Document:

lov-ex102_9.htm

 

 

Exhibit 10.2

 

Warrant Agreement

by and between

Spark Networks, Inc.

and 

PEAK6 Investments, L.P.

Dated as of August 9, 2016

 

 

 

 

 

 

 

 

 

 

Warrant Agreement

This WARRANT AGREEMENT (“Agreement”), dated as of August 9, 2016, is by and between SPARK NETWORKS, INC., a corporation duly organized and existing under the laws of the State of Delaware (the “Company”), and PEAK6 INVESTMENTS, L.P., a Delaware limited partnership (collectively, with its registered assigns as detailed below, the “Holder”).  

WHEREAS, on the date hereof, the Company and the Holder are entering into a Purchase Agreement (the “Purchase Agreement”) pursuant to which the Holder is purchasing 5,000,000 shares of Common Stock, $0.001 par value per share, of the Company (the “Common Stock”);

WHEREAS, simultaneously with the execution of the Purchase Agreement, and as an inducement for the Holder to make the investment, the Company is issuing to the Holder the warrant detailed below (the “Warrant”), which Warrant represents the right to purchase a number of shares of Common Stock as set forth herein; and

WHEREAS, the parties desire to enter into this Agreement to set forth, among other things, the terms and conditions of the Warrant:

NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows:

1.    Warrant. The Company hereby certifies that, for value received, Holder is, subject to the terms and conditions of this Agreement, entitled to purchase from the Company up to a total of 7,500,000 shares (subject to adjustment as provided herein) of Common Stock (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an initial exercise price equal to $1.74 at any time (subject to Section 5(a) hereof) during the period (the “Exercise Period”) commencing on February 9, 2017 and terminating at 5:00 p.m., Pacific Time the first to occur of (i) on August 8, 2021 and (ii) the closing date of any reorganization, consolidation or merger of the Company, transfer of all or substantially all of the assets of the Company or any simultaneous sale of more than a majority of the then outstanding securities of the Company by the existing stockholders of the Company other than a mere reincorporation transaction (each such transaction delineated in this Section 1(ii), a “Reorganization Transaction”) (such earlier date, the “Expiration Date”); provided, however, that in the event that the Warrant has not (and will not) terminate prior to August 8, 2021 and the Holder wishes to exercise the Warrant on August 8, 2021 or within thirty (30) days prior thereto but the Holder is prohibited from exercising this Warrant as a result of the application of the Beneficial Ownership Limitation (as defined in Section 5(b)(iv) of the Warrant), then the Expiration Date of this Warrant shall automatically be extended with respect to such number of Warrant Shares that the Holder may not acquire as a result of the Beneficial Ownership Limitation until 5:00 p.m., Pacific Time on the first to occur of (i) August 8, 2022 and (ii) the closing date of a Reorganization Transaction (provided, further, that the Holder, in such case, shall exercise this Warrant on August 8, 2021 with respect to the maximum number of Warrant Shares that the Holder is permitted to exercise in compliance with the Beneficial Ownership Limitation).  The term “Warrant Price” as used in this Agreement shall mean the exercise price per share at which Common Stock may be purchased at the time this Warrant is exercised. The Warrant Price and the number of Warrant Shares may be adjusted from time to time in accordance with Section 6.  The parties agree that the Warrant was not issued to the Holder in 

 

consideration for or in connection with the performance of any services by the Holder to the Company or any of its Affiliates (as defined below) and the parties agree to treat the Warrant accordingly for all legal, tax and accounting purposes. 

2.    Definitions.  In addition to the terms defined elsewhere in this Agreement, capitalized terms that are not otherwise defined herein have the respective meanings given to such terms in the Purchase Agreement.

3.    Registration of Warrant.  The Company shall register the Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the Holder hereof from time to time.  The Warrant Register also shall set forth the address of the Holder, as provided by the Holder to the Company. The Company may deem and treat the registered Holder of record of the Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. The Company shall register in the Warrant Register the exercise (pursuant to Section 5) or the transfer (pursuant to Section 7) of all or any portion of the Warrant. 

4.    Duration of Warrant.  Subject to Section 5 and Section 6, the Warrant may be exercised only during the Exercise Period. The Warrant, if not exercised on or before the Expiration Date, shall become void, and all rights under the Warrant shall cease at 5:00 p.m. Pacific Time on the Expiration Date. 

5.    Vesting of Warrant; Exercise of Warrant and Issuance of Warrant Shares

(a)   Vesting.  Except as expressly set forth in this Agreement, the Warrant and the rights of the Holder to purchase Warrant Shares hereunder shall immediately and automatically (without any action of the Holder or the Company) vest with respect to one-half of the Warrant Shares and become exercisable with respect to such shares on the first Business Day after which the Closing Sale Price (as defined below) has equaled $2.50 per share (the “First Vesting Threshold”) or higher each Business Day during at least fifteen (15) of the preceding thirty (30) consecutive Business Days (such date, the “First Vesting Date”) and shall vest with respect to all remaining Warrant Shares and become exercisable with respect to such remaining shares on the first Business Day after which the Closing Sale Price (as defined below) has equaled $3.50 per share (the “Second Vesting Threshold” and collectively with the First Vesting Threshold, the “Vesting Thresholds”) or higher each Business Day during at least fifteen (15) of the preceding thirty (30) consecutive Business Days (such date, the “Second Vesting Date”); provided, however, that: 

(i)the rights of the Holder to purchase Warrant Shares hereunder shall automatically (without any action of the Holder or the Company) vest and become exercisable immediately prior to the closing of a Reorganization Transaction (other than a Reorganization Transaction led, co-led or sponsored by Holder or its Affiliates (as defined below)), even if such Reorganization Transaction occurs prior to February 8, 2017 with respect to (A) all of the Warrant Shares, if such closing shall occur during the period beginning on the date hereof through the date that is two (2) years from the date hereof and (B) one-half of the Warrant Shares if (x) such closing shall occur during the period from the day immediately following the two (2) year anniversary of this Agreement through the 

 

date that is three (3) years following the date hereof, (y) neither Vesting Threshold has been achieved and (z) the per share consideration to be paid in connection with such Reorganization Transaction is less than $2.50 per share (for the avoidance of doubt, there shall be no acceleration of vesting pursuant to this Section 5(a)(i) in connection with any Reorganization Transaction to be consummated at any time after the three (3) year anniversary of this Agreement);  

(ii)the rights of the Holder to purchase Warrant Shares hereunder shall automatically (without any action of the Holder or the Company) vest and become exercisable immediately prior to the closing of a Reorganization Transaction, even if such Reorganization Transaction occurs prior to February 8, 2017, with respect to (A) one-half of the Warrant Shares if the per share consideration to be paid in connection with such Reorganization Transaction is equal to or greater than $2.50 per share but less than $3.50 per share and (B) all of the Warrant Shares if the per share consideration to be paid in connection with such Reorganization Transaction is equal to or greater than $3.50 per share; and

(iii)in the event that either (i) the Common Stock is not listed or quoted on an Exchange (other than as a result of a Reorganization Transaction), or (ii) the Management Services Agreement between the  Holder and the Company is terminated pursuant to Section 5(b) thereof (“Termination for Cause by PEAK6”), then in either case, the rights of the Holder to purchase Warrant Shares hereunder shall, in such case, immediately and automatically (without any action of the Holder or the Company) vest and become exercisable with respect to all of the Warrant Shares. 

To the extent that the Warrant Price is adjusted pursuant to Section 6 below, the Vesting Thresholds shall also be adjusted in a like manner on a proportional basis.

