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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
AMENDMENT NO. 1
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
Spark Networks plc
(Exact name of Registrant specified in its charter)
 
     
England and Wales
(State or other jurisdiction of
incorporation or organization)
  98-0200628
(I.R.S. Employer Identification Number)
8383 Wilshire Boulevard, Suite 800
Beverly Hills, California
90211

(Address, including zip code, of principal executive office)
(323) 836-3000
(Registrant’s telephone number, including area code)
 
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Ordinary Shares, Par value 1p per share
 
 

 


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 Exhibit 4.1
 Exhibit 99.1
This registration statement contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this registration statement, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “may,” “will,” “continue,” “should,” “plan,” “predict,” “potential” or the negative of these terms or other similar expressions. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in these forward-looking statements, which are subject to a number of risks, uncertainties and assumptions described in “Item 1. Business—Risk Factors” section and elsewhere in this registration statement.
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Item 1. Business
The information required by this item is contained under the sections “Prospectus Summary,” “Risk Factors,” “Business,” “Cautionary Statement Regarding Forward-Looking Statements” and “Where You Can Find More Information” of the second amendment to the registration statement on Form S-1 (File No. 333-123228) filed as an exhibit hereto (the “Registration Statement”). Those sections are incorporated herein by reference.
Item 2. Financial Information
The information required by this item is contained under the sections “Selected Consolidated Financial Information,” “Pro Forma Combined Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Registration Statement. Those sections are incorporated herein by reference.
Item 3. Properties
The information required by this item is contained under the section “Business—Facilities” of the Registration Statement. That section is incorporated herein by reference.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the beneficial ownership of our ordinary shares, as of October 19, 2005, for:
    each person or entity who we know beneficially owns more than 5% of our ordinary shares;
 
    each Named Executive Officer and each director; and
 
    all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to the securities. The number of shares of ordinary shares outstanding, on an as-converted basis, used in calculating the percentage for each listed shareholder includes ordinary shares underlying options or a warrant held by the shareholder, all of which are being registered in this registration statement, but excludes ordinary shares underlying options or warrants held by any other person or entity. In addition, the number of each shareholder’s ordinary shares underlying warrants and options that are exercisable within 60 days of October 19, 2005 is set forth below. Percentage of beneficial ownership is based on 26,209,496 ordinary shares outstanding as of October 19, 2005. Unless otherwise indicated, the address of each beneficial owner is c/o: Spark Networks plc, 8383 Wilshire Blvd., Suite 800, Beverly Hills, California 90211.
                 
    Number of   Percentage
Name of Beneficial Owner   Shares   of Shares
5% stockholders:
               
Tiger Global Management, L.L.C. (1)
    6,631,085       25.3 %
Capital Research and Management Company (2)
    2,505,000       9.6  
Criterion Capital Management LLC (3)
    3,341,337       12.7  
FM Fund Management Limited (4)
    2,201,890       8.4  
 
Named Executive Officers and Directors:
               
David E. Siminoff (5)
    1,887,000       6.9  
Todd Tappin
          *  
Joe Y. Shapira (6)
    4,512,639       15.9  
Alon Carmel (7)
    4,430,348       15.7  
Michael Riddell
          *  

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    Number of   Percentage
Name of Beneficial Owner   Shares   of Shares
Peter Voutov
          *  
Scott Shleifer (8)
          *  
Michael Brown (9)
    80,000       *  
Benjamin Derhy (10)
    80,000       *  
Laura Lauder (11)
    180,000       *  
Martial Chaillet (12)
    200,000       *  
All directors and executives as a group (10 persons) (13)
    7,689,639       25.0 %
 
*   Less than 1%.
 
(1)   Consists of 5,183,695 shares held by Tiger Global, L.P.; 1,313,392 shares held by Tiger Global, Ltd.; and 133,998 shares held by Tiger Global II, L.P. Each entity has sole voting power over the shares it holds; Tiger Global Management, L.L.C. is the investment manager of Tiger Global, L.P., Tiger Global, Ltd. and Tiger Global II, L.P. and it has shared investment power over the 6,631,085 shares; Charles P. Coleman III is the sole managing member of the Tiger Global Management, L.L.C. Tiger Global Performance, L.L.C. is the sole general partner of Tiger Global, L.P.; Charles P. Coleman III is the sole managing member of the general partner of Tiger Global, L.P.; Tiger Global Performance, L.L.C. is the sole general partner of Tiger Global II, L.P.; Charles P. Coleman III is the sole managing member of Tiger Global II, L.P. The address for Tiger Global Management, L.L.C., Tiger Global, L.P. and Tiger Global II, L.P. is 101 Park Avenue, 48th Floor, New York, New York 10178. The address for Tiger Global, Ltd. is c/o Ironshore Corporate Services Limited, Queensgate House, South Church Street, P.O. Box 1234, George Town, Grand Cayman, Cayman Islands.
 
(2)   Capital Research and Management Company, an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is deemed to be the beneficial owner of 2,505,000 shares as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940. Capital Research and Management Company has sole dispositive power over these shares. Included in the holdings of Capital Research and Management Company is the holding of SMALLCAP World Fund, Inc., an investment company registered under the Investment Company Act of 1940, which is advised by Capital Research and Management Company. SMALLCAP World Fund, Inc. is the beneficial owner of 1,850,000 shares, of which it has sole voting power. The persons controlling the investment decisions with respect to the shares held by Capital Research and Management Company and SMALLCAP World Fund are Gordon Crawford, J. Blair Frank, J. Dale Harvey, Claudia Huntington , Jonathan Knowles and Mark Denning. The address for both entities is 333 South Hope Street, Los Angeles, California 90071.
 
(3)   Criterion Capital Management LLC, of which Christopher H. Lord is the sole manager, purchased shares on the open market with no special arrangements with the Company.
 
(4)   The registered office of FM Fund Management Limited is Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands. Florian Homm has voting and investment powers for the shares held by FM Fund Management Limited.
 
(5)   Includes 1,275,000 shares issuable upon exercise of share options, 337,500 shares of which underlie options exercisable within 60 days of October 19, 2005.
 
(6)   Includes (i) 2,250,000 shares issuable upon exercise of share options, 2,093,750 shares of which underlie options exercisable within 60 days of October 19, 2005, (ii) 1,062,415 shares held by the Joe Shapira Family Trust of which Mr. Shapira is trustee, (iii) 550,000 shares held by the Shapira Children’s Trust of which Mr. Shapira is trustee, and (iv) 12,000 shares, of which he disclaims beneficial ownership, except to the extent of his pecuniary interest, held by a custodian for Mr. Shapira’s children.
 
(7)   Includes (i) 2,000,000 shares issuable upon exercise of share options exercisable within 60 days of October 19, 2005, and (ii) 8,000 shares held by his spouse.
 
(8)   Excludes 5,183,695 shares held by Tiger Global, L.P. and 133,998 shares held by Tiger Global II, L.P., of which Scott Shleifer is a limited partner. Mr. Shleifer holds the position of Managing Director at Tiger Global Management, L.L.C.

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(9)   Represents shares issuable upon exercise of share options, 20,000 shares of which underlie options exercisable within 60 days of October 19, 2005.
 
(10)   Represents shares issuable upon exercise of share options, 20,000 shares of which underlie options exercisable within 60 days of October 19, 2005.
 
(11)   Includes 80,000 shares issuable upon exercise of share options, 15,000 shares of which underlie options exercisable within 60 days of October 19, 2005.
 
(12)   Includes 80,000 shares issuable upon exercise of share options, 15,000 shares of which underlie options exercisable within 60 days of October 19, 2005.
 
(13)   Shares beneficially owned by all executive officers and directors as a group include options to purchase 4,595,000 shares, 2,752,501 shares of which are currently exercisable or exercisable within 60 days of October 19, 2005.
Item 5. Directors and Executive Officers
The information required by this item is contained under the section “Management” of the Registration Statement. That section is incorporated herein by reference.
Item 6. Executive Compensation
The information required by this item is contained under the section “Management—Summary Executive Compensation Table” of the Registration Statement. That section is incorporated herein by reference.
Item 7. Certain Relationships and Related Transactions
The information required by this item is contained under the section “Certain Relationships and Related Party Transactions” of the Registration Statement. That section is incorporated herein by reference.
Item 8. Legal Proceedings
The information required by this item is contained under the section “Business—Legal Proceedings” of the Registration Statement. That section is incorporated herein by reference.
Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Shareholder Matters
The information required by this item is contained under the sections “Dividend Policy” and “Price Range of Global Depositary Shares” of the Registration Statement and under the section “Item 11—Description of Registrant’s Securities to be Registered” herein. Each section is incorporated herein by reference.
Item 10. Recent Sales of Unregistered Securities
The information required by this item is contained under the section “Information Not Required in Prospectus—Item 15. Recent Sales of Unregistered Securities” of the Registration Statement. That section is incorporated herein by reference.
Item 11. Description of Registrant’s Securities
Description of Ordinary Shares
We are providing you with a summary description of our ordinary shares and the material rights of holders of our ordinary shares. Please remember that summaries by their nature lack the precision of the information summarized and that a person’s rights and obligations as a holder of our ordinary shares will be determined by reference to our Memorandum and Articles of Association and applicable English law, each as modified from time to time, and not

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by this summary. We urge you to review our Memorandum and Articles of Association in their entirety and to seek appropriate professional advice regarding their interpretation and applicable English law.
General
Our authorized share capital is £800,000 divided into 80,000,000 ordinary shares of £0.01 each. Set forth below is information concerning the share capital and related summary information concerning the material provisions of our Memorandum and Articles of Association, or Memorandum and Articles, and applicable English company law.
Voting rights
Every holder of ordinary shares who, being an individual, is present in person or by proxy or, being a corporation, has an authorized representative present who is not himself a shareholder, at a general meeting has one vote on a show of hands. Proxies voting on a show of hands do not have more than one vote each, even if they hold a number of proxies or are shareholders themselves. On a poll, every holder of ordinary shares present in person, by its authorized representative or by proxy has one vote for each share held. Voting at a general meeting is by a show of hands unless a poll is demanded. A poll may be demanded by:
 
  the chairman of the meeting;
  not less than three shareholders present at the meeting in person, by proxy or represented by an authorized representative and entitled to vote;
  any shareholder or shareholders present at the meeting in person, by proxy or represented by an authorized representative and representing not less than one-tenth of the total voting rights of all shareholders having the right to vote at such meeting; or
  any shareholder or shareholders present in person, by proxy or represented by an authorized representative and holding a number of ordinary shares conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all of the shares conferring that right.
Where a poll is not demanded, the interests of beneficial owners of ordinary shares who hold through a nominee may not be reflected in votes cast on a show of hands if that nominee does not attend the meeting or receives conflicting voting instructions from different beneficial owners for whom it holds the shares as nominee. Since, under English law, voting rights are only conferred on registered holders of shares, a person holding through a nominee may not directly demand a poll.
Unless otherwise required by law or the Memorandum and Articles, voting in a general meeting is by ordinary resolution. An ordinary resolution, for example, a resolution for the appointment of directors, the declaration of a final dividend, the appointment of the auditors, the increase of authorized share capital or grant of authority to allot shares, requires the affirmative vote of a majority of the shareholders (a) present in person or by an authorized representative or by proxy, excluding the chairman of the meeting in his role as proxy, in the case of a vote by show of hands or (b) present in person, by an authorized representative or by proxy and holding shares conferring in the aggregate a majority of the votes actually cast on the ordinary resolution, in the case of a vote by poll. In the case of a tied vote, whether on a show of hands or on a poll, the chairman of the meeting is entitled to cast a deciding vote. A special resolution, for example, a resolution amending the Memorandum and Articles, changing the name of our company or waiving statutory pre-emption rights on the issue of shares for cash, or an extraordinary resolution, for example, modifying the rights of any class of shares at a meeting of the holders of such class or relating to matters concerning the liquidation of our company, requires the affirmative vote of not less than three-quarters of shareholders present in person, represented by an authorized representative or by proxy and holding shares conferring in aggregate at least three-quarters of the votes actually cast on the resolution, on a vote by poll.
Unless our Board of Directors determines otherwise, no shareholder is entitled to vote in respect of any share held by him either personally or by proxy or to exercise any other right conferred by membership in relation to any shareholders’ meetings, if any sum is payable by him to us in respect of that share. Our Memorandum and Articles of Association do not contain restrictions on the right of non-UK residents or foreign owners to be registered holders or exercise voting rights in respect of our ordinary shares.

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Notices of Shareholder Meetings
An Annual General Meeting and any Extraordinary General Meeting at which it is proposed to pass a Special Resolution or a resolution of which special notice has been given to our company shall be called on least 21 days’ written notice and any other Extraordinary General Meeting is required to be called on at least 14 days’ written notice. The period of notice in each case is exclusive of the day on which the notice is served or deemed to be served and of the day of the meeting itself.
General Meetings may be held on shorter notice than that specified above if such shorter notice is approved by (i) in the case of an Annual General Meeting, all the shareholders entitled to attend and vote at that meeting; and (ii) in the case of an Extraordinary General Meeting by a majority in number of the shareholders entitled to attend and vote at the meeting, such majority holding at least 95% in nominal value of the shares giving the right to attend and vote at that meeting.
The accidental omission to give notice to or the non-receipt of a notice by any shareholder will not invalidate the proceedings at the relevant meeting.
Our articles provide that where a notice or other document is served or sent by post, service or delivery is deemed to be effected on the expiry of 24 hours after the relevant document is posted.
Dividends
The payment of final dividends with respect to any financial year must be recommended by our Board of Directors and approved by the shareholders by ordinary resolution, provided that no such dividend shall exceed the amount recommended by our Board of Directors. If, in the opinion of our Board of Directors, our financial position justifies such payments, the Board of Directors may also from time to time pay interim dividends of amounts, on dates and in respect of periods as they think fit.
No dividend can be paid other than out of profits available for distribution under the provisions of the Companies Act 1985, as amended, and accounting principles generally accepted in the United Kingdom, which differ in some respects from U.S. GAAP. In addition, as a public limited company, we may make a distribution only if and to the extent that, at the time of distribution and following the distribution, the amount of our net assets is not less than the aggregate of the called-up share capital and undistributable reserves (as such terms are defined in the Companies Act 1985) and if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate. No dividend or other moneys payable on or in respect of a share shall bear interest as against us unless otherwise provided by the rights attached to the share. Any dividend unclaimed after a period of 12 years from the date on which it was declared or became due for payment will be forfeited and will revert to us. Our Memorandum and Articles of Association do not contain restrictions on the right of non-UK resident holders of our ordinary shares to receive dividends and other payments.
Winding up
If our company is wound up, the liquidator may, pursuant to the authority given by an extraordinary resolution of our company and any other sanction required by English statutory law, divide among the members, in specie or in kind, the whole or any part of our assets and, for that purpose, value any assets as he deems fair and determine how the division is carried out among shareholders or different classes of shareholders. No shareholder will be compelled to accept any shares or other property in respect of which there is a liability. Distributions to shareholders on a winding up are only usually made after the settlement of claims of the various classes of creditor and subject to applicable company and insolvency laws. Early distributions can be made subject to shareholders providing appropriate forms of indemnity. Where a distribution is proposed to be made to a particular class of shareholders on a winding up, such a distribution is usually made pro rata to their holdings of shares in the company.
Shareholder Derivative Suits
Under English law, our shareholders generally have no right to sue on our behalf. When a wrong has been done to or against us, we are usually the proper plaintiff. There are exceptions including in the case of fraud on minority

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shareholders, the case of a breach of a duty owed personally to a shareholder where that shareholder has suffered personal loss separate and distinct from any loss suffered by the company and when the act complained of is illegal or ultra vires. English law permits an individual shareholder of ours to apply for a court order when our affairs are being or have been conducted in a manner unfairly prejudicial to the interests of one or more of our shareholders or when any actual or proposed act or omission by us is or would be prejudicial. When granting relief, a court has wide discretion and may authorize civil proceedings to be brought on our behalf by a shareholder on such terms as the court may direct.
Issues of shares and pre-emption rights
The directors of English companies may only allot shares and disapply statutory pre-emption rights if authorized by the shareholders. The current authority for this purpose expires on December 10, 2009 but we may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and our Board of Directors may allot equity securities pursuant to any such offer or agreement as if the authority had not expired.
Transfer of shares
Any holder of shares in a certified form may transfer in writing all, or any, of its shares in any usual or common form or in any other form which our Board of Directors may approve. The instrument of transfer of a share must be signed by or on behalf of the transferor and, except in the case of fully paid shares, by or on behalf of the transferee. The transferor will remain the holder of the shares concerned until the name of the transferee is entered in our register of shareholders. The transfer of uncertificated shares may be made in accordance with and be subject to the Uncertificated Securities Regulations 1995.
Our Board of Directors may, in their absolute discretion and without assigning any reason, refuse to register any transfer of shares, not being fully paid shares. Our Board of Directors may also refuse to register an allotment or transfer shares, whether fully paid or not, to more than four persons jointly. Moreover, the registration of transfers may be suspended at such times and for such periods, but not exceeding thirty days in any year, as our Board of Directors may from time to time determine.
Our Board of Directors may decline to recognize any instrument of transfer unless it is in respect of only one class of shares and is lodged, duly stamped if required, at the Registrar’s Office accompanied by the relevant share certificate(s) together with such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer. In the case of a transfer by a recognized clearing house or a nominee of a recognized clearing house or of a recognized investment exchange, the lodgment of share certificates is only necessary if and to the extent that certificates have been issued in respect of the shares in question.
Disclosure of transactions of ownership
The Companies Act 1985 provides that a person, including a company and other legal entities, that acquires any interest of 3% or more of any class of our “relevant share capital,” which includes ADSs and GDSs representing shares, is required to notify us in writing of its interest within two days following the day on which the obligation arises. Relevant share capital, for these purposes, means our issued share capital carrying the right to vote in all circumstances at a general meeting. After the 3% level is exceeded, similar notifications must be made where the interest falls below the 3% level or otherwise in respect of increases or decreases of a whole percentage point.
For purposes of the notification obligation, the interest of a person in shares means any kind of interest in shares including interests in any shares:
  in which a spouse, or child or stepchild under the age of 18, is interested;
 
  in which a company is interested, which includes interests held by other companies over which that company has effective voting power, and either (a) that company or its directors generally act in accordance with that person’s directions or instructions or (b) that person controls one-third or more of the voting power of that company at general meetings; or

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  in which another party is “interested” and the person and that other party are parties to an agreement under section 204 of the Companies Act 1985. Such an agreement is one which provides for two or more parties to acquire interests in             shares of a particular public company and imposes obligations or restrictions on any of the parties as to the use, retention or disposal of such interests acquired pursuant to such agreement, if any interest in the company’s shares is in fact acquired by any of the parties pursuant to the agreement.
Some non-“material” interests may be disregarded for the purposes of calculating the 3% threshold, but the obligation of disclosure will still apply where such interests exceed 10% or more of any class of our relevant share capital and to increases or decreases through a whole percentage point.
In addition, pursuant to section 212 of the Companies Act 1985, we may, as a public company and by written notice, require a person whom we know or have reasonable cause to believe to be, or to have been at any time during the three years immediately preceding the date on which the notice is issued, interested in shares comprised in our “relevant share capital” to confirm that fact or to indicate whether or not that is the case.
Where a person holds or during the previous three years had held an interest in the shares, that person must give any further information that may be required relating to this interest and any other interest in the shares of which this person is aware.
Where we serve a notice under the foregoing provisions on a person who is or was interested in the shares and that person fails to give us any information required by the notice within the time specified in the notice, we may apply to the English courts for an order directing that the shares in question be subject to restrictions prohibiting, among other things, any transfer, the exercise of voting rights, the taking up of rights and, other than during a liquidation, payments in respect of those shares.
A person who fails to fulfill the obligations imposed by sections 198 and 212 of the Companies Act 1985 may be subject to criminal penalties.
Variation of rights and alteration of share capital
Whenever our share capital is divided into different classes of shares, the special rights attached to any class may, subject to the provisions of English statutory law, be varied or abrogated, either with the consent in writing of the holders of three-quarters in nominal value of the issued shares of the class, or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of the shares of the class, but not otherwise, and may be so varied or abrogated either while our company is a going concern or during or in contemplation of a winding up. At every such separate general meeting, the necessary quorum is at least two persons holding or representing by proxy issued shares of the class and any holder of shares of the class present in person or by proxy may demand a poll and will have one vote for every share of the class held by him. At any adjourned meeting any holder of shares of the class present in person or by proxy is a quorum.
We may from time to time by ordinary resolution at a general meeting:
  increase the share capital by the creation of new shares of such amount as the resolution shall prescribe with such preferred, deferred or other special rights, or subject to such restrictions, whether as regards dividend, return of capital, voting or otherwise as may be determined and which may be redeemable;
 
  consolidate and divide all or any of the share capital into shares of larger amount than our existing shares;
 
  cancel shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken, by any person and diminish the amount of its share capital by the amount of shares so cancelled; and

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  subdivide all or any of the shares into shares of a smaller amount than is fixed by the Memorandum and Articles and may by resolution determine that as between the holders of the shares resulting from such subdivision one or more of the shares may, as compared with the others, have any such preferred, deferred or other special rights or be subject to any restrictions, as we have the power to attach to unissued or new shares.
Subject to English statutory law, we may purchase our own shares of any class, including redeemable shares, but so that if there shall be in issue any shares convertible into equity share capital of our own company then no purchase of our own shares shall be made unless it has first been approved by an extraordinary resolution passed at a separate meeting of the holders of such convertible shares.
Subject to the provisions of English statutory law, we may, by special resolution, reduce our share capital, capital redemption reserve, share premium account or other undistributable reserve in any way.
Directors
Unless otherwise determined by ordinary resolution of the holders of ordinary shares, our Articles provide that there shall not be less than three directors. At each annual general meeting one-third (or the number nearest to but not exceeding one-third) of our Board of Directors shall retire from office by rotation. Our directors who retire by rotation include any director who wishes to retire and not to offer himself for re-election. Any further directors who retire by rotation are those who have been longest in office since their last re-election, but, as between persons who become directors on the same day, those to retire (unless they otherwise agree among themselves) are determined by lot. A retiring director is eligible for re-election. Any director may be removed from office at any time by an ordinary resolution of which special notice has been given in accordance with the Act. Our Memorandum and Articles do not provide for a maximum age for directors.
Our Articles provide that a director may be party to or be interested in any contract or transaction to which we are a party, and a director, or any firm of which he is a member, may be remunerated for any services provided to us or any office held (other than the office of Auditor) relating to us. In any such case, the director may retain all profits and advantages accruing to him. Our Articles also provide that (subject to certain exceptions), a director who is in any way interested in a contract or proposed contract with our company shall declare his interest to the Board, and, subject to certain exceptions, will not be entitled to vote at Board meetings in respect of any contract, arrangement or proposal in which that Director has a “material interest”, nor will that Director be counted towards the quorum in relation to any resolution on which he is prohibited from voting.
Our Articles provide that our Board of Directors may exercise all of our powers to borrow money and to mortgage or charge our undertaking, property, and uncalled capital and, subject to applicable English law, to issue debentures and other securities. The Board is required to restrict our borrowings, in the absence of shareholders’ approval, in accordance with a formula set out in the Articles.
The ordinary remuneration of our directors for holding office as such shall from time to time be determined by our Board of Directors. However, such remuneration may not exceed £200,000 per annum in aggregate or such higher amount as the shareholders may, by ordinary resolution, determine and will be divisible among our Board of Directors as they agree. Our Board of Directors may also grant additional remuneration to any director who holds any executive office or who serves on any committee of our Board of Directors and, have the power to pay and agree to pay gratuities, pensions or other retirement, death or disability benefits to any Director or ex-Director. Our Board of Directors are also entitled to be repaid all reasonable expenses incurred by them respectively in the performance of their duties.
Description of Depositary Shares
Depositary Receipts or Global Depositary Receipts (GDRs)
Depositary Receipts evidencing GDSs are issuable by the Depositary pursuant to the Global Deposit Agreement. Each GDS represents one Ordinary Share or evidence of the right to receive one Ordinary Share (together with any additional ordinary shares at any time deposited or deemed deposited under the Global Deposit Agreement and any and all other securities, cash and property received by the Depositary or the Custodian in respect thereof and at such

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time held under the Global Deposit Agreement) (the “Shares”). Only persons in whose names GDRs are registered on the books of the Depositary will be treated by the Depositary and us as owners.
So long as the Book-Entry GDSs are eligible for book-entry settlement with Depository Trust Company (DTC), unless otherwise required by law, such Book-Entry GDSs representing the Shares deposited with any custodian shall be represented by a Master GDR registered in the name of a nominee of DTC and no person acquiring such Book-Entry GDSs shall receive or be entitled to receive physical delivery of certificated GDRs evidencing GDSs. Accordingly, each beneficial owner must rely upon the procedures of DTC and institutions having accounts with DTC to exercise or be entitled to any rights of an owner of a GDR. Each person owning a beneficial interest in the Master GDR must rely upon the procedures of the institutions having accounts with DTC to exercise or be entitled to any rights of a Regulation S owner. Transfers within DTC and Clearstream Banking are made in accordance with the usual rules and operating procedures of the relevant system. Cross-market transfers are effected in DTC through the operating procedures of the relevant system. Cross-market transfers are effected in DTC through the depositary of Clearstream Banking AG. Because of time zone differences, credits of securities received in Clearstream Banking AG as a result of a transaction with a DTC participant are made during the subsequent securities settlement processing date on the business day following the DTC settlement date and such credits or any transactions in such securities settled during such processing are reported to the Clearstream Banking AG participant on such business day. Cash received in Clearstream Banking AG as a result of sales of securities by or through a Clearstream Banking AG participant to a DTC participant are received with value on the DTC settlement date, but are available in the Clearstream Banking AG cash account only as of the business day following settlement in DTC. Where the context requires, the term “GDR” includes the Master GDR.
During any period in which Book-Entry GDSs are represented by the Master GDR, ownership of beneficial interests in the Master GDR are shown on, and the transfer of such ownership is effected only through, records maintained by (i) DTC or its nominee (with respect to participants’ interests) or (ii) institutions having accounts with DTC. All references in the Global Deposit Agreement to issuance or delivery of GDRs is deemed to include, where applicable, adjustments in the records of the Depositary showing the number of Book-Entry GDSs evidenced by the Master GDR.
Deposit, transfer and withdrawal
The Depositary agrees, subject to the terms and conditions of the Global Deposit Agreement, that upon delivery to the Custodian of Shares (or evidence of rights to receive Shares) and pursuant to appropriate instruments of transfer in a form satisfactory to the Custodian, that the Depositary will, upon payment of the fees, charges and taxes provided in the Global Deposit Agreement, execute and deliver at its Corporate Trust Office to, or upon the written order of, the person or persons named in the notice of the Custodian delivered to the Depositary or requested by the person depositing such Shares with the Depositary, and, if the Depositary requires a written order (1) directing the Depositary to adjust its records so as to increase, by the number of GDSs representing such deposited Shares, the number of GDSs evidenced by the Master GDR, and specifying the person or persons to whose DTC participant account such increase in the number of GDSs should be credited or (2) in the case of deposits made at any time that DTC’s book-entry settlement system is not available for the Book-Entry GDSs, directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order a Receipt or Receipts in physical certificated form, for the number of GDSs representing such deposited Shares.
Any deposit of Shares for GDRs must be accompanied by (a) a written certification and agreement (a “Depositor’s Certificate”) by or on behalf of the person who will be the beneficial owner of the GDS or GDSs to be issued upon deposit of such Shares that (i) the GDRs, the GDSs evidenced thereby, and the Shares represented thereby have not been registered under the Securities Act of 1933, (ii) that it is either (a) not a U.S. person (within the meaning of Regulation 5) and is located outside the United States (within the meaning of Regulation 5) and acquired, or has agreed to acquire and will acquire, the Shares to be deposited outside the United States, or (b) is an “accredited investor” as defined in Regulation D under the Securities Act of 1933, (iii) it is not an Affiliate of ours or a person acting on behalf of such an Affiliate and (iv) it is not in the business of buying and selling securities or, if it is in such business, it did not acquire the Shares to be deposited from us or any affiliate thereof in the Offering and (b) an agreement that, during the Restricted Period, it will comply with the restrictions on transfer on transfers of the GDRs, the GDSs evidenced thereby and the Shares represented thereby.

