAQ Global Select Market was $2,558,879,917. Sharesof common stock held by executive officers, directors and holders of more than 5% of the outstanding common stock have been excluded. Thisdetermination of affiliate status is not necessarily a conclusive determination for other purposes. As of February 26, 2018, the registrant had 49,095,551 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held May 3,2018 are incorporated by reference into Part III of this Form 10-K. This Annual Report on Form 10-K includes 116 pages with the Index to Exhibits located on page 112. TABLE OF CONTENTS Page PART I. Item 1. Business3 Item 1A. Risk Factors10 Item 1B. Unresolved Staff Comments31 Item 2. Properties31 Item 3. Legal Proceedings31 Item 4. Mine Safety Disclosures32 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities33 Item 6. Selected Financial Data37 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations38 Item 7A.Quantitative and Qualitative Disclosures About Market Risk56 Item 8.Financial Statements and Supplementary Data58 Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure106 Item 9A.Controls and Procedures106 Item 9B.Other Information109 PART III. Item 10.Directors, Executive Officers and Corporate Governance109 Item 11.Executive Compensation109 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters109 Item 13.Certain Relationships and Related Transactions, and Director Independence109 Item 14.Principal Accounting Fees and Services109 PART IV. Item 15.Exhibits and Financial Statement Schedules109 Item 16.Form 10-K Summary111-2- PART IItem 1. BusinessOverviewj2 Global, Inc., together with its subsidiaries (“j2 Global”, “our”, “us” or “we”), is a leading provider of internet services. Through our CloudServices segment, we provide cloud services to consumers and businesses and license our intellectual property (“IP”) to third parties. In addition, the CloudServices segment includes fax, voice, backup, security and email marketing products. Our Digital Media segment specializes in the technology, gaming,lifestyle and healthcare markets, offering content, tools and services to consumers and businesses.Our Cloud Services segment generates revenues primarily from customer subscription and usage fees and from IP licensing fees. Our Digital Mediasegment generates revenues from advertising and sponsorships, subscription and usage fees, performance marketing and licensing fees.In addition to growing our business organically, on a regular basis we acquire businesses to grow our customer bases, expand and diversify ourservice offerings, enhance our technologies, acquire skilled personnel and enter into new markets.Our consolidated revenues are currently generated from three basic business models, each with different financial profiles and variability. Our CloudServices segment is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with someseasonal weakness in the fourth quarter. The Cloud Services segment also includes the results of our IP licensing business, which can vary dramatically inboth revenues and profitability from period to period. Our Digital Media segment is driven primarily by advertising revenues, has relatively higher sales andmarketing expense and has seasonal strength in the fourth quarter. We continue to pursue additional acquisitions, which may include companies operatingunder business models that differ from those we operate under today. Such acquisitions could impact our consolidated profit margins and the variability ofour revenues.We were incorporated in 2014 as a Delaware corporation through the creation of a new holding company structure, and our Cloud Services segment,operated by our wholly owned subsidiary, j2 Cloud Services, LLC (formerly j2 Cloud Services, Inc.), and its subsidiaries, was founded in 1995. We manageour operations through two business segments: Cloud Services and Digital Media. Information regarding revenue and operating income attributable to eachof our reportable segments and certain geographic information is included within Note 16 - Segment Information of the Notes to Consolidated FinancialStatements included elsewhere in this Annual Report on Form 10-K, which is incorporated herein by reference.Cloud ServicesWe believe that businesses of all sizes are increasingly purchasing cloud services to meet their communication, messaging, security, data backup,hosting, customer relationship management and other needs. Cloud-based services represent a model for delivering and consuming, independent of location,real time business technology services, resources and solutions over the internet. Their goal is to reduce or eliminate costs, increase sales and enhanceproductivity, mobility, business continuity and security. Our eFax®, MyFax® and sFax® online fax services enable users to receive faxes into their emailinboxes and to send faxes via the internet. eVoice® and Onebox® provide our customers a virtual phone system with various available enhancements.KeepItSafe®, LiveVault®, and Livedrive® enable our customers to securely back up their data and dispose of tape or other physical systems. Our FuseMail®service provides our customers email, encryption, archival and perimeter protection solutions, while Campaigner® provides our customers enhanced emailmarketing solutions. All of these services represent software-as-a-service solutions except online backup which represents both a software-as-a-servicesolution and an infrastructure-as-a-service solution. We believe these services represent more efficient and less expensive solutions than many existingalternatives, and provide increased security, privacy, flexibility and mobility.We generate substantially all of our Cloud Services revenues from “fixed” subscription revenues for basic customer subscriptions and, to a lesserextent, “variable” usage revenues generated from actual usage by our subscribers. Our online fax, virtual phone, email, customer relationship managementand online backup products have both a fixed and variable subscription component with the substantial majority of revenues derived from the fixed portion.In addition, the cost structures of all our Cloud Services are very similar in terms of fixed and variable components and include capital expenditures that arein proportion to revenue for each product offering. We also generate Cloud Services revenues from patent licensing. We categorize our Cloud Services andsolutions into two basic groups: number-based, which are services provided in whole or in part through a telephone number, and non-number-based, whichare our other cloud services for business.We market our Cloud Services offerings to a broad spectrum of prospective business customers including sole proprietors, small to medium-sizedbusinesses, enterprises and government organizations. Our marketing efforts include enhancing brand-3- awareness; utilizing online advertising, search engines and affiliate programs; selling through both a telesales and direct sales force; and cross-selling. Wecontinuously seek to extend the number of distribution channels through which we acquire paying customers and improve the cost and volume of customersobtained through our current channels.We offer the following cloud services and solutions:FaxeFax® is the leading brand in the global online fax market. Various tiers of service provide increasing levels of features and functionality to soleproprietors, small and medium-sized businesses, and enterprises around the world. Our most popular services allow individuals to receive and send faxes asemail attachments. In addition to eFax®, we offer online fax services under a variety of alternative brands including sFax®, MyFax®, eFax Plus®, eFaxPro™, eFax Secure™, eFax Corporate™ and eFax Developer™.VoiceeVoice® is a virtual phone system that provides small and medium-sized businesses on-demand voice communications services, featuring a toll-freeor local company number, auto-attendant and menu tree. With these services, a subscriber can assign departmental and individual extensions that canconnect to multiple U.S. or Canadian numbers, including land-line and mobile phones and IP networks, and can enhance reachability through “findme/follow me” capabilities. These services also include advanced integrated voicemail for each extension, effectively unifying mobile, office and otherseparate voicemail services and improving efficiency by delivering voicemails in both native audio format and as transcribed text.Onebox® is a full-featured unified communications suite. It combines the features of many of our other branded services, plus added functionality,to provide a full virtual office. Onebox® includes a virtual phone system, hosted email, online fax, audio conferencing and web conferencing.BackupKeepItSafe® provides fully managed and monitored online backup and disaster recovery solutions for businesses, using its ISO-certified platform.By securing critical digital assets via the internet to highly secure data vaults, customers enjoy peace of mind knowing they have reliable and cost effectivebackups, and equally importantly rapid restores of the data that keeps their businesses operating. Furthermore, our solution for business continuity, backupand recovery will fully protect the customer’s physical, virtual and cloud resources. The software installs simply and provides full-server imaging and provenoff-site data recovery capabilities without costly investments. Company data is protected from human error, file corruption, ransomware and other harmfulfactors.LiveDrive®, which was acquired in February 2014, provides online backup and sync storage features for professionals and individuals. Thecustomers can access their files from anywhere at any time so long as they have access to the internet.LiveVault®, which was acquired in September 2015, provides cloud backup and recovery services. LiveVault® services include, among other items,offsite protection of data combined with local backup, web based access to protected data and a mirrored data center to ensure recoverability.SugarSync®, which was acquired in March 2015, provides online file backup, synchronization and sharing of all of a customer’s documents, photos,music and movies across all of the customer’s computers and mobile devices. The product is not dependent on any specific operating system or deviceplatforms.SecurityFuseMail® offers email security, email archiving and hosted email to businesses of all sizes around the world. These solutions are hosted offsite andseamlessly integrated into a customer’s existing email system. Email security offers multi-level spam and virus detection, works with almost any emailsystem, and deletes virus-infected emails while keeping the email message intact. Email continuity is a solution in which email systems are maintained evenwhen a mail server is down. Email archiving solutions provide for archiving of internal and external ingoing and outgoing emails, and indexing of all emailsto enable seamless search.Excel Micro™ is a Cloud Security distributor focusing on providing email security, web security, and endpoint protection. The solution is offered tothousands of resellers in the United States who provide the product to their end customers.-4- Email MarketingCampaigner® is a cloud-based email marketing solution to help small, medium and large businesses strengthen customer relationships and drivesales. Campaigner offers professional email campaign creation, advanced list management and segmentation tools, and targeted email autoresponders andworkflows. Campaigner also helps businesses increase the size of their mailing lists, comply with email regulations like CAN-SPAM and get more emails tomore inboxes.SMTP is our cloud-based solution for email delivery that enables our customers to begin using an email relay service. Using our SMTP platform,customers control all aspects of their email distribution and can review email campaign statistics through a dashboard. We have a team of experts that helpour customers’ setup and optimize the SMTP relay.IP LicensingWe hold a number of issued U.S. and foreign patents and other intellectual property rights. We seek to license some of these intellectual propertyrights to third parties in exchange for fees. We include the results of these activities within the Cloud Services segment, exclusive of brand licensing by theDigital Media segment.Global Network and OperationsOur Cloud Services business operates multiple physical Points of Presence (“POPs”) worldwide, a central data center in Los Angeles and a remotedisaster recovery facility. We connect our POPs to our central data centers via redundant, and often times diverse, Virtual Private Networks (“VPNs”) usingthe internet. Our network is designed to deliver value-added user applications, customer support and billing services for our customers anywhere in the worldand a local presence for customers from thousands of cities in 50 countries on six continents. We offer our services in all major metropolitan areas in theUnited States (“U.S.”), the United Kingdom (“U.K.”), Canada and such major cities as Berlin, Copenhagen, Madrid, Manila, Mexico City, Milan, Paris, Rome,Singapore, Sydney, Taipei, Tokyo, Vienna and Zurich. Our customers are located throughout the world.Customer Support ServicesOur Cloud Services customer service organization supports our cloud services customers through a combination of online self-help, emailcommunications, interactive chat sessions and telephone calls. Our internet-based online self-help tools enable customers to resolve simple issues on theirown, eliminating the need to speak or write to our customer service representatives. We use internal personnel and contracted third parties (on a dedicatedpersonnel basis) to answer our customer emails and telephone calls and to participate in interactive chat sessions.Our Cloud Services customer service organization provides email support seven days per week, 24 hours per day, to all subscribers. Payingsubscribers have access to live-operator telephone support seven days per week, 24 hours per day. Dedicated telephone support is provided for corporatecustomers 24 hours per day, seven days per week. Live sales and customer support services are available in various languages, including English, Spanish,Dutch, German, French, Japanese and Cantonese.CompetitionOur Cloud Services segment faces competition from, among others, online fax-providers, traditional fax machine or multi-function printercompanies, unified messaging/communications providers, telephone companies, voicemail providers, companies offering PBX systems and outsourced PBXsolutions, email providers, various data backup and hosting providers and customer relationship management solutions. Historically, our most popularsolutions have related to online faxing, including the ability of our customers to access faxes via email and our outbound desktop faxing capabilities. Thesesolutions compete primarily against traditional fax machine manufacturers, which are generally large and well-established companies, as well as publiclytraded and privately-held providers of fax servers and related software and outsourced fax services. Some of these companies may have greater financial andother resources than we do.We believe that the primary competitive factors determining our success in the market for our Cloud Services include financial strength andstability; pricing; reputation for reliability and security of service; intellectual property ownership; effectiveness of customer support; sign-up, service andsoftware ease-of-use; service scalability; customer messaging and branding; geographic coverage; scope of services; currency and payment methodacceptance; and local language sales, messaging and support.For more information regarding the competition that we face, please refer to the section entitled Risk Factors contained in Item 1A of this AnnualReport on Form 10-K.-5- Digital MediaOur Digital Media segment consists of a portfolio of web properties which includes IGN.com, Mashable.com, PCMag.com, HumbleBundle.com,Speedtest.net, AskMen.com, MedPageToday.com, Offers.com and Everydayhealth.com, among many others.Our properties provide trusted reviews of technology, gaming and lifestyle products and services; news and commentary related to their verticalmarkets; professional networking tools, targeted emails and white papers for IT professionals; speed testing for internet and mobile network connections;online deals and discounts for consumers; interactive tools and mobile applications that enable consumers to manage a broad array of health and wellnessneeds on a daily basis, including medical conditions, pregnancy, diet and fitness news; and tools and information for healthcare professionals to stay abreastof industry, legislative and regulatory developments in major medical specialties.We generate Digital Media revenues from the sale of display and video advertising on our owned-and-operated properties as well as third-party sites;from the sale of customer clicks to online merchants as well as commissions on sales attributed to clicks to online merchants; from business-to-business leadsto IT vendors; from the licensing of technology, data and other intellectual material to clients; and from the sale of subscription services to consumers andbusinesses.During 2017, our Digital Media web properties attracted approximately 5.7 billion visits and 23.7 billion page views.We believe competitive factors relating to attracting and retaining users include the ability to provide premium and exclusive content and the reach,effectiveness, and efficiency of our marketing services to attract consumers, advertisers, healthcare professionals and publishers. We continue to seekopportunities to acquire additional web properties, both within and outside of the technology, gaming, lifestyle and healthcare verticals, with the goal ofmonetizing their audiences and content though application of our proprietary technologies and insight.Web PropertiesOur Digital Media properties and services include the following:TechnologyOokla is a global leader in fixed broadband and mobile network testing applications, data and analysis. Over ten million tests are actively initiatedby consumers each day across all of Ookla’s Speedtest platforms, with more than 17 billion completed to date. As a result, Ookla maintains comprehensiveanalytics on worldwide internet performance and accessibility. Ookla solutions have been adopted by a significant number of internet service providers andmobile carriers worldwide and have been translated into over 30 languages for use by thousands of businesses, governments, universities and tradeorganizations.Offers.com is a leading coupons & deals website featuring offers from more than 16,000 of the internet’s more popular stores and brands. Savingshoppers since 2009, Offers.com’s objective is to help consumers find the best deals on the web. Additionally, Offers.com employs a process to verify that itscoupon codes work, saving consumers time and money.Ziff Davis B2B is a leading provider of digital content for buyers of information technology (IT) products and services, allowing IT vendors toidentify, reach and influence corporate IT decision makers who are actively researching specific IT purchases.PCMag is a leading online resource for laboratory-based product reviews, technology news and buying guides. We operate one of the largest andoldest independent testing facilities for consumer technology products. Founded in 1984, our lab produces more than 2,200 unbiased technology productand service reviews annually. PCMag’s “Editor’s Choice” award is recognized globally as a trusted mark for buyers and sellers of technology products andservices.Mashable.com is a global media brand publishing premium content for individuals interested in technology and culture. Powered by a proprietarydata suite, Mashable is recognized as a trusted global brand and produces stories for more than a dozen platforms, including Snapchat, Twitter and Facebook.Gaming & EntertainmentIGN Entertainment is a leading internet media brand focused on the video game and entertainment enthusiast markets. IGN reaches more than 154million monthly users and is followed by more than 11 million subscribers on YouTube and 30 million users on social platforms.-6- HumbleBundle.com is a digital subscription and storefront for video games, ebooks, and software. Customers purchase monthly subscriptions,product bundles, and individual products through our website. In addition, raising money for charity is a core mission for Humble Bundle. Each product saletransaction at Humble Bundle results in a charitable contribution, and, as of January 2018, Humble Bundle had helped raise over $117 million for charity.HealthcareThe Everyday Health properties include a collection of premier content and tools for the consumer and healthcare professional.Everyday Health ConsumerConsumer-focused properties include online content, interactive tools and applications designed to allow consumers to manage a broad array ofhealth and wellness needs on a daily basis. Everyday Health, our flagship brand, is a broad-based health information portal that provides consumers withtrusted and actionable health information intended to empower users to better manage their health and wellness. We operate the Mayo Clinic Diet digital program, a subscription-based plan for weight loss, and ultimately better health, developed by the weightloss experts at Mayo Clinic. Based on the bestselling book by the same name, the Mayo Clinic Diet digital program provides a step-by-step program to jump-start quick weight loss, achieve a goal weight and maintain it for life.Everyday Health Professional PropertiesFor healthcare professionals, we provide premier digital content that enables healthcare professionals to stay abreast of clinical, industry, legislativeand regulatory developments across all major medical specialties. Our flagship professional property, MedPage Today, delivers breaking medical news in 34medical specialties and major public policy developments at the state and federal levels seven days a week. MedPage Today coordinates with approximately4,000 leading researchers and clinicians, as well as more than 300 academic medical centers, to aid in gathering in-depth information for articles. MedPageToday’s excellence has been recognized with awards from the American Society of Healthcare Business Editors, the National Institute for HealthcareManagement, the eHealthcare Leadership Awards, the Medical Marketing and Media Awards and the Web Health Awards. Additionally, MedPage Today wasnamed as a finalist for the Jesse M. Neal Award and the Gerald M. Loeb Award.What to Expect When You’re ExpectingWe operate the digital properties for the What to Expect brand, the leading pregnancy and parenting media resource. Based on the best-sellingpregnancy book, What to Expect When You’re Expecting, by author Heidi Murkoff, the What to Expect website and mobile applications contain content onconception planning and pregnancy, as well as information on newborns and toddlers.Display and Video AdvertisingWe sell online display and video advertising on our owned-and-operated web properties and on third party sites as well as targeted advertisingacross the internet through various unaffiliated third party digital advertising networks.We have contractual arrangements with advertisers either directly or through agencies. The terms of these contracts specify the price of theadvertising to be sold and the volume of advertisements that will be served over the course of a campaign.In addition to the contracts with advertisers and agencies, we have contractual arrangements with certain third party websites not owned by us andthird party advertising networks to deliver online display and video advertising to their websites or to third-party sites.Performance MarketingWe generate business-to-business leads for IT vendors through the marketing of content, including white papers and webinars, and offer additionallead qualification and nurturing services. On the consumer side, we generate clicks to online merchants by promoting deals and discounts on our webproperties.-7- LicensingWe license our proprietary technology, data and intellectual property to third parties for various purposes. For instance, we will license the right touse PCMag’s “Editors’ Choice” logo and other copyrighted editorial content to businesses whose products have earned such distinction.SubscriptionsWe offer subscriptions to businesses for Speedtest Intelligence, which offers up-to-date insights into global fixed broadband and mobile performancedata. We offer subscriptions to consumers for our Mayo Clinic Diet program, PCMag Digital Edition and Humble Bundle.CompetitionCompetition in the digital media space is fierce and continues to intensify.Our digital media business competes with online publishers including CNET, GameSpot, WebMd, Vox and others as well as with portals,advertising networks, social media sites and other platforms, including Google, Facebook, Twitch and others. We believe that the primary competitive factorsdetermining our success in the market for our digital media include the reputation of brands as trusted sources of objective information and our ability toattract internet users and advertisers to our web properties.For more information regarding the competition that we face, please refer to the section entitled Risk Factors contained in Item 1A of this AnnualReport on Form 10-K.Patents and Proprietary RightsWe regard the protection of our intellectual property rights as important to our success. We aggressively protect these rights by relying on acombination of patents, trademarks, copyrights, trade dress and trade secrets. We also enter into confidentiality and intellectual property assignmentagreements with employees and contractors, and nondisclosure agreements with parties with whom we conduct business in order to limit access to anddisclosure of our proprietary information.Through a combination of internal technology development and acquisitions, we have built a portfolio of numerous U.S. and foreign patents. Wegenerate licensing revenues from some of these patents. We are currently engaged in litigation to enforce several of our patents. For a more detaileddescription of the lawsuits in which we are involved, see Item 3. Legal Proceedings. We intend to continue to invest in patents, to aggressively protect ourpatent assets from unauthorized use and to generate patent licensing revenues from authorized users.Several of our U.S. patents have been reaffirmed through reexamination proceedings before the United States Patent and Trademark Office(“USPTO”). We have generated royalties from licensing certain of our patents and have enforced certain patents against companies using our patentedtechnology without our permission.We seek patents for inventions that may contribute to our business or technology sector. In addition, we have multiple pending U.S. and foreignpatent applications, covering components of our technology and in some cases technologies beyond those that we currently offer. Unless and until patentsare issued on the pending applications, no patent rights can be enforced.We have obtained patent licenses for certain technologies where such licenses are necessary or advantageous.We own and use a number of trademarks in connection with our services, including word and/or logo trademarks for eFax, MyFax, eFax Corporate,Sfax, eVoice, KeepItSafe, Fusemail, Onebox, PCMag, IGN, Everyday Health, AskMen, Humble Bundle, Mashable, Health eCareers, Ookla, Speedtest, andGeek.com, among others. Many of these trademarks are registered worldwide, and numerous trademark applications are pending around the world. We holdnumerous internet domain names, including “efax.com”, “efaxcorporate.com”, “myfax.com”, “fax.com”, “evoice.com”, “keepitsafe.com”, “fusemail.com”,“campaigner.com”, “onebox.com”, “pcmag.com”, “techbargains.com”, “ign.com”, “askmen.com”, “speedtest.net”, “offers.com”, “humblebundle.com”,“mashable.com”, “healthecareers.com”, and “geek.com”, among others. We have filed to protect our rights to our brands in certain alternative top-leveldomains such as “.org”, “.net”, “.biz”, “.info” and “.us”, among others.-8- Like other technology-based businesses, we face the risk that we will be unable to protect our intellectual property and other proprietary rights, andthe risk that we will be found to have infringed the proprietary rights of others. For more information regarding these risks, please refer to the section entitledRisk Factors contained in Item 1A of this Annual Report on Form 10-K.Government RegulationWe are subject to a number of foreign and domestic laws and regulations that affect companies conducting business over the internet and, in somecases, using services of third-party telecommunications and internet service providers. These include, among others, laws and regulations addressing privacy,data storage, retention and security, freedom of expression, content, taxation, numbers, advertising and intellectual property. We are not a regulatedtelecommunications provider in the U.S. For information about the risks we face with respect to governmental regulation, please see Item 1A of this AnnualReport on Form 10-K entitled Risk Factors.SeasonalityOur Cloud Services revenues are impacted by the number of effective business days in a given period. We traditionally experience lower thanaverage Cloud Services usage and customer sign-ups in the fourth quarter. Revenues associated with our Digital Media operations are subject to seasonalfluctuations, becoming most active during the fourth quarter holiday period due to increased retail activity.Research and DevelopmentThe markets for our services are evolving rapidly, requiring ongoing expenditures for research and development and timely introduction of newservices and service enhancements. Our future success will depend, in part, on our ability to enhance our current services, to respond effectively totechnological changes, attract and retain engineering talent, sell additional services to our existing customer base and introduce new services andtechnologies that address the increasingly sophisticated needs of our customers.We devote significant resources to develop new services and service enhancements. Our research, development and engineering expenditures were$46.0 million, $38.0 million and $34.3 million for the fiscal years ended December 31, 2017, 2016 and 2015, respectively. For more information regardingthe technological risks that we face, please refer to the section entitled Risk Factors contained in Item 1A of this Annual Report on Form 10-K.EmployeesAs of December 31, 2017, we had approximately 2,487 employees, the majority of whom are in the U.S.Our future success will depend, in part, on our ability to continue to attract, retain and motivate highly qualified technical, marketing andmanagement personnel. Our employees are not represented by any collective bargaining unit or agreement. We have never experienced a work stoppage. Webelieve our relationship with our employees is good.Web Availability of ReportsThe Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filedpursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities and ExchangeCommission (the “SEC”). The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements andother information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge on the Company’swebsite at www.j2.com as soon as reasonably practicable after we file such reports with, or furnish them to, the SEC’s website. The information on our websiteis not part of this report. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding ourfilings we file electronically with the SEC at www.sec.gov.-9- Item 1A. Risk FactorsBefore deciding to invest in j2 Global or to maintain or increase your investment, you should carefully consider the risks described below inaddition to the other cautionary statements and risks described elsewhere in this Annual Report on Form 10-K and our other filings with the SEC, includingour subsequent reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face. Additional risks anduncertainties not presently known to us or that we currently deem immaterial also may affect our business. If any of these known or unknown risks oruncertainties actually occurs, our business, prospects, financial condition, operating results and cash flows could be materially adversely affected. In thatevent, the market price of our common stock will likely decline and you may lose part or all of your investment.Risks Related To Our BusinessAcquisitions and investments in our business have historically played a significant role in our growth and we anticipate that they will continue to do so.We must acquire additional or invest in new or current businesses, products, services and technologies that complement or augment our serviceofferings and customer base in order to sustain our rate of growth. We may not successfully identify suitable acquisition candidates or investment strategies,manage disparate technologies, lines of business, personnel and corporate cultures, realize our business strategy or the expected return on our investment ormanage a geographically dispersed company. If we are unable to identify and execute on acquisitions or execute on our investment strategies, our revenues,business, prospects, financial condition, operating results and cash flows could suffer.The majority of our revenue within the Digital Media segment is derived from short-term advertising arrangements and a reduction in spending by orloss of current or potential advertisers would cause our revenue and operating results to decline.In most cases, our agreements with advertisers have a term of one year or less and may be terminated at any time by the advertiser or by us withoutpenalty. Advertising agreements often provide that we receive payment based on “served” impressions but the online ad industry has started to shift so thatpayment will be made based on “viewable” impressions, and that change in basis could have a negative effect on available impressions thereby reducing ourrevenue potential. Accordingly, it is difficult to forecast display revenue accurately. In addition, our expense levels are based in part on expectations of futurerevenue. Moreover, we believe that advertising on the internet, as in traditional media, fluctuates significantly as a result of a variety of factors, many ofwhich are outside of our control. Some of these factors include budget constraints of our advertisers, cancellations or delays of projects by our advertisers, thecyclical and discretionary nature of advertising spending, general economic, internet-related and media industry conditions, as well as extraordinary events.The state of the global economy and availability of capital has impacted and could further impact the advertising spending patterns of existing and potentialadvertisers. Any reduction in spending by, or loss of, existing or potential advertisers would negatively impact our revenue and operating results. Further, wemay be unable to adjust our expenses and capital expenditures quickly enough to compensate for any unexpected revenue shortfall.-10- If we are unable to develop, commission or acquire compelling content in our Digital Media segment at acceptable prices, our expenses may increase,the number of visitors to our online properties may not grow as anticipated, or may decline, and/or visitors’ level of engagement with our websites maydecline, any of which could harm our operating results.Our future success depends in part on the ability of our Digital Media segment to aggregate compelling content and deliver that content through ouronline properties. We believe that users will increasingly demand high-quality content and services including more video and mobile-specific content. Suchcontent and services may require us to make substantial payments to third parties if we are unable to develop content of our own. Our ability to maintain andbuild relationships with such third-party providers is critical to our success. In addition, as new methods for accessing the internet become available,including through alternative devices, we may need to enter into amended agreements with existing third-party providers to cover the new devices. We maybe unable to monetize the activity on these alternative devices including mobile devices which may supplant current traffic that we monetize. We may beunable to enter into new, or preserve existing, relationships with the third-parties whose content or services we seek to obtain. In addition, as competition forcompelling content increases both domestically and internationally, our third-party providers may increase the prices at which they offer their content andservices to us and potential providers may not offer their content or services to us at all, or may offer them on terms that are not agreeable to us. An increase inthe prices charged to us by third-party providers could harm our operating results and financial condition. Further, many of our content and services licenseswith third parties are non-exclusive. Accordingly, other media providers may be able to offer similar or identical content. This increases the importance of ourability to deliver compelling content and personalization of this content for users in order to differentiate our properties from other businesses. If we areunable to develop compelling content of our own, we may be required to engage freelance services or obtain licensed content which may not be at reasonableprices which could harm our operating results.We have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results.We intend to continue to develop new services, enhance existing services and expand our geographic presence through acquisitions of othercompanies, service lines, technologies and personnel.Acquisitions involve numerous risks, including the following:•Difficulties in integrating the operations, systems, technologies, products and personnel of the acquired businesses;•Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets may have strongermarket positions;•Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespreadoperations resulting from acquisitions; and•The potential loss of key employees, customers, distributors, vendors and other business partners of the businesses we acquire.Acquisitions may also cause us to:•Use a substantial portion of our cash resources or incur debt;•Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition;•Assume liabilities;•Issue common stock that would dilute our current stockholders’ percentage ownership;•Record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges;•Incur amortization expenses related to certain intangible assets; and•Become subject to intellectual property or other litigation.Mergers and acquisitions are inherently risky and subject to many factors outside of our control. We cannot give assurance that our previous orfuture acquisitions will be successful and will not materially adversely affect our business, operating results or financial condition. Failure to manage andsuccessfully integrate acquisitions could materially harm our business and operating results. In addition, our effective tax rate for future periods is uncertainand could be impacted by mergers and acquisitions.-11- In our Digital Media business, if we are unable to prove that our advertising and sponsorship solutions provide an attractive return on investment forour customers, our financial results could be harmed. Our ability to grow revenue from our Digital Media business will be dependent on our ability to demonstrate to marketers that their marketingcampaigns with us provide a meaningful return on investment (“ROI”) relative to offline and other online opportunities. Certain of the marketing campaignswith respect to our Digital Media business are designed such that the revenues received are based entirely upon the ROI delivered for customers. Our DigitalMedia business has invested significant resources in developing its research, analytics and campaign effectiveness capabilities and expects to continue to doso in the future. Our ability, however, to demonstrate the value of advertising and sponsorship on Digital Media business properties will depend, in part, onthe sophistication of the analytics and measurement capabilities, the actions taken by our competitors to enhance their offerings, whether we meet the ROIexpectations of our customers and a number of other factors. If we are unable to maintain sophisticated marketing and communications solutions that providevalue to our customers or demonstrate our ability to provide value to our customers, our financial results will be harmed.Our fax services constitute a significant percentage of our revenue.Currently, fax-to-email revenue constitutes approximately 29% of our consolidated revenues. The success of our business is therefore dependentupon the continued use of fax as a messaging medium and/or our ability to diversify our service offerings and derive more revenue from other services, suchas voice, online backup, email, unified messaging solutions and services related to our Digital Media segment. If the demand for online fax-to-email as amessaging medium decreases, and we are unable to replace lost revenues from decreased usage or cancellation of our fax services with a proportional increasein our customer base or with revenues from our other services, our business, financial condition, operating results and cash flows could be materially andadversely affected. We believe that one of the attractive features of our eFax® and similar products is that fax signatures are a generally accepted method of executingcontracts. There are ongoing efforts by governmental and non-governmental entities to create a universally accepted method for electronically signingdocuments. Widespread adoption of so-called “digital signatures” could reduce demand for our fax services and, as a result, could have a material adverseeffect on our business, prospects, financial condition, operating results and cash flows.A system failure, security breach or other technological risk could delay or interrupt service to our customers, harm our reputation or subject us tosignificant liability.Our operations are dependent on our network being free from interruption by damage from fire, earthquake, power loss, telecommunications failure,unauthorized entry, computer viruses, cyber-attacks or any other events beyond our control. Similarly, the operations of our partners and other third partieswith which we work are also susceptible to the same risks. There can be no assurance that our existing and planned precautions of backup systems, regulardata backups, security protocols and other procedures will be adequate to prevent significant damage, system failure or data loss and the same is true for ourpartners, vendors and other third parties on which we rely. Also, many of our services are web-based, and the amount of data we store for our users on ourservers has been increasing. Despite the implementation of security measures, our infrastructure, and that of our partners, vendors and other third parties, maybe vulnerable to computer viruses, hackers or similar disruptive problems caused by our vendors, partners, other third parties, subscribers, employees or otherinternet users who attempt to invade public and private data networks. As seen in the industries in which we operate and others, these activities have been,and will continue to be, subject to continually evolving cybersecurity and technological risks. Further, in some cases we do not have in place disasterrecovery facilities for certain ancillary services. Moreover, a significant portion of our operations relies heavily on the secure processing, storage andtransmission of confidential and other sensitive data. For example, a significant number of our cloud services customers authorize us to bill their credit ordebit card accounts directly for all transaction fees charged by us. We rely on encryption and authentication technology to effect secure transmission ofconfidential information, including customer credit and debit card numbers. Advances in computer capabilities, new discoveries in the field of cryptographyor other developments may result in a compromise or breach of the technology used by us, our partners, vendors, or other third parties, to protect transactionand other confidential data. Any system failure or security breach that causes interruptions or data loss in our operations, our partners, vendors, or other thirdparties, or in the computer systems of our customers or leads to the misappropriation of our or our customers’ confidential information could result in asignificant liability to us (including in the form of judicial decisions and/or settlements, regulatory findings and/or forfeitures, and other means), causeconsiderable harm to us and our reputation (including requiring notification to customers, regulators, and/or the media), cause a loss of confidence in ourproducts and services, and deter current and potential customers from using our services. Our Board is briefed on cybersecurity risks and we implementcybersecurity risk management under our Board’s oversight. We use vendors to assist with cybersecurity risks, but these vendors may not be able to assist usadequately in preparing for or responding to a cybersecurity incident. We maintain insurance related to cybersecurity risks, but this insurance may not besufficient to cover all of our losses from any breaches or other adverse consequences related to a-12- cybersecurity-event. Any of these events could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows,or cause us to suffer other negative consequences. For example, we may incur remediation costs (such as liability for stolen assets or information, repairs ofsystem damage, and incentives to customers or business partners in an effort to maintain relationships after an attack); increased cybersecurity protectioncosts (which may include the costs of making organizational changes, deploying additional personnel and protection technologies, training employees, andengaging third party experts and consultants); lost revenues resulting from the unauthorized use of proprietary information or the failure to retain or attractcustomers following an attack; litigation and legal risks (including regulatory actions by state and federal governmental authorities and non-U.S.authorities); increased insurance premiums; reputational damage that adversely affects customer or investor confidence; and damage to the company’scompetitiveness, stock price, and diminished long-term shareholder value.Political instability and volatility in the economy may adversely affect segments of our customers, which may result in decreased usage and advertisinglevels, customer acquisition and customer retention rates and, in turn, could lead to a decrease in our revenues or rate of revenue growth.Certain segments of our customers may be adversely affected by political instability and volatility in the general economy or renewed downturns.To the extent these customers’ businesses are adversely affected by political instability or volatility, their usage of our services and/or our customer retentionrates could decline. This may result in decreased cloud services subscription and/or usage revenues and decreased advertising, e-commerce or other revenues,which may adversely impact our revenues and profitability.Users are increasingly using mobile devices to access our content within our Digital Media business segment and if we are unsuccessful in attracting newusers to our mobile offerings, and expanding the capabilities of our content and other offerings with respect to our mobile platforms, our net revenuescould decline.Web usage and the consumption of digital content are increasingly shifting to mobile platforms such as smartphones and other connected devices.Visits to our mobile websites and applications have increased but if the percentage of visits to our mobile websites does not continue to grow or we areunable to effectively monetize our mobile content, net revenue will be impacted. In addition, we are less effective at monetizing digital content on ourmobile websites and applications compared to our desktop websites. The growth of our business depends in part on our ability to continue to adapt to themobile environment and to deliver compelling solutions to consumers and retailers through these new mobile marketing channels. In addition, our successon mobile platforms will be dependent on our interoperability with popular mobile operating systems that we do not control, and any changes in suchsystems that degrade our functionality or give preferential treatment to competitive services could adversely affect usage of our services through mobiledevices.We could be subject to changes in our tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities whichmay adversely impact our financial results.We are a U.S. based multinational company subject to taxes in the U.S. and numerous foreign jurisdictions, including Ireland, where a number of oursubsidiaries are organized. Our provision for income taxes is based on a jurisdictional mix of earnings, statutory tax rates and enacted tax rules, includingtransfer pricing. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. As a result, our futureeffective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred taxassets and liabilities, or changes in tax laws or their interpretation. These changes may adversely impact our effective tax rate and harm our financial positionand results of operations.The recently enacted U.S. federal tax legislation, the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”) may have an adverse effect on our business or onour results of operations. The 2017 Tax Act significantly revised the U.S. tax code by, in part but not limited to, reducing the U.S. corporate tax rate from 35%to 21% and imposing a mandatory one-time transition tax on certain un-repatriated earnings of foreign subsidiaries. The SEC staff acknowledged thechallenges companies face incorporating the effects of tax reform by their financial reporting deadlines and issued Staff Accounting Bulletin No. 118, or SAB118, to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed inreasonable detail to complete accounting for certain income tax effects of the 2017 Tax Act. As of December 31, 2017, we recorded a provisional income taxcharge of $49.2 million for the transition tax on deemed repatriation of deferred foreign income. We also recorded a provisional income tax benefit of $33.3million for the re-measurement of our U.S. deferred tax assets and liabilities because of the federal corporate maximum tax rate reduction. The provisionalamounts recorded are based on our current interpretation and understanding of the 2017 Tax Act, are judgmental and may change as we receive additionalclarification and implementation guidance. We will continue to gather and evaluate the income tax impact of the 2017 Tax Act. Changes to these provisionalamounts or any of our other estimates regarding taxes could result in material charges or credits in future reporting periods.-13- Additionally, the tax project initiated by the Organization for Economic Co-operation and Development (“OECD”) on Base Erosion and ProfitSharing (“BEPS”) and other similar initiatives could adversely affect our worldwide effective tax rate. With the finalization of specific actions containedwithin the OECD’s BEPS study, many OECD countries have acknowledged their intent to implement the actions and update their local tax laws. The extent(if any) to which countries in which we operate adopt and implement these actions could have a material adverse impact on our effective tax rate, income taxexpense, financial condition, results of operations and cash flows.We are subject to examination of our income tax returns by the U.S. Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities.We are currently under audit by the IRS for tax years 2012 through 2014 and the California Franchise Tax Board (“FTB”) for tax years 2012 and 2013. TheFTB, however, has agreed to suspend its audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years. We are also under audit or reviewby other state and foreign taxing authorities for various periods. Our future income tax returns are likely to become the subject of audits by these or othertaxing authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income taxreserves and expense. If our reserves are not sufficient to cover these contingencies, such inadequacy could materially adversely affect our business,prospects, financial condition, operating results and cash flows.Our growth will depend on our ability to develop, strengthen, and protect our brands, and these efforts may be costly and have varying degrees ofsuccess. Our brand recognition has significantly contributed to the success of our business. Strengthening our current brands and launching competitive newbrands will be critical to achieving widespread commercial acceptance of our products and services. This will require our continued focus on activemarketing, the costs of which have been increasing and may continue to increase. In addition, substantial initial investments may be required to launch newbrands and expand existing brands to cover new geographic territories and technology fields. Accordingly, we may need to spend increasing amounts ofmoney on, and devote greater resources to, advertising, marketing and other efforts to cultivate brand recognition and customer loyalty. In addition, we aresupporting an increasing number of brands, each of which requires its own investment of resources. Brand promotion activities may not yield increasedrevenues and, even if they do, increased revenues may not offset the expenses incurred. If we fail to launch, promote, and maintain our brands, or if we incursubstantial expenses in doing so, our business could be harmed. Our brand recognition depends, in part, on our ability to protect our trademark portfolio and establish trademark rights covering new brands andterritories. Some regulators and competitors have taken the view that certain of our brands, such as eFax and eVoice, are descriptive or generic when appliedto the products and services offered by our Cloud Services segment. Nevertheless, we have obtained U.S. and foreign trademark registrations for our brandnames, logos, and other brand identifiers, including, eFax and eVoice. If we are unable to obtain, maintain or protect trademark rights covering our brandsacross the territories in which they are or may be offered, the value of these brands may be diminished, competitors may be able to dilute, harm, or freeload offour brand recognition and reputation, and our ability to attract subscribers may be adversely affected. We hold domain names relating to our brands, in the U.S. and internationally. The acquisition and maintenance of domain names are generallyregulated by governmental agencies and their designees. The regulation of domain names may change. Governing bodies may establish additional top-leveldomains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire ormaintain all relevant domain names that relate to our brands. Furthermore, international rules governing the acquisition and maintenance of domain names inforeign jurisdictions are sometimes different from U.S. rules, and we may not be able to obtain all of our domains internationally. As a result of these factors,we may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our brands,trademarks or other proprietary rights. In addition, failure to secure or maintain domain names relevant to our brands could adversely affect our reputationand make it more difficult for users to find our websites and services.Our business, customers and users may be subject to telecommunications and sales taxes.As a provider of cloud services for business, we do not provide telecommunications services. Thus, we believe that our business and our users (byusing our services) are not subject to various telecommunications and utility taxes. However, several state taxing authorities have challenged this belief andhave and may continue to audit and assess our business and operations with respect to telecommunications and sales taxes.In addition, the application of other indirect taxes (such as sales and use tax, business tax and gross receipt tax) to e-commerce businesses such as j2Global and our users is a complex and evolving issue.-14- The application of existing, new or future laws could have adverse effects on our business, prospects and operating results. There have been, and willcontinue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conductor will conduct business.We are currently under audit for indirect taxes in several states and municipalities. We currently have no material financial reserves established withrespect to indirect taxes. If a material indirect tax liability associated with prior periods were to be recorded, it could materially affect our financial results forthe period in which it is recorded.Much of our Digital Media e-commerce revenue comes from arrangements in which we are paid by retailers to promote their digital product andservice offers on our sites. Certain states have implemented regulations that require retailers to collect and remit sales taxes on sales made to residents of suchstates if a publisher, such as us, that facilitated that sale is a resident of such state. Paid retailers in our marketplace that do not currently have sales tax nexusin any state that subsequently passes similar regulations and in which we have operations, employees or contractors now or in the future, may significantlyalter the manner in which they pay us, cease paying us for sales we facilitate for that retailer in such state, or cease using our marketplace, each of which couldadversely impact our business, financial condition and operating results.Increased numbers of credit and debit card declines in our Cloud Services segment could lead to a decrease in our Cloud Services revenues or rate ofrevenue growth.A significant number of our paid cloud services subscribers pay for their services through credit and debit cards. Weakness in certain segments of thecredit markets and in the U.S. and global economies could result in increased numbers of rejected credit and debit card payments. We believe this could resultin increased cloud services customer cancellations and decreased customer signups. Rejected credit or debit card payments, cloud services customercancellations and decreased customer sign up may adversely impact our revenues and profitability.If our Cloud Services segment experiences excessive fraudulent activity or cannot meet evolving credit card company merchant standards, we couldincur substantial costs and lose the right to accept credit cards for payment and our subscriber base could decrease significantly.A significant number of our paid cloud services subscribers authorize us to bill their credit card accounts directly for all service fees charged by us. Ifpeople pay for these services with stolen credit cards, we could incur substantial unreimbursed third-party vendor costs. We also incur losses from claims thatthe customer did not authorize the credit card transaction to purchase our service. If the numbers of unauthorized credit card transactions become excessive,we could be assessed substantial fines for excess chargebacks and could lose the right to accept credit cards for payment. In addition, we are subject toPayment Card Industry (“PCI”) data security standards, which require periodic audits by independent third parties to assess our compliance. PCI standards area comprehensive set of requirements for enhancing payment account data security. Failure to comply with the security requirements or rectify a security issuemay result in fines or a restriction on accepting payment cards. Credit card companies may change the standards required to utilize their services from time totime. If we are unable to meet these new standards, we could be unable to accept credit cards. Further, the law relating to the liability of providers of onlinepayment services is currently unsettled and states may enact their own rule with which we may not comply. Substantial losses due to fraud or our inability toaccept credit card payments, which could cause our paid cloud services subscriber base to significantly decrease, could have a material adverse effect on ourbusiness, prospects, financial condition, operating results and cash flows.The markets in which we operate are highly competitive and our competitors may have greater resources to commit to growth, superior technologies,cheaper pricing or more effective marketing strategies. Also, we face significant competition for users, advertisers, publishers, developers anddistributors.For information regarding our competition, and the risks arising out of the competitive environment in which we operate, see the section entitledCompetition contained in Item 1 of this Annual Report on Form 10-K. In addition, some of our competitors include major companies with much greaterresources and significantly larger subscriber bases than we have. Some of these competitors offer their services at lower prices than we do. These companiesmay be able to develop and expand their network infrastructures and capabilities more quickly, adapt more swiftly to new or emerging technologies andchanges in customer requirements, take advantage of acquisition and other opportunities more readily and devote greater resources to the marketing and saleof their products and services than we can. There can be no assurance that additional competitors will not enter markets that we are currently serving and planto serve or that we will be able to compete effectively. Competitive pressures may reduce our revenue, operating profits or both.Our Digital Media segment faces significant competition from online media companies as well as from social networking sites, mobile application,traditional print and broadcast media, general purpose and search engines and various e-commerce sites.-15- Several of our competitors offer an integrated variety of internet products, advertising services, technologies, online services and content. Wecompete against these and other companies to attract and retain users, advertisers and developers. We also compete with social media and networking siteswhich are attracting a substantial and increasing share of users and users’ online time, and may continue to attract an increasing share of online advertisingdollars.In addition, several competitors offer products and services that directly compete for users with our Digital Media segment offerings. Similarly, theadvertising networks operated by our competitors or by other participants in the display marketplace offer services that directly compete with our offeringsfor advertisers, including advertising exchanges, ad networks, demand side platforms, ad serving technologies and sponsored search offerings. We alsocompete with traditional print and broadcast media companies to attract advertising spending. Some of our existing competitors and possible entrants mayhave greater brand recognition for certain products and services, more expertise in a particular segment of the market, and greater operational, strategic,technological, financial, personnel, or other resources than we do. Many of our competitors have access to considerable financial and technical resources withwhich to compete aggressively, including by funding future growth and expansion and investing in acquisitions, technologies, and research anddevelopment. Further, emerging start-ups may be able to innovate and provide new products and services faster than we can. In addition, competitors mayconsolidate with each other or collaborate, and new competitors may enter the market. Some of the competitors for our Cloud Services segment ininternational markets have a substantial competitive advantage over us because they have dominant market share in their territories, are owned by localtelecommunications providers, have greater brand recognition, are focused on a single market, are more familiar with local tastes and preferences, or havegreater regulatory and operational flexibility due to the fact that we may be subject to both U.S. and foreign regulatory requirements.If our competitors are more successful than we are in developing and deploying compelling products or in attracting and retaining users, advertisers,publishers, developers, or distributors, our revenue and growth rates could decline.As a creator and a distributor of content over the internet, we face potential liability for legal claims based on the nature and content of the materialsthat we create or distribute. Users access health-related content through our Everyday Health properties, including information regarding particular medical conditions,diagnosis and treatment and possible adverse reactions or side effects from medications. If our content, or content we obtain from third parties, containsinaccuracies, it is possible that consumers who rely on that content or others may make claims against us with various causes of action. Although ourproperties contain terms and conditions, including disclaimers of liability, that are intended to reduce or eliminate our liability, third parties may claim thatthese online agreements are unenforceable. Our editorial and other quality control procedures may not be sufficient to ensure that there are no errors or omissions in our content offerings or toprevent such errors and omissions in content that is controlled by our partners. Even if potential claims do not result in liability to us, investigating anddefending against these claims could be expensive and time consuming and could divert management’s attention away from our operations. Inadequate intellectual property protections could prevent us from defending our proprietary technology and intellectual property.Our success depends, in part, upon our proprietary technology and intellectual property. We rely on a combination of patents, trademarks, tradesecrets, copyrights, contractual restrictions, and other confidentiality safeguards to protect our proprietary technology. However, these measures may provideonly limited protection and it may be costly and time-consuming to enforce compliance with our intellectual property rights. In some circumstances, we maynot have adequate, economically feasible or realistic options for enforcing our intellectual property and we may be unable to detect unauthorized use. Whilewe have a robust worldwide portfolio of issued patents and pending patent applications, there can be no assurance that any of these patents will not bechallenged, invalidated or circumvented, that we will be able to successfully police infringement, or that any rights granted under these patents will in factprovide a competitive advantage to us.In addition, our ability to register or protect our patents, copyrights, trademarks, trade secrets and other intellectual property may be limited in someforeign countries. As a result, we may not be able to effectively prevent competitors in these regions from utilizing our intellectual property, which couldreduce our competitive advantage and ability to compete in those regions and negatively impact our business.We also strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. Wetypically enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with partieswith whom we conduct business in order to limit access to, and disclosure-16- and use of, our proprietary information. However, we may not be successful in executing these agreements with every party who has access to our confidentialinformation or contributes to the development of our technology or intellectual property rights. Those agreements that we do execute may be breached, andwe may not have adequate remedies for any such breach. These contractual arrangements and the other steps we have taken to protect our intellectualproperty rights may not prevent the misappropriation or disclosure of our proprietary information nor deter independent development of similar technologyor intellectual property by others.Monitoring unauthorized use of the content on our websites and mobile applications, and our other intellectual property and technology, is difficultand costly. Our efforts to protect our proprietary rights and intellectual property may not have been and may not be adequate to prevent theirmisappropriation or misuse. Third parties from time to time copy content or other intellectual property or technology from our solutions withoutauthorization and seek to use it for their own benefit. We generally seek to address such unauthorized copying or use, but we have not always been successfulin stopping all unauthorized use of our content or other intellectual property or technology, and may not be successful in doing so in the future. Further, wemay not have been and may not be able to detect unauthorized use of our technology or intellectual property, or to take appropriate steps to enforce ourintellectual property rights.Companies that operate in the same industry as our Cloud Services and Digital Media segments have experienced substantial litigation regardingintellectual property. Currently, we have pending patent infringement lawsuits, both offensive and defensive, against several companies in this industry.Furthermore, we may find it necessary or appropriate to initiate claims or litigation to enforce our intellectual property rights or determine the validity andscope of intellectual property rights claimed by others. This or any other litigation to enforce or defend our intellectual property rights may be expensive andtime-consuming, could divert management resources and may not be adequate to protect our business.We may be found to have infringed the intellectual property rights of others, which could expose us to substantial damages or restrict our operations.We have been and expect to continue to be subject to legal claims that we have infringed the intellectual property rights of others. The readyavailability of damages and royalties and the potential for injunctive relief have increased the costs associated with litigating and settling patentinfringement claims. In addition, we may be required to indemnify our resellers and users for similar claims made against them. Any claims, whether or notmeritorious, could require us to spend significant time, money, and other resources in litigation, pay damages and royalties, develop new intellectualproperty, modify, design around, or discontinue existing products, services, or features, or acquire licenses to the intellectual property that is the subject ofthe infringement claims. These licenses, if required, may not be available at all or have acceptable terms. As a result, intellectual property claims against uscould have a material adverse effect on our business, prospects, financial condition, operating results and cash flows. We may be subject to risks from international operations. As we continue to expand our business operations in countries outside the U.S., our future results could be materially adversely affected by a varietyof uncontrollable and changing factors including, among others, foreign currency exchange rates; political or social unrest or economic instability in aspecific country or region; trade protection measures and other regulatory requirements which may affect our ability to provide our services; difficulties instaffing and managing international operations; and adverse tax consequences, including imposition of withholding or other taxes on payments bysubsidiaries and affiliates. Any or all of these factors could have a material adverse impact on our future business, prospects, financial condition, operatingresults and cash flows. We have only limited experience in marketing and operating our services in certain international markets. Moreover, we have in some casesexperienced and expect to continue to experience in some cases higher costs as a percentage of revenues in connection with establishing and providingservices in international markets versus the U.S. In addition, certain international markets may be slower than the U.S. in adopting the internet and/oroutsourced messaging and communications solutions and so our operations in international markets may not develop at a rate that supports our level ofinvestments.-17- As we continue to grow our international operations, adverse currency fluctuations and foreign exchange controls could have a material adverse effecton our balance sheet and results of operations. As we expand our international operations, we could be exposed to significant risks of currency fluctuations. In some countries outside the U.S., weoffer our services in the applicable local currency, including but not limited to the Australian Dollar, the Canadian Dollar, the Euro, the Hong Kong Dollar,the Japanese Yen, the New Zealand Dollar, the Norwegian Kroner and the British Pound Sterling, among others. As a result, fluctuations in foreign currencyexchange rates affect the results of our operations, which in turn may materially adversely affect reported earnings and the comparability of period to periodresults of operations. Changes in currency exchange rates may also affect the relative prices at which we and foreign competitors sell our services in the samemarket. In addition, changes in the value of the relevant currencies may affect the cost of certain items required in our operations. Furthermore, we maybecome subject to exchange control regulations, which might restrict or prohibit our conversion of other currencies into U.S. Dollars. We cannot assure youthat future exchange rate movements will not have a material adverse effect on our future business, prospects, financial condition, operating results and cashflows. To date, we have not entered into foreign currency hedging transactions to control or minimize these risks.We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could divert significant operational resources and ourmanagement’s time and attention. From time to time, we are subject to litigation or claims or are involved in other legal disputes or regulatory inquiries, including in the areas ofpatent infringement and anti-trust, that could negatively affect our business operations and financial condition. Such disputes could cause us to incurunforeseen expenses, divert operational resources, occupy a significant amount of our management’s time and attention and negatively affect our businessoperations and financial condition. