lov-def14a_20170511.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant To Section 14(a) of the
Securities Exchange Act of 1934

 

Filed by the Registrant                                Filed by a Party other than the Registrant  

Check the appropriate box:

 

Preliminary Proxy Statement

 

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

 

Definitive Proxy Statement

 

 

Definitive Additional Materials

 

 

Soliciting Material Pursuant to §240.14a-12

 

SPARK NETWORKS, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

 

 

Fee paid previously with preliminary materials.

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

 

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 

 

 

 

 


 

SPARK NETWORKS, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

You are cordially invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of Spark Networks, Inc., a Delaware corporation (the “Company”), to be held at the Company’s principal executive offices located at 11150 Santa Monica Boulevard, Suite 600, Los Angeles, California 90025 on May 11, 2017 at 9:00 a.m. Pacific Daylight Time.

The Annual Meeting of the Company is being held for the following purposes:

1.

To elect seven (7) directors to the Board of Directors to serve for one-year terms ending at the 2018 annual meeting of stockholders;

2.

To ratify the appointment of Grant Thornton LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2017;

3.

To approve the Company’s 2017 Omnibus Incentive Plan; and

4.

To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

The Board of Directors has fixed the close of business on March 24, 2017 as the record date (the “Record Date”) for determining those stockholders who will be entitled to notice of and to vote at the Annual Meeting.

We will take advantage of the rules of the Securities and Exchange Commission that allow us to furnish our proxy materials over the internet. As a result, we are sending a Notice of Internet Availability of Proxy Materials to our stockholders rather than a full paper set of the proxy materials. The Notice of Internet Availability of Proxy Materials contains instructions on how to access our proxy materials on the internet, as well as instructions on how stockholders may obtain a paper copy of our proxy materials. This process substantially reduces the costs associated with printing and distributing proxy materials. To make it easy to vote, internet and telephone voting are available. The instructions for voting are on the Notice of Internet Availability of Proxy Materials or, if you received a paper copy of the proxy materials, on the proxy card.

You are cordially invited to attend the Annual Meeting, but whether or not you plan to attend the Annual Meeting, please vote at your earliest convenience by following the instructions in the Notice of Internet Availability of Proxy Materials or date and sign your proxy card and return it in the enclosed postage paid envelope. You may revoke your proxy at any time before it is voted at the Annual Meeting. The giving of this proxy card will not affect your right to vote in person in the event you find it convenient to attend. If you are a stockholder who owns shares through a nominee and attends the Annual Meeting, you should bring a letter from your nominee identifying you as the beneficial owner of the shares and acknowledging that you will vote your shares.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Robert W. O’Hare

Corporate Secretary

Dated: March 31, 2017

Los Angeles, California

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on MAY 11, 2017: The 2017 Proxy Statement and the Annual Report to Stockholders for the year ended December 31, 2016 are also available at: Http://proxy.spark.net.

 

 

 

 


 

SPARK NETWORKS, INC.

PROXY STATEMENT

For Annual Meeting to be Held

May 11, 2017 at 9:00 a.m. Pacific Daylight Time

The enclosed proxy is solicited by the Board of Directors of Spark Networks, Inc. (“we,” “us,” the “Company,” or “Spark”), a Delaware corporation, in connection with the Annual Meeting of Stockholders of the Company to be held at the Company’s principal executive offices located at 11150 Santa Monica Boulevard, Suite 600, Los Angeles, California 90025 on May 11, 2017 at 9:00 a.m. Pacific Daylight Time (the “Annual Meeting”).

The purpose of the Annual Meeting is to vote on the following items of business: (1) the election of seven (7) directors to the Board of Directors to serve one-year terms ending at the 2018 annual meeting of stockholders; (2) ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017; (3) to approve the Company’s 2017 Omnibus Incentive Plan; and (4) to transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

On or about April 5, 2017, we will mail to our stockholders of record and beneficial owners a Notice of Internet Availability of Proxy Materials containing instructions on how to access our 2017 Notice and Proxy Statement and our 2016 Annual Report on our 2016 Form 10-K via the internet.

Annual Report

Our annual report to stockholders for the year ended December 31, 2016 is being made available concurrently to each stockholder along with this proxy statement (collectively, the “Proxy Materials”). Under rules adopted by the Securities and Exchange Commission (the “SEC”), we are furnishing the Proxy Materials to many of our stockholders on the internet, rather than mailing printed copies. If you receive a one-page notice by mail, you will not receive a printed copy of the Proxy Materials unless you request one. Instead, the notice will instruct you how to access and review the Proxy Materials on the internet. If you would like a printed copy of the Proxy Materials, please follow the instructions on the notice.

If you request printed versions of the Proxy Materials, you will also receive a proxy card.

Stockholders may also request a free copy of our 2016 Annual Report on our 2016 Form 10-K, by writing to Corporate Secretary, Spark Networks, Inc., 11150 Santa Monica Boulevard, Suite 600, Los Angeles, California 90025. Alternatively, stockholders may access our 2016 Annual Report on the Company’s website located at www.spark.net. We will also furnish any exhibit to our 2016 Form 10-K, if specifically requested.

Quorum; Voting Rights

Holders of our common stock of record at the close of business on March 24, 2017 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement of the Annual Meeting. There were 32,001,046 shares of our common stock outstanding as of the Record Date. Each share of our common stock is entitled to one vote on each matter to be voted on at the Annual Meeting, and the presence, in person or by proxy, of holders of a majority of the outstanding shares of our common stock, is necessary to constitute a quorum and to conduct business at the Annual Meeting. Abstentions will count toward the presence of a quorum. Broker non-votes also are counted for the purpose of establishing a quorum but are not considered to be entitled to vote. If a quorum is not present at the Annual Meeting, we expect that the Annual Meeting will be adjourned to solicit additional proxies. Stockholders may not cumulate their votes.

Submitting Your Proxy

YOUR VOTE IS IMPORTANT. Your shares can be voted at the Annual Meeting only if you are present in person or represented by proxy. Even if you plan to attend the Annual Meeting, we urge you to vote in advance. Please follow the instructions in the Notice of Internet Availability of Proxy Materials. If you received a paper copy of the Proxy Materials, simply mark your proxy card, and then date, sign and return it in the postagepaid envelope provided.

Stockholders who hold their shares beneficially in a “street name” through a nominee (such as a bank or broker) may be able to vote by telephone, the internet or mail. You should follow the instructions you receive from your nominee to vote those shares. If you are a stockholder who owns shares through a nominee and you attend the Annual Meeting, you should bring a letter from your nominee identifying you as the beneficial owner of the shares and acknowledging that you will vote your shares.

How the Board Recommends that You Vote

The Board of Directors recommends the following votes:

 

1)

“FOR” the election of the seven (7) director nominees named in this proxy statement;

 

2)

“FOR” the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017;

 

3)

“FOR” the approval of the Company’s 2017 Omnibus Incentive Plan;

1


 

Counting of Votes

If a proxy in the accompanying form is duly executed and returned, the shares represented by the proxy will be voted as directed. If no direction is given, the shares represented by the proxy will be voted:

 

1)

“FOR” the election of the seven (7) director nominees;

 

2)

“FOR” the ratification of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017; and

 

3)

“FOR” the approval of the Company’s 2017 Omnibus Incentive Plan;

All properly executed proxies delivered pursuant to this solicitation and not revoked will be voted at the Annual Meeting in accordance with the directions given. Representatives of our transfer agent will assist us in the tabulation of the votes.

If you are a beneficial owner of shares and you do not provide the broker or other nominee that holds your shares with voting instructions, the broker or nominee will determine if it has the discretionary authority to vote on your behalf. See “Broker Non-Votes” below.

Broker Non-Votes

If you are a beneficial owner, meaning that your shares are held through a broker or other nominee (see “Holders of record versus beneficial owners” below), and you do not instruct your broker or nominee on how to vote on a non-routine matter, a “broker non-vote” will occur. Brokers that hold shares of common stock in a “street name” for customers that are the beneficial owners of those shares may generally vote only on routine matters. Brokers generally do not have discretionary voting power (i.e., they cannot vote) on non-routine matters without specific instructions from their customers. Proposals are determined to be routine or non-routine matters based on the rules of the various regional and national exchanges of which the brokerage firm is a member. A broker “non-vote” is a proxy submitted by a broker that does not indicate a vote for some or all of the proposals because the broker does not have discretionary voting authority on certain types of proposals that are non-routine matters and has not received instructions from its customer regarding how to vote on a particular proposal. For beneficial holders that return their voting instructions but do not provide instructions on how to vote, your broker or other nominee will only have the discretion to vote on the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017 (Proposal 2).

Abstentions

Abstentions will be counted as shares present for purposes of determining the presence of a quorum for the transaction of business. A majority of the outstanding shares of common stock, present in person or represented by proxy, will constitute a quorum at the Annual Meeting.

Holders of record versus beneficial owners

If at the close of business on the Record Date your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization or other nominee, then you are the beneficial owner of shares held in “street name” and the Proxy Materials, as applicable, are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares in your account. If you do not provide that organization specific direction on how to vote, your shares held in the name of that organization may not be voted and will not be considered as present and entitled to vote on any matter to be considered at the Annual Meeting.

Revoking Your Proxy or Changing Your Vote

Any proxy given may be revoked at any time before it is voted at the Annual Meeting. Revoke your proxy by notifying the Corporate Secretary of the Company in writing of such revocation, by duly executing and delivering another proxy bearing a later date, submitting a later-dated vote by telephone or via the Internet, since only your latest telephone or Internet vote received by 11:59 p.m. Eastern Time on May 11, 2017 will be counted, or by attending and voting in person at the Annual Meeting. The Company’s principal executive office is located at 11150 Santa Monica Boulevard, Suite 600, Los Angeles, California 90025.

Solicitation of Proxies

The cost of this solicitation of proxies will be borne by the Company. Solicitations will generally be made by mail. In addition, the officers and other regularly engaged employees of the Company may, in a limited number of instances, solicit proxies personally or by telephone. The Company will reimburse banks, brokerage firms, other custodians, nominees and fiduciaries for reasonable expenses incurred in sending proxy materials to beneficial owners of the common stock of the Company.

Delivery of Proxy Materials to Households

“Householding” is a program, approved by the SEC, which allows companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports by delivering only one package of stockholder proxy material to any household at which two or more stockholders reside. If you and other residents at your mailing address own shares of our common stock in a “street name,” your broker or bank may have notified you that your household will receive only one copy of our proxy materials. Once you have received notice from your broker that they will be “householding” materials to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account. If you hold shares of our common stock in your own name as a holder of record, “householding” will not apply to your shares.

2


 

PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Company’s Fourth Amended and Restated Bylaws (the “Bylaws”) provide that the number of members constituting the Board of Directors will be between two and nine members. The Company currently has eight (8) authorized members on its Board of Directors.