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The Depositary will refuse to accept Shares for deposit whenever it is notified in writing that such deposit would result in any violation of applicable laws.
Upon surrender at the Corporate Trust Office of the Depositary of a GDR for the purpose of withdrawal of the Deposited Securities represented by the GDSs evidenced by such GDR, and upon payment of the fees of the Depositary for the surrender of Receipts, governmental charges and taxes provided in the Global Deposit Agreement, and subject to the terms and conditions of the Global Deposit Agreement, the owner of such GDR will be entitled to delivery, to him or upon his order, of the amount of Deposited Securities at the time represented by the GDS or DDSs evidenced by such GDR. The forwarding of share certificates, other securities, property, cash and other documents of title for such delivery will be at the risk and expense of the owner.
Subject to the terms and conditions of the Global Deposit Agreement and any limitations established by the Depositary, the Depositary may execute and deliver GDRs prior to the receipt of Shares (a “Pre-Release”) and deliver Shares upon the receipt and cancellation of GDRs which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such GDR has been Pre-Released. The Depositary may receive GDRs in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release must be (a) preceded or accompanied by a written representation from the person to whom the GDRs or Shares are to be delivered that such person, or its customer, owns the Shares or GDRs to be remitted, as the case may be, (b) at all times fully collateralized with cash or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five business days’ notice and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of Global Depositary Shares which are outstanding at any time as a result of Pre-Releases will not normally exceed 30% of the Shares deposited pursuant to the Global Deposit Agreement; provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate.
The Depositary may retain for its own account any compensation received by it in connection with the foregoing.
Dividends, other distributions and rights
Whenever the Depositary shall receive any currency other than US Dollars, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, the Depositary will convert or cause to be converted into Dollars, to the extent that in its judgment it can do so on a reasonable basis and can transfer the resulting Dollars to the United States, all cash dividends and other cash distributions, if any, denominated in a currency other than Dollars (“Foreign Currency”), that it receives in respect of the deposited Shares, and to distribute the resulting Dollar amount (net of the expenses incurred by the Depositary in converting such Foreign Currency) to the owners entitled thereto, in proportion to the number of GDSs representing such Deposited Securities evidenced by GDRs held by them, respectively. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among owners on account of exchange restrictions or the date of delivery of any GDRR or GDRs or otherwise. The amount distributed to the owners of GDRs will be reduced by any amount on account of taxes to be withheld by us or the Depositary. See “Liability of owner for taxes,” below.
If the Depositary determines that in its judgment any Foreign Currency received by the Depositary cannot be converted on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) received by the Depositary to, or in its discretion may hold such Foreign Currency uninvested and without liability for interest thereon for the respective accounts of, the owners entitled to receive the same. If any such conversion of Foreign Currency, in whole or in part, cannot be effected for distribution to some of the owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in US Dollars to the extent permissible to the owners entitled thereto, and may distribute the balance of the Foreign Currency received by the Depositary to, or hold such balance uninvested and without liability for interest thereon for, the respective accounts of, the owners entitled thereto.
If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Depositary may (i) if Book-Entry GDSs are available, reflect on the records of the Depositary such increase in the

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aggregate number of GDSs representing Shares evidenced by the Master GDR and give notice to DTC of the related increase in the number of GDSs evidenced by the Master GDR or (ii) if Book-Entry GDSs are not available, distribute to the owners of outstanding Receipts entitled thereto, in proportion to the number of Depositary Shares representing such Deposited Securities evidenced by Receipts held by them respectively, additional GDRs evidencing an aggregate number of GDSs that represents the amount of Shares received as such dividend or free distribution, subject to the terms and conditions of the Global Deposit Agreement with respect to the deposit of Shares and the issuance of GDSs evidenced by GDRs, including the withholding of any tax or other governmental charge and the payment of fees of the Depositary as provided in the Global Deposit Agreement. The Depositary may withhold any such distribution of GDRs if it has not received satisfactory assurances from us that such distribution does not require registration under the Securities Act of 1933 or is exempt from registration under the provisions of such Act. In lieu of delivering GDRs for fractional GDSs in the event of any such dividend or free distribution, the Depositary will sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds in accordance with the Global Deposit Agreement. If additional GDRs are not so distributed, each GDS will thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby. Each beneficial owner of GDRs or Shares so distributed shall be deemed to have acknowledged that the Shares have not been registered under the Securities Act of 1933 and to have agreed to comply with the restrictions under the Securities Act of 1933 and to have agreed to comply with the restrictions on transfer.
If we offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary will have discretion as to the procedure to be followed in making such rights available to any owners of GDRs or in disposing of such rights on behalf of any owners and making the net proceeds available to such owners or, if by the terms of such rights offering or for any other reason, the Depositary may not either make such rights available to any owners or dispose of such rights and make the net proceeds available to such owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines in its discretion that it is lawful and feasible to make such rights available to all owners or to all or certain owners but not to other owners, the Depositary may distribute to any owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of GDSs held by such owner, warrants or other instruments therefore in such form as it deems appropriate. If the Depositary determines in its discretion that it is not lawful and feasible to make such rights available to all or certain owners, it may sell the rights, warrants or other instruments in proportion to the number of GDSs held by the owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees and expenses of the Depositary and all taxes and governmental charges payable in connection with such right and subject to the terms and conditions of the Global Deposit Agreement) for the account of such owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such owners because of exchange restrictions or the date of delivery of any GDR or GDRs, or otherwise.
In circumstances in which rights would not otherwise be distributed, if an owner of GDRs requests the distribution of warrants or other instruments in order to exercise the rights allocable to the GDSs of such owner, the Depositary will make such rights available to such owner upon written notice from us to the Depositary that (a) we have elected in our sole discretion to permit such rights to be exercised and (b) such owner has executed such documents as we have determined in our sole discretion are reasonably required under applicable law. Upon instruction pursuant to such warrants or other instruments to the Depositary from such owner to exercise such rights, upon payment by such owner to the Depositary for the account of such owner of an amount equal to the purchase price of the Shares to be received in exercise of the rights, and upon payment of the fees of the Depositary as set forth in such warrants or other instruments, the Depositary will, on behalf of such owner, exercise the rights and purchase the Shares, and we shall cause the Shares so purchased to be delivered to the Depositary on behalf of such owner. As agent for such owner, the Depositary will cause the Shares so purchased to be deposited, and will execute and deliver Receipts to such owner, pursuant to the Global Deposit Agreement.
The Depositary will not offer rights to owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act of 1933 with respect to a distribution to all owners or are registered under the provisions of such Act; provided, that nothing in the Global Deposit Agreement will create, or be construed to create, any obligation on the part of us to file a registration statement with respect to such rights or underlying securities or to endeavor to have such a registration statement declared effective. If an owner of GDRs requests the distribution of warrants or other instruments, notwithstanding that there has been no such registration

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under such Act, the Depositary will not effect such distribution unless it has received an opinion from recognized counsel in the United States for us upon which the Depositary may rely that such distribution to such owner is exempt from such registration. The Depositary will not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to owners in general or any owner in particular.
Whenever the Depositary receives any distribution other than cash, Shares or rights in respect of the Deposited Securities, the Depositary will cause the securities or property received by it to be distributed to the owners entitled thereto, after deduction or upon payment of any fees and expenses of the Depositary or any taxes or other governmental charges, in proportion to their holdings, respectively, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the opinion of the Depositary such distribution cannot be made proportionately among the owners entitled thereto, or if for any other reason (including, but not limited to) any requirement that we or the Depositary withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act of 1933 in order to be distributed to owners or beneficial owners the Depositary deems such distribution not to be feasible, the Depositary may adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received or any part thereof and the net proceeds of any such sale (net of the fees and expenses of the Depositary) will be distributed by the Depositary to the owners entitled thereto as in the case of a distribution received in cash. Each beneficial owner of securities so distributed shall be deemed to have acknowledged that the securities have not been registered under the Securities Act and to have agreed to comply with the restrictions on transfer.
If the Depositary determines that any distribution of property (including Shares and rights to subscribe therefore) is subject to any taxes or other governmental charges which the Depositary is obligated to withhold, the Depositary may, by public or private sale, dispose of all or a portion of such property in such amount and in such manner as the Depositary deems necessary and practicable to pay such taxes or charges and the Depositary will distribute the net proceeds of any such sale after deduction of such taxes or charges to the owners entitled thereto in proportion to the number of GDSs held by them, respectively.
Upon any change in nominal or par value, split-up, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting us or to which we are a party, any securities which shall be received by the Depositary or Custodian in exchange for, in conversion of, or in respect of Deposited Securities will be treated as new Deposited Securities under the Global Deposit Agreement, and the GDSs will thenceforth represent, in addition to the existing Deposited Securities, the right to receive the new Deposited Securities so received in exchange or conversion, unless additional GDRs are delivered pursuant to the following sentence. In any such case the Depositary may (a) if Book-Entry GDSs are available, make appropriate entry in its records, or (b) if Book-Entry GDSs are not available, either (i) execute and deliver additional GDRs as in the case of a dividend in Shares, or (ii) call for the surrender of outstanding GDRs to be exchanged for new GDRs specifically describing such new Deposited Securities.
Record dates
Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each GDS, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, or whenever the Depositary shall find it necessary or convenient the Depositary will fix a record date, which shall be the same date, if any, applicable to the Deposited Securities, or as close thereto as practicable (a) for the determination of the owners who will be (i) entitled to receive such dividend, distribution or rights, or the net proceeds of the sale thereof, or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, or (b) on or after which each GDS will represent the changed number of Shares, all subject to the provisions of the Global Deposit Agreement.
Voting of deposited securities
Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, if requested in writing by us, the Depositary will, as soon as practicable thereafter, mail to all owners a notice, the form of which notice will be in the sole discretion of the Depositary, containing (a) such information included in such notice of meeting received

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by the Depositary from us, and (b) a statement that the owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of English law and of our Memorandum and Articles, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective GDSs and (c) a statement as to the manner in which such instructions may be given. Upon the written request of an owner on such record date, received on or before the date established by the Depositary for such purpose, the Depositary will endeavor, insofar as practicable, to vote or cause to be voted the amount of Shares or other Deposited Securities represented by the GDSs evidenced by such GDRs in accordance with the instructions set forth in such request. The Depositary will not vote or attempt to exercise the right to vote that attaches to the Shares or other Deposited Securities, other than in accordance with such instructions.
Amendment and termination of the Global Deposit Agreement
The form of GDRs and any provisions of the Global Deposit Agreement may at any time and from time to time be amended by agreement between us and the Depositary in any respect which they may deem necessary or desirable without the consent of the owners of GDRs; provided, however, that any amendment that imposes or increases any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or which otherwise prejudices any substantial existing right of owners, will not take effect as to outstanding GDRs until the expiration of 30 days after notice of any amendment has been given to the owners of outstanding GDRs. Every owner of a GDR, at the time any amendment so becomes effective, will be deemed, by continuing to hold such GDR, to consent and agree to such amendment and to be bound by the Global Deposit Agreement as amended thereby. In no event will any amendment impair the right of the owner of any GDR to surrender such GDR and receive therefore the Deposited Securities represented thereby, except to comply with mandatory provisions of applicable law.
The Depositary will at any time at our direction terminate the Global Deposit Agreement by mailing notice of such termination to the owners of the GDRs then outstanding at least 90 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate the Global Deposit Agreement by mailing notice of such termination to us and the owners of all GDRs then outstanding if, any time after 90 days have expired after the Depositary will have delivered to us a written notice of its election to resign and a successor depositary will not have been appointed and accepted its appointment, in accordance with the terms of the Global Deposit Agreement. On and after the date of termination, the owner of a Receipt will, upon (a)(i) receipt by the Depositary at its Corporate Trust Office of written instructions from DTC or DTC’s nominee on behalf of any beneficial owner, if the book-entry settlement system of DTC is then available for the Book-Entry GDSs, or (ii) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts, and (c) payment of any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by the Depositary Shares evidenced by such Receipt. If any GDRs remain outstanding after the date of termination of the Global Deposit Agreement, the Depositary thereafter will discontinue the registration of transfers of GDRs, will suspend the distribution of dividends and other distributions to the owners thereof and will not give any further notices or perform any further acts under the Global Deposit Agreement, except the collection of dividends and other distributions pertaining to the Deposited Securities, the sale of rights and other property provided in this Global Deposit Agreement and the delivery of Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for surrendered GDRs (after deducting, in each case, the fees of the Depositary for the surrender of GDR and other expenses set forth in the Global Deposit Agreement and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held thereunder and may thereafter hold uninvested the net proceeds of such sale, together with any other cash then held by it, unsegregated and without liability for interest, for the pro rata benefit of the owners that have not theretofore surrendered their Receipts, such owners thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary will be discharged from all obligations under the Global Deposit Agreement, except to account for net proceeds and other cash (after deducting, in each case, the fee of the Depositary and other expenses set forth in the Global Deposit Agreement for the surrender of a GDR. and any applicable taxes or other governmental charges).

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Charges of Depositary
The Depositary will charge any party depositing or withdrawing Shares or any party surrendering GDRs or to whom GDRs are issued (including, without limitation) issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the GDRs or Deposited Securities or a distribution of GDRs pursuant to the Global Deposit Agreement) whichever applicable: (1) taxes and other governmental charges; (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on our share register or Foreign Registrar (or any other appointed agent of ours for transfer and registration of the Shares and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals; (3) such cable, telex or facsimile transmission expenses as are expressly provided for in the Global Deposit Agreement to be at the expense of persons depositing Shares or owners; (4) such expenses as are incurred by the Depositary in the conversion of Foreign Currency pursuant to the Global Deposit Agreement; (5) a fee of $5.00 or less per 100 GDSs (or portion thereof) for the execution, delivery and surrender of GDRs pursuant to the Global Deposit Agreement; (6) a fee of $02 or less per GDS (or portion thereof) for any cash distribution made pursuant to the Global Deposit Agreement; (7) a fee of $1.50 or less per certificate for a GDR or GDRs for transfers made pursuant to the Global Deposit Agreement and; (8) a fee for the distribution of securities pursuant to the Global Deposit Agreement, such fee being in an amount equal to the fee for the execution and delivery of GDSs referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause (8) treating all such securities as if they were Shares), but which securities are instead distributed by the Depositary to owners and the net proceeds distributed.
The Depositary, pursuant to the Global Deposit Agreement, may own and deal in any class of our securities and our affiliates and in GDRs.
Liability of owner for taxes
If any tax or other governmental charge shall become payable by the Custodian or the Depositary with respect to any GDR or any Deposited Securities represented by any GDRs, such tax or other governmental charge will be payable by the owner of such GDR to the Depositary. The Depositary may refuse to effect registration of transfer of such GDR (or any split-up or combination thereof), or any withdrawal of Deposited Securities underlying such GDR until such payment is made, and may withhold any dividends or other distributions, in respect of any Deposited Securities or may sell for the account of the owner or beneficial owner thereof any part or all of the Deposited Securities underlying such GDR and may apply such dividends, distributions or the proceeds of any such sale to pay any such tax or other governmental charge and the owner of such GDR will remain liable for any deficiency.
General
Neither the Depositary nor our company nor any of our respective directors, employees, agents or affiliates will be liable to any owner or beneficial owner of any GDR, if by reason of any provision of any present or future law or regulation of the United States, or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of our Memorandum and Articles or by reason of any provision of any securities issued or distributed by us, or any offering or distribution thereof, or by reason of any act of God or war or other circumstances beyond our control, the Depositary or our company or any of our directors, employees, agents or affiliates shall be prevented, delayed or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of the Global Deposit Agreement or Deposited Securities it is provided will be done or performed; nor will the Depositary or our company incur any liability to any owner or beneficial owner of any GDR by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Global Deposit Agreement it is provided will or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for under the Global Deposit Agreement. Where, by the terms of a distribution pursuant to the Global Deposit Agreement, or an offering or distribution pursuant to the Global Deposit Agreement, or for any other reason, such distribution or offering may not be made available to owners, and the Depositary may not dispose of such distribution or offering on behalf of such owners and make the net proceeds available to such owners, then the Depositary will not make such distribution or offering, and will allow the rights, if applicable, to lapse.
We and the Depositary assume no obligation nor will we or the Depositary be subject to any liability under the Global Deposit Agreement to owners or beneficial owners of GDRs, except that we and the Depositary agree to

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perform their respective obligations specifically set forth under the Global Deposit Agreement without negligence or bad faith.
The GDRs are transferable on the books of the Depositary, provided that the Depositary may close the transfer books at any time or from time to time when deemed expedient by it in connection with the performance of its duties. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any GDR or withdrawal of any Deposited Securities or the adjustment of the Depositary’s records to reflect the deposit of Shares or any such transfer, split-up, combination, surrender or withdrawal, the Depositary, the Custodian or the Registrar may require payment from the person presenting the GDR or the depositor of the Shares of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees. The Depositary may refuse to deliver GDRs, to register the transfer of any GDR or to make any distribution on, or related to, Shares until it has received such proof of citizenship or residence, exchange control approval or other information as it may deem necessary or proper. The delivery, transfer, registration of transfer of outstanding GDRs and surrender of GDRs generally may be suspended or refused during any period when the transfer books of the Depositary, our company or the Foreign Registrar are closed or if any such action is deemed necessary or advisable by the Depositary or us, at any time or from time to time.
The Depositary will keep books, at its Corporate Trust Office, for the registration and transfer of GDRs, which at all reasonable times will be open for inspection by the owners, provided that such inspection will not be for the purpose of communicating with owners in the interest of a business or object other than our business or a matter related to the Global Deposit Agreement or the GDRs.
The Depositary may appoint one or more co-transfer agents for the purpose of effecting transfers, combinations and split-ups of GDRs at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by owners or persons entitled to GDRs and will be entitled to protection and indemnity to the same extent as the Depositary.
Warrants
As of October 19, 2005, warrants to purchase a total of 430,000 ordinary shares were outstanding with exercise prices of $2.49 per share. Each warrant contains provisions for the adjustment of the exercise price and the number of shares issuable upon the exercise of the warrant in the event of certain types of reorganizations and significant corporate transactions. Warrant holders have certain registration rights once the only trading market for our securities is located within the United States. These registration rights expire when the shares can be sold pursuant to Rule 144 of the Securities Act of 1933.
Registrar
The registrar for our ordinary shares is Capita IRG, plc.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of December 31, 2004 regarding compensation plans, including individual compensation arrangements, under which equity securities of Spark Networks plc are authorized for issuance.

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                    Number of securities
                    remaining available for future
    Number of Securities to be   Weighted- average   issuance under equity
    issued upon exercise of   exercise price of   compensation plans
    outstanding options,   outstanding options,   (excluding securities reflected
Plan Category   warrants and rights   warrants and rights   in column (a)
    (a)   (b)   (c)
Equity compensation plans approved by security holders
    8,996,759 (1)   $ 3.81       15,503,000 (2)
 
                       
Equity compensation plans not approved by security holders
                 
 
                       
 
                       
Total
    8,996,759               15,503,000  
 
                       
 
(1)   Represents share options outstanding under the 2004 Share Option Scheme and the 2000 Executive Share Option Scheme.
 
(2)   Represents share options outstanding under the 2004 Share Option Scheme. The 2000 Executive Share Option Scheme has been terminated and no future issuances of options are available; however, all outstanding options granted under the plan continue in full force and effect.
Item 12. Indemnification of Directors and Officers
The information required by this item is contained under the section “Information Not Required in Prospectus—Item 14. Indemnification of Directors and Officers” of the Registration Statement. That section is incorporated herein by reference.
Item 13. Financial Statements and Supplementary Data
The information required by this item is contained under the section “Consolidated Financial Statements” and “Notes to Consolidated Financial Statements” of the Registration Statement. That section is incorporated herein by reference.
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The information required by this item is contained under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Change in Accountants” of the Registration Statement. That section is incorporated herein by reference.
Item 15. Financial Statements and Exhibits
(a) Financial Statement
See Item 13 above.
(b) Exhibits
Except for Exhibits 99.1, 4.1 and 4.2, which are included herein, the following exhibits are incorporated herein by reference from the Registration Statement or, where noted, will be filed by amendment:
     
Exhibit    
Number   Description of Exhibit
3.1**
  Memorandum of Association of Registrant dated September 3, 1998
 
   
3.2**
  Amendment to Memorandum of Association dated January 10, 2005 (Name Change)
 
   
3.3**
  Articles of Association of Registrant, as amended April 11, 2000, December 10, 2004 and September 2, 2005
 
   
4.1
  Deposit Agreement for Global Depositary Shares
 
   
4.2
  Form of GDR (included in Exhibit 4.1 herein)

16


Table of Contents

     
Exhibit    
Number   Description of Exhibit
4.3
  Specimen ordinary share certificate
 
   
10.1**
  Lease dated September 1, 2000 between Arden Realty Limited Partnership and the Registrant regarding 8383 Wilshire Boulevard (incorporated by reference to exhibit 10.1 of MatchNet, Inc.’s registration statement on Form S-1 (file no. 333-117940) filed with the Securities and Exchange Commission on August 4, 2004)
 
   
10.1(a)**
  First Amendment to Lease, dated September 5, 2000 (incorporated by reference to exhibit 10.1(a) of MatchNet, Inc.’s registration statement on Form S-1 (file no. 333-117940) filed with the Securities and Exchange Commission on August 4, 2004)
 
   
10.1(b)**
  Second Amendment to Lease, dated January 16, 2003 (incorporated by reference to exhibit 10.1(b) of MatchNet, Inc.’s registration statement on Form S-1 (file no. 333-117940) filed with the Securities and Exchange Commission on August 4, 2004)
 
   
10.1(c)**
  Third Amendment to Lease, dated October 30, 2003 (incorporated by reference to exhibit 10.1(c) of MatchNet, Inc.’s registration statement on Form S-1 (file no. 333-117940) filed with the Securities and Exchange Commission on August 4, 2004)
 
   
10.1(d)**
  Fourth Amendment to Lease, dated May 14, 2004 (incorporated by reference to exhibit 10.1(d) of MatchNet, Inc.’s registration statement on Form S-1 (file no. 333-117940) filed with the Securities and Exchange Commission on August 4, 2004)
 
   
10.2**
  2004 Share Option Scheme
 
   
10.3**
  2000 Executive Share Option Scheme
 
   
10.4**
  Asset Purchase Agreement, dated November 27, 2003, between the Registrant and Point Match USA, Inc. (incorporated by reference to exhibit 10.4 of MatchNet, Inc.’s registration statement on Form S-1 (file no. 333-117940) filed with the Securities and Exchange Commission on August 4, 2004)
 
   
10.4(a)**
  First Amendment to Asset Purchase Agreement, January 7, 2004, between the Registrant and Point Match USA, Inc
 
   
10.5**
  Asset Purchase Agreement, dated November 27, 2003, between MatchNet (Israel) Ltd., a subsidiary of the Registrant, and Point Match Ltd. (incorporated by reference to exhibit 10.5 of MatchNet, Inc.’s registration statement on Form S-1 (file no. 333-117940) filed with the Securities and Exchange Commission on August 4, 2004)
 
   
10.5(a)**
  First Amendment to Asset Purchase Agreement, dated January 7, 2004, between MatchNet (Israel) Ltd., a subsidiary of the Registrant, and Point Match Ltd. (incorporated by reference to exhibit 10.5(a) of MatchNet, Inc.’s registration statement on Form S-1 (file no. 333-117940) filed with the Securities and Exchange Commission on August 4, 2004)
 
   
10.6**
  Executive Employment Agreement, dated August 12, 2004, between the Registrant and David Siminoff
 
   
10.7**
  Executive Employment Agreement, dated October 4, 2004, between the Registrant and Mark Thompson
 
   
10.8**
  Executive Employment Agreement, dated October 4, 2004, between the Registrant and Phillip Nelson
 
   
10.9**
  Executive Employment Agreement, dated March 1, 2005, between the Registrant and Joe Y. Shapira
 
   
10.10
  Form of Indemnification Agreement for Officers and Directors
 
   
10.10(a)
  List of Parties executing Form of Indemnification Agreement for Officers and Directors
 
   
10.11**
  Deal Documents and Purchase Agreement for investment in Yobon, Inc. dated October 19, 2004
 
   
10.12**
  Warrant Agreement, dated December 30, 2004, between the Registrant and Europlay Capital Advisors LLC
 
   
10.13**
  Executive Employment Agreement, dated August 31, 2005, between the Registrant and Gregory R. Liberman
 
   
10.14*
  Stock Purchase Agreement dated May 19, 2005 by and among the Registrant, MingleMatch, Inc., The Corporation of the President of the Church of Jesus Christ of Latter-day Saints, and shareholders of MingleMatch, Inc.
 
   
16.1**
  Letter re: Change in Certifying Accountant (incorporated by reference to exhibit 16.1 of MatchNet, Inc.’s registration statement on Form S-1 (file no. 333-117940) filed with the Securities and Exchange Commission on August 4, 2004)
 
   
21.1**
  List of subsidiaries
 
   
99.1
  Registration Statement on Form S-1
 
*   To be filed by amendment.
 
**   Previously filed.

17


Table of Contents

SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Beverly Hills, State of California, on November 7, 2005.
         