“Business Day” means any day except Saturday, Sunday and any day that is a federal legal holiday on which the financial markets in New York City are closed.  “Closing Sale Price” shall mean the per share closing sale price of the Common Stock on the exchange (the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board) or other national securities or over-the-counter exchange on which the Common Stock is then listed (each, an “Exchange”).   

(b)   Exercise. 

(i)To the extent the rights of the Holder to purchase Warrant Shares pursuant to the Warrant have vested pursuant to Section 5(a) and subject to this Section 5(b), the Warrant may be exercised in whole or in part from time to time by the Holder. 

(ii) Holder may exercise the Warrant by delivering to the Company an exercise notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), appropriately completed and duly executed, and by paying in full the Warrant Price for each full Warrant Share as to which the Warrant is exercised by wire transfer of immediately available funds, in certified check or bank draft payable to the order of the Company.  

 

(iii)If at any time after the date hereof there is no effective Registration Statement on Form S-3 (or similar form) registering, or no current  prospectus available for, the issuance of the Warrant Shares to Holder, then the Warrant may also be exercised at such time by means of a “cashless  exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing (A - B) (X) by (A), where: 

(A)  =  the VWAP on the Trading Day immediately preceding the date of such election;

 

(B)  = the Exercise Price of the Warrant, as adjusted; and 

 

(X)  = the number of Warrant Shares for which the Holder has elected to exercise the Warrant in accordance with the terms of this Agreement by means of a cash exercise rather than a cashless exercise.

 

For the purposes of this Section 5(b)(iii), the following definitions shall apply:

a)“Trading Day” means a day on which the Common Stock is traded on an Exchange.

b)“VWAP” means, for any date, the price determined by the first of the following clauses that applies:  (i) if the Common Stock is then listed or quoted on an Exchange, the daily volume weighted average price of the Common Stock for such date (or, if such date is not a Trading Day, the nearest preceding Trading Day) on the primary Exchange on which the Common Stock is then listed or quoted as reported by Bloomberg  L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);  (ii) if the Common Stock is not then listed or quoted on an Exchange and if prices for the Common Stock are then reported in the “Pink” market published by OTC Markets Group (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (iii) in all other cases, the fair market value of a share of Common Stock as determined by a nationally recognized-independent appraiser selected in good faith by Holder and reasonably acceptable to the Company and whose fees and expenses shall be borne by the Company (such value as determined pursuant to this clause (iii), the “Fair Market Value”).

(iv)Notwithstanding any other provision hereof, the Holder will only be permitted to exercise this Warrant to the extent that following such exercise, the Holder, together with such Holder's Affiliates (as defined below), would own beneficially not more than 29.99% of the then outstanding Common Stock (the “Beneficial Ownership Limitation”); provided, however, that such Beneficial Ownership Limitation shall 

 

permanently terminate immediately upon the receipt of Stockholder Approval (as defined below) and the Holder shall thereafter be permitted to exercise the right to purchase all Warrant Shares under this Warrant.  For the avoidance of doubt, for the purposes of this Section 5(b)(iv), the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall exclude the number of shares of Common Stock which would be issuable upon  exercise of the remaining, non-exercised portion of the Warrant held by the Holder.  Except as set forth in the preceding sentence, for purposes of this Section 5(b)(iv), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, as amended, and the rules and regulations promulgated thereunder.  “Stockholder Approval” shall mean the approval by the stockholders of the Company of the removal of the Beneficial Ownership Limitation as required by the rules of the New York Stock Exchange or the NYSE MKT, as applicable. 

(v)Notwithstanding any other provision hereof, if an exercise of all or any portion of this Warrant is to be made in connection with a Reorganization Transaction, such exercise may at the election of the Holder be conditioned upon the consummation of such Reorganization Transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such Reorganization Transaction.

(c)   Issuance of Common Stock on Exercise. As soon as practicable after the exercise of the Warrant and the clearance of the funds in payment of the Warrant Price, and in any event within thirty (30) days, the Company shall issue to the Holder of the Warrant a certificate or certificates for the number of full shares of Common Stock to which it is entitled, registered in such name or names as may be directed by the Holder, and, if the Warrant shall not have been exercised in full, the Company shall register in the Warrant Register a new warrant to purchase Common Stock, of like tenor, having the same date and form as the Warrant and otherwise having the same terms and conditions as the Warrant (any such new warrant, a “New Warrant”), for the number of Warrant Shares as to which the Warrant shall not have been exercised. The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional.  Nothing herein shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

(d)   Valid Issuance. The Company covenants that all Common Stock issued or delivered upon the proper exercise of the Warrant shall be newly issued shares or shares held in treasury by the Company, duly authorized, validly issued, fully paid and nonassessable, and free and clear of all Liens and shall not be subject to any preemptive rights or similar rights and shall rank pari passu in all respects with other existing Common Stock. “Lien” means any mortgage, lien (statutory or otherwise), charge, pledge, hypothecation, conditional sales agreement, adverse claim, title retention agreement or other security interest, encumbrance or other title defect in or on any interest or title of any vendor, lessor, lender or other secured party to or of such person or entity under any conditional sale, trust receipt or other title retention agreement with respect to any property or asset of such person or entity. 

 

(e)   Date of Issuance. Each person or entity in whose name any certificate for Common Stock is issued shall for all purposes be deemed to have become the holder of record of such Common Stock on the date on which the Warrant is surrendered and payment of the Warrant Price is made, irrespective of the date of delivery of such certificate for such Warrant Shares, except that, if the date of such surrender and payment is a date when the share transfer books of the Company are closed, such person or entity shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the share transfer books are open. The Company shall, upon request of the Holder, use its reasonable best efforts to cause the ownership of the Warrant Shares to be recorded upon exercise in book entry form rather than through the issuance of physical stock certificates to the extent such book entry interests are able to continue to bear required restrictive legends.  

(f)   Issuance Conditioned Upon Compliance with Securities Laws; Accredited Investor. The Warrant and the Warrant Shares issuable upon the exercise of the Warrant have not been and will likely not be registered under the Securities Act of 1933, as amended, (the “Securities Act”) or under any state securities law. The Holder acknowledges that the Company is issuing the Warrant and the Warrant Shares without such registration pursuant to the exemption to the Securities Act’s registration requirements set forth in Section 4(a)(2) of the Securities Act and pursuant to similar exemptions under applicable state securities laws. The Holder hereby affirms, represents and warrants that it is an “accredited investor” as such term is defined in accredited investor is defined in Rule 501 of Regulation D of the Securities Act. The Warrant and Warrant Shares purchased upon the exercise of the Warrant may not be sold or otherwise transferred unless they are registered or unless the sale or transfer is conducted in a transaction exempt from these registration requirements. The Warrant Shares shall bear a legend stating that the Warrant Shares have not been registered under the Securities Act or state securities laws and stating such restrictions on sale or transfer. The Holder represents to the Company that it is acquiring the Warrant and will acquire the Warrant Shares for its own account and for investment purposes only and not with a view toward the resale or other distribution of the Warrant or Warrant Shares. 

(g)   Listing of Warrant Shares. In the time and manner required by any Exchange on which the Common Stock is listed or quoted for trading on the date in question (the “Trading Market”), the Company shall prepare and file with such Trading Market an additional shares listing application covering all the Common Stock issuable upon exercise of the Warrant and shall use its reasonable best efforts to take all steps necessary to cause all of the Common Stock issuable upon  exercise of the Warrant to be promptly approved for listing on the Trading Market at all times.

6.    Certain Adjustments.  The number of Warrant Shares issuable upon exercise of the Warrant, as well as the Warrant Price, is subject to adjustment from time to time as set forth in this Section 6. 