Upon the recommendation of the Nominating Committee, the Board of Directors has nominated Michael J. McConnell, Michael B. Brodsky, Bradley J. Goldberg, Ian V. Jacobs, John H. Lewis, Walter L. Turek and Daniel M. Rosenthal, as nominees for election as directors at the Annual Meeting. Messrs. Goldberg and Rosenthal are being nominated pursuant to a purchase agreement dated August 9, 2016 by and between the Company and PEAK6 Investments, L.P. (“PEAK6”).  Each of the Board’s seven (7) nominees is currently serving as a director of the Company. If elected, each such nominee will serve for a term expiring at our annual meeting of stockholders in 2018.

Unless you otherwise instruct us, your properly executed proxy that is returned in a timely manner will be voted for the election of these seven (7) nominees. Each of Messrs. McConnell, Brodsky, Goldberg, Jacobs, Lewis, Turek and Rosenthal has advised the Company of his availability and willingness to serve if elected. If, however, any of these nominees should be unable to serve or for good cause will not serve, either your proxy will be voted for such substitute nominee(s) as the holders of your proxy, acting in their discretion, may determine, or the Board may determine to reduce the size of the Board. You can find information about Messrs. McConnell, Brodsky, Goldberg, Jacobs, Lewis, Turek and Rosenthal below under the section “Board of Directors and Executive Officers.”

Vote Required

Directors are elected by a plurality of votes present in person or represented by proxy and entitled to vote. If a quorum is present, the nominees receiving the highest number of votes will be elected to the Board of Directors. You may vote either “for” or “withhold” your vote for the director nominee. A properly executed proxy marked “withhold” with respect to the election of the directors will not be voted with respect to the director nominee and will not affect the outcome of the election, although it will be counted for purposes of determining whether there is a quorum.

The Board of Directors has adopted a policy regarding the election of directors, which provides that when a director receives a greater number of votes “withhold” election than votes “for” election, he or she will, promptly following certification of the stockholder vote, offer his or her resignation. In connection with a director resignation, the Nominating Committee of the Board will consider the resignation offer and make a recommendation to the Board. The independent members of the Board will consider what is in the best interests of the Company and its stockholders, and the Board will consider all factors deemed relevant, including the director’s tenure, qualifications, past and expected future contributions to the Company, and the overall composition of the Board, including whether accepting the resignation offer would cause the Company to be in violation of its constituent documents or fail to meet any applicable regulatory or contractual requirements. The Board’s actions may include (i) accepting the resignation offer or (ii) deferring acceptance of the resignation offer until a replacement director with certain necessary qualifications can be identified and elected to the Board.

If you hold your shares in a “street name” and you do not instruct your broker on how to vote in the election of directors, a broker non-vote will occur and no votes will be cast on your behalf. It is therefore critical that you cast your vote if you want it to count in the election of directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”

EACH OF THE DIRECTOR NOMINEES.

3


 

PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Audit Committee has recommended the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017. Grant Thornton LLP became the Company’s independent registered public accounting firm on September 22, 2014 and audited our financial statements for 2015 and 2016.

The stockholders are being requested to ratify the appointment of Grant Thornton LLP at the Annual Meeting. The Company anticipates that a representative of Grant Thornton LLP will attend the Annual Meeting. The representative will have an opportunity to make a statement and to respond to appropriate stockholder questions.

Neither the Company’s Certificate of Incorporation nor the Company’s Bylaws require that stockholders ratify the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm. However, we are requesting ratification because we believe it is a matter of good corporate practice. If the Company’s stockholders do not ratify the appointment, the Audit Committee will reconsider whether or not to retain Grant Thornton LLP, but may, nonetheless, retain Grant Thornton LLP as the Company’s independent registered public accountants. Even if the appointment is ratified, the Audit Committee in its discretion may change the appointment at any time if it determines that the change would be in the best interests of the Company and its stockholders.

Vote Required

You may vote in favor or against this proposal or you may abstain from voting. The affirmative vote of a majority of all votes present or represented by proxy and entitled to vote at the Annual Meeting is required to ratify the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm. If stockholders of record do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board of Directors are to be voted on this proposal, such shares will be voted in favor of the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm. Abstentions will have the same effect as votes cast against the proposal. Generally, brokers and other nominees that do not receive instructions are entitled to vote on the ratification of the appointment of our independent registered public accounting firm as this is a routine matter.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”

THE RATIFICATION OF THE REAPPOINTMENT OF GRANT THORNTON LLP.

4


 

PROPOSAL NO. 3

APPROVAL OF THE COMPANY’S

2017 OMNIBUS INCENTIVE PLAN

The material terms of the 2017 Plan are summarized below.  A copy of the full text of the 2017 Plan is attached to this proxy statement as Appendix A.  This summary of the 2017 Plan is not intended to be a complete description of 2017 Plan and is qualified in its entirety by the actual text of the 2017 Plan to which reference is made.

Our 2017 Plan was adopted by our Board of Directors on March 30, 2017.  The 2017 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Code, to our employees and any parent and subsidiary employees, and for the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards (including annual cash incentives and long-term cash incentives), and any combination thereof to our employees, directors, and consultants and to employees, directors, and consultants of certain affiliated entities.  As of March 29, 2017, approximately four officers, eight directors, 105 employees, and 10 consultants were eligible to participate in the 2017 Plan. Such persons are eligible to participate in the 2017 Plan on the basis that such participation provides an incentive, through ownership of the Company’s common stock, to continue in service to the Company and related entities, and to help the Company compete effectively with other enterprises for the services of qualified persons.  As of March 29, 2017, the closing price of a share of our common stock on the New York Stock Exchange was $0.98.

The 2017 Plan will allow us to continue to offer equity and other awards, which we believe is necessary for us to retain, motivate and attract experienced and highly qualified service providers.  If the 2017 Plan is approved, no awards will be made under our 2007 Omnibus Incentive Plan (the “Predecessor Plan”).

Shareholder approval of the 2017 Plan not only will allow us to grant these awards, it will also permit us to structure incentive compensation intended to preserve certain tax deductions under Section 162(m) of the Internal Revenue Code (“Section 162(m)”).  We refer to these awards as qualified performance-based awards.  Section 162(m) denies a corporation’s tax deduction for compensation it pays to certain executive officers in excess of $1 million per year for each such officer.  Section 162(m) provides an exception to this limitation for qualified performance-based compensation, the material terms of which must be approved by a corporation’s stockholders.  To that end, in connection with approval of 2017 Plan, stockholders are also being asked to approve the management objectives upon which awards intended to qualify as performance-based awards may be based, the annual maximum limits per individual, and eligible employees, as further described below.  We may or may not grant awards under 2017 Plan that are intended to qualify as performance-based awards.  However, to preserve our ability to grant awards intended to qualify as performance-based awards, Section 162(m) requires that stockholders must approve the management objectives upon which awards intended to qualify as performance-based awards may be based, the annual maximum limits per individual, and eligible employees.  Subject to the requirements of Section 162(m), if the material terms under 2017 Plan are not re-approved by stockholders, we will not make any grants under 2017 Plan to our “covered employees” as defined in Section 162(m) that are intended to qualify as performance-based awards, or their successors, until such time, if any, as stockholder approval of a subsequent similar proposal is obtained.

We have reserved 3,250,000 shares of common stock for issuance under the 2017 Plan, plus up to 1,843,240 shares that would otherwise return to the Predecessor Plan as a result of forfeiture, termination or expiration of awards previously granted under the Predecessor Plan and outstanding when the 2017 Plan becomes effective.

Our Board of Directors or a committee of our Board of Directors, which we refer to as the “administrator” in this description, administers the 2017 Plan.  In the case of awards intended to qualify as “performance-based compensation” within the meaning of Section 162(m), the administrator consists of two or more “outside directors” within the meaning of Section 162(m).  The administrator has the power to determine and interpret the terms and conditions of the awards, including, as applicable, the employees, directors, and consultants who will receive awards, the exercise price, the number of shares subject to each award, the vesting schedule and exercisability of the awards, the restrictions on transferability of awards, and the form of consideration payable upon exercise.  The administrator also has the authority to reduce the exercise price of any outstanding stock options and the base appreciation amount of any stock appreciation rights if the exercise price or base appreciation amount exceeds the fair market value of the underlying shares, and to cancel such options and stock appreciation rights in exchange for new awards, in each case without stockholder approval.

The 2017 Plan allows for the grant of incentive stock options that qualify under Section 422 of the Code only to our employees and employees of any of our parents or subsidiaries.  Non-qualified stock options may be granted to our employees and directors and those of certain of our affiliates.  The per share exercise price of all options granted under the 2017 Plan must be equal to at least the per share fair market value of our common stock on the date of grant.  The term of an incentive stock option may not exceed 10 years, except that with respect to any employee who owns more than 10% of the voting power of all classes of our outstanding stock or any parent or subsidiary corporation as of the grant date, the term must not exceed 5 years, and the exercise price must equal at least 110% of the fair market value on the grant date.

After the continuous service of an employee, director or consultant terminates, he or she may exercise his or her option, to the extent vested, for the period of time specified in the option agreement.  However, an option may not be exercised later than the expiration of its term.

The 2017 Plan allows for the grant of stock appreciation rights.  Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our common stock between the date of grant and the exercise date.  The administrator will determine the terms of stock appreciation rights, including when such rights become exercisable and whether to pay the increased appreciation in cash or with shares of our common stock, or a combination thereof, except that the base appreciation amount used to determine the cash or shares to be issued pursuant to the exercise of a stock appreciation right will be no less than 100% of the fair market value per share on the date of grant.  

After the continuous service of an employee, director or consultant terminates, he or she may exercise his or her stock appreciation right, to the extent vested, only to the extent provided in the stock appreciation right agreement.

The 2017 Plan allows for the grant of restricted stock.  Restricted stock awards are shares of our common stock that vest in accordance with terms and conditions, if any, established by the administrator.  The administrator will determine the number of shares of restricted stock granted to any employee, director or consultant.  The administrator may impose whatever conditions, if any, on vesting it determines to be appropriate.  For example, the administrator may set restrictions based on the achievement of specific performance goals.  Shares of restricted stock that do not vest are subject to our right of repurchase or forfeiture.

The 2017 Plan allows for the grant of restricted stock units.  Restricted stock units are awards that will result in payment to a recipient at the end of a specified period only if the vesting criteria established by the administrator, if any, are achieved or the award otherwise vests.  The administrator may impose whatever conditions, if any, to vesting, or restrictions and conditions, if any, to payment that it determines to be appropriate.  The administrator may set

5


 

restrictions based on the achievement of specific performance goals or on the continuation of service or employment.  Payments of earned restricted stock units may be made, in the administrator’s discretion, in cash, with shares of our common stock or other securities, or a combination thereof.