    Spark Networks plc
 
       
 
  By:     /s/ David E. Siminoff
 
       
 
      David E. Siminoff
 
      Chief Executive Officer and President

18

exv4w1
 

Exhibit 4.1
 
 
MATCHNET PLC
AND
THE BANK OF NEW YORK
As Depositary
AND
OWNERS AND BENEFICIAL OWNERS OF
GLOBAL DEPOSITARY RECEIPTS
Global Deposit Agreement
Dated as of April 28, 2000
 
 

 


 

         
ARTICLE 1.  DEFINITIONS
    1  
 
       
SECTION 1.01. Beneficial Owner
    1  
SECTION 1.02. Book-Entry GDSs
    1  
SECTION 1.03. Clearstream
    2  
SECTION 1.04. Commission
    2  
SECTION 1.05. Company
    2  
SECTION 1.06. Custodian
    2  
SECTION 1.07. Depositary; Corporate Trust Office
    2  
SECTION 1.08. Deposited Securities
    2  
SECTION 1.09. Dollars; Pounds; Pence; P
    2  
SECTION 1.10. DTC
    3  
SECTION 1.11. Foreign Currency
    3  
SECTION 1.12. Foreign Registrar
    3  
SECTION 1.13. Global Depositary Shares; GDSs; Global Depositary Receipts; GDRs
    3  
SECTION 1.14. Global Deposit Agreement
    3  
SECTION 1.15. Initial Deposit
    3  
SECTION 1.16. Master GDR
    3  
SECTION 1.17. Owner
    4  
SECTION 1.18. Physical GDSs
    4  
SECTION 1.19. Receipts
    4  
SECTION 1.20. Registrar
    4  
SECTION 1.21. Regulation S
    4  
SECTION 1.22. Rule 144
    4  
SECTION 1.23. Rule 903
    4  
SECTION 1.24. Rule 904
    5  
SECTION 1.25. Securities Act
    5  
SECTION 1.26. Securities Exchange Act
    5  
SECTION 1.27. Shares
    5  
SECTION 1.28. Stamp Taxes
    5  
SECTION 1.29. United States
    5  
 
       
ARTICLE 2.  BOOK-ENTRY SYSTEM FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY TRANSFER AND SURRENDER OF RECEIPTS
    6  
 
       
SECTION 2.01. Form and Transferability of Receipts
    6  
SECTION 2.02. Deposit of Shares
    9  
SECTION 2.03. Execution and Delivery of Receipts
    11  
SECTION 2.04. Transfer of Receipts; Combination and Split-up of Receipts
    12  
SECTION 2.05. Surrender of Receipts and Withdrawal of Shares
    13  
SECTION 2.06. Limitations on Execution and Delivery, Transfer and Surrender of Receipts and Withdrawal of Deposited Securities
    15  
SECTION 2.07. Lost Receipts
    15  
SECTION 2.08. Cancellation and Destruction of Surrendered Receipts
    16  
SECTION 2.09. Pre-Release
    16  
 
       
ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS
    17  
 
       
SECTION 3.01. Filing Proofs, Certificates and Other Information
    17  
SECTION 3.02. Liability of Owner for Taxes
    17  
SECTION 3.03. Warranties on Deposit or Withdrawal of Shares
    17  
 
       
ARTICLE 4. THE DEPOSITED SECURITIES
    18  
 
       
SECTION 4.01. Cash Distributions
    18  

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SECTION 4.02. Distributions Other than Cash, Shares or Rights
    19  
SECTION 4.03. Distributions in Shares
    19  
SECTION 4.04. Rights
    20  
SECTION 4.05. Conversion of Foreign Currency
    22  
SECTION 4.06. Fixing of Record date
    22  
SECTION 4.07. Voting of Deposited Securities
    23  
SECTION 4.08. Changes Affecting Deposited Securities
    24  
SECTION 4.09. Reports
    24  
SECTION 4.10. Lists of Owners
    24  
SECTION 4.11. Withholding
    25  
 
       
ARTICLE 5. THE DEPOSITARY THE CUSTODIANS AND THE COMPANY
    25  
 
       
SECTION 5.01. Maintenance of Office and Transfer Books by the Depositary
    25  
SECTION 5.02. Prevention or Delay in Performance by the Depositary or the Company
    26  
SECTION 5.03. Obligations of the Depositary, the Custodian and the Company
    26  
SECTION 5.04. Resignation and Removal of the Depositary; Appointment of Successor Depositary
    27  
SECTION 5.05. The Costodians
    28  
SECTION 5.06. Notices and Reports
    29  
SECTION 5.07. Issuance and Distribution of Additional Shares, Rights, etc.
    29  
SECTION 5.08. Indemnification
    30  
SECTION 5.09. Charges of Depositary
    30  
SECTION 5.10. Retention of Depositary Documents
    31  
SECTION 5.11. Exclusivity
    31  
SECTION 5.12. Available Information
    31  
 
       
ARTICLE 6. AMENDMENT AND TERMINATION
    32  
 
       
SECTION 6.01. Amendment
    32  
SECTION 6.02. Termination
    32  
 
       
ARTICLE 7. MISCELLANEOUS
    33  
 
       
SECTION 7.01. Counterparts
    33  
SECTION 7.02. No Third Party Beneficiaries
    33  
SECTION 7.03. Severability
    34  
SECTION 7.04. Owners and Beneficial Owners as Parties; Binding Effect
    34  
SECTION 7.05. Notices
    34  
SECTION 7.06. Governing Law
    35  
SECTION 7.07. Article Section
    35  

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GLOBAL DEPOSIT AGREEMENT
          GLOBAL DEPOSIT AGREEMENT dated as of April 28, 2000 among MATCHNET PL.C, incorporated under the laws of England and Wales (herein called the Company), THE BANK OF NEW YORK, a New York banking corporation (herein called the Depositary), and all Owners (as hereinafter defined) and Beneficial Owners (as hereinafter defined) from time to time of Global Depositary Receipts issued hereunder.
W I T N E S S E T H:
          WHEREAS, the Company desires to provide, as hereinafter set forth in this Global Deposit Agreement, for the deposit of Shares (as hereinafter defined) of the Company from time to time with the Depositary or with the Custodian (as hereinafter defined), as agent of the Depositary for the purposes set forth in this Global Deposit Agreement, for the creation of Global Depositary Shares representing the Shares so deposited and for the execution and delivery of Global Depositary Receipts evidencing the Global Depositary Shares; and
          WHEREAS, the Global Depositary Receipts are to be substantially in the form of Exhibit A annexed hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Global Deposit Agreement;
          NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties hereto as follows:
ARTICLE 1. DEFINITIONS.
          The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective terms used in this Global Deposit Agreement;
     SECTION 1.01. Beneficial Owner.
          The term “Beneficial Owner” shall mean each person owning from time to time any beneficial interest in the Master GDR issued hereunder but who is not the Owner of such Receipt.
     SECTION 1.02. Book-Entry GDSs.
          The term “Book-Entry GDSs” shall mean all GDSs other than Physical GDSs, which are evidenced by a Receipt in book-entry form in accordance with Section 2.01(b).

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     SECTION 1.03. Clearstream.
          The term “Clearstream” shall mean Clearstream Banking A.G.
     SECTION 1.04. Commission.
          The term “Commission” shall mean the Securities and Exchange Commission of the United States or any successor governmental agency in the United States.
     SECTION 1.05. Company.
          The term “Company” shall mean MatchNet PLC, incorporated under the laws of England and Wales, and its successors.
     SECTION 1.06. Custodian.
          The term “Custodian” shall mean the London office of The Bank of New York, as agent of the Depositary for the purposes of this Global Deposit Agreement, and any other firm or corporation which may hereafter be appointed by the Depositary pursuant to the terms of Section 5.05, as substitute or additional custodian or custodians hereunder, as the context shall require and shall also mean all of them collectively.
     SECTION 1.07. Depositary; Corporate Trust Office.
          The term “Depositary” shall mean The Bank of New York, a New York banking corporation, and any successor as depositary hereunder. The term “Corporate Trust Office”, when used with respect to the Depositary, shall mean the corporate trust office of the Depositary which at the date of this Global Deposit Agreement is 101 Barclay Street, New York, New York 10286.
     SECTION l.08. Deposited Securities.
          The term “Deposited Securities” as of any time shall mean Shares at such time deposited or deemed to be deposited under this Global Deposit Agreement and any and all other securities, property and cash received by the Depositary or the Custodian in respect thereof and at such time held hereunder, subject as to cash to the provisions of Section 4.05.
     SECTION 1.09. Dollars; Pounds; Pence; P.
          The term “Dollars” shall mean United States dollars. The terms “Pounds” or “Pence” or “P” shall mean the lawful currency of the United Kingdom.

- 2 -


 

     SECTION 1.10. DTC.
          The term “DTC” shall mean The Depository Trust Company, or any successor corporation thereto.
     SECTION 1.11. Foreign Currency.
          The term “Foreign Currency” shall mean any currency other than Dollars.
     SECTION 1.12. Foreign Registrar.
          The term “Foreign Registrar” shall mean the entity that presently carries out the duties of registrar for the Shares or any successor as registrar for the Shares and any other appointed agent of the Company for the transfer and registration of Shares.
     SECTION 1.13. Global Depositary Shares; GDSs; Global Depositary Receipts; GDRs.
          The terms “Global Depositary Shares” and “GDSs” shall mean the securities representing the interests in the Deposited Securities and evidenced by Receipts issued hereunder. Each Global Depositary Share shall represent the right to receive one (1) Share, until there shall occur a distribution upon Deposited Securities covered by Section 4.03 or a change in Deposited Securities covered by Section 4.08 with respect to which additional Receipts are not executed and delivered, and thereafter Global Depositary Shares shall evidence the rights to receive the amount of Shares or Deposited Securities specified in such Sections. The terms “Global Depositary Receipts” and “GDRs” shall mean the global depositary receipts evidencing the GDSs.
     SECTION 1.14. Global Deposit Agreement.
          The term “Global Deposit Agreement” shall mean this Global Deposit Agreement, as the same may be amended from time to time in accordance with the provisions hereof, and all instruments supplemental hereto.
     SECTION 1.15. Initial Deposit.
          The term “Initial Deposit” shall mean the deposit of Shares to the account of any Custodian by the Company pursuant to Section 2.02(a) hereof and in connection with an offering of Global Depositary Shares pursuant to an offering circular dated                     , as completed on                                         .
     SECTION 1.16. Master GDR.
          The term “Master GDR” shall mean the GDS registered in the name of the nominee of DTC evidencing all Book-Entry GDSs, as provided in Section 2.01(b).

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     SECTION 1.17. Owner.
          The term “Owner” shall mean the person in whose name a Receipt is registered on the books of the Depositary maintained for such purpose.
     SECTION 1.18. Physical GDSs.
          The term “Physical GDSs” shall mean GDSs evidenced by Receipts (other than the Master GDR) issued in physical, certificated form pursuant to Section 2.01 (b) at any time that the book-entry settlement system of DTC is not available for the Book-Entry GDSs as provided in Section 2.01 (b).
     SECTION 1.19. Receipts.
          The term “Receipts” shall mean the Global Depositary Receipts, including the Master GDR, issued hereunder, in substantially the form of Exhibit A hereto, evidencing Global Depositary Shares as the same may be amended from time to time in accordance with the provisions hereof.
     SECTION 1.20. Registrar.
          The term “Registrar” shall mean the Depositary or any bank or trust company having an office in the Borough of Manhattan, The City of New York, which shall be appointed to register Receipts and transfers of Receipts and to countersign Receipts as herein provided and shall include any co-registrars appointed by the Depositary.
     SECTION 1.21. Regulation S.
          The term “Regulation S” shall mean Regulation S, as from time to time amended, under the Securities Act.
     SECTION 1.22. Rule 144.
          The term “Rule 144” shall mean Rule 144, as from time to time amended, under the Securities Act.
     SECTION 1.23. Rule 903.
          The term “Rule 903” shall mean Rule 903, as from time to time amended, under the Securities Act.

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     SECTION 1.24. Rule 904.
          The term “Rule 904” shall mean Rule 904, as from time to time amended, under the Securities Act.
     SECTION 1.25. Securities Act.
          The term “Securities Act” shall mean the United States Securities Act of 1933, as from time to time amended.
     SECTION 1.26. Securities Exchange Act.
          The term “Securities Exchange Act” shall mean the United States Securities Exchange Act of 1934, as from time to time amended.
     SECTION 1.27. Shares.
          The term “Shares” shall mean ordinary shares of 1p each in the Company heretofore validly issued and outstanding and fully paid, nonassessable and free of any preemptive rights of the holders of outstanding Shares, or hereafter validly issued and outstanding and fully paid, nonassessable and free of any preemptive rights of the holders of outstanding Shares or interim certificates representing such Shares; provided, however, that if there shall occur any change in par value, a split-up or consolidation or any other reclassification or, upon the occurrence of an event described in Section 4.08, an exchange or conversion in respect of the Shares, the term “Shares” shall thereafter mean the successor securities resulting from such change in par value, split-up or consolidation or such other reclassification or such exchange or conversion.
     SECTION 1.28. Stamp Taxes.
          The term “stamp taxes” shall mean any stamp duty reserve tax imposed by Part IV of the Finance Act 1986 of the United Kingdom (or any statutory modification or re-enactment thereof) in respect of any deposit of Shares in accordance with Section 2.02 of this Deposit Agreement, or any stamp duty imposed by Part III of the Finance Act 1986 of the United Kingdom (or any statutory modification or re-enactment thereof) on any deposit of Shares in accordance with Section 2.02 of this Deposit Agreement, or both of them, as the context may require.
     SECTION 1.29. United States.
          The term “United States” shall, except as otherwise provided in this Global Deposit Agreement or the Receipts, mean the United States of America, its territories and possessions, any State of the United States, and the District of Columbia.

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ARTICLE 2.   BOOK-ENTRY SYSTEM, FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS.
     SECTION 2.01. Form and Transferability of Receipts.
          (a) Receipts shall be entitled “Global Depositary Receipts” and shall be substantially in the form set forth in Exhibit A annexed to this Global Deposit Agreement, with appropriate insertions, modifications and omissions as hereinafter provided. No Receipt shall be entitled to any benefits under this Global Deposit Agreement or be valid or obligatory for any purpose, unless such Receipt shall have been executed by the Depositary by the manual or facsimile signature of a duly authorized signatory of the Depositary and, if a Registrar (other than the Depositary) for the Receipts shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized signatory of the Registrar. The Depositary shall maintain books on which each Receipt so executed and delivered as hereinafter provided and the transfer of each such Receipt shall be registered. Receipts bearing the manual or facsimile signature of a duly authorized signatory of the Depositary who was at any time a proper signatory of the Depositary shall bind the Depositary, notwithstanding that such signatory has ceased to hold such office prior to the execution and delivery of such Receipts by the Registrar or did not hold such office on the date of issuance of such Receipts.
Each Receipt shall bear the following legend:
THIS GLOBAL DEPOSITARY RECEIPT, THE GLOBAL DEPOSITARY SHARES EVIDENCED HEREBY AND THE ORDINARY SHARES OF 1P EACH OF MATCHNET PLC (“SHARES”) REPRESENTED THEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.
           In addition to the foregoing, the Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or modifications not inconsistent with the provisions of this Global Deposit Agreement as may be required (i) by the Depositary; (ii) to comply with any applicable law or regulations or with the rules and regulations thereunder of any securities exchange upon which Global Depositary Shares may be listed or to conform with any usage with respect thereto, or to indicate any special

- 6 -


 

limitations or restrictions to which any particular Receipts are subject by reason of the date or manner of issuance of the underlying Deposited Securities or otherwise; or (iii) by Section 2.01(b) or otherwise.
          The Receipts shall bear a CUSIP number that is different from any CUSIP number that is or may be assigned to any other restricted depositary receipt facility relating to the Shares.
          If applicable, the Receipts shall bear an ISIN number that is different from any ISIN number that is or may be assigned to any other restricted depositary receipt facility relating to the Shares.
          (b) The Company and the Depositary shall make application to DTC and Clearstream for acceptance of the Book-Entry GDSs for their respective book-entry settlement systems. The Company hereby appoints the Depositary acting through any authorized officer thereof as its attorney-in-fact, with full power to delegate, for purposes of executing any agreements, certifications or other instruments or documents necessary or desirable in order to effect the acceptance of the Book-Entry GDSs for DTC and Clearstream eligibility, including but not limited to a letter of representations, with such modifications as are agreed to by the Company and the other parties thereto.
          So long as the Book-Entry GDSs are eligible for book-entry settlement with DTC, unless otherwise required by law, such Book-Entry GDSs representing the Shares deposited with any Custodian shall be represented by a Master GDR registered in the name of a nominee of DTC (initially expected to be Cede & Co.) and no person acquiring such Book-Entry GDSs shall receive or be entitled to receive physical delivery of certificated Receipts evidencing Global Depositary Shares. Accordingly, each Beneficial Owner must rely upon the procedures of DTC and institutions having accounts with DTC to exercise or be entitled to any rights of an Owner of a Receipt. The Bank of New York or such other entity as is agreed with DTC may hold the Master GDR as custodian for DTC. During any period in which Book-Entry GDSs are represented by the Master GDR, ownership of beneficial interests in the Master GDR shall be shown on, and the transfer of such ownership shall be effected only through, records maintained by (i) DTC or its nominee (with respect to participants’ interests) or (ii) institutions having accounts with DTC. All references in this Global Deposit Agreement to issuance or delivery of Receipts shall be deemed to include, where applicable, adjustments in the records of the Depositary showing the number of Book-Entry GDSs evidenced by the Master GDR.
          The Company has requested that DTC not effect any book-entry deliveries of the Book-Entry GDSs, except deliveries to or between DTC participant accounts maintained by the banks that act as depositaries for Clearstream (the “Deliver Order Chill”) until the Company delivers further instructions.

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          For so long as the Master GDR is registered in the name of a nominee of DTC, it shall bear a legend substantially in the following form:
     Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the agent authorized by the issuer for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
          If, at any time when Book-Entry GDSs are represented by the Master GDR, DTC (or Clearstream) ceases to make its book-entry settlement system available for the Book Entry GDSs, the Company shall consult with the Depositary regarding other arrangements for book-entry settlement. Only in the event that it is impracticable without undue effort or expense to continue to make the GDSs available in book-entry form as determined by the Company and the Depositary shall the Company instruct the Depositary to make Receipts evidencing Physical GDSs available to the Beneficial Owners in physical, certificated form, which availability shall be subject to such additions, deletions and modifications to the form of Receipt attached hereto as Exhibit A and this Global Deposit Agreement, and subject to the requirements of any other documents, statements or certifications in connection therewith, as the Company and the Depositary may, from time to time, agree. In the event of issuance of Receipts in physical, certificated form evidencing Physical GDSs, such Receipts may evidence any number of Global Depositary Shares.
          The Receipts shall be typewritten, in the case of the Master GDR, and otherwise shall be engraved, lithographed, printed or typewritten, or in such other form as may be agreed upon by the Company and the Depositary. The Master GDR shall bear such legend or legends as may be required by DTC for acceptance of the Book-Entry GDSs for its book-entry settlement system. The Master GDR shall provide that it shall represent the aggregate amount of Book-Entry GDSs from time to time indicated in the records of the Depositary as being issued hereunder and that the aggregate amount of Global Depositary Shares represented thereby may from time to time be increased or decreased by the adjustment of such records of the Depositary and of DTC or its nominee as hereinafter provided.
          (c) Title to a Receipt (and to the Global Depositary Shares evidenced thereby), when properly endorsed or accompanied by a proper instrument or instruments of transfer and transferred in accordance with the terms of this Global Deposit Agreement, shall be transferable by delivery with the same effect as in the case of a

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negotiable instrument under the laws of the State of New York; provided, however, that the Depositary, notwithstanding any notice to the contrary, may treat the Owner thereof as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in this Global Deposit Agreement and for all other purposes and neither the Depositary nor the Company will have any obligation or be subject to any liability under this Global Deposit Agreement to any holder of a Receipt unless such holder is the Owner thereof.
     SECTION 2.02. Deposit of Shares.
          (a) The Initial Deposit shall be made by delivery of Shares by the Company (or on behalf of the Company at its direction) to an account maintained by any Custodian for such purpose. Provided that the Book-Entry GDSs are accepted for the book-entry settlement system of DTC and Clearstream, it is contemplated that all GDSs sold in connection with the Initial Deposit will be Book-Entry GDSs. Prior to such delivery, the Company shall deliver, or cause to he delivered, (i) to the Depositary (A) a certificate signed on behalf of the Company, certifying the number of Book-Entry GDSs sold in connection with the Initial Deposit (the “Initial Deposit Certificate”), (B) a written order from or on behalf of the Company directing the Depositary to execute and deliver to DTC or its custodian to be credited to the participant accounts of Clearstream, the Master GDR evidencing the number of Book-Entry GDSs specified in the Initial Deposit Certificate, and (C) evidence satisfactory to the Depositary that amounts in respect of any applicable stamp taxes have been fully paid, and (ii) to DTC, an instruction on behalf of the Company, specifying the DTC participant or participants to whose account(s) such Book-Entry GDSs should be credited.
          (b) Subsequent to the Initial Deposit, subject to the terms and conditions of this Global Deposit Agreement, Shares or evidence of rights to receive Shares may be deposited under this Global Deposit Agreement by delivery thereof to any Custodian hereunder, accompanied by any appropriate instrument or instruments of transfer, or endorsement, in form satisfactory to the Custodian, together with a duly executed and completed written certification and agreement (“Depositor Certificate”), in substantially the form attached as Annex I hereto, by or on behalf of the person who will be the Beneficial Owner of the Global Depositary Shares to be issued upon deposit of such Shares, and all such certifications, documents, other information (including, with respect to any applicable stamp taxes, evidence satisfactory to the Depositary that any such amounts have been fully paid) and payments as may be required by the Depositary or the Custodian in accordance with the provisions of this Global Deposit Agreement, and, if the Depositary requires, together with a written order (1) directing the Depositary to adjust its records, as contemplated by Section 2.01 (b), so as to increase, by the number of Global Depositary Shares representing such deposited Shares, the number of Global Depositary Shares evidenced by the Master GDR, and specifying the person or persons to whose DTC participant account such increase in the number of Global Depositary Shares

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should be credited or (2) in the case of deposits made at any time that DTC’s book-entry settlement system is not available for the Book-Entry GDSs as provided in Section 2.01(b), directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order a Receipt or Receipts in physical certificated form, for the number of GDSs representing such deposited Shares; provided, however, that subsequent to the Initial Deposit, the Depositary shall not accept deposits of Shares under this Global Deposit Agreement for a period of 6 months from the date of the start of trading of the GDSs of the Neuer Markt segment of the Frankfurt Stock Exchange.
          No Share shall be accepted for deposit unless accompanied by evidence satisfactory to the Depositary that all conditions to such deposit have been satisfied by the person depositing such Shares under English laws and regulations and any necessary approval has been granted by any governmental body in England, which is then performing the function of the regulation of currency exchange or any other function which requires approval for the deposit of Shares. If required by the Depositary, Shares presented for deposit at any time, whether or not the transfer books of the Company or the Foreign Registrar, if applicable, are closed, shall also be accompanied by an agreement or assignment, or other instrument satisfactory to the Depositary, which will provide for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property which any person in whose name the Shares are or have been recorded may thereafter receive upon or in respect of such deposited Shares, or in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to the Depositary.
          At the request, risk and expense of any person proposing to deposit Shares, and for the account of such person, the Depositary may receive certificates for Shares to be deposited, together with the other instruments and payments herein specified, for the purpose of forwarding such Share certificates to the Custodian for deposit hereunder.
          Upon each delivery to a Custodian of a certificate or certificates for Shares to be deposited hereunder, together with the other documents and payments specified above, such Custodian shall, as soon as transfer and recordation can be accomplished, present such certificate or certificates to the Company or the appointed agent of the Company for transfer and registration of Shares, which may but need not be the Foreign Registrar, if applicable, for transfer and recordation of the Shares being deposited in the name of the Depositary or its nominee or such Custodian or its nominee.
          (c) The Depositary agrees to instruct the Custodian to place all Shares accepted for deposit under this Global Deposit Agreement into segregated accounts separate from any Shares of the Company that may be held by such Custodian under any other depositary receipt facility relating to the Shares.

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          (d) Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or at such other place or places as the Depositary shall determine.
     SECTION 2.03. Execution and Delivery of Receipts.
          (a) Upon receipt from the Custodian of confirmation that the Initial Deposit and delivery of the other documents specified in Section 2.02(a) have been duly made, the Depositary, subject to the terms and conditions of this Global Deposit Agreement, shall execute and deliver to DTC or its custodian the Master GDR evidencing the number of Book-Entry GDSs specified in the Initial Deposit Certificate as having been sold in connection with the Initial Deposit.
          (b) In the case of any deposit of Shares other than the Initial Deposit, upon receipt by any Custodian of any deposit pursuant to Section 2.02(b) hereunder (and in addition, if the transfer books of the Company or the Foreign Registrar, if applicable, are upon the Depositary may in its sole discretion require a proper acknowledgment or other evidence from the Company that any Deposited Securities have been recorded upon the books of the Company or the Foreign Registrar, if applicable, in the name of the Depositary or its nominee or such Custodian or its nominee), together with the other documents and payments required as specified above and pursuant to Section 2.06, such Custodian shall notify the Depositary of such deposit and the name and DTC account number of the DTC participant or participants to whose account(s) the Book-Entry GDSs should be credited or, if DTC’s book-entry settlement system is not then available for the Book-Entry GDSs as provided in Section 2.01(b), the person or persons to whom or upon whose written order a certificated Receipt or Receipts for Physical GDSs are deliverable in respect thereof and the number of Global Depositary Shares to be evidenced thereby. Such notification shall be made by letter or, at the request, risk and expense of the person making the deposit, by air courier, cable, telex or facsimile transmission.
          Upon receiving such notice from such Custodian, the Depositary or its agent, subject to this Global Deposit Agreement, shall (a) if DTC’s book-entry settlement system is then available for the Book-Entry GDSs (i) adjust its records to reflect such deposit so as to evidence the aggregate number of Book-Entry GDSs then outstanding and (ii) instruct DTC to adjust its records to reflect such increase and credit the designated DTC participant account or accounts with such increase, or (b) if DTC’s book-entry settlement system is not then available for Book-Entry GDSs as provided in Section 2.01 (b), execute and deliver outside the United States at the expense and risk of the person depositing such Shares, to or upon the order of the person or persons named in the notice delivered to the Depositary, a certificated Receipt or Receipts, registered in the name or names requested by such person or persons, and evidencing in the aggregate the number of Physical GDSs to which such person or persons are entitled, but, in either case, (A) only upon payment to the Depositary or Custodian of all taxes and governmental

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charges and fees payable in connection with such deposit and the transfer of the deposited Shares and (B) subject to the other terms of this Global Deposit Agreement and the provisions of the Company’s Memorandum and Articles of Association and of the Deposited Securities.
          The Depositary shall neither execute nor deliver a Receipt nor adjust its records in respect of any deposit of Shares unless a Depositor Certificate in substantially the form appearing as Annex I hereto is provided to the Depositary by or on behalf of the person acquiring beneficial ownership of any CDS; provided, that such certification and agreement need not be given and made in connection with the Initial Deposit and the initial issuance of Receipts.
     SECTION 2.04. Transfer of Receipts; Combination and Split-up of Receipts.
          The Depositary, subject to the terms and conditions of this Global Deposit Agreement, including payment of the fees of the Depositary as provided in Section 5.09, shall register transfers of Receipts on its transfer books from time to time, (a) if the book-entry settlement system of DTC is then available for the Book-Entry GDSs, upon receipt by the Depositary at its Corporate Trust Office of written instructions from DTC or DTC’s nominee on behalf of any Beneficial Owner and (b) if the book-entry settlement system of DTC shall become unavailable for the Book-Entry GDSs, upon surrender at the Corporate Trust Office of the Depositary of a Receipt, by the Owner in person or by a duly authorized attorney, properly endorsed or accompanied by a proper instrument or instruments of transfer (including, in the case of any Receipt in physical, certificated form, the due execution and completion of any endorsements appearing thereon relating to compliance with restrictions applicable to the transfer thereof), and duly stamped as may be required by the laws of the State of New York and of the United States. Thereupon the Depositary shall execute a new Receipt or Receipts and deliver the same to or upon the order of the person entitled thereto, subject to receipt of any certifications by such person as the Depositary and the Company may require in order to comply with applicable laws, but only upon payment to the Depositary of the fees of the Depositary as provided in Section 5.09.
          The Depositary may deliver a Receipt or Receipts in exchange for an unrestricted depositary receipt or unrestricted depositary receipts, upon the same terms and subject to the same conditions as apply to a deposit for a Receipt under Section 2.02(b).
          The Depositary, subject to the terms and conditions of this Global Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of Global Depositary Shares requested, evidencing