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings thatcould include monetary damages and injunctive relief. We do not always have insurance coverage for defense costs, judgments, and settlements. We may alsobe subject to indemnification requirements with business partners, vendors, current and former officers and directors, and other third parties. Payments undersuch indemnification provisions may be material. For a more detailed description of certain lawsuits in which we are involved, see Item 3. Legal Proceedings. The successful operation of our business depends upon the supply of critical business elements and marketing relationships from other companies. We depend upon third parties for critical elements of our business, including technology, infrastructure, customer service and sales and marketingcomponents. We rely on private third-party providers for our internet, telecommunications, website traffic and other connections and for co-location of asignificant portion of our servers. Any disruption in the services provided by any of these suppliers, any adverse change in their terms and conditions of useor services, or any failure by them to handle current or higher volumes of activity could have a material adverse effect on our business, prospects, financialcondition, operating results and cash flows. To obtain new cloud services customers, we have marketing agreements with operators of leading search enginesand websites and employ the use of resellers to sell our products. These arrangements typically are not exclusive and do not extend over a significant periodof time. Failure to continue these relationships on terms that are acceptable to us or to continue to create additional relationships could have a materialadverse effect on our business, prospects, financial condition, operating results and cash flows. Our business is highly dependent on our billing systems. A significant part of our revenues depends on prompt and accurate billing processes. Customer billing is a highly complex process, and our billingsystems must efficiently interface with third-party systems, such as those of credit card processing companies. Our ability to accurately and efficiently bill ourcustomers is dependent on the successful operation of our billing systems and the third-party systems upon which we rely, such as our credit card processor,and our ability to provide these third parties the information required to process transactions. In addition, our ability to offer new services or alternative-billing plans is dependent on our ability to customize our billing systems. Any failures or errors in our billing systems or procedures could impair our abilityto properly bill our current customers or attract and service new customers, and thereby could materially and adversely affect our business and financialresults.Our success depends on our retention of our executive officers, senior management and our ability to hire and retain key personnel. Our success depends on the skills, experience and performance of executive officers, senior management and other key personnel. The loss of theservices of one or more of our executive officers, senior managers or other key employees could have a material adverse effect on our business, prospects,financial condition, operating results and cash flows. Our future success also-18- depends on our continuing ability to attract, integrate and retain highly qualified technical, sales and managerial personnel. Competition for these people isintense, and there can be no assurance that we can retain our key employees or that we can attract, assimilate or retain other highly qualified technical, salesand managerial personnel in the future. We are exposed to risk if we cannot maintain or adhere to our internal controls and procedures. We have established and continue to maintain, assess and update our internal controls and procedures regarding our business operations andfinancial reporting. Our internal controls and procedures are designed to provide reasonable assurances regarding our business operations and financialreporting. However, because of the inherent limitations in this process, internal controls and procedures may not prevent or detect all errors or misstatements.To the extent our internal controls are inadequate or not adhered to by our employees, our business, financial condition and operating results could bematerially adversely affected. If we are not able to maintain internal controls and procedures in a timely manner, or without adequate compliance, we may be unable to accuratelyreport our financial results or prevent fraud and may be subject to sanctions or investigations by regulatory authorities such as the SEC or NASDAQ. Anysuch action or restatement of prior-period financial results as a result could harm our business or investors’ confidence in j2 Global, and could cause our stockprice to fall.Our level of indebtedness could adversely affect our financial flexibility and our competitive position.Our level of indebtedness could have significant effects on our business. For example, it could:•make it more difficult for us to satisfy our obligations, including our current indebtedness and any other indebtedness we may incur in the future;•increase our vulnerability to adverse changes in general economic, industry and competitive conditions;•require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing theavailability of our cash flow to fund working capital, capital expenditures, acquisitions and other elements of our business strategy and other generalcorporate purposes, including share repurchases and payment of dividends;•limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;restrict us from exploiting business opportunities;•place us at a competitive disadvantage compared to our competitors that have less indebtedness; and•limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of ourbusiness strategy or other general corporate purposes.In addition, the indenture governing the 6.0% Senior Notes of our subsidiary, j2 Cloud Services, LLC (“j2 Cloud Services”) contains and theagreements evidencing or governing other future indebtedness may contain, restrictive covenants that may limit our ability to engage in activities that maybe in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result inthe acceleration of all of our indebtedness.The indenture governing the 6.0% Senior Notes contains a number of restrictive covenants that impose significant operating and financialrestrictions and may limit our ability to plan for or react to market conditions, meet capital needs or make acquisitions, or otherwise restrict our activities orbusiness plans. These include restrictions on our ability to:•incur additional indebtedness;•create liens;•engage in sale-leaseback transactions;•pay dividends or make distributions in respect of capital stock;•purchase or redeem capital stock;•make investments or certain other restricted payments;•sell assets;•enter into transactions with affiliates; or•effect a consolidation or merger.A breach of the covenants under the indenture governing the 6.0% Senior Notes could result in an event of default. Such a default may allow thecreditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-defaultprovision applies. In the event our lenders or the holders of our 6.0% Senior Notes accelerate the repayment of our borrowings, we and our subsidiaries maynot have sufficient assets to repay that indebtedness or our other indebtedness. -19- To service our debt and fund our other capital requirements, we will require a significant amount of cash, and our ability to generate cash will dependon many factors beyond our control.Our ability to meet our debt service obligations and to fund working capital, capital expenditures, acquisitions and other elements of our businessstrategy and other general corporate purposes, including share repurchases and payment of dividends, will depend upon our future performance, which willbe subject to financial, business and other factors affecting our operations. To some extent, this is subject to general and regional economic, financial,competitive, legislative, regulatory and other factors that are beyond our control. We cannot ensure that we will generate cash flow from operations, or thatfuture borrowings will be available, in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs.If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and couldbe forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional indebtedness or equity capitalor restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, evenif successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The indenture governing the 6.0% Senior Notesrestrict our ability to dispose of assets and may also restrict our ability to raise indebtedness or equity capital to be used to repay other indebtedness when itbecomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations thendue.Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms, orat all, would materially and adversely affect our financial position and results of operations.We may not have the ability to raise the funds necessary to settle conversions of the Convertible Notes or to repurchase the Convertible Notes upon afundamental change or on a repurchase date or the Senior Notes upon a change in control, and our future debt may contain limitations on our ability topay cash upon conversion or repurchase of the Convertible Notes or the Senior Notes.Holders of the 3.25% convertible senior notes due June 15, 2029 (the “Convertible Notes”) will have the right to require us to repurchase theirConvertible Notes on each of June 15, 2021 and June 15, 2024 and upon the occurrence of a fundamental change (as defined in the indenture governing theConvertible Notes), in each case, at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued andunpaid interest, if any. Holders of the Senior Notes also have the right to require our subsidiary, j2 Cloud Services, to repurchase the Senior Notes upon theoccurrence of a change in control (as defined in the indenture governing the Senior Notes) at a repurchase price equal to 101% of the principal amount of theSenior Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the Convertible Notes, unless we elect to deliversolely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to makecash payments in respect of the Convertible Notes being converted. It is our intention to satisfy our conversion obligation by paying and delivering acombination of cash and shares of our common stock, where cash will be used to settle each $1,000 of principal and the remainder, if any, will be settled viashares of our common stock. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchasesof Convertible Notes or Senior Notes surrendered therefor or Convertible Notes being converted. In addition, our ability to repurchase the Convertible Notesor Senior Notes or to pay cash upon conversions of the Convertible Notes may be limited by law, by regulatory authority or by agreements governing ourfuture indebtedness. Our failure to repurchase Convertible Notes or Senior Notes at a time when the repurchase is required by the applicable indenture or topay any cash payable on future conversions of the Convertible Notes as required by the Convertible Notes indenture would constitute a default under theConvertible Notes indenture. A default under either indenture or the fundamental change or change of control itself could also lead to a default underagreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or graceperiods, we may not have sufficient funds to repay the indebtedness and repurchase the Convertible Notes or the Senior Notes or make cash payments uponconversions of the Convertible Notes.-20- The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.In the event the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to convert theConvertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, unless we elect tosatisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), wewould be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition,even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of theoutstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.Our interest deductions attributable to the Convertible Notes may be deferred, limited or eliminated under certain conditions.We believe that the Convertible Notes are subject to the IRS contingent payment debt instrument regulations. This conclusion is subject to complexfactual and legal uncertainty and is not binding on the IRS or the courts. If the IRS takes a contrary position and a court sustains the IRS’ position, our taxdeductions would be severely diminished with a resulting adverse effect on our cash flow and ability to service the Convertible Notes.Risks Related To Our IndustriesOur services may become subject to burdensome regulation, which could increase our costs or restrict our service offerings. We believe that our cloud services are “information services” under the Telecommunications Act of 1996 and related precedent, or, if not“information services,” that we are entitled to other exemptions, meaning that we are not currently subject to U.S. telecommunications services regulation atboth the federal and state levels. In connection with our cloud services business, we utilize data transmissions over public telephone lines and other facilitiesprovided by third-party carriers. These transmissions are subject to foreign and domestic laws and regulation by the Federal Communications Commission(the “FCC”), state public utility commissions and foreign governmental authorities. These regulations affect the availability of numbers, the prices we pay fortransmission services, the administrative costs associated with providing our services, the competition we face from telecommunications service providersand other aspects of our market. However, as messaging and communications services converge and as the services we offer expand, we may become subjectto FCC or other regulatory agency regulation. It is also possible that a federal or state regulatory agency could take the position that our offerings, or a subsetof our offerings, are properly classified as telecommunications services or otherwise not entitled to certain exemptions upon which we currently rely. Such afinding could potentially subject us to fines, penalties or enforcement actions as well as liabilities for past regulatory fees and charges, retroactivecontributions to various telecommunications-related funds, telecommunications-related taxes, penalties and interest. It is also possible that such a findingcould subject us to additional regulatory obligations that could potentially require us either to modify our offerings in a costly manner, diminish our abilityto retain customers, or discontinue certain offerings, in order to comply with certain regulations. Changes in the regulatory environment could decrease ourrevenues, increase our costs and restrict our service offerings. In many of our international locations, we are subject to regulation by the applicablegovernmental authority. In the U.S., Congress, the FCC, and a number of states require regulated telecommunications carriers to contribute to federal and/or state UniversalService Funds (“USF”). Generally, USF is used to subsidize the cost of providing service to low-income customers and those living in high cost or rural areas.Congress, the FCC and a number of states are reviewing the manner in which a provider’s contribution obligation is calculated, as well as the types of entitiessubject to USF contribution obligations. If any of these reforms are adopted, they could cause us to alter or eliminate our non-paid services and to raise theprice of our paid services, which could cause us to lose customers. Any of these results could lead to a decrease in our revenues and net income and couldmaterially adversely affect our business, prospects, financial condition, operating results and cash flows. The Telephone Consumer Protection Act (the “TCPA”) and FCC rules implementing the TCPA, as amended by the Junk Fax Act, prohibit sendingunsolicited facsimile advertisements to telephone fax machines. The FCC, the Federal Trade Commission (“FTC”), or both may initiate enforcement actionagainst companies that send “junk faxes” and individuals also may have a private cause of action. Although entities that merely transmit facsimile messageson behalf of others are not liable for compliance with the prohibition on faxing unsolicited advertisements, the exemption from liability does not apply to faxtransmitters that have a high degree of involvement or actual notice of an illegal use and have failed to take steps to prevent such transmissions. We takesignificant steps to ensure that our services are not used to send unsolicited faxes on a large scale, and we do not believe that we have a high degree ofinvolvement in or notice of the use of our service to broadcast junk faxes. However, because fax transmitters-21- do not enjoy an absolute exemption from liability under the TCPA and related FCC and FTC rules, we could face inquiries from the FCC and FTC orenforcement actions by these agencies, or private causes of action, if someone uses our service for such impermissible purposes. If this were to occur and wewere to be held liable for someone’s use of our service for transmitting unsolicited faxes, the financial penalties could cause a material adverse effect on ouroperations and harm our business reputation. Likewise, the TCPA also prohibits placing calls or sending text messages to mobile phones without “prior express consent” subject to limitedexceptions. Parties that solely enable calling or text messaging are only directly liable under the TCPA pursuant to federal common law vicarious liabilityprinciples. We take significant steps to ensure that users understand that they are responsible for how they use our technology including complying withrelevant federal and state law. However, because we do not enjoy absolute exemption from liability under the TCPA and related FCC and FTC rules, we couldface inquiries from the FCC and FTC or enforcement actions by these agencies, or private causes of action, if someone uses our service for such impermissiblepurposes. If this were to occur and we were to be held liable for someone’s use of our service for unauthorized calling or text messaging mobile users, thefinancial penalties could cause a material adverse effect on our operations and harm our business reputation.Also, in the U.S., the Communications Assistance to Law Enforcement Act (“CALEA”) requires telecommunications carriers to be capable ofperforming wiretaps and recording other call identifying information. In September 2005, the FCC released an order defining telecommunications carriersthat are subject to CALEA obligations as facilities-based broadband internet access providers and Voice-over-Internet-Protocol (“VoIP”) providers thatinterconnect with the public switched telephone network. As a result of this definition, we do not believe that j2 Global is subject to CALEA. However, if thecategory of service providers to which CALEA applies broadens to also include information services, that change may impact our operations.We are subject to a variety of new and existing laws and regulations which could subject us to claims, judgments, monetary liabilities and otherremedies, and to limitations on our business practices.The application of existing domestic and international laws and regulations to us relating to issues such as defamation, pricing, advertising,taxation, promotions, billing, consumer protection, accessibility, content regulation, and intellectual property ownership and infringement in many instancesis unclear or unsettled. In addition, we will also be subject to any new laws and regulations directly applicable to our domestic and international activities.Further, the application of existing laws to us or our subsidiaries regulating or requiring licenses for certain businesses of our advertisers including, forexample, distribution of pharmaceuticals, alcohol, adult content, tobacco, or firearms, as well as insurance and securities brokerage, and legal services, can beunclear. Internationally, we may also be subject to laws regulating our activities in foreign countries and to foreign laws and regulations that are inconsistentfrom country to country. Our Digital Media segment utilizes contractors, freelancers and staff from third party outsourcers to provide content and otherservices. However, in the future, arrangements with such individuals may not be deemed appropriate by the relevant government authority, which couldresult in additional costs and expenses. We may incur substantial liabilities for expenses necessary to defend such litigation or to comply with these laws andregulations, as well as potential substantial penalties for any failure to comply. Compliance with these laws and regulations may also cause us to change orlimit our business practices in a manner adverse to our business.The use of consumer data by online service providers and advertising networks is a topic of active interest among federal, state, and internationalregulatory bodies, and the regulatory environment is unsettled and evolving. Federal, state, and international laws and regulations govern the collection, use,retention, disclosure, sharing and security of data that we receive from and about our users. Our privacy policies and practices concerning the collection, use,and disclosure of user data are posted on our websites.A number of U.S. federal laws, including those referenced below, impact our business. The Digital Millennium Copyright Act (“DMCA”) isintended, in part, to limit the liability of eligible online service providers for listing or linking to third-party websites that include materials that infringecopyrights or other rights of others. Portions of the Communications Decency Act (“CDA”) are intended to provide statutory protections to online serviceproviders who distribute third-party content. We rely on the protections provided by both the DMCA and the CDA in conducting our business. If these orother laws or judicial interpretations are changed to narrow their protections, or if international jurisdictions refuse to apply similar provisions in foreignlawsuits, we will be subject to greater risk of liability, our costs of compliance with these regulations or to defend litigation may increase, or our ability tooperate certain lines of business may be limited. The Children’s Online Privacy Protection Act is intended to impose restrictions on the ability of onlineservices to collect some types of information from children under the age of 13. In addition, Providing Resources, Officers, and Technology to EradicateCyber Threats to Our Children Act of 2008 (“PROTECT Act”) requires online service providers to report evidence of violations of federal child pornographylaws under certain circumstances. Other federal, state or international laws and legislative efforts designed to protect children on the internet may imposeadditional requirements on us. U.S. export control laws and regulations impose requirements and restrictions on exports to certain nations and persons and onour business.-22- In certain instances, we may be subject to enhanced privacy obligations based on the type of information we store and process. While we believe weare in compliance with the relevant laws and regulations, we could be subject to enforcement actions, fines, forfeitures and other adverse actions.The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”), which allows for penalties that runinto the millions of dollars, requires commercial emails to include identifying information from the sender and a mechanism for the receiver to opt out ofreceiving future emails. Several states have enacted additional, more restrictive and punitive laws regulating commercial email. Foreign legislation exists aswell, including Canada’s Anti-Spam Legislation (“CASL”) and the European laws that have been enacted pursuant to European Union Directive 2002/58/ECand its amendments. We use email as a significant means of communicating with our existing and potential users. We believe that our email practices complywith the requirements of the CAN-SPAM Act, state laws, and applicable foreign legislation. If we were ever found to be in violation of these laws andregulations, or any other laws or regulations, our business, financial condition, operating results and cash flows could be materially adversely affected. Many third parties are examining whether the Americans with Disabilities Act (“ADA”) concept of public accommodations also extends to thewebsites and to mobile applications. The Company is assessing the requirements of the ADA to determine what impact this could have on our websites.Generally, some plaintiffs have argued that websites and mobile applications are places of public accommodation under Title III of the ADA and, as such,must be equipped so that individuals with disabilities can navigate and make use of subject websites and mobile applications. The issue is currently underlitigation and there is a split in the federal court of appeals circuits as to what the ADA requires. Certain appellate circuits have found that websites standingalone are subject to the ADA and therefore must be accessible to people with disabilities. Other circuits, including the Ninth Circuit which has appellatejurisdiction over federal district courts in California, where our company is headquartered, have found that in order for websites to be places of publicaccommodation and therefore subject to the ADA there must be both a nexus between the website and the goods and services the website provides as well asa physical brick and mortar location for consumers. We cannot predict how the ADA will ultimately be interpreted as applied to websites and mobileapplications.Since we do not have a retail location, we believe we are in compliance with relevant law. If the law changes or if certain courts with appellatejurisdiction outside of California attempt to exercise jurisdiction over us and find that our website and mobile applications must comply with the ADA, thenany adjustments or requirements to implement any changes prescribed by the ADA could result in increased costs to our business, we may be subject toinjunctive relief, plaintiffs may be able to recover attorneys’ fees, and it is possible that, while the ADA does not provide for monetary damages, we aresubject to such damages through state consumer protection or other laws. It is possible that these potential liabilities could cause a material adverse effect onour operations and harm our business reputation.Native advertising is an increasing part of our Digital Media segment’s online advertising revenue. On December 22, 2015 the FTC issuedGuidelines and an Enforcement Policy Statement on native advertising, described by the FTC as, in part, ads which often “resemble the design, style, andfunctionality of the media in which they are disseminated”. The Company, as well as trade groups and our consultants, are assessing the requirements of theseguidelines on our current practices and industry practices and what, if any, effect this could have on our native advertising business. In addition, the timingand extent of any enforcement by the FTC with regard to the native advertising practices by the Company, or others, could reduce the revenue we generatefrom this line of business.For certain data transfers between the European Union (“EU”) and the U.S., j2 Global, like many other companies, had relied on what is referred to asthe “EU-U.S. Safe Harbor,” in order to comply with privacy obligations imposed by EU countries. Recently, the European Court of Justice invalidated theEU-U.S. Safe Harbor. Subsequently, a group comprised of the majority of EU data protection regulators issued a statement that it would further consider thedecision issued by the European Court of Justice and coordinate any potential enforcement actions after January 31, 2016. But some individual dataprotection regulators located in EU countries have threatened to begin enforcement actions independently of this larger representative group of such entities.Although U.S. and EU policymakers approved a new framework known as “Privacy Shield” that would allow companies like us to continue to rely on someform of a safe harbor for the transfer of certain data from the EU to the U.S., it remains to be seen if this new safe harbor meets the standards of the Europeanlaws on data privacy. It is also unclear whether the UK will offer a similar program to Privacy Shield when the UK leaves the EU. Additionally, other countriesthat relied on the EU-U.S. Safe Harbor that were not part of the EU have also found that data transfers to the U.S. are no longer valid based on the EuropeanCourt of Justice ruling. We cannot predict how or if this issue will be resolved nor can we evaluate any potential liability at this time.The Company is working to put into place various alternative grounds on which to rely in order to be in compliance with relevant law for thetransfer of data from overseas locations to the U.S. which have not been invalidated by the European Court of Justice. Some independent data regulators haveadopted the position that other forms of compliance are also invalid though the-23- legal grounds for these findings remain unclear at this time. We cannot predict at this time whether the alternative grounds that j2 Global continues toimplement will be found to be consistent with relevant laws nor what any potential liability may be at this time.Further, failure or perceived failure by us to comply with our policies, applicable requirements, or industry self-regulatory principles related to thecollection, use, sharing or security of personal information, or other privacy, data-retention or data-protection matters could result in a loss of user confidencein us, damage to our brands, and ultimately in a loss of users and advertising partners, which could adversely affect our business. Changes in these or anyother laws and regulations or the interpretation of them could increase our future compliance costs, make our products and services less attractive to our users,or cause us to change or limit our business practices. Further, any failure on our part to comply with any relevant laws or regulations may subject us tosignificant civil or criminal liabilities.Government and private actions or self-regulatory developments regarding internet privacy matters could adversely affect our ability to conduct ourbusiness.Our Digital Media business collects and sells data about its users’ online behavior and the revenue associated with this activity could be impactedby government regulation and enforcement, industry trends, self-regulation, technology changes, consumer behavior and attitude, and private action. Wealso use such information to work with our advertisers to more effectively target ads to relevant users and consumers, which ads command a higher rate.Many of our users voluntarily provide us with demographic and other information when they register for one of our service or properties. In order forour Everyday Health brand to deliver marketing and communications solutions to pharmaceutical companies, health insurers and hospital systems, we relyon data provided by our customers. We also purchase data from third-party sources to augment our user profiles and marketing databases so we are better ableto personalize content, enhance our analytical capabilities and better target our marketing programs. If changes in user sentiment regarding the sharing ofinformation results in a significant number of visitors to our websites and applications refusing to provide us with demographic information or informationabout their specific health interests, our ability to personalize content for our users and provide targeted marketing solutions would be impaired. If our userschoose to opt-out of having their data used for behavioral targeting, it would be more difficult for us to offer targeted marketing programs to our customers. We append data from third-party sources to augment our user profiles. If we are unable to acquire data from third-party sources for whatever reason,or if there is a marked increase in the cost of obtaining such data, our ability to personalize content and provide marketing solutions could be negativelyimpacted.The use of such consumer data by online service providers and advertising networks is a topic of active interest among federal, state, andinternational regulatory bodies, and the regulatory environment is unsettled. Federal, state, and international laws and regulations govern the collection, use,retention, disclosure, sharing and security of data that we receive from and about our users. Our privacy policies and practices concerning the collection, use,and disclosure of user data are posted on our websites.New and expanding “Do Not Track” regulations have recently been enacted or proposed that protect users’ right to choose whether or not to betracked online. These regulations seek, among other things, to allow consumers to have greater control over the use of private information collected online,to forbid the collection or use of online information, to demand a business to comply with their choice to opt out of such collection or use, and to place limitsupon the disclosure of information to third party websites. These laws and regulations could have a significant impact on the operation of our advertising anddata businesses. U.S. regulatory agencies have also placed an increased focus on online privacy matters and, in particular, on online advertising activities thatutilizes cookies or other tracking tools. Consumer and industry groups have expressed concerns about online data collection and use by companies, whichhas resulted in the release of various industry self-regulatory codes of conduct and best practice guidelines that are binding for member companies and thatgovern, among other things, the ways in which companies can collect, use and disclose user information, how companies must give notice of these practicesand what choices companies must provide to consumers regarding these practices.We may be required or otherwise choose to adopt Do Not Track mechanisms or self-regulation principles, in which case our ability to use ourexisting tracking technologies, to collect and sell user behavioral data, and permit their use by other third parties could be impaired. This could cause our netrevenues to decline and adversely affect our operating results.U.S. and foreign governments have enacted or considered or are considering legislation or regulations that could significantly restrict our ability tocollect, augment, analyze, use and share anonymous data, which could increase our costs and reduce our revenue. -24- We operate across many different jurisdictions both domestically and internationally which may subject us to cybersecurity, privacy, data security anddata protection laws with uncertain interpretations as well as impose conflicting obligations on us.Cybersecurity, privacy, data security, and data protection laws are constantly evolving at the federal and state levels in the United States, as well asabroad. We are currently subject to such laws both at the federal and state levels in the U.S. as well as similar laws in a variety of international jurisdictions.The interpretation of these laws may be uncertain and may also impose confliction obligations on us. While we work to comply with all applicable law andrelevant “best practices” addressing cybersecurity, privacy, data security and data protection, this is an area of the law that is constantly evolving as are therelevant industry codes and threat matrix. Further it is possible that applicable law and “best practices” are interpreted in an inconsistent or conflictingmanner either by differing federal, state or international authorities or across the jurisdictions in which we operate. Any failure or perceived failure by us, ourpartners, our vendors, or third parties on which we rely could result in a significant liability to us (including in the form of judicial decisions and/orsettlements, regulatory findings and/or forfeitures, and other means), cause considerable harm to us and our reputation (including requiring notification tocustomers, regulators, and/or the media), cause a loss of confidence in our products and services, and deter current and potential customers from using ourservices. Any of these events could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.The EU’s General Data Protection Regulation will impose significant compliance costs and expose the Company to substantial risks.The EU has traditionally imposed more strict obligations under data privacy laws and regulations. Individual EU member countries have haddiscretion with respect to their interpretation and implementation of EU data privacy laws, resulting in variation of privacy standards from country tocountry. However, the 1995 Data Protection Directive will be replaced when the General Data Protection Regulation (“GDPR”) that was adopted in April2016 comes into effect in May 2018. The GDPR harmonizes EU data privacy laws and contains significant obligations and requirements that will result in agreater compliance burden with respect to our operations and data use in Europe, which will increase our costs. Additionally, government authorities willhave more power to enforce compliance and impose substantial penalties for any failure to comply. In addition, individuals have the right to compensationunder GDPR. In the event the Company is not in compliance by the implementation date, or fails to maintain compliance thereafter, the Company would beexposed to material damages, costs and/or fines if an EU government authority or EU resident commenced an action. Failure to comply or maintaincompliance could cause considerable harm to us and our reputation (including requiring notification to customers, regulators, and/or the media), cause a lossof confidence in our products and services, and deter current and potential customers from using our services. Any of these events could have a materialadverse effect on our business, prospects, financial condition, operating results and cash flows.We face potential liability related to the privacy and security of health-related information we collect from, or on behalf of, our consumers andcustomers. The privacy and security of information about the physical or mental health or condition of an individual is an area of significant focus in the U.S.because of heightened privacy concerns and the potential for significant consumer harm from the misuse of such sensitive data. We have procedures andtechnology in place intended to safeguard the information we receive from customers and users of our services from unauthorized access or use. The Privacy Standards and Security Standards under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) establish a set ofbasic national privacy and security standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses andcertain healthcare providers, referred to as “covered entities”, and the business associates with whom such covered entities contract for services. Notably,whereas HIPAA previously directly regulated only these covered entities, the Health Information Technology for Economic and Clinical Health Act of 2009(“HITECH”) makes certain of HIPAA’s Privacy and Security Standards directly applicable to covered entities’ business associates. As a result, businessassociates are now subject to significant civil and criminal penalties for failure to comply with applicable Privacy and Security Standards. Additionally,certain states have adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA. HIPAA directly applies to covered entities such as hospital clients of certain of our subsidiaries. Since these clients disclose protected healthinformation to our subsidiaries so that those subsidiaries can provide certain services to them, those subsidiaries are business associates of those clients. Inaddition, we may sign business associate agreements in connection with the provision of the products and services developed for other third parties or inconnection with certain of our other services that may transmit or store protected health information. -25- Failure to comply with the requirements of HIPAA or HITECH or any of the applicable federal and state laws regarding patient privacy, identity theftprevention and detection, breach notification and data security may subject us to penalties, including civil monetary penalties and, in some circumstances,criminal penalties or contractual liability under agreements with our customers and clients. Any failure or perception of failure of our products or services tomeet HIPAA, HITECH and related regulatory requirements could expose us to risks of investigation, notification, litigation, penalty or enforcement,adversely affect demand for our products and services and force us to expend significant capital and other resources to modify our products or services toaddress the privacy and security requirements of our clients and HIPAA and HITECH. Developments in the healthcare industry could adversely affect our business. A significant portion of Everyday Health’s advertising and sponsorship revenues is derived from the healthcare industry, including pharmaceutical,over-the-counter and consumer-packaged-goods companies, and could be affected by changes affecting healthcare spending. Industry changes affectinghealthcare spending could impact the market for these offerings. General reductions in expenditures by healthcare industry participants could result from,among other things: •government regulation or private initiatives that affect the manner in which healthcare industry participants interact with consumers and the generalpublic;•consolidation of healthcare industry participants;•reductions in governmental funding for healthcare; and•adverse changes in business or economic conditions affecting pharmaceutical companies or other healthcare industry participants. Even if general expenditures by industry participants remain the same or increase, developments in the healthcare industry may result in reducedspending in some or all of the specific market segments that we serve now or in the future. For example, use of our content offerings and the sale of ourproducts and services could be affected by: •changes in the design and provision of health insurance plans;•a decrease in the number of new drugs or pharmaceutical products coming to market; and•decreases in marketing expenditures by pharmaceutical companies as a result of governmental regulation or private initiatives that discourage orprohibit advertising or sponsorship activities by pharmaceutical companies. The healthcare industry has changed significantly in recent years, and we expect that significant changes to the healthcare industry will continue tooccur. However, the timing and impact of developments in the healthcare industry are difficult to predict. We cannot assure you that the demand for ourofferings will continue to exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in thehealthcare industry. Government regulation of healthcare creates risks and challenges with respect to our compliance efforts and our business strategies with our EverydayHealth brand. The healthcare industry is highly regulated and subject to changing political, legislative, regulatory and other influences. Existing and future lawsand regulations affecting the healthcare industry could create unexpected liabilities for us, cause us to incur additional costs and restrict our operations.Many healthcare laws are complex, and their application may not be clear. Our failure to accurately anticipate the application of these laws and regulations,or other failure to comply with such laws and regulations, could create liability for us. Even in areas where we are not subject to healthcare regulationdirectly, we may become involved in governmental actions or investigations through our relationships with customers that are regulated, and participation insuch actions or investigations, even if we are not a party and not the subject of an investigation, may cause us to incur significant expenses. For example, there are federal and state laws that govern patient referrals, physician financial relationships and inducements to healthcare providersand patients. The federal healthcare programs’ anti-kickback provisions prohibit any person or entity from willingly offering, paying, soliciting or receivinganything of value, directly or indirectly, to induce or reward, or in return for either the referral of patients covered by Medicare, Medicaid and other federalhealthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or servicecovered by these programs. Many states also have similar anti-kickback laws that are not necessarily limited to items or services for which payment is madeby a federal healthcare program. Our sale of advertising and sponsorships to healthcare providers implicates these laws. However, we review our practices toensure that we comply with all applicable laws. The laws in this area are broad and we cannot determine precisely how they will be applied to our businesspractices. Any determination by a state or federal regulatory agency that any of our practices violate any of these laws could subject us to liability and requireus to change or terminate some portions of our business.-26- Further, we derive revenues from the sale of advertising and promotion of prescription and over-the-counter drugs. If the FDA or the FTC finds thatany of the information provided on our properties violates FDA or FTC regulations, they may take regulatory or judicial action against us and/or theadvertiser of that information. State attorneys general may also take similar action based on their state’s consumer protection statutes. Any increase or changein regulation of advertising and promotion in the healthcare industry could make it more difficult for us to generate and grow our advertising andsponsorship revenues.In addition, the practice of most healthcare professions requires licensing under applicable state law and state laws may further prohibit businessentities from practicing medicine, which is referred to as the prohibition against the corporate practice of medicine. Similar state prohibitions may exist withrespect to other licensed professions. We believe that we do not engage in the practice of medicine or any other licensed healthcare profession, or provide,through our properties, professional medical advice, diagnosis, treatment or other advice that is tailored in such a way as to implicate state licensing orprofessional practice laws. However, a state may determine that some portion of our business violates these laws and may seek to have us discontinue thoseportions or subject us to penalties or licensure requirements. Any determination that we are a healthcare provider and acted improperly as a healthcareprovider may result in liability to us.Our business could suffer if providers of broadband internet access services block, impair or degrade our services. Our business is dependent on the ability of our cloud services customers and visitors to our digital media properties to access our services andapplications over broadband internet connections. Internet access providers and internet backbone providers may be able to block, degrade or charge foraccess or bandwidth use of certain of our products and services, which could lead to additional expenses and the loss of users. Our products and servicesdepend on the ability of our users to access the internet. Use of our services and applications through mobile devices, such as smartphones and tablets, musthave a high-speed data connection. Broadband internet access services, whether wireless or landline, are provided by companies with significant marketpower. Many of these providers offer products and services that directly compete with ours.On January 4, 2018, the FCC, released an order that largely repeals rules that the FCC had in place which prevented broadband internet accessproviders from degrading or otherwise disrupting a broad range of services provisioned over consumers’ and enterprises’ broadband internet access lines. TheFCC’s January 4, 2018, Order is not yet effective and there are efforts in Congress to prevent the Order from becoming effective. Additionally, a number ofstate attorneys general have filed an appeal of the FCC’s January 4, 2018, Order and others may also appeal the Order. A number of states have either passedlegislation, adopted state executive agency policies or are in the process of adopting legislation that would prevent broadband internet access providers fromblocking, degrading and otherwise impairing consumers’ and internet applications service providers’ broadband internet access services. We cannot predictwhether the FCC’s January 4, 2018, Order will become effective, whether it will withstand appeal, or whether states have the authority to adopt legislationand executive policies that may conflict with the FCC’s January 4, 2018, Order.Many of the largest providers of broadband services have publicly stated that they will not degrade or disrupt their customers’ use of applicationsand services, like ours. If such providers were to degrade, impair or block our services, it would negatively impact our ability to provide services to ourcustomers and likely result in lost revenue and profits, and we would incur legal fees in attempting to restore our customers’ access to our services. Broadbandinternet access providers may also attempt to charge us or our customers additional fees to access services like ours that may result in the loss of customersand revenue, decreased profitability, or increased costs to our retail offerings that may make our services less competitive. We cannot predict the potentialimpact of the FCC’s January 4, 2018, Order on us at this time nor can we evaluate the potential impact at this time.Our cloud services business is dependent on a small number of telecommunications carriers in each region and our inability to maintain agreements atattractive rates with such carriers may negatively impact our business. Our cloud services business substantially depends on the capacity, affordability, reliability and security of our network and services provided to usby our telecommunications suppliers. Only a small number of carriers in each region, and in some cases only one carrier, offer the number and networkservices we require. We purchase certain telecommunications services pursuant to short-term agreements that the providers can terminate or elect not torenew. As a result, any or all of our current carriers could discontinue providing us with service at rates acceptable to us, or at all, and we may not be able toobtain adequate replacements, which could materially and adversely affect our business, prospects, financial condition, operating results and cash flows. -27- Our business could suffer if we cannot obtain or retain numbers, are prohibited from obtaining local numbers or are limited to distributing localnumbers to only certain customers. The future success of our number-based cloud services business depends on our ability to procure large quantities of local numbers in the U.S. andforeign countries in desirable locations at a reasonable cost and offer our services to our prospective customers without restrictions. Our ability to procure anddistribute numbers depends on factors such as applicable regulations, the practices of telecommunications carriers that provide numbers, the cost of thesenumbers and the level of demand for new numbers. For example, several years ago the FCC conditionally granted petitions by Connecticut and California toadopt specialized “unified messaging” area codes, but neither state has adopted such a code. Adoption of a specialized area code within a state or nationcould harm our ability to compete in that state or nation if it materially affects our ability to acquire numbers for our operations or makes our services lessattractive due to the unavailability of numbers with a local geographic area. In addition, although we are the customer of record for all of our U.S. numbers, from time to time, certain U.S. telephone carriers inhibit our ability toport numbers or port our numbers away from us to other carriers. If a federal or regulatory agency determines that our customers should have the ability to portnumbers without our consent, we may lose customers at a faster rate than what we have experienced historically, potentially resulting in lower revenues. Also,in some foreign jurisdictions, under certain circumstances, our customers are permitted to port their numbers to another carrier. These factors could lead toincreased cancellations by our cloud services customers and loss of our number inventory. These factors may have a material adverse effect on our business,prospects, financial condition, operating results, cash flows and growth in or entry into foreign or domestic markets. In addition, future growth in our number-based cloud services subscriber base, together with growth in the subscriber bases of other providers ofnumber-based services, has increased and may continue to increase the demand for large quantities of numbers, which could lead to insufficient capacity andour inability to acquire sufficient numbers to accommodate our future growth. We may be subject to increased rates for the telecommunications services we purchase from regulated carriers which could require us to either raisethe retail prices of our offerings and lose customers or reduce our profit margins. The FCC adopted wide-ranging reforms to the system under which regulated providers of telecommunications services compensate each other forthe exchange of various kinds of traffic. While we are not a provider of regulated telecommunications services, we rely on such providers to offer our cloudservices to our customers. As a result of the FCC’s reforms, regulated providers of telecommunications services are determining how the rates they chargecustomers like us will change in order to comply with the new rules. It is possible that some or all of our underlying carriers will increase the rates we pay forcertain telecommunications services. Should this occur, the costs we incur to provide number-based cloud services may increase which may require us toincrease the retail price of our services. Increased prices could, in turn, cause us to lose customers, or, if we do not pass on such higher costs to our subscribers,our profit margins may decrease.New technologies have been developed that are able to block certain of our advertisements or impair our ability to serve interest-based advertisingwhich could harm our operating results.Technologies have been developed and are likely to continue to be developed that can block internet or mobile display advertising. Most of ourDigital Media segment revenues are derived from fees paid by advertisers in connection with the display of advertisements or clicks on advertisements onweb pages or mobile devices. As a result, such technologies and tools are reducing the number of display advertisements that we are able to deliver or ourability to serve our interest-based advertising and this, in turn, could reduce our advertising revenue and operating results. Adoption of these types oftechnologies by more of our users could have a material impact on our revenues. We have implemented third party products to combat these ad-blockingtechnologies and are developing other strategies to address advertisement blocking. However, our efforts may not be successful to offset the potentialincreasing impact of these advertising blocking products.If we or our third-party service providers fail to prevent click fraud or choose to manage traffic quality in a way that advertisers find unsatisfactory,our profitability may decline.A portion of our display revenue comes from advertisers that pay for advertising on a price-per-click basis, meaning that the advertisers pay a feeevery time a user clicks on their advertising. This pricing model can be vulnerable to so-called “click fraud,” which occurs when clicks are submitted on adsby a user who is motivated by reasons other than genuine interest in the subject of the ad. We or our third-party service providers may be exposed to the riskof click fraud or other clicks or conversions that advertisers may perceive as undesirable. If fraudulent or other malicious activity is perpetrated by others andwe or our third--28- party service providers are unable to detect and prevent it, or choose to manage traffic quality in a way that advertisers find unsatisfactory, the affectedadvertisers may experience or perceive a reduced return on their investment in our advertising programs which could lead the advertisers to becomedissatisfied with our advertising programs and they might refuse to pay, demand refunds, or withdraw future business. Undetected click fraud could damageour brands and lead to a loss of advertisers and revenue.If we are unable to continue to attract visitors to our websites from search engines, then consumer traffic to our websites could decrease, which couldnegatively impact the sales of our products and services, our advertising revenue and the number of purchases generated for our retailers through ourDigital Media marketplace.We generate consumer traffic to our websites using various methods, including search engine marketing, or SEM, search engine optimization, orSEO, email campaigns and social media referrals. Our net revenues and profitability levels are dependent upon our continued ability to use a combination ofthese methods to generate consumer traffic to our websites in a cost-efficient manner. We have experienced and continue to experience fluctuations in searchresult rankings for a number of our websites. There can be no assurances that we will be able to grow or maintain current levels of consumer traffic.Our SEM and SEO techniques have been developed to work with existing search algorithms utilized by the major search engines. Major searchengines frequently modify their search algorithms. Changes in these algorithms could cause our websites to receive less favorable placements, which couldreduce the number of users who visit our websites. In addition, we use keyword advertising to improve our search ranking and to attract users to our sites. Ifwe fail to follow legal requirements regarding the use of keywords or search engine guidelines and policies properly, search engines may rank our contentlower in search results or could remove our content altogether from their indices.Any decline in consumer traffic to our websites could adversely impact the amount of ads that are displayed and the number of purchases wegenerate for our retailers, which could adversely affect our net revenues. An attempt to replace this traffic through other channels may require us to increaseour sales and marketing expenditures, which would adversely affect our operating results and which may not be offset by additional net revenues.The industries in which we operate are undergoing rapid technological changes and we may not be able to keep up. The industries in which we operate are subject to rapid and significant technological change. We cannot predict the effect of technological changeson our business. We expect that new services and technologies will emerge in the markets in which we compete. These new services and technologies may besuperior to the services and technologies that we use or these new services may render our services and technologies obsolete. Our future success will depend,in part, on our ability to anticipate and adapt to technological changes and evolving industry standards. We may be unable to obtain access to newtechnologies on acceptable terms or at all, and may therefore be unable to offer services in a competitive manner. Any of the foregoing risks could have amaterial adverse effect on our business, prospects, financial condition, operating results and cash flows. Increased cost of email transmissions could have a material adverse effect on our business. We rely on email for the delivery of certain cloud services. We also offer email security, encryption and archival services. If regulations or otherchanges in the industry lead to a charge associated with the sending or receiving of email messages, the cost of providing our services could increase and, ifsignificant, could materially adversely affect our business, prospects, financial condition, operating results and cash flows.Risks Related To Our StockThe fundamental change purchase feature of the Convertible Notes and the change of control features of the Senior Notes may delay or prevent anotherwise beneficial attempt to take over our company.The terms of the Convertible Notes require us to offer to purchase the Convertible Notes for cash in the event of a fundamental change (as defined inthe indenture governing the Convertible Notes), and the terms of the Senior Notes require our subsidiary, j2 Cloud Services, to offer to repurchase the SeniorNotes for cash in the event of a change of control (as defined in the indenture governing the Senior Notes). These features may have the effect of delaying orpreventing a takeover of our company that would otherwise be beneficial to investors.-29- Conversions of the Convertible Notes will dilute the ownership interest of our existing stockholders, including holders who had previously convertedtheir Convertible Notes.The conversion of some or all of the Convertible Notes will dilute the ownership interests of our existing stockholders. Any sales in the publicmarket of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existenceof the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could depress the price of ourcommon stock.We are a holding company and our operations are conducted through, and substantially all of our consolidated assets are held by, our subsidiaries,which are subject to certain restrictions on their ability to pay dividends to us to fund dividends on our stock, pay interest on the Convertible Notes andfund other holding company expenses.We are a holding company. We conduct substantially all of our operations through our subsidiaries. A substantial portion of our consolidated assetsis held by our subsidiaries. Accordingly, our ability to pay dividends on our stock, service our debt, including the Convertible Notes and fund other holdingcompany expenses depends on the results of operations of our subsidiaries and upon the ability of such subsidiaries to provide us with cash, whether in theform of dividends, loans or otherwise.In addition, dividends, loans or other distributions to us from such subsidiaries are subject to contractual and other restrictions and are subject toother business considerations. j2 Cloud Services, is subject to restrictions on dividends in its existing indenture with respect to the Senior Notes. The SeniorNotes indenture generally prohibits dividends except out of a basket of 50% of cumulative net income (as defined in the indenture) and proceeds from equityofferings, although it permits any dividends if j2 Cloud Services’ pro forma leverage ratio (as calculated as required by the indenture) is less than 3.0 to 1.While j2 Cloud Services is currently in compliance with such covenants, its ability to comply with such covenants is subject to conditions outside itscontrol. If we cannot obtain cash from our subsidiaries, we may not be able to pay dividends on our stock, pay interest on the Convertible Notes and fundother operating company expenses without additional sources of cash.Quarterly dividends may not continue, may not continue to grow or could decrease.We may not continue to issue quarterly dividends or we could decrease the amount of any future dividends or cease to increase the amount of anyfuture dividends. We paid our first quarterly dividend of $0.20 per share of common stock on September 19, 2011. We have declared increasing dividends ineach subsequent quarter. Future dividends are subject to Board approval. We cannot assure that the Company will continue to pay a dividend in the future orthe amount of any future dividends.Future sales of our common stock may negatively affect our stock price. As of February 26, 2018, substantially all of our outstanding shares of common stock were available for resale, subject to volume and manner of salelimitations applicable to affiliates under SEC Rule 144. Sales of a substantial number of shares of common stock in the public market or the perception ofsuch sales could cause the market price of our common stock to decline. These sales also might make it more difficult for us to sell equity securities in thefuture at a price that we think is appropriate, or at all. Anti-takeover provisions could negatively impact our stockholders. Provisions of Delaware law and of our certificate of incorporation and bylaws could make it more difficult for a third-party to acquire control of us.For example, we are subject to Section 203 of the Delaware General Corporation Law, which would make it more difficult for another party to acquire uswithout the approval of our Board of Directors. Additionally, our certificate of incorporation authorizes our Board of Directors to issue preferred stockwithout requiring any stockholder approval, and preferred stock could be issued as a defensive measure in response to a takeover proposal. These provisionscould make it more difficult for a third-party to acquire us even if an acquisition might be in the best interest of our stockholders.-30- Our stock price may be volatile or may decline.Our stock price and trading volumes have been volatile and we expect that this volatility will continue in the future due to factors, such as:•Assessments of the size of our subscriber base and our average revenue per subscriber, and comparisons of our results in these and other areas versusprior performance and that of our competitors;•Variations between our actual results and investor expectations;•Regulatory or competitive developments affecting our markets;•Investor perceptions of us and comparable public companies;•Conditions and trends in the communications, messaging and internet-related industries;•Announcements of technological innovations and acquisitions;•Introduction of new services by us or our competitors;•Developments with respect to intellectual property rights;•Conditions and trends in the internet and other technology industries;•Rumors, gossip or speculation published on public chat or bulletin boards;•General market conditions; and•Geopolitical events such as war, threat of war or terrorist actions.In addition, the stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for thecommon stocks of technology and other companies, particularly communications and internet companies. These broad market fluctuations have previouslyresulted in a material decline in the market price of our common stock. In the past, following periods of volatility in the market price of a particularcompany’s securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in thefuture. Litigation is often expensive and diverts management’s attention and resources, which could have a material adverse effect on our business, prospects,financial condition, operating results and cash flows.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesAs of December 31, 2017, we are leasing approximately 40,000 square feet of office space for our global headquarters in Los Angeles, Californiaunder a lease that expires on January 31, 2020. The Digital Media business is headquartered in New York City, where it leases approximately 43,000 squarefeet of office space pursuant to a lease that extends through May 2019 and 87,000 square feet of office space for Everyday Health pursuant to a lease thatextends through October 2023. Additionally, we have smaller leased offices throughout Asia, North America, Europe and Australia.All of our network equipment is housed either at our leased properties or at one of our multiple co-location facilities around the world. We believeour current facilities are generally in good operating condition and are sufficient to meet our needs for the foreseeable future.Item 3. Legal ProceedingsFrom time to time, j2 Global and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinarycourse of business. Any claims or regulatory actions against j2 Global and its affiliates, whether meritorious or not, could be time consuming and costly, andcould divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorablerulings that could include monetary damages and injunctive relief.-31- On February 17, 2011, Emmanuel Pantelakis (“Pantelakis”) filed suit against a j2 Global affiliate in the Ontario Superior Court of Justice (No. 11-50673), alleging that the j2 Global affiliate breached a contract relating to Pantelakis’s use of the Campaigner® service. The j2 Global affiliate filed aresponsive pleading on March 23, 2011 and responses to undertakings on July 16, 2012. On November 6, 2012, Pantelakis filed a second amended statementof claim, reframing his lawsuit as a negligence action. The j2 Global affiliate filed an amended statement of defense on April 8, 2013. Discovery has closed. Ajudicial pre-trial has been set for July 27, 2018.On January 17, 2013, the Commissioner of the Massachusetts Department of Revenue (“Commissioner”) issued a notice of assessment to a j2 Globalaffiliate for sales and use tax for the period of July 1, 2003 through December 31, 2011. On July 22, 2014, the Commissioner denied the j2 Global affiliate’sapplication for abatement. On September 18, 2014, the j2 Global affiliate petitioned the Massachusetts Appellate Tax Board for abatement of the tax assertedin the notice of assessment (No. C325426). A trial was held on December 16, 2015. On May 18, 2017, the Appellate Board decided in favor of theCommonwealth of Massachusetts. The j2 Global affiliate has requested the findings of fact and conclusions of law from the Appellate Board.On October 16, 2013, a j2 Global affiliate entered an appearance as a plaintiff in a multi-district litigation pending in the Northern District of Illinois(No. 1:12-cv-06286). In this litigation, Unified Messaging Solutions, LLC (“UMS”), a company with rights to assert certain patents owned by the j2 Globalaffiliate, has asserted five j2 Global patents against a number of defendants. While claims against some defendants have been settled, other defendants havefiled counterclaims for, among other things, non-infringement, unenforceability, and invalidity of the patents-in-suit. On December 20, 2013, the NorthernDistrict of Illinois issued a claim construction opinion and, on June 13, 2014, entered a final judgment of non-infringement for the remaining defendantsbased on that claim construction. UMS and the j2 Global affiliate filed a notice of appeal to the Federal Circuit on June 27, 2014 (No. 14-1611). OnDecember 8, 2017, the Federal Circuit affirmed the decision of the lower court.On January 21, 2016, Davis Neurology, P.A. filed a putative class action against two j2 Global affiliates in the Circuit Court for the County of Pope,State of Arkansas (58-cv-2016-40), alleging violations of the TCPA. The case was ultimately removed to the U.S. District Court for the Eastern District ofArkansas (the “Eastern District of Arkansas”) (No. 4:16-cv-00682). On June 6, 2016, the j2 Global affiliates filed a motion for judgment on the pleadings. OnMarch 20, 2017, the Eastern District of Arkansas dismissed all claims against the j2 Global affiliates. On April 17, 2017, Davis Neurology filed a notice ofappeal. On June 20, 2017, Davis Neurology filed its appeal brief. On August 4, 2017 j2 Global affiliates filed a response brief. On August 21, 2017, DavisNeurology filed a reply brief. Oral argument was held January 11, 2018. j2 Global affiliates submitted a supplemental letter brief on January 31, 2018. DavisNeurology submitted a supplemental letter brief on February 15, 2018. The appeal is pending.j2 Global does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing reserves, arelikely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. However, depending on theamount and timing, an unfavorable resolution of some or all of these matters could have a material effect on j2 Global’s consolidated financial position,results of operations, or cash flows in a particular period.The Company has not accrued for any material loss contingencies relating to these legal proceedings because materially unfavorable outcomes arenot considered probable by management. It is the Company’s policy to expense as incurred legal fees related to various litigations.Item 4. Mine Safety DisclosuresNot applicable.