The 2017 Plan also allows for the grant of awards denominated in cash that may be settled in cash or shares of common stock, which may be subject to restrictions, as established by the administrator.  

The administrator will determine the provisions, terms, and conditions of each award including vesting schedules, forfeiture provisions, form of payment (cash, shares, or other consideration) upon settlement of the award, payment contingencies, and satisfaction of any performance criteria.  The performance criteria established by the administrator for any awards intended to qualify as “performance-based compensation” for purposes of Section 162(m) will be one of, or combination of, the following: revenue, earnings before interest, depreciation, amortization and share-based compensation (“ebitdas”), earnings before interest, depreciation, amortization and share-based compensation and impairment charges (“adjusted ebitda”), contribution margin, operating profit, earnings per share, operating margins, return on total equity or total capital, cash flow from operating activities and total shareholder return, operating income, operating profit (earnings from continuing operations before interest and taxes), earnings per share, return on investment or working capital, return on stockholders’ equity, and economic value added (the amount, if any, by which net operating profit after tax exceeds a reference cost of capital). The performance criteria may be applicable to our company, our affiliates or any individual business units of our company or any affiliate and may be measured over any specified period, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the administrator.

The maximum number of shares with respect to which options and SARs may be granted to any grantee under the 2017 Plan in any calendar year is 1,500,000 shares.  In connection with a grantee’s commencement of continuous service with us, a grantee may be granted options and SARs for up to an additional 1,500,000 shares under the 2017 Plan. For awards of restricted stock and restricted stock units that are intended to qualify as “performance-based compensation” for purposes of Section 162(m), the maximum number of shares with respect to which such awards may be granted to any grantee under the 2017 Plan in any calendar year is 1,500,000 shares.  For cash-based awards that are intended to qualify as “performance-based compensation” for purposes of Section 162(m), with respect to each twelve month period that constitutes or is part of each applicable performance period, the maximum amount that may be paid to a grantee pursuant to such awards is $10,000,000. The maximum number of shares with respect to which awards may be granted to any member of the Board of Directors (in consideration for such member’s services as a member of the Board of Directors) under the 2017 Plan in any calendar year is 750,000 shares. The aggregate value of all compensation paid or provided to any such member, in consideration for such member’s services as a member of the Board of Directors, in respect of a calendar year may not exceed $750,000.

The 2017 Plan allows for the transfer of awards under the 2017 Plan only (i) by will, (ii) by the laws of descent and distribution and (iii) for awards other than incentive stock options, to the extent authorized by the administrator to certain persons or entities.  Only the recipient of an incentive stock option may exercise such award during his or her lifetime.

In the event of certain changes in our capitalization, to prevent enlargement of the benefits or potential benefits available under the 2017 Plan, the administrator will make adjustments to one or more of the number of shares that are covered by outstanding awards, the exercise or purchase price of outstanding awards, the numerical share limits contained in the 2017 Plan, and any other terms that the administrator determines require adjustment.

The 2017 Plan provides that, upon a Corporate Transaction (as defined in the 2017 Plan), all outstanding awards will terminate.  However, all such awards will not terminate to the extent they are assumed in connection with the Corporate Transaction. Except as provided otherwise in an individual award agreement, in the event of a Corporate Transaction, for the portion of each award that is neither assumed nor replaced, such portion of the award will automatically become fully vested, provided that the applicable grantee’s continuous service with us or a related entity has not terminated prior to such date. Except as provided otherwise in an individual award agreement, in the event of a Change in Control (as defined in the 2017 Plan and other than a Change in Control which also is a Corporate Transaction), each award will become fully vested, provided that the applicable grantee’s continuous service with us or a related entity has not terminated prior to such date.

The 2017 Plan will automatically terminate 10 years following the date it becomes effective, unless we terminate it sooner.  In addition, our Board of Directors has the authority to amend, suspend or terminate the 2017 Plan provided such action does not impair the rights under any outstanding award.

Certain U.S. Federal Tax Consequences

The following summary of the federal income tax consequences of 2017 Plan transactions is based upon federal income tax laws in effect on the date of this proxy statement.  This summary does not purport to be complete, and does not discuss non-U.S., state or local tax consequences.  As such, please refer to the applicable provisions of the Code for additional information.  

Non-Qualified Stock Options.    Except as provided under Section 409A of the Code discussed below (“Section 409A”), the grant of a non-qualified stock option under the 2017 Plan generally will not result in any U.S. Federal income tax consequences to the grantee or to the Company.  Upon exercise of a non-qualified stock option, the grantee is generally subject to income taxes at the rate applicable to ordinary compensation income on the difference between the option exercise price and the fair market value of the shares on the date of exercise.  This income is generally subject to withholding for U.S. Federal income and employment tax purposes. The Company is entitled to an income tax deduction in the amount of the income recognized by the grantee, subject to possible limitations imposed by Section 162(m) and so long as the Company withholds the appropriate taxes with respect to such income, if required, and the grantee’s total compensation is deemed reasonable in amount.  Any gain or loss on the grantee’s subsequent disposition of the shares of common stock will receive long or short-term capital gain or loss treatment, depending on whether the shares are held for more than one year following exercise.  The Company does not receive a tax deduction for any such gain.  

Absent special limitations on exercisability, in the event a nonqualified stock option is granted with an exercise price less than 100% of the fair market value of our common stock on the date of grant or amended in certain respects, such option may be considered deferred compensation and subject to Section 409A, which provide rules regarding the timing of payment of deferred compensation.  An option subject to Section 409A which fails to comply with the rules of Section 409A can result in the acceleration of income recognition, an additional 20% tax obligation, plus potential penalties and interest, and similar treatment under state law.  

6


 

Incentive Stock Options.    The grant of an incentive stock option under the 2017 Plan will not result in any U.S. Federal income tax consequences to the grantee or to the Company.  A grantee recognizes no U.S. Federal taxable income upon exercising an incentive stock option (subject to the alternative minimum tax rules discussed below), and the Company receives no deduction at the time of exercise.  In the event of a disposition of stock acquired upon exercise of an incentive stock option, the tax consequences depend upon how long the grantee has held the shares of common stock.  If the grantee does not dispose of the shares within two years after the incentive stock option was granted, nor within one year after the incentive stock option was exercised, the grantee will recognize a long-term capital gain (or loss) equal to the difference between the sale price of the shares and the exercise price.  The Company is not entitled to any deduction under these circumstances.  

If the grantee fails to satisfy either of the foregoing holding periods, he or she must recognize ordinary income in the year of the disposition, which is referred to as a “disqualifying disposition.” The amount of such ordinary income generally is the lesser of (i) the difference between the amount realized on the disposition and the exercise price or (ii) the difference between the fair market value of the stock on the exercise date and the exercise price.  Any gain in excess of the amount taxed as ordinary income will be treated as a long or short-term capital gain, depending on whether the stock was held for more than one year.  The Company, in the year of the disqualifying disposition, is entitled to a deduction equal to the amount of ordinary income recognized by the grantee, subject to possible limitations imposed by Section 162(m) and so long as the Company withholds the appropriate taxes with respect to such income, if required, and the grantee’s total compensation is deemed reasonable in amount.  

The “spread” under an incentive stock option—i.e., the difference between the fair market value of the shares at exercise and the exercise price—is classified as an item of adjustment in the year of exercise for purposes of the alternative minimum tax.  If a grantee’s alternative minimum tax liability exceeds such grantee’s regular income tax liability, the grantee will owe the larger amount of taxes.  In order to avoid the application of alternative minimum tax with respect to incentive stock options, the grantee must sell the shares within the same calendar year in which the incentive stock options are exercised.  However, such a sale of shares within the same year of exercise will constitute a disqualifying disposition, as described above.  

In the event that an incentive stock option is amended in certain respects, such option may be considered deferred compensation and subject to the rules of Section 409A, which provides rules regarding the timing of payment of deferred compensation.  An option subject to Section 409A which fails to comply with the rules of Section 409A can result in the acceleration of income recognition, an additional 20% tax obligation, plus potential penalties and interest, and similar treatment under state law.  In addition, the amendment of an incentive stock option may convert the option from an incentive stock option to a nonqualified stock option.  

Restricted Stock and Performance Stock.    The grant of restricted stock and performance shares will generally subject the recipient to ordinary compensation income on the difference between the amount paid for such stock and the fair market value of the shares on the date that the restrictions lapse.  This income is generally subject to withholding for U.S. Federal income and employment tax purposes.  The Company is entitled to an income tax deduction in the amount of the ordinary income recognized by the recipient, subject to possible limitations imposed by Section 162(m) and so long as the Company withholds the appropriate taxes with respect to such income, if required, and the grantee’s total compensation is deemed reasonable in amount.  Any gain or loss on the recipient’s subsequent disposition of the shares will receive long or short-term capital gain or loss treatment depending on how long the stock has been held since the restrictions lapsed.  The Company does not receive a tax deduction for any such gain.  

Recipients of restricted stock and performance shares may make an election under Section 83(b) of the Code, which is referred to as a “Section 83(b) Election,” to recognize as ordinary compensation income in the year that such restricted stock or performance shares are granted, the amount equal to the spread between the amount paid for such stock (if any) and the fair market value on the date of the issuance of the stock.  If such an election is made, the recipient recognizes no further amounts of compensation income upon the lapse of any restrictions and any gain or loss on subsequent disposition will be long or short-term capital gain to the recipient.  The Section 83(b) Election must be made within thirty days from the time the restricted stock or performance share is issued.  

Stock Appreciation Rights.    Recipients of stock appreciation rights, which are referred to as “SARs,” generally should not recognize income until such rights are exercised, assuming there is no ceiling on the value of the right and Section 409A does not apply.  Upon exercise, the grantee will normally recognize taxable ordinary income for U.S. Federal income tax purposes equal to the amount of cash and fair market value the shares, if any, received upon such exercise.  Grantees who are employees will be subject to withholding for U.S. Federal income and employment tax purposes with respect to income recognized upon exercise of a SAR.  Grantees will recognize gain upon the disposition of any shares received on exercise of a SAR equal to the excess of (i) the amount realized on such disposition over (ii) the ordinary income recognized with respect to such shares under the principles set forth above.  That gain will be taxable as long or short-term capital gain depending on whether the shares were held for more than one year.  

The Company will be entitled to a tax deduction to the extent and in the year that ordinary income is recognized by the grantee, subject to possible limitations imposed by Section 162(m) and so long as the Company withholds the appropriate taxes with respect to such income, if required, and the grantee’s total compensation is deemed reasonable in amount.  

A SAR can be considered deferred compensation and subject to Section 409A.  A SAR that does not meet the requirements of Section 409A, such as with respect to the timing of the delivery of cash or shares following vesting, can result in the acceleration of income recognition, an additional 20% tax obligation, plus potential penalties and interest, and similar treatment under state law.  