(a)   Split-Ups. If, after the date hereof, there is a stock dividend or distribution on the outstanding shares of Common Stock or on the outstanding shares of any other class of common stock of the Company (collectively, the “Company Common Stock”), which dividend or distribution is paid or otherwise made in the form of any class of Company Common Stock or any security convertible into or exchangeable for Company Common Stock (“Convertible Securities”), 

 

or there is a split-up or sub-division of any class of Company Common Stock or other similar event, then, on the effective date of such stock dividend, distribution, split-up, sub-division or similar event, the number of shares of Common Stock issuable on exercise of the Warrant shall be increased in proportion to such resulting increase in the outstanding shares of the Company Common Stock (or, in the case of a dividend or distribution in the form of Convertible Securities, in proportion to such resulting increase in the outstanding shares of the Company Common Stock assuming the conversion or exchange into Company Common Stock of all Convertible Securities issued as such dividend or distribution (net of any conversion or exercise price payable in kind)), subject to the provisions of Section 6(f). 

(b)   Reclassifications.  In case of any reclassification, capital reorganization, change in the capital stock or similar transaction of or involving the Company (other than (i) as a result of a subdivision, combination, or stock dividend provided for in Section 6(a) above, or (ii) a Reorganization Transaction), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time before the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization or change by a holder of the same number of shares of Company Common Stock as were purchasable by the holder of this Warrant immediately before such reclassification, reorganization or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c)   If the Company shall fix a record date for the making of a dividend or distribution to all holders of shares of Company Common Stock of securities, evidences of indebtedness, assets, cash, rights or warrants (other than as a result of a subdivision, combination, or stock dividend or distribution provided for in Section 6(a) or (b) above), in each such case, the Warrant Price in effect prior to such record date shall be reduced immediately upon occurrence of the record date to the price determined by multiplying the Warrant Price in effect immediately prior to the reduction by the quotient of (x) the Closing Sale Price of the Common Stock on the last trading day preceding the first date on which the Common Stock trades regular way on the principal national securities exchange on which the Common Stock is listed or admitted to trading without the right to receive such distribution, minus the amount of cash and/or the fair market value (determined by a nationally recognized independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company and whose fees and expenses shall be borne by the Company) of the securities, evidences of indebtedness, assets, rights or warrants to be so distributed in respect of one share of Common Stock divided by (y) such Closing Sale Price on such date specified in clause (x); such adjustment shall be made successively whenever such a record date is fixed. In such event, the number of Warrant Shares shall be increased to the number obtained by multiplying the Warrant Shares immediately prior to such adjustment by the quotient of (x) the Warrant Price in effect immediately prior to the distribution giving rise to this adjustment divided by (y) the new Warrant Price determined in accordance with the immediately preceding sentence.

 

(d)   Aggregation of Shares. If, after the date hereof, the number of outstanding shares of Company Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of any class of Company Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of the Warrant shall be decreased in proportion to such decrease in outstanding Company Common Stock, subject to the provisions of Section 6(g).  

(e)   Warrant Price Adjustment. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrant is adjusted, as provided in Section 6(a) - Section 6(c), the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (i) the numerator of which shall be the number of Warrant Shares purchasable upon the exercise of the Warrant immediately prior to such adjustment, and (ii) the denominator of which shall be the number of Warrant Shares so purchasable immediately thereafter.  

(f)   Notices of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of Warrant Shares issuable upon exercise of the Warrant, the Company shall thereafter give prompt written notice thereof to the Holder, which notice shall state the increase or decrease, if any, in the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of Warrant Shares purchasable at the Warrant Price, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Section 6(a), 6(b) ,6(c), or 6(d), the Company thereafter shall give written notice of the occurrence of such event to the holder of record of the Warrant, at the last address set forth for such holder in the Warrant Register, of the record date or the effective date of the event.  In the event (i) that the Warrant has vested pursuant to Section 5(a) of this Agreement and the Company shall take a record of the holders of its Company Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend; or (ii) of any Reorganization Transaction (as defined below), the Company shall, in each such case, send or cause to be sent to the Holder at least 5 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend and a description thereof, or (B) the effective date on which such Reorganization Transaction is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of the Company Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Company Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such Reorganization Transaction, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares. 

(g)   No Fractional Shares. Notwithstanding any provision contained herein to the contrary, the Company shall not issue fractional shares upon the exercise of the Warrant. If, by reason of any adjustment made pursuant to this Section 6, the holder of record of the Warrant would be entitled, upon the exercise of the Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, at its option either (i) round up to the nearest whole number, the number of shares of Common Stock to be issued to the Holder or (ii) in lieu of such fractional 

 

share interests, pay to the Holder an amount in cash equal to the product obtained by multiplying (x) the fractional share interest to which the Holder would otherwise be entitled by (y) the Fair Market Value on the exercise date.   

(h)   Other Events. If any event shall occur affecting the Company as to which none of the provisions of preceding subsections of this Section 6 are strictly applicable, but which would require an adjustment to the terms of the Warrant in order to (i) avoid an adverse impact on the Warrant and (ii) effectuate the intent and purpose of this Section 6, then the Board of Directors of the Company (the “Board”) shall make an appropriate adjustment in the Warrant Price and the number of shares of Common Stock issuable upon exercise of the Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 6; provided, that no such adjustment pursuant to this Section 6(g) shall increase the Warrant Price or decrease the number of shares of Common Stock issuable as otherwise determined pursuant to this Section 6 or otherwise adversely impact the Holder.

7.    Transfers.  

(a)   Assignment Form; Registration. The Warrant may be offered for sale, sold, transferred or assigned only with the prior written consent of the Company (upon the approval of a majority of the members of the Board); provided, however, that the Warrant may be transferred or assigned (i) with respect to any Warrant Shares for which the Warrant is vested (but only to the extent vested) or (ii) to any person or entity controlling, controlled by or under common control with the Holder (any such person, an “Affiliate” of the Holder) or to any limited partner of the Holder.  Any transfer of the Warrant shall be in compliance with applicable securities laws and shall be subject to this Section 7.  With respect to any transfer made in compliance with this Section 7(a), the Company shall register such transfer in the Warrant Register, with the Form of Assignment attached hereto as Exhibit B duly completed and signed (each, an “Assignment Form”), to the Company at its address specified herein.  Upon any such registration of transfer, a New Warrant evidencing the portion of the Warrant so transferred shall be recorded in the name of the transferee and a New Warrant evidencing the remaining portion of the Warrant not so transferred, if any, shall be recorded to the transferring holder in the Warrant Register. The acceptance of any New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of the Warrant.  In the event the Holder transfers or grants any interest (whether economic or otherwise) in the Warrant to an Affiliate or any other person, the Holder shall notify the Company in writing no later than the date on which such transfer or grant occurs in order to enable the Company to determine if any public disclosure or securities filings are required to be as a result of such transfer by the Company or any executive officer or director of the Company.

(b)   Service Charges. No service or other charge shall be made for any registration of transfer of the Warrant. 

(c)   Closing of Transfer Books. The Company will at no time close its transfer books against the transfer of the Warrant in any manner that interferes with the timely exercise thereof.

 

8.    Other Provisions Relating to Rights of the Holder. 

(a)   No Rights as Stockholder; Limitation on Liability. The Warrant does not entitle the Holder (nor any holder thereof) to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter. No provisions hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Warrant Price or as a stockholder of the Company, whether such liability is asserted by the Company or by its creditors.