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the same aggregate number of Global Depositary Shares as the Receipt or Receipts surrendered.
          Notwithstanding the foregoing, with respect to any transfer of a Receipt evidencing Physical GDSs, upon the surrender of such Receipt together with written instructions as to the person or persons, or to whose DTC participant account the Physical GDSs to be transferred are to be credited, the Depositary will, if at the time DTC’s book-entry settlement system is available for Book-Entry GDSs, cancel the surrendered Receipt, adjust its records, and instruct DTC to adjust its records, so as to increase the number of Global Depositary Shares represented by the Master GDR by the number of Physical GDSs evidenced by the Receipt so surrendered for transfer and inform DTC as to the person or persons, or to whose DTC participant account such Global Depositary Shares are to be credited.
          The Depositary may appoint one or more co-transfer agents for the purpose of effecting transfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Owners or persons entitled to Receipts and will be entitled to protection and indemnity to the same extent as the Depositary.
     SECTION 2.05. Surrender of Receipts and Withdrawal of Shares.
          Subject to the terms and conditions of this Global Deposit Agreement, upon (i) receipt by the Depositary at its Corporate Trust Office of written instructions from DTC or DTC’s nominee on behalf of any Beneficial Owner, if the book-entry settlement system of DTC is then available for the Book-Entry GDSs, and (ii) surrender at the Corporate Trust Office of the Depositary of a Receipt evidencing Book-Entry GDSs or Physical GDSs, if the book-entry settlement system of DTC shall have become unavailable for Book-Entry GDSs, in either case for the purpose of withdrawal of the Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt or representing such person’s beneficial interest in Book-Entry GDSs evidenced by the Master GDR, and upon payment of the fee of the Depositary for the surrender of Receipts as provided in Section 5.09 and payment of all taxes and governmental charges payable in connection with such surrender and withdrawal of the Deposited Securities, and subject to the terms and conditions of this Global Deposit Agreement, the Memorandum and Articles of Association of the Company, the Deposited Securities and applicable law, the Owner of such Receipt acting for itself or on behalf of the Beneficial Owner or DTC participant, as the case may be, shall be entitled to delivery, to him or upon his order, of the amount of Deposited Securities at the time represented by the Global Depositary Shares evidenced by such Receipt or such beneficial interest in Book-Entry GDSs evidenced by the Master GDR. Delivery of such Deposited Securities may be made by the delivery of (x) certificates in the name of such Owner or as ordered by

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him or certificates properly endorsed or accompanied by a proper instrument or instruments of transfer to such Owner or as ordered by him, and (y) any other securities, property and cash to which such Owner is then entitled in respect of such Receipts to such Owner or as ordered by him. Such delivery shall be made, as hereinafter provided, without unreasonable delay.
          Notwithstanding the foregoing, no Deposited Securities may be withdrawn upon receipt of written instructions from DTC or DTC’s nominee on behalf of any Beneficial Owner or the surrender of a Receipt, as the case may be, unless at or prior to the time of surrender, the Depositary shall have received a duly executed and completed written certificate and agreement (“Withdrawal and Transfer Certificate”), in substantially the form attached hereto as Annex II, by or on behalf of the person surrendering such Receipt who after such withdrawal will be the beneficial owner of such Deposited Securities.
          A Receipt surrendered for such purposes may be required by the Depositary to be properly endorsed in blank or accompanied by a proper instrument or instruments of transfer in blank, and if the Depositary so requires, the Owner thereof or the Beneficial Owner of an interest as to which withdrawal instructions have been given, as the case may be, shall execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in such order. Thereupon the Depositary shall direct the Custodian to deliver at the London office of such Custodian, subject to Sections 2.06, 3.01 and 3.02 and to the other terms and conditions of this Global Deposit Agreement, to or upon the written order of the person or persons designated in the order delivered to the Depositary as above provided, the amount of Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt or such beneficial interest in Book-Entry GDSs evidenced by the Master GDR, except that the Depositary may make delivery to such person or persons at the Corporate Trust Office of the Depositary of any dividends or distributions with respect to the Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt or such beneficial interest, or of any proceeds of sale of any dividends, distributions or rights, which may at the time be held by the Depositary.
          At the request, risk and expense of any Owner so surrendering a Receipt or any Beneficial Owner submitting such written instructions for delivery, and for the account of such Owner or Beneficial Owner, the Depositary shall direct the Custodian to forward any cash or other property (other than rights) comprising, and forward a certificate or certificates and other proper documents of title for, the Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt or the beneficial interest in Book-Entry GDSs evidenced by the Master GDR to the Depositary for delivery at the Corporate Trust Office of the Depositary. Such direction shall be given by

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letter or, at the request, risk and expense of such Owner, by air courier, cable, telex or facsimile transmission.
          Notwithstanding the foregoing, each Owner acknowledges that, and each of the Depositary and the Custodian agrees that neither the Custodian nor the Depositary will make any actual delivery of Shares to any Owner at an address within the United States (as defined under Regulation S).
     SECTION 2.06. Limitations on Execution and Delivery, Transfer and Surrender of Receipts and Withdrawal of Deposited Securities.
          (a) As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any Receipt or withdrawal of any Deposited Securities or the adjustment of the Depositary’s records to reflect the deposit of Shares or any such transfer, split-up, combination, surrender or withdrawal, the Depositary, Custodian or Registrar may require payment (or, with respect to any applicable stamp taxes, evidence satisfactory to the Depositary that any such amounts have been fully paid) from the presenter of the Receipt or the depositor of Shares of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to the Shares being deposited or withdrawn) and payment of any applicable fees as herein provided, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of this Global Deposit Agreement, including, without limitation, this Section 2.06.
          (b) The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or deposits of Shares may be refused, or the transfer of Receipts in particular instances may be refused, or the registration of transfer, split-up or combination of outstanding Receipts, or the surrender of outstanding Receipts or the receipt of written instructions from any person having a beneficial interest in Book-Entry GDSs represented by the Master GDR for the purpose of withdrawal of Deposited Securities, may be suspended generally or in particular instances, during any period when the transfer books of the Depositary or the Company or the Foreign Registrar, if applicable, are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of this Global Deposit Agreement, or for any other reason,
     SECTION 2.07. Lost Receipts.
          In case any Receipt shall be mutilated, destroyed, lost or stolen, the Depositary shall execute and deliver a new Receipt of like tenor in exchange and substitution for such mutilated Receipt upon cancellation thereof, or in lieu of and in

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substitution for such destroyed, lost or stolen Receipt. Before the Depositary shall execute and deliver a new Receipt in substitution for a destroyed, lost or stolen Receipt, the Owner thereof shall have (a) filed with the Depositary (i) a request for such execution and delivery before the Depositary has notice that the Receipt has been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond and (b) satisfied any other reasonable requirements imposed by the Depositary.
     SECTION 2.08. Cancellation and Destruction of Surrendered Receipts.
          All Receipts physically surrendered to the Depositary shall be cancelled by the Depositary. The Depositary is authorized to destroy Receipts so cancelled.
     SECTION 2.09. Pre-Release.
          Notwithstanding Section 2.03 hereof, the Depositary may execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.02 (a “Pre-Release”). The Depositary may, pursuant to Section 2.03, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation from the person to whom Receipts or Shares are to be delivered, that such person, or its customer, owns the Shares or Receipts to be remitted, as the case may be, (b) at all times fully collateralized with cash or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of Global Depositary Shares which are outstanding at any time as a result of Pre-Release will not normally exceed thirty percent (30%) of the Shares deposited hereunder; provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate.
          The Depositary may retain for its own account any compensation received by it in connection with the foregoing.
          The person to whom any Pre-Release is to be made pursuant to this Section 2.09 shall be required to deliver to the Depositary a duly executed and completed Depositor Certificate in substantially the form attached hereto as Annex I.

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ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS.
     SECTION 3.01. Filing Proofs, Certificates and Other Information.
          Any person presenting Shares for deposit or any Owner or Beneficial Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, proof of the identity of any person legally or beneficially interested in the Receipt and the nature of such interest, proof of compliance with all applicable laws and regulations and provisions of or governing Deposited Securities and the terms of this Global Deposit Agreement or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, of the Shares presented for deposit or other information, to execute such certificates and to make such representations and warranties, as the Depositary may deem necessary or proper. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or distribution of rights or of the sale proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made.
     SECTION 3.02. Liability of Owner for Taxes.
          If any tax or other governmental charge shall become payable (including, without limitation, any applicable stamp taxes) by the Custodian or the Depositary with respect to any Receipt or any Deposited Securities represented by the Global Depositary Shares evidenced by any Receipt, such tax or other governmental charge shall be payable by the Owner or Beneficial Owner of such Receipt to the Depositary. The Depositary may refuse to effect registration of transfer of such Receipt (or any split-up or combination thereof) or any withdrawal of Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions in respect of any Deposited Securities, or may sell for the account of the Owner or Beneficial Owner thereof any part or all of the Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge and the Owner or Beneficial Owner of such Receipt shall remain liable for any deficiency.
     SECTION 3.03. Warranties on Deposit or Withdrawal of Shares.
          Every person depositing Shares under this Global Deposit Agreement shall be deemed thereby to represent and warrant, in addition to such representations and warranties as may be required pursuant to Section 2.02, that such Shares and each certificate therefor are validly issued, fully paid, nonassessable and free of any preemptive rights of the holders of outstanding Shares and that the person making such deposit is

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duly authorized to do so. Such representations and warranties shall survive the deposit of such Shares and the issuance of Receipts.
          Each purchaser of Receipts or Global Depositary Shares or a beneficial interest therein in connection with the Initial Deposit will be deemed to acknowledge, represent and warrant and agree to the same effect as acknowledgment, certification and agreement set out in paragraphs 2, 3 and 4 of Annex I. Each person depositing or withdrawing Shares will be deemed to acknowledge, represent and warrant to the same effect as the acknowledgment and certifications set out in paragraphs 2, 3 and 4 of Annex I or Annex II, as the case may be. Each such purchaser and each such person depositing or withdrawing Shares will be deemed to represent that it understands that the Receipts and the underlying Shares, unless otherwise agreed by the Company and Depositary, will bear one or more legends substantially to the effect set out in Sections 2.01 (a) and 2.01 (b). Such acknowledgments, representations, warranties and agreements shall survive any such purchase, deposit or withdrawal.
ARTICLE 4. THE DEPOSITED SECURITIES.
     SECTION 4.01. Cash Distributions.
          Whenever the Depositary shall receive any cash dividend or other cash distribution on any Deposited Securities, the Depositary shall, if such cash is received in Foreign Currency, subject to the provisions of Section 4.05, convert such dividend or distribution into Dollars and shall distribute the amount thus received (net of the fees and expenses of the Depositary as provided in Section 5.09) to the Owners entitled thereto, in proportion to the number of Global Depositary Shares representing such Deposited Securities evidenced by Receipts held by them respectively; provided, however, that in the event that the Company or the Depositary shall be required to withhold and does withhold from such cash dividend or such other cash distribution an amount on account of taxes or other governmental charges, the amount distributed to the Owner of the Receipts evidencing Global Depositary Shares representing such Deposited Securities shall be reduced accordingly. The Depositary shall distribute only such amount, however, as can be distributed without attributing to any Owner a fraction of one cent. Any such fractional amounts shall be rounded to the nearest whole cent and so distributed to Owners entitled thereto. The Company or its agent will remit to the appropriate governmental agency in England all amounts withheld and owing to such agency. The Depositary will forward to the Company or its agent such information from its records as the Company may reasonably request to enable the Company or its agent to file necessary reports with governmental agencies, and the Depositary or the Company or its agent may file any such reports necessary to obtain benefits under the applicable tax treaties for the Owners of Receipts.

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     SECTION 4.02. Distributions Other than Cash, Shares or Rights.
          Subject to the provisions of Sections 4.11 and 5.09, whenever the Depositary shall receive any distribution other than a distribution described in Section 4.01, 4.03 or 4.04, the Depositary shall cause the securities or property received by it to be distributed to the Owners entitled thereto, after the deduction or upon payment of any fees and expenses of the Depositary or any taxes or other governmental charges, in proportion to the number of Global Depositary Shares representing such Deposited Securities evidenced by Receipts held by them respectively, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Company or the Depositary withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act in order to be distributed to Owners or Beneficial Owners) the Depositary deems such distribution not to be feasible, the Depositary may adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees and expenses of the Depositary as provided in Section 5.09) shall be distributed by the Depositary to the Owners entitled thereto, all in the manner and subject to the conditions described in Section 4.01. Each beneficial owner of Receipts or Shares so distributed shall be deemed to have acknowledged that the Shares have not been registered under the Securities Act and to have agreed to comply with the restrictions on transfer described in the form of legend set forth in Section 2.01 hereof.
     SECTION 4.03. Distributions in Shares.
          If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Depositary may either (i) if Book-Entry GDSs are available, reflect on the records of the Depositary such increase in the aggregate number of GDSs representing Shares evidenced by the Master GDR and give notice to DTC of the related increase in the number of GDSs evidenced by the Master GDR or (ii) if Book-Entry GDSs are not available, distribute to the Owners of outstanding Receipts entitled thereto, in proportion to the number of Global Depositary Shares representing such Deposited Securities evidenced by Receipts held by them respectively, additional Receipts evidencing an aggregate number of Global Depositary Shares representing the amount of Shares received as such dividend or free distribution, subject to the terms and conditions of the Global Deposit Agreement with respect to the deposit of Shares and the issuance of Global Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 and the payment of the fees and expenses of the Depositary as provided in Section 5.09. The Depositary may withhold any such distribution of Receipts if it has not received satisfactory assurances

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from the Company that such distribution does not require registration under the Securities Act or is exempt from registration under the provisions of such Act. In lieu of delivering Receipts for fractional Global Depositary Shares in any such case, the Depositary shall sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.01. If such adjustments on the records of the Depositary are not so made or additional Receipts are not so distributed, each Global Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby. Each Beneficial Owner of Receipts or Shares so distributed shall be deemed to have acknowledged that the Shares have not been registered under the Securities Act and to have agreed to comply with the restrictions on transfer described in the form of legend set forth in Section 2.01 hereof.
     SECTION 4.04. Rights.
          In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available to such Owners or, if by the terms of such rights offering or for any other reason, the Depositary may not either make such rights available to any Owners or dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines in its discretion that it is lawful and feasible to make such rights available to all or certain Owners but not to other Owners, the Depositary may distribute to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of Global Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it deems appropriate.
          In circumstances in which rights would otherwise not be distributed, if an Owner of Receipts requests the distribution of warrants or other instruments in order to exercise the rights allocable to the Global Depositary Shares of such Owner hereunder the Depositary will make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its sole discretion are reasonably required under applicable law.
          If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon instruction from such an Owner pursuant to such warrants or other instruments to the Depositary from such an Owner to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of

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an amount equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon payment of the fees and expenses of the Depositary and any other charges as set forth in such warrants or other instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.02 of this Global Deposit Agreement, and shall, pursuant to Section 2.03 of this Global Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a distribution pursuant to the second paragraph of this section, such Receipts shall be legended in the manner provided in Section 2.01 and in accordance with applicable U.S. laws, and shall be subject to the appropriate restrictions on sale, deposit, cancellation, and transfer under such laws.
          If the Depositary determines in its discretion that it is not lawful and feasible to make such rights available to all or certain Owners, it may sell the rights, warrants or other instruments in proportion to the number of Global Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees and expenses of the Depositary as provided in Section 5.09 and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of this Global Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise.
          The Depositary will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act with respect to a distribution to all Owners or are registered under the provisions of such Act; provided, that nothing in this Global Deposit Agreement shall create any obligation on the part of the Company to file a registration statement with respect to such rights or underlying securities or to endeavor to have such a registration statement declared effective. If an Owner of Receipts requests the distribution of warrants or other instruments, notwithstanding that there has been no such registration under such Act, the Depositary shall not effect such distribution unless it has received an opinion from recognized counsel in the United States for the Company upon which the Depositary may rely that such distribution to such Owner is exempt from such registration.
          The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.

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     SECTION 4.05. Conversion of Foreign Currency.
          Whenever the Depositary shall receive Foreign Currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the Foreign Currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted, by sale or in any other manner that it may determine, such Foreign Currency into Dollars, and such Dollars shall be distributed to the Owners entitled thereto or, if the Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such warrants and/or instruments, as applicable, upon surrender thereof for cancellation in whole or in part depending upon the terms of such warrants or other instruments. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.09.
          If such conversion or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem desirable.
          If at any time the Depositary shall determine in its judgment that any Foreign Currency received by the Depositary is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) received by the Depositary to, or in its discretion may hold such Foreign Currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.
          If any such conversion of Foreign Currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in Dollars to the extent permissible to the Owners entitled thereto and may distribute the balance of the Foreign Currency received by the Depositary to, or hold such balance uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled thereto.
     SECTION 4.06. Fixing of Record Date.
          Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be

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issued with respect to the Deposited Securities, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each Global Depositary Share, or whenever the Depositary shall find it necessary or convenient, the Depositary shall fix a record date which shall be the same date as the record date, if any, applicable to the Deposited Securities, or as close thereto as practicable (a) for the determination of the Owners who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, or (b) on or after which each Global Depositary Share will represent the changed number of Shares. Subject to the provisions of Sections 4.01 through 4.05 and to the other terms and conditions of this Global Deposit Agreement, the Owners on such record date shall be entitled, as the case may be, to receive the amount distributable by the Depositary with respect to such dividend or other distribution or such rights or the net proceeds of sale thereof in proportion to the number of Global Depositary Shares evidenced by Receipts held by them respectively and to give voting instructions, to exercise the rights of Owners hereunder with respect to such changed number of Shares and to act in respect of any other such matter.
     SECTION 4.07. Voting of Deposited Securities.
          Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, mail to the Owners a notice, the form of which notice shall be in the sole discretion of the Depositary, which shall contain (a) such information as is contained in such notice of meeting received by the Depositary from the Company, (b) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of English law and of the Memorandum and Articles of Association of the Company, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective Global Depositary Shares and (c) a statement as to the manner in which such instructions may be given , including an express indication that such instructions may be given or deemed given in accordance with the last sentence of this paragraph if no instruction is received, to the Depositary to give a discretionary proxy to a person designated to the Company. Upon the written request of an Owner on such record date, received on or before the date established by the Depositary for such purpose, the Depositary shall endeavor, insofar as practicable, to vote or cause to be voted the amount of Shares or other Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the Shares or other Deposited Securities, other than in accordance with such instructions or deemed instructions. If no instructions are received by the Depositary from any Owner with respect to any of the Deposited Securities represented by the Global

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Depositary Shares evidenced by such Owner’s Receipts on or before the date established by the Depositary for such purpose, the Depositary shall deem such Owner to have instructed the Depositary to give a discretionary proxy to a person designated by the Company with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a person designated by the Company to vote such Deposited Securities, provided, that no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary (and the Company agrees to provide such information as promptly as practicable in writing) that (x) the Company does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially and adversely affects the rights of holders of Shares.
     SECTION 4.08. Changes Affecting Deposited Securities.
          In circumstances where the provisions of Section 4.03 do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities, shall be treated as new Deposited Securities under this Global Deposit Agreement, and Global Depositary Shares shall thenceforth represent, in addition to the existing Deposited Securities, the right to receive the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may (a) if Book-Entry GDSs are available, make appropriate entry in its records, or (b) if Book-Entry GDSs are not available, either (i) execute and deliver additional Receipts as in the case of a dividend in Shares or (ii) call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities.
     SECTION 4.09. Reports.
          The Depositary shall make available for inspection by Owners at its Corporate Trust Office any reports and communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary shall also send to the Owners copies of such reports when furnished by the Company pursuant to Section 5.06.
     SECTION 4.10. Lists of Owners.
          Upon request by the Company, the Depositary shall, at the expense of the Company, furnish to it a list, as of a recent date, of the names, addresses and holdings of

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Global Depositary Shares by all persons in whose names Receipts are registered on the books of the Depositary.
     SECTION 4.11. Withholding.
          In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary and practicable to pay such taxes or charges and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of Global Depositary Shares held by them respectively.
ARTICLE 5. THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY.
     SECTION 5.01. Maintenance of Office and Transfer Books by the Depositary.
          Until termination of this Global Deposit Agreement in accordance with its terms, the Depositary shall maintain in the Borough of Manhattan, The City of New York, facilities for the execution and delivery, registration, registration of transfers and surrender of Receipts in accordance with the provisions of this Global Deposit Agreement.
          The Depositary shall keep books at its Corporate Trust Office for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners, provided that such inspection shall not be for the purpose of communicating with Owners in the interest of a business or object other than the business of the Company or a matter related to this Global Deposit Agreement or the Receipts.
          The Depositary may close the transfer books, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties hereunder.
          If any Receipts or the Global Depositary Shares evidenced thereby are listed on one or more stock exchanges in the United States, the Depositary shall act as Registrar or appoint a Registrar or one or more co-registrars for registry of such Receipts in accordance with any requirements of such exchange or exchanges.

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     SECTION 5.02. Prevention or Delay in Performance by the Depositary or the Company.
          Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future law, regulation, order, decree, moratorium or fiat of the United States or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the Memorandum and Articles of Association of the Company, or by reason of any provision of any securities issued or distributed by the Company, or any offering or distribution thereof, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Company or any of their directors, employees, agents or affiliates shall be prevented, delayed or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of this Global Deposit Agreement or Deposited Securities it is provided shall be done or performed; nor shall the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates incur any liability to any Owner or Beneficial Owner of any Receipt by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of this Global Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in this Global Deposit Agreement. Where, by the terms of a distribution pursuant to Section 4.01, 4.02, or 4.03 of this Global Deposit Agreement, or an offering or distribution pursuant to Section 4.04 of this Global Deposit Agreement, or for any other reason, such distribution or offering may not be made available to Owners, and the Depositary may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse.
     SECTION 5.03. Obligations of the Depositary, the Custodian and the Company.
          The Company assumes no obligation nor shall it be subject to any liability under this Global Deposit Agreement to Owners or Beneficial Owners, except that it agrees to perform its obligations specifically set forth in this Global Deposit Agreement without negligence or bad faith.
          The Depositary assumes no obligation nor shall it be subject to any liability under this Global Deposit Agreement to any Owner or Beneficial Owner (including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that it agrees to perform its obligations specifically set forth in this Global Deposit Agreement without negligence or bad faith.

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          Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it in its sole discretion against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary.
          Neither the Depositary nor the Company shall be liable for any action or nonaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner, or any other person believed by it in good faith to be competent to give such advice or information including, but not limited to, any such action or nonaction based upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.
          The Depositary shall not be liable nor any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.
          The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or nonaction is in good faith.
          No disclaimer of liability under the Securities Act is intended by any provision of this Global Deposit Agreement.
     SECTION 5.04. Resignation and Removal of the Depositary; Appointment of Successor Depositary.
          The Depositary may at any time resign as Depositary hereunder by written notice of its election to do so delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided.
          The Depositary may at any time be removed by the Company by written notice of such removal effective upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided.

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          In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall use its best efforts to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. Every successor depositary shall execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the written request of the Company shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Deposited Securities to such successor, and shall deliver to such successor a list of the Owners of all outstanding Receipts. Any such successor depositary shall promptly mail notice of its appointment to the Owners.
          Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.
     SECTION 5.05. The Custodians.
          The Depositary may appoint from time to time one or more agents to act for it as Custodian hereunder. Any such Custodian shall be subject at all times and in all respects to the directions of the Depositary and shall be responsible solely to it. Any Custodian may resign and be discharged from its duties hereunder by notice of such resignation delivered to the Depositary at least 30 days prior to the date on which such resignation is to become effective. If upon such resignation there shall be no Custodian acting hereunder, the Depositary shall, promptly after receiving such notice, appoint a substitute custodian or custodians, each of which shall thereafter be a Custodian hereunder. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners to do so, it may appoint a substitute or additional custodian or custodians, each of which shall thereafter be one of the Custodians hereunder. Upon demand of the Depositary any Custodian shall deliver such of the Deposited Securities held by it as are requested of it to any other Custodian or such substitute or additional custodian or custodians. Each such substitute or additional custodian shall deliver to the Depositary, forthwith upon its appointment, an acceptance of such appointment satisfactory in form and substance to the Depositary.
          Upon the appointment of any successor depositary hereunder, each Custodian then acting hereunder shall forthwith become, without any further act or writing, the agent hereunder of such successor depositary and the appointment of such successor depositary shall in no way impair the authority of each Custodian hereunder; but the successor depositary so appointed shall, nevertheless, on the written request of any Custodian, execute and deliver to such Custodian all such instruments as may be

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proper to give to such Custodian full and complete power and authority as agent hereunder of such successor depositary.
     SECTION 5.06. Notices and Reports.
          On or before the first date on which the Company gives notice, by publication or otherwise, of any meeting of holders of Shares or other Deposited Securities, or of any adjourned meeting of such holders, or of the taking of any action in respect of any cash or other distributions or the offering of any rights in respect of Deposited Securities, the Company agrees to transmit to the Depositary and the Custodian a copy of the notice thereof in the form given or to be given to holders of Shares or other Deposited Securities.
          The Company will arrange for the translation into English and the prompt transmittal by the Company to the Depositary and the Custodian of such notices and any other reports and communications which are made generally available by the Company to holders of its Shares. If requested in writing by the Company, the Depositary will arrange for the mailing, at the Company’s expense, of copies of such notices, reports and communications to all Owners. The Company will timely provide the Depositary with the quantity of such notices, reports, and communications, as requested by the Depositary from time to time, in order for the Depositary to effect such mailings.
     SECTION 5.07. Issuance and Distribution of Additional Shares, Rights, etc.
          The Company agrees that in the event of any issuance or distribution of (1) additional Shares, (2) rights to subscribe for Shares, (3) securities convertible into or exchangeable for Shares, or (4) rights to subscribe for any such securities (each a “Distribution”), the Company will promptly furnish to the Depositary a written opinion from United States counsel for the Company, which counsel shall be satisfactory to the Depositary, stating whether or not the Distribution requires a registration statement under the Securities Act to be in effect prior to making such Distribution available to Owners entitled thereto. If in the opinion of such counsel a registration statement is required, such counsel shall furnish to the Depositary a written opinion as to whether or not there is a registration statement in effect which will cover such Distribution.
          The Company agrees with the Depositary that neither the Company nor any company controlled by, controlling or under common control with the Company will at any time deposit any Shares, either originally issued or previously issued and reacquired by the Company or any such affiliate, unless a registration statement is in effect as to such Shares under the Securities Act.

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     SECTION 5.08. Indemnification.
          The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of this Global Deposit Agreement and of the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by either the Depositary or any Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Company or any of its directors, employees, agents and affiliates.
          The Depositary agrees to indemnify the Company, its directors, employees, agents and affiliates and hold them harmless from any liability or expense which may arise out of acts performed or omitted by the Depositary or its Custodian or their respective directors, employees, agents and affiliates due to their negligence or bad faith.
     SECTION 5.09. Charges of Depositary.
          The Company agrees to pay the fees, reasonable expenses and out-of-pocket charges of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Company from time to time. The Depositary shall present its statement for such charges and expenses to the Company once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.
          The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering Receipts or to whom Receipts are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the Receipts or Deposited Securities or a distribution of Receipts pursuant to Section 4.03), whichever applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar (or any other appointed agent of the Company for transfer and registration of the Shares) and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable, telex and facsimile transmission expenses as are expressly provided for in this Global Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of Foreign Currency pursuant to Section 4.05, (5) a fee of $5.00 or less per 100 Global Depositary Shares (or portion thereof) for the execution and delivery of Receipts pursuant to Section 2.03, 4.03

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or 4.04 and the surrender of Receipts pursuant to Section 2.05 or 6.02, (6) a fee of $.02 or less per Global Depositary Share (or portion thereof) for any cash distribution made pursuant to the Global Deposit Agreement, including, but not limited to Sections 4.01 through 4.04 hereof, (7) a fee for the distribution of securities pursuant to Section 4.02, such fee being in an amount equal to the fee for the execution and delivery of Global Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners and (8) a fee not in excess of $1.50 per certificate for a Receipt or Receipts for transfers made pursuant to the terms of the Global Deposit Agreement.
          The Depositary, subject to Section 2.09 hereof, may own and deal in any class of securities of the Company and its affiliates and in Receipts.
     SECTION 5.10. Retention of Depositary Documents.
          The Depositary is authorized to destroy those documents, records, bills and other data compiled during the term of this Global Deposit Agreement at the times permitted by the laws or regulations governing the Depositary, unless the Company requests that such papers be retained for a longer period or turned over to the Company or to a successor depositary.
     SECTION 5.11. Exclusivity.
          The Company agrees not to appoint any other depositary for issuance of Global Depositary Receipts so long as The Bank of New York is acting as Depositary hereunder.
     SECTION 5.12. Available Information.
          [The Company hereby authorizes the Depositary to deliver such information as furnished by the Company to the Depositary during any period in which the Company informs the Depositary it is subject to the information delivery requirements of Rule 144A(d)(4) to any such Owner, Beneficial Owner, holder of Shares or prospective purchaser at the request of such person. The Company agrees to reimburse the Depositary for its reasonable expenses in connection with such deliveries and to provide the Depositary with such information in such quantities as the Depositary may from time to time reasonably request.]