Performance Units.    Recipients of performance units generally should not recognize income until such units are converted into cash or shares of stock unless Section 409A applies.  Upon conversion, the grantee will normally recognize taxable ordinary income for federal income tax purposes equal to the amount of cash and fair market value the shares, if any, received upon such conversion.  Grantees who are employees will be subject to withholding for federal income and employment tax purposes with respect to income recognized upon conversion of the performance units.  Grantees will recognize gain upon the disposition of any shares received upon conversion of the performance units equal to the excess of (i) the amount realized on such disposition over (ii) the ordinary income recognized with respect to such shares under the principles set forth above.  That gain will be taxable as long or short-term capital gain depending on whether the shares were held for more than one year.   The Company will be entitled to a tax deduction to the extent and in the year that ordinary income is recognized by the grantee, subject to possible limitations imposed by Section 162(m) and so long as the Company withholds the appropriate taxes with respect to such income (if required) and the grantee’s total compensation is deemed reasonable in amount.  

Performance units also can be considered non-qualified deferred compensation and subject to the rules of Section 409A, which provide rules regarding the timing of payment of deferred compensation.  A grant of performance units that does not meet the requirements of Code Section 409A can result in the acceleration of income recognition, an additional 20% tax obligation, plus potential penalties and interest to such grantee, and similar treatment under state law.  

Dividends and Dividend Equivalents.    Recipients of stock-based awards that earn dividends or dividend equivalents will recognize taxable ordinary income on any dividend payments received with respect to unvested shares subject to such awards, which income is generally subject to withholding for U.S.

7


 

Federal income and employment tax purposes.  The Company is entitled to an income tax deduction in the amount of the income recognized by a grantee, subject to possible limitations imposed by Section 162(m) and so long as the Company withholds the appropriate taxes with respect to such income, if required, and the individual’s total compensation is deemed reasonable in amount.  

The foregoing is only a summary of the U.S. Federal income tax consequences of 2017 Plan transactions, and is based upon U.S. Federal income tax laws in effect on the date of this proxy statement.  Reference should be made to the applicable provisions of the Code.  This summary does not purport to be complete, and does not discuss the tax consequences of a grantee’s death or the tax laws of any municipality, state or foreign country to which the grantee may be subject.

New Plan Benefits.  

Awards under the 2017 Plan are based on the discretion of the administrator and/or the Company’s achievement of performance targets established by the administrator, and it is not currently possible to determine the amounts that will be received by persons participating in the 2017 Plan in the future.  

Vote Required

You may vote in favor or against this proposal or you may abstain from voting. The affirmative vote of a majority of all votes is required to ratify Proposal 3. If stockholders of record do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board of Directors are to be voted on this proposal, such shares will be voted in favor of the ratification of the proposed executive compensation. Abstentions will have the same effect as votes cast against the proposal. Brokers and other nominees that do not receive instructions are prohibited from voting on the approval of the amendment to the Company’s 2017 Omnibus Incentive Plan, as this is a non-routine matter.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE 2017 PLAN AND THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER.

8


 

BOARD OF DIRECTORS AND EXECUTIVE OFFICERS

Information Concerning Director Nominees

Each of the persons named below will be nominated for election as a director of the Company at this Annual Meeting to serve for a term of one year ending at the 2018 annual meeting of stockholders and thereafter until his successor is duly elected and has qualified or until his death, resignation or removal. The nominees are currently serving as directors of the Company.  See “Executive Officers” below for more information on Mr. Rosenthal.

 

Name

 

Age

 

Positions

 

 

 

 

 

Michael J. McConnell

 

51

 

Chairman of the Board

 

 

 

 

 

Michael B. Brodsky

 

48

 

Director

 

 

 

 

 

Bradley J. Goldberg

 

47

 

Director

 

 

 

 

 

Ian V. Jacobs(1)

 

40

 

Director

 

 

 

 

 

John H. Lewis(2)

 

44

 

Director

 

 

 

 

 

Walter L. Turek

 

64

 

Director

 

 

 

 

 

Daniel M. Rosenthal

 

57

 

Chief Executive Officer & Director

 

(1)

Chairman of the Compensation Committee

(2)

Chairman of the Nominating Committee

Michael J. McConnell, in addition to being a private investor, serves as Chairman of the Board of Directors of the Company and previously served as Interim Executive Chairman of Spark Networks from August 2014 through December 2014. Since May 2016, Mr. McConnell has served on the Board of Directors of Guidance Software Inc., a NASDAQ-listed provider of forensic security and risk management applications. From August 2011 to November 2014, Mr. McConnell served on the Board of Directors of Redflex Holdings, Limited, an Australian Stock Exchange (ASX)listed developer and manufacturer of digital photo enforcement solutions and as the Interim Non-Executive Chairman from February 2012 to February 2013. Mr. McConnell also served as the Chairman of the Audit Committee, as well as a member of the Remuneration and Nominating & Governance Committees. From 2009 to 2012, Mr. McConnell served as the Chief Executive Officer of Collectors Universe, Inc., a NASDAQ-listed provider of third-party authentication and grading of high value collectibles. Mr. McConnell served on the Board of Directors of Collectors Universe, including on its Compensation and Nominating and Governance committees, from 2007 to 2013. From 1994 to 2007, Mr. McConnell served as a Managing Director of Shamrock Capital Advisors, an investment manager of both domestic and international alternative asset funds in public equities, real estate and private equity, where he led a $1.2 billion direct investment fund and was a member of the firm’s Executive Committee.

Mr. McConnell has served on numerous public and private company boards in the United States, Australia, New Zealand and Ireland over his career. From March 2014 to August 2014, Mr. McConnell served as a Non-Executive Director of Vitacost.com. From August 2011 to November 2012, Mr. McConnell served as Chairman of the Remuneration Committee of the Board, and Audit Committee member, of PaperlinX Limited, an ASX-listed international merchant of paper, communication materials and diversified products and services. From November 2009 to January 2012, Mr. McConnell was a member of the board of directors of MRV Communications, a worldwide supplier of communications equipment and services to carriers, governments and enterprise customers worldwide, where he also served on the Strategy and Compensation Committees. In addition, he has formerly served on the boards of Ansell Limited (October 2001 to November 2005), Nuplex Industries (December 2000 to March 2002), Force Corporation (March 1999 to May 2000), iPass Inc. (February 2007 to October 2008), Neo Technology Ventures (February 1999 to June 2004), Cosmoline Limited (March 1997 to May 1999) and Port-Link International (August 2000 to November 2005). Mr. McConnell received his B.A. in Economics from Harvard University in 1988 and his M.B.A. degree (Shermet Scholar) from the Darden School of the University of Virginia in 1994. Mr. McConnell is a member of the Board of Governors of the microfinance organization Opportunity International.

Michael B. Brodsky joined the Board of Directors of the Company on November 5, 2015 and brings a significant amount of experience as an investor, board director and operating executive. Since October 2010, Mr. Brodsky has served as Chairman of the Board of Directors of Determine, Inc. (NASDAQ: DTRM), an enterprise SaaS-based to “source-to-pay” solutions provider. Since 2013, he has also served as the managing partner of Vajra Asset Management, an investment firm. From 2008 to 2010, Mr. Brodsky was chairman and chief executive officer and a director of Youbet.com, Inc., an online horse racing and betting website acquired in 2010 by Churchill Downs Incorporated, a publicly traded provider of racetracks, casinos, off-track betting and online wagering services. Mr. Brodsky served as a member of the board of directors, and as a member of the Executive Committee of Churchill Downs from 2010 to 2012. From 2005 to 2011, Mr. Brodsky was the managing partner of New World Opportunity Partners, LLC, an investment firm. Mr. Brodsky has also served as a director of Genesis Land Development Corporation, a residential land developer and home builder in Calgary, Canada, with shares listed on the Toronto Stock Exchange, since June, 2012, as a director of Trans World Corporation, a publicly traded company that owns and operates casinos in the Czech Republic, since September, 2013, he has served as Chairman of the Board of Trans World since June of 2014. He also has served as the Lead Director of IDSystems, a publically traded company that provides RFID wireless solutions for tracking high-value assets, since June of 2014. Mr. Brodsky received a Bachelor of Arts degree from Syracuse University, a law degree from Northwestern University School of Law and a Masters in Business Administration from the JL Kellogg Graduate School of Management School of Business at Northwestern University.

Bradley J. Goldberg joined the Board of Directors of the Company on August 10, 2016. Mr. Goldberg has served as the President of PEAK6 Investments, L.P. since 2012.  Mr. Goldberg leads business strategy, business operations, and people development across PEAK6 and its operating companies.  From 2009 until 2011, Mr. Goldberg was the CEO of PEAK6 Online, where he led a portfolio of early stage financial technology businesses, including OptionsHouse, which was subsequently sold to General Atlantic and then to E*TRADE.  Prior to PEAK6, Mr. Goldberg served in various leadership positions at Microsoft, across the Online, Enterprise and Developer businesses. Immediately before joining PEAK6, Mr. Goldberg was General Manager for the Search Business Unit, where he was responsible for product management, consumer marketing, and worldwide business management for Bing. Mr. Goldberg graduated with a Bachelor’s degree in Economics from Amherst College and completed post graduate work in Japan, at the Inter-University Center for Japanese Language Studies. Mr. Goldberg also earned an MBA from Harvard Business School, where he was awarded second year honors.

Ian V. Jacobs is the managing member of 402 Capital, LLC, an investment management firm, which he founded in March 2009. Since June 2016, Mr. Jacobs has served on the Board of Directors of MiX Telematics Limited, an NYSE-listed provider of fleet and mobile asset management solutions. From 2003 until 2009, Mr. Jacobs was employed by Berkshire Hathaway Inc. He received his Masters of Business Administration from Columbia University in 2003. Prior to receiving his M.B.A., Mr. Jacobs was an associate with Goldman Sachs. He completed the CFA program in 2001 and received his B.A. in Economics

9


 

from Yeshiva University in 1997. Mr. Jacobs has considerable experience in U.S. capital markets, and has focused his investments on businesses with identifiable structural competitive advantages.

John H. Lewis is Founder and Managing Partner of Osmium Partners, a value investment firm. Prior to founding Osmium Partners in 2002, from 2001 to 2002, Mr. Lewis was Director of Research at Retzer Capital, a Wisconsin-based hedge fund. From 1999 to 2001, he was an Equity Research Analyst at Heartland Funds, a mutual fund with over $2 billion of assets under management. Mr. Lewis received a B.A. from the University of Maryland in 1996, and an M.B.A. from the University of San Francisco in 1999.