(b)   Reservation of Common Stock. The Company covenants that it shall at all times reserve and keep available, free from preemptive or similar rights, a number of its authorized but unissued Common Stock that shall be sufficient to permit the exercise in full of the Warrant.

9.    Successors.  Subject to the other terms and conditions of this Agreement, all the covenants and provisions of this Agreement by or for the benefit of the Company shall bind and inure to the benefit of their respective successors and assigns. 

10.    Notices.  All notices, statements or other documents which are required or contemplated by this Agreement (including without limitation the delivery of any Exercise Notice or Assignment Form and the issuance of any New Warrant)  to be given, delivered or made by the Company or the Holder to the other (each a “Notice”) shall be in writing and shall be: (a) delivered personally or by commercial messenger; (b) sent via a recognized overnight courier service; (c) sent by registered or certified mail, postage pre-paid and return receipt requested; or (d) sent by facsimile transmission or electronic mail, provided confirmation of delivery is received by sender and the original Notice is sent or delivered contemporaneously by an additional method provided in this Section 10; in each case so long as such Notice is addressed to the intended recipient thereof as set forth below:

 

If to the Company:

	
	
Spark Networks, Inc.

	
11150 Santa Monica Blvd., Suite 600

	
Los Angeles, CA 90025

	
Attention: Robert O’Hare, Chief Financial Officer

	
Email: rohare@spark.net

	
Telephone: (310) 893-0550

 

with a copy to:

	
	
Morrison & Foerster LLP

	
425 Market Street

	
San Francisco, CA 94105

	
Attention: Murray A. Indick & John M. Rafferty

	
Telephone: (415) 268-7096

	
E-mail: MIndick@mofo.com; JRafferty@mofo.com

 

If to the Holder:

	
	
PEAK6 Investments, L.P.

	
141 W. Jackson Blvd., Suite 500

	
Chicago, IL 60604

	
Attention: Matt Hulsizer & Jay Coppoletta

	
Telephone: 312-444-8444 or 312-444-8868

	
E-mail: mhulsizer@peak6.com; legal@peak6.com

 

with a copy to:

	
	
Skadden, Arps, Slate, Meagher & Flom LLP

	
155 North Wacker Drive

	
Chicago, Illinois 60606

	
Attention: Shilpi Gupta

	
Telephone: (312) 407-0700

	
E-mail: shilpi.gupta@skadden.com

Any party may change its address specified above by giving each party Notice of such change in accordance with this Section 10.  Any Notice shall be deemed given upon actual receipt (or refusal of receipt).

 

11.    Applicable Law. THIS AGREEMENT AND THE WARRANT ISSUED HEREBY SHALL BE DEEMED TO BE A CONTRACT UNDER, AND SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS OF ANY STATE.

 

12.    Consent to Jurisdiction, Venue and Service of Process. The Company and the Holder irrevocably (i) agree that any suit, action or other legal proceeding arising out of or relating to this Agreement or the Warrant issued hereunder may be brought exclusively in the Delaware Chancery Court or, if such court shall not have jurisdiction, any federal court located in the State of Delaware, (ii) consent to the jurisdiction of each such court in any such suit, action or proceeding, and (iii) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum.  The Company and the Holder also irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the respective address set forth for such party in Section 10. The Company and the Holder agree that a final judgment in any suit, action or proceeding shall be conclusive and may be enforced in appropriate jurisdictions by suit on the judgment or in any other manner provided by law.  All mailings under this Section 12 shall be by certified mail, return receipt requested. 

13.    Persons Having Rights under this Agreement.  Nothing in this Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the holder of the Warrant any right, remedy, or claim under or by reason of the Warrant or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors and assigns and of the holder of the Warrant, each of whom is a third party beneficiary of this Agreement. 

14.    Effect of Headings. The section headings herein are for convenience only and are not part of this Agreement and shall not affect the interpretation thereof.

15.    Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and such counterparts shall together constitute one and the same instrument.

16.    Amendment and Waiver.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of (i) the Company, upon the approval of a majority of the members of the Board, and (ii) the Holder.

17.    Miscellaneous. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement, the Warrant or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

[Remainder of page intentionally left blank; signature page follows]

 

 

 

IN WITNESS WHEREOF, the Company and Holder have caused this Agreement to be duly executed by its authorized officer as of the date first indicated above.

	
	
 

	
SPARK NETWORKS, INC.

 

	
 

	
By: /s/ Robert W. O’Hare

	
Name: Robert W. O’Hare

	
Title: Chief Financial Officer

 

	
	
PEAK6 Investments, L.P.

 

	
 

	
By: /s/ Jay Coppoletta

	
Name: Jay Coppoletta

	
Title: Chief Corporate Development & Legal Officer

 

 

 

 

EXHIBIT A

FORM OF EXERCISE NOTICE

 (To be executed by the Holder to exercise the right to purchase Warrant Shares)

To Spark Networks, Inc.:

The undersigned is the Holder of the Warrant (the “Warrant”) issued by Spark Networks, Inc., a Delaware corporation (the “Company”), which accompanies this Exercise Notice.  Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant Agreement.

	
1.    
	
The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares.

	
2.    
	
The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares pursuant to the Warrant.

	
3.    
	
The undersigned Holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant.

	
4.    
	
The undersigned Holder confirms to the Company the following checked representations and agreements are true as of the date hereof:

 

__ It is acquiring Warrant Shares whose issuance upon exercise of the Warrant has been registered on an effective registration statement under the Securities Act.

 

OR

 

__ It (A) is an “accredited investor” within the meaning of Rule 501(a)(1) under the Securities Act OR (B) either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Warrant Shares, and has so evaluated the merits and risks of such investment; AND

__ It is acquiring the Warrant Shares for itself and does not intend to re-offer or re-sell the Warrant Shares in connection with a distribution; AND

__ It understands that each Warrant Share is characterized as “restricted security” under the U.S. federal securities laws inasmuch as it is being acquired from the Company in a transaction not involving a public offering and that under U.S. federal securities laws and applicable regulations the Warrant Shares may be resold without registration under the Securities Act only in certain limited circumstances; AND

__ It is understood that certificates evidencing the Warrant Shares will bear any appropriate restrictive legend(s).

 

 

	
5.    
	
Pursuant to this exercise, the Company shall deliver to the undersigned Holder _______________ Warrant Shares in accordance with the terms of the Warrant Agreement and the Warrant. 

	
6.    
	
Following this exercise, the Warrant shall be exercisable to purchase a total of ______________ Warrant Shares.

 

 

			
	
 
	
 
	
 

	
 
	
 
	
 

	
Dated: 
	
 
	
Name of Holder:

	
 
	
 
	
 

	
 
	
 
	
(Print) 

	
 
	
 
	
 

	
 
	
 
	
By:

	
 
	
 
	
Name:

	
 
	
 
	
Title:

	
 
	
 
	
 

	
 
	
 
	
 

 

EXHIBIT B

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

[FOR VALUE RECEIVED,] the undersigned hereby [sells], assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ Warrant Shares to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Spark Networks, Inc. (the “Company”) with full power of substitution in the premises.

		
	
In connection with any transfer of the Warrant, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and is making the transfer pursuant to one of the following:

[Check All That Apply]

(1) ___to the Company; or

(2) ___to an “accredited investor” (as defined in Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”)); or

(3) ___pursuant to the exemption from registration provided by Rule 144 under the Securities Act or pursuant to another exemption available under the Securities Act; or

(4) ___pursuant to an effective registration statement under the Securities Act.

If the box is checked below, the undersigned confirms and represents to the Company that the Warrant is not being transferred to an “affiliate” of the Company as defined in Rule 144 of the Securities Act.  