-32- PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock is traded on the NASDAQ Global Select Market under the symbol “JCOM”. The following table sets forth the high and lowclosing sale prices for our common stock for the periods indicated, as reported by the NASDAQ Global Select Market. High LowYear ended December 31, 2017 First Quarter86.96 81.42 Second Quarter91.17 80.86 Third Quarter85.85 72.08 Fourth Quarter78.96 72.17Year ended December 31, 2016 First Quarter80.51 56.90 Second Quarter68.30 60.01 Third Quarter69.99 61.89 Fourth Quarter83.47 62.69HoldersWe had 280 registered stockholders as of February 26, 2018. That number excludes the beneficial owners of shares held in “street” name or heldthrough participants in depositories.DividendsWe initiated a quarterly cash dividend program in August 2011 with a payment of $0.20 per share of common stock on September 19, 2011. Wehave paid an increasing quarterly cash dividend in each subsequent calendar quarter. The following is a summary of each dividend declared during fiscalyear 2017 and 2016:Declaration Date Dividend perCommon Share Record Date Payment DateFebruary 10, 2016 $0.3250 February 23, 2016 March 10, 2016May 5, 2016 $0.3350 May 18, 2016 June 2, 2016August 2, 2016 $0.3450 August 17, 2016 September 1, 2016November 1, 2016 $0.3550 November 18, 2016 December 5, 2016February 9, 2017 $0.3650 February 22, 2017 March 9, 2017May 4, 2017 $0.3750 May 19, 2017 June 2, 2017August 2, 2017 $0.3850 August 14, 2017 September 1, 2017October 31, 2017 $0.3950 November 17, 2017 December 5, 2017On February 2, 2018, the Company’s Board of Directors approved a quarterly cash dividend of $0.4050 per share of common stock payable onMarch 9, 2018 to all stockholders of record as of the close of business on February 22, 2018 (see Note 20 - Subsequent Events). Future dividends are subjectto Board approval.Recent Sales of Unregistered SecuritiesNot applicable.-33- Issuer Purchases of Equity Securities Effective February 15, 2012, the Company’s Board of Directors approved a program authorizing the repurchase of up to five million shares of ourcommon stock through February 20, 2013 (the “2012 Program”). On February 2, 2018, the Company announced that it has extended the 2012 Program set toexpire February 19, 2018 by an additional year (see Note 20 - Subsequent Events). Cumulatively at December 31, 2017, we repurchased 2.1 million sharesunder the 2012 Program at an aggregated cost of $58.6 million (including an immaterial amount of commission fees).In July 2016, the Company acquired and subsequently retired 935,231 shares of j2 Global common stock in connection with the acquisition ofIntegrated Global Concepts, Inc. (see Note 3 - Business Acquisitions). As a result of the purchase of j2 Global common stock, the Company’s Board ofDirectors approved a reduction in the number of shares available for purchase under the 2012 Program by the same amount leaving 1,938,689 shares of j2Global common stock available for purchase under this program.The following table details the repurchases that were made under and outside the 2012 Program during the three months ended December 31, 2017:PeriodTotal Number ofSharesPurchased (1) Average PricePaid Per Share Total Number ofShares PurchasedasPart of PubliclyAnnounced PlansorPrograms MaximumNumber ofShares thatMay Yet BePurchasedUnder the Plans orProgramsOctober 1, 2017 - October 31, 20172,828 $73.78 — 1,938,689November 1, 2017 - November 30, 2017— $— — 1,938,689December 1, 2017 - December 31, 201723,705 $75.20 — 1,938,689Total26,533 — 1,938,689(1) Includes shares surrendered to the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with employee stockoptions and/or the vesting of restricted stock issued to employees.Equity Compensation Plan InformationThe following table provides information as of December 31, 2017 regarding shares outstanding and available for issuance under j2 Global’sexisting equity compensation plans:Plan CategoryNumber ofSecuritiesto BeIssued UponExercise ofOutstandingOptions,Warrantsand Rights (a) Weighted-AverageExercise Price ofOutstandingOptions,Warrantsand Rights (b) Number ofSecuritiesRemainingAvailablefor FutureIssuanceUnder EquityCompensationPlans(ExcludingSecuritiesReflected inColumn (a)) (c)Equity compensation plans approved by security holders375,675 $31.30 5,073,717Equity compensation plans not approved by security holders— — — Total375,675 $31.30 5,073,717The number of securities remaining available for future issuance includes 3,450,474 and 1,623,243 under our 2015 Stock Option Plan and 2001Employee Stock Purchase Plan, respectively. Please refer to Note 13 to the accompanying consolidated-34- financial statements for a description of these Plans as well as our 2007 Stock Option Plan, which terminated on February 14, 2017.Performance GraphThis performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act of 1934, or otherwise subject to the liabilitiesunder that Section and shall not be deemed to be incorporated by reference into any filing of j2 Global under the Securities Act of 1933, as amended, or theExchange Act.The following graph compares the cumulative total stockholder return for j2 Global, the NASDAQ Computer Index and an index of companies thatj2 Global has selected as its peer group in the cloud service for business space.j2 Global’s peer group index for 2017 consists of IAC/InterActive Corp., TripAdvisor, Inc., LivePerson, Inc., LogMeIn, Inc., Zillow Group, Inc.,Salesforce.com, Inc., Open Text Corp. and The Ultimate Software Group, Inc. Given the growth in our Digital Media segment, we have removedAthenahealth, Inc., WebMD Health Corp and Bankrate Inc. and have added IAC/InterActive Corp., TripAdvisor, Inc. and the Zillow Group, Inc. to our peergroup. Both WebMD Health Corp. and Bankrate Inc. were acquired during the current year.j2 Global’s 2016 peer group index consisted of Athenahealth, Inc., WebMD Health Corp., LivePerson, Inc., LogMeIn, Inc., Bankrate Inc.,Salesforce.com, Inc., Open Text Corp. and The Ultimate Software Group, Inc.Measurement points are December 31, 2012 and the last trading day in each of j2 Global’s fiscal quarters through the end of fiscal 2017. The graphassumes that $100 was invested on December 31, 2012 in j2 Global’s common stock and in each of the indices, and assumes reinvestment of any dividends.The stock price performance on the following graph is not necessarily indicative of future stock price performance.Measurement NASDAQ2017 Peer2016 PeerDatej2 GlobalComputer IndexGroup IndexGroup IndexDec-12100.00100.00100.00100.00Mar-13129.63102.24107.66108.26Jun-13141.20104.17103.5698.21Sep-13164.92115.66132.84128.19Dec-13167.35131.95146.20140.99Mar-14168.34133.99151.62146.65Jun-14171.87144.87158.34144.71Sep-14167.88152.06154.40147.66Dec-14210.12158.17152.57153.99Mar-15223.10160.20167.48164.14Jun-15231.47160.53171.68164.61Sep-15241.98152.46164.53168.63Dec-15280.49168.05183.96189.29Mar-16213.78169.49169.73178.95Jun-16220.07162.79185.71193.22Sep-16232.44186.51177.00181.27Dec-16283.24188.67166.99171.84Mar-17291.33212.97190.22200.63Jun-17296.41221.89203.92211.44Sep-17261.03241.28214.46221.78Dec-17266.08261.81230.34242.28-35- [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]-36- Item 6. Selected Financial DataThe following selected consolidated financial data should be read in conjunction with our consolidated financial statements, the related notescontained in this Annual Report on Form 10-K and the information contained herein in Item 7, Management’s Discussion and Analysis of FinancialCondition and Results of Operations. Historical results are not necessarily indicative of future results. Years Ended December 31, 2017 2016 2015 2014 2013 (In thousands, except for share and per share amounts)Statement of Income Data: Revenues$1,117,838 $874,255 $720,815 $599,030 $520,801Cost of revenues172,313 147,100 122,958 105,989 86,893 Gross profit945,525 727,155 597,857 493,041 433,908Operating expenses: Sales and marketing330,296 206,871 159,009 141,967 131,317 Research, development and engineering46,004 38,046 34,329 30,680 25,485 General and administrative323,517 239,672 205,137 134,188 101,683 Total operating expenses699,817 484,589 398,475 306,835 258,485Income from operations245,708 242,566 199,382 186,206 175,423 Interest expense, net67,777 41,370 42,458 31,204 21,254 Other (income) expense, net(22,035) (10,243) 5 (165) 11,472Income before income taxes199,966 211,439 156,919 155,167 142,697Income tax expense60,541 59,000 23,283 29,840 35,175Net income$139,425 $152,439 $133,636 $125,327 $107,522Less extinguishment of Series A preferred stock— — — (991) —Net income attributable to j2 Global, Inc. common shareholders$139,425 $152,439 $133,636 $124,336 $107,522 Net income per common share: Basic$2.89 $3.15 $2.76 $2.60 $2.31 Diluted$2.83 $3.13 $2.73 $2.58 $2.28Weighted average shares outstanding: Basic47,586,242 47,668,357 47,627,853 46,778,015 45,548,767 Diluted48,669,027 47,963,226 48,087,760 47,106,538 46,140,019Cash dividends declared per common share$1.52 $1.36 $1.22 $1.10 $0.98 2017 2016 2015 2014 2013 (In thousands)Balance Sheet Data: Cash and cash equivalents$350,945 $123,950 $255,530 $433,663 $207,801Working capital355,325 (106,090) 286,151 486,816 274,133Total assets2,453,093 2,062,328 1,783,719 1,705,202 1,153,789Other long-term liabilities31,434 3,475 18,228 22,416 1,458Total stockholders’ equity$1,020,305 $914,536 $890,208 $820,235 $706,418-37- Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operationscontains forward-looking statements. These forward-looking statements involve risks, uncertainties and assumptions. The actual results may differmaterially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed in Part I, Item1A - “Risk Factors” in this Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, whichreflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to theseforward-looking statements, except as required by law. Readers should carefully review the Risk Factors and the risk factors set forth in other documents wefile from time to time with the SEC.Overviewj2 Global, Inc., together with its subsidiaries (“j2 Global”, “the Company”, “our”, “us” or “we”), is a leading provider of internet services. Throughour Cloud Services segment, we provide cloud services to consumers and businesses and license our intellectual property (“IP”) to third parties. In addition,the Cloud Services segment includes fax, voice, backup, security and email marketing products. Our Digital Media segment specializes in the technology,gaming, lifestyle and healthcare markets offering content, tools and services to consumers and businesses.Our Cloud Services segment generates revenues primarily from customer subscription and usage fees and from IP licensing fees. Our Digital Mediasegment generates revenues from advertising and sponsorships, subscription and usage fees, performance marketing and licensing fees.In addition to growing our business organically, on a regular basis we acquire businesses to grow our customer bases, expand and diversify ourservice offerings, enhance our technologies, acquire skilled personnel and enter into new markets.Our consolidated revenues are currently generated from three basic business models, each with different financial profiles and variability. Our CloudServices segment is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with someseasonal weakness in the fourth quarter. The Cloud Services segment also includes the results of our IP licensing business, which can vary dramatically inboth revenues and profitability from period to period. Our Digital Media segment is driven primarily by advertising revenues, has relatively higher sales andmarketing expense and has seasonal strength in the fourth quarter. We continue to pursue additional acquisitions, which may include companies operatingunder business models that differ from those we operate under today. Such acquisitions could impact our consolidated profit margins and the variability ofour revenues.j2 Global was incorporated in 2014 as a Delaware corporation through the creation of a new holding company structure, and our Cloud Servicessegment, operated by our wholly owned subsidiary, j2 Cloud Services, LLC (formerly j2 Cloud Services, Inc.), and its subsidiaries, was founded in 1995. Wemanage our operations through two business segments: Cloud Services and Digital Media. Information regarding revenue and operating income attributableto each of our reportable segments and certain geographic information is included within Note 16, “Segment Information” of the Notes to ConsolidatedFinancial Statements included elsewhere in this Annual Report on Form 10-K, which is incorporated herein by reference.-38- Cloud Services Segment Performance MetricsThe following table sets forth certain key operating metrics for our Cloud Services segment for the years ended December 31, 2017, 2016 and 2015(in thousands, except for percentages): Years Ended December 31, 2017 2016 2015Subscriber revenues: Fixed$471,269 $468,395 $414,919Variable102,928 93,950 83,804Total subscriber revenues574,197 562,345 498,723Other license revenues4,759 4,593 5,915Total revenues$578,956 $566,938 $504,638Percentage of total subscriber revenues: Fixed82.1% 83.3% 83.2%Variable17.9% 16.7% 16.8%Total revenues: Number-based$384,929 $367,741 $352,656Non-number-based194,027 199,197 151,982Total revenues$578,956 $566,938 $504,638 Average monthly revenue per Cloud Business Customer (ARPU) (1)(2)$15.31 $15.21 $14.79Cancel rate (3)2.0% 2.1% 2.1%(1) Quarterly ARPU is calculated using our standard convention of applying the average of the quarter’s beginning and ending base to the total revenuefor the quarter. We believe ARPU provides investors an understanding of the average monthly revenues we recognize associated with each CloudServices customer. As ARPU varies based on fixed subscription fee and variable usage components, we believe it can serve as a measure by whichinvestors can evaluate trends in the types of services, levels of services and the usage levels of those services across our Cloud Services customerbase.(2) Cloud Services customers are defined as paying direct inward dialing numbers for fax and voice services, and direct and resellers’ accounts for otherservices.(3) Cancel Rate is defined as cancels of small and medium businesses and individual Cloud Services customers with greater than four months ofcontinuous service (continuous service includes Cloud Services customers administratively canceled and reactivated within the same calendarmonth), and enterprise Cloud Services customers beginning with their first day of service. Calculated monthly and expressed as an average over thethree months of the quarter.Digital Media Segment Performance MetricsThe following table sets forth certain key operating metrics for our Digital Media segment for the years ended December 31, 2017, 2016 and 2015(in millions): Years Ended December 31, 2017 2016 2015Visits5,720 4,992 4,001Page views23,731 18,063 10,276Sources: Google Analytics and Partner Platforms-39- Critical Accounting Policies and EstimatesWe prepare our consolidated financial statements and related disclosures in accordance with U.S. generally accepted accounting principles(“GAAP”) and our discussion and analysis of our financial condition and operating results require us to make judgments, assumptions and estimates thataffect the amounts reported in our consolidated financial statements and accompanying notes. See Note 2, “Basis of Presentation and Summary of SignificantAccounting Policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K which describes the significant accountingpolicies and methods used in the preparation of our consolidated financial statements. We base our estimates on historical experience and on various otherassumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assetsand liabilities. Actual results may differ significantly from those estimates under different assumptions and conditions and may be material.We believe that our most critical accounting policies are those related to revenue recognition, valuation and impairment of investments, share-basedcompensation expense, long-lived and intangible asset impairment, contingent consideration, income taxes and contingencies and allowance for doubtfulaccounts. We consider these policies critical because they are those that are most important to the portrayal of our financial condition and results and requiremanagement’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherentlyuncertain. Senior management has reviewed these critical accounting policies and related disclosures with the Audit Committee of the Company’s Board ofDirectors.Revenue RecognitionCloud ServicesThe Company’s Cloud Services revenues substantially consist of monthly fixed subscription and variable usage-based fees, which are primarily paidin advance by credit card. In accordance with GAAP, the Company recognizes revenue when persuasive evidence of an arrangement exists, services havebeen provided, the sales price is fixed and determinable and collection is probable. The Company defers the portions of monthly, quarterly, semi-annuallyand annually recurring subscription and usage-based fees collected in advance and recognizes them in the period earned. Additionally, the Company defersand recognizes subscriber activation fees and related direct incremental costs over a subscriber’s estimated useful life.Along with our numerous proprietary Cloud Services solutions, the Company also generates revenues by reselling various third party solutions,primarily through our email security and online backup lines of business. These third party solutions, along with our proprietary products, allow theCompany to offer customers a variety of solutions to better meet their needs. The Company determines whether reseller revenue should be reported on agross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as the principal in atransaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis.In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations andthe Company places the most weight on three factors: whether or not the Company (i) is the primary obligor in the arrangement, (ii) has latitude indetermining pricing and (iii) bears credit risk.The Company records revenue on a gross basis with respect to reseller revenue as the Company is the primary obligator in the arrangement, haslatitude in determining pricing and bears all credit risk associated with our reseller program partners.j2 Global’s Cloud Services also include patent license revenues generated under license agreements that provide for the payment of contractuallydetermined fully paid-up or royalty-bearing license fees to j2 Global in exchange for the grant of non-exclusive, retroactive and future licenses to ourintellectual property, including patented technology. Patent revenues may also consist of revenues generated from the sale of patents. Patent license revenuesare recognized when earned over the term of the license agreements. With regard to fully paid-up license arrangements, the Company recognizes as revenuein the period the license agreement is executed the portion of the payment attributable to past use of the intellectual property and amortizes the remainingportion of such payments on a straight-line basis, or pro-rata revenue basis, as appropriate over the life of the licensed patent(s). With regard to royalty-bearing license arrangements, the Company recognizes revenues of license fees earned during the applicable period. With regard to patent sales, theCompany recognizes as revenue in the period of the sale the amount of the purchase price over the carrying value of the patent(s) sold.-40- The Cloud Services business also generates revenues by licensing certain technology to third parties. These licensing revenues are recognized whenearned in accordance with the terms of the underlying agreement. Generally, revenue is recognized as the third party uses the licensed technology over theperiod.Digital MediaThe Company’s Digital Media revenues primarily consist of revenues generated from the sale of advertising campaigns that are targeted to theCompany’s proprietary websites and to those websites operated by third parties that are part of the Digital Media business’s advertising network. Revenuesfor these advertising campaigns are recognized as earned either when an ad is placed for viewing by a visitor to the appropriate web page or when the visitor“clicks through” on the ad, depending upon the terms with the individual advertiser.Revenues for Digital Media business-to-business operations consist of lead-generation campaigns for IT vendors and are recognized as earned whenthe Company delivers the qualified leads to the customer.j2 Global also generates Digital Media revenues through the license of certain assets to clients, for the clients’ use in their own promotionalmaterials or otherwise. Such assets may include logos, editorial reviews, or other copyrighted material. Revenues under such license agreements arerecognized when the assets are delivered to the client. Also, Digital Media revenues are generated through the license of certain speed testing technologywhich is recognized when delivered to the client and through providing data services primarily to Internet Service Providers (“ISPs”) and wireless carrierswhich is recognized as earned over the term of the access period. The Digital Media business also generates other types of revenues, including businesslisting fees, subscriptions to online publications, and from other sources. Such other revenues are recognized as earned.The Company determines whether Digital Media revenue should be reported on a gross or net basis by assessing whether the Company is acting asthe principal or an agent in the transaction. If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis. If theCompany is acting as an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or anagent, the Company follows the accounting guidance for principal-agent considerations and the Company places the most weight on three factors: whether ornot the Company (i) is the primary obligor in the arrangement, (ii) has latitude in determining pricing and (iii) bears credit risk.The Company records revenue on a gross basis with respect to revenue generated (i) by the Company serving online display and video advertisingacross its owned-and-operated web properties, on third party sites or on unaffiliated advertising networks, (ii) through the Company’s lead-generationbusiness and (iii) through the Company’s Digital Media licensing program. The Company records revenue on a net basis with respect to revenue paid to theCompany by certain third-party advertising networks who serve online display and video advertising across the Company’s owned-and-operated webproperties and certain third party sites.Valuation and Impairment of InvestmentsWe account for our investments in debt and equity securities in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No.320, Investments - Debt and Equity Securities (“ASC 320”). ASC 320 requires that certain debt and equity securities be classified into one of three categories:trading, available-for-sale or held-to-maturity securities. Our investments are comprised primarily of readily marketable corporate and governmental debtsecurities, money-market accounts and time deposits. We determine the appropriate classification of our investments at the time of acquisition and reevaluatesuch determination at each balance sheet date. Held-to-maturity securities are those investments that we have the ability and intent to hold until maturity.Held-to-maturity securities are recorded at amortized cost. Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as aseparate component of accumulated other comprehensive income (loss) in stockholders’ equity until realized. Trading securities are carried at fair value, withunrealized gains and losses included in interest and other income on our consolidated statement of income. All securities are accounted for on a specificidentification basis. We assess whether an other-than-temporary impairment loss on an investment has occurred due to declines in fair value or other marketconditions (see Note 4 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K).-41- Share-Based Compensation Expense We comply with the provisions of FASB ASC Topic No. 718, Compensation - Stock Compensation (“ASC 718”). Accordingly, we measure share-based compensation expense at the grant date, based on the fair value of the award, and recognize the expense over the employee’s requisite service periodusing the straight-line method. The measurement of share-based compensation expense is based on several criteria including, but not limited to, the valuationmodel used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate, dividend rate and award cancellationrate. These inputs are subjective and are determined using management’s judgment. If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, we may change the input factors used in determining future share-basedcompensation expense. Any such changes could materially impact our results of operations in the period in which the changes are made and in periodsthereafter. We elected to adopt the alternative transition method for calculating the tax effects of share-based compensation.Long-lived and Intangible Assets We account for long-lived assets in accordance with the provisions of FASB ASC Topic No. 360, Property, Plant, and Equipment (“ASC 360”),which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.We assess the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate thatthe carrying value may not be recoverable. Factors we consider important which could individually or in combination trigger an impairment review includethe following: .Significant underperformance relative to expected historical or projected future operating results; .Significant changes in the manner of our use of the acquired assets or the strategy for our overall business; .Significant negative industry or economic trends; .Significant decline in our stock price for a sustained period; and .Our market capitalization relative to net book value.If we determined that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of oneor more of the above indicators of impairment, we would record an impairment equal to the excess of the carrying amount of the asset over its estimated fairvalue.We have assessed whether events or changes in circumstances have occurred that potentially indicate the carrying value of definite-lived intangiblesand long-lived assets may not be recoverable and noted no indicators of potential impairment for the years ended December 31, 2017, 2016 and 2015.Goodwill and Purchased Intangible Assets We evaluate our goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No. 350, Intangibles - Goodwill andOther (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested for impairment annually ormore frequently if circumstances indicate potential impairment. In connection with the annual impairment test for goodwill, we have the option to perform aqualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determinethat it was more likely than not that the fair value of the reporting unit is less than its carrying amount, then we perform the impairment test upon goodwill.The impairment test is comprised of two steps: (1) a reporting unit’s fair value is compared to its carrying value; if the fair value is less than its carrying value,impairment is indicated; and (2) if impairment is indicated in the first step, it is measured by comparing the implied fair value of goodwill and intangibleassets to their carrying value at the reporting unit level. In connection with the annual impairment test for intangible assets, we have the option to perform aqualitative assessment in determining whether it is more likely than not that the fair value is less than its carrying amount, then we perform the impairmenttest upon intangible assets. We completed the required impairment review for the years ended December 31, 2017, 2016, and 2015 and noted no impairment.Consequently, no impairment charges were recorded.-42- Contingent ConsiderationCertain of our acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement of future incomethresholds. The contingent earn-out arrangements are based upon our valuations of the acquired companies and reduce the risk of overpaying for acquisitionsif the projected financial results are not achieved.The fair values of these earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisitiondates. For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair valueof contingent consideration as a liability on the consolidated balance sheets. We consider several factors when determining that contingent earn-outliabilities are part of the purchase price, including the following: (1) the valuation of our acquisitions is not supported solely by the initial considerationpaid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (2) the formershareholders of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable levelcompared with the compensation of our other key employees. The contingent earn-out payments are not affected by employment termination.We measure our contingent earn-out liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 ofthe fair value hierarchy (see Note 6 “Fair Value Measurements” of the Notes to Consolidated Financial Statements included elsewhere in this Annual Reporton Form 10-K, which is incorporated herein by reference). We may use various valuation techniques depending on the terms and conditions of the contingentconsideration including a Monte-Carlo simulation. This simulation uses probability distribution for each significant input to produce hundreds or thousandsof possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring. Significant increases or decreases to these inputsin isolation would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earn-outobligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will berecorded in earnings. The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in ourconsolidated statements of cash flows. Any amount paid in excess of the liability on the acquisition date is reflected as cash used in operating activities.We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materiallyfrom the initial estimates. Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the present valuecalculation are reported in interest expense. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported inoperating income.Income Taxes We account for income taxes in accordance with FASB ASC Topic No. 740, Income Taxes (“ASC 740”), which requires that deferred tax assets andliabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. ASC740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets willnot be realized. Our valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time. In assessing this valuationallowance, we review historical and future expected operating results and other factors to determine whether it is more likely than not that deferred tax assetsare realizable.We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, and administrative practicesin various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significantjudgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinarycourse of business for which the ultimate tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as intercompanytransactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory ratesand higher than anticipated in jurisdictions where we have higher statutory rates, the applicability of special tax regimes, losses incurred in jurisdictions forwhich we are not able to realize the related tax benefit, changes in foreign currency exchange rates, entry into new businesses and geographies, changes toour existing businesses and operations, acquisitions (including integrations) and investments and how they are financed, changes in our stock price, changesin our deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices,principles, and interpretations. In addition, a number of countries are actively pursuing changes to their tax laws applicable to corporate multinationals, suchas the recently enacted the 2017 Tax Act. Finally, foreign governments may enact tax laws in response to the 2017 Tax Act that could result in furtherchanges to global taxation and materially affect our financial position and results of operations.-43- The U.S. federal tax legislation, the 2017 Tax Act significantly revised the U.S. tax code by, in part but not limited to, reducing the U.S. corporatetax rate from 35% to 21% and imposing a mandatory one-time transition tax on certain un-repatriated earnings of foreign subsidiaries The SEC staffacknowledged the challenges companies face incorporating the effects of tax reform by their financial reporting deadlines. In response, the SEC staff issuedStaff Accounting Bulletin No. 118, or SAB 118, to address the application of U.S. GAAP in situations when a registrant does not have the necessaryinformation available, prepared, or analyzed in reasonable detail to complete accounting for certain income tax effects of the 2017 Tax Act. As of December31, 2017, we recorded a provisional income tax charge of $49.2 million for the transition tax on deemed repatriation of deferred foreign income. We alsorecorded a provisional income tax benefit of $33.3 million for the re-measurement of our U.S. deferred tax assets and liabilities because of the federalcorporate maximum tax rate reduction. The provisional amounts recorded are based on our current interpretation and understanding of the 2017 Tax Act, arejudgmental and may change as we receive additional clarification and implementation guidance. We will continue to gather and evaluate the income taximpact of the 2017 Tax Act. Changes to these provisional amounts or any of our other estimates regarding taxes could result in material charges or credits infuture reporting periods.Income Tax Contingencies We calculate current and deferred tax provisions based on estimates and assumptions that could differ from the actual results reflected in income taxreturns filed during the following year. Adjustments based on filed returns are recorded when identified in the subsequent year.ASC 740 provides guidance on the minimum threshold that an uncertain income tax position is required to meet before it can be recognized in thefinancial statements and applies to all tax positions taken by a company. ASC 740 contains a two-step approach to recognizing and measuring uncertainincome tax positions. The first step is to evaluate the income tax position for recognition by determining if the weight of available evidence indicates that itis more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is tomeasure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that the benefitwill be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item is included ona tax return are considered to have met the recognition threshold. We recognize accrued interest and penalties related to uncertain income tax positions inincome tax expense on our consolidated statement of income. On a quarterly basis, we evaluate uncertain income tax positions and establish or releasereserves as appropriate under GAAP.As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing withuncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. Our estimate of the potential outcome of any uncertaintax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. Therefore, the actual liability for U.S. orforeign taxes may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially to reversepreviously recorded tax liabilities. In addition, we may be subject to examination of our tax returns by the U.S. Internal Revenue Service (“IRS”) and otherdomestic and foreign tax authorities.It is possible that one or more of these audits may conclude in the next 12 months and that the unrecognized tax benefits we have recorded inrelation to these tax years may change compared to the liabilities recorded for the periods. However, it is not possible to estimate the amount, if any, of suchchange. We establish reserves for these tax contingencies when we believe that certain tax positions might be challenged despite our belief that our taxpositions are fully supportable. We adjust these reserves when changing events and circumstances arise.Non-Income Tax Contingencies We are currently under audit by various state, local and foreign taxing authorities for direct and indirect non-income related taxes, includingCanadian sales tax. In accordance with the provisions of FASB ASC Topic No. 450, Contingencies (“ASC 450”) we make judgments regarding the futureoutcome of contingent events and record loss contingency amounts that are probable and reasonably estimable based upon available information.As a provider of cloud services for business, we do not provide telecommunications services. Thus, we believe that our business and our users (byusing our services) are generally not subject to various telecommunication taxes. However, several state taxing authorities have challenged this belief andhave and may continue to audit and assess our business and operations with respect to telecommunications and other sales taxes. In addition, the applicationof other indirect taxes (such as sales and use tax, business tax and gross receipt tax) to e-commerce businesses such as j2 Global and our users is a complexand evolving issue. -44- The application of existing, new or future laws could have adverse effects on our business, prospects and operating results. There have been, and willcontinue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conductor will conduct business.On March 3, 2017, the New York State Department of Taxation and Finance issued a notice of assessment for sales and use tax for the period ofMarch 1, 2009 through February 28, 2014. We have reached a settlement with the Department which has expanded the period up to November 30, 2017. Wehave accrued $2.80 million as of December 31, 2017. On February 18, 2018, we paid $2.77 million to New York in settlement. On August 24, 2016, theOffice of Finance for the City of Los Angeles notified us that they will commence an audit of business and communications taxes for the period of January 1,2013 through December 31, 2016 which has concluded with no material impact. For other jurisdictions, we currently have no reserves established for thesematters, as we have determined that the liability is not probable and estimable. However, it is reasonably possible that such a liability could be incurred,which would result in additional expense, which could materially impact our financial results.Allowances for Doubtful Accounts We reserve for receivables we may not be able to collect. These reserves are typically driven by the volume of credit card declines and past dueinvoices and are based on historical experience as well as an evaluation of current market conditions. On an ongoing basis, management evaluates theadequacy of these reserves.Recent Accounting PronouncementsSee Note 2, “Basis of Presentation and Summary of Significant Accounting Policies”, to our accompanying consolidated financial statements for adescription of recent accounting pronouncements and our expectations of their impact on our consolidated financial position and results of operations.Results of OperationsYears Ended December 31, 2017, 2016 and 2015Cloud Services SegmentAssuming a stable or improving economic environment, and, subject to our risk factors, we expect the revenue and profits as included in the resultsof operations below in our Cloud Services segment to be stable for the foreseeable future (excluding the impact of acquisitions). The main focus of our CloudServices offerings is to reduce or eliminate costs, increase sales and enhance productivity, mobility, business continuity and security of our customers as thetechnologies and devices they use evolve over time. As a result, we expect to continue to take steps to enhance our existing offerings and offer new servicesto continue to satisfy the evolving needs of our customers. Through our IP licensing operations, which are included in the Cloud Services segment, we seekto make our IP available for license to third parties, and we expect to continue to attempt to obtain additional IP through a combination of acquisitions andinternal development in an effort to increase available licensing opportunities and related revenues.We expect acquisitions to remain an important component of our strategy and use of capital in this segment; however, we cannot predict whether ourcurrent pace of acquisitions will remain the same within this segment. In a given period, we may close greater or fewer acquisitions than in prior periods oracquisitions of greater or lesser significance than in prior periods. Moreover, future acquisitions of businesses within this segment but with different businessmodels may impact the segment’s overall profit margins. Also, as IP licensing often involves litigation, the timing of licensing transactions is unpredictableand can and does vary significantly from period to period. This variability can cause the overall segment’s financial results to materially vary from period toperiod.Digital Media SegmentAssuming a stable or improving economic environment, and, subject to our risk factors, we expect the revenue and profits in our Digital Mediasegment to improve over the next several quarters as we integrate our recent acquisitions and over the longer term as advertising transactions continue to shiftfrom offline to online. The main focus of our advertising programs is to provide relevant and useful advertising to visitors to our websites and those includedwithin our advertising networks, reflecting our commitment to constantly improve their overall web experience. As a result, we expect to continue to takesteps to improve the relevance of the ads displayed on our websites and those included within our advertising networks.-45- The operating margin we realize on revenues generated from ads placed on our websites is significantly higher than the operating margin we realizefrom revenues generated from those placed on third-party websites. Growth in advertising revenues from our websites has generally exceeded that from third-party websites. This trend has had a positive impact on our operating margins, and we expect that this will continue for the foreseeable future. However, thetrend in advertising spend is shifting to mobile devices and other newer advertising formats which generally experience lower margins than those fromdesktop computers and tablets. We expect this trend to continue to put pressure on our margins.We expect acquisitions to remain an important component of our strategy and use of capital in this segment; however, we cannot predict whether ourcurrent pace of acquisitions will remain the same within this segment. In a given period, we may close greater or fewer acquisitions than in prior periods oracquisitions of greater or lesser significance than in prior periods. Moreover, future acquisitions of businesses within this segment but with different businessmodels may impact the segment’s overall profit margins.j2 Global ConsolidatedWe anticipate that the stable revenue trend in our Cloud Services segment combined with the improving revenue and profits in our Digital Mediasegment will result in overall improved revenue and profits for j2 Global on a consolidated basis, excluding the impact of any future acquisitions which canvary dramatically from period to period.We expect operating profit as a percentage of revenues to generally decrease in the future primarily due to the fact that revenue with respect to ourDigital Media segment (i) is increasing as a percentage of our revenue on a consolidated basis and (ii) has historically operated at a lower operating margin.The following table sets forth, for the years ended December 31, 2017, 2016 and 2015, information derived from our statements of income as apercentage of revenues. This information should be read in conjunction with the accompanying financial statements and the Notes to Consolidated FinancialStatements included elsewhere in this Annual Report on Form 10-K. Years Ended December 31, 2017 2016 2015Revenues100% 100% 100%Cost of revenues15 17 17 Gross profit85 83 83Operating expenses: Sales and marketing30 24 22 Research, development and engineering4 4 5 General and administrative29 27 28 Total operating expenses63 55 55Income from operations22 28 28Interest expense, net6 5 6Other expense (income), net(2) (1) —Income before income taxes18 24 22Income tax expense5 7 3Net income12% 17% 19%Revenues (in thousands, except percentages)2017 2016 2015 PercentageChange 2017versus 2016 PercentageChange 2016versus 2015Revenues$1,117,838 $874,255 $720,815 28% 21%Our revenues consist of revenues from our Cloud Services segment and from our Digital Media segment. Cloud Services revenues primarily consistof revenues from “fixed” customer subscription revenues and “variable” revenues generated from actual-46- usage of our services. We also generate Cloud Services revenues from IP licensing. Digital Media revenues primarily consist of advertising revenues, feespaid for generating business leads, and licensing and sale of editorial content and trademarks.Our revenues have increased over the past three years primarily due to the following factors:•Acquisitions within our Digital Media properties, plus organic growth in that segment;•Acquisitions within our Cloud Services segment, plus organic growth in that segment.Cost of Revenues(in thousands, except percentages)2017 2016 2015 PercentageChange 2017versus 2016 PercentageChange 2016versus 2015Cost of revenue$172,313 $147,100 $122,958 17% 20%As a percent of revenue15% 17% 17% Cost of revenues is primarily comprised of costs associated with data and voice transmission, numbers, editorial and production costs, networkoperations, customer service, online processing fees and equipment depreciation. The increase in cost of revenues for the year ended December 31, 2017 wasprimarily due to an increase in costs associated with businesses acquired in and subsequent to fiscal 2016 that resulted in additional editorial and productioncosts. The increase in cost of revenues for the year ended December 31, 2016 was primarily due to an increase in costs associated with businesses acquired inand subsequent to fiscal 2015 that resulted in additional network operations, editorial and production costs, customer service and depreciation.Operating ExpensesSales and Marketing. (in thousands, except percentages)2017 2016 2015 PercentageChange 2017versus 2016 PercentageChange 2016versus 2015Sales and Marketing$330,296 $206,871 $159,009 60% 30%As a percent of revenue30% 24% 22% Our sales and marketing costs consist primarily of internet-based advertising, sales and marketing, personnel costs and other business development-related expenses. Our internet-based advertising relationships consist primarily of fixed cost and performance-based (cost-per-impression, cost-per-click andcost-per-acquisition) advertising relationships with an array of online service providers. Advertising cost for the years ended December 31, 2017, 2016 and2015 was $143.3 million (primarily consisting of $95.4 million of third-party advertising costs and $41.0 million of personnel costs), $96.8 million(primarily consisting of $64.8 million of third-party advertising costs and $26.3 million of personnel costs) and $63.5 million (primarily consisting of $41.2million of third-party advertising costs and $21.9 million of personnel costs), respectively. The increase in sales and marketing expenses from 2016 to 2017was primarily due to increased personnel costs and advertising associated with the acquisition of Everyday Health within the Digital Media segment, whichwas acquired in December 2016. The increase in sales and marketing expenses from 2015 to 2016 was primarily due to increased advertising associated withbusinesses acquired within the Digital Media and Cloud Services segments and additional personnel costs.Research, Development and Engineering.(in thousands, except percentages)2017 2016 2015 PercentageChange 2017versus 2016 PercentageChange 2016versus 2015Research, Development and Engineering$46,004 $38,046 $34,329 21% 11%As a percent of revenue4% 4% 5% -47- Our research, development and engineering costs consist primarily of personnel-related expenses. The increase in research, development andengineering costs from 2016 to 2017 and 2015 to 2016 were primarily due to an increase in professional services and personnel costs associated withacquisitions within the Cloud Service and Digital Media segments. General and Administrative.(in thousands, except percentages)2017 2016 2015 PercentageChange 2017versus 2016 PercentageChange 2016versus 2015General and Administrative$323,517 $239,672 $205,137 35% 17%As a percent of revenue29% 27% 28% Our general and administrative costs consist primarily of personnel-related expenses, depreciation and amortization, changes in the fair valueassociated with contingent consideration, share-based compensation expense, bad debt expense, professional fees, severance and insurance costs. Theincrease in general and administrative expense from 2016 to 2017 was primarily due to additional amortization of intangible assets and personnel costsrelating to acquisitions closed during 2016 and 2015 and increased depreciation expense. The increase in general and administrative expense from 2015 to2016 was primarily due to an increase in amortization of intangible assets, an increase in the fair value associated with contingent consideration issued incertain acquisitions within the Digital Media segment, personnel costs relating to acquisitions closed during 2015 and 2016 and bad debt expense.Share-Based CompensationThe following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanyingcondensed consolidated statements of income for the years ended December 31, 2017, 2016 and 2015 (in thousands): Years Ended December 31, 2017 2016 2015Cost of revenues$500 $436 $373Operating expenses: Sales and marketing1,723 1,782 2,435 Research, development and engineering1,182 904 863 General and administrative19,332 10,528 8,122Total$22,737 $13,650 $11,793During the year, the Company accelerated the vesting of certain shares held by employees which were surrendered to the Company to satisfy taxwithholding obligations in connection with such employees’ restricted stock. The Company recognized share-based compensation of $1.4 million duringyear due to this vesting acceleration.In connection with Nehemia Zucker’s resignation as Chief Executive Officer effective as of December 31, 2017, all of his outstanding and unvestedstock options and time-based restricted shares, along with the tranche of performance-vesting restricted shares that was then next scheduled to vest, vested infull on December 29, 2017. As a result, the Company has accelerated the recognition of share-based compensation expense associated with these awardswhich impacted the fourth quarter by approximately $5.1 million.Non-Operating Income and ExpensesInterest expense, net. Our interest expense, net is generated primarily from interest expense due to outstanding debt, partially offset by interestincome earned on cash, cash equivalents and short and long-term investments. Interest expense, net was $67.8 million, $41.4 million, and $42.5 million forthe years ended December 31, 2017, 2016 and 2015, respectively. The increase from 2016 to 2017 was due to increased interest expense associated with theissuance of the $650 million 6.0% Senior Notes and our line of credit borrowings, the loss on the extinguishment of the $250 million 8.0% Senior Notes anddecreased interest income on cash, cash equivalents and investments. The decrease between 2015 and 2016 was primarily due to additional interest income.-48- Other (income) expense, net. Our other (income) expense, net is generated primarily from miscellaneous items, gain or losses on currency exchangeand the sale of investments. Other (income) expense, net was $(22.0) million, $(10.2) million, and $0.0 million for the years ended December 31, 2017, 2016and 2015, respectively. The change from 2016 to 2017 was attributable to an increase in gains earned in the current period related to the sales of subsidiariesin our Digital Media and Cloud segments; partially offset by increased losses on currency exchange compared to the prior period which included the sale ofour strategic investment in Carbonite resulting in a gain on sale of $7.6 million and a breakup fee of $2.5 million associated with the competitive bid forcertain assets of Gawker Media. The change from 2015 to 2016 is primarily due to the gain on sale of our Carbonite investment and the Gawker Media Groupbreak-up fee.Income TaxesOur effective tax rate is based on pre-tax income, statutory tax rates, tax regulations (including those related to transfer pricing) and different taxrates in the various jurisdictions in which we operate. The tax bases of our assets and liabilities reflect our best estimate of the tax benefits and costs weexpect to realize. When necessary, we establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized. The 2017 Tax Act signed into law on December 22, 2017 significantly revises the U.S. corporate income tax by, among other things, lowering thestatutory corporate tax rate from 35.0% to 21.0%, eliminating certain deductions, imposing a mandatory one-time tax on accumulated earnings of foreignsubsidiaries as of 2017, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. The 2017 Tax Act also enhanced andextended through 2026 the option to claim accelerated depreciation deductions on qualified property. The SEC staff acknowledged the challengescompanies face incorporating the effects of tax reform by their financial reporting deadlines and issued SAB 118 to address the application of U.S. GAAP insituations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete accounting for certainincome tax effects of the 2017 Tax Act.As of December 31, 2017, we have not completed our determination of the accounting implications of the 2017 Tax Act on our tax accruals.However, we have reasonably estimated the effects of the 2017 Tax Act and recorded provisional amounts in our financial statements as of December 31,2017. We recorded a provisional tax expense for the impact of the 2017 Tax Act of $15.9 million. This amount is comprised of $49.2 million expenseassociated with the mandatory one-time tax on the accumulated untaxed earnings of our foreign subsidiaries, offset with $33.3 million benefit related to there-measurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21.0% from 35.0%. Theone-time transition tax on the accumulated earnings of our foreign subsidiaries will be paid over eight years as provided in the 2017 Tax Act. As we completeour analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, the IRS,and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for incometaxes in the period in which the adjustments are made.As of December 31, 2017, we had federal net operating loss carryforwards (“NOLs”) of $102.2 million after considering substantial restrictions onthe utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended. We estimate that all of the above-mentioned federal NOLs will be available for use before their expiration. These NOLs expire through the year 2036. The $102.2 million NOL carryforwardamount includes $89.1 million acquired pursuant to the Everyday Health transaction.As of December 31, 2017 and 2016, the Company has foreign tax credits of zero and $11.9 million, respectively. The Company has provided avaluation allowance on the foreign tax credits of zero and $11.9 million as of December 31, 2017 and 2016, respectively, as the weight of available evidencedoes not support full utilization of these credits. The foreign tax credits were fully utilized in 2017 as a result of the transition tax on repatriated foreignearnings. If these tax credits were not fully utilized, the foreign tax credits would have expired in the year 2025. In addition, as of December 31, 2017 and2016, we had available unrecognized state research and development tax credits of $2.3 million and $3.5 million, respectively, which last indefinitely.Income tax expense amounted to $60.5 million, $59.0 million and $23.3 million for the years ended December 31, 2017, 2016 and 2015,respectively. Our effective tax rates for 2017, 2016 and 2015 were 30.3%, 27.9% and 14.8%, respectively.-49- The increase in our annual effective income tax rate from 2016 to 2017 was primarily attributable to the following:1.an increase during 2017 in the transition tax due to the 2017 Tax Act; partially offset by:2.a decrease during 2017 in the valuation of deferred tax liabilities due to the decrease in the federal tax rate per the 2017 Tax Act; and3.a decrease during 2017 in the amount of deemed distribution income (Section 956) from our foreign subsidiaries.The increase in our annual effective income tax rate from 2015 to 2016 was primarily attributable to the following:1.the reversal of uncertain income tax positions during 2015;2.an increase during 2016 in the amount of deemed distribution income (Section 956) from our foreign subsidiaries; partially offset by:3.a decrease during 2016 in the valuation allowance for foreign tax credit carryforwards.In order to provide additional understanding in connection with our foreign taxes, the following represents the statutory and effective taxrate by significant foreign country: Ireland United Kingdom CanadaStatutory tax rate 12.5% 20.0% (19.0% from April 1, 2017) 26.5%Effective tax rate (1) 12.5% 20.1% 26.5%(1) Effective tax rate excludes certain discrete items.The statutory tax rate is the rate imposed on taxable income for corporations by the local government in that jurisdiction. The effective tax ratemeasures the taxes paid as a percentage of pretax profit. The effective tax rate can differ from the statutory tax rate when a company can exempt some incomefrom tax, claim tax credits, or due to the effect of book-tax differences that do not reverse and discrete items.Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis. We believeour tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business.Certain of these tax positions have in the past been, and are currently being, challenged, and this may have a significant impact on our effective tax rate if ourtax reserves are insufficient.Segment ResultsOur business segments are based on the organization structure used by management for making operating and investment decisions and for assessingperformance. Our reportable business segments are: (i) Cloud Services; and (ii) Digital Media.We evaluate the performance of our operating segments based on segment revenues, including both external and intersegment net sales, andsegment operating income. We account for intersegment sales and transfers based primarily on standard costs with reasonable mark-ups established betweenthe segments. Identifiable assets by segment are those assets used in the respective reportable segment’s operations. Corporate assets consist of cash and cashequivalents, deferred income taxes and certain other assets. All significant intersegment amounts are eliminated to arrive at our consolidated financial results.-50- Cloud ServicesThe following segment results are presented for fiscal years 2017, 2016 and 2015 (in thousands): 2017 2016 2015External net sales$578,956 100.0% $566,938 100.0% $504,638 100.0%Inter-segment net sales— — — — — —Segment net sales578,956 100.0 566,938 100.0 504,638 100.0Cost of revenues118,746 20.5 120,562 21.3 101,209 20.1Gross profit460,210 79.5 446,376 78.7 403,429 79.9Operating expenses234,166 40.4 235,497 41.5 193,227 38.3Segment operating income$226,044 39.0% $210,879 37.2% $210,202 41.7%Segment net sales of $579.0 million in 2017 increased $12.0 million, or 2.1%, from the prior comparable period primarily due to businessacquisitions. Segment net sales of $566.9 million in 2016 increased $62.3 million, or 12.3%, from the prior comparable period primarily due to businessacquisitions.Segment gross profit of $460.2 million in 2017 increased $13.8 million from 2016 and segment gross profit of $446.4 million in 2016 increased$42.9 million from 2015 primarily due to an increase in net sales between the periods. The gross profit as a percentage of revenues for 2017 was consistentwith the previous comparable period. The gross profit as a percentage of revenues for 2016 was lower in comparison to the previous comparable periodprimarily due to increased transition-related costs within network operations. In addition, acquisitions historically have lower initial profitability than ourexisting business until synergies with respect to those acquisitions are realized.Segment operating expenses of $234.2 million in 2017 decreased $1.3 million from 2016 primarily due to lower depreciation and amortization.Segment operating expenses of $235.5 million in 2016 increased $42.3 million from 2015 primarily due to (a) additional depreciation and amortization andan increase in personnel costs associated with businesses acquired in and subsequent to 2015; and (b) sales and marketing costs primarily due to additionaladvertising.As a result of these factors, segment operating earnings of $226.0 million in 2017 increased $15.2 million, or 7.2%, from 2016, and segmentoperating earnings of $210.9 million in 2016 increased $0.7 million, or 0.3%, from 2015. Our Cloud Services segment consists of several services which havesimilar economic characteristics, including the nature of the services and their production processes, the type of customers, as well as the methods used todistribute these services.Digital MediaThe following segment results are presented for fiscal years 2017, 2016 and 2015 (in thousands): 2017 2016 2015External net sales$538,882 100.0% $307,317 100.0% $216,177 99.9%Inter-segment net sales57 — 146 — 197 0.1Segment net sales538,939 100.0 307,463 100.0 216,374 100.0Cost of revenues53,574 9.9 26,538 8.6 21,749 10.1Gross profit485,365 90.1 280,925 91.4 194,625 89.9Operating expenses437,297 81.1 230,225 74.9 164,188 75.9Segment operating income$48,068 8.9% $50,700 16.5% $30,437 14.1%Segment net sales of $538.9 million in 2017 increased $231.5 million, or 75.3%, and segment net sales of $307.5 million increased $91.1 million, or42.1%, from the prior comparable period primarily due to business acquisitions subsequent to the prior comparable period.Segment gross profit of $485.4 million in 2017 increased $204.4 million and segment gross profit of $280.9 million in 2016 increased $86.3 millionfrom the prior comparable period primarily due to an increase in net sales between the periods. Gross profit as a percentage of revenues in 2017 and 2016 wasconsistent with the prior comparable periods.-51- Segment operating expenses of $437.3 million in 2017 increased $207.1 million from the prior comparable period primarily due to (a) increasedsales and marketing costs primarily due to additional advertising and personnel costs associated with businesses acquired in and subsequent to 2016; and (b)amortization of intangible assets and depreciation associated with business acquisitions subsequent to the prior comparable period. Segment operatingexpenses of $230.2 million in 2016 increased $66.0 million from the prior comparable period primarily due to (a) increased sales and marketing costsprimarily due to additional advertising and personnel costs associated with businesses acquired in and subsequent to 2015; (b) amortization of intangibleassets associated with business acquisitions subsequent to the prior comparable period; and (c) an increase in the fair value associated with contingentconsideration issued in certain acquisitions.As a result of these factors, segment operating income of $48.1 million in 2017 decreased $2.6 million, or 5.2%, from 2016, and segment operatingincome of $50.7 million in 2016 increased $20.3 million, or 66.6%, from 2015.-52- Liquidity and Capital ResourcesCash and Cash Equivalents and InvestmentsAt December 31, 2017, we had cash and investments of $408.7 million compared to $124.0 million at December 31, 2016. The increase in cash andinvestments resulted primarily from the issuance of long-term debt and cash from operations, partially offset by the repayment of the line of credit, businessacquisitions, dividends and interest paid, and purchases of property and equipment. At December 31, 2017, cash and investments consisted of cash and cashequivalents of $350.9 million and long-term investments of $57.7 million. Our investments are comprised primarily of certain preferred stock and preferredstock warrants. For financial statement presentation, we classify our investments primarily as short- and long-term based upon their maturity dates. Short-terminvestments mature within one year of the date of the financial statements and long-term investments mature one year or more from the date of the financialstatements. We retain a substantial portion of our cash and investments in foreign jurisdictions for future reinvestment. As of December 31, 2017 cash andinvestments held within foreign and domestic jurisdictions were $137.5 million and $271.2 million, respectively. As of December 31, 2016 cash andinvestments held within foreign and domestic jurisdictions were $48.1 million and $75.9 million, respectively. On December 22, 2017, the U.S. governmentenacted comprehensive tax legislation, the 2017 Tax Act. We will continue to assess the impact of the 2017 Tax Act on the tax consequences of futurerepatriations of foreign earnings and our assertion of indefinite reinvestment of foreign earnings. See Note 11 “Income Taxes” of the Notes to theConsolidated Financial Statements for additional information. The Company’s Board of Directors approved four quarterly cash dividends during the year ended December 31, 2017, totaling $1.5200 per share ofcommon stock. On February 2, 2018, the Company approved a quarterly cash dividend of $0.4050 per share of common stock payable on March 9, 2018 toall stockholders of record as of the close of business on February 22, 2018. Future dividends are subject to Board approval.On June 27, 2017, j2 Cloud Services, LLC (“j2 Cloud”), a wholly-owned subsidiary of j2 Global, Inc., and j2 Cloud Co-Obligor, Inc., a wholly-owned subsidiary of j2 Cloud (the “Co-Issuer” and together with j2 Cloud, the “Issuers”) completed the issuance and sale of $650 million aggregate principalamount of 6.0% senior notes due 2025 in a private placement. The proceeds were used to redeem all of j2 Cloud’s 8.0% notes due in 2020, and to distributesufficient net proceeds to j2 Global to pay off all amounts outstanding under its existing credit facility (as described further below), with the remaining netproceeds to be used for general corporate purposes, including acquisitions.On December 5, 2016, j2 Global, Inc. entered into a Credit Agreement (the “Credit Agreement”) with MUFG Union Bank, N.A., as administrativeagent, and certain other lenders from time to time party thereto (collectively, the “Lenders”). Pursuant to the Credit Agreement, the Lenders provided j2 witha credit facility of $225.0 million (the “Credit Facility”), $180.0 million of which was drawn at closing of the Everyday Health acquisition and used tofinance a portion of the cash consideration in the acquisition. During the second quarter of 2016, the Company drew an additional $45.0 million. On June 27,2017, the Company repaid the outstanding Credit Facility with cash received from its subsidiary, j2 Cloud, and terminated the Credit Agreement.On August 1, 2017, j2 Cloud redeemed all of its outstanding $250 million 8.0% senior unsecured notes due in 2020 for $265 million, including aredemption premium and relevant accrued interest.In order to timely complete the Everyday Health acquisition, the Company borrowed $126.8 million from its non-US subsidiaries. During the thirdquarter 2017, the Company repaid its borrowings from its non-U.S. subsidiaries.On September 25, 2017, the Board of Directors of the Company authorized the Company’s entry into a commitment to invest $200 million in aninvestment fund (the “Fund”) over several years at a fairly ratable rate. The manager, OCV Management, LLC (“OCV”), and general partner of the Fund areentities with respect to which Richard S. Ressler, Chairman of the Board of Directors (the “Board”) of the Company, is indirectly the majority equity holder.As a limited partner in the Fund, the Company will pay an annual management fee to the manager equal to 2.0% (reduced by 10% each year beginning withthe sixth year) of capital commitments. In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company hasreceived distributions equal to its invested capital, the Fund’s general partner will be entitled to a carried interest equal to 20%. The Fund has a six yearinvestment period, subject to certain exceptions. The commitment was approved by the Audit Committee of the Board in accordance with the Company’srelated-party transaction approval policy.In February 2018, the Company received a capital call notice from the management of OCV for approximately $12.2 million, inclusive of certainmanagement fees.-53- We currently anticipate that our existing cash and cash equivalents and short-term investment balances and cash generated from operations will besufficient to meet our anticipated needs for working capital, capital expenditure, investment requirements, stock repurchases and cash dividends for at leastthe next 12 months.Cash FlowsOur primary sources of liquidity are cash flows generated from operations, together with cash and cash equivalents and short-term investments. Netcash provided by operating activities was $264.4 million, $282.4 million and $229.1 million for the years ended December 31, 2017, 2016 and 2015,respectively. Our operating cash flows resulted primarily from cash received from our customers offset by cash payments we made to third parties for theirservices, employee compensation and interest payments associated with our debt. The decrease in our net cash provided by operating activities in 2017compared to 2016 was primarily attributable to decrease in accounts payable and accrued expenses including a $20.0 million payment of certain contingentcompensation obligations of Everyday Health as well as a payment of contingent consideration of $20.0 million associated with the acquisition of Ookla; anincrease in deferred income tax balances and a decrease in income tax payable and liability for uncertain tax positions; partially offset by an increase indepreciation and amortization, share-based compensation and increase in other long term liabilities. The increase in our net cash provided by operatingactivities in 2016 compared to 2015 was primarily attributable to an increase in depreciation and amortization, income tax payable, liability for uncertain taxpositions and deferred income tax balances, additional amortization of financing costs and discounts and share-based compensation, partially offset by anincrease in accounts receivable and decrease in other long term liabilities. Our prepaid tax payments were $6.0 million and zero at December 31, 2017 and2016, respectively. Our cash and cash equivalents and short-term investments were $350.9 million, $124.0 million and $335.2 million at December 31, 2017,2016 and 2015, respectively.Net cash used in investing activities was $(158.5) million, $(448.9) million and $(335.7) million for the years ended December 31, 2017, 2016 and2015, respectively. Net cash used in investing activities in 2017 was primarily attributable to business acquisitions, capital expenditures associated with thepurchase of property and equipment and the purchase of intangible assets; partially offset by proceeds from the sale of businesses. Net cash used in investingactivities in 2016 was primarily attributable to business acquisitions, purchase of available-for-sale investments, purchases of property and equipment andinvestments in intangible assets, partially offset by the sale of available-for-sale investments. Net cash used in investing activities in 2015 was primarilyattributable to business acquisitions, purchase of available-for-sale investments, purchases of property and equipment and investments in intangible assets,partially offset by the sale of available-for-sale investments and maturity of certificates of deposit.Net cash provided by (used in) financing activities was $111.8 million, $41.2 million and $(67.4) million for the years ended December 31, 2017,2016 and 2015, respectively. Net cash provided by financing activities in 2017 was primarily attributable to proceeds from the issuance of long-term debt,additional borrowings under our line of credit and exercise of stock options; partially offset by the repayment in full of the line of credit and other debt,dividends paid, repurchases of stock and business acquisitions. Net cash used in by financing activities in 2016 was primarily attributable to proceeds from aline of credit, exercise of stock options and excess tax benefit from share-based compensation, partially offset by dividends paid, deferred payments foracquisitions and the repurchase of stock. Net cash provided by financing activities in 2015 was primarily attributable to dividends paid, deferred paymentsfor acquisitions and the repurchase of stock, partially offset by the exercise of stock options and excess tax benefit from share-based compensation.Stock Repurchase ProgramIn February 15, 2012, the Company’s Board of Directors authorized the repurchase of up to five million shares of our common stock throughFebruary 20, 2013 which was subsequently extended through February 19, 2018 (see Note 20 - Subsequent Events for discussion regarding the extension ofthe share repurchase program by an additional year).-54- Contractual Obligations and CommitmentsThe following table summarizes our contractual obligations and commitments as of December 31, 2017: Payment Due by Period (in thousands)Contractual Obligations 1 Year 2-3 Years 4-5 Years More than 5Years TotalLong-term debt - principal (a) $— $— $402,500 $650,000 $1,052,500Long-term debt - interest (b) 54,031 104,163 84,541 117,000 359,735Operating leases (c) 18,589 31,046 23,248 13,258 86,141Capital leases (d) 9 — — — 9Telecom services and co-location facilities (e) 4,226 3,641 855 — 8,722Holdback payment (f) 2,097 1,500 — — 3,597Transition tax (g) 3,807 7,614 7,614 28,553 47,588Other (h) 1,866 2,310 2,310 — 6,486Total $84,625 $150,274 $521,068 $808,811 $1,564,778________________________ (a)These amounts represent principal on long-term debt.