Walter L. Turek has served on the board of Ascentis Corporation, a provider of human resources software, online payroll services, and SaaS Human Capital Management solutions since 2011 and served as Executive Chairman from 2011 until its sale to Summit Partners in March 2017. In February 2017 Mr. Turek was appointed to the board of Windstream Holdings, Inc. (NASDAQ: WIN), a provider of advanced network communications and technology solutions.  From 2005 until its sale to Vista Equity Partners in 2012, Mr. Turek served on the Board of Directors, including as Chairman of the Nominations and Governance Committee and a member of the Audit and Compensation Committees, of Greenway Medical Technologies (formerly NYSE: GWAY), a provider of information solutions to improve the financial performance of healthcare providers. During his tenure with Greenway Medical, revenues grew from approximately $10 million to $140 million. From 2009 to its sale in 2011 to Juniper Networks, he served as Co-Founder and Director of Mykonos Software, a provider of security solutions for websites and web applications against hackers, fraud and theft. Since 1999, Mr. Turek has been a member of the Board of Directors of BlueTie.com, a leading provider of email hosting services and cloud based collaboration solutions.

Until June 2009, Mr. Turek served as an officer and Senior Vice President of Sales and Marketing for Paychex, Inc., a leading provider of payroll and human resource services (NASDAQ: PAYX), where he oversaw a sales force of over 2,000 people as well as the company’s Marketing and International efforts. During the course of his twenty-five year tenure with Paychex, company revenues grew from $10 million to $2 billion, and the company’s market capitalization expanded to $13 billion. In addition, Mr. Turek also served as Corporate Director of Stromberg, a wholly owned subsidiary and a provider of time and attendance solutions.

Executive Officers

The following table sets forth certain information with respect to our executive officers.

 

Name

 

Age

 

Positions

 

 

 

 

 

Daniel M. Rosenthal

 

57

 

Chief Executive Officer (since August 11, 2016)

 

 

 

 

 

Robert W. O’Hare

 

36

 

Chief Financial Officer and Corporate Secretary (since March 1, 2015)

 

 

 

 

 

David Budworth

 

46

 

Chief Technology Officer (since August 11, 2016)

 

Daniel M. Rosenthal has served as the Company’s Chief Executive Officer and as a member of the Board of Directors since August 2016. Mr. Rosenthal joined the Company from PEAK6 Investments, L.P., where he spent seventeen years in a variety of roles across the firm. Most recently, Mr. Rosenthal oversaw the development of PEAK6’s electronic trading strategies and served as a member of the Board of Directors of Apex Clearing Corporation, a subsidiary of PEAK6.  From June 2012 through November 2015, Mr. Rosenthal served as Chief Executive Officer of Apex Clearing Corporation.  Prior to his role at Apex Clearing Corporation, Mr. Rosenthal served as PEAK6’s Chief Technology Officer and led the development of proprietary trading platforms, risk management, and back office functions. Mr. Rosenthal co-founded OptionsHouse, LLC in 2005 and served as its Co-Chief Executive Officer until May 2008.

Robert W. O’Hare joined the Company in 2015 from Square, Inc., where he served as Corporate Finance & Investor Relations Lead since 2013. Prior to Square, he was Director of Financial Planning & Analysis at Pandora Media, Inc. from 2010 to 2013. Prior to Pandora, he held financial roles at Spitfire Capital (2009 - 2010), Spectrum Equity Investors (2006 - 2009) and Thomas Weisel Partners (2004 - 2006). Mr. O’Hare received his B.S. from Georgetown University and is a CFA charter holder.

David Budworth joined the Company in 2016 from PEAK6 Investments, L.P., where he served as Chief Architect from January 2008 to August 2016, overseeing technical design, structure and management across a diverse range of investments.  In addition to his role as Chief Architect, Mr. Budworth also served as CTO of PEAK6 Capital Management LLC, from January 2011 to February 2013.  Prior to his position as Chief Architect, from August 2005 to January 2008, Mr. Budworth served as a CTO of OptionsHouse. In his time at PEAK6, Mr. Budworth led the designed and build-out of a large number of PEAK6's technology initiatives with various teams throughout the firm, both in trading and online.

Bankruptcies

Other than as set forth below, during the past ten years, a petition under the Federal bankruptcy laws or any state insolvency law has not been filed by or against, or a receiver, fiscal agent or similar officer has not been appointed by a court for the business or property of any of our directors, executive officers or nominees for election as director at the Annual Meeting, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing.

Mr. Brodsky served as the Co-Chief Executive Officer of Federated Sports & Gaming Inc. (“Federated”) and Federated Heartland, Inc. (“Federated Heartland”) from October 2010 until his resignation from Federated and Federated Heartland, effective March 1, 2012. On February 28, 2012, each of Federated and Federated Heartland filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland.

CORPORATE GOVERNANCE AND BOARD MATTERS

Code of Business Conduct and Ethics

The Company’s Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code”), which applies to all directors, officers and employees. The purpose of the Code is to promote honest and ethical conduct. The Code is posted in the corporate governance section of the investor relations page of the Company’s website located at www.spark.net and is available in print, without charge, upon written request to the Corporate Secretary at Spark Networks, Inc., 11150 Santa Monica Boulevard, Suite 600, Los Angeles, California 90025. The Company intends to post promptly any amendments to or waivers of the Code granted to directors or officers on its website.

10


 

Director Independence

The Board of Directors has determined that Michael J. McConnell, Michael B. Brodsky, Bradley J. Goldberg, Ian V. Jacobs, John H. Lewis, Jonathan R. Mather and Walter L. Turek are each an “independent” director as defined by the listing standards of the NYSE MKT currently in effect and approved by the SEC and all applicable rules and regulations of the SEC. All members of the Audit, Compensation and Nominating Committees satisfy the NYSE MKT and SEC “independence” standards applicable to members of each such committee.

The Board of Directors made this affirmative determination regarding these directors’ independence based on discussions with the directors and on its review of the directors’ responses to a standard questionnaire regarding employment and compensation history; affiliations, family and other relationships; and transactions with the Company, including relationships described below and in “Certain Relationships and Related Transactions.” The purpose of the Board of Directors’ review with respect to each director was to determine whether any such relationships or transactions were inconsistent with a determination that the director is independent under the NYSE MKT rules.

Family Relationships

There are no family relationships among any of our executive officers or directors.

Attendance of Directors at Board Meetings and Annual Meeting of Stockholders

During 2016, the Board of Directors met eight times, the Audit Committee met five times, the Compensation Committee met one time, and the Nominating Committee did not meet. Each director who was on the Board during this timeframe attended at least 75% of the aggregate number of meetings held during his term of service by (1) the Board of Directors and (2) those committees of the Board of Directors on which he served.

The Company does not have a policy requiring its directors to attend the Annual Meeting of Stockholders. In 2016, all directors attended the Annual Meeting of Stockholders.

Board Committees

Audit Committee. The Audit Committee consists of John H. Lewis, Jonathan R. Mather and Walter L. Turek, each of whom is an independent director. Mr. Mather, Chairman of the Audit Committee, is an “audit committee financial expert” as defined under Item 407(d) of Regulation S-K. The purpose of the Audit Committee is to represent and assist the Company’s Board of Directors in its general oversight of the Company’s accounting and financial reporting processes, audits of the consolidated financial statements and internal control management. The Audit Committee’s responsibilities include:

 

The appointment, replacement, compensation, and oversight of work of the independent registered public accounting firm, including resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting, for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services.

 

Reviewing and discussing with management and the independent auditor various topics and events that may have significant financial impact on our Company or that are the subject of discussions between management and the independent auditors.

The Board of Directors has adopted a written charter for the Audit Committee. A current copy of the Audit Committee Charter is available in the corporate governance section of the investor relations page of the Company’s website located at www.spark.net.

Compensation Committee. The Compensation Committee consists of Bradley J. Goldberg, Ian V. Jacobs, John H. Lewis and Walter L. Turek. Each member is an independent director. Mr. Jacobs is the Chairman of the Compensation Committee. The Compensation Committee is responsible for the design, review, recommendation and approval of compensation arrangements for the Company’s executive officers, including our Chief Executive Officer, and key employees. The Compensation Committee conducts an annual review (in connection with the conclusion of our business planning process) of the compensation packages for each of our named executive officers. Based on this review, the Compensation Committee approves, to the extent applicable, (a) base salary changes, (b) any cash payout amounts earned under the previous year’s annual cash incentive awards, (c) equity grants and (d) targets and potential payout amounts under any performance-based incentive compensation programs for the new year. The Compensation Committee will annually review the proposed performance metric(s) applicable to the named executive officers and approve the performance targets and target payout amounts for the named executive officers. The Company does not have a general equity grant policy. The Compensation Committee may take other individual compensation actions during the year as needed. In reviewing and making compensation decisions of other executive officers, the Committee may consult with the Company’s Chief Executive Officer and any others who can review the performance of the other executive officers, provide annual recommendations for individual management objectives, and provide input on strategic initiatives. The Compensation Committee has the authority, to the extent it deems necessary or appropriate, to retain a compensation consultant and other advisors to assist in the evaluation of Chief Executive Officer or executive officer compensation.

The Board of Directors has adopted a written charter for the Compensation Committee. A current copy of the Compensation Committee Charter is available in the corporate governance section of the investor relations page of the Company’s website located at www.spark.net.

Nominating Committee. The Nominating Committee consists of Michael B. Brodsky, Bradley J. Goldberg, Ian V. Jacobs and John H. Lewis, each of whom is an independent director. Mr. Lewis is the Chairman of the Nominating Committee. The Nominating Committee assists in the selection of director nominees, approves director nominations to be presented for stockholder approval at our annual general meeting, fills any vacancies on our Board of Directors, considers any nominations of director candidates validly made by stockholders, and reviews and considers developments in corporate governance practices.

The Board of Directors has adopted a written charter for the Nominating Committee. A current copy of the Nominating Committee Charter is available in the corporate governance section of the investor relations page of the Company’s website located at www.spark.net.

Board Leadership Structure and Role in Risk Oversight

The Board of Directors does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board of Directors. Currently, the Company’s Chief Executive Officer serves on the Board but does not act as Chairman of the Board.

Companies face a variety of risks, including credit risk, liquidity risk, and operational risk. The Board of Directors believes an effective risk management system will allow the Company to (1) make timely identifications of the material risks that the Company faces, (2) communicate necessary information with

11


 

respect to material risks to senior executives and, as appropriate, to the Board or Audit Committee, (3) implement appropriate and responsive risk management strategies consistent with the Company’s risk profile, and (4) integrate risk management into Company decision-making.

The Board has designated the Audit Committee to take the lead in overseeing risk management. The Audit Committee discusses with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies.

The Board encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day business operations. The Board also works, with the input of the Company’s executive officers, to assess and analyze the most likely areas of future risk for the Company.