 ̈The transferee is not an “affiliate” of the Company as defined in Rule 144 of the Securities Act.

	
 

 

 

	
Dated: 
	
 

	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
Address of Transferee

	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
 

 

		
	
 
	
 

	
In the presence of:lov-ex103_8.htm

 

Exhibit 10.3

 

 

MANAGEMENT SERVICES AGREEMENT

This MANAGEMENT SERVICES AGREEMENT dated as of August 9, 2016 (the “Effective Date”) by and among SPARK NETWORKS, INC., a Delaware corporation (the “Company”), and PEAK6 INVESTMENTS, L.P. (“PEAK6”).

WHEREAS, the Company and PEAK6 have entered into a Purchase Agreement, dated as of the Effective Date (the “Purchase Agreement”), pursuant to which PEAK6 has purchased 5,000,000 shares of Common Stock of the Company (the “Purchased Stock”) at a per share price of $1.55 (the “Stock Price”); and

WHEREAS, in connection with the Purchase Agreement, the Company agrees to retain PEAK6 to perform certain services for the Company, and PEAK6 agrees to provide such services to the Company, as described further below.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereby agree as follows:

1.Services.  

(a)Description of Services.  The Company shall retain PEAK6 to provide, and PEAK6 shall provide and perform, the following marketing, technology, strategy, development and other services for the Company (collectively, the “Services”) (it being understood that (i) the Company currently has, and will continue to have, marketing, technology, strategy and development personnel and that PEAK6 will not be responsible for replacing or providing all marketing, technology, strategy, development or other services to the Company and (ii) there may be times when certain of the following services are not needed or are needed with greater or less intensity):

(i)marketing, product, advertising, promotional and brand strategy development and implementation oversight, which includes decision making authority on strategy, spending, campaigns and other marketing, advertising, brand and/or promotional matters for the Company; provided that such spending is within the Board-approved annual budget of the Company; provided, further, that for the avoidance of doubt, PEAK6 shall determine the means of providing such development and oversight in its discretion; 

(ii)strategic planning in coordination with the Company, including evaluating major strategic alternatives;

(iii)identification of, and support for, potential acquisitions and dispositions (including aid with negotiations and analysis support);

(iv)strategic financial advice and capital structure guidance, including without limitation with respect to raising additional capital and cash management;

 

(v)strategic managerial and operational advice in connection with the operations of the Company, including without limitation advice with respect to the development and implementation of strategies for improving the operating, marketing and financial performance of the Company; 

(vi) information technology and infrastructure consulting, contract review and assistance, and technology support (provided, that it is understood that (i) such services shall not include providing general technology department services to the Company, (ii) the Company will retain and employ technology, IT and infrastructure personnel, including a CTO, that are not PEAK6 employees or resources and (iii) PEAK6 is not an outsourced technology function for the Company); and

(vii)such other services for the Company upon which the Board of Directors of the Company (the “Board”) and PEAK6 agree in writing. 

(b)Performance of Services.  PEAK6 shall render the Services in a timely and professional manner reasonably consistent with industry standards.  PEAK6 shall provide and devote to the performance of the Services under this Agreement such employees, agents and partners of PEAK6 as PEAK6 deems appropriate or necessary in order to furnish the Services to the Company in accordance with this Agreement.  In performing the Services, PEAK6 agrees to provide its personnel and their computer and related equipment at its own expense and the Company would be responsible for payment of other costs and/or expenses of acquisition, implementation, negotiation, vendor retention, media buy and oversight and management with respect to other services that may be recommended by PEAK6.  The Company shall make its facilities and equipment available to PEAK6 as reasonably necessary in connection with the Services.  PEAK6 may not subcontract or otherwise delegate its obligations under this Agreement without the Company’s prior written consent (upon the approval of a majority of the members of the Board), which may not be unreasonably withheld, conditioned or delayed; provided, further, that in the event personnel of PEAK6 are terminated that were providing Services hereunder, PEAK6 may subcontract the Services such individual had been providing until PEAK6 hires a replacement (and PEAK6 shall be responsible for the performance of such Services by such subcontractor under this Agreement to the same extent that PEAK6 would have been responsible for the performance of such Services under this Agreement had PEAK6 performed such Services itself); provided, further, that it is acknowledged that PEAK6 may recommend the hiring by the Company, at the Company’s expense, of subcontractors, rather than employees, to fill positions at the Company and the retention of such subcontractors would not be deemed the use of a subcontractor by PEAK6 hereunder.  Any individual hired by the Company as an employee or contractor at the recommendation of PEAK6 (including the Chief Executive Officer or Chief Technology Offer, as referenced below in Section 2) shall enter into the Company’s standard proprietary information and invention assignment agreement for employees and contractors.  For any work performed on the Company’s premises, PEAK6 shall comply with all reasonable and generally applicable security, confidentiality, safety and health policies of the Company.  PEAK6 agrees that in performing the Services, in the absence of approval from the Board (through budget approval or otherwise), it may not cause the Company to incur expenses or obligations that would cause the Company to have less than $5,000,000 of cash or cash equivalents on hand (the “Expenditures Limit”); provided, however, that (i) the Expenditures Limit shall not be reduced 

 

by any amount paid in cash by the Company to the former equity holders of Smooch Labs Inc. (“Smooch”) for earnout payment pursuant to the terms of that certain Agreement and Plan of Merger by the Company, Smooch and the former equity of Smooch; and (ii) this sentence shall not in any way limit or impair the payment of the Management Fee to PEAK6 and, in the event that this limitation in Services applies, PEAK6 shall not be responsible or liable for providing such limited Service.   

(c)No Conflict of Interest.  PEAK6 agrees during the Term (as defined below) not to accept work or enter into any agreement or accept any obligation that is inconsistent or incompatible with PEAK6’s obligations under this Agreement or the scope of Services rendered for the Company.  PEAK6 represents and warrants that there is no other existing agreement or duty on PEAK6’s part inconsistent with this Agreement.

(d)Limit of Liability.  Other than with respect to a breach of Section 6 of this Agreement, PEAK6, its affiliates, subsidiaries, employees, officers, partners, agents and representatives (collectively, the “PEAK6 Parties”) shall have no liability for the provision of any Services or otherwise hereunder other than as a result of the gross negligence, willful misconduct or fraud of a PEAK6 Party and the Company shall indemnify and hold the PEAK6 Parties harmless from any claim, proceeding, action, suit or liability resulting from or related to the Services other than as a result of the gross negligence, willful misconduct or fraud of a PEAK6 Party (other than with respect to a breach of Section 6 of this Agreement by a PEAK6 Party); provided, however, that other than with respect to a breach of Section 6 of this Agreement by a PEAK6 Party, in no event shall the liability, claims, losses or obligations of the PEAK6 Parties exceed the amount of management fees actually paid hereunder pursuant to Section 4.  Notwithstanding anything to the contrary herein, the foregoing limitations of liability with respect to the PEAK6 Parties shall not apply with respect to any breach of Section 6 of this Agreement by any PEAK6 Party, and the Company shall have no indemnification obligations to the PEAK6 Parties with respect to any claim, proceeding, action, suit or liability resulting from or related to a breach of Section 6 of this Agreement by any PEAK6 Party.