(b)These amounts represent interest on long-term debt.(c)These amounts represent undiscounted future minimum rental commitments under noncancellable operating leases.(d)These amounts represent undiscounted future minimum rental commitments under noncancellable capital leases.(e)These amounts represent service commitments to various telecommunication providers.(f)These amounts represent the holdback amounts in connection with certain business acquisitions.(g)These amounts represent commitments related to the transition tax on unrepatriated foreign earnings.(h)These amounts primarily represent certain consulting and Board of Director fee arrangements, software license commitments and others.As of December 31, 2017, our liability for uncertain tax positions was $52.2 million. The future payments related to uncertain tax positions have notbeen presented in the table above due to the uncertainty of the amounts and timing of cash settlement with the taxing authorities.We have not presented contingent consideration associated with acquisitions in the table above due to the uncertainty of the amounts and thetiming of cash settlements.Off-Balance Sheet ArrangementsWe are not party to any material off-balance sheet arrangements.-55- Item 7A. Quantitative and Qualitative Disclosures About Market RiskThe following discussion of the market risks we face contains forward-looking statements. Forward-looking statements are subject to risks anduncertainties. Actual results could differ materially from those discussed in the forward-looking statements. Readers are cautioned not to place unduereliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. j2 Global undertakes no obligation to reviseor publicly release the results of any revision to these forward-looking statements, except as required by law. Readers should carefully review the riskfactors described in this document as well as in other documents we file from time to time with the SEC, including the Quarterly Reports on Form 10-Q andany Current Reports on Form 8-K filed or to be filed by us in 2018.Interest Rate RiskOur exposure to market risk for changes in interest rates relates primarily to our investment portfolio. The primary objectives of our investmentactivities are to preserve our principal while at the same time maximizing yields without significantly increasing risk. To achieve these objectives, wemaintain our portfolio of cash equivalents and investments in a mix of instruments that meet high credit quality standards, as specified in our investmentpolicy. Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of December 31, 2017,the carrying value of our cash and cash equivalents approximated fair value. Our return on these investments is subject to interest rate fluctuations.As of December 31, 2017, we had no investments in debt securities with effective maturities greater than one year. As of December 31, 2017 andDecember 31, 2016, we had cash and cash equivalent investments in time deposits and money market funds with maturities of three months or less of $350.9million and $124.0 million, respectively. We cannot ensure that future interest rate movements will not have a material adverse effect on our future business, prospects, financial condition,operating results and cash flows. To date, we have not entered into interest rate hedging transactions to control or minimize certain of these risks.Foreign Currency RiskWe conduct business in certain foreign markets, primarily in Canada, Australia and the European Union. Our principal exposure to foreign currencyrisk relates to investment and inter-company debt in foreign subsidiaries that transact business in functional currencies other than the U.S. Dollar, primarilythe Australian Dollar, the Canadian Dollar, the Euro, the Hong Kong Dollar, the Japanese Yen, the New Zealand Dollar, the Norwegian Kroner and the BritishPound Sterling. If we are unable to settle our short-term intercompany debts in a timely manner, we remain exposed to foreign currency fluctuations.As we expand our international presence, we become further exposed to foreign currency risk by entering new markets with additional foreigncurrencies. The economic impact of currency exchange rate movements is often linked to variability in real growth, inflation, interest rates, governmentalactions and other factors. These changes, if material, could cause us to adjust our financing and operating strategies. As currency exchange rates change, translation of the income statements of the international businesses into U.S. Dollars affects year-over-yearcomparability of operating results, the impact of which is immaterial to the comparisons set forth in this Annual Report on Form 10-K.Historically, we have not hedged translation risks because cash flows from international operations were generally reinvested locally; however, wemay do so in the future. Our objective in managing foreign exchange risk is to minimize the potential exposure to changes that exchange rates might have onearnings, cash flows and financial position.For the years ended December 31, 2017, 2016 and 2015, foreign exchange losses amounted to $5.8 million, $0.7 million and $0.1 million,respectively. The increase in losses to our earnings in the current period were attributable to increased inter-company debt between periods in foreignsubsidiaries that were in functional currencies other than the U.S. Dollar. Foreign exchange losses were not material to our earnings in 2017, 2016 and 2015,respectively.Cumulative translation adjustments, net of tax, included in other comprehensive income for the years ended December 31, 2017 and 2016, was$25.6 million and $(23.1) million, respectively.-56- We currently do not have derivative financial instruments for hedging, speculative or trading purposes and therefore are not subject to such hedgingrisk. However, we may in the future engage in hedging transactions to manage our exposure to fluctuations in foreign currency exchange rates.-57- Item 8.Financial Statements and Supplementary DataREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directorsj2 Global, Inc.Los Angeles, CaliforniaOpinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of j2 Global, Inc. (the “Company”) and subsidiaries as of December 31, 2017 and2016, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the periodended December 31, 2017, and the related notes and financial statement schedule listed in the accompanying index (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 theCompany and subsidiaries at December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the periodended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), theCompany's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2018 expressed anunqualified opinion thereon.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange 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 obtainreasonable assurance about whether the consolidated 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 consolidated financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts anddisclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis forour opinion./s/ BDO USA, LLPWe have served as the Company’s auditors since 2014.Los Angeles, CaliforniaMarch 1, 2018-58- j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDecember 31, 2017 and 2016(In thousands, except share amounts) 2017 2016ASSETS Cash and cash equivalents$350,945 $123,950Accounts receivable, net of allowances of $8,701 and $7,988, respectively234,195 199,871Prepaid expenses and other current assets35,287 24,178Total current assets620,427 347,999Long-term investments57,722 —Property and equipment, net79,773 68,094Trade names, net123,947 115,853Patent and patent licenses, net10,871 13,928Customer relationships, net193,606 208,155Goodwill1,196,611 1,122,810Other purchased intangibles, net157,327 173,755Deferred income taxes— 5,289Other assets12,809 6,445Total assets$2,453,093 $2,062,328LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued expenses$169,837 $178,071Income taxes payable, current— 16,753Deferred revenue, current95,255 80,384Line of credit— 178,817Other current liabilities10 64Total current liabilities265,102 454,089Long-term debt1,001,944 601,746Deferred revenue, non-current47 1,588Income taxes payable, non-current43,781 —Liability for uncertain tax positions52,216 46,537Deferred income taxes38,264 40,357Other long-term liabilities31,434 3,475Total liabilities1,432,788 1,147,792Commitments and contingencies— —Preferred stock - Series A, $0.01 par value. Authorized 6,000 at December 31, 2017 and 2016,respectively; total issued and outstanding is zero and zero at December 31, 2017 and 2016, respectively.— —Preferred stock - Series B, $0.01 par value. Authorized 20,000 at December 31, 2017 and 2016,respectively; total issued and outstanding is zero and zero at December 31, 2017 and 2016, respectively.— —Common stock, $0.01 par value. Authorized 95,000,000 at December 31, 2017 and 2016; total issuedand outstanding 47,854,510 and 47,443,716 shares at December 31, 2017 and 2016, respectively.479 474Additional paid-in capital325,854 308,329Retained earnings723,062 660,382Accumulated other comprehensive loss(29,090) (54,649)Total stockholders’ equity1,020,305 914,536Total liabilities and stockholders’ equity$2,453,093 $2,062,328See Notes to Consolidated Financial Statements-59- j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEYears Ended December 31, 2017, 2016 and 2015(In thousands, except share and per share data) 2017 2016 2015Total revenues$1,117,838 $874,255 $720,815 Cost of revenues (1)172,313 147,100 122,958Gross profit945,525 727,155 597,857Operating expenses: Sales and marketing (1)330,296 206,871 159,009Research, development and engineering (1)46,004 38,046 34,329General and administrative (1)323,517 239,672 205,137Total operating expenses699,817 484,589 398,475Income from operations245,708 242,566 199,382 Interest expense, net67,777 41,370 42,458 Other (income) expense, net(22,035) (10,243) 5Income before income taxes199,966 211,439 156,919Income tax expense60,541 59,000 23,283Net income$139,425 $152,439 $133,636 Net income per common share: Basic$2.89 $3.15 $2.76Diluted$2.83 $3.13 $2.73Weighted average shares outstanding: Basic47,586,242 47,668,357 47,627,853Diluted48,669,027 47,963,226 48,087,760Cash dividends paid per common share$1.52 $1.36 $1.22 (1) Includes share-based compensation expense as follows: Cost of revenues$500 $436 $373Sales and marketing1,723 1,782 2,435Research, development and engineering1,182 904 863General and administrative19,332 10,528 8,122Total$22,737 $13,650 $11,793 See Notes to Consolidated Financial Statements-60- j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEYears Ended December 31, 2017, 2016 and 2015(In thousands) 2017 2016 2015 Net income$139,425 $152,439 $133,636Other comprehensive income (loss), net of tax: Foreign currency translation adjustment25,559 (23,076) (15,058)Change in fair value on available-for-sale investments, net of tax expense (benefit) ofzero, $1,495 and ($4,556) for the years ended 2017, 2016 and 2015, respectively.— (2,449) (6,939)Other comprehensive income (loss), net of tax25,559 (25,525) (21,997)Comprehensive income$164,984 $126,914 $111,639See Notes to Consolidated Financial Statements-61- j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended December 31, 2017, 2016 and 2015(In thousands) 2017 2016 2015Cash flows from operating activities: Net income$139,425 $152,439 $133,636Adjustments to reconcile net earnings to net cash provided by operatingactivities: Depreciation and amortization162,041 122,091 93,213Amortization of financing costs and discounts11,952 9,818 9,105Share-based compensation22,737 13,650 11,793Provision for doubtful accounts13,159 13,169 6,872Deferred income taxes, net(21,432) (13,779) (17,083)Loss on extinguishment of debt and related interest expense7,962 — —Gain on sale of businesses(27,681) — —Changes in fair value of contingent consideration2,300 4,850 16,200Gain on available-for-sale investments— (7,716) (549)Decrease (increase) in: Accounts receivable(37,546) (30,687) (18,508)Prepaid expenses and other current assets4,001 (957) 1,461Other assets(2,712) (497) (3,881)Increase (decrease) in: Accounts payable and accrued expenses(34,116) 6,363 8,757Income taxes payable14,888 25,409 3,578Deferred revenue941 (4,213) (3,480)Liability for uncertain tax positions4,936 10,620 (5,718)Other long-term liabilities3,564 (18,173) (6,335)Net cash provided by operating activities264,419 282,387 229,061Cash flows from investing activities: Maturity of investments— 241,817 121,752Purchases of investments(4) (80,918) (135,894)Purchases of property and equipment(39,595) (24,746) (17,297)Acquisition of businesses, net of cash received(174,951) (580,691) (302,809)Proceeds from sale of businesses, net of cash divested58,300 — —Purchases of intangible assets(2,240) (4,321) (1,455)Net cash used in investing activities(158,490) (448,859) (335,703)Cash flows from financing activities: Issuance of long-term debt, net636,485 — —Repayment of debt(255,000) — —Proceeds from line of credit, net44,981 178,710 —Repayment of line of credit(225,000) — —Repurchase and retirement of common stock(9,850) (56,496) (3,674)Issuance of common stock under employee stock purchase plan259 254 260Exercise of stock options1,108 3,570 4,958Dividends paid(73,469) (65,835) (58,826)Deferred payments for acquisitions(7,637) (20,832) (14,271)Other(54) 1,779 4,190Net cash provided by (used in) financing activities111,823 41,150 (67,363)Effect of exchange rate changes on cash and cash equivalents9,243 (6,258) (4,128)Net change in cash and cash equivalents226,995 (131,580) (178,133)Cash and cash equivalents at beginning of year123,950 255,530 433,663Cash and cash equivalents at end of year$350,945 $123,950 $255,530See Notes to Consolidated Financial Statements-62- j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYYears Ended December 31, 2017, 2016 and 2015(in thousands, except share amounts) Additional AccumulatedTotal Common stockpaid-inRetainedothercomprehensiveStockholders’ SharesAmountcapitalearningsincome/(loss)equityBalance, January 1, 201547,409,514$474$273,304$553,584$(7,127)$820,235Net income———133,636—133,636Other comprehensive income, net of tax benefit ($4,556)————(21,997)(21,997)Dividends———(58,826)—(58,826)Exercise of stock options221,22124,956——4,958Issuance of shares under Employee Stock Purchase Plan4,020—260——260Vested restricted stock278,0923(3)———Repurchase and retirement of common stock(53,904)(1)(1,955)(1,718)—(3,674)Exchange of Series B preferred stock91,7341(1)———Share based compensation——11,017113—11,130Excess tax benefit on share based compensation——4,486——4,486Balance, December 31, 201547,950,677$479$292,064$626,789$(29,124)$890,208Net income———152,439—152,439Other comprehensive income, net of tax expense $1,495————(25,525)(25,525)Dividends———(65,835)—(65,835)Exercise of stock options142,87013,569——3,570Issuance of shares under Employee Stock Purchase Plan3,918—254——254Vested restricted stock270,0983(3)———Repurchase and retirement of common stock(1,015,584)(10)(3,344)(53,142)—(56,496)Exchange of Series B preferred stock91,7371(1)———Share based compensation——13,519131—13,650Excess tax benefit on share based compensation——2,271——2,271Balance, December 31, 201647,443,716$474$308,329$660,382$(54,649)$914,536Net income———139,425—139,425Other comprehensive income, net of tax of zero————25,55925,559Dividends———(73,469)—(73,469)Exercise of stock options38,18311,107——1,108Issuance of shares under Employee Stock Purchase Plan3,283—259——259Vested restricted stock397,7814(4)———Repurchase and retirement of common stock(117,076)(1)(6,441)(3,408)—(9,850)Exchange of Series B preferred stock88,6231(1)———Share based compensation——22,605132—22,737Balance, December 31, 201747,854,510$479$325,854$723,062$(29,090)$1,020,305See Notes to Consolidated Financial Statements-63- j2 GLOBAL, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2017, 2016 and 20151. The Companyj2 Global, Inc., together with its subsidiaries (“j2 Global” or the “Company”), is a leading provider of internet services. Through our Cloud Servicessegment, we provide cloud services to consumers and businesses and license our intellectual property (“IP”) to third parties. In addition, the Cloud Servicessegment includes fax, voice, backup, security and email marketing products. Our Digital Media segment specializes in the technology, gaming, lifestyle andhealthcare markets, offering content, tools and services to consumers and businesses.2. Basis of Presentation and Summary of Significant Accounting Policies(a)Principles of ConsolidationThe accompanying consolidated financial statements include the accounts of j2 Global and its direct and indirect wholly-owned subsidiaries. Allintercompany accounts and transactions have been eliminated in consolidation.On August 10, 2016, j2 Cloud Services, Inc., a Delaware corporation and subsidiary of the Company, converted into a Delaware limited liabilitycompany which continues as j2 Cloud Services, LLC.On August 12, 2016, all of the equity interests in Ziff Davis, LLC, a Delaware limited liability company, and all of the equity interests in AdvancedMessaging Technologies, Inc., a Delaware corporation, held by j2 Cloud Services, LLC, a Delaware limited liability company, were distributed to j2 Global,the parent company of j2 Cloud Services, LLC.(b)Use of EstimatesThe preparation of consolidated financial statements in accordance with generally accepted accounting principles in the United States of America(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financialstatements, including judgments about investment classifications, and the reported amounts of net revenue and expenses during the reporting period. Webelieve that our most significant estimates are those related to valuation and impairment of marketable securities, valuation of assets acquired and liabilitiesassumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes and contingenciesand allowance for doubtful accounts. On an ongoing basis, management evaluates its estimates based on historical experience and on various other factorsthat the Company believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.(c)Allowances for Doubtful Accountsj2 Global reserves for receivables it may not be able to collect. These reserves for the Company’s Cloud Services segment are typically driven by thevolume of credit card declines and past due invoices and are based on historical experience as well as an evaluation of current market conditions. Thesereserves for the Company’s Digital Media segment are typically driven by past due invoices based on historical experience. On an ongoing basis,management evaluates the adequacy of these reserves.(d)Revenue RecognitionCloud ServicesThe Company’s Cloud Services revenues substantially consist of monthly recurring subscription and usage-based fees, which are primarily paid inadvance by credit card. In accordance with GAAP, the Company recognizes revenue when persuasive evidence of an arrangement exists, services have beenprovided, the sales price is fixed and determinable and collection is probable. The Company defers the portions of monthly, quarterly, semi-annually andannually recurring subscription and usage-based fees collected in advance and recognizes them in the period earned. Additionally, the Company defers andrecognizes subscriber activation fees and related direct incremental costs over a subscriber’s estimated useful life.-64- Along with our numerous proprietary Cloud Services solutions, the Company also generates revenues by reselling various third party solutions,primarily through our email security and online backup lines of business. These third party solutions, along with our proprietary products, allow theCompany to offer customers a variety of solutions to better meet their needs. The Company determines whether reseller revenue should be reported on agross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as the principal in atransaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis.In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations andthe Company places the most weight on three factors: whether or not the Company (i) is the primary obligor in the arrangement, (ii) has latitude indetermining pricing and (iii) bears credit risk.The Company records revenue on a gross basis with respect to reseller revenue as the Company is the primary obligator in the arrangement, haslatitude in determining pricing and bears all credit risk associated with our reseller program partners.j2 Global’s Cloud Services also include patent license revenues generated under license agreements that provide for the payment of contractuallydetermined fully paid-up or royalty-bearing license fees to j2 Global in exchange for the grant of non-exclusive, retroactive and future licenses to ourintellectual property, including patented technology. Patent revenues may also consist of revenues generated from the sale of patents. Patent license revenuesare recognized when earned over the term of the license agreements. With regard to fully paid-up license arrangements, the Company recognizes as revenuein the period the license agreement is executed the portion of the payment attributable to past use of the intellectual property and amortizes the remainingportion of such payments on a straight-line basis, or pro-rata revenue basis, as appropriate over the life of the licensed patent(s). With regard to royalty-bearing license arrangements, the Company recognizes revenues of license fees earned during the applicable period. With regard to patent sales, theCompany recognizes as revenue in the period of the sale the amount of the purchase price over the carrying value of the patent(s) sold.The Cloud Services business also generates revenues by licensing certain technology to third parties. These licensing revenues are recognized whenearned in accordance with the terms of the underlying agreement. Generally, revenue is recognized as the third party uses the licensed technology over theperiod.Digital MediaThe Company’s Digital Media revenues primarily consist of revenues generated from the sale of advertising campaigns that are targeted to theCompany’s proprietary websites and to those websites operated by third parties that are part of the Digital Media business’s advertising network. Revenuesfor these advertising campaigns are recognized as earned, either when an ad is placed for viewing by a visitor to the appropriate web page or when the visitor“clicks through” on the ad, depending upon the terms with the individual advertiser.Revenues for Digital Media business-to-business operations consist of lead-generation campaigns for IT vendors and are recognized as earned whenthe Company delivers the qualified leads to the customer.j2 Global also generates Digital Media revenues through the license of certain assets to clients, for the clients’ use in their own promotionalmaterials or otherwise. Such assets may include logos, editorial reviews, or other copyrighted material. Revenues under such license agreements arerecognized when the assets are delivered to the client. Also, Digital Media revenues are generated through the license of certain speed testing technologywhich is recognized when delivered to the client through providing data services primarily to Internet Service Providers (“ISPs”) and wireless carriers whichis recognized as earned over the term of the access period. The Digital Media business also generates other types of revenues, including business listing fees,subscriptions to online publications, and from other sources. Such other revenues are recognized as earned.The Company determines whether Digital Media revenue should be reported on a gross or net basis by assessing whether the Company is acting asthe principal or an agent in the transaction. If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis. If theCompany is acting as an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or anagent, the Company follows the accounting guidance for principal-agent considerations and the Company places the most weight on three factors: whether ornot the Company (i) is the primary obligor in the arrangement, (ii) has latitude in determining pricing and (iii) bears credit risk.The Company records revenue on a gross basis with respect to revenue generated (i) by the Company serving online display and video advertisingacross its owned-and-operated web properties, on third party sites or on unaffiliated advertising networks, (ii) through the Company’s lead-generationbusiness and (iii) through the Company’s Digital Media licensing program. The Company records revenue on a net basis with respect to revenue paid to theCompany by certain third-party advertising-65- networks who serve online display and video advertising across the Company’s owned-and-operated web properties and certain third party sites.(e)Fair Value Measurementsj2 Global complies with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic No.820, Fair Value Measurements and Disclosures (“ASC 820”), in measuring fair value and in disclosing fair value measurements. ASC 820 provides aframework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities.As of December 31, 2017, the carrying value of cash and cash equivalents, long-term investments, accounts receivable, interest receivable, accountspayable, accrued expenses, interest payable, customer deposits and long-term debt are reflected in the financial statements at cost. With the exception oflong-term investments and long-term debt, cost approximates fair value due to the short-term nature of such instruments. The fair value of the Company’soutstanding debt was determined using the quoted market prices of debt instruments with similar terms and maturities, if available. As of the same dates, thecarrying value of other long-term liabilities approximated fair value as the related interest rates approximate rates currently available to j2 Global.(f)Cash and Cash Equivalentsj2 Global considers cash equivalents to be only those investments that are highly liquid, readily convertible to cash and with maturities of threemonths or less at the purchase date.(g)Investmentsj2 Global accounts for its investments in debt and equity securities in accordance with FASB ASC Topic No. 320, Investments - Debt and EquitySecurities (“ASC 320”). Debt investments are typically comprised of corporate and governmental debt securities. Equity securities recorded as available-for-sale represent strategic equity investments. j2 Global determines the appropriate classification of its investments at the time of acquisition and evaluates suchdetermination at each balance sheet date. Held-to-maturity securities are those investments which the Company has the ability and intent to hold untilmaturity and are recorded at amortized cost. Available-for-sale securities are those investments j2 Global does not intend to hold to maturity and can be sold.Available-for-sale securities are carried at fair value with unrealized gains and losses included in other comprehensive income. Trading securities are carriedat fair value, with unrealized gains and losses included in investment income. Securities are accounted for on a specific identification basis, average costmethod or other method, as appropriate.(h)Debt Issuance Costs and Debt Discountj2 Global capitalizes costs incurred with borrowing and issuance of debt securities and records debt issuance costs and discounts as a reduction tothe debt amount. These costs and discounts are amortized and included in interest expense over the life of the borrowing or term of the credit facility usingthe effective interest method.(i)Derivative Instrumentsj2 Global currently holds an embedded derivative instrument related to contingent interest in connection with its 3.25% Convertible Notes issuedon June 10, 2014. This embedded derivative instrument is carried at fair value with changes recorded to interest expense (see Note 6 - Fair ValueMeasurements). -66- (j)Concentration of Credit RiskAll of the Company’s cash, cash equivalents and marketable securities are invested at major financial institutions primarily within the United States,United Kingdom and Ireland. These institutions are required to invest the Company’s cash in accordance with the Company’s investment policy with theprincipal objectives being preservation of capital, fulfillment of liquidity needs and above market returns commensurate with preservation of capital. TheCompany’s investment policy also requires that investments in marketable securities be in only highly rated instruments, with limitations on investing insecurities of any single issuer. However, these investments are not insured against the possibility of a total or near complete loss of earnings or principal andare inherently subject to the credit risk related to the continued credit worthiness of the underlying issuer and general credit market risks. At December 31,2017, the Company’s cash and cash equivalents were maintained in accounts that are insured up to the limit determined by the applicable governmentalagency. The Company’s deposits held in qualifying financial institutions in Ireland are fully insured through March 28, 2018 to the extent on deposit priorto March 28, 2013. With respect to the Company’s deposits with financial institutions in other jurisdictions, the insured amount held in other institutions isimmaterial in comparison to the total amount of the Company’s cash and cash equivalents held by these institutions which is not insured. These institutionsare primarily in the United States and United Kingdom, however, the Company has accounts within several other countries including Australia, Austria,China, France, Germany, Italy, Japan, New Zealand and the Netherlands.(k)Foreign CurrencySome of j2 Global’s foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities aretranslated at exchange rates prevailing at the balance sheet dates. Revenues, costs and expenses are translated into U.S. Dollars at average exchange rates forthe period. Gains and losses resulting from translation are recorded as a component of accumulated other comprehensive income (loss). Net translationgain/(loss) was $25.6 million, $(23.1) million and $(15.1) million for the years ended December 31, 2017, 2016 and 2015, respectively. Realized gains andlosses from foreign currency transactions are recognized within other (income) expense, net. Foreign exchange losses amounted to $5.8 million, $0.7 millionand $0.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.(l)Property and EquipmentProperty and equipment are stated at cost. Equipment under capital leases is stated at the present value of the minimum lease payments. Depreciationis calculated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of property and equipment range from 1 to10 years. Fixtures, which are comprised primarily of leasehold improvements and equipment under capital leases, are amortized on a straight-line basis overtheir estimated useful lives or for leasehold improvements, the related lease term, if less. The Company has capitalized certain internal use software andwebsite development costs which are included in property and equipment. The estimated useful life of costs capitalized is evaluated for each specific projectand ranges from 1 to 5 years.(m)Impairment or Disposal of Long-Lived Assetsj2 Global accounts for long-lived assets, which include property and equipment and identifiable intangible assets with finite useful lives (subject toamortization), in accordance with the provisions of FASB ASC Topic No. 360, Property, Plant, and Equipment (“ASC 360”), which requires that long-livedassets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset. If it isdetermined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognizedto the extent of the difference.j2 Global assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of long-lived assets maynot be recoverable. No impairment was recorded in fiscal year 2017, 2016 or 2015.The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii)the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have beeninitiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value,and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures a long-lived assetthat is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized inthe period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upondesignation as an asset held for sale, the Company stops recording depreciation expense-67- on the asset. The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer isclassified as held for sale.(n)Goodwill and Intangible AssetsGoodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a businesscombination. Intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are recorded at the estimatedfair value of the assets acquired. Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developedtechnologies and other intangible assets. Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from1 to 20 years. In accordance with FASB ASC Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), goodwill and other intangible assets withindefinite lives are not amortized but tested annually for impairment or more frequently if j2 Global believes indicators of impairment exist. In connectionwith the annual impairment test for goodwill, the Company has the option to perform a qualitative assessment in determining whether it is more likely thannot that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it was more likely than not that the fair value of thereporting unit is less than its carrying amount, then it performs the impairment test upon goodwill. The impairment test involves a two-step process. The firststep involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company generallydetermines the fair value of its reporting units using the income approach methodology of valuation. If the carrying value of a reporting unit exceeds thereporting unit’s fair value, j2 Global performs the second step of the test to determine the amount of impairment loss. The second step involves measuring theimpairment by comparing the implied fair values of the affected reporting unit’s goodwill and intangible assets with the respective carrying values. Inaccordance with ASC 350, the Company performed the annual impairment test for goodwill for fiscal year 2017 using a qualitative assessment primarilytaking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific events.The Company performed the annual impairment test for intangible assets with indefinite lives for fiscal 2017 using a qualitative assessment primarily takinginto consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific events. j2 Globalconcluded that there were no impairments in 2017, 2016 and 2015.(o)Contingent Considerationj2 Global measures the contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significantunobservable inputs classified within Level 3 of the fair value hierarchy (see Note 6 - Fair Value Measurements). The Company may use various valuationtechniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses a probabilitydistribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities ofdifferent outcomes occurring. Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with ahigher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid,and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the liability onthe acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the liabilityon the acquisition date is reflected as cash used in operating activities.j2 Global reviews and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differmaterially from the initial estimates. Changes in the estimated fair value of our contingent earn-out liabilities related to the time component of the presentvalue calculation are reported in interest expense. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported inoperating income.(p)Income Taxesj2 Global’s income is subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating theCompany’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculationsfor which the ultimate tax determination is uncertain. j2 Global establishes reserves for tax-related uncertainties based on estimates of whether, and the extentto which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that certain positions might bechallenged despite the Company’s belief that its tax return positions are fully supportable. j2 Global adjusts these reserves in light of changing facts andcircumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of reserve provisionsand changes to reserves that are considered appropriate.-68- j2 Global accounts for income taxes in accordance with FASB ASC Topic No. 740, Income Taxes (“ASC 740”), which requires that deferred taxassets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets andliabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferredtax assets will not be realized. The valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time. In assessing thisvaluation allowance, j2 Global reviews historical and future expected operating results and other factors, including its recent cumulative earnings experience,expectations of future taxable income by taxing jurisdiction and the carryforward periods available for tax reporting purposes, to determine whether it is morelikely than not that deferred tax assets are realizable.ASC 740 provides guidance on the minimum threshold that an uncertain income tax benefit is required to meet before it can be recognized in thefinancial statements and applies to all income tax positions taken by a company. ASC 740 contains a two-step approach to recognizing and measuringuncertain income tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates thatit is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step isto measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that thebenefit will be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item isincluded on a tax return are considered to have met the recognition threshold. j2 Global recognized accrued interest and penalties related to uncertain incometax positions in income tax expense on its consolidated statements of income.(q)Share-Based Compensationj2 Global accounts for share-based awards in accordance with the provisions of FASB ASC Topic No. 718, Compensation - Stock Compensation(“ASC 718”). Accordingly, j2 Global measures share-based compensation expense at the grant date, based on the fair value of the award, and recognizes theexpense over the employee’s requisite service period using the straight-line method. The measurement of share-based compensation expense is based onseveral criteria, including but not limited to the valuation model used and associated input factors, such as expected term of the award, stock price volatility,risk free interest rate, dividend rate and award cancellation rate. These inputs are subjective and are determined using management’s judgment. If differencesarise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, j2 Global maychange the input factors used in determining future share-based compensation expense. Any such changes could materially impact the Company’s results ofoperations in the period in which the changes are made and in periods thereafter. The Company estimates the expected term based upon the historicalexercise behavior of our employees.j2 Global accounts for option grants to non-employees in accordance with FASB ASC Topic No. 505, Equity, whereby the fair value of such optionsis determined using the Black-Scholes option pricing model at the earlier of the date at which the non-employee’s performance is complete or a performancecommitment is reached.(r)Earnings Per Common Share (“EPS”)EPS is calculated pursuant to the two-class method as defined in ASC Topic No. 260, Earnings per Share (“ASC 260”), which specifies that alloutstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents are considered participatingsecurities and should be included in the computation of EPS pursuant to the two-class method.Basic EPS is calculated by dividing net distributed and undistributed earnings allocated to common shareholders, excluding participating securities,by the weighted-average number of common shares outstanding. The Company’s participating securities consist of its unvested share-based payment awardsthat contain rights to nonforfeitable dividends or dividend equivalents. Diluted EPS includes the determinants of basic EPS and, in addition, reflects theimpact of other potentially dilutive shares outstanding during the period. The dilutive effect of participating securities is calculated under the more dilutiveof either the treasury method or the two-class method.(s)Research, Development and EngineeringResearch, development and engineering costs are expensed as incurred. Costs for software development incurred subsequent to establishingtechnological feasibility, in the form of a working model, are capitalized and amortized over their estimated useful lives.-69- (t)Segment ReportingFASB ASC Topic No. 280, Segment Reporting (“ASC 280”), establishes standards for the way that public business enterprises report informationabout operating segments in their annual consolidated financial statements and requires that those enterprises report selected information about operatingsegments in interim financial reports. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and majorcustomers. The Company operates as two segments: (1) Cloud Services and (2) Digital Media.(u)Advertising CostsAdvertising costs are expensed as incurred. Advertising costs for the years ended December 31, 2017, 2016 and 2015 was $143.3 million, $96.8million and $63.5 million, respectively.(v)Sales TaxesThe Company may collect sales taxes from certain customers which are remitted to governmental authorities as required and are excluded fromrevenues.(w)Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, as a new Topic,Accounting Standards Codification (“ASC”) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determinewhen and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, theFASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of the new revenuestandard for periods beginning after December 15, 2016 to December 15, 2017, with early adoption permitted but not earlier than the original effective date.In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606). This ASU is related to reporting revenue gross versusnet, or principal versus agent considerations. This ASU is meant to clarify the guidance in ASU 2014-09, Revenue from Contracts with Customers, as itpertains to principal versus agent considerations. Specifically, the guidance addresses how entities should identify goods and services being provided to acustomer, the unit of account for a principal versus agent assessment, how to evaluate whether a good or service is controlled before being transferred to acustomer, and how to assess whether an entity controls services performed by another party. In April 2016, the FASB issued ASU 2016-10, Revenue fromContracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. This ASU is meant to clarify the guidance in FASB ASU 2014-09, Revenue from Contracts with Customers. Specifically, the guidance addresses an entity’s identification of its performance obligations in a contract, aswell as an entity’s evaluation of the nature of its promise to grant a license of intellectual property and whether or not that revenue is recognized over time orat a point in time. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements andPractical Expedients. This ASU does not change the core principle of the guidance in Topic 606. Instead, the amendments provide clarifying guidance in afew narrow areas and add some practical expedients. In December 2016, the FASB issued 2016-20, Technical Corrections and Improvements to Topic 606,Revenue from Contracts with Customers. The amendments in this ASU represent changes to clarify the Codification or to correct unintended application ofguidance. This ASU must be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. This ASU iseffective January 1, 2018 and the Company is using the modified retrospective method and will present the cumulative effect of applying the standard to allcontracts not completed as of the adoption date. The Company has (i) finalized its review of customer contracts for its business segments and assessed theimpact of the standard on these contracts; (ii) trained internal stakeholders on the changes to revenue recognition policies; and (iii) assessed the need forappropriate changes to the Company’s business processes and controls to support revenue recognition and disclosures under the new standard. The Companyhas concluded that the primary change to its revenue recognition for its customer contracts upon adopting ASC 606 is related to the timing of when revenueis recognized. While revenue from certain contracts will continue to be recognized at a point in time, revenue from other contracts is required to berecognized over time. The Company expects changes in the revenue recognition for licensing and patents and has finalized its detailed assessment ofcustomer contracts, including the specific dollar impact of any changes in recognition that will occur on the Company’s consolidated financial statementsupon adoption. While the Company will provide expanded disclosures as a result of the adoption of this ASU, the Company does not expect there to be amaterial impact to the consolidated financial statements as of January 1, 2018.-70- In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of FinancialAssets and Financial Liabilities. The amendments in this ASU modify how entities measure equity investments and present changes in the fair value offinancial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted underthe equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. Apracticality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedientto estimate fair value under ASC 820, Fair Value Measurements, and as such these investments may be measured at cost. This ASU is effective for financialstatements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. After adoption, investments within thescope of the standard will be recorded at fair value with changes in fair value recognized in earnings.In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU establishes a right-of-use (“ROU”) model that requires a lessee to record aROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating,with classification affecting the pattern of expense recognition in the income statement. This ASU is effective for fiscal years beginning after December 15,2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leasesexisting at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedientsavailable. The Company is currently evaluating the impact of this ASU on our financial statements. The Company currently has both capital and operatingleases, both domestically and internationally, with varying expiration dates through 2025 in the aggregate amount of $86.1 million for the period endedDecember 31, 2017.In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718). This ASU is related to simplifications of employeeshare-based payment accounting. This pronouncement eliminates the APIC pool concept and requires that excess tax benefits and tax deficiencies berecorded in the income statement when awards are settled. The pronouncement also addresses simplifications related to statement of cash flows classification,accounting for forfeitures, and minimum statutory tax withholding requirements. This ASU is effective for fiscal years, and for interim periods within thosefiscal years, beginning after December 15, 2016. Early adoption is permitted.The new standard requires prospective recognition of excess tax benefits and deficiencies resulting from stock-based compensation awards vestingand exercises be recognized in the income statement. Previously, these amounts were recognized in additional paid-in capital. Net excess tax benefits of $2.3million for the period ended December 31, 2017, were recognized as a reduction of income tax expense. In addition, ASU 2016-09 requires excess taxbenefits and deficiencies to be prospectively excluded from the assumed future proceeds in the calculation of diluted shares, resulting in an insignificantincrease in diluted weighted average shares outstanding for the period ended December 31, 2017, which did not have a material impact on earnings per share.The Company has elected to continue to estimate the number of stock-based awards expected to vest, as permitted by ASU 2016-09, rather thanelecting to account for forfeitures as they occur. The standard also requires that the excess tax benefits from share based compensation awards be reported as operating activities in the consolidatedstatements of cash flows. Previously, these cash flows were included in financing activities. We have elected to apply this change on a prospective basis,resulting in an increase in net cash provided by operating activities of $2.3 million for the period ended December 31, 2017.The prior period was not adjusted with the adoption of ASU 2016-09 due to the adoption of this standard on a prospective basis.In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expectedcredit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective forfiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this standard is not expected to have amaterial impact on our financial statements and related disclosures.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.The new guidance is intended to reduce diversity in practice in how transactions are classified in the statement of cash flows. This ASU is effective for fiscalyears, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company adopted this guidance on a retrospective basis in2017 and has determined that there is no material impact on our financial statements.-71- In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory. The amendmentsin this ASU reduce the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity assettransfer, other than inventory, when the transfer occurs. Historically, the income tax consequence was not recognized until the asset was sold to an outsideparty. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted.The Company does not expect the adoption of this ASU to have a material impact on our financial statements and related disclosures.In November 2016, the FASB issued 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash - a consensus of the FASB Emerging IssuesTask Force. The amendments in this ASU require restricted cash and restricted cash equivalents to be classified in the statement of cash flows as cash and cashequivalents. The guidance will be applied on a retrospective basis beginning with the earliest period presented. The amendments in this ASU are effective forannual and interim periods beginning after December 15, 2017. Early adoption is permitted. The Company adopted this guidance on a retrospective basis in2017 and has determined that there is no material impact on our financial statements.In January 2017, the FASB issued 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in thisASU provide a robust framework to use in determining when a set of assets and activities is a business. This ASU is effective for fiscal years, and interimperiods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted and the standard should be applied prospectively. TheCompany does not expect the adoption of this ASU to have a material impact on our financial statements and related disclosures.In January 2017, the FASB issued 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Theamendments in this ASU simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminating therequirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Instead, under this pronouncement, an entitywould perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and would recognizean impairment change for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized is not to exceed thetotal amount of goodwill allocated to that reporting unit. In addition, income tax effects will be considered, if applicable. This ASU is effective for fiscalyears, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted and should be adopted on a prospectivebasis. The Company does not expect the adoption of this ASU to have a material impact on our financial statements and related disclosures.In February 2018, the FASB issued 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain TaxEffects from Accumulated Other Comprehensive Income. The amendments in this ASU allow reclassification from accumulated other comprehensive incometo retained earnings for stranded tax effects resulting from the U.S. federal tax legislation, the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”).Consequently, the amendments eliminate the stranded tax effects resulting from the 2017 Tax Act and will improve the usefulness of information reported tofinancial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the 2017 Tax Act, the underlyingguidance that requires that the effect of a change in tax laws or rates to be included in income from continuing operations is not affected. This ASU iseffective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted andshould be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporateincome tax rate in the 2017 Tax Act is recognized. The Company is currently evaluating the effect of this ASU on our financial statements and relateddisclosures.In February 2018, the FASB issued 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10):Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU clarify certain aspects of the guidance issued inASU 2016-01, Financial Instruments - Overall. As is consistent with other clarifying standards, the amendments are not expected to have a significant effecton the current accounting practice. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interimperiods beginning after June 15, 2018. Public entities with fiscal years beginning between December 15, 2017 and June 15, 2018 are not required to adoptthese amendments until the interim period beginning after June 15, 2018. Early adoption is permitted and should be adopted in conjunction with ASU 2016-01. The Company is currently evaluating the effect of this ASU on our financial statements and related disclosures.ReclassificationsCertain prior year reported amounts have been reclassified to conform with the 2017 presentation.-72- 3. Business AcquisitionsThe Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversifyits service offerings, enhance its technology, acquire skilled personnel and enter into other jurisdictions.The Company completed the following acquisitions during the year ended December 31, 2017, paying the purchase price in cash in eachtransaction: (a) an asset purchase of sFax, acquired on March 31, 2017, an Austin-based provider of mobile cloud faxing for health care; (b) a share purchaseof the entire issued capital of WeCloud AB, acquired on June 12, 2017, a Swedish-based provider of cloud-based internet security services; (c) an assetpurchase of MyPhoneFax.com, acquired on June 30, 2017, a provider of online fax services; (d) an asset purchase of EZ Publishing (dba “StreamSend”),acquired on August 22, 2017, a provider of email marketing solutions; (e) a share purchase of all the issued capital of Humble Bundle Inc., acquired onOctober 13, 2017, a digital storefront for video games based in California; (f) an asset purchase of blackfriday.com, acquired on November 7, 2017, an onlinesolution that markets popular Black Friday ads that are centrally located connecting shoppers with retailers; (g) a share purchase of all the issued capital ofOnTargetJobs, Inc., acquired on December 4, 2017, a provider of online recruitment solutions for job seekers and employers in North America; (h) a sharepurchase of all the issued capital of Mashable Inc., acquired on December 5, 2017, a global, multi-platform media and entertainment company providingtech, digital culture and entertainment content around the globe; and (i) other immaterial acquisitions of online data backup, email marketing and emailsecurity businesses.The consolidated statement of income since the date of each acquisition and balance sheet as of December 31, 2017, reflect the results of operationsof all 2017 acquisitions. For the year ended December 31, 2017, these acquisitions contributed $34.7 million to the Company’s revenues. Net incomecontributed by these acquisitions was not separately identifiable due to j2 Global’s integration activities and is impracticable to provide. Total considerationfor these transactions was $203.9 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase ordecrease the final consideration paid.The following table summarizes the allocation of the purchase consideration for all 2017 acquisitions (in thousands):Assets and LiabilitiesValuation Accounts receivable$14,130Other assets 10,243Property and equipment 6,411Deferred tax asset 405Trade names 20,610Trademarks 1,373Customer relationships 61,307Other intangibles 36,998Goodwill 121,827Accounts payables and accrued expenses (27,995)Deferred revenue (11,853)Deferred tax liability (29,534) Total$203,922During 2017, the purchase price accounting has been finalized for the following acquisitions: (i) Fonebox; (ii) Everyday Health Inc.; (iii) sFax; (iv)MyPhoneFax.com; (v) StreamSend; and (vi) other immaterial fax, online data backup, email security and email marketing businesses. The initial accountingfor all other 2017 acquisitions is incomplete and subject to change, which may be significant. j2 Global has recorded provisional amounts which may bebased upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminaryacquisition date working capital and related tax items.During the year ended December 31, 2017, the Company recorded adjustments to prior period acquisitions due to the finalization of the purchaseaccounting in the Cloud Services segment which resulted in a net decrease in goodwill of $(0.8) million. In addition, the Company recorded adjustments tothe initial working capital related to prior period acquisitions in the Digital Media segment, which resulted in a net decrease in goodwill of $(4.7)million (see Note 8 - Goodwill and Intangible Assets). Such-73- adjustments had an immaterial impact to amortization expense within the Consolidated Statement of Income for the year ended December 31, 2017.Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and representsintangible assets that do not qualify for separate recognition. Goodwill recognized in connection with these acquisitions during the year ended December 31,2017 is $121.8 million, of which $34.7 million is expected to be deductible for income tax purposes.2016The Company completed the following acquisitions during the year ended December 31, 2016, paying the purchase price in cash for eachtransaction: (a) an asset purchase of VaultLogix, acquired on February 17, 2016, a Massachusetts-based provider of cloud data backup and storage forbusiness clients; (b) a share purchase of the entire issued capital of Callstream Group Limited, acquired on March 3, 2016, a provider of cloud-based callmanagement solutions to markets in the United Kingdom; (c) an asset purchase of Publicaster, acquired on April 1, 2016, a Maryland-based provider of emailmarketing services; (d) an asset purchase of SMTP, acquired on June 27, 2016, a Florida-based provider of cloud email services offering solutions rangingfrom sophisticated transactional email solutions to cost-effective Simple Mail Transfer Protocol (“SMTP”) relay services; (e) a share purchase of the entireissued capital of Integrated Global Concepts, Inc. (“IGC”), acquired on July 12, 2016, a Chicago-based provider of fax and voicemail services; (f) a sharepurchase of the entire issued capital of Front-safe A/S, acquired on July 15, 2016, a Denmark-based provider of cloud backup solutions; (g) an asset purchaseof Fonebox Australia, acquired on October 18, 2016, an Australia-based provider of voice, call routing and virtual receptionist business; (h) a share purchaseof all the outstanding shares of common stock of Everyday Health Inc. (“Everyday Health”), acquired on December 5, 2016, a New York-based provider ofdigital health and wellness solutions; and (i) other immaterial acquisitions of online data backup, email marketing, email security and digital mediabusinesses.The consolidated statement of income since the date of each acquisition and balance sheet, as of December 31, 2016, reflect the results of operationsof all 2016 acquisitions. For the year ended December 31, 2016, these acquisitions contributed $52.9 million to the Company’s revenues. Net incomecontributed by these acquisitions was not separately identifiable due to j2 Global’s integration activities and is impracticable to provide. Total considerationfor these transactions was $596.1 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase ordecrease the final consideration paid.The following table summarizes the allocation of the purchase consideration for all 2016 acquisitions (in thousands):Assets and Liabilities (1)Valuation Accounts receivable$70,922Other assets 11,730Property and equipment 11,109Trade names 5,866Trademarks 70,300Customer relationships 85,482Other intangibles 91,264Goodwill 333,190Accounts payables and accrued expenses (62,188)Deferred revenue (6,904)Deferred tax liability (14,503)Capital lease (194) Total$596,074(1) In connection with the purchase of IGC, the majority of the value was associated with the 935,231 shares of j2 Global common stock held by IGC. Thevalue associated with these shares was recorded as a separate transaction from the fax business and has been excluded from the schedule above.During the year ended December 31, 2016, the Company recorded adjustments to prior period acquisitions primarily due to the finalization of thepurchase accounting in the Cloud Services segment which resulted in a net increase in goodwill in the amount of $0.8 million. In addition, the Companyrecorded adjustments to the initial working capital related to prior period-74- acquisitions and updated the purchase accounting of Offers.com in the Digital Media segment, which resulted in a net decrease in goodwill in the amountof $(5.0) million with a corresponding increase in trade names, net and other purchased intangibles, net (see Note 8 - Goodwill and Intangible Assets). Suchadjustments had an immaterial impact to amortization expense within the Consolidated Statement of Income for the year ended December 31, 2016.Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and representsintangible assets that do not qualify for separate recognition. Goodwill recognized in connection with these acquisitions during the year ended December 31,2016 is $333.2 million, of which $102.4 million is expected to be deductible for income tax purposes.IGCThe Company acquired the entire issued capital of IGC on July 12, 2016 for a cash purchase price of approximately $6.3 million (excludingamounts allocated to the Company’s purchase of its common stock described below), net of cash acquired and assumed liabilities and is subject to certainpost-closing adjustments which may increase or decrease the final consideration paid.At the date of acquisition, IGC held 935,231 of the Company’s common stock which the Company determined should be treated as a separatetransaction from the acquired fax and voicemail businesses. In order to determine the amount of purchase consideration allocable to the fax and voicemailbusiness and the Company’s common stock, the Company used a relative fair value approach and concluded that the amounts of consideration allocable tothe fax and voicemail business and the Company’s common stock were $6.3 million and $51.5 million, respectively. See Note 12 - Stockholders’ Equity forfurther discussion regarding the Company’s common stock acquired in connection with the IGC business combination.Everyday HealthOn December 5, 2016, the Company acquired all the outstanding shares of common stock of Everyday Health, $0.01 par value per share, at apurchase consideration $493.7 million (net of cash acquired and assumed liabilities) or $10.50 per share in cash, and subject to certain post-closingadjustments which may increase or decrease the final consideration paid.Everyday Health is a leading provider of digital health and marketing and communication solutions. Everyday Health attracts a large and engagedaudience of consumers and healthcare professionals to its premier health and wellness properties and utilizes its data and analytics expertise to deliver highlypersonalized content experiences and efficient and effective marketing and engagement solutions. Everyday Health enables consumers to manage their dailyhealth and wellness needs, healthcare professionals to stay informed and make better decisions for their patients, and marketers, health payers and providersto communicate and engage with consumers and healthcare professionals to drive better health outcomes. Everyday Health’s content and solutions aredelivered through multiple channels, including desktop, mobile web, mobile phone and tablet applications, as well as video and social media.The Company acquired Everyday Health to bring together two leading digital media companies with complimentary visions and platforms toengage and monetize audiences. The combined company will be well positioned to deliver compelling benefits to customers with content that connects,informs and empowers audiences. The Company’s Digital Media segment maintains leading positions in the technology, gaming and men's lifestyle verticalswith strong and well-established brands. Everyday Health adds a new vertical and set of market-leading trusted health properties to the portfolio whilediversifying the company’s audience mix.The consolidated statement of income, since the date of acquisition, and balance sheet, as of December 31, 2016, reflect the results of operationsEveryday Health. For the year ended December 31, 2016, Everyday Health contributed $23.2 million to the Company’s revenues. Net income contributed byEveryday Health was not separately identifiable due to j2 Global’s integration activities and is impracticable to provide.-75- The following table summarizes the allocation of the purchase consideration for the Everyday Health acquisition (in thousands):Assets and LiabilitiesValuation Cash$15,918Accounts receivable 67,968Other assets 11,168Property and equipment 6,494Trademarks 70,300Customer relationships 45,500Other intangibles 88,267Goodwill 263,988Accounts payables and accrued expenses (59,091)Deferred revenue (5,297)Deferred tax liability (11,500) Total$493,715Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and representsintangible assets that do not qualify for separate recognition. Goodwill recognized in connection with the Everyday Health acquisition during the year endedDecember 31, 2016 is $264.0 million, of which $65.4 million is expected to be deductible for income tax purposes.Pro Forma Financial Information for Everyday Health AcquisitionThe following unaudited pro forma supplemental information is based on estimates and assumptions, which j2 Global believes are reasonable.However, this information is not necessarily indicative of the Company’s consolidated financial position or results of income in future periods or the resultsthat actually would have been realized had j2 Global and Everyday Health been combined companies during the periods presented. These pro forma resultsexclude any savings or synergies that would have resulted from the Everyday Health business acquisition had it occurred on January 1, 2015 and do not takeinto consideration the exiting of any acquired lines of business. This unaudited pro forma supplemental information includes incremental intangible assetamortization and other charges as a result of the Everyday Health acquisition, net of the related tax effects.The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and Everyday Health as if theacquisition had occurred on January 1, 2015 (in thousands, except per share amounts): Year ended December 31,2016 December 31,2015 (unaudited) (unaudited)Revenues$1,082,813 $952,806Net income$103,541 $115,059EPS - Basic$2.14 $2.38EPS - Diluted$2.13 $2.35Pro Forma Financial Information for All 2016 AcquisitionsThe following unaudited pro forma supplemental information is based on estimates and assumptions, that j2 Global believes are reasonable.However, this information is not necessarily indicative of the Company’s consolidated financial position or results of income in future periods or the resultsthat actually would have been realized had j2 Global and the acquired businesses been combined companies during the periods presented. These pro formaresults exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2015 and do not take intoconsideration the exiting of any acquired lines of business. This unaudited pro forma supplemental information includes incremental intangible assetamortization and other charges as a result of the acquisitions, net of the related tax effects.-76- The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and its 2016 acquisitions as ifeach acquisition had occurred on January 1, 2015 (in thousands, except per share amounts): Year ended December 31,2016 December 31,2015 (unaudited) (unaudited)Revenues$1,102,510 $1,009,169Net income$108,822 $111,817EPS - Basic$2.25 $2.31EPS - Diluted$2.24 $2.292015The Company completed the following acquisitions during the year ended December 31, 2015, paying the purchase price in cash for eachtransaction: (a) a share purchase of the entire issued share capital of Firstway, acquired on February 11, 2015, an Ireland-based distributor of FaxBOX®digital fax services; (b) an asset purchase of Nuvotera (formerly known as Spam Soap), acquired on February 13, 2015, a California-based supplier of emailsecurity; (c) an asset purchase of EmailDirect, acquired on February 19, 2015, a California-based provider of email marketing services; (d) an asset purchaseof SugarSync®, Inc., acquired on March 23, 2015, a California-based provider of online file backup, synchronization and sharing assets; (e) an asset purchaseof Popfax, acquired on September 23, 2015, a France-based global provider of internet fax services; (f) a stock purchase of the entire capital stock of Salesify,acquired on September 17, 2015, a California-based based provider of lead generation solutions; (g) an asset purchase of LiveVault®, acquired on September30, 2015, a California-based global provider of data backup and recovery services; (h) a membership interest purchase of the entire units of Offers.com,acquired on December 31, 2015, a Texas-based and is an online marketplace connecting millions of consumers with discounts from thousands of leadingmerchants; and (i) certain other immaterial acquisitions of fax, online data backup and email businesses.The consolidated statement of income since the date of each acquisition and balance sheet, as of December 31, 2015, reflect the results of operationsof all 2015 acquisitions. For the year ended December 31, 2015, these acquisitions contributed $52.4 million to the Company’s revenues. Net incomecontributed by these acquisitions was not separately identifiable due to j2 Global’s integration activities. Total consideration for these transactionswas $314.0 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments.The following table summarizes the allocation of the purchase consideration as follows (in thousands):Assets and LiabilitiesValuation Accounts receivable$14,935Other assets 1,415Property and equipment 5,769Software 18,764Trade names 22,602Customer relationships 98,027Other intangibles 1,873Goodwill 172,593Accounts payables and accrued expenses (9,684)Deferred revenue (10,764)Deferred tax liability (1,316)Capital lease (195) Total$314,019 Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and representsintangible assets that do not qualify for separate recognition. Goodwill recognized in connection-77- with these acquisitions during the year ended December 31, 2015 is $172.6 million, of which $143.3 million is expected to be deductible for income taxpurposes.Pro Forma Financial Information for 2015 AcquisitionsThe following unaudited pro forma supplemental information is based on estimates and assumptions that j2 Global believes are reasonable.However, this information is not necessarily indicative of the Company’s consolidated financial position or results of income in future periods or the resultsthat actually would have been realized had j2 Global and the acquired businesses been combined companies during the period presented. These pro formaresults exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2014 and do not take intoconsideration the exiting of any acquired lines of business. This unaudited pro forma supplemental information includes incremental intangible assetamortization and other charges as a result of the acquisitions, net of the related tax effects.The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and its 2015 acquisitions as ifeach acquisition had occurred on January 1, 2014 (in thousands, except per share amounts): Year ended December 31,2015 December 31,2014 (unaudited) (unaudited)Revenues$823,904 $744,388Net income$159,408 $126,196EPS - Basic$3.29 $2.64EPS - Diluted$3.26 $2.624. InvestmentsInvestments consist of certificates of deposits and equity securities. The Company’s equity investments were received as part of the consideration for the sale of Tea Leaves Health, LLC (“Tea Leaves”) which occurredon October 5, 2017 and are without readily determinable fair values because these securities are privately held, not traded on any public exchanges and is notan investment in any mutual fund or similar type investment. As a result, the Company has determined that these investments should be accounted for usingthe cost method of accounting in accordance with FASB ASC Topic 325, Investments - Other (see Note 5 - Assets Held for Sale).The following table summarizes the Company’s investments (in thousands): December 31, 2017 December 31, 2016Certificates of deposit$— $60Equity securities57,722 —Total$57,722 $60 For the years ended December 31, 2017, 2016 and 2015, the Company recorded realized gains from the sale of investments of approximately zero, $7.7million and $0.5 million, respectively.During the years ended December 31, 2017, 2016 and 2015, we did not recognize any other-than-temporary impairment losses.5.Assets Held for SaleDuring the second quarter 2017, the Company committed to a plan to sell Cambridge BioMarketing Group, LLC (“Cambridge”), a subsidiary withinthe Digital Media segment, as it was determined to be a non-core asset. On July 12, 2017, in a cash transaction, the Company sold Cambridge for a loss of$0.9 million which was recorded in other (income) expense, net.