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ARTICLE 6. AMENDMENT AND TERMINATION.
     SECTION 6.01. Amendment.
          The form of the Receipts and any provisions of this Global Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary without the consent of Owners or Beneficial Owners of Receipts in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than the fees of the Depositary for the execution and delivery or the cancellation of Receipts and taxes, including, without limitation, stamp taxes and other governmental charges), or which shall otherwise prejudice any substantial existing right of Owners, shall, however, not become effective as to outstanding Receipts until the expiration of thirty days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner and Beneficial Owner, at the time any amendment so becomes effective, shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Global Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.
     SECTION 6.02. Termination.
          The Depositary shall, at any time at the direction of the Company, terminate this Global Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 90 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate this Global Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding, if at any time 90 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.04. On and after the date of termination, the Owner of a Receipt will, upon (a)(i) receipt by the Depositary at its Corporate Trust Office of written instructions from DTC or DTC’s nominee on behalf of any Beneficial Owner, if the book-entry settlement system of DTC is then available for the Book-Entry GDSs, or (ii) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.05, and (c) payment of any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends and other distributions to the Owners thereof, and shall not give any further notices or perform any further acts

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under this Global Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights and other property as provided in this Global Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Global Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under this Global Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Global Deposit Agreement, and any applicable taxes or governmental charges). Upon the termination of this Global Deposit Agreement, the Company shall be discharged from all obligations under this Global Deposit Agreement except for its obligations to the Depositary under Sections 5.08 and 5.09 hereof.
ARTICLE 7. MISCELLANEOUS.
     SECTION 7.01. Counterparts.
          This Global Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts shall constitute one and the same instrument. Copies of this Global Deposit Agreement shall be filed with the Depositary and the Custodians and shall be open to inspection by any Owner or Beneficial Owner of a Receipt during business hours.
     SECTION 7.02. No Third Party Beneficiaries.
          This Global Deposit Agreement is for the exclusive benefit of the parties hereto and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person.

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     SECTION 7.03. Severability.
          In case any one or more of the provisions contained in this Global Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.
     SECTION 7.04. Owners and Beneficial Owners as Parties; Binding Effect.
          The Owners and Beneficial Owners of Receipts from time to time shall be parties to this Global Deposit Agreement and shall be bound by all of the terms and conditions hereof and of the Receipts by acceptance thereof.
     SECTION 7.05. Notices.
          Any and all notices to be given to the Company shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to MatchNet PLC, Durrant House, 2nd Floor, 8-13 Chiswell Street, London EC1Y 4UP, England or any other place to which the Company may have transferred its principal office.
          Any and all notices to be given to the Depositary shall be deemed to have been duly given if in English and personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to The Bank of New York, 101 Barclay Street, New York, New York 10286, Attention: Global Depositary Receipt Administration, or any other place to which the Depositary may have transferred its Corporate Trust Office.
          Any and all notices to be given to any Owner shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to such Owner at the address of such Owner as it appears on the transfer books for Receipts of the Depositary, or, if such Owner shall have filed with the Depositary a written request that notices intended for such Owner be mailed to some other address, at the address designated in such request.
          Delivery of a notice sent by mail or cable, telex or facsimile transmission shall be deemed to be effective at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post office letter box. The Depositary or the Company may, however, act upon any cable, telex or facsimile transmission received by it, notwithstanding that such cable, telex or facsimile transmission shall not subsequently be confirmed by letter as aforesaid.

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     SECTION 7.06. Governing Law.
          This Global Deposit Agreement and the Receipts shall be interpreted and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the laws of the State of New York.
     SECTION 7.07. Article; Section.
          Wherever references are made in this Global Deposit Agreement to an “Article” or “Articles” or to a “Section” or “Sections”, such references shall mean an article or articles or a section or sections of this Global Deposit Agreement, unless otherwise required by the context.

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          IN WITNESS WHEREOF, MATCHNET PLC and THE BANK OF NEW YORK have duly executed this Global Deposit Agreement as of the day and year first set forth above and all Owners and Beneficial Owners shall become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof.
         
  MATCHNET PLC

 
 
 
  By:   /s/ Joe Shapira    
    Name:   JOE SHAPIRA   
    Title : CEO   
 
  THE BANK OF NFW YORK.
  as Depositary

 
 
 
  By:   /s/ David Stueber    
    Name:   David Stueber    
    Title:   Vice President   
 

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Annex I
Certification and Agreement of Certain Acquirors of Receipts
Upon Deposit of Shares Pursuant to Section 2.02 of the
Global Deposit Agreement
          We refer to the Global Deposit Agreement, dated as of April 28, 2000 (the “Global Deposit Agreement”), among MATCHNET PLC (the “Company”), THE BANK OF NEW YORK, as Depositary, and Owners and Beneficial Owners of Global Depositary Receipts (the “Receipts”) issued thereunder. Capitalized terms used but not defined herein shall have the meanings given them in the Global Deposit Agreement.
          1. This certification and agreement is furnished in connection with the deposit of Shares and issuance of Global Depositary Shares to be evidenced by one or more Receipts pursuant to Section 2.02 of the Global Deposit Agreement.
          2. We acknowledge (or if we are a broker-dealer, our customer has confirmed to us that it acknowledges) that the Receipts, the Global Depositary Shares evidenced thereby and the Shares represented thereby have not been and will not be registered under the Securities Act (the “Act”).
          3. We certify that either:
  A.   We are, or at the time the Shares are deposited and at the time the Receipts are issued will be, the beneficial owner of the Shares and of the Global Depositary Shares evidenced by such Receipt or Receipts, and (i) either (x) we are an “accredited investor” (as defined in Regulation D) or (y) we are not a U.S. person (as defined in Regulation S) and we are located outside the United States (within the meaning of Regulation S under the Act) and acquired, or have agreed to acquire and will have acquired, the Shares to be deposited outside the United States (within the meaning of Regulation S), and (ii) we are not in the business of buying and selling securities or, if we are in such business, we did not acquire the securities to be deposited from the Company or any affiliate thereof in the initial distribution of Global Depositary Shares and Shares.
OR
  B.   We are a broker-dealer acting on behalf of our customer; our customer has confirmed to us that it is, or at the time the Shares are deposited and at the time the Receipt or Receipts are issued will be, the beneficial owner of the

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Shares and of the Global Depositary Shares evidenced by such Receipt or Receipts, and (i) either (x) we are an “accredited investor” (as defined in Regulation D) or (y) we are not a U.S. person (as defined in Regulation S) and we are located outside the United States (within the meaning of Regulation S under the Act) and acquired, or have agreed to acquire and will have acquired, the Shares to be deposited outside the United States (within the meaning of Regulation S), and (ii) it is not in the business of buying and selling securities or, if it is in such business, it did not acquire the securities to be deposited from the Company or any affiliate thereof in the initial distribution of Global Depositary Shares and Shares.
     4. We agree (or if we are a broker-dealer, our customer has confirmed to us that it agrees) that we (or it) will not offer, sell, pledge or otherwise transfer such Receipts, the Global Depositary Shares evidenced thereby or the Shares represented thereby except in accordance with Regulation S under the Act, in either case in accordance with any applicable securities laws of any state of the United States.
         
  Very truly yours,
     
  [NAME OF CERTIFYING ENTITY]  
 
  By:      
    Title:   
Dated:       

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Annex II
Certification and Agreement of Persons Receiving
Deposited Securities Upon Withdrawal
Pursuant to Section 2.05 of the
Global Deposit Agreement
          We refer to the Deposit Agreement, dated as of April 28, 2000 (the “Global Deposit Agreement”), among MATCHNET PLC (the “Company”), THE BANK OF NEW YORK, as Depositary thereunder, and Owners and Beneficial Owners of Global Depositary Receipts (the “Receipts”) issued thereunder. Capitalized terms used but not defined herein shall have the meanings given them in the Deposit Agreement.
          1. We are surrendering a Receipt or Receipts in accordance with the terms of the Deposit Agreement for the purpose of withdrawal of the Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt or Receipts (the “Shares”) pursuant to Section 2.05 of the Deposit Agreement.
          2. We acknowledge (or if we are a broker-dealer, our customer has confirmed to us that it acknowledges) that the Receipts, the Global Depositary Shares evidenced thereby and the securities represented thereby have not been and will not be registered under the Securities Act (the “Act”).
          3. We certify that either:
     (a) We are located outside the United States (within the meaning of Regulation S under the Act), and either:
     (i) we have sold or otherwise transferred, or agreed to sell or otherwise transfer and at or prior to the time of withdrawal will have sold or otherwise transferred, the Receipts or the Shares in accordance with Regulation S under the Act, and we are, or prior to such sale or other transfer we were, the beneficial owner of the Receipts, or
     (ii) we will be the beneficial owner of the Shares upon withdrawal, and, accordingly, we agree that we will not offer, sell, pledge or otherwise transfer the shares except in accordance with Regulation S under the Act.

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OR
(b) we are an “accredited investor” (as defined in Regulation D) acting for our own account or for the account of one or more qualified institutional buyers and we have agreed to acquire (or it has agreed to acquire), the Receipts or the Shares in a transaction which we understand is being made in reliance upon the Regulation D safe harbor.
          4. If we are a broker-dealer, we further certify that we are acting for the account of our customer and that our customer has confirmed the accuracy of the representations contained in paragraph 3 hereof that are applicable to it.
         
  Very truly,


[NAME OF CERTIFYING ENTITY]
 
 
  By:      
    Title:   
Dated:       

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  GLOBAL DEPOSITARY SHARES
 
  (Each Global Depositary Share
 
  represents One (1) deposited Share)
EXHIBIT A
[FORM OF RECEIPT]
REGULATION S
     THIS GLOBAL DEPOSITARY RECEIPT, THE GLOBAL DEPOSITARY SHARES EVIDENCED HEREBY AND THE ORDINARY SHARES OF 1P EACH OF MATCHNET PLC (“SHARES”) REPRESENTED THEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.
     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE AGENT AUTHORIZED BY THE COMPANY FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 


 

THE BANK OF NEW YORK
GLOBAL DEPOSITARY RECEIPT
FOR ORDINARY SHARES OF 1P EACH
OF
MATCHNET PLC
(ORGANIZED UNDER THE LAWS OF ENGLAND AND WALES)
          The Bank of New York as depositary (hereinafter called the “Depositary”), hereby certifies that                      , or registered assigns IS THE OWNER OF                     
GLOBAL DEPOSITARY SHARES
representing deposited ordinary shares of 1p each in registered form (herein called “Shares”) of MatchNet PLC organized under the laws of England and Wales (herein called the “Company”). At the date hereof, each Global Depositary Share represents one (1) Share which is either deposited or subject to deposit under the Global Deposit Agreement at the London office of The Bank of New York (herein called the “Custodian”). The Depositary’s Corporate Trust Office is located at a different address than its principal executive office. Its Corporate Trust Office is located at 101 Barclay Street, New York, N.Y. 10286, and its principal executive office is located at One Wall Street, New York, N.Y. 10286.
         
  THE BANK OF NEW YORK,
as Depositary
 
 
  By:      
    Authorized Signatory   
Dated:                    , 2000       
 
         
Countersigned:
       
 
 
 
Authorized Signatory
   
THE DEPOSITARY’S CORPORATE TRUST OFFICE ADDRESS IS
101 BARCLAY STREET, NEW YORK, N.Y. 10286

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1.   THE GLOBAL DEPOSIT AGREEMENT; BOOK-ENTRY GLOBAL DEPOSITARY SHARES.
     This Global Depositary Receipt is one of an issue (herein called “Receipts”), all issued and to be issued upon the terms and conditions set forth in the deposit agreement, dated as of April 28, 2000 (herein called the “Global Deposit Agreement”), by and among the Company, the Depositary, and all Owners and Beneficial Owners from time to time of Receipts issued thereunder, each of whom by accepting this Receipt agrees to become a party thereto and become bound by all the terms and conditions thereof. The Global Deposit Agreement sets forth the rights of Owners and Beneficial Owners of the Receipts and the rights and duties of the Depositary in respect or in lieu of the Shares deposited or deemed to be deposited thereunder and any and all other securities, property and cash from time to time received in respect or in lieu of such Shares and held thereunder (such Shares, securities, property, and cash are herein called “Deposited Securities”). Copies of the Global Deposit Agreement are on file at the Depositary’s Corporate Trust Office in The City of New York and at the office of the Custodian.
     The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Global Deposit Agreement and are qualified by and subject to the detailed provisions of the Global Deposit Agreement, to which reference is hereby made. Capitalized terms defined in the Global Deposit Agreement and not defined herein shall have the meanings set forth in the Global Deposit Agreement.
     This Receipt shall bear a CUSIP number that is different from any CUSIP number that is or may be assigned to any other restricted depositary shares relating to the Shares.
     If applicable, this Receipt shall bear an ISIN number that is different from any ISIN number that is or may be assigned to any other restricted depositary shares relating to the Shares.
     So long as the Book-Entry GDSs are eligible for book-entry settlement with DTC, unless otherwise required by law, such Book-Entry GDSs representing the Shares deposited with any Custodian shall be represented by a Master GDR registered in the name of a nominee of DTC (initially expected to be Cede & Co.) and no person acquiring such Book-Entry GDSs shall receive or be entitled to receive physical delivery of certificated Receipts evidencing Global Depositary Shares. Accordingly, each Beneficial Owner must rely upon the procedures of DTC and institutions having accounts with DTC to exercise or be entitled to any rights of an Owner of a Receipt. The Bank of New York or such other entity as is agreed with DTC may hold the Master GDR as custodian for DTC. During any period in which Book-Entry GDSs are represented by the Master GDR, ownership of beneficial interests in the Master GDR shall be shown on, and the transfer of such ownership shall be effected only through, records maintained by (i) DTC or its nominee (with respect to participants’ interests) or (ii) institutions having accounts with DTC. All references in this Global Deposit Agreement to issuance or delivery of

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Receipts shall be deemed to include, where applicable, adjustments in the records of the Depositary showing the number of Book-Entry GDSs evidenced by the Master GDR.
     The Company has requested that DTC not effect any book-entry deliveries of the Book-Entry GDSs, except deliveries to or between DTC participant accounts maintained by the banks that act as depositaries for Clearstream (the “Deliver Order Chill”) until the Company delivers further instructions.
     If, at any time when Book-Entry GDSs are represented by a Master GDR, DTC (or Clearstream) ceases to make its book-entry settlement system available for the Book-Entry GDSs, the Company shall consult with the Depositary regarding other arrangements for book-entry settlement. Only in the event that it is impracticable without undue effort or expense to continue to make the Global Depositary Shares available in book-entry form as determined by the Company and the Depositary, the Company shall instruct the Depositary to make Receipts evidencing Physical GDSs available to the Beneficial Owners in physical, certificated form, which availability shall be subject to such additions, deletions and modifications to the form of Receipt and the Global Deposit Agreement and subject to the requirements of any other documents, statements or certifications in connection therewith as the Company and the Depositary may, from time to time, agree. In the event of issuance of Receipts in physical, certificated form evidencing Physical GDSs, such Receipts may evidence any number of Global Depositary Shares.
2.   SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES.
     Subject to the terms and conditions of the Global Deposit Agreement, upon (i) receipt by the Depositary at its Corporate Trust Office of written instructions from DTC or DTC’s nominee on behalf of any Beneficial Owner, if the book-entry settlement system of DTC is then available for the Book-Entry GDSs, and (ii) surrender at the Corporate Trust Office of the Depositary of this Receipt evidencing Book-Entry GDSs or Physical GDSs, if the book-entry settlement system of DTC shall have become unavailable for Book-Entry GDSs, in either case, for the purpose of withdrawal of the Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt or representing such person’s beneficial interest in Book-Entry GDSs evidenced by the Master GDR, and upon payment of the fee of the Depositary for the surrender of Receipts as provided in Section 5.09 of the Global Deposit Agreement and payment of all taxes and governmental charges payable in connection with such surrender and withdrawal of the Deposited Securities (or, with respect to any applicable stamp taxes, upon the Depositary’s receipt of evidence satisfactory to the Depositary that any such amounts have been fully paid), and subject to the terms and conditions of the Global Deposit Agreement, the Memorandum and Articles of Association of the Company, the Deposited Securities and applicable law, the Owner of such Receipt acting for itself or on behalf of the Beneficial Owner or DTC participant, as the case may be, shall be entitled to delivery, to him or upon his order of the amount of Deposited Securities at the time represented by

- 4 -


 

the Global Depositary Shares evidenced by such Receipt or such beneficial interest in Book-Entry GDSs evidenced by the Master GDR. Delivery of such Deposited Securities may be made by the delivery of (x) certificates in the name of such Owner or as ordered by him or certificates properly endorsed or accompanied by a proper instrument or instruments of transfer to such Owner or as ordered by him, and (y) any other securities, property and cash to which such Owner is then entitled in respect of such Receipts to such Owner or as ordered by him. Such delivery shall be made, as hereinafter provided, without unreasonable delay.
     Notwithstanding the foregoing, no Deposited Securities may be withdrawn upon receipt of written instructions from DTC or DTC’s nominee on behalf of any Beneficial Owner or the surrender of this Receipt, as the case may be, unless at or prior to the time of surrender the Depositary shall have received a duly executed and completed written certificate and agreement (“Withdrawal and Transfer Certificate”), in substantially the form attached as Annex II to the Global Deposit Agreement, by or on behalf of the person surrendering such Receipt who after such withdrawal will be the beneficial owner of such Deposited Securities.
     A Receipt surrendered under Section 2.05 of the Global Deposit Agreement for such purposes may be required by the Depositary to be properly endorsed in blank or accompanied by a proper instrument or instruments of transfer in blank, and if the Depositary so requires, the Owner thereof or the Beneficial Owner of an interest as to which withdrawal instructions have been given, as the case may be, shall execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in such order. Thereupon the Depositary shall direct the Custodian to deliver at the London office of such Custodian, subject to Sections 2.06, 3.01 and 3.02 of the Global Deposit Agreement and to the other terms and conditions of the Global Deposit Agreement, to or upon the written order of the person or persons designated in the order delivered to the Depositary as above provided, the amount of Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt or such beneficial interest in Book-Entry GDSs evidenced by the Master GDR, except that the Depositary may make delivery to such person or persons at the Corporate Trust Office of the Depositary of any dividends or distributions with respect to the Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt or such beneficial interest, or of any proceeds of sale of any dividends, distributions or rights, which may at the time be held by the Depositary.
     At the request, risk and expense of any Owner so surrendering a Receipt or any Beneficial Owner submitting such written instructions for delivery, and for the account of such Owner or Beneficial Owner, the Depositary shall direct the Custodian to forward any cash or other property (other than rights) comprising, and forward a certificate or certificates and other proper documents of title for, the Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt or the beneficial interest in

- 5 -


 

     Book-Entry GDSs evidenced by the Master GDR to the Depositary for delivery at the Corporate Trust Office of the Depositary. Such direction shall be given by letter or, at the request, risk and expense of such Owner, by air courier, cable, telex or facsimile transmission.
     Notwithstanding the foregoing, each Owner acknowledges that, and each of the Depositary and the Custodian agrees that neither the Custodian nor the Depositary will make any actual delivery of Shares to any Owner at an address within the United States (as defined under Regulation S).
3.   TRANSFERS, SPLIT-UPS, AND COMBINATIONS OF RECEIPTS.
     The transfer of this Receipt is registrable on the books of the Depositary (a) if the book-entry settlement system of DTC is then available for the Book-Entry GDSs, upon receipt by the Depositary at its Corporate Trust Office of written instructions from DTC or DTC’s nominee on behalf of any Beneficial Owner and (b) if the book-entry settlement system of DTC shall become unavailable for the Book-Entry GDSs, upon surrender at the Corporate Trust Office of the Depositary of this Receipt, by the Owner hereof in person or by a duly authorized attorney, properly endorsed or accompanied by a proper instrument or instruments of transfer (including, in the case of any Receipt in physical, certificated form, the due execution and completion of any endorsements appearing thereon relating to compliance with restrictions applicable to the transfer thereof) and duly stamped as may be required by the laws of the State of New York and the United States, and subject to the payment of funds sufficient to pay any applicable transfer taxes and the fees and expenses of the Depositary as provided in Section 5.09 of the Global Deposit Agreement (or, with respect to any applicable stamp taxes, upon the Depositary’s receipt of evidence satisfactory to the Depositary that any such amounts have been fully paid). Thereupon the Depositary shall execute a new Receipt or Receipts and deliver the same to or upon the order of the person entitled thereto, subject to receipt of any certifications by such person as the Depositary and the Company may require in order to comply with applicable laws.
     This Receipt may be split into other such Receipts, or may be combined with other such Receipts into one Receipt, representing the same aggregate number of Global Depositary Shares as the Receipt or Receipts surrendered. The Depositary may deliver this Receipt or Receipts in exchange for an unrestricted depositary receipt or unrestricted depositary receipts, upon the same terms and subject to the same conditions as apply to a deposit for this Receipt under Section 2.02(b) of the Global Deposit Agreement. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any Receipt or withdrawal of any Deposited Securities or the adjustment of the Depositary’s records to reflect the deposit of Shares or any such transfer, split-up, combination, surrender or withdrawal, the Depositary, Custodian or Registrar may require payment from the depositor of Shares or the presenter of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and

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any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to the Shares being deposited or withdrawn) and payment of any applicable fees as herein provided (or, with respect to any applicable stamp taxes, upon the Depositary’s receipt of evidence satisfactory to the Depositary that any such amounts have been fully paid), may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of the Global Deposit Agreement, including, without limitation, Section 2.06 thereof.
     Notwithstanding the foregoing, with respect to any transfer of a Receipt evidencing Physical GDSs, upon the surrender of such Receipt together with written instructions as to the person or persons, or to whose DTC participant account the Physical GDSs to be transferred are to be credited, the Depositary will, if at the time DTC’s book-entry settlement system is available for Book-Entry GDSs, cancel the surrendered Receipt, adjust its records, and instruct DTC to adjust its records, so as to increase the number of Global Depositary Shares represented by the Master GDR by the number of Physical GDSs evidenced by the Receipt so surrendered for transfer and inform DTC as to the person or persons, or to whose DTC participant account such Global Depositary Shares are to be credited.
     The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or deposits of Shares may be refused, or the transfer of Receipts in particular instances may be refused or the registration of transfer, split-up or combination of outstanding Receipts, or the surrender of outstanding Receipts or the receipt of written instructions from any person having a beneficial interest in Book-Entry GDSs represented by the Master GDR for the purpose of withdrawal of Deposited Securities, may be suspended generally or in particular instances, during any period when the transfer books of the Depositary or the Company or the Foreign Registrar, if applicable, are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of the Global Deposit Agreement, or for any other reason.
4.   LIABILITY OF OWNER FOR TAXES.
     If any tax or other governmental charge shall become payable with respect to this Receipt or any Deposited Securities represented by the Global Depositary Shares evidenced by this Receipt, such tax or other governmental charge will be payable by the Owner or Beneficial Owner hereof to the Depositary (or, with respect to any applicable stamp taxes, such Owner or Beneficial Owner may provide the Depositary with evidence satisfactory to the Depositary that any such amounts have been fully paid). The Depositary may refuse to effect registration of transfer of this Receipt (or any split-up or combination hereof) or any withdrawal of Deposited Securities represented by Global Depositary Shares evidenced by this Receipt until such payment is made, and may

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withhold any dividends or other distributions in respect of any Deposited Securities, or may sell for the account of the Owner or Beneficial Owner hereof any part or all of the Deposited Securities represented by the Global Depositary Shares evidenced by this Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of Such tax or other governmental charge and the Owner or Beneficial Owner hereof will remain liable for any deficiency.
5.   WARRANTIES OF DEPOSITORS.
     Every person depositing Shares under the Global Deposit Agreement will be deemed thereby to represent and warrant, in addition to such representations and warranties as may be required pursuant to Section 2.02 of the Global Deposit Agreement, that such Shares and each certificate therefor are validly issued, fully paid, nonassessable, and free of any preemptive rights of the holders of outstanding Shares and that the person making such deposit is duly authorized to do so. Such representations and warranties will survive the deposit of such Shares and issuance of Receipts.
     Each purchaser of Receipts or Global Depositary Shares or a beneficial interest therein in connection with the Initial Deposit will be deemed to acknowledge, represent and warrant and agree to the same effect as the acknowledgment, certification and agreement set out in paragraphs 2, 3 and 4 of Annex I to the Global Deposit Agreement. Each person depositing or withdrawing Shares will be deemed to acknowledge, represent and warrant to the same effect as the acknowledgment and certifications set out in Annex I or II to the Global Deposit Agreement, as the case may be. Each such purchaser and each such person on whose behalf Shares are deposited, and each person depositing or withdrawing Shares will be deemed to represent that it understands that the Receipts and the underlying Shares, unless otherwise agreed by the Company and the Depositary, will bear one or more legends substantially to the effect set out in Sections 2.01(a) and 2.01(b) of the Global Deposit Agreement. Such acknowledgments, representations, warranties and agreements shall survive any such purchase, deposit or withdrawal.
6.   FILING PROOFS, CERTIFICATES AND OTHER INFORMATION.
     Any person presenting Shares for deposit or any Owner or Beneficial Owner of this Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, proof of the identity of any person legally or beneficially interested in this Receipt and the nature of such interest, proof of compliance with all applicable laws and regulations and provisions of or governing Deposited Securities and the terms of the Global Deposit Agreement or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, of the Shares presented for deposit or other information, to execute such certificates and to make such representations and warranties, as the Depositary may deem necessary or proper. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or distribution of rights or of the sale proceeds thereof or the delivery of any Deposited Securities until such

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proof or other information is filed or such certificates are executed or such representations and warranties made. No Share shall be accepted for deposit unless accompanied by evidence satisfactory to the Depositary that all conditions to such deposit have been satisfied by the person depositing such Shares under the laws and regulations of England and that any necessary approval has been granted by any governmental body in England which is then performing the function of the regulation of currency exchange or any other function which requires approval for the deposit of Shares.
7.   CHARGES OF DEPOSITARY.
     The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering Receipts or to whom Receipts are issued (including without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the Receipts or Deposited Securities or a distribution of Receipts pursuant to Section 4.03 of the Global Deposit Agreement) whichever applicable. (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company (or any other appointed agent of the Company for transfer and registration of the Shares) and applicable to transfers of Shares to the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals under the Global Deposit Agreement, (3) such cable, telex and facsimile transmission expenses as are expressly provided in the Global Deposit Agreement (4) such expenses as are incurred by the Depositary in the conversion of Foreign Currency pursuant to Section 4.05 of the Global Deposit Agreement, (5) a fee of $5.00 or less per 100 Global Depositary Shares (or portion thereof) for the execution and delivery of Receipts pursuant to Section 2.03, 4.03 or 4.04 of the Global Deposit Agreement, and the surrender of receipts pursuant to Section 2.05 or 6.02 of the Global Deposit Agreement and (6) a fee of $.02 or less per Global Depositary Share (or portion thereof) for any cash distribution made pursuant to the Global Deposit Agreement, including, but not limited to, Sections 4.01 through 4.04 thereof, (7) a fee for the distribution of securities pursuant to Section 4.02 of the Global Deposit Agreement, such fee being in an amount equal to the fee for the execution and delivery of Global Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause (7) treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners and (8) a fee not in excess of $1.50 per certificate for a Receipt or Receipts for transfers made pursuant to the terms of the Global Deposit Agreement.
     The Depositary, subject to Section 2.09 of the Global Deposit Agreement, may own and deal in any class of securities of the Company and its affiliates and in Receipts.
8.   PRE-RELEASE OF RECEIPTS.
     Notwithstanding Section 2.03 of the Global Deposit Agreement, the Depositary may execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.02