2.Board Matters.  The appointment of the Company’s Chief Executive Officer and the Chief Technology Officer shall be subject to the approval of a majority of the members of the Board.  Such appointment shall be made at such time that all seats on the Board are then filled.  Any Chief Executive Officer or Chief Technology Officer may only be terminated by the Company for Specified Termination Reasons.  “Specified Termination Reasons” means (i) termination for “Cause” (as defined below), or (ii) termination with the approval of at least 50% of all members of the Board at such time when all seats on the Board are then filled. “Cause” shall mean the occurrence during the term of employment of any of the following: (i) formal admission to (including a plea of guilty or nolo contendere to), or conviction of a felony, or any criminal offense involving moral turpitude under any applicable law, or (ii) gross negligence or willful misconduct in the performance of material duties if such negligence or misconduct has been communicated to the relevant employee in the form of a written notice from the Board and is not substantially cured within thirty (30) days following receipt of such written notice.

 

3.Term.  Subject to Section 5 hereof, this Agreement shall be in effect for a term of five (5) years commencing on the date hereof and terminating on August 8, 2021 (the “Term”).  

4.Management Fee.  

(i)The Company shall pay PEAK6 a cash fee of $1.5 million per year for the Services rendered by PEAK6 pursuant to this Agreement (the “Management Fee”).  The Management Fee shall be paid on a quarterly basis in the manner set forth in Section 4(ii) below.  The parties agree that the Management Fee shall be treated as full consideration for the Services provided to the Company by PEAK6. 

(ii)The Management Fee shall be payable on a quarterly basis on each September 1, December 1, March 1 and June 1 in an amount of $375,000 per upcoming quarter (“Quarterly Payment”), to be adjusted if appropriate as provided in Section 4(iv) (and with the last payment at the end of the Term pro-rated to reflect that the Agreement will terminate prior to the end of a full three-month period). The first Quarterly Payment shall be due on September 1, 2016 (and shall include a stub period payment for the period from the Effective Date through August 31, 2016 of $90,411).  PEAK6 shall be responsible for all of its expenses incurred in performance of the Services under this Agreement other than as provided herein, including Section 4(iv) below (provided, for the avoidance of doubt, that the salaries of the Chief Executive Officer and Chief Technology Officer shall be paid directly by the Company and shall not be expenses of PEAK6 hereunder).

(iii)  In the event that any Investor Designee (as defined in the Purchase Agreement) does not approve of the Company’s Chief Executive Officer or Chief Technology Officer appointment, or the Investor Designee does not approve of the termination of a Chief Executive Officer or Chief Technology Officer of the Company pursuant to clause (ii) of the definition of “Specified Termination Reason” in Section 2 above, then: the Company shall, if requested in writing by PEAK6, promptly file, and obtain the effectiveness of, a registration statement with the Securities and Exchange Commission and take such actions set forth in Section 8.1(d) of the Purchase Agreement with respect to such registration statement, and the Company shall reasonably assist PEAK6 in completing the sale of shares of the Company held by PEAK6 under such registration statement.

(iv)Notwithstanding anything to the contrary in this Agreement, and in addition to Section 1 hereof, in the event during the term of the Agreement PEAK6 partners or employees are engaged to provide marketing or marketing related services to the Company either as replacement of Company employees or other external marketing resources engaged by the Company or as if they were Company employees (temporary or full time), then the Company shall reimburse PEAK6 for the actual costs (including full burdened compensation and benefits) incurred of such PEAK6 partners or employees with respect to the marketing or marketing related services so provided to the Company; provided, however, that the amount to be reimbursed in any year by the Company for such marketing or marketing related services provided to the Company by PEAK6 partners or employees shall not exceed the lesser of Saved Company Marketing Costs (as defined below) or $1,750,000.  Reimbursement to PEAK6 shall be made on a monthly basis promptly following PEAK6's delivery of a reasonably detailed 

 

invoice for such prior month regardless of whether PEAK6’s costs exceed the current Saved Company Marketing Costs (but always subject to the $1,750,000 limit in any year); provided that, at the end of each yearly anniversary hereof, if Saved Company Marketing Costs does not exceed the amount paid to PEAK6 under this Section, PEAK6 shall reimburse such shortfall to the Company.  “Saved Company Marketing Costs” means the aggregate amount of fully burdened costs to the Company of the sales and marketing employees and external marketing resources (consulting or otherwise) that provided marketing or similar services to the Company as of the date hereof that are replaced by PEAK6 partners or employees hereunder or otherwise reduced by the Company.  For clarity, Saved Company Marketing Costs shall be calculated on a look forward basis, such that if the monthly run rate of costs so reduced or saved was $125,000, the Saved Company Marketing Costs would be $1,500,000 each year of the Term. 

5.Termination.  

(a)Termination for Convenience by the Company.  At any time following the third year anniversary of the Effective Date, the Company may terminate this Agreement at its convenience, with or without cause, upon at least 60 days’ prior written notice to PEAK6.  Upon any termination of the Agreement pursuant to this Section 5(a), the Company shall pay PEAK6 any unpaid Quarterly Payments that are due on or before the effective date of termination and the amounts due under Section 4(iv) for costs and/or expenses incurred through the date of termination.  Such payments shall be made within five (5) days of termination and shall be in full satisfaction of any obligation or liability of the Company to PEAK6 for payments due to PEAK6 under this Agreement.

(b)Termination for Cause by PEAK6.  PEAK6, at its option, shall have the right to terminate this Agreement for “Cause” (as defined below) by written notice to the Company unless the Company remedies (if curable) the event or condition giving rise to “Cause” within twenty (20) calendar days after receipt of such written notice. Upon any termination of the Agreement pursuant to this Section 5(b), (i) the Company shall pay PEAK6 any unpaid Quarterly Payments that are due on or before the effective date of termination and the amounts due under Section 4(iv) for costs and/or expenses incurred through the date of termination, (ii) an amount equal to the aggregate amount of all Management Fees that would have been paid by the Company to PEAK6 in the first three years of this Agreement less amounts actually paid (but not less than zero), and (iii) the Warrant (as defined below) shall immediately vest in full without regard to any vesting conditions set forth therein.  Such payment shall be made within 15 days of termination and shall be in full satisfaction of any obligation or liability of the Company to PEAK6 for payments due to PEAK6 under this Agreement.   The “Warrant” is the Warrant Agreement, dated as of the Effective Date (the “Warrant”), pursuant to which the Company has granted PEAK6 the right to purchase up to 7,500,000 shares of Common Stock of the Company at a per share exercise price of $1.74.  For purposes of this Section 5(b), “Cause” shall mean: (i) the commission by the Company of an act against PEAK6 that would reasonably be expected to cause material harm to PEAK6 constituting common law fraud, a felony or a criminal act; (ii) the Company becomes insolvent, makes a general assignment for the benefit of creditors, files a voluntary petition for bankruptcy, suffers or permits the appointment of a receiver for its business or assets, becomes subject to any proceedings under any bankruptcy or insolvency law (whether domestic or foreign), has would up or liquidated, voluntarily or otherwise, or ceases to do business in the normal course; (iii) 

 

willful misconduct or gross negligence by the Company in connection with PEAK6’s provision of the Services which would reasonably be expected to have a material adverse effect on the business, operations and financial affairs of PEAK6; or (iv) the failure of the Company to pay PEAK6 the Quarterly Payment or amounts due under Section 4(iv) when due.   