-78- During the third quarter 2017, the Company committed to a plan to sell j2 Australia Hosting Pty Ltd (dba “Web24”), a subsidiary within the CloudServices segment, as it was determined to be a non-core asset. On September 1, 2017, in a cash transaction, the Company sold Web24 for a gain of $1.6million which was recorded in other (income) expense, net.During the third quarter 2017, the Company committed to a plan to sell Tea Leaves, a subsidiary within the Digital Media segment, as it wasdetermined to be a non-core asset. On October 5, 2017, in a transaction consisting of a combination of cash and various equity securities, the Company soldTea Leaves for a gain of $27.0 million which was recorded in other (income) expense, net.6.Fair Value Measurementsj2 Global complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands thedisclosures required for fair value measurements of financial and non-financial assets and liabilities. ASC 820 clarifies that 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. As such,fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As abasis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies inmeasuring fair value: §Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. §Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices foridentical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated byobservable market data for substantially the full term of the assets or liabilities. §Level 3 – Unobservable inputs which are supported by little or no market activity.The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs whenmeasuring fair value.The Company’s money market funds are classified within Level 1. The Company values these Level 1 investments using quoted market prices.The fair value of the Convertible Notes (see Note 9 - Long-Term Debt) is determined using recent quoted market prices or dealer quotes for suchsecurities, which are Level 1 inputs. The fair value of our senior notes (8.0% senior unsecured notes at December 31, 2016 and 6.0% senior unsecured notes atDecember 31, 2017) (see Note 9 - Long-Term Debt) is determined using quoted market prices or dealer quotes for instruments with similar maturities andother terms and credit ratings, which are Level 2 inputs. The fair value of long-term debt was $1.2 billion and $792.2 million, at December 31, 2017 andDecember 31, 2016, respectively.In addition, the Convertible Notes contain terms that may require the Company to pay contingent interest on the Convertible Notes which isaccounted for as a derivative with fair value adjustments being recorded to interest expense (see Note 9 - Long Term Debt). This derivative is fair valuedusing a binomial lattice convertible bond pricing model using historical and implied market information, which are Level 2 inputs.The Company classifies its contingent consideration liability in connection with acquisitions within Level 3 because factors used to develop theestimated fair value are unobservable inputs, such as volatility and market risks, and are not supported by market activity. The fair value of the contingentconsideration liability was determined using option based approaches. This methodology was utilized because the distribution of payments is not symmetricand amounts are only payable upon certain earnings before interest, tax, depreciation and amortization (“EBITDA”) thresholds being reached. Such valuationapproach included a Monte-Carlo simulation for the contingency since the financial metric driving the payments is path dependent. Significant increases ordecreases in either of the inputs noted above in isolation would result in a significantly lower or higher fair value measurement.-79- The following tables present the fair values of the Company’s financial assets or liabilities that are measured at fair value on a recurring basis (inthousands):December 31, 2017Level 1 Level 2 Level 3 Fair ValueAssets: Cash equivalents: Money market and other funds$453 $— $— $453Total assets measured at fair value$453 $— $— $453 Liabilities: Contingent consideration$— $— $20,477 $20,477Contingent interest derivative— 768 — 768Total liabilities measured at fair value$— $768 $20,477 $21,245 December 31, 2016Level 1 Level 2 Level 3 Fair ValueAssets: Cash equivalents: Money market and other funds$7,737 $— $— $7,737Certificates of Deposit— 60 — 60Total assets measured at fair value$7,737 $60 $— $7,797 Liabilities: Contingent consideration$— $— $17,450 $17,450Contingent interest derivative— 958 — 958Total liabilities measured at fair value$— $958 $17,450 $18,408At the end of each reporting period, management reviews the inputs to measure the fair value measurements of financial and non-financial assets andliabilities to determine when transfers between levels are deemed to have occurred. For the years ended December 31, 2017 and 2016, there were no transfersthat have occurred between levels.-80- The following table presents a reconciliation of the Company’s derivative instruments (in thousands): Amount Affected line item in the Statement of IncomeDerivative Liabilities: Level 2: Balance as of January 1, 2016$1,450 Total fair value adjustments reported in earnings(492) Interest expense, netBalance as of December 31, 2016$958 Total fair value adjustments reported in earnings(190) Interest expense, netBalance as of December 31, 2017$768 The following tables presents a reconciliation of the Company’s Level 3 financial assets or liabilities that are measured at fair value on a recurringbasis (in thousands): Level 3 Affected line item in the Statement of IncomeBalance as of January 1, 2016$30,600 Total fair value adjustments reported in earnings4,850 General and administrativeContingent consideration payments(18,000) Not ApplicableBalance as of December 31, 2016$17,450 Contingent consideration17,577 Total fair value adjustments reported in earnings2,300 General and administrativeContingent consideration payments(16,850) Not ApplicableBalance as of December 31, 2017$20,477 In connection with the acquisition of Ookla on December 1, 2014, contingent consideration of up to an aggregate of $40.0 million may be payableupon achieving certain future income thresholds and had a fair value of $17.0 million at December 31, 2016. Due to the Company achieving certain earningstargets for the year ended December 31, 2016, $20.0 million ($16.9 million of contingent consideration and $3.1 million of compensation) was paid duringthe second quarter of 2017. There are no further payments pending.In connection with the acquisition of Salesify on September 17, 2015, contingent consideration of up to an aggregate of $17.0 million may bepayable upon achieving certain future income thresholds and had a fair value of zero and $0.6 million at December 31, 2017 and 2016, respectively.In connection with the acquisition of Humble Bundle, on October 13, 2017, contingent consideration of up to an aggregate of $40.0 million may bepayable upon achieving certain future income thresholds and had a fair value of $19.7 million at December 31, 2017 which was recorded as an other long-term liability on the consolidated balance sheet at December 31, 2017.In connection with the acquisition of blackfriday.com on November 7, 2017, contingent consideration of up to an aggregate of $1.5 million may bepayable upon achieving certain future income thresholds and had a fair value of $0.8 million at December 31, 2017 which was recorded as an other long-termliability on the consolidated balance sheet at December 31, 2017.During the year ended December 31, 2017, the Company recorded a net increase in the fair value of the contingent consideration of $2.3 million andreported such increase in general and administrative expenses.-81- 7. Property and EquipmentProperty and equipment, stated at cost, at December 31, 2017 and 2016 consisted of the following (in thousands): 2017 2016Computers and related equipment$215,631 $173,103Furniture and equipment2,035 1,928Leasehold improvements16,163 12,929 233,829 187,960Less: Accumulated depreciation and amortization(154,056) (119,866) Total property and equipment, net$79,773 $68,094Depreciation and amortization expense was $33.0 million, $26.8 million and $19.2 million for the years ended December 31, 2017, 2016 and 2015,respectively.Total disposals of long-lived assets for the years ended December 31, 2017, 2016 and 2015 was $4.0 million, zero and zero, respectively. Thedisposals during 2017 were primarily related to the sale of Cambridge, Web24, and Tea Leaves (see Note 5 - Assets Held for Sale).8.Goodwill and Intangible AssetsGoodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a businesscombination. Intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are recorded at the estimatedfair value of the assets acquired. Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developedtechnologies and other intangible assets. The fair values of these identified intangible assets are based upon expected future cash flows or income, which takeinto consideration certain assumptions such as customer turnover, trade names and patent lives. These determinations are primarily based upon theCompany’s historical experience and expected benefit of each intangible asset. If it is determined that such assumptions are not accurate, then the resultingchange will impact the fair value of the intangible asset. Identifiable intangible assets are amortized over the period of estimated economic benefit, whichranges from one to 20 years.The changes in carrying amounts of goodwill for the years ended December 31, 2017 and 2016 are as follows (in thousands): Cloud Services Digital Media ConsolidatedBalance as of January 1, 2016$502,718 $304,943 $807,661Goodwill acquired (Note 3)69,202 263,988 333,190Purchase Accounting Adjustments (4)816 (4,957) (4,141)Foreign exchange translation(13,584) (316) (13,900)Balance as of December 31, 2016$559,152 $563,658 $1,122,810Goodwill acquired (Note 3)34,035 87,792 121,827Goodwill written off related to sale of a business unit (1)(2)(3)(3,614) (54,127) (57,741)Purchase accounting adjustments (4)(766) (4,667) (5,433)Foreign exchange translation14,946 202 15,148Balance as of December 31, 2017$603,753 $592,858 $1,196,611(1) On July 12, 2017, in a cash transaction, the Company sold Cambridge which resulted in $17.8 million of goodwill being written off in connection with thissale (see Note 5 - Assets Held for Sale).(2) On September 1, 2017, in a cash transaction, the Company sold Web24 which resulted in $3.6 million of goodwill being written off in connection with thissale (see Note 5 - Assets Held for Sale).(3) On October 5, 2017, in a cash and equity transaction, the Company sold Tea Leaves, which resulted in $36.3 million of goodwill being written off inconnection with this sale (see Note 5 - Assets Held for Sale).(4) Purchase accounting adjustments relate to adjustments to goodwill in connection with prior year business acquisitions (see Note 3 - BusinessAcquisitions).-82- Intangible assets are summarized as of December 31, 2017 and 2016 as follows (in thousands):Intangible Assets with Indefinite Lives: 2017 2016Trade names$27,379 $27,379Other5,432 5,432Total$32,811 $32,811Intangible Assets Subject to Amortization:As of December 31, 2017, intangible assets subject to amortization relate primarily to the following (in thousands): Weighted-Average AmortizationPeriod HistoricalCost AccumulatedAmortization NetTrade names11.2 years $147,997 $51,429 $96,568Patent and patent licenses6.6 years 67,724 56,853 10,871Customer relationships (1)8.9 years 447,070 253,464 193,606Other purchased intangibles4.8 years 218,628 66,733 151,895Total $881,419 $428,479 $452,940(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits areconsumed. This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years, despite the overall life ofthe asset.As of December 31, 2016, intangible assets subject to amortization relate primarily to the following (in thousands): Weighted-Average AmortizationPeriod HistoricalCost AccumulatedAmortization NetTrade names11.5 years $127,342 $38,868 $88,474Patent and patent licenses6.6 years 65,605 51,677 13,928Customer relationships (1)9.6 years 390,930 182,775 208,155Other purchased intangibles6.0 years 195,913 27,590 168,323Total $779,790 $300,910 $478,880(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits areconsumed. This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years, despite the overall life ofthe asset. -83- During the year ended December 31, 2016, the Company acquired Everyday Health. The identified intangible assets recognized as part of theacquisition and their respective estimated weighted average amortizations were as follows (in thousands): December 31, 2016 Weighted-Average AmortizationPeriod Fair ValueTrademarks5.2 years $70,300Customer relationships10.1 years 45,500Other purchased intangibles1.7 years 88,267Total $204,067During the year ended December 31, 2016, the Company completed 21 other acquisitions which were individually immaterial. The identifiedintangible assets recognized as part of these acquisition and their respective estimated weighted average amortizations were as follows (in thousands): December 31, 2016 Weighted-Average AmortizationPeriod Fair ValueTrade names6.3 years $5,866Customer relationships7.5 years 39,982Other purchased intangibles3.3 years 2,997Total $48,845Expected amortization expenses for intangible assets subject to amortization at December 31, 2017 are as follows (in thousands):Fiscal Year: 2018$122,2942019103,172202054,315202135,280202230,231Thereafter107,648Total expected amortization expense$452,940Amortization expense was $129.0 million, $95.3 million and $74.0 million for the years ended December 31, 2017, 2016 and 2015, respectively.9. Long-Term Debt6.0% Senior NotesOn June 27, 2017, j2 Cloud Services, LLC (“j2 Cloud”) and j2 Cloud Co-Obligor, Inc. (the “Co-Issuer” and together with j2 Cloud, the “Issuers”),wholly-owned subsidiaries of the Company, completed the issuance and sale of $650 million aggregate principal amount of their 6.0% senior notes due in2025 (the “6.0% Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933. j2 Cloud receivedproceeds of $636.5 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The 6.0% Senior Notes are presented aslong-term debt, net of deferred issuance costs, on the condensed consolidated balance sheets as of December 31, 2017. The proceeds were used to redeem allof j2 Cloud’s 8.0% notes due in 2020, and to distribute sufficient net proceeds to j2 Global to pay off all amounts outstanding under its existing creditfacility, with the remaining net proceeds to be used for general corporate purposes, including acquisitions. The 6.0% Senior Notes bear interest at a rate of 6.0% per annum, payable semi-annually in arrears on January 15 and July 15 of each year,commencing on January 15, 2018. The 6.0% Senior Notes mature on July 15, 2025, and are senior unsecured-84- obligations of the Issuers which are guaranteed on an unsecured basis by certain subsidiaries of j2 Cloud (as defined in the Indenture, dated June 27, 2017(the “Indenture”)). If j2 Cloud or any of its restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an insignificant subsidiary (asdefined in the Indenture), after the issue date, or any insignificant subsidiary ceases to fit within the definition of insignificant subsidiary, such restrictedsubsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Issuers’ obligations under the 6.0% Senior Notes.The Issuers may redeem some or all of the 6.0% Senior Notes at any time on or after July 15, 2020 at specified redemption prices plus accrued andunpaid interest, if any, to, but excluding the redemption date. Before July 15, 2020, in connection with certain equity offerings, the Issuers also may redeemup to 35% of the 6.0% Senior Notes at a price equal to 106.0% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding theredemption date. In addition, at any time prior to July 15, 2020, the Issuers may redeem some or all of the 6.0% Senior Notes at a price equal to 100% of theprincipal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an applicable “make-whole” premium.The indenture contains certain restrictive and other covenants applicable to j2 Cloud and subsidiaries designated as restricted subsidiariesincluding, but not limited to, restrictions on (i) paying dividends or making distributions on j2 Cloud’s membership interests or repurchasing j2 Cloud’smembership interests; (ii) making certain restricted payments; (iii) creating liens or entering into sale and leaseback transactions; (iv) entering intotransactions with affiliates; (v) merging or consolidating with another company; and (vi) transferring and selling assets. These covenants include certainexceptions. Violation of these covenants could result in a default which could result in the acceleration of outstanding amounts if such default is not cured orwaived within the time periods outlined in the indenture. Payments, specifically dividend payments, are restricted only if j2 Cloud and its subsidiariesdesignated as restricted subsidiaries have a leverage ratio of greater than 3.0 to 1.0. In addition, if such leverage ratio is in excess of 3.0 to 1.0, restriction onrestricted payments is subject to various exceptions, including an exception for the payment of restricted payments up to $75 million. These contractualprovisions did not, as of December 31, 2017, restrict j2 Cloud’s ability to pay dividends to j2 Global, Inc. The Company is in compliance with its debtcovenants as of December 31, 2017.As of December 31, 2017, the estimated fair value of the 6.0% Senior Notes was approximately $684.1 million and was based on the quoted marketprices of debt instruments with similar terms, credit rating and maturities of the 6.0% Senior Notes which are Level 2 inputs (see Note 6 - Fair ValueMeasurements).8.0% Senior NotesOn August 1, 2017, j2 Cloud redeemed all of its outstanding $250 million 8.0% senior unsecured notes due in 2020 for $265 million, including aredemption premium and relevant accrued interest which resulted in a loss on extinguishment of $8.0 million recorded which was recorded in Interestexpense, net.3.25% Convertible NotesOn June 10, 2014, j2 Global issued $402.5 million aggregate principal amount of 3.25% convertible senior notes due June 15, 2029 (the“Convertible Notes”). j2 Global received proceeds of $391.4 million in cash, net of underwriters’ discounts and commissions. The net proceeds wereavailable for general corporate purposes. The Convertible Notes bear interest at a rate of 3.25% per annum, payable semiannually in arrears on June 15 andDecember 15 of each year. Beginning with the six-month interest period commencing on June 15, 2021, the Company must pay contingent interest on theConvertible Notes during any six-month interest period if the trading price per $1,000 principal amount of the Convertible Notes for each of the five tradingdays immediately preceding the first day of such interest period equals or exceeds $1,300. Any contingent interest payable on the Convertible Notes will bein addition to the regular interest payable on the Convertible Notes.Holders may surrender their Convertible Notes for conversion at any time prior to the close of business on the business day immediately precedingthe maturity date only if one or more of the following conditions is satisfied: (i) during any calendar quarter commencing after the calendar quarter ending onSeptember 30, 2014 (and only during such calendar quarter), if the closing sale price of j2 Global common stock for at least 20 trading days in the period of30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occursis more than 130% of the applicable conversion price of the Convertible Notes on each such trading day; (ii) during the five consecutive business day periodfollowing any ten consecutive trading day period in which the trading price for the Convertible Notes for each such trading day was less than 98% of theproduct of (a) the closing sale price of j2 Global common stock on each such trading day and (b) the applicable conversion rate on each such trading day; (iii)if j2 Global calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the business day prior to the redemptiondate; (iv) upon the occurrence of specified corporate events; or (v) during either the period beginning on, and including, March 15, 2021 and ending on, butexcluding, June-85- 20, 2021 or the period beginning on, and including, March 15, 2029 and ending on, but excluding, the maturity date. j2 Global will settle conversions ofConvertible Notes by paying or delivering, as the case may be, cash, shares of j2 Global common stock or a combination thereof at j2 Global’s election. TheCompany currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company’s common stock,where cash will be used to settle each $1,000 of principal and the remainder, if any, will be settled via shares of the Company’s common stock.As of December 31, 2017, the conversion rate is 14.5899 shares of j2 Global common stock for each $1,000 principal amount of Convertible Notes,which represents a conversion price of approximately $68.54 per share of j2 Global common stock. The conversion rate is subject to adjustment for certainevents as set forth in the indenture governing the Convertible Notes, but will not be adjusted for accrued interest. In addition, following certain corporateevents that occur on or prior to June 20, 2021, j2 Global will increase the conversion rate for a holder that elects to convert its Convertible Notes inconnection with such a corporate event.j2 Global may not redeem the Convertible Notes prior to June 20, 2021. On or after June 20, 2021, j2 Global may redeem for cash all or part of theConvertible Notes at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to,but excluding, the redemption date. No sinking fund is provided for the Convertible Notes.Holders have the right to require j2 Global to repurchase for cash all or part of their Convertible Notes on each of June 15, 2021 and June 15, 2024 ata repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, therelevant repurchase date. In addition, if a fundamental change, as defined in the indenture governing the Convertible Notes, occurs prior to the maturity date,holders may require j2 Global to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount of theConvertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.The Convertible Notes are the Company’s general senior unsecured obligations and rank: (i) senior in right of payment to any of the Company’sfuture indebtedness that is expressly subordinated in right of payment to the Convertible Notes; (ii) equal in right of payment to the Company’s existing andfuture unsecured indebtedness that is not so subordinated; (iii) effectively junior in right of payment to any of the Company’s secured indebtedness to theextent of the value of the assets securing such indebtedness; and (iv) structurally junior to all existing and future indebtedness (including trade payables)incurred by the Company’s subsidiaries.Accounting for the Convertible NotesIn accordance with ASC 470-20, Debt with Conversion and Other Options, convertible debt that can be settled for cash is required to be separatedinto the liability and equity component at issuance, with each component assigned a value. The value assigned to the liability component is the estimatedfair value, as of the issuance date, of similar debt without the conversion feature. The difference between the cash proceeds and estimated fair value of theliability component, representing the value of the conversion premium assigned to the equity component, is recorded as a debt discount on the issuancedate. This debt discount is amortized to interest expense using the effective interest method over the period from the issuance date through the first statedrepurchase date on June 15, 2021.j2 Global estimated the borrowing rates of similar debt without the conversion feature at origination to be 5.79% for the Convertible Notes anddetermined the debt discount to be $59.0 million. As a result, a conversion premium after tax of $37.7 million was recorded in additional paid-in capital. Theaggregate debt discount is amortized as interest expense over the period from the issuance date through the first stated repurchase date on June 15, 2021which management believes is the expected life of the Convertible Notes using an interest rate of 5.81%. As of December 31, 2017, the remaining period overwhich the unamortized debt discount will be amortized is 3.5 years.The Convertible Notes are carried at face value less any unamortized debt discount. The fair value of the Convertible Notes at each balance sheetdate is determined based on recent quoted market prices or dealer quotes for the Convertible Notes, which are Level 1 inputs (see Note 6 - Fair ValueMeasurements). If such information is not available, the fair value is determined using cash-flow models of the scheduled payments discounted at marketinterest rates for comparable debt without the conversion feature. As of December 31, 2017 and 2016, the estimated fair value of the Convertible Notes wasapproximately $504.5 million and $516.8 million, respectively.As of December 31, 2017 and 2016, the if-converted value of our Convertible Notes exceeded the principal amount of $402.5 million by $38.1million and $75.2 million, respectively.-86- The following table provides additional information related to our Convertible Notes (in thousands): 2017 2016Additional paid-in capital$37,700 $37,700 Principal amount of Convertible Notes$402,500 $402,500Unamortized discount of the liability component32,189 40,356Carrying amount of debt issuance costs5,667 7,002Net carrying amount of Convertible Notes$364,644 $355,142The following table provides the components of interest expense related to our Convertible Notes (in thousands): 2017 2016 2015Cash interest expense (coupon interest expense)$13,081 $13,081 $13,081Non-cash amortization of discount on Convertible Notes8,167 7,707 7,274Amortization of debt issuance costs1,335 1,217 1,109Total interest expense related to Convertible Notes$22,583 $22,005 $21,464The Company has recorded additional interest expense associated with the contingent interest feature of the Convertible Notes for the years endedDecember 31, 2017, 2016, and 2015 of $(0.2) million, $(0.5) million, and $0.7 million, respectively (see Note 6 - Fair Value Measurements).Long-term debt as of December 31, 2017 and 2016 consists of the following (in thousands): 2017 2016Senior Notes: 6.0% Senior Notes$650,000 $—8.0% Senior Notes— 250,0003.25% Convertible Notes402,500 402,500Less: Unamortized discount(42,902) (42,997)Deferred issuance costs(7,654) (7,757)Total long-term debt$1,001,944 $601,746Less: Current portion— —Total long-term debt, less current portion$1,001,944 $601,746At December 31, 2017, future principal payments for debt were as follows (in thousands):Years Ended December 31, 2018$—2019—2020—2021402,5002022—Thereafter650,000 $1,052,500Interest expense was $59.2 million, $42.7 million and $43.6 million for the years ended December 31, 2017, 2016 and 2015, respectively.-87- 10. Commitments and ContingenciesLitigationFrom time to time, j2 Global and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinarycourse of business. Any claims or regulatory actions against j2 Global and its affiliates, whether meritorious or not, could be time consuming and costly, andcould divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorablerulings that could include monetary damages and injunctive relief.On February 17, 2011, Emmanuel Pantelakis (“Pantelakis”) filed suit against a j2 Global affiliate in the Ontario Superior Court of Justice (No. 11-50673), alleging that the j2 Global affiliate breached a contract relating to Pantelakis’s use of the Campaigner® service. The j2 Global affiliate filed aresponsive pleading on March 23, 2011 and responses to undertakings on July 16, 2012. On November 6, 2012, Pantelakis filed a second amended statementof claim, reframing his lawsuit as a negligence action. The j2 Global affiliate filed an amended statement of defense on April 8, 2013. Discovery has closed. Ajudicial pre-trial has been set for July 27, 2018.On January 17, 2013, the Commissioner of the Massachusetts Department of Revenue (“Commissioner”) issued a notice of assessment to a j2 Globalaffiliate for sales and use tax for the period of July 1, 2003 through December 31, 2011. On July 22, 2014, the Commissioner denied the j2 Global affiliate’sapplication for abatement. On September 18, 2014, the j2 Global affiliate petitioned the Massachusetts Appellate Tax Board for abatement of the tax assertedin the notice of assessment (No. C325426). A trial was held on December 16, 2015. On May 18, 2017, the Appellate Board decided in favor of theCommonwealth of Massachusetts and the Company paid and expensed the tax assessment. The j2 Global affiliate has requested the findings of fact andconclusions of law from the Appellate Board.On October 16, 2013, a j2 Global affiliate entered an appearance as a plaintiff in a multi-district litigation pending in the Northern District of Illinois(No. 1:12-cv-06286). In this litigation, Unified Messaging Solutions, LLC (“UMS”), a company with rights to assert certain patents owned by the j2 Globalaffiliate, has asserted five j2 Global patents against a number of defendants. While claims against some defendants have been settled, other defendants havefiled counterclaims for, among other things, non-infringement, unenforceability, and invalidity of the patents-in-suit. On December 20, 2013, the NorthernDistrict of Illinois issued a claim construction opinion and, on June 13, 2014, entered a final judgment of non-infringement for the remaining defendantsbased on that claim construction. UMS and the j2 Global affiliate filed a notice of appeal to the Federal Circuit on June 27, 2014 (No. 14-1611). OnDecember 8, 2017, the Federal Circuit affirmed the decision of the lower court.On January 21, 2016, Davis Neurology, P.A. filed a putative class action against two j2 Global affiliates in the Circuit Court for the County of Pope,State of Arkansas (58-cv-2016-40), alleging violations of the TCPA. The case was ultimately removed to the U.S. District Court for the Eastern District ofArkansas (the “Eastern District of Arkansas”) (No. 4:16-cv-00682). On June 6, 2016, the j2 Global affiliates filed a motion for judgment on the pleadings. OnMarch 20, 2017, the Eastern District of Arkansas dismissed all claims against the j2 Global affiliates. On April 17, 2017, Davis Neurology filed a notice ofappeal. On June 20, 2017, Davis Neurology filed its appeal brief. On August 4, 2017 j2 Global affiliates filed a response brief. On August 21, 2017, DavisNeurology filed a reply brief. Oral argument was held January 11, 2018. j2 Global affiliates submitted a supplemental letter brief on January 31, 2018. DavisNeurology submitted a supplemental letter brief on February 15, 2018. The appeal is pending.j2 Global does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing reserves, arelikely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. However, depending on theamount and timing, an unfavorable resolution of some or all of these matters could have a material effect on j2 Global’s consolidated financial position,results of operations, or cash flows in a particular period.The Company has not accrued for any material loss contingencies relating to these legal proceedings because materially unfavorable outcomes arenot considered probable by management. It is the Company’s policy to expense as incurred legal fees related to various litigations.-88- Credit AgreementOn December 5, 2016, j2 Global entered into a Credit Agreement (the Credit Agreement) with MUFG Union Bank, N.A., as administrative agent, andcertain other lenders from time to time party thereto (collectively, the Lenders). Pursuant to the Credit Agreement, the Lenders provided j2 Global with acredit facility of $225.0 million (the Credit Facility). On June 27, 2017, the Company paid off the entire line of credit of $225.0 million, in addition tointerest and miscellaneous fees of $0.5 million and terminated the Credit Agreement.Operating Leasesj2 Global leases certain facilities and equipment under non-cancelable operating leases which expire at various dates through 2025. Office andequipment leases are typically for terms of three to five years and generally provide renewal options for terms up to an additional five years. In most cases, theCompany expects leases that expire will be renewed or replaced by other leases with similar terms. Future minimum lease payments at December 31, 2017under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) are as follows (in thousands): Lease PaymentsFiscal Year: 2018$18,589201917,325202013,721202112,049202211,199Thereafter13,258Total minimum lease payments$86,141Rental expense for the years ended December 31, 2017, 2016 and 2015 was $15.3 million, $10.6 million and $9.0 million, respectively.SubleaseTotal sublease income for the years ended December 31, 2017, 2016 and 2015 was $0.7 million and $0.6 million and $0.5 million, respectively.Total estimated aggregate sublease income to be received in the future is $9.0 million.Non-Income Related TaxesAs a provider of cloud services for business, the Company does not provide telecommunications services. Thus, it believes that its business and itsusers (by using our services) are generally not subject to various telecommunication taxes. However, several state taxing authorities have challenged thisbelief and have and may continue to audit and assess our business and operations with respect to telecommunications and other sales taxes. In addition, theapplication of other indirect taxes (such as sales and use tax, business tax and gross receipt tax) to e-commerce businesses such as j2 Global and our users is acomplex and evolving issue. The application of existing, new or future laws could have adverse effects on our business, prospects and operating results.There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerousmarkets in which we conduct or will conduct business.The Company is currently under audit for indirect taxes in several states and municipalities. On March 3, 2017, the New York State Department ofTaxation and Finance issued a notice of assessment for sales and use tax for the period of March 1, 2009 through February 28, 2014. We have reached asettlement with the Department which has expanded the period up to November 30, 2017. We have accrued $2.80 million as of December 31, 2017. OnFebruary 18, 2018, we paid $2.77 million to New York in settlement. On August 24, 2016, the Office of Finance for the City of Los Angeles notified us thatthey would commence an audit of business and communications taxes for the period of January 1, 2013 through December 31, 2016, which has concludedwith no material impact. For other jurisdictions, we currently have no reserves established for these matters, as we have determined that the liability is notprobable and estimable. However, it is reasonably possible that such a liability could be incurred, which would result in additional expense, which couldmaterially impact our financial results.-89- 11. Income TaxesIncome tax expense amounted to $60.5 million, $59.0 million and $23.3 million for the years ended December 31, 2017, 2016 and 2015,respectively. Our effective tax rates for 2017, 2016 and 2015 were 30.3%, 27.9% and 14.8%, respectively.The Company has not completed its accounting for the income tax effects of the 2017 Tax Act. Where the Company has been able to makereasonable estimates of the effects for which its analysis is not yet complete, the Company has recorded provisional amounts in accordance with SEC StaffAccounting Bulletin No. 118. Where the Company has not yet been able to make reasonable estimates of the impact of certain elements, the Company hasnot recorded any amounts related to those elements and has continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effectimmediately prior to the enactment of the 2017 Tax Act.The Company’s accounting for the following elements of the 2017 Tax Act is incomplete. However, the Company was able to make reasonableestimates of certain effects and, therefore, has recorded provisional amounts as follows:Revaluation of deferred tax assets and liabilities: The 2017 Tax Act reduces the U.S. federal corporate tax rate from 35% to 21% for tax yearsbeginning after December 31, 2017. In addition, the 2017 Tax Act makes certain changes to the depreciation rules and implements new limits on thedeductibility of certain executive compensation. The Company has evaluated these changes and has recorded a provisional decrease to net deferred taxliabilities of $33.3 million with a corresponding decrease to deferred tax expense. The Company is still completing its calculation of the impact of thesechanges on its deferred tax balances.Transition tax on unrepatriated foreign earnings: The transition tax on unrepatriated foreign earnings is a tax on previously untaxed accumulatedand current earnings and profits (“E&P”) of the Company’s foreign subsidiaries. To determine the amount of the transition tax, the Company must determine,among other factors, the amount of post-1986 E&P of its foreign subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. TheCompany was able to make a reasonable estimate of the transition tax and has recorded a provisional transition tax expense of $49.2 million. The Companyis continuing to gather additional information to more precisely compute the amount of the transition tax to complete its calculation of E&P as well as thefinal determination of non-U.S. income taxes paid.Valuation allowances: The Company must assess whether its valuation allowance analyses for deferred tax assets are affected by various aspects ofthe 2017 Tax Act (e.g., deemed repatriation of deferred foreign income, future GILTI inclusions, new categories of foreign tax credits). Since, as discussedherein, the Company has recorded provisional amounts related to certain portions of the 2017 Tax Act, any corresponding determination of the need for orchange in a valuation allowance is also provisional. Prior to 2017, the Company had recorded valuation allowances for certain tax attributes that theCompany estimated were not more likely than not to be utilized prior to their expiration. Based on a preliminary review of its 2017 and future taxableincome, the Company has recorded a provisional release of valuation allowance in the amount of $11.9 million with a corresponding deferred tax benefit.The Company’s accounting for the following elements of the 2017 Tax Act is incomplete, and it has not yet been able to make reasonable estimatesof the effects of these items. Therefore, no provisional amounts were recorded.Global intangible low taxed income (“GILTI”): The 2017 Tax Act creates a new requirement that certain income (i.e. GILTI) earned by foreignsubsidiaries must be included currently in the gross income of the U.S. shareholder. Due to the complexity of the new GILTI tax rules, the Company iscontinuing to evaluate this provision of the 2017 Tax Act and the application of ASC 740. Under U.S. GAAP, the Company is permitted to make anaccounting policy election to either treat taxes due on future inclusions in U.S. taxable income related to GILTI as a current-period expense when incurred orto factor such amounts into the Company’s measurement of its deferred taxes. The Company has not yet completed its analysis of the GILTI tax rules and isnot yet able to reasonably estimate the effect of this provision of the 2017 Tax Act or make an accounting policy election for the ASC 740 treatment of theGILTI tax. Therefore, the Company has not recorded any amounts related to potential GILTI tax in its financial statements and has not yet made a policydecision regarding whether to record deferred taxes on GILTI.Indefinite reinvestment assertion: Beginning in 2018, the 2017 Tax Act provides a 100% deduction for dividends received from 10-percent ownedforeign corporations by U.S. corporate shareholders, subject to a one-year holding period. Although dividend income is now exempt from U.S. federal tax inthe hands of the U.S. corporate shareholders, companies must still apply the guidance of ASC 740-30-25-18 to account for the tax consequences of outsidebasis differences and other tax impacts of their investments in non-U.S. subsidiaries. While the Company has accrued the transition tax on the deemedrepatriated earnings that were previously indefinitely reinvested, the Company was unable to determine a reasonable estimate of the remaining tax liability, ifany, under the 2017 Tax Act for its remaining outside basis differences or evaluate how the 2017 Tax Act will affect the Company’s-90- existing accounting position to indefinitely reinvest unremitted foreign earnings. Therefore, the Company has not included a provisional amount for thisitem in its financial statements for fiscal 2017. The Company will record amounts as needed for this item beginning in the first reporting period during themeasurement period in which the Company obtains necessary information and is able to analyze and prepare a reasonable estimate.The provision for income tax consisted of the following (in thousands): Years Ended December 31, 2017 2016 2015Current: Federal$55,804 $46,293 $21,745State3,265 3,874 1,805Foreign22,904 22,612 16,816 Total current81,973 72,779 40,366 Deferred: Federal(15,682) (6,822) (8,581)State962 (330) (3,462)Foreign(6,712) (6,627) (5,040)Total deferred(21,432) (13,779) (17,083)Total provision$60,541 $59,000 $23,283A reconciliation of the statutory federal income tax rate with j2 Global’s effective income tax rate is as follows: Years Ended December 31, 2017 2016 2015Statutory tax rate35 % 35 % 35 %State income taxes, net0.8 1.1 0.3Foreign rate differential(16.1) (14.6) (15.8)Foreign income inclusion7.2 9.4 5.4Foreign tax credit(6.2) (5.5) (6.1)Reserve for uncertain tax positions3.9 4.7 (3.3)Valuation allowance(0.9) (1.0) 1.8IRC Section 199 deductions(1.6) (1.1) (1.2)The 2017 Tax Act - provisional transition tax24.6 — —The 2017 Tax Act - tax rate impact on deferred taxes(16.1) — —Other(0.3) (0.1) (1.3)Effective tax rates30.3 % 27.9 % 14.8 %The Company’s effective rate for each year is normally lower than the 35% U.S. federal statutory plus applicable state income tax rates primarily dueto earnings of j2 Global’s subsidiaries outside of the U.S. in jurisdictions where the effective tax rate is lower than in the U.S.-91- Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets andliabilities. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows (in thousands): Years Ended December 31, 2017 2016Deferred tax assets: Net operating loss carryforwards$29,317 $59,806Tax credit carryforwards2,645 16,281Accrued expenses3,165 14,759Allowance for bad debt1,570 2,624Share-based compensation expense6,476 5,631Basis difference in fixed assets1,881 2,195Impairment of investments48 74Deferred revenue728 2,361State taxes1,777 1,758Other14,165 9,227 61,772 114,716Less: valuation allowance(197) (12,028)Total deferred tax assets$61,575 $102,688 Deferred tax liabilities: Basis difference in intangible assets$(70,252) $(98,830)Prepaid insurance(616) (246)Convertible debt(27,504) (36,592)Other(1,467) (2,088)Total deferred tax liabilities(99,839) (137,756)Net deferred tax liabilities$(38,264) $(35,068)The Company had approximately $61.6 million and $102.7 million in deferred tax assets as of December 31, 2017 and 2016, respectively, relatedprimarily to net operating loss carryforwards, tax credit carryforwards and accrued expenses treated differently between its financial statements and its taxreturns. Based on the weight of available evidence, the Company assesses whether it is more likely than not that some portion or all of a deferred tax assetwill not be realized. If necessary, j2 Global records a valuation allowance sufficient to reduce the deferred tax asset to the amount that is more likely that notto be realized. The deferred tax assets should be realized through future operating results and the reversal of temporary differences.As of December 31, 2017, the Company had federal net operating loss carryforwards (“NOLs”) of $102.2 million, after considering substantialrestrictions on the utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended (the “InternalRevenue Code”). j2 Global currently estimates that all of the above-mentioned federal NOLs will be available for use before their expiration. These NOLsexpire through the year 2036. The $102.2 million NOL carryforward amount includes $89.1 million acquired pursuant to the Everyday Health transaction.As of December 31, 2017 and 2016, the Company has foreign tax credits of zero and $11.9 million, respectively. The Company has provided avaluation allowance on the foreign tax credits of zero and $11.9 million, respectively, as the weight of available evidence does not support full utilization ofthese credits. The foreign tax credits were fully utilized in 2017 as a result of the transition tax on repatriated foreign earnings. If these tax credits were notfully utilized, the foreign tax credits would have expired in the year 2025. In addition, as of December 31, 2017 and 2016, the Company had state researchand development tax credits of $2.3 million and $3.5 million, respectively, which last indefinitely.Certain tax payments are prepaid during the year and included within prepaid expenses and other current assets on the consolidated balance sheet.The Company’s prepaid tax payments were $6.0 million and zero at December 31, 2017 and 2016, respectively.-92- Uncertain Income Tax PositionsTax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will besustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit torecognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized uponultimate settlement. The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt ofcash within one year as non-current liabilities in the consolidated balance sheets.As of December 31, 2017, the total amount of unrecognized tax benefits was $45.0 million, of which $39.8 million, if recognized, would affect theCompany’s effective tax rate. As of December 31, 2016, the total amount of unrecognized tax benefits was $41.2 million, of which $37.0 million, ifrecognized, would affect the Company’s effective tax rate. As of December 31, 2015, the total amount of unrecognized tax benefits was $32.5 million, ofwhich $29.8 million, if recognized would affect the Company’s effective tax rate.The aggregate changes in the balance of unrecognized tax benefits, which excludes interest and penalties, for 2017, 2016 and 2015, is as follows (inthousands): Years Ended December 31, 2017 2016 2015Beginning balance$41,218 $32,536 $34,635Increases related to tax positions during a prior year— 2,082 10,361Decreases related to tax positions taken during a prior year(401) — (17,107)Increases related to tax positions taken in the current year7,223 6,703 8,841Settlements(2,639) — (4,194)Decreases related to expiration of statute of limitations(389) (103) —Ending balance$45,012 $41,218 $32,536The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of December 31, 2017,2016 and 2015, the total amount of interest and penalties accrued was $7.2 million, $5.3 million and $3.4 million, respectively, which is classified as non-current liabilities in the consolidated balance sheets. In connection with tax matters, the Company recognized interest and penalty (benefit) expense in 2017,2016 and 2015 of $2.1 million, $1.9 million and $(1.4) million, respectively.Uncertain income tax positions are reasonably possible to significantly change during the next 12 months as a result of completion of income taxaudits and expiration of statutes of limitations. At this point it is not possible to provide an estimate of the amount, if any, of significant changes in reservesfor uncertain income tax positions as a result of the completion of income tax audits that are reasonably possible to occur in the next 12 months. In addition,the Company cannot currently estimate the amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result ofexpiration of statutes of limitations due to ongoing audits. As a result of ongoing federal, state and foreign income tax audits (discussed below), it isreasonably possible that our entire reserve for uncertain income tax positions for the periods under audit will be released. It is also reasonably possible thatthe Company’s reserves will be inadequate to cover the entire amount of any such income tax liability.Income before income taxes included income from domestic operations of $61.9 million, $84.8 million and $61.0 million for the yearsended December 31, 2017, 2016 and 2015, respectively, and income from foreign operations of $138.1 million, $126.6 million and $95.9 million for theyears ended December 31, 2017, 2016 and 2015, respectively.Income Tax Audits:In November 2015, the U.S. Internal Revenue Service (“IRS”) began an income tax audit of the Company’s 2012 and 2013 tax years. In March 2016,the IRS expanded its income tax audit to include the Company’s 2014 tax year. Additionally, the Company was notified on March 22, 2017 that the IRS willbe auditing Everyday Health’s 2014 tax year. In December 2017, the Company was notified by the IRS that the 2014 audit of Everyday Health will beconcluded with no changes.The Company is under audit by the California Franchise Tax Board (“FTB”) for tax years 2012 and 2013. The FTB, however, has agreed to suspendits audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years.-93- The Company is under income tax audit by the New York State Department of Taxation and Finance (“NYS”) for tax years 2011 through 2013. InMarch 2017, NYS expanded its income tax audit to include the Company’s 2014 tax year.In September 2017, the Massachusetts Department of Revenue notified the Company that it will commence an audit of income tax for tax years2014 and 2015. In addition, the Georgia Department of Revenue notified the Company that it will commence an audit of income tax for tax years 2014through 2016.The Company is currently under audit by the French tax authorities for tax years 2011 to 2016. The audit is in the preliminary fact gathering stage.It is reasonably possible that these audits may conclude in the next 12 months and that the uncertain tax positions the Company has recorded inrelation to these tax years may change compared to the liabilities recorded for these periods. If the recorded uncertain tax positions are inadequate to coverthe associated tax liabilities, the Company would be required to record additional tax expense in the relevant period, which could be material. If the recordeduncertain tax positions are adequate to cover the associated tax liabilities, the Company would be required to record any excess as reduction in tax expensein the relevant period, which could be material. However, it is not currently possible to estimate the amount, if any, of such change.12. Stockholders’ EquityPreferred Stock ExchangeIn November 2014, the Company provided holders of the Company’s Series A Preferred Stock (“j2 Series A Stock”) and the Company’s Series BPreferred Stock (“j2 Series B Stock”) an exchange right in which shares may be exchanged for j2 common stock. The exchange right associated with theshares of j2 Series A Stock provided that such shares were immediately exercisable at an exchange ratio of 20.4319 shares of j2 common stock per share of j2Series A Stock (the “Series A Exchange Ratio”). Both holders of the j2 Series A Stock exercised this exchange right which resulted in the issuance of 235,665shares of j2 common stock. The exchange right associated with the vested shares of the j2 Series B Stock is exercisable during specified exchange periods atan exchange ratio of 31.8094 shares of j2 common stock per share of j2 Series B Stock (the “Series B Exchange Ratio”). Holders of vested j2 Series B Stockexercised this exchange right which resulted in the issuance of 88,623 and 91,737 shares of j2 common stock during fiscal years 2017 and 2016, respectively.In connection with the exercise of the exchange right and the resulting extinguishment of the j2 Series A Stock, the Company recorded thedifference between the carrying value of the Series A and the fair value of the j2 common stock exchanged within retained earnings as a preferred stockdividend. In connection with the exercise of the exchange right associated with j2 Series B Stock, the Company recognized incremental fair value in theamount of $6.3 million and recorded additional share-based compensation in the amount of $1.2 million and $1.3 million for the years ended December 31,2017 and 2016, respectively. The remaining amount of unrecognized incremental fair value will be recognized over the remaining service period.The Series B Exchange Ratio is adjusted in the event of a subdivision of the outstanding j2 common stock or j2 Series B Stock, a declaration of adividend payable in shares of j2 common stock or j2 Series B Stock, a declaration of a dividend payable in a form other than shares in an amount that has amaterial effect on the value of shares of j2 common stock or j2 Series B Stock, a combination or consolidation of the outstanding j2 common stock or j2Series B Stock into a lesser number of shares of j2 common stock or j2 Series B Stock, respectively, specified changes in control, a recapitalization, areclassification, or a similar occurrence, the Company shall adjust the Series B Exchange Ratio as it deems appropriate in its sole discretion.Common Stock Repurchase ProgramIn February 2012, the Company’s Board of Directors approved a program authorizing the repurchase of up to five million shares of j2 Globalcommon stock through February 20, 2013 (the “2012 Program”) which was subsequently extended through February 19, 2019 (see Note 20 - SubsequentEvents). On February 15, 2012, the Company entered into a Rule 10b5-1 trading plan with a broker to facilitate the repurchase program. No shares wererepurchased under the share repurchase program for the years ended December 31, 2017 and 2016. Cumulatively at December 31, 2017, 2.1 million shareswere repurchased at an aggregate cost of $58.6 million (including an immaterial amount of commission fees).In July 2016, the Company acquired and subsequently retired 935,231 shares of j2 Global common stock in connection with the acquisition ofIntegrated Global Concepts, Inc. (see Note 3 - Business Acquisitions). As a result of the purchase of j2 Global common stock, the Company’s Board ofDirectors approved a reduction in the number of shares available for purchase-94- under the 2012 Program by the same amount leaving 1,938,689 shares of j2 Global common stock available for purchase under this program.Periodically, participants in j2 Global’s stock plans surrender to the Company shares of j2 Global stock to pay the exercise price or to satisfy taxwithholding obligations arising upon the exercise of stock options or the vesting of restricted stock. During the year ended December 31, 2017, the Companypurchased 117,076 shares from plan participants for this purpose.Dividends The following is a summary of each dividend declared during fiscal year 2017 and 2016:Declaration Date Dividend per CommonShare Record Date Payment DateFebruary 10, 2016 $0.3250 February 23, 2016 March 10, 2016May 5, 2016 $0.3350 May 18, 2016 June 2, 2016August 2, 2016 $0.3450 August 17, 2016 September 1, 2016November 1, 2016 $0.3550 November 18, 2016 December 5, 2016February 9, 2017 $0.3650 February 22, 2017 March 9, 2017May 4, 2017 $0.3750 May 19, 2017 June 2, 2017August 2, 2017 $0.3850 August 14, 2017 September 1, 2017October 31, 2017 $0.3950 November 17, 2017 December 5, 2017On February 2, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.4050 per share of common stock payable onMarch 9, 2018 to all stockholders of record as of the close of business on February 22, 2018 (see Note 20 - Subsequent Events). Future dividends will besubject to Board approval.13. Stock Options and Employee Stock Purchase Planj2 Global’s share-based compensation plans include the 2007 Stock Plan, the 2015 Stock Plan and the 2001 Employee Stock Purchase Plan. Eachplan is described below.(a)The 2007 Stock Option Plan and the 2015 Stock Option PlanIn October 2007, j2 Global’s Board of Directors adopted the j2 Global, Inc. 2007 Stock Option Plan (the “2007 Plan”). The 2007 Plan provides forthe granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other share-basedawards. The number of authorized shares of common stock that may be used for 2007 Plan purposes is 4,500,000. Options under the 2007 Plan may begranted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the fair market value of j2 Global’scommon stock on the date of grant for incentive stock options and not less than 85% of the fair market value of j2 Global’s common stock on the date ofgrant for non-statutory stock options. The 2007 Plan terminated on February 14, 2017.In May 2015, j2 Global’s Board of Directors adopted the j2 Global, Inc. 2015 Stock Option Plan (the “2015 Plan”). The 2015 Plan provides for thegrant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares,performance share units and other share-based awards and is intended as a successor plan to the 2007 Stock Plan since no further grants will be made underthe 2007 Stock Plan. 4,200,000 shares of common stock are authorized to be used for 2015 Plan purposes. Options under the 2015 Plan may be granted atexercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100% of the fairmarket value of j2 Global’s common stock subject to the option on the date the option is granted.At December 31, 2017, 2016 and 2015, options to purchase 361,875, 353,258 and 457,792 shares of common stock were exercisable under andoutside of the 2015 Plan and the 2007 Plan combined, at weighted average exercise prices of $29.92, $26.10 and $24.78, respectively. Stock optionsgenerally expire after 10 years and vest over a 5-year period.All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m). -95- Stock Options Stock option activity for the years ended December 31, 2017, 2016 and 2015 is summarized as follows: Number of Shares Weighted-AverageExercise Price Weighted-AverageRemainingContractual Life (InYears) AggregateIntrinsicValueOptions outstanding at January 1, 2015725,649 $24.29 Granted62,000 67.35 Exercised(221,221) 22.41 Canceled— — Options outstanding at December 31, 2015566,428 $29.74 Granted— — Exercised(142,870) 26.04 Canceled(9,700) 26.92 Options outstanding at December 31, 2016413,858 $31.09 Granted— — Exercised(38,183) 29.03 Canceled— — Options outstanding at December 31, 2017375,675 $31.30 2.5 $16,429,727Exercisable at December 31, 2017361,875 $29.92 2.3 $16,323,743Vested and expected to vest at December 31, 2017373,168 $31.05 2.4 $16,410,477For the years ended December 31, 2017, 2016 and 2015, j2 Global granted zero, zero and 62,000 options, respectively, to purchase shares ofcommon stock pursuant to the 2015 Plan. These stock options vest 20% per year and expire 10 years from the date of grant.The per share weighted-average grant-date fair values of stock options granted during the period ended December 31, 2015 was $15.22. There wereno stock options granted during the years 2017 and 2016.The total intrinsic values of options exercised during the years ended December 31, 2017, 2016 and 2015 was $2.1 million, $5.6 million and $10.5million, respectively. The total fair value of options vested during the years ended December 31, 2017, 2016 and 2015 was $0.6 million, $0.6 million and$0.7 million, respectively.Cash received from options exercised under all share-based payment arrangements for the years ended December 31, 2017, 2016 and 2015 was $1.1million, $3.6 million and $5.0 million, respectively. The actual tax benefit realized for the tax deductions from option exercises under the share-basedpayment arrangements totaled $0.7 million, $1.9 million and $3.7 million, respectively, for the years ended December 31, 2017, 2016 and 2015.-96- The following table summarizes information concerning outstanding and exercisable options as of December 31, 2017: Options Outstanding Exercisable OptionsRange ofExercise Prices Number OutstandingDecember 31, 2017 WeightedAverageRemainingContractualLife WeightedAverageExercisePrice NumberExercisableDecember 31,2017 WeightedAverageExercisePrice$17.19 22,000 1.18 years $17.19 22,000 $17.1920.91 45,558 0.34 years 20.91 45,558 20.9121.67 50,040 1.35 years 21.67 50,040 21.6722.92 84,092 2.35 years 22.92 84,092 22.9224.61 - 25.93 14,500 4.02 years 25.13 14,500 25.1327.60 700 3.08 years 27.60 700 27.6029.34 75,585 3.36 years 29.34 75,585 29.3429.53 13,700 4.17 years 29.53 13,700 29.5331.07 7,500 3.82 years 31.07 7,500 31.0767.35 62,000 3.51 years 67.35 48,200 67.35$17.19 - $67.35 375,675 2.46 years $31.30 361,875 $29.92As discussed in Note 12, “Stockholders’ Equity”, the Company provided holders of j2 Series B Stock an exchange right in which j2 Series B Stockmay be exchanged for j2 common stock during specified exchange periods. The Company determined that such exchange right represents a grant under the2007 Plan for the year ended December 31, 2014, and accordingly, reduced the awards available under the 2007 Plan. At December 31, 2017, there were3,450,474 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan, and noadditional shares are available for grant under or outside of the 2007 Plan.The Company recognized $0.4 million, $0.4 million and $0.7 million of compensation expense related to stock options for the years endedDecember 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, there was $0.2 million of total unrecognized compensation expense related tononvested share-based compensation options granted under the 2015 Plan and the 2007 Plan. That expense is expected to be recognized ratably over aweighted average period of 2.35 years (i.e., the remaining requisite service period).Fair Value Disclosure j2 Global uses the Black-Scholes option pricing model to calculate the fair value of each option grant. The expected volatility is based on historicalvolatility of the Company’s common stock. The Company estimates the expected term based upon the historical exercise behavior of our employees. Therisk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. TheCompany uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors. Estimated forfeiture rates were 14.3%,12.7% and 14.1% as of December 31, 2017, 2016 and 2015, respectively.The weighted-average fair values of stock options granted have been estimated utilizing the following assumptions: Years Ended December 31, 2017 2016 2015Risk-free interest rate—% —% 1.6%Expected term (in years)0.0 0.0 5.2Dividend yield—% —% 1.8%Expected volatility—% —% 28.1%Weighted average volatility—% —% 28.1%-97- Restricted Stock and Restricted Stock Units j2 Global has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to the the 2007 Plan and the 2015Plan. Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period. Beginning in fiscal year 2012 vesting periods are approximately one year for awards tomembers of the Company’s Board of Directors and five years for senior staff. The Company granted 300,330, 317,914 and 252,940 shares of restricted stockand restricted units during the years ended December 31, 2017, 2016 and 2015, respectively, and recognized $22.2 million, $13.2 million and $11.0 million,respectively of related compensation expense. As of December 31, 2017, the Company had unrecognized share-based compensation cost of $36.6 millionassociated with these awards. This cost is expected to be recognized over a weighted-average period of 3.9 years for awards and 3.3 years for units. The totalfair value of restricted stock and restricted stock units vested during the years ended December 31, 2017, 2016 and 2015 was $15.1 million, $8.0 million and$6.4 million, respectively. The actual tax benefit realized for the tax deductions from the vesting of restricted stock awards and units totaled $2.3 million,$3.5 million and $3.8 million, respectively, for the years ended December 31, 2017, 2016 and 2015. In accordance with ASC 718, share-based compensationis recognized on dividends paid related to nonvested restricted stock not expected to vest, which amounted to approximately $0.1 million, $0.1 million and$0.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.During the year, the Company accelerated the vesting of certain shares held by employees which were surrendered to the Company to satisfy taxwithholding obligations in connection with such employees’ restricted stock. The Company recognized share-based compensation of $1.4 million during theyear due to this vesting acceleration.In connection with Nehemia Zucker’s resignation as Chief Executive Officer effective as of December 31, 2017, all of his outstanding and unvestedstock options and time-based restricted shares, along with the tranche of performance-vesting restricted shares that was then next scheduled to vest, vested infull on December 29, 2017. As a result, the Company has accelerated the recognition of share-based compensation expense associated with these awardswhich impacted the fourth quarter by approximately $5.1 million.Restricted Stock - Awards with Market Conditionsj2 Global has awarded certain key employees market-based restricted stock awards pursuant to the 2015 Plan. The market-based awards have vestingconditions that are based on specified stock price targets of the Company’s common stock. Market conditions were factored into the grant date fair valueusing a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stockprice targets with a 20-day and 30-day lookback (trading days) for 2016 and 2017, respectively. Stock-based compensation expense related to an award witha market condition will be recognized over the requisite service period using the graded-vesting method regardless of whether the market condition issatisfied, provided that the requisite service period has been completed. During the year ended December 31, 2017 and 2016, the Company awarded 85,825and 106,780 market-based restricted stock awards, respectively. The per share weighted average grant-date fair values of the market-based restricted stockawards granted during the years ended December 31, 2017 and 2016 were $72.20 and $44.67, respectively.The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions: December 31, 2017 December 31, 2016Underlying stock price at valuation date$91.17 $63.73Expected volatility29.0% 29.8%Risk-free interest rate2.17% 1.51%-98- Restricted stock award activity for the years ended December 31, 2017, 2016 and 2015 is set forth below: Shares Weighted-AverageGrant-DateFair ValueNonvested at January 1, 2015814,050 $26.57Granted234,540 68.11Vested(254,871) 25.16Canceled(88,915) 40.97Nonvested at December 31, 2015704,804 $39.08Granted296,414 41.27Vested(255,503) 31.27Canceled(40,700) 63.95Nonvested at December 31, 2016705,015 $41.40Granted289,230 61.34Vested(381,411) 39.71Canceled(7,268) 76.08Nonvested at December 31, 2017605,566 $51.57 Restricted stock unit activity for the years ended December 31, 2017, 2016 and 2015 is set forth below: Number ofShares Weighted-AverageRemainingContractualLife (in Years) AggregateIntrinsicValueOutstanding at January 1, 2015102,924 Granted18,400 Vested(23,221) Canceled(41,858) Outstanding at December 31, 201556,245 Granted21,500 Vested(14,595) Canceled(11,200) Outstanding at December 31, 201651,950 Granted11,100 Vested(16,370) Canceled(8,280) Outstanding at December 31, 201738,400 1.8 $2,881,152Vested and expected to vest at December 31, 201729,397 1.6 $2,205,686Employee Stock Purchase Plan In May of 2001, j2 Global established the j2 Global, Inc. 2001 Employee Stock Purchase Plan, as amended (the “Purchase Plan”), which provides forthe issuance of a maximum of 2,000,000 shares of common stock. Under the Purchase Plan, eligible employees can have up to 15% of their earningswithheld, up to certain maximums, to be used to purchase shares of j2 Global’s common stock at certain plan-defined dates. The price of the common stockpurchased under the Purchase Plan for the offering periods is equal to 95% of the fair market value of the common stock at the end of the offering period.During 2017, 2016 and 2015, 3,283, 3,918 and 4,020 shares, respectively were purchased under the Purchase Plan at price ranging from $85.73 to $70.43 pershare during 2017. As of December 31, 2017, 1,623,243 shares were available under the Purchase Plan for future issuance. See Note 20 “Subsequent Events”for changes to the Purchase Plan.-99- 14. Defined Contribution 401(k) Savings Planj2 Global has several 401(k) Savings Plans that qualify under Section 401(k) of the Internal Revenue Code. Eligible employees may contribute aportion of their salary through payroll deductions, subject to certain limitations. The Company may make annual contributions at its sole discretion to theseplans. For the years ended December 31, 2017, 2016 and 2015, the Company incurred expenses of $3.0 million, $1.8 million and $1.9 million, respectively,for contributions to these 401(k) Savings Plans.15. Earnings Per Share The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data): Years Ended December 31, 2017 2016 2015Numerator for basic and diluted net income per common share: Net income attributable to j2 Global, Inc. common shareholders$139,425 $152,439 $133,636Net income available to participating securities (a)(1,792) (2,242) (2,159)Net income available to j2 Global, Inc. common shareholders137,633 150,197 131,477Denominator: Weighted-average outstanding shares of common stock47,586,242 47,668,357 47,627,853Dilutive effect of: Equity incentive plans228,166 201,660 293,911Convertible debt (b)854,619 93,209 165,996Common stock and common stock equivalents48,669,027 47,963,226 48,087,760Net income per share: Basic$2.89 $3.15 $2.76Diluted$2.83 $3.13 $2.73(a) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid orunpaid).(b) Represents the incremental shares issuable upon conversion of the Convertible Notes due June 15, 2029 by applying the treasury stock method when theaverage stock price exceeds the conversion price of the Convertible Notes (see Note 9 - Long Term Debt)For the years ended December 31, 2017, 2016 and 2015, there were zero options outstanding, respectively, which were excluded from thecomputation of diluted earnings per share because the exercise prices were greater than the average market price of the common shares.-100- 16. Segment InformationThe Company’s business segments are based on the organization structure used by management for making operating and investment decisions andfor assessing performance. j2 Global’s reportable business segments are: (i) Cloud Services; and (ii) Digital Media. The Company’s Cloud Services segment is driven primarily by subscription revenues that are relatively higher margin, stable and predictable fromquarter to quarter with some seasonal weakness in the fourth quarter. The Cloud Services segment also includes the results of our IP licensing business, whichcan vary dramatically in both revenues and profitability from period to period. The Company’s Digital Media segment is driven primarily by advertisingrevenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter.Information on reportable segments and reconciliation to consolidated income from operations is as follows (in thousands): Years Ended December 31, 2017 2016 2015Revenue by segment: Cloud Services$578,956 $566,938 $504,638Digital Media538,939 307,463 216,374Elimination of inter-segment revenues(57) (146) (197)Total revenue1,117,838 874,255 720,815 Direct costs by segment (1): Cloud Services352,912 356,059 294,436Digital Media490,871 256,763 185,937Direct costs by segment (1):843,783 612,822 480,373 Cloud Services operating income (2)226,044 210,879 210,202Digital Media operating income48,068 50,700 30,437Segment operating income274,112 261,579 240,639 Global operating costs (2)(3)28,404 19,013 41,257Income from operations$245,708 $242,566 $199,382 (1) Direct costs for each segment include cost of revenues and other operating expenses that are directly attributable to the segment, such as employeecompensation expense, local sales and marketing expenses, engineering and network operations expenses, depreciation and amortization and otheradministrative expenses.(2) During 2016, the Company determined certain personnel and third-party costs were directly attributable to a particular segment. As a result, these costswere no longer classified as Global operating costs in 2016. If such costs in 2015 were classified consistent with the 2016 presentation, the operating incomefor Cloud Services segment would have been $189.1 million and Global operating costs would have been $20.2 million, respectively.(3) Global operating costs include general and administrative and other corporate expenses that are managed on a global basis and that are not directlyattributable to any particular segment.