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of the Global Deposit Agreement (a “Pre-Release”). The Depositary may, pursuant to Section 2.05 of the Global Deposit Agreement, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation from the person to whom Receipts or Shares are to be delivered, that such person, or its customer, owns the Shares or Receipts to be remitted, as the case may be, (b) at all times fully collateralized with cash or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of Global Depositary Shares which are outstanding at any time as a result of Pre-Release will not normally exceed thirty percent (30%) of the Shares deposited under the Global Deposit Agreement; provided, however. that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate.
     The Depositary may retain for its own account any compensation received by it in connection with the foregoing.
     The person to whom any Pre-Release is to be made pursuant to Section 2.09 of the Global Deposit Agreement shall be required to deliver to the Depositary a duly executed and completed Depositor Certificate in substantially the form attached to the Global Deposit Agreement as Annex I.
9.   TITLE TO RECEIPTS.
     Title to this Receipt (and to the Global Depositary Shares evidenced hereby), when properly endorsed or accompanied by a proper instrument or instruments of transfer and transferred in accordance with the terms of the Global Deposit Agreement, is transferable by delivery with the same effect as in the case of a negotiable instrument under the laws of the State of New York; provided, however, that the Depositary, notwithstanding any notice to the contrary, may treat the Owner hereof as the absolute owner hereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Global Deposit Agreement and for all other purposes and neither the Depositary nor the Company will have any obligation or be subject to any liability under the Global Deposit Agreement to any holder of this Receipt, unless such holder is the Owner hereof.
10.   VALIDITY OF RECEIPT.
     This Receipt will not be entitled to any benefits under the Global Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shall have been executed by the Depositary by the manual or facsimile signature of a duly authorized signatory of the Depositary, and if a Registrar (other than the Depositary) for the Receipts

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shall have been appointed, countersigned by the manual or facsimile signature of a duly authorized signatory of the Registrar.
11.   REPORTS; INSPECTION OF TRANSFER BOOKS.
     The Depositary will make available for inspection by Owners at its Corporate Trust Office any reports and communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary shall also send to the Owners copies of such reports when furnished by the Company pursuant to Section 5.06 of the Global Deposit Agreement.
     The Depositary shall keep books at its Corporate Trust Office for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners, provided that such inspection shall not be for the purpose of communicating with Owners in the interest of a business or object other than the business of the Company or a matter related to the Global Deposit Agreement or the Receipts.
     The Depositary may close the transfer books, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties under the Global Deposit Agreement.
12.   DIVIDENDS AND DISTRIBUTIONS.
     Whenever the Depositary shall receive any cash dividend or other cash distribution on any Deposited Securities, the Depositary shall, if such cash is received in Foreign Currency, subject to the provisions of Section 4.05 of the Global Deposit Agreement, convert such dividend or distribution into Dollars and shall distribute the amount thus received (net of the fees and expenses of the Depositary as provided in Section 5.09 of the Global Deposit Agreement) to the Owners entitled thereto, in proportion to the number of Global Depositary Shares representing such Deposited Securities evidenced by Receipts held by them respectively; provided, however, that in the event that the Company or the Depositary shall be required to withhold and does withhold from such cash dividend or such other cash distribution an amount on account of taxes or other governmental charges, the amount distributed to the Owner of the Receipts evidencing Global Depositary Shares representing such Deposited Securities shall be reduced accordingly.
     Subject to the provisions of Sections 4.11 and 5.09 of the Global Deposit Agreement, whenever the Depositary shall receive any distribution other than a distribution described in Section 4.01, 4.03 or 4.04 of the Global Deposit Agreement, the Depositary shall cause the securities or property received by it to be distributed to the Owners entitled thereto, after the deduction or upon payment of any fees and expenses of the Depositary or any taxes or other governmental charges under the Global Deposit

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Agreement in proportion to the number of Global Depositary Shares representing such Deposited Securities evidenced by Receipts held by them respectively, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Company or the Depositary withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act in order to be distributed to Owners or Beneficial Owners of Receipts) the Depositary deems such distribution not to be feasible, the Depositary may adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees and expenses of the Depositary as provided in Section 5.09 of the Global Deposit Agreement) shall be distributed by the Depositary to the Owners entitled thereto, all in the manner and subject to the conditions described in Section 4.01 of the Global Deposit Agreement. Each beneficial owner of Receipts or Shares so distributed shall be deemed to have acknowledged that the shares have not been registered under the Securities Act and to have agreed to comply with the restrictions on transfer described in the legend affixed at the beginning hereof.
     If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Depositary may either (i) if Book-Entry GDSs are available, reflect on the records of the Depositary such increase in the aggregate number of GDSs representing Shares evidenced by the Master GDR and give notice to DTC of the related increase in the number of GDSs evidenced by the Master GDR or (ii) if Book-Entry GDSs are not available, distribute to the Owners of outstanding Receipts entitled thereto, in proportion to the number of Global Depositary Shares representing such Deposited Securities evidenced by Receipts held by them respectively, additional Receipts evidencing an aggregate number of Global Depositary Shares representing the amount of Shares received as such dividend or free distribution, subject to the terms and conditions of the Global Deposit Agreement with respect to the deposit of Shares and the issuance of Global Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 of the Global Deposit Agreement and the payment of the fees and expenses of the Depositary as provided in Section 5.09 of the Global Deposit Agreement. The Depositary may withhold any such distribution of Receipts if it has not received satisfactory assurances from the Company that such distribution does not require registration under the Securities Act or is exempt from registration under the provisions of such Act. In lieu of delivering Receipts for fractional Global Depositary Shares in any such case, the Depositary shall sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.01 of the Global Deposit Agreement. If such adjustments on the records of the Depositary are not so made or additional Receipts are not so distributed, each Global Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented

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thereby. Each Beneficial Owner of Receipts or Shares so distributed shall be deemed to have acknowledged that the Shares have not been registered under the Securities Act and to have agreed to comply with the restrictions on transfer described in the form of legend set forth in Section 2.01 of the Global Deposit Agreement.
     In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems necessary and practicable to pay any such taxes or charges and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of Global Depositary Shares held by them respectively.
13.   RIGHTS.
     In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available to such Owners or, if by the terms of such rights offering or for any other reason, the Depositary may not either make such rights available to any Owners or dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines in its discretion that it is lawful and feasible to make such rights available to all or certain Owners but not to other Owners, the Depositary may distribute to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of Global Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it deems appropriate.
     In circumstances in which rights would otherwise not be distributed, if an Owner of Receipts requests the distribution of warrants or other instruments in order to exercise the rights allocable to the Global Depositary Shares of such Owner under the Global Deposit Agreement, the Depositary will make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its sole discretion are reasonably required under applicable law.
     If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon instruction from such an Owner pursuant to such warrants or other instruments to the Depositary from such an Owner to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of an amount

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equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon payment of the fees and expenses of the Depositary and any other charges as set forth in such warrants or other instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.02 of the Global Deposit Agreement, and shall, pursuant to Section 2.03 of the Global Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a distribution pursuant to the second paragraph of Section 4.04 of the Global Deposit Agreement, such Receipts shall be legended in the manner provided in Section 2.01 of the Global Deposit Agreement and in accordance with applicable U.S. laws, and shall be subject to the appropriate restrictions on sale, deposit, cancellation and transfer under such laws.
     If the Depositary determines in its discretion that it is not lawful and feasible to make such rights available to all or certain Owners, it may sell the rights, warrants or other instruments in proportion to the number of Global Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights-available, and allocate the net proceeds of such sales (net of the fees and expenses of the Depositary as provided in Section 5.09 of the Global Deposit Agreement and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of the Global Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise.
     The Depositary will not offer rights to Owners unless both the rights and the securities to which such rights relate are either exempt from registration under the Securities Act with respect to a distribution to all Owners or are registered under the provisions of such Act; provided, that nothing in the Global Deposit Agreement shall create any obligation on the part of the Company to file a registration statement with respect to such rights or underlying securities or to endeavor to have such a registration statement declared effective. If an Owner of Receipts requests the distribution of warrants or other instruments, notwithstanding that there has been no such registration under such Act, the Depositary shall not effect such distribution unless it has received an opinion from recognized counsel in the United States for the Company upon which the Depositary may rely that such distribution to such Owner is exempt from such registration.
     The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.

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14.   CONVERSION OF FOREIGN CURRENCY.
     Whenever the Depositary shall receive Foreign Currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the Foreign Currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted, by sale or in any other manner that it may determine, such Foreign Currency into Dollars, and such Dollars shall be distributed to the Owners entitled thereto or, if the Depositary shall have distributed any warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such warrants and/or instruments, as applicable, upon surrender thereof for cancellation in whole or in part depending upon the terms of such warrants or other instruments. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.09 of the Global Deposit Agreement.
     If such conversion or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary shall file such application for approval or license, if any, as it may deem desirable.
     If at any time the Depositary shall determine in its judgment that any Foreign Currency received by the Depositary is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the opinion of the Depositary is not obtainable, or if any such approval or license is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) received by the Depositary to, or in its discretion may hold such Foreign Currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.
     If any such conversion of Foreign Currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make such conversion and distribution in Dollars to the extent permissible to the Owners entitled thereto and may distribute the balance of the Foreign Currency received by the Depositary to, or hold such balance uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled thereto.
15.   FIXING OF RECORD DATE.
     Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever the Depositary shall receive notice of

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any meeting of holders of Shares or other Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each Global Depositary Share, or whenever the Depositary shall find it necessary or convenient, the Depositary shall fix a record date which shall be the same date as the record date, if any, applicable to the Deposited Securities, or as close thereto as practicable (a) for the determination of the Owners who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, or (b) on or after which each Global Depositary Share will represent the changed number of Shares. Subject to the provisions of Sections 4.01 through 4.05 of the Global Deposit Agreement and to the other terms and conditions of the Global Deposit Agreement, the Owners on such record date shall be entitled, as the case may be, to receive the amount distributable by the Depositary with respect to such dividend or other distribution or such rights or the net proceeds of sale thereof in proportion to the number of Global Depositary Shares evidenced by Receipts held by them respectively and to give voting instructions, to exercise the rights of Owners under the Global Deposit Agreement with respect to such changed number of Shares and to act in respect of any other such matter.
16.   VOTING OF DEPOSITED SECURITIES.
     Upon receipt of notice of any meeting of holders of Shares or other Deposited Securities, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, mail to the Owners a notice, the form of which notice shall be in the sole discretion of the Depositary, which shall contain (a) such information as is contained in such notice of meeting received by the Depositary from the Company, (b) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of English law and of the Memorandum and Articles of Association of the Company, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective Global Depositary Shares, and (c) a statement as to the manner in which such instructions may be given[, including an express indication that such instructions may be given or deemed given in accordance with the last sentence of this paragraph if no instruction is received, to the Depositary to give a discretionary proxy to a person designated to the Company]. Upon the written request of an Owner on such record date, received on or before the date established by the Depositary for such purpose, the Depositary shall endeavor, insofar as practicable, to vote or cause to be voted the amount of Shares or other Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the Shares or other Deposited Securities, other than in accordance with such instructions [or deemed instructions. If no instructions are received by the Depositary from any Owner with respect to any of the Deposited Securities represented by the Global Depositary Shares evidenced by this Receipt on or before the date established by the Depositary for such purpose, the Depositary

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shall deem such Owner to have instructed the Depositary to give a discretionary proxy to a person designated by the Company with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a person designated by the Company to vote such Deposited Securities, provided, that no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary (and the Company agrees to provide such information as promptly as practicable in writing) that (x) the Company does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially and adversely affects the rights of holders of Shares].
17.   CHANGES AFFECTING DEPOSITED SECURITIES.
     In circumstances where the provisions of Section 4.03 of the Global Deposit Agreement do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities, shall be treated as new Deposited Securities under the Global Deposit Agreement, and Global Depositary Shares shall thenceforth represent, in addition to existing Deposited Securities, the right to receive the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may (a) if Book-Entry GDSs are available, make appropriate entry in its records, or (b) if Book-Entry GDSs are not available, either (i) execute and deliver additional Receipts as in the case of a dividend in Shares or (ii) call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities.
18.   LIABILITY OF THE COMPANY AND DEPOSITARY.
     Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Beneficial Owner of any Receipt, if by reason of any provision of any present or future law, regulation, order, decree, moratorium or fiat of the United States or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the Memorandum and Articles of Association of the Company, or by reason of any provision of any securities issued or distributed by the Company, or any offering or distribution thereof, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Company or any of their directors, employees, agents or affiliates shall be prevented, delayed or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of the Global Deposit Agreement or the Deposited Securities it is provided shall be done or performed; nor shall the Depositary nor the Company nor any

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of their respective directors, employees, agents or affiliates incur any liability to any Owner or Beneficial Owner of any Receipt by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Global Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in the Global Deposit Agreement. Where, by the terms of a distribution pursuant to Section 4.01, 4.02, or 4.03 of the Global Deposit Agreement, or an offering or distribution pursuant to Section 4.04 of the Global Deposit Agreement, or for any other reason, such distribution or offering may not be made available to Owners, and the Depositary may not dispose of such distribution or offering on behalf of such Owners and make the net proceeds available to such Owners, then the Depositary shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse.
     The Company assumes no obligation nor shall it be subject to any liability under the Global Deposit Agreement to any Owner or Beneficial Owner, except that it agrees to perform its obligations specifically set forth in the Global Deposit Agreement without negligence or bad faith. The Depositary assumes no obligation nor shall it be subject to any liability under the Global Deposit Agreement to any Owner or Beneficial Owner (including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that it agrees to perform its obligations specifically set forth in the Global Deposit Agreement without negligence or bad faith. Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it in its sole discretion against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary. Neither the Depositary nor the Company shall be liable for any action or nonaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner, or any other person believed by it in good faith to be competent to give such advice or information including, but not limited to, any such action or nonaction based upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary. The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or nonaction is in good faith. No disclaimer of liability under the Securities Act is intended by any provision of the Global Deposit Agreement.

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     The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of the Global Deposit Agreement and of the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by either the Depositary or any Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Company or any of its directors, employees, agents and affiliates.
     The Depositary agrees to indemnify the Company, its directors, employees, agents and affiliates and hold them harmless from any liability or expense which may arise out of acts performed or omitted by the Depositary or its Custodian or their respective directors, employees, agents and affiliates due to their negligence or bad faith.
19.   RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF SUCCESSOR CUSTODIAN.
     The Depositary may at any time resign as Depositary under the Global Deposit Agreement by written notice of its election to do so delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Global Deposit Agreement. The Depositary may at any time be removed by the Company by written notice of such removal effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Global Deposit Agreement. In case at any time the Depositary shall resign or be removed, the Company will use its best efforts to appoint a successor depositary, which will be a bank or trust company having an office in the Borough of Manhattan, The City of New York. Every successor depositary will execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment under the Global Deposit Agreement, and thereupon such successor depositary, without any further act or deed, will become fully vested with all the rights, powers, duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the written request of the Company, will execute and deliver an instrument transferring to such successor all rights and powers of such predecessor under the Global Deposit Agreement, will duly assign, transfer and deliver all right, title and interest in the Deposited Securities to such successor, and will deliver to such successor a list of the Owners of all outstanding Receipts. Any such successor depositary will promptly mail notice of its appointment to the Owners. Whenever the Depositary in its discretion determines that it is in the best interest of the Owners to do so, it may appoint a substitute or additional custodian or custodians.
20.   AMENDMENT.
     The form of the Receipts and any provisions of the Global Deposit Agreement may at any time and from time to time be amended by agreement between the Company

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and the Depositary without the consent of Owners or Beneficial Owners of Receipts in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other expenses), or which shall otherwise prejudice any substantial existing right of Owners will, however, not become effective as to outstanding Receipts until the expiration of thirty days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner and Beneficial Owner at the time any amendment so becomes effective will be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Global Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of this Receipt to surrender such Receipt and receive herefor the Deposited Securities represented hereby, except in order to comply with mandatory provisions of applicable law.
21.   TERMINATION OF GLOBAL DEPOSIT AGREEMENT.
     The Depositary shall at any time at the direction of the Company terminate the Global Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 90 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate the Global Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding, if at any time 90 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.04 of the Global Deposit Agreement. On and after the date of termination, the Owner of this Receipt will, upon (a) (i) receipt by the Depositary at its Corporate Trust Office of written instructions from DTC or DTC’s nominee on behalf of any Beneficial Owner, if the book-entry settlement system of DTC is then available for the Book-Entry GDSs, or (ii) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.05 of the Global Deposit Agreement, and (c) payment of any applicable taxes or governmental charges, be entitled to delivery, to him or upon his order, of the amount of Deposited Securities represented by the Global Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends and other distributions to the Owners thereof, and shall not give any further notices or perform any further acts under the Global Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights and other property as provided in the Global Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in

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accordance with the terms and conditions of the Global Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held :under the Global Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it under the Global Deposit Agreement, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds. After making such sale, the Depositary shall be discharged from all obligations under the Global Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Global Deposit Agreement, and any applicable taxes or governmental charges). Upon the termination of the Global Deposit Agreement, the Company shall be discharged from all obligations under the Global Deposit Agreement except for its obligations to the Depositary under Sections 5.08 and 5.09 of the Global Deposit Agreement.

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As Filed With The United States Securities and Exchange Commission on November 7, 2005
Registration No. 333-123228
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Amendment No. 2 to
Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
 
Spark Networks plc
(Exact name of Registrant as specified in its charter)
 
         
England and Wales   7375   98-0200628
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (IRS Employer
Identification Number)
 
8383 Wilshire Boulevard, Suite 800
Beverly Hills, CA 90211
(323) 836-3000
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
 
David E. Siminoff
President and Chief Executive Officer
Spark Networks plc
8383 Wilshire Boulevard, Suite 800
Beverly Hills, California 90211
Telephone: (323) 836-3000
Fax: (323) 836-3333
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
Copies to:
Thomas J. Poletti, Esq.
Katherine J. Blair, Esq.
Anh Q. Tran, Esq.
Kirkpatrick & Lockhart Nicholson Graham LLP
10100 Santa Monica Boulevard, 7th Floor
Los Angeles, California 90067
Telephone: (310) 552-5000
Fax: (310) 552-5001
 
     Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement is declared effective.
     If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check following box: þ
     If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o
     If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o
     If this form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering:    o
     If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act of 1933, check the following box:    o
 
CALCULATION OF REGISTRATION FEE
                         
                         
                         
            Maximum     Proposed Maximum      
      Amount to be     Offering Price     Aggregate Offering     Amount of
Title of Each Class of Securities to be Registered     Registered(1)     Per Share(2)     Price     Registration Fee
                         
  Ordinary Shares, par value 1p per share(3)
    26,209,496     $7.12     $186,611,612     $21,964
                         
  Ordinary Shares, par value 1p per share(3)(4)
    7,025,000     $7.12     $50,018,000     $5,887
                         
    Total Registration Fee
                      $27,851(5)
                         
                         
(1)  In accordance with Rule 416(a), the Registrant is also registering hereunder an indeterminate number of additional shares of common stock that shall be issuable pursuant to Rule 416 to prevent dilution resulting from stock splits, stock dividends or similar transactions.
(2)  Estimated pursuant to Rule 457(c) of the Securities Act of 1933, as amended, solely for the purpose of computing the amount of the registration fee based on the average of the high and low sales prices of the ordinary shares traded in the form of Global Depositary Receipts, or GDRs, as reported by the Frankfurt Stock Exchange in Germany on September 15, 2005. For purposes of this calculation the sales price of the GDRs is converted into U.S. dollars at an exchange rate of 0.81413 per $1.00, which is based on the average bid and ask currency exchange price as reported by OANDA on September 15, 2005.
(3)  Consists of ordinary shares that are to be offered and sold in the form of American Depositary Shares, or ADSs, by the selling shareholders identified in this prospectus and any prospectus supplement. The ADSs, each representing one ordinary share, evidenced by American Depositary Receipts, or ADRs, upon deposit of the ordinary shares registered hereby, are being registered under a separate registration statement on Form F-6.
(4)  Represents shares of the Registrant’s ordinary shares being registered for resale that have been or may be acquired upon the exercise of warrants or options issued to the selling stockholders named in this prospectus and any prospectus supplement.
(5)  Previously paid. Pursuant to Rule 457(p), the registration fee was partially offset by a previously paid filing fee of $12,670 paid in connection with the filing on August 4, 2004 by MatchNet, Inc. of a registration statement on Form S-1 (file number 333-117940). In addition, $15,210 was also previously paid.
    The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 
 


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The information in this prospectus is not complete and may be changed. The selling shareholders may not sell these securities until the Securities and Exchange Commission declares our registration statement effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion, dated November 7, 2005
33,234,496 American Depositary Shares
SPARK NETWORKS PLC
(LOGO)
Representing 33,234,496 Ordinary Shares
 
     
  The selling shareholders identified in this prospectus and any prospectus supplement are offering 33,234,496 ordinary shares in the form of American Depositary Shares, or ADSs. Each ADS represents the right to receive one ordinary share. We will not receive any proceeds from the sale of our shares by the selling shareholders, except for funds received from the exercise of warrants and options held by selling shareholders, if and when exercised.
 
  No public market for our ordinary shares or ADSs currently exists in the United States of America.
 
  Our ordinary shares in the form of Global Depositary Shares, or GDSs, currently trade on the Frankfurt Stock Exchange under the symbol “MHJG.” The last reported sales price of the GDSs on the Frankfurt Stock Exchange on November 3, 2005 was 5.65 per GDS, or $6.86 per GDS.
 
  Proposed trading symbol for the ADSs: American Stock Exchange — LOV.
This investment involves risk. See “Risk Factors” beginning on page 6.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of anyone’s investment in these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is                     , 2005


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You should rely only on information contained in this prospectus. We have not authorized any other person to provide you with different information. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. The information in this prospectus is complete and accurate as of the date on the front cover, but the information may have changed since that date.

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PROSPECTUS SUMMARY
This summary highlights information continued elsewhere in this prospectus and does not contain all the information you should consider in your investment decision. You should read this summary, which includes material information, with the more detailed information set out in this prospectus and the financial statements and related notes. You should carefully consider, among other things, the matters discussed in “Risk Factors.” We were incorporated in September 1998 under the laws of England and Wales as a public limited company. Throughout this prospectus, we refer to Spark Networks plc (known as MatchNet plc until January 10, 2005) and our subsidiaries as “we,” “us,” “our,” “our company,” “Spark Networks” and “MatchNet” unless otherwise indicated. Spark Networks, MatchNet, JDate, AmericanSingles and MingleMatch are our trademarks. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of the respective holders.
Our Business
We are a leading provider of online personals services in the United States and internationally. Our Web sites enable adults to meet online and participate in a community, become friends, date, form a long-term relationship or marry. We provide this opportunity through the many features on our Web sites, such as detailed profiles, onsite email centers, real-time chat rooms, and instant messaging services. According to comScore Media Metrix, we averaged approximately 3.6 million total unique visitors per month to our Web sites in the United States during the first six months of 2005, which ranked us as the third largest provider of online personals services in the United States in terms of total unique visitors. comScore Media Metrix defines “total unique visitors” as the estimated number of different individuals that visited any content of a Web site, a category, a channel, or an application during the reporting period. The number of “total unique visitors” to our Web sites as measured by comScore Media Metrix does not correspond to the number of members we have in any given period. Currently, our key Web sites are JDate.com and AmericanSingles.com. We operate several international Web sites and maintain operations in both the United States and Israel. Information regarding the geographical source of our revenues can be found in our Consolidated Financial Statements included in this prospectus. Membership on our sites is free and allows a registered user to post a personal profile and to access our searchable database of member profiles and our 24 hours a day, 7 days a week customer service. The ability to initiate most communication with other members requires the payment of a monthly subscription fee, which represents our primary source of revenue. Our subscription fees are charged on a monthly basis, with discounts for longer-term subscriptions ranging from three to twelve months, and subscriptions renew automatically for subsequent one-month periods until paying subscribers terminate them.
We believe that online personals fulfill significant needs for America’s single adults who are looking to meet a companion or date. Traditional methods such as printed personals advertisements, offline dating services and public gathering places often do not meet the needs of time-constrained single people. Printed personals advertisements offer individuals limited personal information and interaction before meeting. Offline dating services are time-consuming, expensive and offer a smaller number of potential partners. Public gathering places such as restaurants, bars and social venues provide a limited ability to learn about others prior to an in-person meeting. In contrast, online personals services facilitate interaction between singles by allowing them to screen and communicate with a large number of potential companions. With features such as detailed personal profiles, email and instant messaging, this medium allows users to communicate with other singles at their convenience and affords them the ability to meet multiple people in a safe and secure online setting.
 

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For the six month period ended June 30, 2005, we had approximately 219,200 average paying subscribers, representing an increase of 0.6% from the same period in 2004. Our JDate and AmericanSingles segments had approximately 69,300 and 115,300 average paying subscribers for the six months ended June 30, 2005, a decrease of 2.7% and 11.2%, respectively, compared to the same period in 2004.
We intend to grow our business in the following ways:
  •   Increasing our base of members in the United States and internationally through consistent and targeted marketing efforts and geographic expansion. We define a member as an individual who has posted a personal profile during the immediately preceding 12 months or an individual who has previously posted a personal profile and has subsequently logged on to one of our Web sites at least once in the preceding 12 months. Members may or may not be paying subscribers which we define as individuals who have paid a monthly fee for access to communication and Web site features beyond those provided to our members. Accordingly, the number of members we have at any given time may not directly affect our revenue.
 
  •   Increasing the number of our members who become paying subscribers by offering improved technology and communications features and by utilizing our strong customer service focus.
 
  Extending into new vertical affinity markets that we believe will be receptive to paid online personals and are large enough to enable us to attain enough paying subscribers sufficient to support an online community. We view vertical affinity markets as identifiable groups of people who share common interests and the desire to meet companions or dates with similar interests, backgrounds or traits.
Office Location
Our principal executive offices are located at 8383 Wilshire Boulevard, Suite 800, Beverly Hills, California 90211. Our telephone number at that location is (323) 836-3000. Our registered office is located at 24/26 Arcadia Avenue, N3 2JU, England. Our corporate Web site address is www.spark.net. This is a textual reference only. We do not incorporate the information on our Web site into this prospectus, and you should not consider any information on, or that can be accessed through, our Web site as part of this prospectus.
Our Securities
Our ordinary shares currently trade on the Frankfurt Stock Exchange in the form of Global Depositary Shares, or GDSs, each of which represents the right to receive one ordinary share. The selling shareholders identified in this prospectus and any prospectus supplement are offering 33,234,496 ordinary shares in the form of American Depositary Shares, or ADSs, each of which represents the right to receive one ordinary share. ADSs may be issued to persons located in the United States and the selling shareholders may sell their ordinary shares in the form of ADSs after this registration statement is declared effective by the Securities and Exchange Commission except during any time with respect to which we inform those shareholders that this registration statement may not be relied upon. Selling shareholders that hold their ordinary shares in the form of GDSs may offer and sell their shares in the United States by surrendering those GDSs to our depositary bank, The Bank of New York, and requesting the depositary bank to deliver ADSs to the order of the purchaser. Once GDSs have been surrendered for ordinary shares, the shares may not be re-deposited for GDSs because the GDS facility has been closed to such re-deposits of shares, and if and when all GDSs have been surrendered, we
 

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intend to terminate our GDS deposit agreement such that our ordinary shares will only be publicly traded in the form of ADSs.
We are registering the ordinary shares in the form of ADSs, and not directly as ordinary shares, because an acquisition or transfer of an ordinary share in the United States will trigger a United Kingdom stamp duty, and such stamp duty is generally not triggered when the sale or transfer of the ordinary shares is effected in the form of ADSs. See “Taxation” on page 108 for additional information regarding taxation of our ordinary shares and ADSs.
The Offering
ADSs offered by selling shareholders 33,234,496 ADSs(1)
 
Total ordinary shares outstanding after the offering, including ordinary shares underlying ADSs and GDSs 26,209,496 Ordinary Shares(2)
 
Use of Proceeds We will not receive any of the net proceeds from the sale of shares by the selling shareholders. See “Use of Proceeds.”
 