(c)Termination for Cause by the Company.  The Company, at its option, shall have the right to terminate this Agreement for “Cause” (as defined below) by written notice to PEAK6 unless PEAK6 remedies (if curable) the event or condition giving rise to “Cause” within twenty (20) calendar days after receipt of such written notice.  Upon any termination of the Agreement pursuant to this Section 5(c), PEAK6 shall pay the Company within fifteen (15) days of termination an amount equal to the aggregate amount of all Management Fees paid by the Company to PEAK6 during the Term of the Agreement.  Upon any termination of the Agreement pursuant to this Section 5(c), the Company shall not be obligated to pay any further amounts to PEAK6 under this Agreement, whether or not then past due or accrued.  For purposes of this Section 5(c), “Cause” shall mean: (i) the commission by PEAK6 of an act against the Company that would reasonably be expected to cause material harm to the Company constituting common law fraud, a felony or a criminal act; (ii) PEAK6 becomes insolvent, makes a general assignment for the benefit of creditors, files a voluntary petition for bankruptcy, suffers or permits the appointment of a receiver for its business or assets, becomes subject to any proceedings under any bankruptcy or insolvency law (whether domestic or foreign), has would up or liquidated, voluntarily or otherwise, or ceases to do business in the normal course; or (iii) willful misconduct or gross negligence by PEAK6 in provision of the Services which would reasonably be expected to have a material adverse effect on the business, operations and financial affairs of the Company.

(d)Cessation of Services; Survival.  Upon the effective date of any termination of this Agreement, PEAK6 shall immediately cease performing any Services under this Agreement.  Sections 6 through 15 of this Agreement shall survive the expiration or termination of this Agreement.  Neither party shall be liable to the other for damages of any kind solely as a result of rightfully terminating this Agreement in accordance with its terms.  

(e)Delivery of Materials.  Upon any termination of this Agreement or at any time upon the Company’s request, PEAK6 shall promptly return to the Company any and all Confidential Information (as defined below) of the Company.  Upon any termination, PEAK6 shall also promptly deliver all Work Product then in progress, and all Background Technology, Third Party Technology or PEAK6 Proprietary Information required to be provided hereunder (each as defined below).

6.Confidentiality.  

(a)Definition.  Each party acknowledges that confidential, proprietary and/or trade secret information may be disclosed or submitted by one party (the “Disclosing Party”) to the other (the “Receiving Party”) hereunder, including, without limitation, trade secrets, processes, techniques, drawings, models, customer-related information and data, computer programs, databases, business plans, technical data, product ideas, marketing data, contracts and financial information (collectively, the “Confidential Information”). For the avoidance of doubt, (a) the Disclosing Party shall include any employee of the Company, 

 

including the Chief Executive Officer and/or Chief Technology Officer of the Company and (b) Work Product is addressed in Section 7 and shall not constitute the Confidential Information of PEAK6. 

(b)Scope of Use.  The Receiving Party shall preserve and protect the confidentiality of the Disclosing Party’s Confidential Information using precautions at least as restrictive as those it takes to protect its own confidential, proprietary and/or trade secret information (but in no event less than a reasonable degree of care).  The Receiving Party shall not itself, nor shall it allow others to, use, display, copy, disclose, transmit, reverse engineer, disassemble, decompile, translate or modify all or any part of such Confidential Information, without the Disclosing Party’s prior written consent (which consent, in the case of the Company, shall require approval of the majority of the members of the Board); provided that the Receiving Party shall be permitted to take any of the foregoing actions in connection with the performance of covenants and obligations under this Agreement (provided that in no event shall the Receiving Party allow others to take any of the foregoing actions without obtaining the prior written consent of the Company upon the approval of the majority of the members of the Board).  The Receiving Party agrees to limit access to the Disclosing Party’s Confidential Information to those of its affiliates, directors, officers, employees and contractors who: (a) have a need to know such Confidential Information for purposes of such party performing its obligations hereunder; and (b) are obligated in writing to protect the confidentiality of such Confidential Information under terms at least as restrictive as those set forth in this Section 6.  The Receiving Party shall be fully and directly responsible and liable to the Disclosing Party for any breach of this Section 6 by any individuals or entities receiving access to the Disclosing Party’s Confidential Information through or on behalf of the Receiving Party.

(c)Exclusions.  The restrictions set forth in this Section 6 shall not apply with respect to any information which: (a) became publicly known through lawful means; (b) was rightfully in the Receiving Party’s possession prior to disclosure by the Disclosing Party; (c) is disclosed to the Receiving Party without confidential or proprietary restriction by a third party who rightfully possesses the information (without confidential or proprietary restriction); or (d) is independently developed by the Receiving Party without use of or reference to any Confidential Information of the Disclosing Party.  

(d)Disclosure in Compliance with Law.  In the event the Receiving Party is required by law, securities exchange or regulation or court order to disclose any of the Disclosing Party’s Confidential Information, the Receiving Party promptly shall, if not prohibited by law, regulation or rule, notify the Disclosing Party in writing prior to making any such disclosure in order to facilitate the Disclosing Party’s effort to seek a protective order or other appropriate remedy from the proper authority.  The Receiving Party agrees to reasonably cooperate with the Disclosing Party, at the Disclosing Party’s expense, in seeking such order or other remedy.  The Receiving Party further agrees that if the Disclosing Party is not successful in precluding the requesting legal body from requiring the disclosure of the Confidential Information, it shall furnish only that portion of the Confidential Information that is legally required and shall exercise all reasonable efforts to obtain reliable assurances that confidential treatment shall be accorded the Confidential Information.

 

(e)Prior Non-Disclosure Agreement.  In the event the parties have heretofore entered into one or more confidentiality or non-disclosure agreements, such agreement(s) shall, as applicable, govern the treatment of information disclosed or exchanged by the parties up to and including the day immediately prior to the Effective Date hereof, and the provisions of this Section 6 shall govern the treatment of Confidential Information disclosed or exchanged by the parties from and after the Effective Date hereof. 

7.Intellectual Property. 

(a)Work Product.  As used in this Agreement, the term “Work Product” shall include, without limitation, all discoveries, ideas, inventions, concepts, developments, know-how, trade secrets, works of authorship, materials, software (source and object code), HTML, writings, drawings, designs, processes, techniques, formulas, data, specifications, technology, patent applications (and contributions thereto), and other creations (and any related improvements or modifications to the foregoing or to any Confidential Information of the Company), whether or not patentable, relating to any activities of the Company that are conceived, created or otherwise developed by or for PEAK6 (alone or with others) in connection with rendering the Services or delivered to the Company by or for PEAK6 in connection with rendering the Services (a) during the Term, or (b) if based on Confidential Information of the Company, after termination of this Agreement.  

(b)Assignment.  PEAK6 agrees that any and all Work Product (other than Background Technology) shall be the sole and exclusive property and Confidential Information of the Company.  To the extent that such Work Product may not be considered “work made for hire,” and except for PEAK6’s rights in the Background Technology or any third party rights in any Third Party Technology (as such terms are defined below), PEAK6 hereby irrevocably assigns and agrees to assign to the Company all right, title and interest worldwide in and to such Work Product (whether currently existing or conceived, created or otherwise developed later), including, without limitation, all copyrights, trademarks, trade secrets, patents, industrial rights and all other intellectual and proprietary rights related thereto (the “Proprietary Rights”), effective immediately upon the inception, conception, creation or development thereof.  

(c)License.  To the extent, if any, that any Work Product (other than Background Technology) or Proprietary Rights are not assignable or that PEAK6 retains any right, title or interest in and to any such Work Product or any Proprietary Rights, PEAK6 hereby grants to the Company a perpetual, irrevocable, fully paid-up, royalty-free, transferable, sublicensable (through multiple levels of sublicensees), exclusive, worldwide right and license to use, reproduce, distribute, display and perform (whether publicly or otherwise), prepare derivative works of and otherwise modify, make, sell, offer to sell, import and otherwise use and exploit (including by having others exercise such rights on behalf of the Company) all or any portion of such Work Product or Proprietary Rights, in any form or media (now known or later developed).  

 

(d)Background Technology, Third Party Technology and PEAK6 Proprietary Information.   