-101- 2017 2016 Assets: Cloud Services$1,078,577 $911,327 Digital Media1,317,113 1,124,535 Total assets from reportable segments2,395,690 2,035,862 Corporate57,403 26,466 Total assets$2,453,093 $2,062,328 2017 2016 2015Capital expenditures: Cloud Services$7,031 $6,113 $7,546Digital Media32,564 18,633 9,389Total from reportable segments39,595 24,746 16,935Corporate— — 362Total capital expenditures$39,595 $24,746 $17,297 Depreciation and amortization: Cloud Services$68,436 $79,533 $62,385Digital Media93,605 42,558 30,008Total from reportable segments162,041 122,091 92,393Corporate— — 820Total depreciation and amortization$162,041 $122,091 $93,213j2 Global maintains operations in the U.S., Canada, Ireland, Japan and other countries. Geographic information about the U.S. and all other countries for thereporting periods is presented below. Such information attributes revenues based on jurisdictions where revenues are reported (in thousands). Years Ended December 31, 2017 2016 2015Revenues: United States$830,800 $607,285 $492,682Canada78,099 76,775 74,864Ireland74,430 71,340 43,717All other countries134,509 118,855 109,552Total$1,117,838 $874,255 $720,815 December 31, 2017 December 31, 2016Long-lived assets: United States$452,143 $453,053All other countries80,571 93,430Total$532,714 $546,48317. Supplemental Cash Flows InformationCash paid for interest during the years ended December 31, 2017, 2016 and 2015 was $35.8 million, $33.1 million and $33.1 million, respectively,substantially all of which related to interest on outstanding debt and foreign taxes.Cash paid for income taxes net of refunds received was $51.1 million, $37.4 million and $42.0 million during the years ended December 31, 2017,2016 and 2015, respectively.-102- The Company acquired property and equipment for $0.3 million, $0.4 million and $0.6 million during the years ended December 31, 2017, 2016and 2015, respectively, which had not been yet paid at the end of each such year. During the years ended December 31, 2017, 2016 and 2015, j2 Global recorded the tax benefit from the exercise of stock options and restricted stockas a reduction of its income tax liability of $2.9 million, $5.4 million and $7.5 million, respectively.In connection with the sale of Tea Leaves during the fourth quarter 2017, the Company received certain equity securities as non cash considerationinitially valued in the amount of $57.7 million.18.Accumulated Other Comprehensive IncomeThe following table summarizes the changes in accumulated balances of other comprehensive income, net of tax, for the years ended December 31,2017 and 2016 (in thousands): Unrealized Gains(Losses) onInvestments Foreign CurrencyTranslation TotalBalance as of January 1, 2016$2,449 $(31,573) $(29,124) Other comprehensive income (loss) before reclassifications744 (23,076) (22,332) Amounts reclassified from accumulated other comprehensive income(3,193) — (3,193)Net current period other comprehensive loss(2,449) (23,076) (25,525)Balance as of December 31, 2016$— $(54,649) $(54,649) Other comprehensive income before reclassifications— 25,559 25,559Net current period other comprehensive income— 25,559 25,559Balance as of December 31, 2017$— $(29,090) $(29,090)The following table provides details about reclassifications out of accumulated other comprehensive income for the years ended December 31, 2017and 2016 (in thousands):Details about Accumulated Other ComprehensiveIncome Components Amount Reclassified from Accumulated Other ComprehensiveIncome Affected Line Item in the Statement of Income Year Ended December 31,2017 Year Ended December 31,2016 Unrealized gain on available-for-saleinvestments $— $(5,149) Other (income) expense, net — (5,149) Income before income taxes — 1,956 Income tax expense — (3,193) Net incomeTotal reclassifications for the period $— $(3,193) Net income-103- 19. Quarterly Results (unaudited)The following tables contain selected unaudited statement of income information for each quarter of 2017 and 2016 (in thousands, except share andper share data). j2 Global believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the informationfor the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. Year Ended December 31, 2017 FourthQuarter ThirdQuarter SecondQuarter FirstQuarter Revenues$316,380 $273,616 $273,174 $254,669Gross profit 270,406 231,245 230,015 213,859Net income 49,871 32,358 31,376 25,820 Net income per common share: Basic$1.03 $0.67 $0.65 $0.54Diluted$1.02 $0.66 $0.63 $0.52Weighted average shares outstanding Basic 47,721,700 47,609,819 47,547,118 47,463,231Diluted 48,437,580 48,521,082 48,948,315 48,766,031 Year Ended December 31, 2016 FourthQuarter ThirdQuarter SecondQuarter FirstQuarter Revenues$251,837 $210,116 $211,800 $200,502Gross profit 211,608 173,124 176,209 166,214Net income 43,158 45,569 33,770 29,943 Net income per common share: Basic$0.90 $0.95 $0.69 $0.62Diluted$0.89 $0.94 $0.69 $0.61Weighted average shares outstanding Basic 47,348,372 47,310,011 48,055,783 47,966,718Diluted 47,862,218 47,494,744 48,265,298 48,238,09820. Subsequent Events On January 4, 2018, in a cash transaction, the Company acquired certain assets of Lifescript, a California based provider of digital health andwellness solutions.On January 26, 2018, in a cash transaction, the Company acquired all the issued capital of ThreatTrack Security Holdings, Inc., a Florida basedprovider of cybersecurity solutions.On February 2, 2018, the Company’s Board of Directors approved a quarterly cash dividend of $0.4050 per share of common stock payable onMarch 9, 2018 to all stockholders of record as of the close of business on February 22, 2018. The Company also announced that it extended the Company’sshare repurchase program set to expire February 19, 2018 by an additional year.-104- On February 2, 2018, the Company approved an amendment (the “Amendment”) to the Company’s Amended and Restated 2001 Employee StockPurchase Plan, to be effective May 1, 2018, such that (i) the purchase price for each offering period shall be 85% of the lesser of the fair market value of ashare of common stock of the Company (a “Share”) on the beginning or the end of the offering period, rather than 95% of the fair market value of a Share atthe end of the offering period, and (ii) each offering period will be six months, rather than three months.On February 2, 2018, the Board appointed Sarah Fay as a director, effective immediately.In February 2018, the Company received a capital call notice from the management of OCV Management, LLC. for approximately $12.2 million,inclusive of certain management fees.-105- Item 9. Changes In And Disagreements With Accountants On Accounting And Financial DisclosureNone.Item 9A.Controls and Procedures(a) Evaluation of Disclosure Controls and ProceduresThe Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure thatinformation required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the timeperiods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to theCompany’s management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regardingrequired disclosure.As of the end of the period covered by this report, j2 Global’s management, with the participation of Vivek Shah, our principal executive officer, andR. Scott Turicchi, our principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls andprocedures. Based upon that evaluation, Mr. Shah and Mr. Turicchi concluded that these disclosure controls and procedures were effective as of the end ofthe period covered in this Annual Report on Form 10-K.(b) Management’s Annual Report on Internal Control Over Financial Reportingj2 Global’s 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) for j2 Global. In order to evaluate the effectiveness of internal control over financial reporting, as required bySection 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control – IntegratedFramework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) using the 2013 framework. Our system of internalcontrol over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Basedon its assessment, management has concluded that j2 Global’s internal control over financial reporting was effective as of December 31, 2017. Managementdid not assess the effectiveness ofinternal control over financial reporting of all the 2017 acquisitions (see Note 3 - Business Acquisitions) because of the timing of these acquisitions. Theseacquisitions combined constituted 9.9% of total assets as of December 31, 2017 and 3.1% of revenues for the year then ended. Our internal controls overfinancial reporting as of December 31, 2017 have been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in theattestation report which is included herein.(c) Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934)which occurred during the fourth quarter of our fiscal year ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect,our internal control over financial reporting.-106- (d) Report of Independent Registered Public Accounting FirmREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMShareholders and Board of Directorsj2 Global, Inc.Los Angeles, CaliforniaOpinion on Internal Control over Financial ReportingWe have audited j2 Global, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2017, based on criteria establishedin Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSOcriteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, basedon the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), theconsolidated balance sheets of the Company and subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of income,comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes andschedules, and our report dated March 1, 2018 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control overFinancial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are apublic accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.As indicated in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment ofand conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of all the 2017 acquisitions, which areincluded in the consolidated balance sheet of the Company and subsidiaries as of December 31, 2017, and the related consolidated statements of income,comprehensive income, stockholders’ equity, and cash flows for the year then ended. These acquisitions combined constituted approximately 9.9% of totalassets as of December 31, 2017, and approximately 3.1% of revenues for the year then ended. Management did not assess the effectiveness of internal controlover financial reporting of all the 2017 acquisitions because of the timing of these acquisitions. Our audit of internal control over financial reporting of theCompany also did not include an evaluation of the internal control over financial reporting of all the 2017 acquisitions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal 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 asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.-107- Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate./s/ BDO USA, LLPLos Angeles, CaliforniaMarch 1, 2018-108- Item 9B. Other InformationNone.PART IIIItem 10.Directors, Executive Officers and Corporate GovernanceThe information required by this item is incorporated by reference to the information to be set forth in our proxy statement (“2017 Proxy Statement”)for the 2017 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2017.Item 11. Executive CompensationThe information required by this item is incorporated by reference to the information to be set forth in our 2017 Proxy Statement.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this item is incorporated by reference to the information to be set forth in our 2017 Proxy Statement.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this item is incorporated by reference to the information to be set forth in our 2017 Proxy Statement.Item 14. Principal Accounting Fees and ServicesThe information required by this item is incorporated by reference to the information to be set forth in our 2017 Proxy Statement.PART IVItem 15.Exhibits and Financial Statement Schedules(a) 1. Financial Statements.The following financial statements are filed as a part of this Annual Report on Form 10-K:Report of Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of IncomeConsolidated Statements of Comprehensive IncomeConsolidated Statements of Stockholders’ EquityConsolidated Statements of Cash FlowsNotes to Consolidated Financial Statements2. Financial Statement Schedule The following financial statement schedule is filed as part of this Annual Report on Form 10-K: Schedule II-Valuation and Qualifying AccountsAll other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto.-109- 3. ExhibitsThe following exhibits are filed with this Annual Report on Form 10-K or are incorporated herein by reference as indicated below (numbered inaccordance with Item 601 of Regulation S-K). We shall furnish copies of exhibits for a reasonable fee (covering the expense of furnishing copies) uponrequest.Exhibit No.Exhibit Title2.1Agreement and Plan of Merger, dated as of October 21, 2016, by and among Everyday Health, Inc., Ziff Davis, LLC, Project EchoAcquisition Corp. and j2 Global, Inc. (13)3.1Amended and Restated Certificate of Incorporation of j2 Global, Inc., dated as of June 10, 2014 (8)3.2Second Amended and Restated By-Laws (12)4.1Specimen of Common Stock Certificate (6)4.2.1Indenture, dated as of July 26, 2012 (7)4.2.2First Supplemental Indenture, dated as of June 10, 2014 (8)4.2.3Indenture, dated as of June 10, 2014 (9)4.2.4First Supplemental Indenture, dated as of June 17, 2014 (10)4.3Indenture, dated as of June 27, 2017 (16)10.1j2 Global, Inc. 2007 Stock Option Plan (5)10.2j2 Global, Inc. 2015 Stock Option Plan (11)10.3Form of Restricted Stock Agreement Pursuant to j2 Global, Inc. 2015 Stock Option Plan (15)10.4Amended and Restated j2 Global, Inc. 2001 Employee Stock Purchase Plan (4)10.4.1Amendment to Amended and Restated j2 Global, Inc. 2001 Employee Stock Purchase Plan (18)10.5Letter Agreement, dated as of April 1, 2001, between j2 Global, Inc. and Orchard Capital Corporation (2)10.5.1Amendment to Letter Agreement, dated as of December 31, 2001, between j2 Global, Inc. and Orchard Capital Corporation (3)10.6Employment Agreement, dated as of March 21, 1997, between j2 Global Inc. and Nehemia Zucker (1)10.7Registration Rights Agreement, dated as of June 30, 1998, by and among JFAX Communications, Inc., the Delaware State Employees’Retirement Fund, the Declaration of Trust for Defined Benefit Plan of ICI American Holdings Inc., the Declaration of Trust for DefinedBenefit Plan of Zeneca Holdings Inc., the J.W. McConnell Family Foundation, DCJ Fund Investment Partners II, L.P., DLJ CapitalCorporation, GMT Partners, LLC, Orchard/JFAX Investors, L.L.C. and DLJ Private Equity Employees Fund, L.P. (1)10.8Credit Agreement, dated as of December 5, 2016, among j2 Global Inc., MUFG Union Bank, N.A., as Administrative Agent, and the lendersparty thereto (14)10.9Second Amended and Restated Limited Partnership Agreement, dated as of January 19, 2018, by and among OCV I GP, LLC and j2Global, Inc.10.10Letter Agreement, dated as of December 20, 2017, by and between j2 Global, Inc. and Nehemia Zucker (17)21.1List of subsidiaries of j2 Global, Inc.23.1Consent of Independent Registered Public Accounting Firm – BDO USA, LLP31.1Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document-110- ____________________(1) Incorporated by reference to j2 Global’s Registration Statement on Form S-1 filed with the Commission on April 16, 1999,Registration No. 333-76477.(2) Incorporated by reference to j2 Global’s Annual Report on Form 10-K/A filed with the Commission on April 30, 2001.(3) Incorporated by reference to j2 Global’s Annual Report on Form 10-K filed with the Commission on April 1, 2002.(4) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on May 3, 2006.(5) Incorporated by reference to Exhibit A to j2 Global’s Definitive Proxy Statement on Schedule 14A filed with the Commissionon September 18, 2007.(6) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on December 7, 2011.(7) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on July 27, 2012.(8) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on June 10, 2014.(9) Incorporated by reference to j2 Global’s Registration Statement on Form S-3ASR filed with the Commission on June 10,2014, Registration No. 333-196640.(10) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on June 17, 2014.(11) Incorporated by reference to Annex A to j2 Global’s Definitive Proxy Statement on Schedule 14A filed with the Commissionon March 26, 2015.(12) Incorporated by reference to j2 Global’s Current Registration Statement on Form S-8 filed with the Commission on May6, 2015.(13) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on October 27, 2016.(14) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on December 5, 2016.(15) Incorporated by reference to j2 Global’s Annual Report on Form 10-K filed with the Commission on March 1, 2017.(16) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on June 27, 2017.(17) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on December 27, 2017.(18) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on February 8, 2018.Item 16.Form 10-K SummaryNone.-111- SIGNATUREPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized, on March 1, 2018. j2 Global, Inc. By:/s/ VIVEK SHAH Vivek Shah Chief Executive Officer (Principal Executive Officer)-112- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated, in each case on March 1, 2018.Signature Title /s/ VIVEK SHAH Chief Executive Officer and a DirectorVivek Shah (Principal Executive Officer) /s/ R. SCOTT TURICCHI President and Chief Financial OfficerR. Scott Turicchi (Principal Financial Officer) /s/ STEVE P. DUNN Chief Accounting OfficerSteve P. Dunn /s/ RICHARD S. RESSLER Chairman of the Board and a DirectorRichard S. Ressler /s/ DOUGLAS Y. BECH DirectorDouglas Y. Bech /s/ ROBERT J. CRESCI DirectorRobert J. Cresci /s/ WILLIAM B. KRETZMER DirectorWilliam B. Kretzmer /s/ STEPHEN ROSS DirectorStephen Ross /s/ JON MILLER DirectorJon Miller /s/ SARAH FAY DirectorSarah Fay -113- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS(In thousands)Description Balance atBeginningof Period Additions:Charged toCosts andExpenses Deductions:Write-offs (1)and recoveries Balanceat Endof PeriodYear Ended December 31, 2017: Allowance for doubtful accounts $7,988 $13,159 $(12,446) $8,701Deferred tax asset valuation allowance $12,028 $70 $(11,901) $197Year Ended December 31, 2016: Allowance for doubtful accounts $4,261 $13,168 $(9,441) $7,988Deferred tax asset valuation allowance $14,242 $339 $(2,553) $12,028Year Ended December 31, 2015: Allowance for doubtful accounts $3,685 $6,873 $(6,297) $4,261Deferred tax asset valuation allowance $11,358 $6,959 $(4,075) $14,242______________________(1) Represents specific amounts written off that were considered to be uncollectible.-114- Exhibit 10.9OCV FUND I, L.P.SECOND AMENDED AND RESTATED LIMITED PARTNERSHIPAGREEMENT Table of ContentsPageARTICLE 1 NAME, PURPOSE AND OFFICES OF PARTNERSHIP 11.1 Name 11.2 Purpose 11.3 Principal Offices 11.4 Registered Agent and Office 2ARTICLE 2 TERM OF PARTNERSHIP 22.1 Term 22.2 Events Affecting a Member of the General Partner 22.3 Events Affecting a Limited Partner of the Partnership 22.4 Events Affecting the General Partner 22.5 Removal of the General Partner 22.6 Withdrawal of Initial Limited Partner 3ARTICLE 3 NAME AND ADMISSION OF PARTNERS 3 3.1 Schedule of Partners 33.2 Admission of Additional Partners 4ARTICLE 4 CAPITAL ACCOUNTS, CAPITAL CONTRIBUTIONS AND NONCONTRIBUTING PARTNERS 54.1 Capital Accounts 54.2 Capital Contributions of the Limited Partners 54.3 Capital Contributions of the General Partner 74.4 Noncontributing Partners 74.5 Suspension Period 11ARTICLE 5 PARTNERSHIP ALLOCATIONS 115.1 Allocation of Profit or Loss 115.2 Reallocation of Contingent Losses 135.3 Regulatory Allocations 13 5.4 Income Tax Allocations 14ARTICLE 6 MANAGEMENT FEE; PARTNERSHIP EXPENSES 146.1 Management Fee 146.2 Expenses 16ARTICLE 7 WITHDRAWALS BY AND DISTRIBUTIONS TO THE PARTNERS 177.1 Interest 177.2 Withdrawals by the Partners 177.3 Partners’ Obligation to Repay or Restore 177.4 Tax Distributions 177.5 Discretionary Distributions 187.6 Withholding Obligations 19ARTICLE 8 MANAGEMENT DUTIES AND RESTRICTIONS 208.1 Management 208.2 No Control by the Limited Partners; No Withdrawal 208.3 Existing Funds; Successor Funds; Other Activities and Investment Opportunities 218.4 Investment Restrictions 23ARTICLE 9 INVESTMENT REPRESENTATION AND TRANSFER OF PARTNERSHIP INTERESTS 259.1 Investment Representation of the Limited Partners 259.2 Qualifications of the Limited Partners 259.3 Transfer by General Partner 259.4 Transfer by Limited Partner 259.5 Requirements for Transfer 269.6 Substitution as a Limited Partner 27ARTICLE 10 DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP 2810.1 Extension of Partnership Term 2810.2 Early Termination of the Partnership 28 10.3 Winding Up Procedures 2810.4 Payments in Liquidation 2910.5 Return of Excess Distributions 29ARTICLE 11 FINANCIAL ACCOUNTING, REPORTS AND MEETINGS 3011.1 Financial Accounting; Fiscal Year 3011.2 Supervision; Inspection of Books 3011.3 Quarterly Reports 3011.4 Annual Report; Financial Statements of the Partnership 3111.5 Tax Returns 3111.6 Tax Matters Partner; Partnership Representative 3111.7 Website Based Reporting 33ARTICLE 12 VALUATION AND ADVISORY COMMITTEE 3312.1 Valuation 3312.2 Advisory Committee 34ARTICLE 13 REGULATED PARTNERS 3513.1 ERISA Partners 3513.2 Governmental Plan Partners 3613.3 Private Foundation Partners 3613.4 Bank Holding Company Act Partners 37ARTICLE 14 CERTAIN DEFINITIONS 3714.1 Accounting Period 3714.2 Adjusted Asset Value 3714.3 Affiliate 3814.4 Capital Account 3814.5 Capital Commitment; Committed Capital 3814.6 Carry Percentage 38 14.7 Code 3814.8 Deemed Gain or Deemed Loss 3914.9 Fee Date 3914.10 Final Closing Date 3914.11 Idle Funds Income 3914.12 Investment Period 3914.13 Management Fee Percentage 3914.14 Marketable; Marketable Securities; Marketability 3914.15 Nonmarketable Securities 3914.16 Partnership Expenses 3914.17 Partnership Percentage 3914.18 Percentage in Interest; Majority in Interest 4014.19 Person 4014.20 Portfolio Company 4014.21 Prime Rate 4014.22 Principals 4014.23 Profit or Loss 4014.24 Securities 4114.25 Securities Act 4114.26 Subscription Agreement 4114.27 Treasury Regulations 41ARTICLE 15 OTHER PROVISIONS 4115.1 Governing Law 4115.2 Limitation of Liability of the Limited Partners 4115.3 Exculpation 4215.4 Indemnification 4215.5 Arbitration 4515.6 Execution and Filing of Documents 4615.7 Other Instruments and Acts 46 15.8 Binding Agreement 4615.9 Notices; Electronic Transmission of Reports 4615.10 Power of Attorney 4615.11 Amendment 4715.12 Entire Agreement 4815.13 Titles; Subtitles 4815.14 Partnership Name 4815.15 Confidentiality 4815.16 Liability for Third Party Reports 5115.17 Anti-Money Laundering 5115.18 Partnership Legal Matters 51 Index of Defined TermsAccounting Period 14.1Act PreambleActivation Date 4.2(a)Additional Partners 3.2(b)Adjusted Asset Value 14.2Administrator 15.5(a)Advisers Act 8.1(b)Advisory Committee 12.2Affected Parties 15.15(a)Affiliate 14.3Affiliates Fund 8.3(b)Agreement PreambleApplicable Tax Rate 7.4Arbitration 15.5(a)Arbitrator 15.5(a)BHC Partner 13.4Capital Account 14.4Capital Commitment 14.5Carry Percentage 14.6Claim 15.5(a)Code 14.7 Co-Investment Fund 8.3(d)Co-Investment Opportunity 8.3(d)Committed Capital 14.5Company Act 8.3(c)Confidential Information 15.15(a)Contingent Loss 5.2(a)Cooley 15.18(a)Covered Persons 15.3Deemed Gain 14.8Deemed Loss 14.8Defaulting Limited Partner 4.4(b)Default Notice 4.4(b)Delaware Arbitration Act 15.5(f)DOL Regulations 4.2(b)ERISA 9.5(a)(iv)ERISA Partner 13.1(a)FATCA 7.6(c)Fee Date 14.9Final Closing Date 14.10FOIA Limited Partner 15.15(d)Foreign Entity 8.4(i)Fully Invested 8.3(a)Fund Level Information 15.15(d)GAAP 11.1General Partner PreambleGovernmental Plan Partner 13.2GP Group 8.3(d)Idle Funds Income 14.11Indemnified Parties 15.4(a) Initial Closing Date 2.6Interest Charge 3.2(c)Internal Dispute 15.4(a)Investment Period 14.12Limited Partners PreambleLoss 14.23Majority in Interest 14.18Management Company 8.1(b)Management Fee 6.1(a)Management Fee Percentage 14.13Management Fee Savings 6.1(d)Marketable 14.14Marketability 14.14Marketable Securities 14.14NASDAQ 12.1(a)(i)Nonmarketable Securities 14.15Optionees 4.4(b)(vi)Optionor 4.4(b)(vi)Parallel Funds 8.3(b)Partner(s) 3.1Partnership PreamblePartnership Expenses 14.16Partnership Legal Matters 15.18(b)Partnership Percentage 14.17Partnership Representative 11.6(b)Payback 7.5(a)(i)Percentage in Interest 14.18Person 14.19Pooled Vehicle Partner 15.15(e) Portfolio Company 14.20Portfolio Confidential Information 15.15(e)Prime Rate 3.2(c)/14.21Prior Agreement PreamblePrincipals 14.22Private Foundation Partner 13.3Profit 14.23Qualified Purchaser Fund 8.3(c)Qualified Purchaser Limited Partner 8.3(c)(i)Regulatory Allocations 5.3(a)Remaining Portion 4.4(b)(vi)(2)Reporting Site 11.7Securities 14.24Securities Act 14.25Side Funds 8.3(b)Subject Reports 11.7Successor Fund 8.3(a)Subscription Agreement 14.26Suspension Event 4.5(b)Suspension Event Notice 4.5(b)Tax Payments 7.6(a)Termination Date 2.1Transfer Expenses 9.5(b)Treasury Regulations 14.27Trigger Event 2.5(c)VCOC 4.2(b)VCOC Notice 4.2(b) OCV FUND I, L.P.SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENTTHIS SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this “Agreement”) is made and entered intoas of January 19, 2018, by and among OCV I GP, LLC, a Delaware limited liability company (the “General Partner”), and each of thosepersons admitted as limited partners from time to time (the “Limited Partners”), who hereby amend and restate the Amended andRestated Limited Partnership Agreement, dated October 19, 2016, of OCV FUND I, L.P., a Delaware limited partnership (the“Partnership”), in accordance with the provisions of the Delaware Revised Uniform Limited Partnership Act, as amended (the “Act”), toread entirely as follows:WITNESSETHWHEREAS, the Partnership was formed under the Act pursuant to a Certificate of Limited Partnership filed with the Secretary of Stateof the State of Delaware on September 8, 2016 and was originally governed by the Limited Partnership Agreement of the Partnershipdated as of September 8, 2016 (the “Original Agreement”);WHEREAS, the Original Agreement was amended and restated by the Amended and Restated Limited Partnership Agreement of thePartnership, dated as of October 19, 2016 (the “Prior Agreement”) in connection with the initial closing of the Partnership;WHEREAS, the initial closing date of the Partnership occurred on October 19, 2016 (the “Initial Closing Date”); andWHEREAS, the parties hereto desire to enter into this Second Amended and Restated Limited Partnership Agreement of the Partnershipto make the modifications hereinafter set forth.NOW THEREFORE, in consideration of the mutual promises and agreements herein made and intending to be legally bound hereby,the parties hereto agree to amend and restate the Prior Agreement in its entirety to read as follows:ARTICLE 1NAME, PURPOSE AND OFFICES OF PARTNERSHIP 1.1 Name. The name of the Partnership is OCV Fund I, L.P. The affairs of the Partnership shall be conducted under the Partnershipname, or such other name as the General Partner may, in its discretion, determine.1.2 Purpose. The primary purpose of the Partnership is to provide a limited number of select investors with the opportunity to realizelong-term appreciation from public and private companies, with a particular focus on the technology and life science industries. Thegeneral purposes of the Partnership are to buy, sell, hold and otherwise invest in Securities of every kind and nature and rights andoptions with respect thereto, including, without limitation, stock, notes, bonds, debentures and evidence of indebtedness; to exercise allrights, powers, privileges and other incidents of ownership or possession with respect to Securities held or owned by the Partnership; toenter into, make and perform all contracts and other undertakings; and to engage in all activities and transactions as may be necessary,advisable or desirable to carry out the foregoing.1.3 Principal Offices. The principal office of the Partnership shall be at 4700 Wilshire Blvd., Los Angeles, California 90010, or suchother place or places in the United States as the General Partner may from time to time designate, and the General Partner is authorizedto amend the Certificate of Limited Partnership of the Partnership to reflect the foregoing, without the consent of any other Partner orother Person being required.1.4 Registered Agent and Office. The name of the registered agent for service of process of the Partnership and the address of thePartnership’s registered office in the State of Delaware shall be Corporation Service Company, 2711 Centerville Road, Suite 400,Wilmington, Delaware 19808, or such other agent or office in the State of Delaware as the General Partner may from time to timedesignate, and the General Partner is authorized to amend the Certificate of Limited Partnership of the Partnership to reflect theforegoing without the consent of any other Partner or other Person being required.ARTICLE 2TERM OF PARTNERSHIP2.1 Term. The term of the Partnership commenced upon the date of the filing of the Certificate of Limited Partnership of thePartnership with the office of the Secretary of State of the State of Delaware and shall continue until the tenth anniversary of theActivation Date (as defined in paragraph 4.2(a)) (the “Termination Date”), unless extended pursuant to paragraph 10.1 or soonerdissolved as provided in paragraph 10.2.2.2 Events Affecting a Member of the General Partner. The death, temporary or permanent incapacity, insanity, incompetency,retirement, bankruptcy, expulsion, resignation, withdrawal or removal, liquidation, dissolution, reorganization, merger, sale of all orsubstantially all the stock or assets of, or other change in the ownership or nature of, any member of the General Partner shall not, inand of itself, dissolve the Partnership.2.3 Events Affecting a Limited Partner of the Partnership. The death, temporary or permanent incapacity, insanity, incompetency,bankruptcy, expulsion, resignation, withdrawal or removal, liquidation, dissolution, reorganization, merger, sale of all or substantiallyall the stock or assets of, or other change in the ownership or nature of, a Limited Partner shall not, in and of itself, dissolve thePartnership. 2.4 Events Affecting the General Partner. Except as provided in paragraph 10.2 and to the fullest extent permitted by law, thebankruptcy, expulsion, resignation, withdrawal or removal, liquidation, dissolution, reorganization, merger, sale of all or substantiallyall the stock or assets of, or other change in the ownership or nature of, the General Partner shall not, in and of itself, constitute an“event of withdrawal” of the General Partner under the Act, and upon the happening of any such event, the affairs of the Partnershipshall be continued without dissolution by the General Partner or any successor entity thereto.2.5 Removal of the General Partner.(a) Promptly following a Trigger Event (as defined below), the General Partner shall provide written notice to the Limited Partners ofthe Trigger Event, and at the election of Sixty-Six and Two-Thirds Percent (66 2/3%) in Interest of the Limited Partners, pursuant to awritten vote occurring during any time during the ninety (90) day period following such notice to the Limited Partners, the GeneralPartner may be removed from its capacity as the general partner of the Partnership.(b) In the event of the removal of the General Partner pursuant to paragraph 2.5(a), the Limited Partners, acting by Sixty-Six and Two-Thirds Percent (66 2/3%) in Interest of the Limited Partners, shall be entitled to appoint a replacement general partner of the Partnershipand thereafter the removed General Partner shall not be entitled to have any rights or powers of a general partner; provided, however,that the removed General Partner and any Indemnified Party shall remain entitled to exculpation and indemnification pursuant toparagraphs 15.3 and 15.4 hereof with respect to any matter arising prior to or out of events or circumstances existing prior to theGeneral Partner’s removal. Such successor general partner will and is hereby authorized to continue the Partnership and exercise therights, powers and obligations hereunder of the General Partner and, upon execution of a written acceptance of this Agreement shall bedeemed admitted to the Partnership as a General Partner immediately prior to the removal of the prior general partner. The removedGeneral Partner shall no longer be required to make additional capital contributions pursuant to paragraph 4.3 hereof. The removedGeneral Partner’s interest shall be converted to that of a non-voting Limited Partner, and the removed General Partner shall be entitledthereafter to seventy-five percent (75%) of the allocations and distributions to which it would otherwise be entitled to receive had it notbeen removed when, as and if such allocations and distributions are made, in respect of all activities of and investments by thePartnership that occurred prior to the effective date of removal, subject to its repayment obligation with respect to such activities andinvestments under paragraph 10.5. The removed General Partner shall not be entitled to receive any payments of management fee thatfirst become payable pursuant to paragraph 6.1 after the date of its removal.(c) For purposes of this paragraph 2.5, a “Trigger Event” shall have occurred if the General Partner or any Principal is (i) convictedof, or pleads guilty or nolo contendere to (A) any felony involving fraud, embezzlement, misappropriation of funds or any other actinvolving material improper personal benefit against the Partnership or its assets, or (B) any willful and material violation of any federalsecurities law that results in a material adverse effect to the Limited Partners that remains uncured for sixty (60) days following the dateon which the General Partner receives written notice of such violation, or (ii) found by a court of competent jurisdiction or by a bindingarbitration to have engaged in conduct constituting gross negligence or willful misconduct in connection with the performance of theirobligations under this Agreement.; provided, however, that a Trigger Event shall be deemed not to have occurred with respect to clause(ii) above if, in the case of acts by an employee (for the avoidance of doubt, other than a Principal) or other representative of the General Partner, the offending party is removed as an employee and/or other representative of the GeneralPartner within thirty (30) days of the General Partner’s determination that such party had engaged in conduct that would otherwise havegiven rise to a Trigger Event and the Partnership has been made whole for any direct losses solely attributable to such offending party,if any; provided that the General Partner shall use reasonable diligence to ensure discovery of all “Trigger Events”.ARTICLE 3NAME AND ADMISSION OF PARTNERS3.1 Schedule of Partners. Each Limited Partner being admitted to the Partnership on the date hereof shall be deemed admitted to thePartnership as a limited partner of the Partnership upon its execution and delivery (by or on behalf of such Person) of a counterpart ofthis Agreement and the acceptance thereof by the General Partner. The name and address of the General Partner and the LimitedPartners (hereinafter the General Partner and Limited Partners shall be referred to collectively as the “Partners” and each individually asa “Partner”), the amount of each Partner’s Capital Commitment to the Partnership and such Partner’s Partnership Percentage shall bemaintained as part of the Partnership’s books and records on a schedule of partners in the Partnership’s principal office. The GeneralPartner shall, without the necessity of obtaining the consent of any other Partner, cause the books and records of the Partnership to beamended from time to time to reflect the admission of any new Partner, the withdrawal, partial withdrawal or substitution of any Partner,the transfer of interests among Partners, receipt by the Partnership of notice of any change of address of a Partner, or the change in anyPartner’s Capital Commitment or Partnership Percentage. A confidential copy of the schedule of partners shall be kept on file at theprincipal office of the Partnership. Upon the request of any Limited Partner, the General Partner shall provide such Limited Partner witha version of the most recent schedule of partners disclosing only the Partnership’s Committed Capital, the General Partner’s CapitalCommitment and such Limited Partner’s Capital Commitment and Partnership Percentage.3.2 Admission of Additional Partners.(a) Except as provided in paragraphs 3.2(b), 4.4(b)(vi) and 9.6, an additional Person may be admitted as a Partner only with theconsent of the General Partner and a Majority in Interest of the Limited Partners.(b) Notwithstanding paragraph 3.2(a), one or more Persons may be admitted to the Partnership as additional Limited Partners(“Additional Partners”) or existing Limited Partners may increase their Capital Commitments (such existing Limited Partners are referredto herein as Additional Partners for purposes of this Agreement to the extent of such Capital Commitment increase) with the consent ofonly the General Partner on or before December 31, 2017; provided that after such admission (or Capital Commitment increase), theamount of aggregate capital committed to the Partnership and all Parallel Funds does not exceed three hundred million dollars($300,000,000). (c) Each Person who is to be admitted as an Additional Partner to the Partnership pursuant to this Agreement shall accede to thisAgreement, and shall be admitted to the Partnership as a Limited Partner upon executing and delivering to the Partnership (i) aSubscription Agreement or other written document providing for such admission or Capital Commitment increase, (ii) a counterpartsignature page to this Agreement or other written document as the General Partner deems appropriate in order for such AdditionalPartner to become bound by the terms of this Agreement, neither of which shall require the consent or approval of any other Partner,and (iii) unless waived by the General Partner in its sole discretion, pay simple interest with respect to the amount described inparagraph 3.2(d), at an annual rate equal to the floating commercial rate of interest published in the Wall Street Journal (or itssuccessors) as its prime rate (the “Prime Rate”) as of the date of such Partner’s admission plus four percent (4%), for the period of timefrom the date each such capital contribution would have been due through the date of payment (an “Interest Charge”). Limited Partnersadmitted to the Partnership after the Initial Closing Date will not be entitled to share in any Idle Funds Income accruing prior to orcontemporaneously with their admission date. An Interest Charge shall not be treated as a capital contribution by the additional personadmitted as a Partner but rather shall be allocable as Idle Funds Income to the Partners in proportion to their respective PartnershipPercentages during the applicable periods.(d) Each such Additional Partner shall contribute, on or after the date of its admission or the acceptance by the General Partner of itsCapital Commitment increase, the same percentage of its Capital Commitment or its Capital Commitment increase, as the case may be,as has been contributed by the Limited Partners of the Partnership admitted prior to such date.(e) Upon the admission or Capital Commitment increase of any Additional Partner pursuant to this paragraph 3.2, the General Partnermay, in its sole discretion, make a special distribution of all or a portion of the contribution of capital made by such Additional Partnerpursuant to paragraph 3.2(d). Such distribution shall be made to all Partners in accordance with Partnership Percentages (as adjusted toreflect the admission of such Additional Partner), shall be deemed to be a return of capital to such Partners (and shall not be treated as adistribution for purposes of paragraph 4.2(d)(ii)), shall be added back to the unfunded Capital Commitments of such Partners and shallbe subject to a capital call by the General Partner pursuant to paragraph 4.2(a).ARTICLE 4CAPITAL ACCOUNTS, CAPITAL CONTRIBUTIONSAND NONCONTRIBUTING PARTNERS4.1 Capital Accounts. An individual Capital Account shall be maintained for each Partner.4.2 Capital Contributions of the Limited Partners.(a) Each Limited Partner shall contribute capital to the Partnership in cash as requested by the General Partner upon fifteen (15)business days’ prior written notice. The due date of the initial capital call of the Partnership shall be referred to as the “Activation Date.”Each capital contribution shall be made in accordance with Partnership Percentages. Notwithstanding anything in the foregoing to thecontrary, no Limited Partner shall be required to contribute any capital following the Investment Period, except as may be necessary for(1) Partnership Expenses and the payment of the Management Fee pursuant to Article 6; (2) completion of transactions with respect towhich the Partnership has entered into a binding commitment or which were in process prior to the expiration of the Investment Period;(3) follow-on investments in the Securities of issuers in which the Partnership holds a pre-existing interest as of the date of such proposedfollow-on investment; provided that the aggregate amount of capital invested in such follow-on investments shall not exceed fortypercent (40%) of aggregate Capital Commitments; and (4) fulfillment of indemnification obligations to the Partnership, including, butnot limited to, such Limited Partner’s obligations pursuant to paragraph 4.2(d). As soon as reasonably practicable following theInvestment Period, the General Partner shall provide the Advisory Committee with a list of any binding commitments or transactions inprocess referenced in clause (2) above, where any such transaction has not been completed as of the end of the Investment Period. Allcapital contributions from the Limited Partners shall be made to the Partnership by wire transfer or other transfer of immediatelyavailable U.S. funds on or before the relevant due date to the account designated for such purpose. In no event shall any LimitedPartner be required to contribute capital in an aggregate amount in excess of its Capital Commitment. Notwithstanding anythingcontained herein to the contrary, the General Partner may accept capital contributions from a Limited Partner in an amount that exceedsthe amount requested by the General Partner. For the avoidance of doubt, the amount of capital contributed by a Limited Partner inexcess of the amount of capital that such Limited Partner would have contributed pursuant to this paragraph had such Limited Partnercontributed capital as requested by the General Partner shall be considered as an advance fulfillment of the eventual obligation of suchLimited Partner to contribute capital to the Partnership and shall not accrue interest. Any such advanced amounts shall not (a) be treatedas a capital contribution available to the Partnership until such time as such amounts would have been requested by the General Partnerpursuant to the terms of this Agreement, or (b) be deemed delivered to the Partnership for purposes of the right of such Limited Partnerto any allocations or distributions pursuant to the terms of this Agreement, and the General Partner may make any other necessaryadjustments, in good faith, to further the intended economic arrangement with respect to such advanced amounts.(b) Notwithstanding paragraph 4.2(a) to the contrary, with respect to the Partnership’s initial request for capital contributions underparagraph 4.2, in the event that the sum of the Capital Commitments of all ERISA Partners (as defined in paragraph 13.1(a)) togetherequals or exceeds twenty-five percent (25%) of the Capital Commitments of all Limited Partners, then no ERISA Partner shall berequired to contribute capital pursuant to this Agreement until such time as the General Partner shall have delivered notice (the “VCOCNotice”), to such ERISA Partner to the effect that the Partnership’s first portfolio company investment has qualified or will qualify uponits closing as a “venture capital investment” within the meaning of the U.S. Department of Labor regulations (“DOL Regulations”) suchthat the Partnership will qualify as a “venture capital operating company” (a “VCOC”) under applicable DOL Regulations. In the eventthat an ERISA Partner has not received the VCOC Notice prior to the date on which any capital contribution would otherwise be dueunder paragraph 4.2(a), such ERISA Partner shall pay such capital contribution into an interest-bearing escrow account designated bythe General Partner. The terms of any such escrow account shall be reasonably satisfactory to such ERISA Partner and in compliancewith ERISA (as defined in paragraph 9.5(a)(iv)) (including Dept. of Labor Adv. Op. 95-04A). Upon delivery of the VCOC Notice, allamounts in the escrow account shall be delivered to the Partnership in fulfillment of the ERISA Partner’s obligation under paragraph4.2(a), and (ii) all income earned on amounts contributed to such escrow account shall be returned to the ERISA Partners pro rataaccording to their respective capital contributions to such escrow account.(c) The General Partner may, in its sole discretion, return to the Partners all or a portion of any cash capital contribution intended for aproposed investment that is not consummated as anticipated, or applied to the payment or reimbursement of expenses, or any other purpose, pro rata in accordance with their respective capital contributions;provided that such returned capital shall not otherwise be treated as a distribution under this Agreement and shall be added back to theunfunded Capital Commitments of such Partners and be subject to a capital call by the General Partner pursuant to paragraph 4.2(a).(d) (i) If, in the sole discretion of the General Partner, Partnership assets are insufficient to fulfill any liability or obligation of thePartnership (including, but not limited to, any indemnification obligation of the Partnership pursuant to paragraph 15.4), prior to thetermination of the Partnership the General Partner may require each Partner to contribute capital to the Partnership in an amount up tosuch Partner’s unfunded Capital Commitment, if any.(ii) If, in the sole discretion of the General Partner, Partnership assets remain insufficient to fulfill any indemnification obligations orliabilities of the Partnership pursuant to paragraph 15.4 following the contribution to the Partnership of the maximum amount permittedby paragraph 4.2(d)(i), the General Partner may recall distributions previously made to the Partners solely for the purpose of fulfilling orsatisfying such an obligation or liability. The obligation to recontribute distributions under this paragraph 4.2(d)(ii) shall be applied prorata in proportion to the amount such obligation or liabilities would have reduced the distributions received by the Partners pursuant tothis Agreement had such obligations or liabilities been incurred by the Partnership prior to the time such distributions were made (ineach case, with any in kind distributions valued as of the date of distribution). In no event shall any Limited Partner be required tocontribute capital pursuant to this paragraph 4.2(d)(ii) in an amount in excess of the lesser of (1) distributions previously received bysuch Partner (or such Partner’s predecessor in interest) from the Partnership (and not previously returned to the Partnership by suchPartner pursuant to this Agreement or otherwise), and (2) twenty-five percent (25%) of such Partner’s Capital Commitment. In no eventwill the General Partner be permitted to recall any amounts distributed after the date two (2) years from the date of final liquidation ofthe Partnership.4.3 Capital Contributions of the General Partner. The General Partner shall have an aggregate Capital Commitment to the Partnershipand the Parallel Funds equal to at least one percent (1%) of the aggregate Capital Commitments of all Partners payable on the sameschedule and in the same proportions as the Limited Partners’ capital contributions are made. Each capital contribution made by theGeneral Partner shall be made in cash.4.4 Noncontributing Partners.(a) The Partnership shall be entitled to enforce the obligations of each Limited Partner to make the contributions to capital set forth inparagraph 4.2 or this paragraph 4.4, and the Partnership shall have all remedies available at law or in equity if any such contribution isnot so made. Such Limited Partner shall pay all costs and expenses incurred by the Partnership in connection with such LimitedPartner’s failure to make a capital contribution, including, without limitation, attorneys’ fees and all fees and expenses incurred inconnection with any legal proceeding relating to the failure of such Limited Partner to make such a contribution.(b) Additionally, without in any way limiting any remedy that the Partnership may pursue pursuant to paragraph 4.4(a), should anyLimited Partner fail to make any of the capital contributions required of it under this Agreement, such Limited Partner shall be in default(a “Defaulting Limited Partner”). In the event of such default, the General Partner may, in its sole discretion, elect to enforce one ormore of the provisions of this paragraph 4.4(b) in connection with such a default, to which each Limited Partner hereby expressly consents, provided such default shall have continued uncured for ten (10) or more days after delivery of the DefaultNotice described in the following sentence. The General Partner shall deliver written notice to such Defaulting Limited Partner if itdetermines to utilize one or more of the powers set forth in paragraph 4.4(a) or this paragraph 4.4(b) (a “Default Notice”). If the defaultshall have continued uncured for ten (10) or more days after delivery of the Default Notice, the Defaulting Limited Partner may notmake any additional contributions of capital against such Defaulting Limited Partner’s Capital Commitment (other than to fund theManagement Fee and Partnership Expenses, which contribution such Defaulting Limited Partner shall be required to makenotwithstanding its failure to make a required capital contribution) without the written consent of the General Partner, which consentmay be granted or denied in the sole discretion of the General Partner.(i) The General Partner may waive, in whole or in part, the requirement of payment with respect to any due and unpaid capitalcontributions by a Defaulting Limited Partner pursuant to this Agreement and reduce such Defaulting Limited Partner’s CapitalCommitment and Partnership Percentage accordingly.(ii) The General Partner may extend the time for payment for a Defaulting Limited Partner of any due and unpaid capital contributionsby such Defaulting Limited Partner pursuant to this Agreement.(iii) The General Partner may declare the entire amount of a Defaulting Limited Partner’s then unfunded Capital Commitment to beimmediately due and payable.(iv) On behalf of the Partnership, the General Partner may enforce, by appropriate legal proceedings, the Defaulting Limited Partner’sobligation to make payment on the amount of any due and unpaid capital contributions by such Defaulting Limited Partner pursuant tothis Agreement or to pay the entire amount of such Defaulting Limited Partner’s then unfunded Capital Commitment.(v) Should the General Partner, in its sole discretion, elect to exercise the provisions of this paragraph 4.4(b)(v), such DefaultingLimited Partner shall pay all expenses incurred or anticipated to be incurred by the Partnership in connection with the default andinterest on the amount of the unpaid contribution to the Partnership then due at the Prime Rate plus four percent (4%) per annum (or ifless, the highest rate permitted by applicable law), such interest to accrue from the date the contribution to the Partnership was requiredto be made pursuant to this Agreement until the date the contribution is made by such Defaulting Limited Partner, unless such paymentis waived by the General Partner. The accrued interest shall be paid by the Defaulting Limited Partner to the Partnership upon paymentof such contribution. The accrued interest so paid shall not be treated as an additional contribution to the capital of the Partnership, butshall be deemed to be income to the Partnership; provided that such income shall not be allocated to the Capital Account of theDefaulting Limited Partner. Until such time as the unpaid contribution and accrued interest thereon shall have been paid by theDefaulting Limited Partner, the General Partner may elect to withhold any or all distributions to be made to such Defaulting LimitedPartner pursuant to Article 7 or Article 10 and recover any such unpaid contribution and accrued interest thereon by set off against anysuch distribution withheld.(vi) Should the General Partner, in its sole discretion, elect to exercise the provisions of this paragraph 4.4(b)(vi), the General Partnerand the nondefaulting Limited Partners (the “Optionees”), shall have the right and the option, but not the obligation, to acquire thePartnership interest of the Defaulting Limited Partner (the “Optionor”), as follows: (1) The General Partner shall notify the Optionees of the default within twenty (20) days of the expiration of the ten (10) day noticeperiod commencing upon delivery of the Default Notice. Such notice shall advise each Optionee of the portion and the price of theOptionor’s interest available to it. The portion available to each Optionee shall be a fraction, the numerator of which is its CapitalCommitment and the denominator of which is the aggregate Capital Commitments of the Optionees. The aggregate price for theOptionor’s interest shall be fifty percent (50%) of the amount of the Optionor’s Capital Account calculated as of the due date of theadditional contribution and adjusted to reflect the allocation of the appropriate proportion of the Partnership’s unrealized gains andlosses as of the due date of such defaulted contribution. The price for each Optionee shall be prorated according to the portion of theOptionor’s interest purchased by each such Optionee. The option granted hereunder shall be exercisable for a period of thirty (30) dayscommencing on the date that is thirty (30) days following the date of the initial notice of default from the General Partner to theOptionor by delivery to the Optionor of a notice of exercise of option together with a nonrecourse promissory note for the purchaseprice and a security agreement in accordance with subparagraph (5) below, which notice and documents the General Partner shallpromptly forward to the Optionor.(2) Should any Optionee not exercise its option within said thirty (30) day period provided in subparagraph (1), the General Partnershall immediately notify the other Optionees who have elected to exercise their option, which Optionees shall have the right and optionratably among them to acquire the portion of the Optionor’s interest not so acquired (the “Remaining Portion”) within thirty (30) daysof the date of the notice specified in this subparagraph (2) on the same terms as provided in subparagraph (1).(3) Any amount of the Remaining Portion not acquired by the Optionees pursuant to subparagraph (2) may be acquired by theGeneral Partner within thirty (30) days of the expiration of the thirty (30) day period specified in subparagraph (2) on the same terms asset forth in subparagraph (1); provided, however, that the General Partner may, but shall not be obligated to, make the additionalcontributions otherwise due from the Optionor with respect to the Remaining Portion so acquired (provided that the CapitalCommitment shall be adjusted to reflect any nonpayment of such additional contributions). The General Partner shall provide notice tothe Limited Partners regarding its acquisition of all or any portion of an Optionor’s interest in the Partnership pursuant to thissubparagraph (3).(4) Any amount of the Remaining Portion not acquired by the Optionees and the General Partner pursuant to subparagraphs (2) or (3)may, if the General Partner deems it in the best interest of the Partnership, be sold by the General Partner to any other investor, on termsnot more favorable to such parties than those applicable to the Optionees’ option, and upon the consent of the General Partner, anysuch third party purchaser may become a Limited Partner to the extent of the interest purchased hereunder.(5) The price due from each of the General Partner and the Optionees (and, if applicable, any third party purchaser pursuant tosubparagraph (4)) shall be payable by a noninterest bearing, nonrecourse promissory note (in such form as the General Partner shalldesignate) due upon final liquidation of the Partnership. Each such note shall be secured by the portion of the Optionor’s Partnershipinterest so purchased by its maker pursuant to a security agreement in a form designated by the General Partner and shall beenforceable by the Optionor only against such security.(6) Upon exercise of any option hereunder, each Optionee (and, if applicable, any third party purchaser pursuant to subparagraph (4))shall be obligated (A) to contribute to the Partnership that portion of the additional capital then due from the Optionor equal to the percentage of the Optionor’s interest purchased by such person and (B)except as otherwise provided in subparagraph (3), to pay the same percentage of any further contributions otherwise due from suchOptionor on the date such contributions are otherwise due. Each person who purchases a portion of the Optionor’s Partnership interestshall be deemed to have acquired such portion as of the due date of the additional capital contribution with respect to which theOptionor defaulted, and any distributions made after the due date on account of the Optionor’s interest shall be distributed among suchpurchasers (and, unless the entire interest was purchased, the Optionor) in accordance with their ultimate respective interests in theOptionor’s interest. Distributions otherwise allocable to the Optionor under the preceding sentence shall first be used to offset anydefaulted contribution of the Optionor still due to the Partnership. Upon completion of any transaction hereunder, the General Partnershall cause the schedule of partners to be amended to reflect all necessary changes resulting therefrom including, without limitation,admission of a purchaser as a Limited Partner, and adjustment of Capital Account balances, Capital Commitment amounts andPartnership Percentages as of the date of Optionor’s default to reflect the acquisition from Optionor of the appropriate pro rata portionof each such item (including, if applicable, the reduction of aggregate Capital Commitments and resulting adjustment of PartnershipPercentages in connection with any acquisition of any Remaining Portion by the General Partner pursuant to subparagraph (3)). Thepurchase and transfer of the Partnership interest of the Optionor shall occur automatically upon exercise by any Optionee or the GeneralPartner of its option hereunder, without any action by Optionor.(7) Notwithstanding the sale of any portion of an Optionor’s interest pursuant to this paragraph 4.4(b)(vi), such Optionor shall not bereleased from its unfunded Capital Commitment except as actually funded by the acquirer of any such portion of Optionor’s interest.(8) In the event that any amount of the Remaining Portion is not acquired by the Optionees, the General Partner and any third partypurchasers pursuant to paragraphs 4.4(b)(vi)(1)-(4), then, in its sole discretion, the General Partner may apply any of the remediesdescribed in paragraphs 4.4(a) and (b) to such unsold portion.(vii) The General Partner may, in its sole discretion, elect to remove such Defaulting Limited Partner from the Partnership, in whichsuch event (1) one hundred percent (100%) of the Defaulting Limited Partner’s Capital Account balance shall be forfeited andreallocated to the Capital Accounts of the non-defaulting Partners proportionally, based on, with respect to each such Partner, the ratiothat its Partnership Percentage immediately prior to such calculation bears to the aggregate Partnership Percentages of all Partners (otherthan the Defaulting Limited Partner) and (2) the Defaulting Limited Partner’s Partnership Percentage shall be reduced to zero.(viii) In addition to the foregoing, the General Partner may pursue any other remedy that the General Partner, in its sole discretion,deems advisable.(c) Notwithstanding any other provision of this Agreement, each Limited Partner (1) agrees that it will execute any instruments orperform any other acts that are or may be necessary to effectuate and carry out the transactions contemplated by this paragraph 4.4, and(2) designates and appoints the General Partner its true and lawful representative and attorney-in-fact, in its name, place, and stead tomake, execute, sign, acknowledge, deliver or file any and all instruments, documents or certificates on behalf of any Defaulting LimitedPartner in order to give effect to any remedy against such Defaulting Limited Partner (including, but not limited to, the remedies setforth in paragraph 4.4(b)). (d) The Partners agree that the General Partner’s authority and discretion to enforce any remedy against a Defaulting Limited Partner(including but not limited to the remedies set forth in this paragraph 4.4) supersede any fiduciary duties of the General Partner to suchDefaulting Limited Partner. The Partners further agree that the remedies set forth in this paragraph 4.4 are fair and reasonable in light ofthe difficulty in ascertaining the actual damages that would be incurred by the Partnership and the non-defaulting Partners as a result ofthe Defaulting Limited Partner’s failure to contribute capital when due pursuant to the terms of this Agreement.4.5 Suspension Period.(a) Notwithstanding any other provision of this Agreement, no Limited Partner shall be required to contribute capital to thePartnership in respect of its Capital Commitment during any suspension of the Investment Period except for:(i) Partnership Expenses and the payment of the Management Fee pursuant to Article 6;(ii) completion of transactions with respect to which the Partnership has entered into a binding commitment or which were in processprior to the suspension of the Investment Period;(iii) follow-on investments in the Securities of issuers in which the Partnership holds a pre-existing interest as of the date of suchproposed follow-on investment; provided that the aggregate amount of capital invested in such follow-on investments shall not exceedforty percent (40%) of aggregate Capital Commitments and no such follow-on investment shall be made later than eighteen (18) monthsfrom the date of a Suspension Event Notice, unless the Advisory Committee otherwise provides its written consent to approve suchfollow-on investments; and(iv) fulfillment of indemnification obligations to the Partnership, including, but not limited to, such Limited Partner’s obligationspursuant to paragraph 4.2(d);(b) In the event that Richard Ressler (i) is no longer a principal of the General Partner, or (ii) ceases to fulfill his time commitmentrequirement set forth in paragraph 8.3(a) (regardless of whether he continues to be a principal of the General Partner) (each, a“Suspension Event”), the General Partner shall promptly notify (and no later than five business days from the occurrence of theSuspension Event) the Limited Partners (the “Suspension Event Notice”) and the Investment Period shall be automatically suspended asof the occurrence of the Suspension Event. The Investment Period may be reinstated and the Partnership may re-commence normaloperations upon the affirmative vote of a Majority in Interest of the Limited Partners. If the Investment Period has not been reinstated bythe Limited Partners and normal Partnership operations have not re-commenced pursuant to the preceding sentence within one hundredeighty (180) days after the Suspension Event Notice, then the Investment Period shall be automatically terminated and the Principalsshall be permitted to raise a new fund or other entity with objectives similar to the Partnership. ARTICLE 5PARTNERSHIP ALLOCATIONS5.1 Allocation of Profit or Loss. Except as otherwise provided in this Article 5:(a) Profit shall initially be allocated (solely as an interim step in calculating final allocations pursuant to the remainder of thisparagraph 5.1) to the Capital Accounts of all Partners in proportion to their respective Partnership Percentages. The amount of suchProfits so apportioned to each Partner shall be finally allocated between such Partner and the General Partner as follows:(i) First, one hundred percent (100%) to the Partner in an amount equal to the allocations of Management Fees made to the Partnerpursuant to paragraph 5.1(c) that have not been restored by previous allocations made pursuant to this paragraph 5.1(a)(i) until thecumulative Profit allocated pursuant to this paragraph 5.1(a)(i) for all prior Accounting Periods equals the cumulative amount ofManagement Fees allocated to the Partner pursuant to paragraph 5.1(c) for the current Accounting Period and all prior AccountingPeriods(ii) Second,(1) The Carry Percentage of the Partnership's remaining Profit shall be allocated to the Capital Account of such Partner to the extentthat such account was previously allocated a Contingent Loss that has not been restored by previous allocations pursuant to thisparagraph 5.1(a)(ii)(1). Such Profit shall be allocated to such Partner’s Capital Account on the basis of the proportion that the unrestoredContingent Losses contained in such Partner’s Capital Account bear to the aggregate unrestored Contingent Losses contained in allPartners’ Capital Accounts. Any balance of such Carry Percentage of the Partnership’s Profit shall be allocated to the Capital Account ofthe General Partner; and(2) The percentage equal to one hundred percent (100%) less the Carry Percentage of the Partnership's remaining Profit shall beallocated to the Capital Account of such Partner.(b) Loss shall initially be allocated (solely as an interim step in calculating final allocations pursuant to this paragraph 5.1) to theCapital Accounts of all Partners in proportion to their respective Partnership Percentages. The amount of such Losses so apportioned toeach Partner shall be finally allocated between such Partner and the General Partner as follows:(i) The Carry Percentage of the Partnership’s Loss shall be allocated to the Capital Account of the General Partner.(ii) The percentage equal to one hundred percent (100%) less the Carry Percentage of the Partnership’s Loss shall be allocated to theCapital Account of such Partner.(c) Management Fees paid pursuant to paragraph 6.1 below shall be allocated to all the Partners in proportion to their respectiveManagement Fee Percentages. (d) All Idle Funds Income (net of directly associated expenses) of the Partnership for each Accounting Period shall be allocated to theCapital Accounts of all of the Partners in proportion to their respective Partnership Percentages (as modified by paragraph 3.2(c)).(e) If Additional Partners are admitted to the Partnership as Limited Partners (or increase their respective Capital Commitments)subsequent to the Initial Closing Date, then allocations of Profit and Loss (including, without limitation Partnership Expenses andManagement Fees) attributable to periods subsequent to the Initial Closing Date shall be adjusted by the General Partner as necessary to,as quickly as possible, cause the Capital Account balances of the Partners to reflect the same amounts that they would have reflected ifall Partners had been admitted to the Partnership and made all of their Capital Commitments and their respective capital contributionshad been received at the same time at the Initial Closing Date and had received allocations of Profit and Loss in accordance with Article5, all as the General Partner may in its discretion determine to be equitable.5.2 Reallocation of Contingent Losses.(a) Except as provided in paragraph 5.2(b), if, for any Accounting Period, after the allocations provided in this Article 5 have beenmade, the balance of the Capital Account of the General Partner has been reduced to less than the General Partner’s PartnershipPercentage of the sum of the balances of the Capital Accounts of all Partners, an amount of the Partnership’s Loss for such AccountingPeriod (the “Contingent Loss”) shall be reallocated from the General Partner’s Capital Account to all of the Partners’ Capital Accounts(in proportion to each Partner’s respective Partnership Percentage) so that the General Partner’s Capital Account balance is equal to theGeneral Partner’s Partnership Percentage of the sum of the balances of the Capital Accounts of all Partners. For purposes of thisparagraph 5.2, the General Partner’s Capital Account shall not be deemed to include any amounts attributable to a Limited Partner’sinterest held by the General Partner, but shall be deemed to include any outstanding obligations by the General Partner to contributecapital to the Partnership.(b) The amount of Contingent Loss that would otherwise be reallocated from the General Partner’s Capital Account under paragraph5.2(a) shall instead remain allocated to the General Partner’s Capital Account until allocations of Loss to the General Partner’s CapitalAccount pursuant to this paragraph 5.2(b) equal the amount of distributions, if any, that the General Partner would have to return to thePartnership under paragraph 10.5 if the Partnership were then in liquidation.5.3 Regulatory Allocations.(a) This Agreement is intended to comply with the safe harbor provisions set forth in Treasury Regulation 1.704-1(b) and theallocations set forth in paragraph 5.3(b) (the “Regulatory Allocations”) are intended to comply with certain requirements of TreasuryRegulation Section 1.704-1(b). If the Regulatory Allocations result in allocations being made that are inconsistent with the manner inwhich the Partners intend to divide Partnership Profit and Loss as reflected in paragraphs 5.1 and 5.2, the General Partner shall use itsbest efforts to adjust subsequent allocations of any items of profit, gain, loss, income or expense such that the net amount of theRegulatory Allocations and such subsequent special adjustments to each Partner is zero.(b) The allocations provided in this Article 5 shall be subject to the following exceptions:(i) Any loss or expense otherwise allocable to a Limited Partner that exceeds the positive balance in such Limited Partner’s CapitalAccount shall instead be allocated first to all Partners who have positive balances in their Capital Accounts in proportion to their respective Partnership Percentages, and when all Partners’ Capital Accountshave been reduced to zero, then to the General Partner; income shall first be allocated to reverse any loss allocated under this paragraph5.3(b)(i), in reverse order of such loss allocations, until all such prior loss allocations have been reversed.(ii) If any Limited Partner unexpectedly receives any adjustments, allocations, or distributions described in Treasury RegulationSection 1.704-1(b)(2)(ii)(d)(4) through (d)(6), which causes or increases a deficit balance in such Limited Partner’s Capital Account,items of Partnership income and gain shall be specially allocated promptly to such Limited Partner in an amount and manner sufficientto eliminate the deficit balance in its Capital Account created by such adjustments, allocations, or distributions.(iii) For purposes of this paragraph 5.3(b), the balance in a Partner’s Capital Account shall take into account the adjustments providedin Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4) through (d)(6).5.4 Income Tax Allocations.(a) Except as otherwise provided in this paragraph or as otherwise required by the Code and the rules and Treasury Regulationspromulgated thereunder, a Partner’s distributive share of Partnership income, gain, loss, deduction, or credit for income tax purposesshall be the same as is entered in the Partner’s Capital Account pursuant to this Agreement.(b) In accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss and deduction with respectto any asset contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to takeaccount of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its initialAdjusted Asset Value and to comply with the special allocation requirements of Code Section 704.(c) If the Adjusted Asset Value of any Partnership asset is adjusted pursuant to the terms of this Agreement, subsequent allocations ofincome, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such assetfor federal income tax purposes and its Adjusted Asset Value in the same manner as under Code Section 704(c) and the TreasuryRegulations thereunder.ARTICLE 6MANAGEMENT FEE; PARTNERSHIP EXPENSES6.1 Management Fee.(a) Commencing with the Activation Date, the Management Company (as defined in paragraph 8.1) shall be compensated on aquarterly basis for services rendered during the term of the Partnership by the payment in advance by the Partnership in cash to theManagement Company on the first day of each fiscal quarter (or portion thereof) of a management fee (the “Management Fee”). TheManagement Fee for each fiscal year shall be payable in advance on each Fee Date.