The Director Nomination Process

The Nominating Committee considers nominees from all sources, including stockholders. Stockholder nominees are evaluated by the same criteria used to evaluate potential nominees from other sources. The Board of Directors will consist of a majority of directors who qualify as “independent” directors within the meaning of the listing standards of the NYSE MKT, as the same may be amended from time to time. Minimally, nominees should have a reputation for integrity, honesty, and adherence to high ethical standards. They should have demonstrated business experience and the ability to exercise sound judgment in matters related to the current and long-term objectives of the Company, and should be willing and able to contribute positively to the decision-making process of the Company. In addition, they should not have, nor appear to have, a conflict of interest that would impair the nominee’s ability to represent the interests of the Company or to fulfill the responsibilities of a director.

Although the Company does not have a policy regarding diversity, the value of diversity on the Board is considered and the particular or unique needs of the Company shall be taken into account at the time a nominee is being considered. The Nominating Committee seeks a broad range of perspectives and considers both the personal characteristics (gender, ethnicity, age) and experience (industry, professional, public service) of directors and prospective nominees to the Board. Additionally, the Nominating Committee considers the respective qualifications needed for directors serving on various committees of the Board, and serving as chairs of such committees, should be taken into consideration. In recruiting and evaluating nominees, the Nominating Committee considers the appropriate mix of skills and experience and background needed for members of the Board and for members of each of the Board’s committees, so that the Board and each committee has the necessary resources to perform its respective functions effectively. The Nominating Committee also believes that a prospective nominee should be willing to limit the number of other corporate boards on which he or she serves so that the proposed director is able to devote adequate time to his or her duties to the Company, including preparing for and attending Board and committee meetings. In addition, the re-nomination of existing directors is not viewed as automatic, but based on continuing qualification under the criteria set forth above. In addition, the Nominating Committee will consider the existing director’s performance on the Board and on any committee on which such director serves, which will include attendance at Board and committee meetings.

Director Nominees by Stockholders. The Company’s Bylaws provide that stockholders may nominate directors for consideration at an annual meeting provided they comply with the notice procedures in the Bylaws, which are described under “Stockholder Proposals-Proposals to be Submitted for Annual Meeting” and is a stockholder of record on the date of the giving of such notice and on the record date for the determination of stockholders entitled to vote at such meeting. Any such notice shall also include the information regarding the stockholder making the nomination and the nominee required by the Company’s Bylaws. Nominations made by stockholders in this manner are eligible to be presented by the stockholder at the meeting, but such nominees will not have been considered by the Nominating Committee as a nominee to be potentially supported by the Company.

EXECUTIVE OFFICER & DIRECTOR COMPENSATION

Introduction

This Executive Officer & Director Compensation section is designed to provide stockholders with an understanding of our compensation program and to discuss the compensation earned for 2016 by our named executive officers. Our Compensation Committee oversees our executive compensation program. The Compensation Committee reviews and establishes the compensation for our executive officers and is responsible for administering and awarding equity grants under our existing stock incentive plans.

The Compensation Committee believes its compensation programs align the interests of our executives with those of our stockholders by placing great emphasis on at-risk compensation tied to specific short-term business objectives and long-term stockholder returns. To receive such short-term incentives, defined measurable goals must be achieved. Additionally, the new long-term stock award program requires management to deliver significant equity value creation within a specified time frame to be of value to its participants. Going forward, the Compensation Committee is committed to continued improvement in response to executive compensation trends and regulatory developments.

Named Executive Officers

In 2016, our named executive officers were:

 

Daniel M. Rosenthal, Chief Executive Officer

 

Robert W. O’Hare, Chief Financial Officer

 

David Budworth, Chief Technology Officer

 

Michael S. Egan, Former Chief Executive Officer

 

John R. Volturo, Former Chief Marketing Officer

 

Shailen Mistry, Former Chief Information Officer

Our Philosophy on Executive Compensation

Our primary objectives with respect to executive compensation are to attract and retain the best possible executive talent, to link annual compensation (cash and stockbased) and long-term stock-based compensation to achievement of measurable corporate goals and individual performance, and to align

12


 

executives’ incentives with stockholder value creation. To achieve these objectives, we are endeavoring to implement and maintain compensation plans that tie our executives’ overall compensation to our financial performance and return to stockholders. Overall, the total compensation opportunity is intended to create a competitive executive compensation program.

Our Process for Executive Compensation

The Compensation Committee oversees our executive compensation program. Each Committee member is an independent nonemployee director and qualifies as an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Compensation Committee develops and recommends to the Board the overall compensation package for our Chief Executive Officer and, with the additional assistance of our Chief Executive Officer, for each of our other executive officers. Our Chief Executive Officer does not participate in determining his compensation. Although objective criteria may be used, the Compensation Committee retains final discretion in determining the compensation of our executive officers. In general, the Compensation Committee makes its final determination of both annual incentive awards and awards earned based on long-term performance in the first quarter following the end of each performance period.

In implementing and administering the Company’s compensation philosophy, the Committee:

 

Reviews market data to assess the competitiveness of the Company’s compensation policies;

 

Reviews the Company’s performance against the Company’s plans and budgets and considers the degree of attainment of performance goals and objectives; and

 

Reviews the individual performance of each executive officer.

As a general practice, the Committee makes significant decisions over multiple meetings, discussing conceptual matters, reviewing preliminary recommendations, reviewing final recommendations and reviewing advice of legal advisors before acting. The Committee also holds special meetings as necessary in order to perform its duties.

Consideration of Say-on-Pay Results

Stockholders perform an advisory vote regarding the compensation of the Company’s named executives every three years. At the Company’s annual meeting of stockholders held in June 2016, approximately 75% of the votes cast on the advisory vote to approve the compensation of our named executive officers were voted in favor of the proposal. Stockholders review the compensation of the Company’s named executive officers every three years.

Elements of Named Executive Officer Compensation

Our named executive officer compensation consists of base salary, annual performance based cash and equity incentives, long-term equity plan participation and customary broad-based employee benefits. In addition, on occasion, the Compensation Committee may award special bonuses to the named executive officers. Consistent with our pay for performance philosophy, we believe that we can better motivate the named executive officers to enhance stockholder return if a significant portion of their compensation is “at-risk”; that is, contingent upon the achievement of performance objectives and overall strong company performance. The mix of base salary, annual bonus opportunity based on achievement of objectives and long-term stock-based compensation incentive (in the form of appreciation in shares underlying stock options and restricted stock units) varies depending on the officer’s position level.

The following discussion describes the mix of compensation methods that we use.

Base Salary. Base salaries for our named executive officers are established based on the scope of their responsibilities. Base salaries are reviewed on an annual basis and any increases are similar in scope to our overall corporate salary increase, if any.

Annual Incentives. Our employment contracts with our named executive officers provide them with an opportunity to receive annual cash and stock incentive compensation consisting of the possibility of receipt of a cash bonus and a stock or option award, payable once per year. Any such annual incentive would be dependent upon attaining specific corporate and/or personal objectives for the prior fiscal year, as well as the Company achieving its stated financial budget. Our goal with bonuses to our named executive officers is to reward executives in a manner that is commensurate with the level of achievement of certain financial and operational goals that we believe, if attained, result in greater long-term stockholder value. We believe that stock ownership is an important factor in aligning corporate and individual goals. Restricted stock unit (“RSU”) awards require a minimum hold period to further align management and stockholders. The Board of Directors approves these financial and strategic goals on an annual basis.

Long-term Incentives: The Company’s stock option program is designed to reward executives when they have created substantial value for stockholders over a specified period of time. It does this, in part, by (a) vesting each grant of options over a period of one or more years, and (b) instituting strike prices for options that are at or above current market prices, such that the award only has value if the Company’s stock price increases.  We believe that providing long-term incentives as a component of compensation helps us to attract and retain our named executive officers. These incentives also align the financial rewards paid to our named executive officers with our long-term performance, thereby encouraging our named executive officers to focus on our long-term performance goals.

Other Benefits: Named executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, group life, disability, and accidental death and dismemberment insurance and our 401(k) plan. We do not plan on maintaining any pension plan or retirement benefit other than our 401(k) plan.

13


 

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed the Executive Officer & Director Compensation section and discussed it with Company management. In reliance on its review and the discussions referred to above, the Compensation Committee recommended to the Board that the Executive Officer & Director Compensation section be included in the Company’s Proxy Statement.

Respectfully Submitted,

The Compensation Committee

Ian V. Jacobs (Chairman)

Bradley J. Goldberg

John H. Lewis

Walter L. Turek

14


 

Summary Compensation Table

The following table shows information regarding the compensation earned during the fiscal years ended December 31, 2016 and 2015 by our principal executive officer and our two most highly compensated executive officers who were employed by us at the end of the fiscal year ended December 31, 2016, as well as Messrs. Egan, Volturo and Mistry, for whom disclosure would have been provided pursuant to paragraph (m)(2)(ii) of Item 402 of Regulation S-K but for the fact that they were not serving as an executive officer at the end of 2016 (the “named executive officers”).

 

Name & Principal Position

 

Year

 

Salary

 

 

Bonus

 

 

Stock

Awards(1)

 

 

Option Awards(2)

 

 

Non-Equity Incentive

Plan

Compensation(3)

 

 

All Other

Compensation(4)

 

 

Total

 

Daniel M. Rosenthal,

 

2016

 

$

156,154

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$

25,846

(5)

 

$

182,000

 

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Joined August 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert W. O’Hare,

 

2016

 

$

250,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$

55,000

 

 

$

31,614

(6)

 

$

336,614

 

Chief Financial Officer

 

2015

 

$

187,500

 

 

 

-

 

 

 

-

 

 

$

108,000

 

 

$

50,000

 

 

$

37,649

(6)

 

$

383,149

 

(Joined February 2015)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David Budworth,

 

2016

 

$

115,962

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

$

35,962

(7)

 

$

151,924

 

Chief Technology Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Joined August 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael S. Egan,

 

2016

 

$

218,480

 

 

$

83,000

(10)

 

$

128,940

 

 

 

-

 

 

 

-

 

 

$

212,776

(9)

 

$

643,196

 

Former Chief Executive Officer

 

2015

 

$

300,000

 

 

$

45,000

(8)

 

 

-

 

 

$

108,000

 

 

$

70,000

 

 

$

29,611

(9)

 

$

552,611

 

(Departed September 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John R. Volturo,

 

2016

 

$

201,141

 

 

$

50,000

(10)

 

 

-

 

 

 

-

 

 

 

-

 

 

$

178,609

(11)

 

$

429,750

 

Former Chief Marketing Officer

 

2015

 

$

183,333

 

 

 

-

 

 

 

-

 

 

$

99,000

 

 

$

100,000

 

 

$

770

 

 

$

383,103

 

(Departed September 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shailen Mistry,

 

2016

 

$

173,397

 

 

$

50,000

(10)

 

 

-

 

 

 

-

 

 

 

-

 

 

$

161,853

(12)

 

$

385,250

 

Former Chief Information Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Departed September 2016)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

The amounts disclosed reflect the aggregate grant date fair value of the stock awards in accordance with FASB ASC Topic 718 based upon the probable outcome of achieving the underlying vesting conditions. The grant date fair value of each stock award is computed based on the closing price of our common stock on the date of the grant.