Proposed American Stock Exchange symbol LOV
 
(1) Consists of 26,209,496 ordinary shares, 6,595,000 ordinary shares underlying options and 430,000 ordinary shares underlying warrants. The ordinary shares are to be offered and sold in the form of American Depositary Shares, or ADSs. The ADSs, each representing one ordinary share, evidenced by American Depositary Receipts, or ADRs, upon deposit of the ordinary shares registered hereby, are being registered under a separate registration statement on Form F-6.
 
(2) The total number of ordinary shares to be outstanding immediately after this offering is based on 26,209,496 ordinary shares outstanding as of October 19, 2005. This information excludes:
  •   8,760,688 ordinary shares issuable upon the exercise of outstanding options as of October 19, 2005, with exercise prices ranging from $0.88 to $9.44 per share and a weighted average exercise price of $3.96 per share;
 
  •   430,000 ordinary shares issuable upon the exercise of warrants outstanding as of October 19, 2005, with an exercise price an exercise price of $2.49 per share; and
 
  14,372,562 ordinary shares available for issuance under our share option schemes.
 

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Summary Consolidated Financial Data
The following summary consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements, related notes, and other financial information included herein.
                                             
        Six months ended
    Year ended December 31,(1)   June 30,(1)
         
    2002   2003   2004   2004   2005
                     
                (unaudited)   (unaudited)
    (in thousands, except per share and paying subscriber data)
Consolidated Statements of Operations Data:
                                       
Net revenues
  $ 16,352     $ 36,941     $ 65,052     $ 30,862     $ $31,990  
Direct marketing expenses
    5,396       18,395       31,240       15,864       11,279  
                               
 
Contribution margin
    10,956       18,546       33,812       14,998       20,711  
Operating expenses:
                                       
 
Indirect marketing
    403       907       2,451       1,051       503  
 
Customer service
    1,207       2,536       3,379       1,878       1,137  
 
Technical operations
    1,587       4,341       7,162       3,318       2,950  
 
Product development
    603       959       2,013       871       1,890  
 
General and administrative (excluding share-based compensation)(2)
    7,996       16,885       27,727       12,078       12,512  
 
Share-based compensation
          1,871       1,704       2,401       (28 )
 
Amortization of goodwill and intangible assets
    524       555       860       482       411  
 
Impairment of long-lived assets and goodwill
          1,532       208              
                               
   
Total operating expenses
    12,320       29,586       45,504       22,079       19,375  
                               
Operating income (loss)
    (1,364 )     (11,040 )     (11,692 )     (7,081 )     1,336  
Interest (income) and other expenses, net
    (840 )     (188 )     (66 )     32       144  
                               
(Loss) income before income taxes
    (524 )     (10,852 )     (11,626 )     (7,113 )     1,192  
Provision for income taxes
                1       1       64  
                               
Net (loss) income
  $ (524 )   $ (10,852 )   $ (11,627 )   $ (7,114 )   $ 1,128  
                               
Net (loss) income per share — basic and diluted(3)
  $ (0.03 )   $ (0.57 )   $ (0.51 )   $ (0.33 )   $ 0.04  
                               
Weighted average shares outstanding — basic(3)
    18,460       18,970       22,667       21,521       25,389  
Weighted average shares outstanding — diluted(3)
                                    29,080  
Other Financial Data:
                                       
Depreciation
  $ 874     $ 1,441     $ 3,065     $ 1,369     $ 1,767  
Additional Information:
                                       
Average paying subscribers(4)
    58,700       125,800       226,100       217,900       219,200  
 

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    December 31,    
        June 30,
    2002   2003   2004   2005
                 
Consolidated Balance Sheet Data:
                               
Cash, cash equivalents and marketable securities
  $ 7,755     $ 5,815     $ 7,423     $ 8,292  
Total assets
    17,461       16,969       27,359       41,485  
Deferred revenue
    1,535       3,232       3,933       3,925  
Capital lease obligations and notes payable
          487       1,873       11,978  
Total liabilities
    3,998       11,659       16,872       26,340  
Shares subject to rescission(5)
                3,819       3,819  
Accumulated deficit
    (21,156 )     (32,008 )     (43,635 )     (42,507 )
Total shareholders’ equity
    13,463       5,310       6,668       11,326  
 
(1) Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of certain asset and business acquisitions.
(2) In 2004, general and administrative expenses included an expense of approximately $2.4 million related to an employee severance, $2.1 million related to the United States initial public offering of MatchNet, Inc. that was planned for mid-2004, but which was withdrawn shortly after the related registration statement was filed in the third quarter of 2004, as well as one legal settlement resulting in the recognition of $900,000 in expenses in the third quarter and two legal settlements resulting in the recognition of $2.1 million in expenses in the fourth quarter of 2004. In 2003, general and administrative expenses included a charge of $1.7 million primarily related to a settlement with Comdisco.
(3) For information regarding the computation of per share amounts, refer to note 1 of our consolidated financial statements.
(4) Average paying subscribers for each month are calculated as the sum of the paying subscribers at the beginning and the end of the month, divided by two. Average paying subscribers for periods longer than one month are calculated as the sum of the average paying subscribers for each month, divided by the number of months in such period. Additionally, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of other business metrics we use to evaluate our business.
(5) Under our 2000 Executive Share Option Scheme (“2000 Option Scheme”), we granted options to purchase ordinary shares to certain of our employees, directors and consultants. The issuances of securities upon exercise of options granted under our 2000 Option Scheme may not have been exempt from registration and qualification under federal and California state securities laws, and as a result, we may have potential liability to those employees, directors and consultants to whom we issued securities upon the exercise of these options. In order to address that issue, we may elect to make a rescission offer to those persons who exercised all, or a portion, of those options and continue to hold the shares issued upon exercise, to give them the opportunity to rescind the issuance of those shares. However, the staff of the Securities and Exchange Commission is of the opinion that a rescission offer will not bar or extinguish any liability under the Securities Act of 1933 with respect to these options and shares, nor will a rescission offer extinguish a holder’s right to rescind the issuance of securities that were not registered or exempt from the registration requirements under the Securities Act of 1933. As of June 30, 2005, assuming every eligible person that continues to hold the securities issued upon exercise of options granted under the 2000 Option Scheme were to accept a rescission offer, we estimate the total cost to us to complete the rescission would be approximately $3.8 million including statutory interest at 7% per annum, accrued since the date of exercise of the options. The rescission acquisition price is calculated as equal to the original exercise price paid by the optionee to our company upon exercise of their option.
Presentation of Financial Information
We report our financial statements in U.S. dollars and prepare our financial statements in accordance with generally accepted accounting principles in the United States. In this prospectus, except where otherwise indicated, references to “$” or “U.S. dollars” are to the lawful currency of the United States, references to “” or “euro” are to the single currency of the European Union, and references to “£” or “pound sterling” are to the currency of the United Kingdom. Unless otherwise noted, the exercise prices of options and warrants as outstanding on June 30, 2005 noted in this prospectus are presented on an as converted basis into U.S. dollars at an exchange rate of  0.82898 per $1.00 or £ 0.55426 per $1.00, each of which is based on the average bid and ask exchange price as reported by OANDA for the day June 30, 2005. The exercise prices of options and warrants as outstanding on August 31, 2005 utilize the exchange rate as of October 19, 2005, which as  0.83612 per $1.00.
 

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RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this prospectus and the related registration statement before making an investment decision. The risks described below are the material risks that we are currently aware of that are facing our company. In addition, other sections of this prospectus may include additional factors that could adversely impact our business and operating results. If any of the following risks actually occurs, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our ordinary shares, in the form of ADSs, would decline and you may lose all or part of your investment.
Risks Related To Our Business
We have significant operating losses and we may incur additional losses in the future.
We have historically generated significant operating losses. As of June 30, 2005, we had an accumulated deficit of approximately $42.5 million. We had net income of approximately $1.1 million for the six months ended June 30, 2005 and a loss of $11.6 million for the fiscal year ended December 31, 2004. We also had negative operating cash flow in 2004. We expect that our operating expenses will continue to increase during the next several years as a result of the promotion of our services, the hiring of additional key personnel, the expansion of our operations, including the launch of new Web sites, and entering into acquisitions, strategic alliances and joint ventures. If our revenues do not grow at a substantially faster rate than these expected increases in our expenses or if our operating expenses are higher than we anticipate, we may not be profitable and we may incur additional losses, which could be significant.
Our limited operating history and relatively new business model in an emerging and rapidly evolving market makes it difficult to evaluate our future prospects.
We derive nearly all of our net revenues from online subscription fees for our services, which is an early-stage business model for us that has undergone, and continues to experience, rapid and dramatic changes. As a result, we have very little operating history for you to evaluate in assessing our future prospects. You must consider our business and prospects in light of the risks and difficulties we will encounter as an early-stage company in a new and rapidly evolving market. Our performance will depend on the continued acceptance and evolution of online personal services and other factors addressed herein. We may not be able to effectively assess or address the evolving risks and difficulties present in the market, which could threaten our capacity to continue operations successfully in the future.
If our efforts to attract a large number of members, convert members into paying subscribers and retain our paying subscribers are not successful, our revenues and operating results would suffer.
Our future growth depends on our ability to attract a large number of members, convert members into paying subscribers and retain our paying subscribers. This in turn depends on our ability to deliver a high-quality online personals experience to these members and paying subscribers. As a result, we must continue to invest significant resources in order to enhance our existing products and services and introduce new high-quality products and services that people will use. If we are unable to predict user preferences or industry changes, or if we are unable to modify our products and services on a timely basis, we may lose existing members and paying subscribers and may fail to attract new members and paying subscribers. Our revenue and expenses would also be adversely affected if our innovations are not responsive to the needs of our members and paying subscribers or are not brought to market in an effective or timely manner.

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Our subscriber acquisition costs vary depending upon prevailing market conditions and may increase significantly in the future.
Costs for us to acquire paying subscribers are dependent, in part, upon our ability to purchase advertising at a reasonable cost. Our advertising costs vary over time, depending upon a number of factors, many of which are beyond our control. Historically, we have used online advertising as the primary means of marketing our services.
In general, the costs of online advertising have recently increased substantially and we expect those costs to continue to increase as long as the demand for online advertising remains robust. If we are not able to reduce our other operating costs, increase our paying subscriber base or increase revenue per paying subscriber to offset these anticipated increases, our profitability will be adversely affected.
Competition presents an ongoing threat to the performance of our business.
We expect competition in the online personals business to continue to increase because there are no substantial barriers to entry. For example, an article in the USA Today stated that there are signs of fierce competition among online personals sites, and that an Internet tracking firm found that the number of online personals sites it monitors had reached 836 in February 2005, up from 611 in January 2004. We believe that our ability to compete depends upon many factors both within and beyond our control, including the following:
  the size and diversity of our member and paying subscriber bases;
 
  the timing and market acceptance of our products and services, including the developments and enhancements to those products and services relative to those offered by our competitors;
 
  customer service and support efforts;
 
  selling and marketing efforts; and
 
  our brand strength in the marketplace relative to our competitors.
We compete with traditional personals services, as well as newspapers, magazines and other traditional media companies that provide personals services. We compete with a number of large and small companies, including Internet portals and specialty-focused media companies that provide online and offline products and services to the markets we serve. Our principal online personals services competitors include Yahoo! Personals, Match.com, a wholly-owned subsidiary of InterActiveCorp., and eHarmony, all of which operate primarily in North America. In addition, we face competition from social networking Web sites such as MySpace and Friendster. Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources and larger customer bases than we do. These factors may allow our competitors to respond more quickly than we can to new or emerging technologies and changes in customer requirements. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies which may allow them to build larger member and paying subscriber bases than we have. Our competitors may develop products or services that are equal or superior to our products and services or that achieve greater market acceptance than our products and services. These activities could attract members and paying subscribers away from our Web sites and reduce our market share.
In addition, current and potential competitors are making, and are expected to continue to make, strategic acquisitions or establishing cooperative and, in some cases, exclusive relationships with significant companies or competitors to expand their businesses or to offer more comprehensive products and services. To the extent these competitors or potential competitors establish exclusive relationships with major portals, search engines and Internet service providers, or ISPs, our ability to reach potential members through online advertising may be restricted. Any of these competitors could

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cause us difficulty in attracting and retaining members and converting members into paying subscribers and could jeopardize our existing affiliate program and relationships with portals, search engines, ISPs and other Web properties.
Our efforts to capitalize upon opportunities to expand into new vertical affinity markets may fail and could result in a loss of capital and other valuable resources.
One of our strategies is to expand into new vertical affinity markets to increase our revenue base. We view vertical affinity markets as identifiable groups of people who share common interests and the desire to meet companions or dates with similar interests, backgrounds or traits. Our planned expansion into such vertical affinity markets will occupy our management’s time and attention and will require us to invest significant capital resources. The results of our expansion efforts into new vertical affinity markets are unpredictable, and there is no guarantee that our efforts will have a positive effect on our revenue base. We face many risks associated with our planned expansion into new vertical affinity markets, including but not limited to the following:
  competition from pre-existing competitors with significantly stronger brand recognition in the markets we enter;
 
  our improper evaluations of the potential of such markets;
 
  diversion of capital and other valuable resources away from our core business and other opportunities that are potentially more profitable; and
 
  weakening our current brands by over expansion into too many new markets.
If we fail to keep pace with rapid technological change, our competitive position will suffer.
We operate in a market characterized by rapidly changing technologies, evolving industry standards, frequent new product and service announcements, enhancements and changing customer demands. Accordingly, our performance will depend on our ability to adapt to rapidly changing technologies and industry standards, and our ability to continually improve the speed, performance, features, ease of use and reliability of our services in response to both evolving demands of the marketplace and competitive service and product offerings. There have been occasions when we have not been as responsive as many of our competitors in adapting our services to changing industry standards and the needs of our members and paying subscribers. Our industry has been subject to constant innovation and competition. Historically, new features may be introduced by one competitor, and if they are perceived as attractive to users, they are often copied later by others. Over the last few years, such new feature introductions in the industry have included instant messaging, message boards, ecards, personality profiles, and mobile content delivery. We are currently unable to deliver mobile features until completion of our new system architecture. Introducing new technologies into our systems involves numerous technical challenges, substantial amounts of capital and personnel resources and often takes many months to complete. We intend to continue to devote efforts and funds toward the development of additional technologies and services. For example, in 2003 and 2004 we introduced a number of new Web sites and features, and we anticipate the introduction of additional Web sites and features in 2005 and 2006. We may not be able to effectively integrate new technologies into our Web sites on a timely basis or at all, which may degrade the responsiveness and speed of our Web sites. Such technologies, even if integrated, may not function as expected.
Our business depends on establishing and maintaining strong brands and if we are not able to maintain and enhance our brands, we may be unable to expand or maintain our member and paying subscriber bases.
We believe that establishing and maintaining our brands is critical to our efforts to attract and expand our member and paying subscriber bases. We believe that the importance of brand recognition will

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continue to increase, given the growing number of Internet sites and the low barriers to entry for companies offering online personals services. For example, an article in the USA Today stated that there are signs of fierce competition among online personals sites, and that an Internet tracking firm found that the number of online personals sites it monitors had reached 836 in February 2005, up from 611 in January 2004. To attract and retain members and paying subscribers, and to promote and maintain our brands in response to competitive pressures, we intend to substantially increase our financial commitment to creating and maintaining distinct brand loyalty among these groups. If visitors, members and paying subscribers to our Web sites and our affiliate and distribution associates do not perceive our existing services to be of high quality, or if we introduce new services or enter into new business ventures that are not favorably received by such parties, the value of our brands could be diluted, thereby decreasing the attractiveness of our Web sites to such parties. In addition, we changed our corporate name in January 2005 from MatchNet plc to Spark Networks plc, however, we did not change the names of our Web sites or brand names. Our adoption of a new corporate name may prevent us from taking advantage of goodwill that potential and existing customers may have associated with our old corporate name. As a result, our results of operations may be adversely affected by decreased brand recognition.
We may have potential liability under California state and federal securities laws with respect to the grant of share options to certain of our employees, directors and consultants and the exercise of these options.
Under our 2000 Executive Share Option Scheme (“2000 Option Scheme”), we granted options to purchase ordinary shares to certain of our employees, directors and consultants. California state securities laws generally require qualification for the offer and sale of securities subject to California law. Under California law, the grant of an option constitutes a sale of the underlying shares at the time of the option grant and not at the exercise of the option. Our option grants were not qualified and may not have been exempt from qualification under California state securities laws. As a result, we may have potential liability to those employees, directors and consultants to whom we granted options under the 2000 Option Scheme. In order to address that issue, we may elect to make a rescission offer to the holders of outstanding options under the 2000 Option Scheme to give them the opportunity to rescind the grant of their options.
As of June 30, 2005, assuming every eligible optionee were to accept a rescission offer, we estimate the total cost to us to complete the rescission would be approximately $4.0 million including statutory interest at 7% per annum. These amounts reflect the costs of offering to rescind the issuance of the outstanding options by paying an amount equal to 20% of the aggregate exercise price for the entire option.
In addition, issuances of securities upon exercise of options granted under our 2000 Option Scheme may not have been exempt from registration and qualification under California state securities laws as a result of the option grants themselves and also may not have been exempt from registration under federal securities laws. Federal securities laws prohibit the offer or sale of securities unless the sales are registered or exempt from registration. The issuances of ordinary shares upon the exercise of our options were not registered and may not have been exempt from registration under California state and federal securities laws. As a result, we may have potential liability to those employees, directors and consultants to whom we issued securities upon the exercise of these options. In order to address that issue, we may elect to make a rescission offer to those persons who exercised all, or a portion, of those options and continue to hold the shares issued upon exercise, to give them the opportunity to rescind the issuance of those shares.
As of June 30, 2005, assuming every eligible person that continues to hold the securities issued upon exercise of options granted under the 2000 Option Scheme were to accept a rescission offer, we estimate the total cost to us to complete the rescission would be approximately $3.8 million including

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statutory interest at 7% per annum, accrued since the date of exercise of the options. These amounts are calculated by reference to the acquisition price of the Option Shares.
A holder could argue that this process does not represent an adequate remedy for issuance of an option and securities issued upon exercise of an option in violation of California state or federal securities laws and, if a court were to impose a greater remedy, our financial exposure could be greater. In addition, it is the Securities and Exchange Commission’s position that a rescission offer will not bar or extinguish any liability under the Securities Act of 1933 with respect to these options and shares, nor will a rescission offer extinguish a holder’s right to rescind the issuance of securities that were not registered or exempt from the registration requirements under the Securities Act of 1933. If any or all of the holders reject or fail to respond to our rescission offer, the holders will keep their options and securities and we may continue to be liable under federal and California state securities laws for up to an amount equal to the value of the options and securities granted or issued plus any statutory interest we may be required to pay. Further, claims or actions based on fraud may not be waived or barred pursuant to a rescission offer and there can be no assurance that we will be able to enforce any waivers that we may receive in connection with the rescission offer in order to bar such claims or other causes of action until the applicable statute of limitations has run. In addition, despite a rescission offer, whether accepted or not, if it is determined that we offered securities without properly registering them under federal or state law, or securing an exemption from registration, regulators could impose monetary fines or other sanctions as provided under these laws.
In addition, we are required to obtain approval from an English court and 75% of our outstanding shares in order to effect a rescission offer, and if we fail to obtain such approvals, we would not be able to attempt to address our potential liability under California state and federal securities laws through a rescission offer. For the purposes of English company law, a rescission offer in respect of our shares would take the form of a purchase by our company of the relevant shares. The Companies Act 1985 (“Companies Act”) provides that we may only purchase our own shares using our “distributable profits” (as defined by the Companies Act) or the proceeds from the issuance of new shares for that purpose. Due to the deficit on our profit and loss account as a consequence of our previous accumulated losses, we do not currently have sufficient distributable profits to effect the rescission offer with respect to the shares. However, under the Companies Act, if we receive the approval of our shareholders and the High Court of Justice in England and Wales (the “Court”), we can reduce the deficit on the profit and loss account on our balance sheet by effecting a reduction of our share premium account and offsetting the amount of such reduction against the deficit on the profit and loss account. This process is known as a “share premium reduction.” The share premium reduction must be approved by at least 75% of the shares held by the shareholders that vote on the resolution and by the Court. In order to satisfy the Court that our creditors will be properly protected we propose to give an undertaking to the Court to transfer to a special non-distributable reserve (the “Special Reserve”) the excess of the amount of the reduction of share premium account over the deficit on our profit and loss account at the date when the reduction of capital takes effect (the “Effective Date”) and not to distribute the Special Reserve until all of our creditors as at the Effective Date are paid off or have otherwise consented to the reduction of capital. Any profits made prior to the Effective Date will be credited to the Special Reserve and will not be distributable unless and until all of our creditors as of the Effective Date have been paid off or have otherwise consented to the reduction of capital. In addition to shareholder approval of the share premium reduction, we would be required to obtain prior approval from 75% of votes cast by our shareholders of any purchase contract that we enter to purchase Option Shares from parties that accept our rescission offer. If we fail to obtain approval from the Court and at least 75% of our outstanding shares for the share premium reduction or 75% of votes cast approving a purchase contract, we would not be able to attempt to address our potential liability under California state and federal securities laws through a rescission offer and remain subject to the risk described in this risk factor.

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We have terminated and no longer grant options under our 2000 Option Scheme, but options previously granted under the 2000 Option Scheme remain in full force and effect. We intend to file a registration statement on Form S-8 to cover the issuance of future shares upon exercise of presently unexercised options under the 2000 Option Scheme.
If we are unable to attract, retain and motivate key personnel or hire qualified personnel, or such personnel do not work well together, our growth prospects and profitability will be harmed.
Our performance is largely dependent on the talents and efforts of highly skilled individuals. We have recently recruited many of our directors, executive officers and other key management talent, some of which have limited or no experience in the online personals industry. For example, David E. Siminoff, our President and Chief Executive Officer, joined us in August 2004 and each of our Chief Financial Officer, Chief Operating Officer and General Counsel, and Chief Technology Officer joined us in October 2004. Because members of our executive management have only worked together as a team for a limited time, there are inherent risks in the management of our company with respect to decision-making, business direction, product development and strategic relationships. In the event that the members of our executive management team are unable to work well together or agree on operating principles, business direction or business transactions or are unable to provide cohesive leadership, our business could be harmed and one or more of those individuals may discontinue their service to our company, and we would be forced to find a suitable replacement. The loss of any of our management or key personnel could seriously harm our business. Furthermore, we have recently experienced significant turnover on our board of directors. We currently have seven members serving on our board of directors. Since October 2004, we have had two directors resign from our board of directors and five directors join our board of directors. Alon Carmel, one of our company’s co-founders and co-chairmen, resigned from his position in February 2005 to pursue other entrepreneurial and philanthropic interests.
In August 2004, we initiated a cost reduction program and terminated the employment of 40 full-time and temporary employees, and, as a result, our future recruiting efforts may become more difficult. We may also encounter difficulties in recruiting personnel as we become a more mature company in a competitive industry. Competition in our industry for personnel is intense, and we are aware that our competitors have directly targeted our employees. We do not have non-competition agreements with most employees and, even in cases where we do, these agreements are of limited enforceability in California. We also do not maintain any key-person life insurance policies on our executives. The incentives to attract, retain and motivate employees provided by our option grants or by future arrangements, such as cash bonuses, may not be as effective as they have been in the past. If we do not succeed in attracting necessary personnel or retaining and motivating existing personnel, we may be unable to grow effectively.
Our inability to effectively manage our growth could have a materially adverse effect on our profitability.
We have experienced rapid growth since inception. The growth and expansion of our business and service offerings places a continuous significant strain on our management, operational and financial resources. We are required to manage multiple relations with various strategic associates, technology licensors, members, paying subscribers and other third parties. In the event of further growth of our operations or in the number of our third-party relationships, our computer systems or procedures may not be adequate to support our operations and our management may not be able to manage such growth effectively. To effectively manage our growth, we must continue to implement and improve our operational, financial and management information systems and to expand, train and manage our employee base. If we fail to do so, our management, operational and financial resources could be overstrained and adversely impacted.

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We expect our growth rates to decline and our operating margins could deteriorate.
We believe our revenue growth rate will decline as our net revenues increase to higher levels and as the growth of the online personals industry begins to slow. We have seen a decline in our growth rates during the latter stages of 2004 and first half of 2005. A February 2005 report by Jupiter Research forecasts the online personals industry will experience single digit growth in 2005 as compared to 77% growth in 2003. It is possible that our operating margins will deteriorate if revenue growth does not exceed planned increases in expenditures for all aspects of our business in an increasingly competitive environment, including sales and marketing, general and administrative and technical operations expenses.
Our business depends on our server and network hardware and software and our ability to obtain network capacity; our current safeguard systems may be inadequate to prevent an interruption in the availability of our services.
The performance of our server and networking hardware and software infrastructure is critical to our business and reputation, to our ability to attract visitors and members to our Web sites, to convert them into paying subscribers and to retain paying subscribers. An unexpected and/or substantial increase in the use of our Web sites could strain the capacity of our systems, which could lead to a slower response time or system failures. Although we have not yet experienced many significant delays, any future slowdowns or system failures could adversely affect the speed and responsiveness of our Web sites and would diminish the experience for our visitors, members and paying subscribers. We face risks related to our ability to scale up to our expected customer levels while maintaining superior performance. If the usage of our Web sites substantially increases, we may need to purchase additional servers and networking equipment and services to maintain adequate data transmission speeds, the availability of which may be limited or the cost of which may be significant. Any system failure that causes an interruption in service or a decrease in the responsiveness of our Web sites could reduce traffic on our Web sites and, if sustained or repeated, could impair our reputation and the attractiveness of our brands as well as reduce revenue and negatively impact our operating results.
Furthermore, we rely on many different hardware systems and software applications, some of which have been developed internally. If these hardware systems or software applications fail, it would adversely affect our ability to provide our services. If we are unable to protect our data from loss or electronic or magnetic corruption, or if we receive a significant unexpected increase in usage and are not able to rapidly expand our transaction-processing systems and network infrastructure without any systems interruptions, it could seriously harm our business and reputation. We have experienced occasional systems interruptions in the past as a result of unexpected increases in usage, and we cannot assure you that we will not incur similar or more serious interruptions in the future. From time to time, our company and our Web sites have been subject to delays and interruptions due to software viruses, or variants thereof, such as internet worms. To date, we have not experienced delays or systems interruptions that have had a material impact on our business.
In addition, we do not currently have adequate disaster recovery systems in place, which means in the event of any catastrophic failure involving our Web sites, we may be unable to serve our Web traffic for a significant period of time. Our servers primarily operate from only a single site in Southern California and the absence of a backup site could exacerbate this disruption. Any system failure, including network, software or hardware failure, that causes an interruption in the delivery of our Web sites and services or a decrease in responsiveness of our services would result in reduced visitor traffic, reduced revenue and would adversely affect our reputation and brands.