(b) The Management Fee for each Fee Date (prior to the adjustments described in paragraph 6.1(c)) shall be an amount equal to thesum of the individual amounts calculated by multiplying each Partner’s Management Fee Percentage by such Partner’s CapitalCommitment. Notwithstanding the foregoing, (i) the Management Fee for each of the Partnership’s first and last fiscal quarters shall beproportionately reduced based upon the ratio that the number of days in each such period bears to ninety (90), (ii) an additional Management Fee shall be payable upon the date of admission or increase in Capital Commitment of any Additional Partneradmitted or increasing such Additional Partner’s Capital Commitment subsequent to the Initial Closing Date to reflect the increasedCapital Commitments calculated as if such Additional Partner had been admitted to the Partnership as of the Initial Closing Date with aCapital Commitment equal to each such Additional Partner’s Capital Commitment immediately following such admission or increase,and (iii) for each period of four successive fiscal quarters commencing on or after the sixth anniversary of the Activation Date, theManagement Fee Percentage (prior to the adjustments described in paragraph 6.1(c)) shall be reduced by ten percent (10%) of theoriginal Management Fee Percentage annually, until the Management Fee Percentage is reduced to a percentage that is equal to sixtypercent (60%) of the original Management Fee Percentage (i.e., an original annual rate of 2.5% will not be reduced below 1.5%);provided that the Management Fee Percentage shall be reduced to a percentage equal to fifty percent (50%) of the original ManagementFee Percentage (i.e., an original annual rate of 2.5% will be reduced to 1.25%) during the first one-year extension of the Partnershipterm pursuant to paragraph 10.1 and the Management Fee Percentage thereafter shall be zero percent (0%).(c) The Management Fee otherwise payable by the Partnership to the Management Company pursuant to paragraph 6.1(a) for a fiscalquarter shall be offset by the following amounts:(i) an amount equal to one hundred percent (100%) of the amount of any cash or other compensation paid as directors, consulting,management service, advisory, consultant, transaction, commitment, breakup or broken deal fees or similar fees to the General Partner,the Management Company, the Principals or any of their respective Affiliates (expressly excluding any such amounts relating to anyoperators in residence or operating partners of the General Partner or the Management Company) during the immediately precedingquarter by or in connection with any Portfolio Company or any company in which the Partnership expected to invest but issuance ofSecurities was not consummated (net of any unreimbursed expenses of the General Partner, the Management Company or thePrincipals). For the purposes of this paragraph 6.1(c), all non-cash compensation in the form of options, warrants or other similar rightsreceived by any parties set forth in this paragraph 6.1(c) shall offset Management Fees only at such time as they are valued by thePartnership pursuant to this paragraph 6.1(c). All non-cash compensation shall be valued upon the earliest to occur of (a) thedistribution to the Partners of any Securities of the Portfolio Company issuing such non-cash compensation, (b) the exercise of suchoptions, warrants or other similar rights, or (c) the date of dissolution of the Partnership. The value of options and warrants shall be, ona per share basis, the difference, as of the valuation date, between the exercise price and the fair market value of the Securities on suchdate, net of any applicable taxes (determined by reference to the Applicable Tax Rate) deemed attributable to such option or warrant.No value shall be attributable to an option or warrant if the securities are of a Portfolio Company that has been written off or writtendown to a nominal amount as of the valuation date; and(ii) an amount equal to any private placement or finder’s fees paid by the Partnership during the immediately preceding quarter inconnection with the formation and organization of the Partnership pursuant to paragraph 6.2(c).(d) To account for the fact that the Partnership may pay a reduced management fee with respect to certain Partners (such foregoneamount shall be referred to as the “Management Fee Savings”), the General Partner may, from time to time in its sole discretion (andnotwithstanding anything in Article 7 to the contrary) cause the Partnership to return to those certain Partners that are paying a reduced management fee the respective capital contributions made by such Partners to the Partnership, until, as of any time, such aggregatereturns to such Partners equal its cumulative amount of Management Fee Savings as of such time. Any amounts distributed to suchPartners pursuant to this paragraph 6.1(d) shall be disregarded for purposes of paragraphs 4.2 and 4.3 and Article 7, and shall notincrease such Partners’ unfunded Capital Commitment (and, for purposes of Article 7, any corresponding capital contribution of suchPartners shall also be disregarded).6.2 Expenses.(a) From the Management Fee, the Management Company shall bear all normal operating expenses incurred in connection with themanagement of the Partnership, the General Partner and the Management Company, except for those expenses borne directly by thePartnership as set forth in subparagraphs (b), (c) and (d) below and elsewhere herein. Such normal operating expenses to be borne bythe Management Company shall include, without limitation, expenditures on account of salaries, wages, travel and other expenses ofemployees of the General Partner or the Management Company, overhead and rentals payable for space used by the General Partner (orits designee) or the Partnership, office expenses and expenses incurred in connection with research and analysis of industry sectors inwhich the Partnership invests and identifying potential investment opportunities (other than those borne by the Partnership as providedin paragraph 6.2(b) below). The General Partner shall bear and pay any such expenses that are required to be borne and paid by theManagement Company pursuant to this paragraph 6.2(a) and elsewhere herein to the extent not so borne and paid by the ManagementCompany, and in no event will any such expense be borne by the Partnership.(b) The Partnership shall bear all costs and expenses (in each case to the extent not borne by a Portfolio Company or prospectivePortfolio Company) incurred in the holding, purchase, sale or exchange of Securities (whether or not ultimately consummated),including, but not by way of limitation, private placement fees, finder’s fees, interest on and fees and expenses arising out of borrowedmoney, real property or personal property taxes on investments, including documentary, recording, stamp and transfer taxes, brokeragefees or commissions, or other similar charges (including any merger fees payable to third parties), travel expenses, legal fees andexpenses, expenses incurred in connection with the investigation, prosecution or defense of any claims by or against the Partnership,including claims by or against a governmental authority, audit and accounting fees, consulting fees relating to investments or proposedinvestments, taxes applicable to the Partnership on account of its operations, fees incurred in connection with the maintenance of bankor custodian accounts, and all expenses incurred in connection with the registration of the Partnership’s Securities under applicablesecurities laws or regulations; provided, however, that any placement fees and related expenses payable with respect to the sale oflimited partnership interests in the Partnership shall reduce the management fee payable to the General Partner in accordance withparagraph 6.1(c)(ii). The Partnership shall also bear expenses incurred by the General Partner in serving as the tax matters partner orPartnership Representative (as described in paragraph 11.6), any sales or other taxes or government charges which may be assessedagainst the Partnership, the cost of liability and other premiums for insurance protecting the Partnership, the General Partner, theManagement Company, the Advisory Committee, and their respective partners, members, stockholders, managers, principals, officers,directors, trustees, employees, agents or affiliates in connection with the activities of the Partnership, legal fees and expenses associatedwith reporting, registration or compliance requirements of the General Partner or the Management Company imposed by the UnitedStates Securities and Exchange Commission solely in connection with the Partnership, all out-of-pocket expenses of preparing and distributing reports to Partners, out-of-pocket expenses associated with Partnership communications withPartners, including preparation and distribution of annual, quarterly or other reports to the Partners, costs incurred by the Partnership,the General Partner, or the Management Company in connection with Partnership meetings or Advisory Committee matters, all legal,accounting, tax, consulting and professional services fees and expenses (including tax preparation) relating to the Partnership and itsactivities, bookkeeping services, fees and expenses relating to outsourced finance, administration, accounting and back-office services,costs and expenses relating to litigation and threatened litigation involving the Partnership, including the Partnership’s indemnificationobligation pursuant to this Agreement, and all expenses that are not normal operating expenses and all other expenses properlychargeable to the activities of the Partnership. Notwithstanding the foregoing, the Managing Directors and other personnel of theGeneral Partner shall not use chartered aircraft that is expensed to the Partnership unless either (i) it is the lowest cost option available,or (ii) only the amount corresponding to the cost of commercial airfare for similar travel is allocated as an expense to the Partnership.(c) The Partnership shall bear all organizational, syndication and marketing costs, fees and expenses incurred by or on behalf of theGeneral Partner or Management Company in connection with the formation and organization of the Partnership and the General Partner(including the definitive agreements related thereto), including legal and accounting fees and expenses incident thereto; provided thatthe amount of such costs, fees and expenses that are borne by the Partnership shall not exceed in the aggregate five hundred thousanddollars ($500,000).(d) The Partnership shall bear all liquidation costs, fees and expenses incurred by the General Partner (or its designee) in connectionwith the liquidation of the Partnership and General Partner at the end of the Partnership’s term, specifically including but not limited tolegal and accounting fees and expenses.(e) Each of the Partnership and the Management Company agree to reimburse the other as appropriate to give effect to the provisionsof this paragraph 6.2 in the event that either such party pays an obligation that is properly the responsibility of the other.(f) To the extent that any expenses borne by the Partnership pursuant to subparagraphs (b), (c), (d) and (e) above also benefit anotherinvestment entity managed by the General Partner or its Affiliates, such expenses shall be allocated among the Partnership and the otherinvestment entity in a manner reasonably determined by the General Partner, (i) pro rata in proportion to the aggregate capitalcommitments of the Partnership together with any such funds, (ii) pro rata in proportion to relative investment amounts, where theexpenses relate to a particular transaction in which the applicable funds participate, or (iii) by another reasonable method of allocatingexpenses.(g) Notwithstanding anything herein to the contrary, any Partnership Expenses borne by the Partnership pursuant to subparagraphs(b), (c), (d) and (e) above shall be reasonable.ARTICLE 7WITHDRAWALS BY AND DISTRIBUTIONS TO THE PARTNERS 7.1 Interest. Except as otherwise provided in this Agreement, no interest shall be paid to any Partner on account of its interest in thecapital of or on account of its investment in the Partnership.7.2 Withdrawals by the Partners. No Partner may withdraw any amount from its Capital Account unless such withdrawal is madepursuant to this Article 7 or Article 10.7.3 Partners’ Obligation to Repay or Restore. Except as required by law or the terms of this Agreement, no Partner shall be obligatedat any time to repay or restore to the Partnership all or any part of any distribution made to it from the Partnership in accordance withthe terms of this Article 7.7.4 Tax Distributions. Within ninety (90) days after the end of each calendar year during the Partnership term, the Partnership shalldistribute to each Partner in cash an amount up to the excess, if any of (a) the Applicable Tax Rate multiplied by the net taxable incomeallocated to such Partner as a result of such Partner’s ownership of an interest in the Partnership for such calendar year, over (b) all priorcash distributions made pursuant to this paragraph 7.4 or paragraph 7.5 during such calendar year (except for any such distributionsmade pursuant to this paragraph 7.4 with respect to a prior calendar year). Notwithstanding the foregoing, (a) the General Partner shallhave no obligation to make the foregoing distributions if the total amount to be distributed to all Partners would be less than one milliondollars ($1,000,000) and (b) the General Partner shall have the authority, in its sole discretion, to make good faith estimates of amountsexpected to be distributable pursuant to the first sentence of this paragraph 7.4 with respect to a given calendar year and to distributesuch estimated amounts to the Partners as advances from time to time during such calendar year. The “Applicable Tax Rate” shall meanthe highest state, federal and local income, self-employment and Medicare tax rates then applicable to individuals resident in the Stateof California, applied by taking into account the character of the taxable income in question (i.e., capital gain, ordinary income, etc.).Distributions made pursuant to this paragraph 7.4 shall be treated as advances against distributions payable pursuant to paragraph 7.5and shall reduce amounts otherwise distributable to Partners pursuant to paragraph 7.5 as necessary to achieve the same result as wouldpertain if all distributions made pursuant to paragraphs 7.4 and 7.5 had been made pursuant to paragraph 7.5.7.5 Discretionary Distributions.(a) The General Partner may make distributions of cash or Marketable Securities from time to time. Any such distribution shall beapportioned (solely as an interim step in calculating final distributions pursuant to the remainder of this paragraph 7.5(a)) to all Partnersin proportion to their respective Partnership Percentages. The amount of such distributions so apportioned to each Partner shall befinally distributed between such Partner and the General Partner as follows:(i) Prior to the time that such Partner has received distributions pursuant to this subparagraph (a)(i) or deemed distributed hereunderpursuant to paragraph 7.4 (with any in-kind distributions valued at the time of distribution in accordance with paragraph 12.1) equal tothe sum of the capital contributions such Partner has previously made to the Partnership (“Payback”), all such distributions shall bemade to such Partner until Payback has been achieved. The determination of whether Payback has occurred shall be made at the time ofeach distribution.(ii) Subsequent to Payback, all such distributions shall be made in a percentage equal to one hundred percent (100%) less the CarryPercentage to such Partner and the Carry Percentage to the General Partner. (b) Notwithstanding paragraph 7.5(a), the General Partner may make any distribution described in this paragraph 7.5 to all Partners inproportion to their respective Partnership Percentages; provided, however, that the General Partner may make subsequent distributionsto the General Partner to the extent of any distribution that would have been made to the General Partner but for a distribution madepursuant to this paragraph 7.5(b).(c) Whenever more than one type of Securities is being distributed in kind in a single distribution or whenever more than one class ofSecurities of a Portfolio Company (or a portion of a class of such Securities having a tax basis per share or unit different from otherportions of such class) are distributed in kind by the Partnership, each Partner shall receive its ratable portion of each type, class orportion of such class of Securities distributed in kind (except to the extent that a disproportionate distribution is necessary to avoiddistributing fractional shares).(d) Securities distributed in kind shall be subject to such conditions and restrictions as the General Partner determines are legallyrequired or appropriate. Subject to paragraph 7.5(g), whenever types or classes of Securities are distributed in kind, each Partner shallreceive its ratable portion of each type or class of Securities distributed in kind.(e) Notwithstanding any other provision of this paragraph 7.5, prior to the dissolution of the Partnership, the Partnership shall notmake a distribution of Nonmarketable Securities.(f) Immediately prior to any distribution in kind, the Deemed Gain or Deemed Loss of any Securities distributed shall be allocated tothe Capital Accounts of all Partners as Profit or Loss pursuant to Article 5.(g) Notwithstanding any other provision of this paragraph 7.5 to the contrary, no distribution shall be made to any Partner to theextent such distribution would increase or result in a negative Capital Account balance for such Partner and the portion of suchdistribution otherwise allocable to such Partner may be made to the other Partners in proportion to and in the amounts of the positivebalance, if any, in their respective Capital Accounts.7.6 Withholding Obligations.(a) If and to the extent the Partnership is required by law, including FATCA (as defined below), (as determined in good faith by theGeneral Partner) to make payments (“Tax Payments”) with respect to any Partner in amounts required to discharge any legal obligationof the Partnership or the General Partner to make payments to any governmental authority with respect to any federal, state, local orforeign tax liability of such Partner arising as a result of such Partner’s interest in the Partnership, then the amount of any such TaxPayments shall be deemed to be a loan by the Partnership to such Partner, which loan shall: (i) be secured by such Partner’s interest inthe Partnership, (ii) bear interest at the Prime Rate, and (iii) be payable upon demand. Amounts paid in respect of interest on such loanshall be treated as Profit of the Partnership and shall not be treated as a capital contribution by such Partner. The General Partner shallpromptly notify each Limited Partner of any Tax Payments made with respect to such Limited Partner.(b) If and to the extent the Partnership is required to make any Tax Payments with respect to any distribution to a Partner, either (i)such Partner’s proportionate share of such distribution shall be reduced by the amount of such Tax Payments (provided that suchPartner’s Capital Account shall be adjusted pursuant to paragraph 14.4 for such Partner’s full proportionate share of the distribution), or(ii) such Partner shall promptly pay to the Partnership prior to such distribution an amount of cash equal to such Tax Payments. In theevent a portion of a distribution in kind is retained by the Partnership pursuant to clause (i), such retained Securities may, in the sole discretion of the General Partner, either (1) be distributed to the Partners inaccordance with the terms of this Article 7 including this paragraph 7.6(b), or (2) be sold by the Partnership to generate the cashnecessary to satisfy such Tax Payments. If the Securities are sold, then for purposes of income tax allocations only under thisAgreement, any gain or loss on such sale or exchange shall be allocated to the Partner to whom the Tax Payments relate.(c) Each Limited Partner will, as applicable, take such actions as are required to establish to the reasonable satisfaction of the GeneralPartner that the Limited Partner is (i) not subject to the withholding tax obligations imposed by Section 1471 of the Code and (ii) notsubject to withholding tax obligations imposed by Section 1472 of the Code. In addition, each Limited Partner will assist the Partnershipand the General Partner with any applicable information reporting or other obligation imposed on the Partnership, the General Partner,or their respective Affiliates, pursuant to FATCA that is attributable to such Limited Partner. As used herein, “FATCA” means theForeign Account Tax Compliance provisions enacted as part of the U.S. Hiring Incentives to Restore Employment Act and codified inSections 1471 through 1474 of the Code, all rules, regulations and other guidance issued thereunder, and all administrative and judicialinterpretations thereof.ARTICLE 8MANAGEMENT DUTIES AND RESTRICTIONS8.1 Management.(a) The General Partner shall have the sole and exclusive right to manage, control, and conduct the affairs of the Partnership and to doany and all acts on behalf of the Partnership, including, without limitation, exercise rights to elect to adjust the tax basis of Partnershipassets, revoke such elections, and make such other tax elections as the General Partner shall deem appropriate.(b) The General Partner will enter into, by itself or on behalf of the Partnership, an agreement (and any modifications, amendmentsextensions, renewal, or termination thereof) with OCV Management, LLC (the “Management Company”), a relying adviser of OFSCapital Management, an investment adviser registered under the U.S. Investment Advisers Act of 1940, as amended (the “AdvisersAct”), for the provision of certain advisory, management, administrative, operational or other services with respect to the Partnership onterms to be determined by the General Partner; provided, that (i) the General Partner shall remain ultimately responsible for the overallmanagement of the Partnership and for its duties and responsibilities hereunder, and (ii) such agreement shall not contain any term orprovision that is inconsistent with this Agreement or that would impose any additional cost or expense on the Partnership solely byreason of any term in such agreement (but, for the avoidance of doubt, may include the assignment to such entity or entities of all orany portion of the Management Fee otherwise payable to the General Partner pursuant to paragraph 6.1).(c) The Limited Partners hereby acknowledge that the General Partner may be prohibited from taking action for the benefit of thePartnership: (i) due to confidential information acquired or obligations incurred in connection with an outside activity permitted to bedone by the General Partner, the Management Company, or any of their respective members, managers, employees, or Affiliatespursuant to this Agreement; (ii) in consequence of any member, manager, employee, agent or Affiliate of the General Partner orManagement Company serving as an officer, director, consultant, agent, advisor or employee of a Portfolio Company; or (iii) inconnection with activities undertaken by the General Partner, the Management Company, or any of their respective members, managers, employees, or Affiliates prior to the Initial Closing Date. NoPerson shall be liable to the Partnership or any Partner for any failure to act for the benefit of the Partnership in consequence of aprohibition described in the preceding sentence.8.2 No Control by the Limited Partners; No Withdrawal. No Limited Partner, in its capacity as such, shall take any part in the controlor management of the affairs of the Partnership nor shall any Limited Partner have any authority to act for or on behalf of thePartnership or to vote on any matter relative to the Partnership and its affairs except as is specifically permitted by this Agreement.Except as specifically set forth in this Agreement, no Limited Partner shall have the right or power to: (a) withdraw or reduce itscontribution to the capital of the Partnership or reduce its Capital Commitment; (b) to the fullest extent permitted by law, cause thedissolution and winding up of the Partnership; or (c) demand or receive property in return for its capital contributions. For purposes ofthe Act, the Limited Partners shall constitute a single class or group of limited partners.8.3 Existing Funds; Successor Funds; Other Activities and Investment Opportunities.(a) Except as otherwise agreed to by the Advisory Committee or as provided below, each Principal shall, so long as he shall remain amanager of the General Partner, devote such time as is reasonably necessary to effectively manage the affairs of the Partnership;provided, that until the expiration or the termination of the Investment Period, Mark Yung will devote substantially all of his businesstime to the affairs of the Partnership, his pre-existing engagements and obligations that are not competitive with the Partnership, theParallel Funds (as defined below), any Co-Investment Funds (as defined below) and any successor fund permitted by the next sentence.The foregoing notwithstanding, each Principal may (i) form and operate one or more Parallel Funds (as defined in paragraph 8.3(b)below) and one or more Co-Investment Funds (as defined in paragraph 8.3(d)), and (ii) form a successor investment fund with aninvestment focus and strategy similar to the Partnership (a “Successor Fund”) on or after such time as at least seventy-seven and one-half of one percent (77.5%) of the Partnership’s Committed Capital has been invested, committed or reserved for investment in portfoliocompanies, or applied, committed or reserved for Partnership working capital or expenses (“Fully Invested”). The restriction set forth inthe first sentence of this paragraph 8.3(a) shall not apply following the earlier of (A) the expiration or termination of the InvestmentPeriod and (B) the date upon which the Partnership is Fully Invested; provided that at all times each Principal, for so long as he shallremain a manager of the General Partner, shall devote such time and effort as is reasonably necessary to diligently manage thePartnership’s business and affairs.(b) Pursuant to paragraph 8.3(a)(i), the General Partner and the Principals may form and serve as general partner (or in a similarmanagement role) of (i) one or more investment partnerships or similar entities to accommodate the tax, regulatory or other specialneeds of investors who otherwise would invest as Limited Partners of the Partnership on substantially similar terms, including economicterms, as the Partnership (collectively, the “Side Funds”) and (ii) one or more entities organized to accommodate the capital investmentof the members of the General Partner and the Management Company and their employees, consultants and parties expected to have astrategic or other important benefit to the Partnership (collectively, the “Affiliates Fund” and together with the Side Funds, the “ParallelFunds”). In the event that any Parallel Fund is formed, upon each purchase of Securities (other than short term obligations) by thePartnership, each Parallel Fund will simultaneously invest on the same terms and at the same price as the Partnership pro rata inaccordance with the remaining available capital of each such fund; provided, however, that a Parallel Fund shall not be required tomake any such investment in a Security (i) if the General Partner receives from the issuer thereof a written notice to the effect that the issuer will not permit such Parallel Fund to invest on the same terms as the Partnership, or (ii) where such investment is not permitted byapplicable law or, for non-Affiliates Funds only, by the terms of the governing agreement of such Parallel Fund. Each Parallel Fundshall also dispose of each such Security at substantially the same time and on substantially the same terms as the Partnership. Each ofthe Limited Partners hereby consents and agrees to the activities and investments identified in subparagraph (a) above and in thissubparagraph (b) and further consents and agrees that neither the Partnership nor any of its Partners shall have any rights in or to suchactivities or investments, or any profits derived therefrom.(c) Notwithstanding any provision herein, in the event that the General Partner determines that the number of “beneficial owners” ofthe Partnership equals or exceeds seventy-five (75) (as defined and calculated pursuant to Section 3(c)(1) of the Investment CompanyAct of 1940, as amended (the “Company Act”), the General Partner shall have the option, at any time subsequent to such determinationand exercisable by the General Partner by notice to the Limited Partners, to form a Parallel Fund pursuant to the terms of this clause (c)for purposes of maintaining exemptions from registration under the Company Act (the “Qualified Purchaser Fund”).(i) Upon the formation of the Qualified Purchaser Fund, the General Partner may elect that the interest of any “qualified purchaser”(as defined in Section 2(a)(51) of the Company Act) (a “Qualified Purchaser Limited Partner”) in the Partnership be automaticallyconverted to an equivalent interest in the Qualified Purchaser Fund and each Qualified Purchaser Limited Partner that becomes a limitedpartner in the Qualified Purchaser Fund shall automatically cease to be a limited partner in the Partnership; provided, that the GeneralPartner has reasonably determined after consultation with the Partnership’s counsel that such conversion is not reasonably likely toresult in an adverse effect with respect to such Qualified Purchaser Limited Partner. Such conversion shall occur at the time of notice bythe General Partner to such Qualified Purchaser Limited Partner, and shall be effected by a transfer of such Qualified Purchaser LimitedPartner’s indirect interest in each of the Partnerships’ assets and liabilities to the Qualified Purchaser Fund in return for limitedpartnership interests in the Qualified Purchaser Fund followed by a distribution by the Partnership of such limited partnership interestsin the Qualified Purchaser Fund to such Qualified Purchaser Limited Partner in full redemption of such Qualified Purchaser LimitedPartner’s interests in the Partnership. A portion of the General Partner’s interest in the Partnership shall likewise be converted to asimilar interest in the Qualified Purchaser Fund as necessary to cause the General Partner to have the same percentage interests in eachof the Partnership and the Qualified Purchaser Fund.(ii) The initial capital account balances in the Qualified Purchaser Fund of each Qualified Purchaser Limited Partner placed in theQualified Purchaser Fund shall be equal to such Qualified Purchaser Limited Partner’s capital account balances in the Partnershipimmediately before such conversion. Each Qualified Purchaser Limited Partner placed in the Qualified Purchaser Fund shall have thesame duties and obligations to the Qualified Purchaser Fund as set forth in the Partnership Agreement and under applicable law,including, without limitation, the obligation to contribute its remaining Capital Commitment to the Qualified Purchaser Fund instead ofthe Partnership. Each Qualified Purchaser Limited Partner hereby agrees to execute any instruments or perform any other acts that are ormay be necessary to effectuate and carry out the transactions contemplated by this clause (ii) and otherwise authorized under thisAgreement. In addition, each Qualified Purchaser Limited Partner hereby designates and appoints the General Partner its true and lawfulattorney, in its name, place and stead to make, execute and sign any and all documents necessary or appropriate to consummate andimplement the transactions contemplated by this clause (ii) and otherwise authorized under this Agreement, including, without limitation, thelimited partnership agreement of the Qualified Purchaser Fund and any Subscription Agreement relating to the Qualified PurchaserFund.(d) Each Limited Partner hereby agrees that the General Partner may offer the right to participate in investment opportunities of thePartnership to other private investors, groups, partnerships or corporations, including, without limitation, any Limited Partner and anySuccessor Funds managed by one or more Affiliates of the General Partner, whenever the General Partner, in its sole and absolutediscretion, so determines; provided, however, that none of the General Partner, the Principals, the Management Company, any of theirrespective employees nor any of their respective Affiliates (the “GP Group”) shall invest personally, or through any entity (other than aSuccessor Fund) in which any such person has investment decision making authority or management control, in Securities of anyPortfolio Company in which such person has not previously invested except (x) through a Parallel Fund or a co-investment vehiclemanaged by the General Partner or the Principals to invest in the Co-Investment Opportunities of the Partnership formed pursuant toparagraph 8.3(a)(i) (a “Co-Investment Fund”); provided that such investments through a Co-Investment Fund shall be disclosed to theAdvisory Committee, (y) where the Securities of such Person are at the time of such investment Marketable Securities, or (z) where suchinvestment has been approved by the Advisory Committee. Notwithstanding the foregoing, for so long as the Partnership has adequatereserves to make investments in issuers in which it does not then hold an interest or until the expiration or suspension of the InvestmentPeriod, the Principals shall present to the Partnership all investment opportunities of which they become aware which are within thePartnership’s investment criteria (for the avoidance of doubt, investments permitted under paragraph 8.3(e) shall not be consideredwithin the Partnership’s investment criteria). A “Co-Investment Opportunity” shall mean (i) an opportunity to invest in a portfoliocompany concurrently with the Partnership to the extent of the available excess capacity over the Partnership’s desired allocation, and(ii) an opportunity to participate in a follow-on investment opportunity of the Partnership to the extent that the Partnership elects not toparticipate, in each case as determined in the sole discretion of the General Partner.(e) Without the prior consent of the Advisory Committee, none of the GP Group shall invest, except through a Parallel Fund that is co-investing with the Partnership in accordance with paragraph 8.3(b), through a Co-Investment Fund or through a Successor Fund, in anySecurities of any private company in which neither such party nor the Partnership then holds an investment if such Securities would bewithin the Partnership’s investment criteria.(f) Without the consent of the Advisory Committee, the Partnership may not purchase Securities from or sell Securities to any of theGP Group; provided, however, following the final admission of Limited Partners pursuant to paragraph 3.2(b), the Partnership maypurchase Securities from or sell Securities to a Parallel Fund at cost for the purpose of allocating then existing Securities between suchentities in proportion to their respective available capital.8.4 Investment Restrictions.(a) Without the consent of the Advisory Committee, the General Partner may not incur indebtedness on behalf of the Partnership, orguaranty indebtedness of Portfolio Companies, in an aggregate amount exceeding ten percent (10%) of the Partnership’s CommittedCapital (determined on a cost basis at the time of investment); provided, however, that (i) no such borrowing or guaranty shall be madeto the extent that any Limited Partner (or its equity owners) would be required to recognize unrelated business taxable income under Section 512 ofthe Code or unrelated debt-financed income under Section 514 of the Code, and (ii) without the consent of the Advisory Committee, nosuch borrowing may be made from the General Partner or the Principals.(b) In the event that the sum of the capital commitments of all ERISA Partners equals or exceeds twenty-five percent (25%) of thecapital commitments of all Limited Partners, the General Partner shall use its reasonable best efforts to operate the Partnership such thatit qualifies as a “venture capital operating company” under the DOL Regulations.(c) Without the approval of the Advisory Committee, the Fund may not invest in any portfolio company in which the General Partner,the Principals, or any of their affiliates, or any entity managed or operated or controlled by any of them, holds an interest.(d) Without the prior approval of the Advisory Committee, no more than ten percent (10%) of the Partnership’s Committed Capital(determined on a cost basis at the time of investment) may be invested in publicly-traded Securities (excluding (i) private placements ofpublic company securities, (ii) Securities which were not publicly traded at the time of such investment, (iii) Securities acquired in a“going private” transaction or series of transactions and (iv) Money Market Fund Investments).(e) Without the prior approval of the Advisory Committee, no more than twenty-five percent (25%) of the Partnership’s CommittedCapital (determined on a cost basis at the time of investment) may be invested in the Securities of any single Portfolio Company,including any Affiliates of such Portfolio Company.(f) The aggregate cost basis of Portfolio Company investments made by the Partnership, whether or not realized, may not exceed onehundred fifteen percent (115%) of the Partnership’s Committed Capital.(g) The General Partner shall use its reasonable efforts to operate the Partnership in a manner that will not cause any Partner subject toSection 511 of the Code to recognize unrelated business taxable income under Section 512 of the Code or unrelated debt-financingincome under Section 514 of the Code (“UBTI”); provided, however, that the Partnership may, subject to paragraph 8.4(a), borrowmoney pending the due date of a capital call so long as such borrowing would be fully repaid promptly following the delivery of capitaldue in connection with such capital call; and provided further, that the operation of paragraph 6.1(c) shall be deemed not to violate thiscovenant.(h) The General Partner shall use its reasonable best efforts to conduct the affairs of the Partnership so as to avoid having thePartnership, or any Partner or partner or member thereof, treated as engaged in a trade or business within the United States for purposesof Sections 871, 875, 882, 884 and 1446 of the Code or generate effectively connected income as defined in Section 864(c) of theCode; provided, that the operation of paragraph 6.1(c) shall be deemed not to violate this covenant.(i) Without the consent of the Advisory Committee, not more than ten percent (10%) of the Partnership’s Committed Capital shall beinvested in Foreign Entities. For purposes of this subparagraph (d), a “Foreign Entity” shall be any entity with a majority of its assets oroperations located outside of the United States or Canada, other than any entity in which either (i) a majority of its assets, (ii) a majorityof its operations, (iii) its principal executive office, or (iv) its jurisdiction of organization is within the United States or Canada. (j) Without the consent of the Advisory Committee, the General Partner shall not cause the Partnership to invest in any otherinvestment fund (excluding investments in money market or similar funds) if such investment would cause the Limited Partners toeffectively incur any management fee expenses or any allocation of “carried interest” on investment gains in excess of the levels setforth herein (it being intended that the foregoing be permitted to allow the General Partner either to invest in an investment fund whichis free of management fees and “carried interest”, or to adhere to the foregoing restriction by reducing an appropriate amount of suchitems at the level of the Partnership).(k) The Partnership shall not invest in any entity if such investment is actively opposed by such entity’s board of directors or othergoverning body at the time of such proposed investment.(l) The Partnership shall not make investments in a Portfolio Company the principal business of which is the passive ownership,development or management of real estate.(m) The General Partner shall use its reasonable efforts, based upon the information available to it from time to time, to avoid causingthe Partnership to make an investment in any foreign corporation that is likely to become a direct or indirect investment in a passiveforeign investment company (“PFIC”) within the meaning of Section 1297 of the Code, unless the PFIC has agreed to provide thestatements and information necessary to enable the Partnership to make (and it does so make) a “qualified electing fund” election withinthe meaning of Section 1295 of the Code with respect to such PFIC.ARTICLE 9INVESTMENT REPRESENTATION AND TRANSFEROF PARTNERSHIP INTERESTS9.1 Investment Representation of the Limited Partners. This Agreement is made with each of the Limited Partners in reliance uponeach Limited Partner’s representation to the Partnership, which by executing this Agreement each Limited Partner hereby confirms, thatits interest in the Partnership is to be acquired for investment, and not with a view to the sale or distribution of any part thereof, and thatit has no present intention of selling, granting participation in, or otherwise distributing the same, and each Limited Partner understandsthat its interest in the Partnership has not been registered under the Securities Act and that any transfer or other disposition of the interestmay not be made without registration under the Securities Act or pursuant to an applicable exemption therefrom. Each Limited Partnerfurther represents that it does not have any contract, undertaking, agreement, or arrangement with any Person to sell, transfer, or grantparticipations to such Person, or to any third Person, with respect to its interest in the Partnership.9.2 Qualifications of the Limited Partners. Each Limited Partner represents that it is an “accredited investor” within the meaning ofthat term as defined in Regulation D promulgated under the Securities Act.9.3 Transfer by General Partner. The General Partner shall not sell, assign, mortgage, pledge or otherwise dispose of its interest in thePartnership or in its capital assets or property without the prior written consent of a Majority in Interest of the Limited Partners.Admissions of new members of the General Partner or the transfer of interests in the General Partner by its members shall not bedeemed to be a sale or other disposition of the General Partner’s interest in the Partnership so long as the Principals (including for thispurpose, trusts or investment vehicles formed for the benefit of a Principal or his family members or entities affiliated with such Principal) continue to retain direct ownership of and control over at least fifty percent(50%) of the equity and economic interests in the General Partner after such admission or transfer.9.4 Transfer by Limited Partner. No Limited Partner shall sell, assign, pledge, mortgage, hypothecate, gift or otherwise dispose of ortransfer any interest in the Partnership without the prior written consent of the General Partner, which consent may be granted or deniedin the sole discretion of the General Partner. Notwithstanding the foregoing, after delivery of the opinion of counsel hereinafter requiredby this Article 9 (provided, however, that the General Partner may, in its sole discretion, waive, in whole or in part, the requirement ofan opinion of counsel), no consent shall be required to a Limited Partner selling, assigning, pledging, mortgaging, hypothecating,gifting or otherwise disposing of or transfering its interest in the Partnership, directly or indirectly, (a) to any entity directly or indirectlyholding eighty percent (80%) or more of the ownership interests of the Limited Partner (including profits or other economic interests) orany entity of which eighty percent (80%) or more of the beneficial ownership (including profits or other economic interests) are helddirectly or indirectly by such entity, including any entity of which the Limited Partner holds, directly or indirectly, eighty percent (80%)or more of the beneficial ownership (including profits or other economic interests), (b) to any successor in interest upon the sale of allor substantially all of the assets of the Limited Partner, or in connection with a merger, consolidation or dissolution or any corporateLimited Partner, (c) to certain affiliated corporations or business entities of a Limited Partner, (d) as may be required by any law orregulation, (e) by testamentary disposition or intestate succession, or (f) to a trust, profit sharing plan or other entity controlled by, or forthe benefit of, such Limited Partner or one or more family members. A change in any trustee or fiduciary of a Limited Partners shall notbe considered to be a sale, assignment, pledge, mortgage, hypothecation, gift or other disposition or transfer under this paragraph 9.4,provided written notice of such change is given to the General Partner within a reasonable period of time after the effective date thereof.Unless otherwise consented to by the General Partner, any sale, assignment, pledge, mortgage, hypothecation, gift or other dispositionof or transfer by a Limited Partner of its interest in the Partnership shall be effective as of the end of the fiscal quarter in which theGeneral Partner consents to such transfer.9.5 Requirements for Transfer.(a) No sale, assignment, pledge, mortgage, hypothecation, gift or other disposition of or transfer by a Limited Partner of its interest inthe Partnership, directly or indirectly, shall be permitted until the General Partner shall have received an opinion of counsel satisfactoryto it in form and substance (or waived, in whole or in part, such opinion requirement) that the effect of such transfer or dispositionwould not:(i) result in a violation of the Securities Act or any comparable state law;(ii) require the Partnership to register as an investment company under the U.S. Investment Company Act of 1940, as amended;(iii) require the Partnership, the General Partner, any member of the General Partner, the Management Company or their respectiveAffiliates to register as an investment adviser under the Advisers Act;(iv) result in the Partnership’s assets being considered, in the opinion of counsel for the Partnership, as “plan assets” within themeaning of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or any regulations proposed orpromulgated thereunder; (v) result in a termination of the Partnership’s status as a partnership for tax purposes;(vi) cause the Partnership to be characterized as a “publicly traded partnership” as such term is defined in Section 7704(b) of theCode;(vii) result in a violation of any law, rule, or regulation by any Limited Partner, the Partnership, the General Partner, any member ofthe General Partner, the Management Company or any of their respective Affiliates; or(viii) result in a violation of this Agreement.Such legal opinion shall be provided to the General Partner by the transferring Limited Partner or the proposed transferee. Uponrequest, the General Partner will use its good faith diligent efforts to provide any information possessed by the Partnership andreasonably requested by a transferring Limited Partner to enable it to render the foregoing opinion. Notwithstanding any provision ofthis Article 9 to the contrary, the General Partner may, in its sole discretion, waive, in whole or in part, the requirement of an opinion ofcounsel provided for in this paragraph 9.5(a).(b) Any Limited Partner who requests or otherwise seeks to effect a sale, assignment, pledge, mortgage, hypothecation, gift or otherdisposition of or transfer of all or a portion of its interest in the Partnership hereby agrees to reimburse the Partnership, at the request ofthe General Partner, for any expenses reasonably incurred by the Partnership in connection with such transaction, including the costs ofseeking and obtaining any legal opinion required by paragraph 9.5(a) and any other legal, tax, accounting and miscellaneous expenses(“Transfer Expenses”), whether or not such transfer is consummated. At its election, and in any event if the transferor has notreimbursed the Partnership for any Transfer Expenses incurred by the Partnership in preparing for or consummating a proposed orcompleted transfer within thirty (30) days after the General Partner has delivered to such Partner written demand for payment, theGeneral Partner may seek reimbursement from the transferee of such interest (or portion thereof). If the transferee does not reimbursethe Partnership for such Transfer Expenses within a reasonable time (or, in the case of a transfer not consummated, the prospectivetransferor does not reimburse the Partnership within a reasonable time), the General Partner may charge the Capital Account related tosuch interest with such Transfer Expenses.9.6 Substitution as a Limited Partner.(a) A transferee of a Limited Partner’s interest in the Partnership pursuant to this Article 9 shall be admitted as a substituted LimitedPartner with respect to the limited partner interest transferred only with the written consent of the General Partner, which consent maybe granted or denied in the sole discretion of the General Partner, and only if such transferee (a) elects to become a substituted LimitedPartner and (b) executes, acknowledges and delivers to the Partnership such other instruments as the General Partner may deemnecessary or advisable to effect the admission of such transferee as a substituted Limited Partner, including, without limitation, thewritten acceptance and adoption by such transferee of the provisions of this Agreement. Subject to paragraph 9.4, without the writtenconsent of the General Partner to such substitution and the written opinion of counsel required by paragraph 9.5(a) (or waiver thereof,in whole or in part, by the General Partner), no transferee of a limited partner interest shall be admitted as a substituted Limited Partner.(b) The transferee of a limited partner interest in the Partnership transferred pursuant to this Article 9 that is admitted to the Partnershipas a substituted Limited Partner shall succeed to the rights and liabilities of the transferor Limited Partner (to the extent of the interest transferred) and, after the effective date of such admission, theCapital Commitment, contribution and Capital Account of the transferor shall become the Capital Commitment, contribution and CapitalAccount, respectively, of the transferee, to the extent of the interest transferred. If a transferee is not admitted to the Partnership as asubstituted Limited Partner, (i) such transferee shall have no right to participate with the Limited Partners in any votes taken or consentsgranted or withheld by the Limited Partners hereunder, and (ii) the transferor shall remain liable to the Partnership for all contributionsand other amounts payable with respect to the transferred interest to the same extent as if no transfer had occurred. Subject to clause (i)above, a Person in whom a Limited Partner’s interest in the Partnership becomes vested by operation of law may be entered in thebooks and records of the Partnership as the holder of such interest upon notification to the General Partner by such Person and deliveryof sufficient supporting documentation to the General Partner.(c) If a transfer has been proposed or attempted but the requirements of this Article 9 have not been satisfied, the General Partner shallnot admit the purported transferee as a substituted Limited Partner but, to the contrary, shall use its reasonable best efforts to ensure thatthe Partnership (i) continues to treat the transferor as the sole owner of the interest in the Partnership purportedly transferred, (ii) makesno distributions to the purported transferee and (iii) does not furnish to the purported transferee any tax, financial information or otherConfidential Information regarding the Partnership. The General Partner shall also use its reasonable best efforts to ensure that thePartnership does not otherwise treat the purported transferee as an owner of any interest in the Partnership (either legal or equitable),unless required by law to do so. The Partnership shall be entitled to seek injunctive relief, at the expense of the purported transferor, toprevent any such purported transfer.ARTICLE 10DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP10.1 Extension of Partnership Term. Upon or before the Termination Date, the General Partner may in its reasonable discretion bywritten notice to the Limited Partners extend the Partnership term for one additional one (1) year period, and upon the conclusion ofsuch extension period, with the consent of the Advisory Committee, the General Partner may extend the Partnership term for a secondadditional one (1) year period, and upon the conclusion of this second one (1) year extension period, with the consent of a Majority inInterest of the Limited Partners, the General Partner may extend the Partnership term for additional one (1) year periods. During suchone (1) year extension periods, the General Partner shall use its reasonable efforts to convert the Partnership’s Nonmarketable Securitiesinto Marketable Securities or cash, and all Securities that become Marketable Securities during such period or periods shall be promptlydistributed to the Partners. The General Partner shall not purchase the Securities of any new issuer in which the Partnership does notalready hold an interest during such period; provided, however, that the General Partner may purchase additional Securities of aPortfolio Company if it deems such a purchase to be in the best interests of the Partnership. The management fee during any extensionperiod shall be as set forth in Article 6.10.2 Early Termination of the Partnership. (a) Subject to the Act, the Partnership shall dissolve, and the affairs of the Partnership shall be wound up prior to the Termination Date(or such subsequent date to which the Partnership term has previously been extended pursuant to paragraph 10.1):(i) ninety (90) days after the withdrawal, bankruptcy, or dissolution of the General Partner, unless a Majority in Interest of the LimitedPartners elect to continue the Partnership within such ninety (90) day period; or(ii) at any time upon the election of Eighty-Five Percent (85.0%) in Interest of the Limited Partners with or without cause (i.e., “nofault termination”).(b) In the event that the Partnership is dissolved pursuant to paragraph 10.2(a), a Majority in Interest of the Limited Partners shall electone or more liquidators to manage the liquidation of the Partnership in the manner described in paragraphs 10.3 and 10.4.10.3 Winding Up Procedures.(a) Promptly upon dissolution of the Partnership (unless the Partnership is continued in accordance with this Agreement or theprovisions of the Act), the affairs of the Partnership shall be wound up and the Partnership liquidated.(b) Distributions during the winding up period may be made in cash or in kind or partly in cash and partly in kind. The GeneralPartner or the liquidator shall use its best judgment as to the most advantageous time for the Partnership to sell Securities or to makedistributions in kind. All cash and each Security distributed in kind after the date of dissolution of the Partnership shall be distributedratably in accordance with paragraph 10.4(c) with the Partners Capital Accounts being adjusted through the date of each distribution,unless such distribution would result in a violation of a law or regulation applicable to a Limited Partner, in which event, upon receiptby the General Partner of notice to such effect, such Limited Partner may designate a different entity to receive the distribution, ordesignate, subject to the approval of the General Partner, an alternative distribution procedure (provided such alternative distributionprocedure does not prejudice any of the other Partners). Each Security so distributed shall be subject to reasonable conditions andrestrictions necessary or advisable, as determined in the reasonable discretion of the General Partner or the liquidator, in order topreserve the value of such Security or for legal reasons.10.4 Payments in Liquidation. The assets of the Partnership shall be distributed in final liquidation of the Partnership in the followingorder:(a) to the creditors of the Partnership, other than Partners, in the order of priority established by law, either by payment or byestablishment of reserves;(b) to the Partners, in repayment of any loans made to, or other debts owed by, the Partnership to such Partners; and(c) the balance, if any, to the General Partner and the Limited Partners in respect of the positive balances in their Capital Accounts incompliance with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2).10.5 Return of Excess Distributions. (a) Notwithstanding paragraphs 7.3 and 10.4, upon liquidation of the Partnership pursuant to this Article 10, the General Partner shallbe required to pay back to the Partnership the amount by which the cumulative net distributions received by the General Partner overthe life of the Partnership (excluding amounts received by the General Partner in respect of its Partnership Percentage and amountsreturned to the Partnership by the General Partner pursuant to paragraph 4.2(d)(ii) prior to final liquidation of the Partnership) exceedsthe sum of the aggregate allocations of net profits minus the aggregate allocations of net losses and expenses made to the GeneralPartner in respect of its “carried interest”; provided, however, that the amount of repayment described in this paragraph 10.5 shall belimited to the cumulative net distributions received by the General Partner over the life of the Partnership (excluding amounts receivedby the General Partner in respect of its Partnership Percentage and amounts returned to the Partnership by the General Partner pursuantto paragraph 4.2(d)(ii) prior to final liquidation of the Partnership) reduced by the federal and state income taxes payable on suchexcess amount by the members of the General Partner (assuming for this purpose that all in kind distributions were immediately soldupon receipt and such taxes were paid at the Applicable Tax Rate).(b) In the event that the assets of the General Partner are insufficient to satisfy the obligation described in the preceding sentence, eachmember of the General Partner shall be severally, but not jointly, liable for and shall personally guaranty his or her pro rata share of theGeneral Partner’s remaining obligation to the Partnership under this paragraph 10.5. The pro rata shares described in the precedingsentence shall be based on relative distributions received by each member of the General Partner from the General Partner. The GeneralPartner shall cause each member of the General Partner to execute a guarantee agreement for the benefit of the Limited Partners.(c) If Partners are required to recontribute distributions pursuant to paragraph 4.2(d)(ii) after the final liquidation and winding up ofthe Partnership, the amount of the General Partner’s obligation under paragraph 10.5(a) shall be recomputed by treating the expensegiving rise to the return of distributions pursuant to paragraph 4.2(d)(ii) as if it had occurred prior to final liquidation. The differencebetween the amount originally computed pursuant to paragraph 10.5(a) as of the final liquidation and winding up of the Partnership andthe amount described in the immediately preceding sentence shall reduce dollar for dollar the aggregate amount otherwise required tobe recontributed by the Partners pursuant to paragraph 4.2(d)(ii).ARTICLE 11FINANCIAL ACCOUNTING, REPORTS AND MEETINGS11.1 Financial Accounting; Fiscal Year. The books and records of the Partnership shall be kept in accordance with the provisions ofthis Agreement and otherwise in accordance with U.S. generally accepted accounting principles consistently applied (“GAAP”) oranother recognized method of accounting, including without limitation tax basis accounting, and shall be audited at the end of eachfiscal year by an independent public accountant of national or regional standing selected by the General Partner beginning with the firstcalendar year commencing after the Activation Date; provided, that such initial audit of the books and records of the Partnership shallcover the Partnership’s prior fiscal years beginning on the Initial Closing Date. The Partnership’s fiscal year shall be the calendar year.11.2 Supervision; Inspection of Books. Proper and complete books of account of the Partnership, copies of the Partnership’s federal,state and local tax returns for each fiscal year, the schedule of partners, this Agreement and the Partnership’s Certificate of LimitedPartnership and any amendments thereto shall be kept under the supervision of the General Partner at the principal office of the Partnership. Such books and records shall be open toinspection by the Limited Partners, or their accredited representatives, at any reasonable time during normal business hours afterreasonable advance notice. Notwithstanding anything in this Agreement to the contrary, the schedule of partners shall be available forinspection or copying unless either (i) the General Partner is prohibited from disclosing such schedule due to confidentiality obligationsowed to another Limited Partner but only to the extent of such confidentiality obligations, or (ii) withheld from any particular LimitedPartner if the General Partner reasonably determines that the disclosure of such schedule to such Limited Partner may result in thegeneral public gaining access to such schedule. Such books and records shall be maintained by the General Partner or its designee for aperiod of three (3) years following final dissolution of the Partnership. Notwithstanding the foregoing, the General Partner shall have thebenefit of the confidential information provisions of Section 17-305(b) of the Act and the obligation to make Confidential Informationavailable or to furnish Confidential Information shall be subject to paragraph 15.15.11.3 Quarterly Reports. The General Partner shall use commercially reasonable efforts to transmit to the Limited Partners within forty-five (45) days, or as soon thereafter as practicable, after the close of each of the first three quarters of each fiscal year, (a) a summary ofacquisitions and dispositions of investments made by the Partnership during such quarter and (b) a list of investments then held togetherwith a valuation of the investments then held. Notwithstanding anything in this paragraph to the contrary, the obligations under thisparagraph 11.3 shall commence with the first full fiscal quarter beginning on or after the Activation Date.11.4 Annual Report; Financial Statements of the Partnership. Beginning with the first calendar year commencing after the ActivationDate, the General Partner shall use commercially reasonable efforts to transmit to the Limited Partners within ninety (90) days after theclose of the Partnership’s fiscal year, audited financial statements of the Partnership prepared in accordance with the terms of thisAgreement and otherwise in accordance with U.S. GAAP, including an income statement for the year then ended and a balance sheet asof the end of such year, and a list of investments then held together with a valuation of the investments then held.11.5 Tax Returns.(a) The General Partner shall use commercially reasonable efforts to cause IRS Form 1065, Schedule K-1 and any other taxinformation reasonably requested by a Limited Partner, to be prepared and delivered to the Limited Partners within ninety (90) daysafter the close of the Partnership’s fiscal year.(b) Each Limited Partner hereby agrees and covenants that it shall not make an election under Section 732(d) of the Code with respectto property distributed to it by the Partnership without the prior written consent of the General Partner. The General Partner may, butshall not be obligated to, cause the Partnership to make an election under Section 754 of the Code or an election to be treated as an“electing investment partnership” within the meaning of Section 743(e) of the Code. If the Partnership elects to be treated as an electinginvestment partnership, each Limited Partner shall (i) reasonably cooperate with the Partnership to maintain such status, (ii) shall nottake any action that would be reasonably inconsistent with such election, (iii) provide the General Partner with any informationnecessary to allow the Partnership to comply with its obligations to make tax basis adjustments under Sections 734 or 743 of the Codeand its tax reporting and other obligations as an electing investment partnership, and (iv) provide the General Partner and such LimitedPartner’s transferee, promptly upon request, with the information required under Section 6031(b) of the Code or otherwise to be furnished to the Partnership or such transferee, including suchinformation as is reasonably necessary to enable the Partnership and such transferee to compute the amount of losses disallowed underSection 743(e) of the Code, but in no event shall such Limited Partner be required to provide such information prior to its receipt of itsSchedule K-1 for such taxable year, except to the extent of information, if any, required by the Partnership to complete its Schedule K-1s. Whether or not the Partnership makes such election, promptly upon request, each Limited Partner shall provide the General Partnerwith any information related to such Partner reasonably necessary (as determined in the General Partner’s sole discretion) to allow thePartnership to comply with (i) its obligations to make tax basis adjustments under Sections 734 or 743 of the Code and (ii) any otherU.S. federal income tax reporting obligations of the Partnership.11.6 Tax Matters Partner; Partnership Representative.(a) This paragraph 11.6(a) shall apply for fiscal years of the Partnership beginning on or before December 31, 2017 (or if the effectivedate of Section 1101 of the Bipartisan Budget Act of 2015 is extended, such later extended date). The General Partner shall be thePartnership’s tax matters partner under the Code and under any comparable provision of state law. The General Partner shall have theright to resign as tax matters partner by giving thirty (30) days written notice to each Partner. Upon such resignation a successor taxmatters partner shall be elected by Two-Thirds in Interest of the Limited Partners. The tax matters partner shall employ experienced taxcounsel to represent the Partnership in connection with any audit or investigation of the Partnership by the Internal Revenue Service andin connection with all subsequent administrative and judicial proceedings arising out of such audit. If the tax matters partner is requiredby law or regulation to incur fees and expenses in connection with tax matters not affecting all the Partners, then the Partnership shall beentitled to reimbursement from those Partners on whose behalf such fees and expenses were incurred. The tax matters partner shall keepthe Partners informed of all administrative and judicial proceedings, as required by Section 6223(g) of the Code, and shall furnish toeach Partner, if such Partner so requests in writing, a copy of each notice or other communication received by the tax matters partnerfrom the Internal Revenue Service, except such notices or communications as are sent directly to such requesting Partner by the InternalRevenue Service. The relationship of the tax matters partner to the Limited Partners is that of a fiduciary, and the tax matters partner hasfiduciary obligations to perform its duties as tax matters partner in such manner as will serve the best interests of the Partnership and allof the Partnership’s Partners. To the fullest extent permitted by law, but subject to the limitations and exclusions of paragraph 15.4below, the Partnership agrees to indemnify the tax matters partner and its agents and save and hold them harmless, from and in respectto all (a) fees, costs and expenses in connection with or resulting from any claim, action, or demand against the tax matters partner, theGeneral Partner or the Partnership that arise out of or in any way relate to the tax matters partner’s status as tax matters partner for thePartnership, and (b) all such claims, actions, and demands and any losses or damages therefrom, including amounts paid in settlementor compromise of any such claim, action, or demand; provided, that this indemnity shall not extend to conduct by the tax matterspartner and/or its agents adjudged (x) not to have been undertaken in good faith or (y) to have constituted intentional wrongdoing.(b) For fiscal years of the Partnership beginning after December 31, 2017 (or if the effective date of Section 1101 of the BipartisanBudget Act of 2015 is extended, such later extended date): (i) the General Partner (or such other person selected by the General Partner)shall be designated the “partnership representative” within the meaning of Code Section 6223(a) (the “Partnership Representative”) andthe General Partner shall be authorized to take any actions necessary under Treasury Regulations or other guidance to cause the GeneralPartner to be designated as such; (ii) the Partnership and each Partner agree that they shall be bound by the actions taken by thePartnership Representative, as described in Code Section 6223(b); (iii) the Partners consent to the election set forth in Code Section6226(a) and agree to take any action, and furnish the General Partner with any information necessary, to give effect to such election ifthe General Partner decides to make such election; (iv) any imputed underpayment imposed on the Partnership (or any fiscallytransparent entity in which the Partnership owns an interest) pursuant to Code Section 6232 (and any related interest, penalties or otheradditions to tax) that the General Partner reasonably determines is attributable to one or more Partners (including any former Partner)shall be, in the General Partner’s sole discretion either (A) treated as a Tax Payment subject to the provisions of paragraph 7.6 or (B)promptly paid by such Partners to the Partnership (pro rata in proportion to their respective shares of such underpayment) within fifteen(15) days following the General Partner’s request for payment, which request for payment, for the avoidance of doubt, will be madeonly after the Partnership has received a notice of final partnership adjustment pursuant to Code Section 6231 (and any failure to paysuch amount shall result in a subsequent reduction in distributions otherwise payable to such Partner plus interest on such amountcalculated at the Prime Rate plus four percent (4%)) and/or shall constitute a failure “to make any of the capital contributions requiredof it under this Agreement” subject to the terms of paragraph 4.5); provided, that in making the determination of which Partners(including former Partners) any such imputed underpayment is attributable to, the General Partner will allocate any imputedunderpayment imposed on the Partnership (and any related interest, penalties, additions to tax and audit costs) among the Partners ingood faith taking into account each Partner’s particular status, including, for the avoidance of doubt, a Partner’s tax-exempt status; and(v) paragraph 15.3 and paragraph 15.4 shall apply to the General Partner in its capacity as Partnership Representative. Any referencesto Code Sections set forth in this paragraph 11.6(b) refer to those Sections as in effect for fiscal years of the Partnership beginning afterDecember 31, 2017 (or if the effective date of Section 1101 of the Bipartisan Budget Act of 2015 is extended, such later extendeddate). The General Partner, in its capacity as the Partnership Representative, shall be authorized to take any of the foregoing actions (orany similar actions), to the extent necessary to allow the Partnership to comply with the partnership audit provisions of the BipartisanBudget Act of 2015. Regarding the potential obligation of a former Partner under this paragraph, the following shall apply: (i) eachPartner agrees that notwithstanding any other provision in this Agreement if it is no longer a Partner it shall nevertheless be obligatedfor any responsibilities under this paragraph as if it were a Partner at the time of demand hereunder; and (ii) the General Partner will notconsent to the transfer of interest of any Limited Partner unless the transferee receiving such interest agrees that in the event thetransferor of such interest does not fulfill its obligation under the preceding clause (i) within twenty (20) business days following writtendemand by the General Partner, such transferee shall be jointly and severally liable with such transferor for such obligation and theGeneral Partner may thereafter treat the transferee as the relevant Partner for purposes of this paragraph. The General Partner willprovide prompt written notification to each Limited Partner in the event of any audit of the Partnership by the United States InternalRevenue Service.11.7 Website Based Reporting. The General Partner shall be entitled, in its sole discretion, to transmit the reports and statementsdescribed in paragraphs 11.3 and 11.4 (the “Subject Reports”) to one or more Limited Partners solely by means of granting suchLimited Partners access to a database or other forum hosted on a website designated by the General Partner (the “Reporting Site”), withsuch parameters regarding access and availability of information for review as the General Partner deems reasonably necessary toprotect the confidentiality and proprietary nature of the information contained therein (including, but not limited to, establishing password protections for access to the Reporting Site, preventing the Subject Reports postedon the Reporting Site from being copied or otherwise print capable and having such Subject Reports available for review for a restrictedperiod of time (but in no event less than 30 days from the first date such Subject Reports are posted on the Reporting Site)). Unless theGeneral Partner exercises its discretion pursuant to and in compliance with paragraph 15.15(c) to restrict access to certain ConfidentialInformation that may be included in a Subject Report posted on the Reporting Site, the Subject Reports posted on the Reporting Siteshall contain all of the material information included in those Subject Reports transmitted to Limited Partners other than pursuant to thisparagraph 11.7. The Subject Reports shall be posted on the Reporting Site within the same number of days after the end of theapplicable fiscal quarter or Fiscal Year as is required pursuant to paragraphs 11.3 and 11.4.ARTICLE 12VALUATION AND ADVISORY COMMITTEE12.1 Valuation. Subject to the specific standards set forth below, the valuation of Securities and other assets and liabilities under thisAgreement shall be at fair market value. Except as may be required under applicable Treasury Regulations, no value shall be placed onthe goodwill or the name of the Partnership or the General Partner, the Partnership’s office, records, files and statistical data or anyintangible assets of the Partnership in the nature of or similar to goodwill in determining the value of the interest of any Partner in thePartnership or in any accounting among the Partners.