(2)

The amounts disclosed reflect the aggregate grant date fair value of the equity awards in accordance with FASB ASC Topic 718 based upon the probable outcome of achieving the underlying vesting conditions. For assumptions used in the calculation of equity awards, see Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.

(3)

Our Compensation Committee establishes an annual pool from which cash bonuses can be distributed to the executive officers of the Company. This amount is based on the Company’s revenue from certain key segments and adjusted earnings before interest, taxes, depreciation and amortization (also known as Adjusted EBITDA). Bonus amounts for each executive officer are based on achieving certain financial targets as well as individual management objectives. See the summary of the employment agreements below for each officer for a further description of the determination of their bonuses.

(4)

All Other Compensation, as applicable, includes $48,185, $33,281 and $10,200 in 401(k) plan employer contributions for 2016, 2015 and 2014, respectively. For 2016, 2015 and 2014, the amount also includes gym membership benefit, health care premium coverage, life insurance premium coverage, severance payments, and payments of accrued but unused vacation. Specific amounts over $1,500 are separately noted below.

(5)

Includes $5,580 in 401(k) plan employer contributions and moving expenses of $18,198.

(6)

Includes $10,600 and $7,500 in 401(k) plan employer contributions for 2016 and 2015, respectively. Also includes $19,754 and $15,525 in health care premium coverage for 2016 and 2015, respectively. Includes $13,996 in moving expenses for 2015.

(7)

Includes $4,138 in 401(k) plan employer contributions, $6,364 in health care premium coverage and moving expenses of $25,000.

(8)

Includes a one-time signing bonus of $45,000 for 2015.

(9)

Includes $10,600 and $10,400 in 401(k) plan employer contributions for 2016 and 2015, respectively. Also includes $18,683 and $17,431 in health care premium coverage for 2016 and 2015, respectively. Includes $157,500 of severance in 2016.

(10)

Includes a one-time separation STI payment.

(11)

Includes $10,600 in 401(k) plan employer contributions and $145,000 of severance.

(12)

Includes $6,667 in 401(k) plan employer contributions, $19,851 in health care premium coverage and $125,000 of severance.

15


 

Grants of Plan-Based Awards for 2016

The following table provides information about grants of both non-equity incentive awards made through annual cash payments as well as equity awards made under the 2007 Omnibus Incentive Plan in the year ended December 31, 2016.

 

 

 

 

 

 

 

Estimated Possible Payouts Under

Non-Equity Incentive Plan Awards(1)

 

 

Estimated Future Payouts Under

Equity Incentive Plan Awards(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name of Executive

 

Grant Date

 

 

Threshold ($)

 

 

Target ($)

 

 

Maximum ($)

 

 

Threshold (#)

 

 

Target (#)

 

 

Maximum (#)

 

 

All Other

Stock

Awards:

Number of

Shares of

Stock or

Units (#)

 

 

All Other

Option

Awards:

Number of Securities

Underlying

Options(3)

 

 

Exercise

Price of

Option

Awards

($/Sh)(4)

 

 

Grant

Date

fair

value of

stock

and

option

awards

($)(5)

 

 

 

 

 

Rosenthal

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

O’Hare

 

 

 

 

 

 

 

 

 

 

55,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1/1/2016

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,000

 

 

 

24,000

 

 

 

40,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Budworth

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Egan

 

 

 

 

 

 

 

 

 

 

150,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1/1/2016

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

30,000

 

 

 

60,000

 

 

 

100,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

3/11/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volturo

 

 

 

 

 

 

 

 

 

 

100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1/1/2016

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,000

 

 

 

40,000

 

 

 

66,667

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mistry

 

 

 

 

 

 

 

 

 

 

100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1/1/2016

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,000

 

 

 

24,000

 

 

 

40,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

1/4/2016

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

(i) 60,000

 

 

 

(i) 5.25

 

 

29,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(ii) 120,000

 

 

 

(ii) 7.50

 

 

15,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(iii) 180,000

 

 

 

(iii) 10.00

 

 

7,200

 

 

 

 

 

 

(1)

Our Compensation Committee establishes an annual pool from which cash bonuses can be distributed to the executive officers of the Company. This amount is based on the Company’s revenue from certain key segments and adjusted earnings before interest, taxes, depreciation and amortization (also known as Adjusted EBITDA). Bonus amounts for each executive officer are based on achieving certain financial targets as well as individual management objectives. See the summary of the employment agreements below for each officer for a further description of the determination of their bonuses.

(2)

This column represents the number of shares of RSUs that were eligible to be granted to Messrs. O’Hare, Egan, Volturo, and Mistry pursuant to their respective Employment Agreements. None of these grants vested because financial targets required for vesting were not met.

(3)

This column represents the number of stock options granted to Mr. Mistry by the Board on January 4, 2016 in respect of his employment as an executive officer. Mr. Mistry's options expired unexercised following the termination of his employment.

(4)

Stock option prices reflect the exercise price for each respective tranche of option awards.

(5)

The amounts disclosed reflect the aggregate grant date fair value of equity awards in accordance with FASB ASC Topic 718. The grant date fair value of each stock award is computed based on the closing price of our common stock on the date of the grant. For assumptions used in calculation of equity awards, see Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.

16


 

Outstanding Equity Awards at Fiscal Year-End

The following table presents the outstanding equity awards held by each of the named executive officers as of the year ended December 31, 2016.

 

Option Awards

 

Stock Awards

Name of

Executive

 

Grant

Date

 

Number of

Securities

Underlying

Unexercised

Options

(Exercisable)

 

Number of

Securities

Underlying

Unexercised

Options

(Unexercisable)

 

Equity

Incentive

Plan

Awards:

Securities

Underlying

Unexercised

Unearned

Options

 

 

 

Option

Exercise

Price

 

 

Option

Expiration

Date

 

Stock

Award

Grant

Date

 

Number

of

Shares

or Units

of Stock

That

Have

Not

Vested(1)

 

 

 

Market

Value of

Shares

or Units

of Stock That

Have

Not

Vested(2)

 

Equity

Incentive

Plan

Awards:

Number

of

Unearned

Shares,

Units or

other

Rights

That

Have Not

Vested

 

Equity

Incentive

Plan

Awards:

Market

or Payout

Value of

Unearned

Shares,

Units or

other

Rights

That

Have Not

Vested

Rosenthal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

-

 

-

 

-

 

 

 

-

 

 

-

 

-

 

-

 

 

 

-

 

-

 

-

O’Hare

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4/1/2015

 

-

 

60,000

 

-

 

 

$

5.25

 

 

12/31/2019

 

1/1/2016

 

12,000

(1)

 

$

10,080

 

-

 

-

 

 

4/1/2015

 

-

 

120,000

 

-

 

 

 

7.50

 

 

12/31/2019

 

-

 

-

 

 

 

-

 

-

 

-

 

 

4/1/2015

 

-

 

180,000

 

-

 

 

 

10.00

 

 

12/31/2019

 

-

 

-

 

 

 

-

 

-

 

-

Total

 

 

 

-

 

360,000

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Budworth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

-

 

-

 

-

 

 

 

-

 

 

-

 

-

 

-

 

 

 

-

 

-

 

-

Egan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

-

 

-

 

-

 

 

 

-

 

 

-

 

1/1/2016

 

30,000

 

 

$

25,200

 

-

 

-

Volturo

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

-

 

-

 

-

 

 

 

-

 

 

-

 

1/1/2016

 

20,000

 

 

$

16,800

 

-

 

-

Mistry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

-

 

-

 

-

 

 

 

-

 

 

-

 

1/1/2016

 

12,000

 

 

$

10,080

 

-

 

-

 

(1)

Represents the number of shares of RSUs that were granted to Messrs. O’Hare, Egan, Volturo, and Mistry. None of these grants vested because the financial targets required for vesting were not met.

(2)

The market value of the stock awards (RSUs) represents the product of the closing price of the Company’s stock as of December 31, 2016, which was $0.84 per share.

17


 

Option Exercises and Stock Vested

The following table provides information about common stock options exercised and restricted common stock that vested during the year ended December 31, 2016:

 

 

 

Option Awards

 

 

 

Stock Awards

Name

 

Number of Shares

Acquired on

Exercise

 

 

 

Value Realized

on Exercise

 

 

 

Number of Shares

Acquired on

Vesting

 

 

 

Value Realized on

Vesting

Rosenthal

 

-

 

 

 

-

 

 

 

-

 

 

 

-

O’Hare

 

-

 

 

 

-

 

 

 

-

 

 

 

-

Budworth

 

-

 

 

 

-

 

 

 

-

 

 

 

-

Egan

 

-

 

 

 

-

 

 

 

42,000

 

 

$

35,280

Volturo

 

-

 

 

 

-

 

 

 

-

 

 

 

-

Mistry

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans

The Company has a defined contribution plan under Section 401(k) of the Internal Revenue Code covering all full-time employees providing for matching contributions by the Company, as defined in the plan. The Company also has a related nonqualified deferred compensation plan whereby the Company may make contributions to executives’ accounts to make up for the limitations imposed by the Internal Revenue Code on Company profit sharing and matching contributions under the 401(k) plan. Participants in each plan may direct the investment of their personal accounts to a choice of mutual funds consisting of various portfolios of stocks, bonds, or cash instruments.

 

Name

 

 

Executive

Contributions in the

2016 Fiscal Year

 

 

 

Registrant Contributed

in 2016 Fiscal Year ($)(1)

 

 

 

Aggregate Earnings in

2016 Fiscal Year ($)(1)

 

 

 

Aggregate

Withdrawals/

Distributions

 

 

 

Aggregate

Balance at 2016

Fiscal Year End

Rosenthal

 

$

10,000

 

 

$

5,580

 

 

$

449

 

 

 

-

 

 

$

16,029

O’Hare

 

$

18,000

 

 

$

10,600

 

 

$

6,390

 

 

 

-

 

 

$

60,742

Budworth

 

$

7,511

 

 

$

4,138

 

 

$

(39

)

 

 

-

 

 

$

11,610

Egan

 

$

18,000

 

 

$

10,600

 

 

$

13,075

 

 

 

-

 

 

$

195,326

Volturo

 

$

15,467

 

 

$

10,600

 

 

$

1,631

 

 

$

(27,698

)

 

 

-

Mistry

 

$

9,600

 

 

$

6,667

 

 

$

772

 

 

 

-

 

 

$

17,039

 

(1)

Amounts reported as contributions are reflected in All Other Compensation in the Summary Compensation Table above. Amounts reported as Aggregate Earnings are not reflected in the Summary Compensation Table.