(i)The assignment set forth in Section 7(b) and exclusive license set forth in Section 7(c) shall not apply to: (i) any creations (including, without limitation, any technology, inventions, discoveries, works of authorship or other prior creations) that were conceived, created or reduced to practice by or for PEAK6 (alone or with others) prior to commencement of PEAK6’s contractor arrangement with the Company or which were  conceived, created or reduced to practice by or for PEAK6 (alone or with others) not in connection with the performance of the Services hereunder and without use of or reference to (or otherwise based on) any Confidential Information of the Company (collectively, “Background Technology”); or (ii) any software, materials or other technology which is owned or controlled by a third party (“Third Party Technology”).  

(ii)Unless otherwise agreed by the parties in writing, to the extent any Background Technology or Third Party Technology is incorporated by PEAK6 or with PEAK6’s approval into or otherwise included in, or is necessary or desirable for the use or exploitation of, any deliverable or other Work Product and such deliverable or other Work Product is necessary or desirable for the online dating and online community businesses of the Company (including its affiliates and its or their successors and assigns), PEAK6 hereby grants to the Company a perpetual, irrevocable, fully paid-up, royalty-free, transferable, sublicensable (through multiple levels of sublicensees), worldwide right and license to reproduce, distribute, display and perform (whether publicly or otherwise), prepare derivative works of and otherwise modify, make, have made, sell, offer to sell, import and otherwise use and exploit (including by having others exercise such rights on behalf of the Company) all or any portion of such Background Technology or Third Party Technology in connection with developing, enhancing, marketing, distributing or providing, maintaining or supporting, or otherwise using or exploiting, all or any portion of the Work Product or Proprietary Rights, in any form or media (now known or later developed), without any obligation to account to PEAK6 or any third party.

8.Independent Contractor Relationship.  PEAK6’s relationship with the Company shall be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, agency or employer-employee relationship between the parties.  PEAK6 is not the agent of the Company and is not authorized and shall not have any authority to make any representation, contract or commitment on behalf of the Company, or otherwise bind the Company in any respect whatsoever.  PEAK6 (and its employees and agents) shall not be entitled to any of the benefits the Company may make available to its employees, such as group insurance, stock option, stock compensation, profit-sharing or retirement benefits.  PEAK6 shall be solely responsible for all tax returns and payments required to be filed with or made to any federal, state or local tax authority with respect to PEAK6’s performance of services and receipt of fees under this Agreement.  

9.Noninterference.  PEAK6 acknowledges that the Company’s relationships with its employees, agents, suppliers, customers and vendors are valuable business assets.  Accordingly, PEAK6 agrees that, during the Term PEAK6 shall not (for itself or for any third party) divert or attempt to divert from the Company any business, employee, agent, supplier, client, customer or vendor, through solicitation or otherwise.  

 

10.Notices.  All notices, statements or other documents which are required or contemplated by this Agreement to be given, delivered or made by the Company or PEAK6 to the other (each a “Notice”) shall be in writing and shall be: (a) delivered personally or by commercial messenger; (b) sent via a recognized overnight courier service; (c) sent by registered or certified mail, postage pre-paid and return receipt requested; or (d) sent by facsimile transmission or electronic mail, provided confirmation of delivery is received by sender and the original Notice is sent or delivered contemporaneously by an additional method provided in this Section 10; in each case so long as such Notice is addressed to the intended recipient thereof as set forth below: 

 

If to the Company:

 

	
	
Spark Networks, Inc.

	
11150 Santa Monica Blvd., Suite 600

	
Los Angeles, CA 90025

	
Attention: Robert O’Hare, Chief Financial Officer

	
Email: rohare@spark.net

 

with a copy to:

 

	
	
Morrison & Foerster LLP

	
425 Market Street

	
San Francisco, CA 94105

	
Attention: Murray A. Indick & John M. Rafferty

	
Telephone: (415) 268-7096

	
Facsimile: (415) 276-7147

	
E-mail: MIndick@mofo.com; JRafferty@mofo.com

 

If to PEAK6:

 

	
	
PEAK6 Investments, L.P.

	
141 W. Jackson Blvd., Suite 500

	
Chicago, IL 60604

	
Attention: Matt Hulsizer & Jay Coppoletta

	
Telephone: 312-444-8444 or 312-444-8868

	
E-mail: mhulsizer@peak6.com; legal@peak6.com

 

with a copy to:

 

	
	
Skadden, Arps, Slate, Meagher & Flom LLP

	
155 North Wacker Drive

	
Chicago, Illinois 60606

	
Attention: Shilpi Gupta

	
Telephone: (312) 407-0700

	
E-mail: shilpi.gupta@skadden.com

 

 

Any party may change its address specified above by giving each party Notice of such change in accordance with this Section 10.  Any Notice shall be deemed given upon actual receipt (or refusal of receipt).

11.Assignment; Successors.  Neither party may delegate any obligations hereunder to any other party without the prior written consent of the other party (which consent, in the case of the Company, shall require the approval of a majority of the members of the Board).  Subject to the foregoing with respect to such obligations, this Agreement (i) may be assigned by a party in connection with a merger, transfer of assets, or other transaction or event involving all or a substantial portion of the business of such party, and (ii) all the obligations hereunder shall be binding on and the rights hereunder shall inure to the benefit of the successors and assigns of the parties.

12.Counterparts.  This Agreement may be executed and delivered by each party hereto in separate counterparts (including facsimile or PDF), each of which when so executed and delivered shall be deemed an original, and both of which taken together shall constitute one and the same agreement.

13.Entire Agreement; Modification.  The terms and conditions hereof constitute the entire agreement between the parties hereto with respect to the subject matter of this Agreement and supersede all previous communications, either oral or written, representations or warranties of any kind whatsoever, except as expressly set forth herein.  No amendments or modifications of this Agreement nor waiver of the terms or conditions thereof shall be binding upon either party unless approved in writing by an authorized representative of such party.

14.Applicable Law. PURSUANT TO SECTION 5‐1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW (OR ANY SUCCESSOR STATUTE THERETO), THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT UNDER, AND SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND APPLICABLE FEDERAL LAW.

15.Consent to Jurisdiction, Venue and Service of Process. Pursuant to, and in accordance with, Section 5‐1402 of the New York General Obligations Law (or any successor statute thereto), the Company and PEAK6 irrevocably (i) agree that any suit, action or other legal proceeding arising out of or relating to this Agreement may be brought in the non‐exclusive jurisdiction of a court of record in the State of New York located in the Borough of Manhattan or in the United States District Court for the Southern District of the State of New York located in the Borough of Manhattan, (ii) consent to the jurisdiction of each such court in any such suit, action or proceeding, and (iii) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum.  The Company and PEAK6 also irrevocably consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the respective address set forth for such party in Section 10 hereof. The Company and PEAK6 agree that a final judgment in any suit, action or proceeding 

 

shall be conclusive and may be enforced in appropriate jurisdictions by suit on the judgment or in any other manner provided by law.   

 

 

 

IN WITNESS WHEREOF, the parties have executed this Management Services Agreement as of the day and year first above written.

		
	
SPARK NETWORKS, INC.

	
 
	
 

	
/s/ Robert W. O’Hare

	
By:
	
Robert W. O’Hare

	
Title:
	
Chief Financial Officer

	
 
	
 

	
 
	
 

	
PEΔK6 INVESTMENTS, L.P.

	
 
	
 

	
/s/ Jay Coppoletta

	
By:
	
Jay Coppoletta

	
Title:
	
Chief Corporate Development & Legal Officer

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