(a) The following criteria shall be used for determining the fair market value of Securities:(i) If traded on one or more securities exchanges or quoted on the automated screen-based quotation and trade execution systemoperated by Nasdaq, Inc., or any successor thereto (“NASDAQ”), the value shall be deemed to be the Securities’ closing price on theprincipal of such exchanges on the valuation date.(ii) If actively traded over the counter (other than on the NASDAQ), the value shall be deemed to be the average of the closing bidand ask prices of such Securities on the valuation date.(iii) If there is no active public market, the value shall be the fair market value thereof, as determined by the General Partner, takinginto consideration the purchase price of the Securities, developments concerning the investee company subsequent to the acquisition ofthe Securities, any financial data and projections of the investee company provided to the General Partner, any contractual restrictionson sale of the Securities, indications of public float and liquidity of Securities, and such other factor or factors as the General Partnermay deem relevant in accordance with a valuation policy established by the General Partner, which shall be reasonably acceptable tothe Advisory Committee.(b) If the General Partner in good faith determines that, because of special circumstances, the valuation methods set forth in paragraph12.1 do not fairly determine the value of a Security, the General Partner shall make such adjustments or use such alternative valuationmethod as it reasonably deems appropriate.(c) The General Partner shall have the power at any time to determine, for all purposes of this Agreement, the fair market value of anyassets and liabilities of the Partnership. (d) If within thirty (30) days of receipt of either the quarterly or annual reports described in paragraphs 11.3 and 11.4, respectively,the Advisory Committee notifies the General Partner of an objection to such proposed valuation contained in such reports, then, if theGeneral Partner and a majority of the members of the Advisory Committee cannot otherwise mutually agree on the valuation, theGeneral Partner and the Advisory Committee may each appoint an independent securities expert to render a valuation, and the averageof such experts valuations shall be adopted as the Partnership’s valuation. The Advisory Committee shall receive a copy of all suchexpert valuations. The fees and expenses of any expert retained in accordance with this paragraph 12.1(d) shall be borne by thePartnership.12.2 Advisory Committee. The General Partner will appoint an Advisory Committee (the “Advisory Committee”), which shall consistof no more than, unless the Advisory Committee consents otherwise, four (4) representatives of the Limited Partners selected by theGeneral Partner from time to time in its reasonable judgment; provided, however, no member of the Advisory Committee may be arepresentative of the General Partner, a Principal, or an Affiliate thereof. The duties of the Advisory Committee will include (a)consideration of any approvals sought by the General Partner pursuant to the terms of this Agreement; and (b) such advice and counselas is requested by the General Partner in connection with the Partnership’s investments and other Partnership matters, including withrespect to all matters pertaining to conflicts of interest submitted to the Advisory Committee by the General Partner with respect to thePartnership, the General Partner or any of the members of the General Partner (excluding matters otherwise expressly addressedpursuant to the terms of this Agreement). Subject to paragraph 12.1(d), the General Partner (or its designee) will retain ultimateresponsibility for asset valuations and for making all investment decisions. All actions, consents or approvals of the AdvisoryCommittee shall require a majority of its members serving at the time such action, consent or approval is taken, which actions, consentsor approvals may be carried out by telephone, facsimile or electronic mail or other means reasonably acceptable to the General Partner.To the fullest extent permitted by law, neither the members of the Advisory Committee, nor the Limited Partners on behalf of whomsuch members act as representatives, shall owe any duties (fiduciary or otherwise) to the Partnership or any other Partner in respect ofthe activities of the Advisory Committee, except to refrain from bad faith violations of the implied contractual obligation of good faith.For the avoidance of doubt, any member of the Advisory Committee may vote in his or her own interest or in the interest of theirconstituent Limited Partner, which interest may or may not be aligned with the interest of the Management Company, the GeneralPartner or the other Limited Partners, and shall not be deemed to have acted in bad faith for voting in such manner. The General Partnermay, in its sole discretion, seek the approval of the Advisory Committee in connection with (i) approval required under the AdvisersAct, including, without limitation, (i) any approvals required under Section 206(3) thereof, or (ii) any consent to a transaction thatwould result in an “assignment” (within the meaning of the Advisers Act) of the Partnership’s contract with the Management Companyor the General Partner’s interest in the Partnership, and it is agreed by the Partners that such approval of the Advisory Committee shallconstitute the consent of the Partnership and the Limited Partners for purposes of the Advisers Act.ARTICLE 13REGULATED PARTNERS13.1 ERISA Partners. (a) Each Limited Partner that is, or whose equity interests are at least partially owned by, an “employee benefit plan” (the “ERISAPartner”) within the meaning of, and subject to the provisions of, ERISA hereby (i) acknowledges that it is its understanding that neitherthe Partnership, the General Partner, nor any of the Affiliates of the General Partner, are “fiduciaries” of such Limited Partner within themeaning of ERISA by reason of the Limited Partner investing its assets in, and being a Limited Partner of, the Partnership; (ii)acknowledges that it has been informed of and understands the investment objectives and policies of, and the investment strategies thatmay be pursued by, the Partnership; (iii) acknowledges that it is aware of the provisions of Section 404 of ERISA relating to therequirements for investment and diversification of the assets of employee benefit plans and trusts subject to ERISA; (iv) represents thatit has given appropriate consideration to the facts and circumstances relevant to the investment by that ERISA Partner’s plan in thePartnership and has determined that such investment is reasonably designed, as part of such portfolio, to further the purposes of suchplan; (v) represents that, taking into account the other investments made with the assets of such plan, and the diversification thereof,such plan’s investment in the Partnership is consistent with the requirements of Section 404 and other provisions of ERISA; (vi)acknowledges that it understands that current income will not be a primary objective of the Partnership; and (vii) represents that, takinginto account the other investments made with the assets of such plan, the investment of assets of such plan in the Partnership isconsistent with the cash flow requirements and funding objectives of such plan.(b) Notwithstanding any provision contained herein to the contrary, each ERISA Partner may elect to withdraw from the Partnership,or upon demand by the General Partner shall withdraw from the Partnership, at the time and in the manner hereinafter provided, if eitherthe ERISA Partner or the General Partner shall obtain a materially unqualified opinion of counsel (which counsel shall be reasonablyacceptable to both the ERISA Partner and the General Partner) to the effect that, as a result of applicable statutes, regulations, case law,administrative interpretations, or similar authority (i) the continuation of the ERISA Partner as a Limited Partner of the Partnership or theconduct of the Partnership will result, or there is a material likelihood the same will result, in a material violation of ERISA, or (ii) all orany portion of the assets of the Partnership constitute assets of the ERISA Partner and are subject to the provisions of ERISA tosubstantially the same extent as if owned directly by the ERISA Partner. In the event such opinion of counsel is issued to the GeneralPartner, a copy of such opinion shall promptly be given to all the ERISA Partners, together with the written notice of the election of theERISA Partner to withdraw or the written demand of the General Partner for withdrawal, whichever the case may be. In the event suchopinion of counsel is issued to the ERISA Partner, a copy of such opinion shall promptly be given the General Partner. Thereupon,unless within ninety (90) days after receipt of such written notice and opinion the General Partner is able to eliminate the necessity forsuch withdrawal to the reasonable satisfaction of the ERISA Partner and the General Partner, whether by correction of the conditiongiving rise to the necessity of the ERISA Partner’s withdrawal, or the amendment of this Agreement, or otherwise, such ERISA Partnershall withdraw its entire interest in the Partnership, such withdrawal to be effective upon the last day of the fiscal quarter during whichsuch ninety (90) day period expired.(c) The withdrawing ERISA Partner shall be entitled to receive within ninety (90) days after the date of such withdrawal an amountequal to the fair market value of such Partner’s interest in the Partnership valued as of the effective date of such withdrawal.(d) Any distribution or payment to a withdrawing ERISA Partner pursuant to this paragraph 13.1 may, in the sole discretion of theGeneral Partner, be made in cash, in securities, in the form of a promissory note, the terms of which shall be mutually agreed upon by the General Partner and the withdrawing ERISA Partner, or anycombination thereof.(e) Any valuation necessary for the purposes of a distribution or payment to a withdrawing ERISA Partner pursuant to this paragraphshall be made by the General Partner in good faith pursuant to paragraph 12.1.13.2 Governmental Plan Partners. Notwithstanding any provision of this Agreement to the contrary, any Limited Partner that is eithera “governmental plan” as defined in Title 29, Section 1002(32) of the United States Code or an employee benefit plan subject toGovernmental Plan Regulations (a “Governmental Plan Partner”) may elect to withdraw from the Partnership, or upon demand by theGeneral Partner shall withdraw from the Partnership, if either the Governmental Plan Partner or the General Partner shall obtain anopinion of counsel (which counsel shall be reasonably acceptable to both the Governmental Plan Partner and the General Partner) to theeffect that the Governmental Plan Partner, the Partnership, or the General Partner would be in violation, or there is a material likelihoodthe same would result, of any Governmental Plan Regulation, as a result of the Governmental Plan Partner continuing as a LimitedPartner, and, in the case of an opinion obtained by the General Partner, that such violation would have a material adverse effect on theGeneral Partner or the Partnership. In the event of the issuance of the opinion of counsel referred to in the preceding sentence, thewithdrawal of and disposition of the Governmental Plan Partner’s interest in the Partnership shall be governed by paragraph 13.1 of theAgreement, as if the Governmental Plan Partner were an ERISA Partner.13.3 Private Foundation Partners. Notwithstanding any provision of the Agreement to the contrary, any Limited Partner that is, orwhose equity interests are at least partially owned by, a “private foundation” as described in Section 509 of the Code (a “PrivateFoundation Partner”), may elect to withdraw from the Partnership, or upon demand by the General Partner shall withdraw from thePartnership, if either the Private Foundation Partner or the General Partner shall obtain an opinion of counsel (which counsel shall bereasonably acceptable to both the Private Foundation Partner and the General Partner) to the effect that such withdrawal is necessary inorder for the Private Foundation Partner to avoid (a) excise taxes imposed by Subchapter A of Chapter 42 of the Code (other thanSections 4940 and 4942 thereof), or (b) a material breach of the fiduciary duties of its trustees under any federal or state law applicableto private foundations or any rule or regulation adopted thereunder by any agency, commission, or authority having jurisdiction. In theevent of the issuance of the opinion of counsel referred to in the preceding sentence, the withdrawal of and disposition of the PrivateFoundation Partner’s interest in the Partnership shall be governed by paragraph 13.1, as if the Private Foundation Partner were anERISA Partner.13.4 Bank Holding Company Act Partners. Notwithstanding any provision of the Agreement to the contrary, any Limited Partner thatis subject to the BHC Act (a “BHC Partner”), may elect to withdraw from the Partnership, or upon demand by the General Partner shallwithdraw from the Partnership, if the BHC Partner or the General Partner shall obtain an opinion of counsel (which counsel shall bereasonably acceptable to both the BHC Partner and the General Partner) to the effect that the BHC Partner would be in violation of anyprovision of the BHC Act, including any regulation, written interpretation or directive of any governmental authority having regulatoryauthority over the BHC Partner, enacted or promulgated after the date of formation of the Partnership, as a result of the BHC Partnercontinuing as a Limited Partner. In the event of the issuance of the opinion of counsel referred to in the preceding sentence, the withdrawal of and disposition of the BHC Partner’s interest in the Partnership shall be governed by paragraph 13.1, as if the BHCPartner were an ERISA Partner.ARTICLE 14CERTAIN DEFINITIONS14.1 Accounting Period. Accounting Period shall refer to the period beginning on the 1st day of January and ending on the 31st ofDecember; provided, however, that the General Partner may elect to commence a new Accounting Period on (i) the date of any changein the Partners’ respective interests in the Profits or Losses of the Partnership during such calendar year except on the first day thereof,or (ii) any other date the General Partner shall determine. An Accounting Period shall terminate immediately prior to thecommencement of a new Accounting Period (or if no new Accounting Period has been commenced, on December 31) and the finalAccounting Period shall terminate on the date the Partnership shall terminate.14.2 Adjusted Asset Value. The Adjusted Asset Value with respect to any asset shall be the asset’s adjusted basis for federal incometax purposes, except as follows:(a) The initial Adjusted Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value ofsuch asset at the time of contribution, as determined by the contributing Partner and the Partnership.(b) In the discretion of the General Partner, the Adjusted Asset Values of all Partnership assets may be adjusted to equal theirrespective gross fair market values, as determined by the General Partner, and the resulting unrealized profit or loss allocated to theCapital Accounts of the Partners pursuant to Article 5, as of the following times: (i) upon distribution by the Partnership to a Partner ofmore than a de minimis amount of Partnership assets, unless all Partners receive simultaneous distributions of either undivided interestsin the distributed property or identical Partnership assets in proportion to their interests in Partnership distributions as provided inparagraphs 7.4 and 7.5 and (ii) the grant of an additional interest in the Partnership to any new or existing Partner.(c) The Adjusted Asset Values of all Partnership assets shall be adjusted to equal their respective gross fair market values, asdetermined by the General Partner, and the resulting unrealized profit or loss allocated to the Capital Accounts of the Partners pursuantto Article 5, as of the termination of the Partnership either by expiration of the Partnership’s term or the occurrence of an eventdescribed in paragraph 10.2.14.3 Affiliate. An Affiliate of any Person shall mean any Person that directly, or indirectly through one or more intermediaries,controls, or is controlled by or is under common control with the Person specified or over which the Person specified has direct orindirect investment control; provided, however, the term “Affiliate” with respect to the General Partner and the Management Companyshall not include (i) any Person that is not engaged in the day-to-day management or operations of the General Partner or theManagement Company, or (ii) any investment held by the Partnership. 14.4 Capital Account. The Capital Account of each Partner shall consist of its original capital contribution, (a) increased by anyadditional capital contributions, its share of income or gain that is allocated to it pursuant to this Agreement, and the amount of anyPartnership liabilities that are assumed by it or that are secured by any Partnership property distributed to it, and (b) decreased by theamount of any distributions to or withdrawals by it, its share of expense or loss that is allocated to it pursuant to this Agreement, and theamount of any of its liabilities that are assumed by the Partnership or that are secured by any property contributed by it to thePartnership. The foregoing provision and the other provisions of this Agreement relating to the maintenance of Capital Accounts areintended to comply with Treasury Regulation Section 1.704-1(b)(2)(iv), and shall be interpreted and applied in a manner consistent withsuch Treasury Regulations. In the event the General Partner shall determine that it is prudent to modify the manner in which the CapitalAccounts, or any debits or credits thereto, are computed in order to comply with such Treasury Regulations, the General Partner maymake such modification, provided that it is not likely to have more than an insignificant effect on the total amounts distributable to anyPartner pursuant to Article 7 and Article 10.14.5 Capital Commitment; Committed Capital. A Partner’s Capital Commitment shall mean the amount that such Partner has agreed tocontribute to the capital of the Partnership as set forth in the books and records of the Partnership. The Partnership’s Committed Capitalshall equal the sum of the aggregate Capital Commitments of all Partners.14.6 Carry Percentage. Carry Percentage means, with respect to each Partner, the percentage rate so designated on the GeneralPartner’s acceptance page to such Partner’s Subscription Agreement or as otherwise set forth in writing by the General Partner;provided, that if no such rate is designated with respect to a Partner, then such rate percentage shall be twenty percent (20%).14.7 Code. The Code is the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions ofsucceeding law).14.8 Deemed Gain or Deemed Loss. The Deemed Gain from any in kind distribution of Securities shall be equal to the excess, if any,of the fair market value of the Securities distributed (valued as of the date of distribution in accordance with paragraph 12.1), over theaggregate Adjusted Asset Value of the Securities distributed. The Deemed Loss from any in kind distribution of Securities shall be equalto the excess, if any, of the aggregate Adjusted Asset Value of the Securities distributed over the fair market value of the Securitiesdistributed (valued as of the date of distribution in accordance with paragraph 12.1).14.9 Fee Date. Fee Date shall mean each of the following dates each fiscal year: January 1, April 1, July 1 and October 1, or the nextbusiness day thereafter if any of the foregoing falls on a non-business day in a particular fiscal year.14.10 Final Closing Date. The Final Closing Date shall mean the final day upon which the General Partner has admitted LimitedPartners to the Partnership pursuant to paragraph 3.2(b) (including any extensions of the period applicable therein).14.11 Idle Funds Income. Idle Funds Income shall mean all income received by the Partnership from commercial paper, certificates ofdeposit, treasury bills, and other money market investments with maturities of less than twelve (12) months. 14.12 Investment Period. The Investment Period shall mean the period beginning on the date of the Initial Closing Date andterminating upon the sixth anniversary of the Activation Date.14.13 Management Fee Percentage. Management Fee Percentage means, with respect to each Limited Partner, the percentage rate sodesignated on the General Partner’s acceptance page to such Limited Partner’s Subscription Agreement; provided, that if no such rate isdesignated with respect to a Limited Partner, then such rate percentage shall be 0.625% (i.e., 2.50% annually).14.14 Marketable; Marketable Securities; Marketability. These terms shall refer to Securities that are (a) traded on a national securitiesexchange, on NASDAQ, or over the counter, and (i) freely transferable pursuant to either Rule 144 of the Securities Act (without beingsubject to any volume restrictions set forth in Rule 144(e)) or Rule 145 of the Securities Act it being agreed that the General Partnermay assume that none of the Partners is an “affiliate” of the issuer thereof as defined under Rule 144 of the Securities Act and (ii) notsubject to any underwriter “lock-up” or other contractual restrictions on transferability, or (b) currently the subject of an effectiveSecurities Act registration statement.14.15 Nonmarketable Securities. Nonmarketable Securities are all Securities other than Marketable Securities.14.16 Partnership Expenses. Partnership Expenses shall be those expenses borne directly by the Partnership pursuant to paragraphs6.2(b), (c) and (d).14.17 Partnership Percentage. The Partnership Percentage for each Partner shall be determined by dividing the amount of suchPartner’s Capital Commitment by the Committed Capital of the Partnership. The sum of the Partners’ Partnership Percentages shall beone hundred percent (100%).14.18 Percentage in Interest; Majority in Interest. A specified fraction or percentage in interest of the Partners or of the LimitedPartners shall mean partners or limited partners of the Partnership and the Parallel Funds whose Capital Commitments, stated as apercentage of the aggregate Capital Commitments of the Partnership and the Parallel Funds, equal or exceed the required fraction orpercentage in interest of all such Partners or Limited Partners (not subject to any rounding); provided, however, that for purposes ofdetermining the foregoing, the partnership percentage share of each limited partner of the Partnership and the Parallel Funds shall beequal to (a) its aggregate capital commitment to the Partnership and the Parallel Funds, as applicable, divided by (b) the sum of theaggregate committed capital of the Partnership and the Parallel Funds. In addition, to the extent that a particular matter is specificallyapplicable or unique to one (1) or more of the Partnership and the Parallel Funds and not specifically applicable or unique to one ormore of the Partnership or the Parallel Funds, the capital commitments of all limited partners to the entities to whom such matter is notspecifically applicable or unique shall be disregarded in such calculation but only with respect to that particular matter. A Majority inInterest shall mean more than fifty percent (50%) in interest. Any interest owned or controlled by the General Partner, an Affiliate of theGeneral Partner or any Defaulting Limited Partner shall not be counted for purposes of any determination under this Agreement or inthe operating agreement of any applicable Parallel Fund of a particular percentage in interest of the Limited Partners and the limitedpartners of the Parallel Fund (as applicable) including, for the avoidance of doubt, the foregoing determinations of percentages ininterest.14.19 Person. Person shall mean any individual, general partnership, limited partnership, limited liability partnership, limited liabilitycompany, corporation, unincorporated organization, joint venture, trust, business or statutory trust, cooperative or association,governmental agency, or other entity, whether domestic or foreign, and the heirs, executors, administrators, legal representative, successors and assigns of such Person where thecontext so permits.14.20 Portfolio Company. Portfolio Company shall mean any corporation or other business entity that is an issuer of Securities heldby the Partnership. Any corporation or other business entity in which the Partnership holds an indirect beneficial ownership interestthrough a special purpose vehicle shall also be considered a Portfolio Company for purposes of this Agreement.14.21 Prime Rate. Prime Rate shall mean the annual rate of interest published in the Wall Street Journal from time to time as the“Prime Rate” or a comparable source selected by the General Partner in its reasonable discretion.14.22 Principals. Principals shall refer to Richard Ressler and Mark Yung, as well as each additional Person, if any, appointed by theGeneral Partner as a manager pursuant to the terms of its then controlling operating or other definitive agreement.14.23 Profit or Loss. Profit or Loss shall be an amount computed for each Accounting Period as of the last day thereof that is equal tothe Partnership’s taxable income or loss for such Accounting Period, determined in accordance with Section 703(a) of the Code (for thispurpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall beincluded in taxable income or loss), with the following adjustments:(a) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profit orLoss pursuant to this paragraph shall be added to such taxable income or loss;(b) Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditurespursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profit or Loss pursuantto this paragraph shall be subtracted from such taxable income or loss;(c) Gain or loss resulting from any disposition of a Partnership asset with respect to which gain or loss is recognized for federalincome tax purposes shall be computed by reference to the Adjusted Asset Value of the asset disposed of rather than its adjusted taxbasis;(d) The difference between the gross fair market value of all Partnership assets and their respective Adjusted Asset Values shall beadded to such taxable income or loss in the circumstances described in paragraph 14.2;(e) Items which are specially allocated pursuant to paragraphs 3.2(c), 4.4(b)(v), 5.1(c), 5.1(d), 5.1(e), 5.3 and 5.4 shall not be takeninto account in computing Profit or Loss; and(f) The amount of any Deemed Gain or Deemed Loss on any Securities distributed in kind shall be added to or subtracted from (as thecase may be) such taxable income or loss to the extent not taken into account under paragraph 14.23(d).14.24 Securities. Securities shall mean securities of every kind and nature and rights and options with respect thereto, including stock,notes, bonds, debentures, options, evidences of indebtedness and other business interests of every type, including partnerships, jointventures, proprietorships and other business entities. 14.25 Securities Act. Securities Act shall mean the U.S. Securities Act of 1933, as amended.14.26 Subscription Agreement. With respect to each Limited Partner, the Subscription Agreement and Investor Questionnaire amongsuch Limited Partner, the Partnership and the General Partner effecting the purchase and sale of such Limited Partner’s interest in thePartnership.14.27 Treasury Regulations. Treasury Regulations shall mean the Income Tax Regulations promulgated by the United StatesDepartment of Treasury under the Code, as such Regulations may be amended from time to time (including corresponding provisionsof succeeding Regulations).ARTICLE 15OTHER PROVISIONS15.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware assuch law would be applied to agreements among the residents of such state made and to be performed entirely within such state.15.2 Limitation of Liability of the Limited Partners. Except as required by law, no Limited Partner shall be personally liable for theexpenses, liabilities or obligations of the Partnership. Notwithstanding the foregoing, each Limited Partner shall be required to pay tothe Partnership, at such times and subject to the conditions set forth herein, all amounts that such Limited Partner has agreed to pay inrespect of its Capital Commitment and to deliver such other amounts it is obligated to pay over to the Partnership pursuant to thisAgreement.15.3 Exculpation. Neither the General Partner, the Management Company, the tax matters partner or Partnership Representative, themembers of the Advisory Committee, and their respective officers, employees, principals, managers, members, agents and affiliates(collectively, the “Covered Persons”) shall be liable, responsible or accountable in damages or otherwise to any Partner or thePartnership for honest mistakes of judgment, or for action or inaction, taken in good faith and in the reasonable belief that such actionor inaction was in, or not opposed to, the best interest of the Partnership, or for losses due to such mistakes, action, or inaction, or to thenegligence, dishonesty, or bad faith of any employee, broker, or other agent of the Partnership, provided that such employee, broker, oragent was selected and monitored with reasonable care. To the fullest extent permitted by law, no Covered Person shall be liable to thePartnership or any Partner with respect to any action or omission taken or suffered by any of them in good faith if such action oromission is taken or suffered in reliance upon and in accordance with the opinion or advice of legal counsel (as to matters of law), or ofaccountants (as to matters of accounting), or of investment bankers, accounting firms, or other appraisers (as to matters of valuation),provided that any such professional or firm is selected and monitored with reasonable care. Notwithstanding any of the foregoing to thecontrary, the provisions of this paragraph 15.3 and the immediately following paragraph shall not be construed so as to relieve (orattempt to relieve) any Covered Person of any liability by reason of such Covered Person’s commission of gross negligence, willfulmisconduct, recklessness or willful and material breach of the Agreement that results in a material adverse effect to the Limited Partners;provided that members of the Advisory Committee, the Limited Partners of which such Persons are representatives, and any liquidatorother than the General Partner shall be entitled to the benefit of exculpation under this paragraph 15.3 so long as such Person acted ingood faith. Notwithstanding any other provision of this Agreement, to the extent that, at law or in equity, a Partner has duties (including fiduciary duties) and liabilities relating thereto to the Partnership, any Partner or any other Person bound by this Agreement, suchPartner acting under this Agreement shall not be liable to the Partnership, any Partner or any other Person bound by this Agreement forbreach of fiduciary duty for its good faith reliance on the provisions of this Agreement, and the provisions of this Agreement, to theextent that they restrict or eliminate the duties (including fiduciary duties) and liabilities (by specifying a duty of care or otherwise) ofany Covered Person to the Partnership or any Partner otherwise existing at law or in equity or otherwise, are agreed by the Partners toreplace such duties and liabilities of such Covered Person.15.4 Indemnification.(a) The Partnership agrees to indemnify, out of the assets of the Partnership only (including the proceeds of liability insurance and anyamounts that the Partners may be required to contribute pursuant to paragraph 4.2), the General Partner, the Management Company, thetax matters partner, the Partnership Representative, the members of the Advisory Committee, and unless otherwise determined by theGeneral Partner, their respective officers, employees, principals, managers, members, agents and Affiliates (the “Indemnified Parties”)to the fullest extent permitted by law and to save and hold them harmless from and in respect of all (i) fees, costs, and expenses,including reasonable legal fees, paid in connection with or resulting from any claim, action, suit, controversy, dispute, judgment,demand or proceeding against the Indemnified Parties that arise out of or in any way relate to the Partnership, its properties, business, oraffairs, or any other enterprise for which such Indemnified Party is or was serving, as a director, officer, employee or otherwise, at therequest of the Partnership and (ii) such claims, actions, suits, controversies, disputes, judgments, demands and proceedings and anylosses, damages or liabilities resulting from such claims, actions, suits, controversies, disputes, judgments, demands, and proceedings,including amounts paid in settlement or compromise of any such claim, action, suit, controversy, dispute, judgment, demand andproceeding; provided, that such Indemnified Party acted in good faith and in the reasonable belief that such Indemnified Party’s actionor inaction was in, or not opposed to, the best interest of the Partnership; and provided further, that this indemnity shall not extend(except in the case of members of the Advisory Committee or their constituent Limited Partners, who need only have acted in goodfaith in order to receive the benefit of indemnification under this paragraph 15.4) to any conduct which constitutes gross negligence,willful misconduct, recklessness or willful and material breach of the Agreement that results in a material adverse effect to the LimitedPartners. Notwithstanding any of the foregoing, in no event shall the Partnership indemnify or advance fees and expenses for any“Internal Disputes”. For purposes of this paragraph 15.4, “Internal Dispute” shall refer to claims, actions and demands in which: (x) theGeneral Partner or any of its Affiliates (including for this purpose, the General Partner’s members and managers) are pursuing a claim,action or demand solely against the General Partner or any of its Affiliates (including for this purpose the General Partner’s membersand managers); and (y) neither the Partnership, nor any Parallel Fund, is a plaintiff or defendant in such claim, action or demand (orwill, or could reasonably be expected to, receive any monetary benefit from the outcome of such proceeding).(b) At the election of the General Partner, expenses incurred by any Indemnified Party in defending a claim or proceeding covered bythis paragraph 15.4 may, to the fullest extent permitted by law, be paid by the Partnership in advance of the final disposition of suchclaim or proceeding, provided the Indemnified Party undertakes in writing to repay such amount to the extent it is ultimately determinedthat such Indemnified Party was not entitled to be indemnified. (c) At its election, the General Partner may cause the Partnership to purchase and maintain insurance, at the expense of the Partnershipand to the extent available, for the protection of any Indemnified Party or potential Indemnified Party against any liability incurred inany capacity which results in such Person being an Indemnified Party (provided that such Person is serving in such capacity at therequest of the Partnership or the General Partner), whether or not the Partnership has the power to indemnify such Person against suchliability. The General Partner may purchase and maintain insurance on behalf of and at the expense of the Partnership for the protectionof any officer, director, manager, employee or other agent of any other organization in which the Partnership directly or indirectly ownsan interest or of which the Partnership is a creditor against similar liabilities, whether or not the Partnership has the power to indemnifyany Person against such liabilities.(d) The provisions of this paragraph 15.4 shall remain in effect as to each Indemnified Party whether or not such Indemnified Partycontinues to serve in the capacity that entitled such Person to be indemnified. The foregoing right of indemnification shall inure to thebenefit of the executors, administrators, personal representatives, successors or assigns of each such Indemnified Party.(e) The rights to indemnification and advancement of expenses conferred in this paragraph 15.4 shall not be exclusive and shall be inaddition to any rights to which any Indemnified Party may otherwise be entitled or hereafter acquire under any law, statute, rule,regulation, charter document, by-law, contract or agreement.(f) The General Partner may make, execute, record and file on its own behalf and on behalf of the Partnership all instruments andother documents (including one or more separate indemnification agreements between the Partnership and individual IndemnifiedParties or Covered Persons) that the General Partner deems necessary or appropriate in order to extend the benefit of the provisions ofthis paragraph 15.4 to the Indemnified Parties and Covered Persons; provided that, such other instruments and documents authorizedhereunder shall be on the same terms as provided for in this paragraph 15.4 except as otherwise may be required by applicable law.(g) The Partners intend that, to the maximum extent provided by law, as between (1) Portfolio Companies, (2) the Partnership, and (3)the General Partner or the Management Company (or an Affiliate thereof), this paragraph 15.4(g) shall be interpreted to reflect anordering of liability for potentially overlapping or duplicative indemnification payments as follows: first, any applicable PortfolioCompany shall have primary liability; second, the Partnership and any Successor Fund (if applicable) shall have secondary liability; andthird, the General Partner, the Management Company and/or its Affiliates shall be liable only after exhausting all availableindemnification and/or insurance resources of the applicable Portfolio Company and the Partnership. The possibility that an IndemnifiedParty may receive indemnification payments from a Portfolio Company shall not restrict the Partnership from making payments underthis paragraph 15.4(g) to an Indemnified Party that is otherwise eligible for such payments, but such payments by the Partnership arenot intended to relieve any Portfolio Company from liability that it would otherwise have to make indemnification payments to suchIndemnified Party. If an Indemnified Party that has received indemnification payments from the Partnership actually receivesindemnification payments from a Portfolio Company or under any insurance policy for the same damages, such Indemnified Party shallrepay the Partnership as soon as practicable to the extent of such duplicative payments. Indemnification payments (if any) made to anIndemnified Party by the General Partner or the Management Company (or an Affiliate thereof) in respect of damages for which (and tothe extent) such Indemnified Party is otherwise eligible for payments from the Partnership under this paragraph 15.4 and/or any Successor Fund under the limited partnership agreement or other governing agreement of such SuccessorFund shall not relieve the Partnership and/or any Successor Fund from its obligation to such Indemnified Party and/or the GeneralPartner or the Management Company (or any Affiliate thereof), as applicable, for such payments (and the General Partner and theManagement Company shall not be required to provide any indemnification payments until the Partnership’s or any Successor Fund’sobligation to provide such benefits has been exhausted). To the extent that the Partnership is required to provide such indemnificationpayments pursuant to the terms of this Agreement, it hereby waives and releases the General Partner and the Management Companyand their respective Affiliates (other than the Partnership and any Successor Funds), from any claims for contribution, subrogation orany other recovery of any kind in respect of indemnification payments paid by the Partnership. As used in this paragraph 15.4,“indemnification payments” made or to be made by a Portfolio Company shall be deemed to include (i) advancement of expenses withregard to indemnification obligations, (ii) payments made or to be made by any successor to the indemnification obligations of suchPortfolio Company and (iii) payments made or to be made by or on behalf of such Portfolio Company (or such successor) pursuant toan insurance policy or similar arrangement.15.5 Arbitration.(a) Except as otherwise agreed to in writing by the General Partner, any claim, dispute, or controversy of whatever nature arising outof or relating to this Agreement, including, without limitation, any action or claim based on tort, contract, or statute (including anyclaims of breach), or concerning the interpretation, effect, termination, validity, performance and/or breach of this Agreement(“Claim”), shall be resolved by final and binding arbitration (“Arbitration”) before three arbitrators (“Arbitrator”) selected from andadministered by JAMS, Inc. (the “Administrator”) in accordance with its then existing arbitration rules or procedures regardingcommercial or business disputes. The arbitration shall be held in Los Angeles, California.(b) Depositions may be taken and full discovery may be obtained in any arbitration commenced under this provision.(c) The Arbitrator shall, within fifteen (15) calendar days after the conclusion of the Arbitration hearing, issue a written award andstatement of decision describing the essential findings and conclusions on which the award is based, including the calculation of anydamages awarded. The Arbitrator shall be authorized to award compensatory damages, but shall not be authorized (i) to award non-economic damages, such as for emotional distress, pain and suffering or loss of consortium, (ii) to award punitive damages, or (iii) toreform, modify or materially change this Agreement or any other agreements contemplated hereunder; provided, however, that thedamage limitations described in parts (i) and (ii) of this sentence will not apply if such damages are statutorily imposed. The Arbitratoralso shall be authorized to grant any temporary, preliminary or permanent equitable remedy or relief he deems just and equitable andwithin the scope of this Agreement, including, without limitation, an injunction or order for specific performance.(d) Each party shall bear its own attorney’s fees, costs, and disbursements arising out of the arbitration, and shall pay an equal shareof the fees and costs of the Administrator and the Arbitrator; provided, however, that the Arbitrator shall be authorized to determinewhether a party is substantially the prevailing party, and if so, to award to that substantially prevailing party reimbursement for itsreasonable attorneys’ fees, costs and disbursements (including, for example, expert witness fees and expenses, photocopy charges, travel expenses, etc.), and/or the fees and costs of the Administrator and the Arbitrator. Absent the filing of anapplication to correct or vacate the arbitration award under Title 10 of the Delaware Code sections 5713 through 5717, each party shallfully perform and satisfy the arbitration award within fifteen (15) days of the service of the award.(e) BY AGREEING TO THIS BINDING ARBITRATION PROVISION, THE PARTIES UNDERSTAND THAT, EXCEPT ASOTHERWISE AGREED TO IN WRITING BY THE GENERAL PARTNER, THEY ARE WAIVING CERTAIN RIGHTS ANDPROTECTIONS WHICH MAY OTHERWISE BE AVAILABLE IF A CLAIM BETWEEN THE PARTIES WERE DETERMINED BYLITIGATION IN COURT, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO SEEK OR OBTAIN CERTAIN TYPES OFDAMAGES PRECLUDED BY THIS PARAGRAPH 15.5, THE RIGHT TO A JURY TRIAL, CERTAIN RIGHTS OF APPEAL, AND ARIGHT TO INVOKE FORMAL RULES OF PROCEDURE AND EVIDENCE.(f) This paragraph 15.5 shall be construed to the maximum extent possible to comply with the laws of the State of Delaware,including, to the extent applicable, the Uniform Arbitration Act (10 Del. C. § 5701 et seq.) (the “Delaware Arbitration Act”). If,nevertheless, it shall be determined by a court of competent jurisdiction that any provision or wording of this paragraph 15.5 shall beinvalid or unenforceable under the Delaware Arbitration Act, to the extent applicable, or other applicable law, such invalidity shall notinvalidate all of this paragraph 15.5. In that case, this paragraph 15.5 shall be construed so as to limit any term or provision so as tomake it valid or enforceable within the requirements of the Delaware Arbitration Act or other applicable law, and, in the event suchterm or provision cannot be so limited, this paragraph 15.5 shall be construed to omit such invalid or unenforceable provision.15.6 Execution and Filing of Documents. This Agreement may be executed in two (2) or more counterparts, each of which shall bedeemed an original but all of which together shall constitute one and the same instrument. Delivery of an executed signature page ofthis Agreement by facsimile, DocuSign or by electronic mail in portable document format (PDF) will be effective as delivery of amanually executed signature page of this Agreement.15.7 Other Instruments and Acts. The Partners shall use commercially reasonable efforts to execute any other instruments or performany other acts that are or may be reasonably necessary to effectuate and carry on the limited partnership created by this Agreement.15.8 Binding Agreement. This Agreement shall be binding upon the transferees, successors, assigns, and legal representatives of thePartners.15.9 Notices; Electronic Transmission of Reports. Any notice or other communication that one Partner desires to give to anotherPartner shall be in writing, and shall be deemed effectively given: (a) upon Personal delivery to the Partner to be notified, (b) when sentby confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c)three (3) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day afterdeposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. Allcommunications shall be addressed to the other Partner at the address shown in the books and records of the Partnership or at suchother address as a Partner may designate by ten (10) days’ advance written notice to the other Partners. In addition to the provisions inparagraph 11.7, the General Partner shall be entitled to transmit to Limited Partners by email the reports required by paragraphs 11.3, 11.4 and11.5.15.10 Power of Attorney. By signing this Agreement, each Limited Partner designates and appoints the General Partner its true andlawful representative and attorney-in-fact, in its name, place, and stead to make, execute, sign, acknowledge, deliver or file theCertificate of Limited Partnership and any amendment thereto and such other instruments, documents, or certificates that may from timeto time be required of the Partnership by the laws of the United States of America, the laws of the state of the Partnership’s formation, orany other state in which the Partnership shall conduct its affairs in order to qualify or otherwise enable the Partnership to conduct itsaffairs in such jurisdictions. Such attorney is not hereby granted any authority on behalf of the Limited Partners to amend thisAgreement except that as attorney for each of the Limited Partners, the General Partner shall have the authority to amend thisAgreement and the Certificate of Limited Partnership (and to execute any amendment to the Agreement or the Certificate of LimitedPartnership on behalf of itself and as attorney-in-fact for each of the Limited Partners) as may be required to effect:(a) Admission of additional Partners pursuant to Article 3;(b) Additional capital commitments pursuant to Article 4;(c) Transfers of Limited Partner interests pursuant to Article 9; and(d) Any other amendments of this Agreement adopted in accordance with paragraph 15.11 or the Certificate of Limited Partnership ofthe Partnership contemplated by this Agreement including, without limitation, amendments reflecting any action of the Partners dulytaken pursuant to this Agreement whether or not such Partner voted in favor of or otherwise approved such action.The foregoing grant of authority (i) is a special power of attorney coupled with an interest in favor of the General Partner and as suchshall be irrevocable and shall survive the death or disability of a Partner that is a natural Person or the merger, dissolution or othertermination of the existence of a Partner that is a corporation, association, partnership, limited liability company or trust, and (ii) shallsurvive the assignment by the Partner of the whole or any portion of its interest, except that where the assignee of the whole thereof hasfurnished a power of attorney, this power of attorney shall survive such assignment for the sole purpose of enabling the General Partnerto execute, acknowledge and file any instrument necessary to effect any permitted substitution of the assignee for the assignor as aPartner and shall thereafter terminate. Notwithstanding the foregoing, this power of attorney and the power of attorney granted inparagraphs 4.4(c) and 8.3(c)(ii) granted by each Limited Partner shall expire as to such Partner immediately after the dissolution of thePartnership or the amendment of the Partnership’s books and records to reflect the complete withdrawal of such Partner as a Partner ofthe Partnership. The execution of this power of attorney is not intended to, and does not, revoke any prior powers of attorney executedby each such Limited Partner. This power of attorney is not intended to, and shall not, be revoked by any subsequent power of attorneyeach such Limited Partner may execute. This power of attorney shall be governed by and construed in accordance with the internal lawsof the State of Delaware.15.11 Amendment.(a) Except as provided by clauses (a) – (c) of paragraph 15.10 and subject to paragraph 15.11(b), this Agreement may be amendedonly with the written consent of the General Partner and a Majority in Interest of the Limited Partners. Notwithstanding the foregoing,the General Partner may amend this Agreement without the consent of any of the other Partners to reflect changes validly made in the membership of the Partnership andthe capital contributions of the Partners.(b) Notwithstanding paragraph 15.11(a), (i) no amendment to the provisions of Article 13 may be made without the consent of eachERISA Partner, Governmental Plan Partner, Private Foundation Partner or BHC Partner who may be adversely affected by suchamendment and (ii) no amendment may modify any provision regarding the limited liability of the Limited Partners without the consentof all of the Partners.(c) Notwithstanding paragraphs 15.11(a) and (b), no amendment of this Agreement may (i) modify any provision requiring theconsent of more than a Majority in Interest of the Limited Partners without the consent of such higher Percentage in Interest, (ii)increase any Partner’s Capital Commitment or any Partner’s obligations or liabilities under this Agreement, unless such Partner hasexpressly consented in writing to such amendment, (iii) (1) modify the method of making Partnership allocations or distributions,modify the method of determining the Partnership Percentage of any Partner, reduce any Partner’s Capital Account, modify anyprovision of this Agreement pertaining to limitations on liability of the Limited Partners, or (2) change the restrictions contained in thisparagraph 15.11(c), unless each Partner materially adversely affected thereby in a manner materially different than the other Partnershas expressly consented in writing to such amendment, or (iv) modify the number of Advisory Committee members pursuant toparagraph 12.2 without the consent of the Advisory Committee.(d) The Partnership’s or General Partner’s (or its managers’, members’ or employees’) noncompliance with any provision hereof inany single transaction or event may be waived prospectively or retroactively in writing by the same Percentage in Interest of the LimitedPartners that would be required to amend such provision pursuant to paragraphs 15.11(a), (b) or (c). No waiver shall be deemed awaiver of any subsequent event of noncompliance except to the extent expressly provided in such waiver.15.12 Entire Agreement. This Agreement constitutes the full, complete and final agreement of the Partners and supersedes all prioragreements between the Partners with respect to the Partnership. Notwithstanding the provisions of this Agreement, including paragraph15.11, or of any Subscription Agreement, it is hereby acknowledged and agreed that the General Partner on its own behalf or on behalfof the Partnership, without the approval of any Limited Partner or any other Person, may enter into a side letter or similar agreement toor with a Limited Partner that has the effect of establishing rights under, or altering or supplementing the terms of, this Agreement or ofany Subscription Agreement. The parties hereto agree that any terms contained in a side letter or similar agreement to or with a LimitedPartner shall govern with respect to such Limited Partner notwithstanding the provisions of this Agreement or of any SubscriptionAgreement.15.13 Titles; Subtitles. The titles and subtitles used in this Agreement are used for convenience only and shall not be considered in theinterpretation of this Agreement.15.14 Partnership Name. The Limited Partners acknowledge that the Partnership is using the name pursuant to a limited grant of theright to use the name from the Management Company, which right may be terminated during the term of the Partnership, that the nameof the Partnership may be changed without the consent of the Limited Partners and that the Limited Partners have no rights to, orinterest in, the name of the Partnership, any intellectual property associated therewith or any goodwill derived therefrom. No value shall be placed upon the name or the goodwill attached to it for the purpose of determining the value of any Partner’s CapitalAccount or interest in the Partnership.15.15 Confidentiality.(a) This Agreement, the offering documents of the Partnership, any Subscription Agreement, and all financial statements, tax reports,portfolio valuations, reviews or analyses of potential or actual investments, reports or other materials and all other documents andinformation concerning the affairs of the Partnership and its investments, including, without limitation, information about the PortfolioCompanies (collectively, the “Confidential Information”), that any Limited Partner may receive or that may be disclosed, distributed ordisseminated (whether in writing, orally, electronically or by other means) to any Limited Partner or its representatives, includingConfidential Information disclosed to members of the Advisory Committee, pursuant to or in accordance with this Agreement, orotherwise as a result of its ownership of an interest in the Partnership, constitute proprietary and confidential information about thePartnership, the General Partner, their respective Affiliates and the Portfolio Companies (the “Affected Parties”). Each Limited Partneracknowledges and agrees that the Affected Parties derive independent economic value from the Confidential Information not beinggenerally known and that the Confidential Information is the subject of reasonable efforts to maintain its secrecy. Each Limited Partnerfurther acknowledges and agrees that the Confidential Information is a trade secret, the disclosure of which is likely to cause substantialand irreparable competitive harm to the Affected Parties or their respective businesses.(b) Each Limited Partner agrees to hold all Confidential Information in confidence, and not to disclose any Confidential Informationto any third party without the prior written consent of the General Partner. Notwithstanding the preceding sentence, each LimitedPartner may disclose such Confidential Information: (i) to its officers, directors, trustees, equity owners, wholly-owned subsidiaries,Affiliates, employees and outside experts (including but not limited to its attorneys, accountants, investment advisers, auditors andrepresentatives) on a “need to know” basis, so long as such Persons are bound by similar duties of confidentiality to the Partnership assuch Limited Partner, and so long as such Limited Partner shall remain liable for any breach of this paragraph 15.15 by such Persons;(ii) to the extent that such information is required to be disclosed by applicable law in connection with any governmental, administrativeor regulatory proceeding or filing (including any inspection or examination or any disclosure necessary in connection with a request forinformation made under a state or federal freedom of information act or similar law), after reasonable prior written notice to the GeneralPartner (except where such notice is expressly prohibited by law); (iii) to the extent that the information provided by the Partnership isotherwise available in the public domain in the absence of any improper or unlawful action on the part of such Partner; or (iv) to otherLimited Partners. Any Limited Partner seeking to make disclosure in reliance on the foregoing clause (ii) above, such Limited Partnershall use its commercially reasonable efforts to claim any relevant exception under such laws or obligations which would prevent orlimit public disclosure of the Confidential Information and provide the General Partner immediate notice upon the Limited Partner’sreceipt of a request for disclosure of any Confidential Information pursuant to such laws or obligations.(c) Each Limited Partner also agrees that any document constituting or containing, or any other embodiment of, any ConfidentialInformation shall be returned to the Partnership upon the General Partner’s request. Notwithstanding any provision of this Agreement tothe contrary, the General Partner may withhold disclosure of any Confidential Information (other than this Agreement or tax reports) toany particular Limited Partner if the General Partner reasonably determines that the disclosure of such Confidential Information to suchLimited Partner may result in the general public gaining access to such Confidential Information or that such disclosure is not in the bestinterests of the Partnership or its investments; provided, however, that to the extent that any information is not delivered to a LimitedPartner based on the General Partner’s exercise of its discretion under this sentence, such information shall be made available forreview, but not copying, during regular business hours at a location mutually determined by the General Partner and such LimitedPartner. In no event shall a Limited Partner be denied access to information deliverable pursuant to paragraph 11.5 of this Agreement.The Limited Partners acknowledge and agree that: (1) the Partnership, the General Partner and their respective Affiliates may acquireconfidential information related to third parties (e.g., Portfolio Companies) that pursuant to fiduciary, contractual, legal or similarobligations may not be disclosed to the Limited Partners without violating such obligations; and (2) neither the Partnership, the GeneralPartner nor their respective Affiliates shall be in breach of any duty under this Agreement or the Act in consequence of acquiring,holding or failing to disclose Confidential Information to a Limited Partner so long as such obligations were undertaken in good faith.(d) In addition, with respect to each Limited Partner that is subject to any “freedom of information,” “sunshine” or other law, rule orregulation that imposes upon such Limited Partner an obligation to make information available to the public (a “FOIA LimitedPartner”), the Partnership hereby requests confidential treatment of the Confidential Information, and such Limited Partner shall usecommercially reasonable efforts to take such action as necessary for such Confidential Information to be exempt from disclosure, to themaximum extent permitted under such law, rule or regulation. Notwithstanding anything contained in this paragraph 15.15 to thecontrary, each FOIA Limited Partner may publicly disclose the following: (i) the FOIA Limited Partner’s status as a Limited Partner ofthe Partnership, (ii) the amount of such FOIA Limited Partner’s Capital Commitment, (iii) the total amount of such FOIA LimitedPartner’s Capital Commitment that has been drawn down pursuant to capital calls, (iv) the total amount of distributions received by theFOIA Limited Partner from the Partnership, and (v) the FOIA Limited Partner’s net internal rate of return with respect to thePartnership’s performance as prepared by such FOIA Limited Partner; provided that any disclosure of the FOIA Limited Partner’s netinternal rate of return shall state expressly or be accompanied by a statement that such information has been prepared by the FOIALimited Partner and not the Partnership, the General Partner or any Affiliate thereof (collectively, the “Fund Level Information”). Onlywith respect to FOIA Limited Partners, for purposes of this paragraph 15.15, Confidential Information shall be deemed not to includeFund Level Information.(e) In addition, with respect to each Limited Partner that is a “fund of funds” or a similar pooled investment vehicle (but specificallyexcluding any pension, retirement or similar benefit plan) (a “Pooled Vehicle Partner”), the Pooled Vehicle Partner shall be permitted tomake disclosure to its direct equity owners (expressly excluding permission to make disclosure to any indirect or other beneficialowners) that are subject to a written confidentiality agreement or obligation that provides a degree of protection to the Partnershipcomparable to that provided in this paragraph 15.15 of solely the following Confidential Information: (i) the Pooled Vehicle Partner’sstatus as a Limited Partner of the Partnership, (ii) the amount of such Pooled Vehicle Partner’s Capital Commitment, (iii) the totalamount of such Pooled Vehicle Partner’s Capital Commitment that has been drawn down pursuant to capital calls, (iv) the total amountof distributions received by the Pooled Vehicle Partner from the Partnership, (v) the Pooled Vehicle Partner’s net internal rate of returnwith respect to the Partnership’s performance as prepared by such Pooled Vehicle Partner; provided that any disclosure of the PooledVehicle Partner’s net internal rate of return shall state expressly or be accompanied by a statement that such information has been prepared by the Pooled Vehicle Partnerand not the Partnership, the General Partner or any Affiliate thereof, (vi) the net asset value of the Pooled Vehicle Partner’s interest inthe Partnership (both cost and market value), (vii) such ratios and performance information calculated by the Pooled Vehicle Partnerusing the information in clauses (ii) through (vi) above, including the ratio of net asset value plus distributions to contributions (i.e., the“multiple”); provided that any disclosure of such ratios and performance information shall state expressly or be accompanied by astatement that such information has been prepared by the Pooled Vehicle Partner and not the Partnership, the General Partner or anyAffiliate thereof, (viii) quarterly and annual reports summarizing the status of the Pooled Vehicle Partner’s investment in the Partnership(without disclosure of any information concerning a Portfolio Company, other than the name of such Portfolio Company, a descriptionof the business of such Portfolio Company and information regarding the industry and geographic location of such Portfolio Company,the Partnership’s cost basis in each such Portfolio Company, the Partnership’s carry value of each investment in such PortfolioCompany and, upon liquidity of any such Portfolio Company, the Partnership’s rate of return related to such investment (the “PortfolioConfidential Information”)), (ix) the name and address of the Partnership, the General Partner and the Principals, and (x) a descriptionof the Partnership’s investment focus; provided, however, that no Pooled Vehicle Partner may provide Portfolio ConfidentialInformation to an equity owner of such Pooled Vehicle Partner that would be a FOIA Limited Partner of the Partnership if such equityowner of the Pooled Vehicle Partner were a Limited Partner of the Partnership; other than the Fund Level Information that the PooledVehicle Partner would be able to disclose if it were a FOIA Limited Partner, if the General Partner reasonably determines that thedisclosure of such information may result in the general public gaining access to such information or that such disclosure is not in thebest interests of the Partnership or its investments; provided, further, that to the extent that any information is not delivered to suchequity owner based on the General Partner’s exercise of discretion under this sentence, the Limited Partner may make such informationavailable for review, but not copying, by such equity owner.(f) Each Limited Partner agrees to notify such Limited Partner’s attorneys, accountants and other similar advisers about theirobligations in connection with this paragraph 15.15 and will further cause such advisers to abide by the aforesaid provisions of thisparagraph 15.15. Notwithstanding the foregoing, no Limited Partner shall be liable to the Partnership for any breach of this paragraph15.15 by any adviser of such Limited Partner if the adviser is bound by an obligation to keep such Confidential Informationconfidential and such Limited Partner agrees to enforce such obligation.15.16 Liability for Third Party Reports. In no event shall the Partnership or the General Partner, or any of their respective Affiliates,have any liability to any Partner with respect to any information disseminated to any such Partner, where such information originatedfrom any third party, including without limitation, any entity in which the Partnership has made an investment.15.17 Anti-Money Laundering. Notwithstanding any other provision of this Agreement, the General Partner, in its own name and onbehalf of the Partnership, shall be authorized without the consent of any Person, including any other Partner, to take such action as itdetermines in its sole discretion to be necessary or advisable to comply with any anti-money laundering or anti-terrorist laws, rules,regulations, directives or special measures, including the actions contemplated in any Subscription Agreement related to the Partnership.15.18 Partnership Legal Matters. Each Partner hereby agrees and acknowledges that: (a) Cooley LLP (“Cooley”) has been retained as legal counsel by the General Partner in connection with the formation of thePartnership and the offering of Limited Partner interests and in such capacity has provided legal services to the General Partner and thePartnership. The General Partner expects to retain Cooley to provide legal services to the General Partner and the Partnership inconnection with the management and operation of the Partnership.(b) Cooley is not and will not represent the Limited Partners in connection with the formation of the Partnership, the offering oflimited partner interests, the management and operation of the Partnership, or any dispute that may arise between the Limited Partnerson the one hand and the General Partner and the Partnership on the other (the “Partnership Legal Matters”).(c) Each Limited Partner will, if it wishes counsel on a Partnership Legal Matter, retain its own independent counsel with respectthereto and, except as otherwise specifically provided by this Agreement, will pay all fees and expenses of such independent counsel.[THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Partners have executed this Agreement as of the date first written above. GENERAL PARTNER: LIMITED PARTNER: OCV I GP, LLC j2 Global, Inc. ____________(Print name of investing entity)By: /s/ Mark Yung______________ By: /s/ Scott Turicchi_______ Principal (signature)Name: Scott Turicchi________ (print name)Title: President and Chief Financial Officer THE SECURITIES EVIDENCED BY THIS PARTNERSHIP AGREEMENT HAVE NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATEDUNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT COVERING SUCH SECURITIES ORTHE GENERAL PARTNER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLYSATISFACTORY TO THE GENERAL PARTNER, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT ORHYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933ACT. EXHIBIT 21.1 List of Subsidiaries ofj2 Global, Inc.j2 Global, Inc.'s principal affiliates as of December 31, 2017, are listed below. All other affiliates, if considered in the aggregate as a single affiliate, would notconstitute a significant subsidiary. Name State or Other Jurisdiction of Incorporation j2 Australia Cloud Connect Pty Ltd Australia j2 Global Australia Pty Ltd Australia j2 Global Canada, Inc. Canada Ziff Davis Canada, Inc. Canada j2 Global Denmark A/S Denmark Electric Mail (Ireland) Limited Ireland j2 Global Holdings Limited Ireland j2 Global Ireland Limited Ireland Ziff Davis Holdings Limited Ireland j2 Global (Netherlands) B.V. Netherlands NCSG Holding AB Sweden Stay Secure Sweden AB Sweden FuseMail UK Limited United Kingdom j2 Global UK Limited United Kingdom Livedrive Internet Limited United Kingdom Everyday Health, Inc. Delaware, United States Everyday Health Media, LLC Delaware, United States Humble Bundle, Inc. Delaware, United States IGN Entertainment, Inc. Delaware, United States j2 Cloud Services, LLC Delaware, United States j2 Web Services, Inc. Delaware, United States KeepItSafe, Inc. Delaware, United States Mashable, Inc. Delaware, United States Offers.com, LLC Delaware, United States OnTargetJobs, Inc. Delaware, United States SaleBuild, Inc. Delaware, United States Ziff Davis, LLC Delaware, United States Excel Micro, LLC Pennsylvania, United States Ookla, LLC Washington, United States EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMj2 Global, Inc.Los Angeles, CaliforniaWe hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-149641, 333-64986, 333-135340, 333-87504, 333-55402, 333-31064 and 333-203913) of j2 Global, Inc. of our reports dated March 1, 2018, relating to the consolidated financial statements andfinancial statement schedule, and the effectiveness of j2 Global, Inc.’s internal control over financial reporting, which appear in this Form 10-K./s/ BDO USA, LLPBDO USA, LLPLos Angeles, CaliforniaMarch 1, 2018 EXHIBIT 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Vivek Shah, certify that:1.I have reviewed this Annual Report on Form 10-K of j2 Global, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. /s/ VIVEK SHAH Vivek Shah Dated:March 1, 2018Chief Executive Officer(Principal Executive Officer) EXHIBIT 31.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, R. Scott Turicchi, certify that:1.I have reviewed this Annual Report on Form 10-K of j2 Global, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. /s/ R. SCOTT TURICCHI R. Scott Turicchi Dated:March 1, 2018Chief Financial Officer(Principal Financial Officer) EXHIBIT 32.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of j2 Global, Inc. (the “Company”) for the year ended December 31, 2017 as filed with the Securities andExchange Commission on the date hereof (the “Report”), Vivek Shah, as Chief Executive Officer (Principal Executive Officer) of the Company, and R. ScottTuricchi, as Chief Financial Officer (Principal Financial Officer) of the Company, each hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to§906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, respectively, that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended;and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Dated:March 1, 2018By:/s/ VIVEK SHAH Vivek Shah Chief Executive Officer(Principal Executive Officer) Dated:March 1, 2018By:/s/ R. SCOTT TURICCHI R. Scott Turicchi Chief Financial Officer(Principal Financial Officer) A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to j2 Global, Inc. and will beretained by j2 Global, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
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