Employment Contracts

On August 9, 2016, Company entered into employment letters with each of Daniel M. Rosenthal, the Company’s Chief Executive Officer, and David Budworth, the Company’s Chief Technology Officer. Additionally, on December 13, 2016, the Company entered into an amended and restated employment agreement with Robert W. O’Hare, the Company’s Chief Financial Officer. Summaries of the material terms of these employment contracts are set forth below.

Daniel M. Rosenthal

Term. Mr. Rosenthal is subject to “at-will employment,” meaning that employment with the Company is for no specific period of time.

Annual Base Salary. Mr. Rosenthal receives an annual base salary of $400,000.

Benefits. Mr. Rosenthal is entitled to participate in any and all of the Company’s employee benefit plans generally applicable to the Company’s executives and are entitled to an annual cash and/or stock bonus at the discretion of the Board of Directors.

Additional Activities.  Mr. Rosenthal is permitted to provide PEAK6 with certain transition and other services. However, Mr. Rosenthal must devote substantially all work time to the Company, except to the extent otherwise approved by the Board of Directors in writing. Mr. Rosenthal has agreed to preserve the Company’s confidential and proprietary information and refrain from interfering with the Company’s relationships with its employees, clients, customers and suppliers.

Termination. If the Company terminates Mr. Rosenthal’s employment without cause or Mr. Rosenthal terminates his employment for good reason with the Company in the first year of employment, the Company will pay for Mr. Rosenthal’s relocation costs.

David Budworth

Term. Mr. Budworth is subject to “at-will employment,” meaning that employment with the Company is for no specific period of time.

Annual Base Salary. Mr. Budworth receives an annual base salary of $300,000.

Benefits. Mr. Budworth is entitled to participate in any and all of the Company’s employee benefit plans generally applicable to the Company’s executives and are entitled to an annual cash and/or stock bonus at the discretion of the Board of Directors.

Additional Activities.  Mr. Budworth is permitted to provide PEAK6 with certain transition and other services. However, Mr. Budworth must devote substantially all work time to the Company, except to the extent otherwise approved by the Board of Directors in writing. Mr. Budworth has agreed to preserve the Company’s confidential and proprietary information and refrain from interfering with the Company’s relationships with its employees, clients, customers and suppliers.

18


 

Termination. If the Company terminates Mr. Budworth’s employment without cause or Mr. Budworth terminates his employment for good reason with the Company in the first year of employment, the Company will pay for Mr. Budworth’s relocation costs.

Robert W. O’Hare

Term. The term of Mr. O’Hare’s amended and restated employment agreement commenced on January 1, 2017 and shall continue until terminated pursuant to the terms of the agreement. The agreement is terminable for any reason or no reason by either the Company or Mr. O’Hare. Any such termination shall not be effective, however, until at least thirty (30) days following receipt of written notice of such termination by the other party.

Compensation. During the term, the Company pays Mr. O’Hare an annual base salary of $305,000. Mr. O’Hare’s base salary may not be increased or decreased. Mr. O’Hare also shall be eligible to receive a short-term annual cash incentive (“STI”) payment of $24,000 based upon specific operational goals to be determined by the Board or the Compensation Committee of the Board.

Termination of Employment. Either the Company or Mr. O’Hare may terminate Mr. O’Hare’s employment at any time, with or without Cause (as such term is defined in the employment agreement), during the term of the employment agreement. In the event Mr. O’Hare’s employment terminates as described below under clauses (i) through (iii) or Mr. O’Hare is terminated by the Company for Cause, the Company shall pay to Mr. O’Hare upon Mr. O’Hare’s termination of employment: (i) the prorated base salary earned as of the date of Mr. O’Hare’s termination of employment, plus (ii) the accrued but unused vacation as of the date of Mr. O’Hare’s termination of employment, plus (iii) a pro rata amount of Mr. O’Hare’s STI payment for the year in which Mr. O’Hare’s employment terminates based on the number of days Mr. O’Hare was employed by the Company during such year (provided that in the event of Mr. O’Hare’s voluntary resignation during the Retention Period (defined below), Mr. O’Hare shall be entitled to a pro rata amount of Mr. O’Hare’s STI as set forth below in (i)). Any unvested equity interests held by Mr. O’Hare shall be forfeited upon the employment termination date, except as otherwise provided in the employment agreement.

 

(i)

In addition to any payments set forth above, in the event that the Company causes to occur an involuntary termination without Cause, Mr. O’Hare resigns from employment with the Company for Good Reason (as defined in the employment agreement) during the term or Mr. O’Hare voluntarily resigns during the period after May 31, 2017 but prior to July 31, 2017 (the “Retention Period”), Mr. O’Hare shall be entitled to a “Severance Package” that consists of the following: (a) a single cash lump sum “Severance Payment” equal to 50% of Mr. O’Hare’s base salary, payment to be made on the sixtieth (60th) day following such termination, (b) reimbursement of any COBRA payments paid by Mr. O’Hare in the twelve (12) month period following Mr. O’Hare’s termination of employment to the extent Mr. O’Hare is not eligible for similar coverage through another employer, and (c) in the event of Mr. O’Hare’s voluntary resignation during the Retention Period, a pro rata amount of Mr. O’Hare’s STI payment for the year in which Mr. O’Hare’s employment terminates based on the number of days Mr. O’Hare was employed by the Company during such year. Mr. O’Hare’s eligibility for such Severance Package will be conditional on Mr. O’Hare executing a Separation Agreement that includes a general mutual release by the Company and Mr. O’Hare in favor of the other.

 

(ii)

In addition to any payments set forth above, but not as set forth in paragraph (i) above, in the event of a Change in Control (as defined in the employment agreement), and following the Change in Control, Mr. O’Hare resigns for any of the three following reasons: (a) Mr. O’Hare’s base salary is reduced by the Company; (b) a reduction in Mr. O’Hare’s title, or a material reduction in Mr. O’Hare’s duties, authorities, and/or responsibilities; or (c) a requirement by the Company, without Mr. O’Hare’s consent, that Mr. O’Hare relocate to a location greater than thirty-five (35) miles from Mr. O’Hare’s place of residence, then Mr. O’Hare shall be entitled to a “Severance Package” that consists of the following: (y) a single cash lump sum “Severance Payment” equal to 100% of Mr. O’Hare’s base salary, payment to be made on the sixtieth (60th) day following such termination, and (z) reimbursement of any COBRA payments paid by Mr. O’Hare in the twelve (12) month period following Mr. O’Hare’s termination of employment to the extent Mr. O’Hare is not eligible for similar coverage through another employer. Mr. O’Hare’s eligibility for such Severance Package will be conditional on Mr. O’Hare executing a Separation Agreement that includes a general mutual release by the Company and Mr. O’Hare in favor of the other.

 

(iii)

In the event that Mr. O’Hare dies or terminates employment by reason of a Disability (as defined in the employment agreement) during the term, Mr. O’Hare shall be entitled to (a) payment of the unpaid prorated base salary earned as of the date of Mr. O’Hare’s death or Disability (the “Measurement Date”), and (b) reimbursement of any COBRA payments paid by Mr. O’Hare or his estate or beneficiaries in the twelve (12) month period following the Measurement Date.

Change of Control. In the event of a Change in Control (as defined in the employment agreement), 100% of any restricted stock units granted to Mr. O’Hare by the Company that are not yet vested shall vest immediately upon such Change in Control.

Other Terms. Subject to certain exceptions as provided in the employment agreement, during Mr. O’Hare’s employment with the Company and for a period of twelve (12) months thereafter, Mr. O’Hare has agreed that he will not knowingly, separately or in association with others, materially and substantially interfere with, impair, disrupt or damage (i) the Company’s relationship with any of the customers of the Company with whom Mr. O’Hare has had contact by contacting them for the purpose of inducing or encouraging any of them to divert or take away business from the Company and to an enterprise that is in direct competition with the Company Business or (ii) the Company’s business by directly contacting any Company officers or key employees for the purpose of inducing or encouraging them to discontinue their employment with the Company.

Separation Agreements

Michael S. Egan

The employment of Michael S. Egan, the Company’s former Chief Executive Officer, terminated effective as of September 9, 2016.  On August 27, 2016, the Company entered into a separation and release agreement with Mr. Egan, pursuant to which Mr. Egan received severance payments consisting of (i) an amount equal to $157,500, which is 50% of Mr. Egan’s annual base salary, paid in equal installments on the Company’s normal payroll dates for a period of six months beginning on November 8, 2016; (ii) a short-term annual incentive award in the amount of $83,000; (iii) accrued but unused vacation of $24,231; and (iv) reimbursement for COBRA payments paid by Mr. Egan for 12 months.  

19


 

John Volturo

The employment of John Volturo, the Company’s former Chief Marketing Officer, terminated effective as of September 9, 2016.  On September 1, 2016, the Company entered into a separation and release agreement with Mr. Volturo, pursuant to which Mr. Volturo received severance payments consisting of (i) an amount equal to $145,000, which is 50% of Mr. Volturo’s annual base salary, paid in equal installments on the Company’s normal payroll dates for a period of six months beginning on November 8, 2016; (ii) a short-term annual incentive award in the amount of $50,000; (iii) accrued but unused vacation of $21,192; and (iv) reimbursement for COBRA payments paid by Mr. Volturo for 12 months

Shailen Mistry

The employment of Shailen Mistry, the Company’s former Chief Technology Officer, terminated effective as of September 9, 2016. On September 7, 2016, the Company entered into a separation and release agreement with Mr. Mistry, pursuant to which Mr. Mistry received severance payments consisting of (i) an amount equal to $125,000, which is 50% of Mr. Mistry’s annual base salary, paid in equal installments on the Company’s normal payroll dates for a period of six months; (ii) a short-term annual incentive award in the amount of $50,000; (iii) accrued but unused vacation of $9,495; and (iv) reimbursement for COBRA payments paid by Mr. Mistry for 12 months.

Payments upon Termination or Change in Control

The Company provides severance and change in control arrangements in certain of the employment agreements or letters it has executed with its named executive officers, as discussed in the section titled “Employment Contracts and Termination of Employment and Change of Control Arrangements” above. Following is a summary of the payments that the Company’s named executive officers who held office in 2016 would have received in the event of a termination or termination after a change in control on December 31, 2016 (provided such termination was not effected by the Company for cause or by the officer without good reason), or in the event of a change of control on December 31, 2016:

 

Named Executive Officer

 

Salary

Continuation or

Severance

 

 

Bonus

 

 

Common Stock

Options / RSUs(1)

 

 

Total

 

Rosenthal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

•  Termination without Cause or with Good Reason(2)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

•  Change of Control