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The failure to establish and maintain affiliate agreements and relationships could limit the growth of our business.
We have entered into, and expect to continue to enter into, arrangements with affiliates to increase our member and paying subscribers bases, bring traffic to our Web sites and enhance our brands. Pursuant to our arrangements, an affiliate generally advertises or promotes our Web site on its Web site, and earns a fee whenever visitors to its Web site click though the advertisement to one of our Web sites and registers or subscribes on our Web site. Affiliate arrangements constitute over half of our marketing program. These affiliate arrangements are easily cancelable, often with one day notice. We do not typically have any exclusivity arrangements with our affiliates, and some of our affiliates may also be affiliates for our competitors. None of these affiliates, individually, represents a material portion of our revenue. If any of our current affiliate agreements is terminated, we may not be able to replace the terminated agreement with an equally beneficial arrangement. We cannot assure you that we will be able to renew any of our current agreements when they terminate or, if we are able to do so, that such renewals will be available on acceptable terms. We also do not know whether we will be able to enter into additional agreements or that any relationships, if entered into, will be on terms favorable to us.
We rely on a number of third-party providers and their failure or unwillingness to continue to perform could harm us.
We rely on third parties to provide important services and technologies to us, including a third party that manages and monitors our offsite data center located in Southern California, ISPs, search engine marketing providers and credit card processors. In addition, we license technologies from third parties to facilitate our ability to provide our services. Any failure on our part to comply with the terms of these licenses could result in the loss of our rights to continue using the licensed technology, and we could experience difficulties obtaining licenses for alternative technologies. Furthermore, any failure of these third parties to provide these and other services, or errors, failures, interruptions or delays associated with licensed technologies, could significantly harm our business. Any financial or other difficulties our providers face may have negative effects on our business, the nature and extent of which we cannot predict. Except to the extent of the terms of our contracts with such third party providers, we exercise little or no control over them, which increases our vulnerability to problems with the services and technologies they provide and license to us. In addition, if any fees charged by third-party providers were to substantially increase, such as if ISPs began charging us for email sent by our paying subscribers to other members or paying subscribers, we could incur significant additional losses.
If we fail to develop or maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in our financial reporting, which would harm the value of our shares.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports, effectively prevent fraud and operate as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We have, in the past, discovered and may, in the future, discover areas of our internal controls over financial reporting that need improvement. For example, during our audit of 2003 results, our external auditors brought to our attention a need to restate 2001 and 2002 results and also noted, in a letter to management, certain conditions involving internal controls and operations, none of which were a material weakness.
If we become a U.S. public company, we will be subject to the reporting requirements of the Sarbanes-Oxley Act of 2002. Beginning December 31, 2006, we will be required to annually assess and report on our internal controls over financial reporting. If we are unable to adequately establish or improve

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our internal controls over financial reporting, we may report that our internal controls are ineffective and our external auditors will not be able to issue an unqualified opinion on the effectiveness of our internal controls. Ineffective internal controls over financial reporting could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our securities or could affect our ability to access the capital markets and which could result in regulatory proceedings against us by, among others, the U.S. Securities Exchange Commission.
We face risks related to our recent accounting restatements, which could result in costly litigation or regulatory proceedings against us.
Our ordinary shares in the form of GDSs trade on the Frankfurt Stock Exchange in Germany. Pursuant to the laws governing this exchange, we publicly report our quarterly and annual operating results. On April 28, 2004, we publicly announced that we had discovered accounting inaccuracies in previously reported financial statements. As a result, following consultation with our new auditors, we restated our financial statements for the nine months ended September 30, 2003 and for each of the years ended December 31, 2001 and 2002 to correct inappropriate accounting entries.
The restatements primarily related to the timing of recognition of deferred revenue and the capitalization of bounty costs, which are the amounts paid to online marketers to acquire members. The restatements are in accordance with United States generally accepted accounting principles and pertain primarily to timing matters and had no impact on cash flow from operations or our ongoing operations. The impact on net loss for 2001 and 2002 was an increase of $1.5 million and $1.0 million, respectively.
The restatement of the financial statements may lead to litigation claims and/or regulatory proceedings against us. The defense of any such claims or proceedings may cause the diversion of management’s attention and resources, and we may be required to pay damages if any such claims or proceedings are not resolved in our favor. Any litigation or regulatory proceeding, even if resolved in our favor, could cause us to incur significant legal and other expenses. Moreover, we may be the subject of negative publicity focusing on the financial statement inaccuracies and resulting restatement. The occurrence of any of the foregoing could divert our resources, harm our reputation and cause the price of our securities to decline.
Acquisitions could result in operating difficulties, dilution and other harmful consequences.
In May 2005, we acquired MingleMatch, Inc., and we plan, during the next few years, to further extend and develop our presence, both within the United States and internationally, partially through acquisitions of entities offering online personals services and related businesses. We have limited experience acquiring companies and the companies we have acquired have been small. We have evaluated, and continue to evaluate, a wide array of potential strategic transactions. From time to time, we may engage in discussions regarding potential acquisitions, some of which may divert significant resources away from our daily operations. In addition, the process of integrating an acquired company, business or technology is risky and may create unforeseen operating difficulties and expenditures. For example, we have been engaged in significant litigation in the past, but which has since settled, with respect to our acquisition of SocialNet, Inc. in 2001. Some areas where we may face risks include:
  the need to implement or remediate controls, procedures and policies of acquired companies that lacked appropriate controls, procedures and policies prior to the acquisition;
 
  diversion of management time and focus from operating our business to acquisition integration challenges;
 
  cultural challenges associated with integrating employees from an acquired company into our organization;

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  retaining employees from the businesses we acquire; and
 
  the need to integrate each company’s accounting, management information, human resource and other administrative systems to permit effective management.
The anticipated benefit of many of our acquisitions may not materialize. Future acquisitions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs, any of which could harm our financial condition. Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all.
We may not be effective in protecting our Internet domain names or proprietary rights upon which our business relies or in avoiding claims that we infringe upon the proprietary rights of others.
We regard substantial elements of our Web sites and the underlying technology as proprietary, and attempt to protect them by relying on trademark, service mark, copyright, patent and trade secret laws, and restrictions on disclosure and transferring title and other methods. We also generally enter into confidentiality agreements with our employees and consultants, and generally seek to control access to and distribution of our technology, documentation and other proprietary information. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our proprietary information without authorization or to develop similar or superior technology independently. Effective trademark, service mark, copyright, patent and trade secret protection may not be available in every country in which our services are distributed or made available through the Internet, and policing unauthorized use of our proprietary information is difficult. Any such misappropriation or development of similar or superior technology by third parties could adversely impact our profitability and our future financial results.
We believe that our Web sites, services, trademarks, patent and other proprietary technologies do not infringe upon the rights of third parties. However, there can be no assurance that our business activities do not and will not infringe upon the proprietary rights of others, or that other parties will not assert infringement claims against us. We are aware that other parties utilize the “Spark” name, or other marks that incorporate it, and those parties may have rights to such marks that are superior to ours. From time to time, we have been, and expect to continue to be, subject to claims in the ordinary course of business including claims of alleged infringement of the trademarks, service marks and other intellectual property rights of third parties by us. Although such claims have not resulted in any significant litigation or had a material adverse effect on our business to date, any such claims and resultant litigation might subject us to temporary injunctive restrictions on the use of our products, services or brand names and could result in significant liability for damages for intellectual property infringement, require us to enter into royalty agreements, or restrict us from using infringing software, services, trademarks, patents or technologies in the future. Even if not meritorious, such litigation could be time-consuming and expensive and could result in the diversion of management’s time and attention away from our day-to-day business.
We currently hold various Web domain names relating to our brands and in the future may acquire new Web domain names. The regulation of domain names in the United States and in foreign countries is subject to change. Governing bodies may establish additional top level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names in all countries in which we conduct business. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our existing trademarks and other proprietary rights or those we may seek to acquire. Any such inability to protect ourselves could cause us to lose a significant portion of our members and paying subscribers to our competitors.

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We may face potential liability, loss of users and damage to our reputation for violation of our privacy policy or privacy laws and regulations.
Our privacy policy prohibits the sale or disclosure to any third party of any member’s personal identifying information, except to the extent expressly set forth in the policy. Growing public concern about privacy and the collection, distribution and use of information about individuals may subject us to increased regulatory scrutiny and/or litigation. In the past, the Federal Trade Commission has investigated companies that have used personally identifiable information without permission or in violation of a stated privacy policy. If we are accused of violating the stated terms of our privacy policy, we may be forced to expend significant amounts of financial and managerial resources to defend against these accusations and we may face potential liability. Our membership database holds confidential information concerning our members, and we could be sued if any of that information is misappropriated or if a court determines that we have failed to protect that information.
In addition, our affiliates handle personally identifiable information pertaining to our members and paying subscribers. Both we and our affiliates are subject to laws and regulations related to Internet communications (including the CAN-SPAM Act of 2003), consumer protection, advertising, privacy, security, and data protection. If we or our affiliates are found to be in violation of these laws and regulations, we may become subject to administrative fines or litigation, which could materially increase our expenses and cause the value of our securities to decline.
We may be liable as a result of information retrieved from or transmitted over the Internet.
We may be sued for defamation, civil rights infringement, negligence, copyright or trademark infringement, invasion of privacy, personal injury, product liability or under other legal theories relating to information that is published or made available on our Web sites and the other sites linked to it. These types of claims have been brought, sometimes successfully, against online services in the past. We also offer email services, which may subject us to potential risks, such as liabilities or claims resulting from unsolicited email or spamming, lost or misdirected messages, security breaches, illegal or fraudulent use of email or personal information or interruptions or delays in email service. Our insurance does not specifically provide for coverage of these types of claims and, therefore, may be inadequate to protect us against them. In addition, we could incur significant costs in investigating and defending such claims, even if we ultimately are not held liable. If any of these events occurs, our revenues could be materially adversely affected or we could incur significant additional expense, and the market price of our securities may decline.
Our quarterly results may fluctuate because of many factors and, as a result, investors should not rely on quarterly operating results as indicative of future results.
Fluctuations in operating results or the failure of operating results to meet the expectations of public market analysts and investors may negatively impact the value of our ordinary shares and depositary shares. Quarterly operating results may fluctuate in the future due to a variety of factors that could affect revenues or expenses in any particular quarter. Fluctuations in quarterly operating results could cause the value of our securities to decline. Investors should not rely on quarter-to-quarter comparisons of results of operations as an indication of future performance. Factors that may affect our quarterly results include:
  the demand for, and acceptance of, our online personals services and enhancements to these services;
 
  the timing and amount of our subscription revenues;
 
  the introduction, development, timing, competitive pricing and market acceptance of our Web sites and services and those of our competitors;

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  the magnitude and timing of marketing initiatives and capital expenditures relating to expansion of our operations;
 
  the cost and timing of online and offline advertising and other marketing efforts;
 
  the maintenance and development of relationships with portals, search engines, ISPs and other Web properties and other entities capable of attracting potential members and paying subscribers to our Web sites;
 
  technical difficulties, system failures, system security breaches, or downtime of the Internet, in general, or of our products and services, in particular;
 
  costs related to any acquisitions or dispositions of technologies or businesses; and
 
  general economic conditions, as well as those specific to the Internet, online personals and related industries.
As a result of the factors listed above and because the online personals business is still immature, making it difficult to predict consumer demand, it is possible that in future periods results of operations may be below the expectations of public market analysts and investors. This could cause the market price of our securities to decline.
We may need additional capital to finance our growth or to compete, which may cause dilution to existing shareholders or limit our flexibility in conducting our business activities.
We currently anticipate that existing cash, cash equivalents and marketable securities and cash flow from operations will be sufficient to meet our anticipated needs for working capital, operating expenses and capital expenditures for at least the next 12 months. We may need to raise additional capital in the future to fund expansion, whether in new vertical affinity or geographic markets, develop newer or enhanced services, respond to competitive pressures or acquire complementary businesses, technologies or services. Such additional financing may not be available on terms acceptable to us or at all. To the extent that we raise additional capital by issuing equity securities, our shareholders may experience substantial dilution, and to the extent we engage in debt financing, if available, we may become subject to restrictive covenants that could limit our flexibility in conducting future business activities. If additional financing is not available or not available on acceptable terms, we may not be able to fund our expansion, promote our brands, take advantage of acquisition opportunities, develop or enhance services or respond to competitive pressures.
Our limited experience outside the United States increases the risk that our international expansion efforts and operations will not be effective.
One of our strategies is to expand our presence in international markets. Although we currently have offices in Germany, Israel and the United Kingdom and Web sites that serve the Australian, Canadian, German, Israeli and United Kingdom markets, we have only limited experience with operations outside the United States. Our primary international operations are in Israel, which carries additional risk for our business as a result of continuing hostilities there. Expansion into international markets requires management time and capital resources. In addition, we face the following additional risks associated with our expansion outside the United States:
  challenges caused by distance, language and cultural differences;
 
  local competitors with substantially greater brand recognition, more users and more traffic than we have;
 
  our need to create and increase our brand recognition and improve our marketing efforts internationally and build strong relationships with local affiliates;

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  longer payment cycles in some countries;
 
  credit risk and higher levels of payment fraud in some countries;
 
  different legal and regulatory restrictions among jurisdictions;
 
  political, social and economic instability;
 
  potentially adverse tax consequences; and
 
  higher costs associated with doing business internationally.
Our international operations subject us to risks associated with currency fluctuations.
Our foreign operations may subject us to currency fluctuations and such fluctuations may adversely affect our financial position and results. However, sales and expenses to date have occurred primarily in the United States. For this reason, we have not engaged in foreign exchange hedging. In connection with our planned international expansion, currency risk positions could change correspondingly and the use of foreign exchange hedging instruments could become necessary. Effects of exchange rate fluctuations on our financial condition, operations, and profitability may depend on our ability to manage our foreign currency risks. There can be no assurance that steps taken by management to address foreign currency fluctuations will eliminate all adverse effects and, accordingly, we may suffer losses due to adverse foreign currency fluctuation.
Our business could be significantly impacted by the occurrence of natural disasters and other catastrophic events.
Our operations depend upon our ability to maintain and protect our network infrastructure, hardware systems and software applications, which are housed primarily at a data center located in Southern California that is managed by a third party. Our business is therefore susceptible to earthquakes, tsunamis and other catastrophic events, including acts of terrorism. We currently lack adequate redundant network infrastructure, hardware and software systems supporting our services at an alternate site. As a result, outages and downtime caused by natural disasters and other events out of our control, which affect our systems or primary data center, could adversely affect our reputation, brands and business.
We hold a fixed amount of insurance coverage, and if we were found liable for an uninsured claim, or claim in excess of our insurance limits, we may be forced to expend a significant capital to resolve the uninsured claim.
We contract for a fixed amount of insurance to cover potential risks and liabilities, including, but not limited to, property and casualty insurance, general liability insurance, and errors and omissions liability insurance. Although we have not recently experienced any significantly increased premiums as a result of changing policies of our providers, we have experienced increasing insurance premiums due to the increasing size of our business, and thus the increased potential risk to underwriters for insuring our business. If we decide to obtain additional insurance coverage in the future, it is possible that we may not be able to get enough insurance to meet our needs, we may have to pay very high prices for the coverage we do get, or we may not be able to acquire any insurance for certain types of business risk or may have gaps in coverage for certain risks. This could leave us exposed to potential uninsured claims for which we could have to expend significant amounts of capital resources. Consequently, if we were found liable for a significant uninsured claim in the future, we may be forced to expend a significant amount of our operating capital to resolve the uninsured claim.

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Our services are not well-suited to many alternate Web access devices, and as a result the growth of our business could be negatively affected.
The number of people who access the Internet through devices other than desktop and laptop computers, including mobile telephones and other handheld computing devices, has increased dramatically in the past few years, and we expect this growth to continue. The lower resolution, functionality and memory currently associated with such mobile devices may make the use of our services through such mobile devices more difficult and generally impairs the member experience relative to access via desktop and laptop computers. If we are unable to attract and retain a substantial number of such mobile device users to our online personals services or if we are unable to develop services that are more compatible with such mobile communications devices, our growth could be adversely affected.
Risks Related to Our Industry
The percentage of canceling paying subscribers in comparison to other subscription businesses requires that we continuously seek new paying subscribers to maintain or increase our current level of revenue.
Internet users in general, and users of online personals services specifically, freely navigate and switch among a large number of Web sites. Monthly subscriber churn represents the ratio expressed as a percentage of (a) the number of paying subscriber cancellations during the period divided by the average number of paying subscribers during the period and (b) the number of months in the period. The number of average paying subscribers is calculated as the sum of the paying subscribers at the beginning and end of the month, divided by two. Average paying subscribers for periods longer than one month are calculated as the sum of the average paying subscribers for each month, divided by the number of months. For the quarters ended June 30, 2005 and 2004, the monthly subscriber churn for (1) the JDate segment was 26.5% and 25.8%, respectively, (2) the AmericanSingles segment was 37.8% and 35.6%, respectively, and (3) the Web sites in our Other Businesses segment was 18.6% and 17.9%, respectively. We cannot assure you that our monthly average subscriber churn will remain at such levels, and it may increase in the future. This makes it difficult for us to have a stable paying subscriber base and requires that we constantly attract new paying subscribers at a faster rate than subscription terminations to maintain or increase our current level of revenue. If we are unable to attract new paying subscribers on a cost-effective basis, our business will not grow and our profitability will be adversely affected.
Our network is vulnerable to security breaches and inappropriate use by Internet users, which could disrupt or deter future use of our services.
Concerns over the security of transactions conducted on the Internet and the privacy of users may inhibit the growth of the Internet and other online services generally, and online commerce services, like ours, in particular. To date, we have not experienced any material breach of our security systems; however, our failure to effectively prevent security breaches could significantly harm our business, reputation and results of operations and could expose us to lawsuits by state and federal consumer protection agencies, by governmental authorities in the jurisdictions in which we operate, and by consumers. Anyone who is able to circumvent our security measures could misappropriate proprietary information, including customer credit card and personal data, cause interruptions in our operations or damage our brand and reputation. Such breach of our security measures could involve the disclosure of personally identifiable information and could expose us to a material risk of litigation, liability or governmental enforcement proceeding. We cannot assure you that our financial systems and other technology resources are completely secure from security breaches or sabotage, and we have occasionally experienced security breaches and attempts at “hacking.” We may be required to incur significant additional costs to protect against security breaches or to alleviate problems caused by such breaches. Any well-publicized compromise of our security or the security of any other Internet provider could deter people from using our services or the Internet to conduct transactions that involve

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transmitting confidential information or downloading sensitive materials, which could have a detrimental impact on our potential customer base.
Computer viruses may cause delays or other service interruptions and could damage our reputation, affect our ability to provide our services and adversely affect our revenues. The inadvertent transmission of computer viruses could also expose us to a material risk of loss or litigation and possible liability. Moreover, if a computer virus affecting our system were highly publicized, our reputation could be significantly damaged, resulting in the loss of current and future members and paying subscribers.
We face certain risks related to the physical and emotional safety of our members and paying subscribers.
The nature of online personals services is such that we cannot control the actions of our members and paying subscribers in their communication or physical actions. There is a possibility that one or more of our members or paying subscribers could be physically or emotionally harmed following interaction with another of our members or paying subscribers. We warn our members and paying subscribers that we do not and cannot screen other members and paying subscribers and, given our lack of physical presence, we do not take any action to ensure personal safety on a meeting between members or paying subscribers arranged following contact initiated via our Web sites. If an unfortunate incident of this nature occurred in a meeting of two people following contact initiated on one of our Web sites or a Web site of one of our competitors, any resulting negative publicity could materially and adversely affect us or the online personals industry in general. Any such incident involving one of our Web sites could damage our reputation and our brands. This, in turn, could adversely affect our revenues and could cause the value of our ordinary shares and depositary shares to decline. In addition, the affected members or paying subscribers could initiate legal action against us, which could cause us to incur significant expense, whether we were successful or not, and damage our reputation.
We face risks of litigation and regulatory actions if we are deemed a dating service as opposed to an online personals service.
We supply online personals services. In many jurisdictions, companies deemed dating service providers are subject to additional regulation, while companies that provide personals services are not generally subject to similar regulation. Because personals services and dating services can seem similar, we are exposed to potential litigation, including class action lawsuits, associated with providing our personals services. In the past, a small percentage of our members have alleged that we are a dating service provider, and, as a result, they claim that we are required to comply with regulations that include, but are not limited to, providing language in our contracts that may allow members to (1) rescind their contracts within a certain period of time, (2) demand reimbursement of a portion of the contract price if the member dies during the term of the contract and/or (3) cancel their contracts in the event of disability or relocation. If a court holds that we have provided and are providing dating services of the type the dating services regulations are intended to regulate, we may be required to comply with regulations associated with the dating services industry and be liable for any damages as a result our past and present non-compliance.
Three separate yet similar class action complaints have been filed against us. On June 21, 2002, Tatyana Fertelmeyster filed an Illinois class action complaint against us in the Circuit Court of Cook County, Illinois, based on an alleged violation of the Illinois Dating Referral Services Act. On September 12, 2002, Lili Grossman filed a New York class action complaint against us in the Supreme Court in the State of New York based on alleged violations of the New York Dating Services Act and the Consumer Fraud Act. On November 14, 2003, Jason Adelman filed a nationwide class action complaint against us in the Los Angeles County Superior Court based on an alleged violation of California Civil Code section 1694 et seq., which regulates businesses that provide dating services. In each of these cases, the complaint included allegations that we are a dating service as defined by the

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applicable statutes and, as an alleged dating service, we are required to provide language in our contracts that allows (i) members to rescind their contracts within three days, (ii) reimbursement of a portion of the contract price if the member dies during the term of the contract and/or (iii) members to cancel their contracts in the event of disability or relocation. Causes of action include breach of applicable state and/or federal laws, fraudulent and deceptive business practices, breach of contract and unjust enrichment. The plaintiffs are seeking remedies including declaratory relief, restitution, actual damages although not quantified, treble damages and/or punitive damages, and attorney’s fees and costs.
Huebner v. InterActiveCorp., Superior Court of the State of California, County of Los Angeles, Case No. BC 305875 involves a similar action, involving the same plaintiff’s counsel as Adelman, brought against InterActiveCorp’s Match.com that has been ruled related to Adelman, but the two cases have not been consolidated. We have not been named a defendant in the Huebner case. Adelman and Huebner each seek to certify a nationwide class action based on their complaints. Because the cases are class actions, they have been assigned to the Los Angeles Superior Court Complex Litigation Program. The court has ordered a bifurcation of the liability issue. At an August 15, 2005 Status Conference, the court set the bifurcated trial on the issue of liability for March 27, 2006.
On March 25, 2005, the court in Fertelmeyster entered its Memorandum Opinion and Order (“Memorandum Opinion”) granting summary judgment in our favor on the grounds that Fertelmeyster lacks standing to seek injunctive relief or restitutionary relief under the Illinois Dating Services Act, Fertelmeyster did not suffer any actual damages, and we were not unjustly enriched as a result of our contract with Fertelmeyster. The Memorandum Opinion “disposes of all matters in controversy” in the litigation and also provides that we are subject to the Illinois Dating Services Act and, as such, our subscription agreements violate the act and are void and unenforceable. This ruling may subject us to potential liability for claims brought by the Illinois Attorney General or customers that have been injured by our violation of the statute. Fertelmeyster filed a Motion for Reconsideration of the Memorandum Opinion and, on August 26, 2005, the court issued its opinion denying Fertelmeyster’s Motion for Reconsideration. In the opinion, the court, among other things: (i) decertified the class, eliminating the last remnant of the litigation; (ii) rejected each of the plaintiff’s arguments based on the arguments and law that we provided in our opposition; (iii) stated that the court would not judicially amend the Illinois statute to provide for restitution when the legislature selected damages as the sole remedy; (iv) noted that the cases cited by plaintiff in connection with plaintiff’s Motion for Reconsideration actually support the court’s prior order granting summary judgment in our favor; and (v) denied plaintiff’s Motion for Reconsideration in its entirety.
In December 2002, the Supreme Court of New York dismissed the case brought by Ms. Grossman. Although the plaintiff appealed the decision, in October 2004, the New York Supreme Court, Appellate Division upheld the lower court’s dismissal. In addition, two Justices wrote concurring opinions stating their opinion that our services were not covered under the New York Dating Services Act.
We intend to defend vigorously against each of the pending lawsuits, however, no assurance can be given that these matters will be resolved in our favor.
We are exposed to risks associated with credit card fraud and credit payment, which, if not properly addressed, could increase our operating expenses.
We depend on continuing availability of credit card usage to process subscriptions and this availability, in turn, depends on acceptable levels of chargebacks and fraud performance. We have suffered losses and may continue to suffer losses as a result of subscription orders placed with fraudulent credit card data, even though the associated financial institution approved payment. Under current credit card practices, a merchant is liable for fraudulent credit card transactions when, as is the case with the transactions we process, that merchant does not obtain a cardholder’s signature. Our failure to

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adequately control fraudulent credit card transactions would result in significantly higher credit card-related costs and, therefore, increase our operating expenses and may preclude us from accepting credit cards as a means of payment.
We face risks associated with our dependence on computer and telecommunications infrastructure.
Our services are dependent upon the use of the Internet and telephone and broadband communications to provide high-capacity data transmission without system downtime. There have been instances where regional and national telecommunications outages have caused us, and other Internet businesses, to experience systems interruptions. Any additional interruptions, delays or capacity problems experienced with telephone or broadband connections could adversely affect our ability to provide services to our customers. The temporary or permanent loss of all, or a portion, of the telecommunications system could cause disruption to our business activities and result in a loss of revenue. Additionally, the telecommunications industry is subject to regulatory control. Amendments to current regulations, which could affect our telecommunications providers, could disrupt or adversely affect the profitability of our business.
In addition, if any of our current agreements with telecommunications providers were terminated, we may not be able to replace any terminated agreements with equally beneficial ones. There can be no assurance that we will be able to renew any of our current agreements when they expire or, if we are able to do so, that such renewals will be available on acceptable terms. We also do not know whether we will be able to enter into additional agreements or that any relationships, if entered into, will be on terms favorable to us.
Our business depends, in part, on the growth and maintenance of the Internet, and our ability to provide services to our members and paying subscribers may be limited by outages, interruptions and diminished capacity in the Internet.
Our performance will depend, in part, on the continued growth and maintenance of the Internet. This includes maintenance of a reliable network backbone with the necessary speed, data capacity and security for providing reliable Internet services. Internet infrastructure may be unable to support the demands placed on it if the number of Internet users continues to increase, or if existing or future Internet users access the Internet more often or increase their bandwidth requirements. In addition, viruses, worms and similar programs may harm the performance of the Internet. We have no control over the third-party telecommunications, cable or other providers of access services to the Internet that our members and paying subscribers rely upon. There have been instances where regional and national telecommunications outages have caused us to experience service interruptions during which our members and paying subscribers could not access our services. Any additional interruptions, delays or capacity problems experienced with any points of access between the Internet and our members could adversely affect our ability to provide services reliably to our members and paying subscribers. The temporary or permanent loss of all, or a portion, of our services on the Internet, the Internet infrastructure generally, or our members’ and paying subscribers’ ability to access the Internet could disrupt our business activities, harm our business reputation, and result in a loss of revenue. Additionally, the Internet, electronic communications and telecommunications industries are subject to federal, state and foreign governmental regulation. New laws and regulations governing such matters could be enacted or amendments may be made to existing regulations at any time that could adversely impact our services. Any such new laws, regulations or amendments to existing regulations could disrupt or adversely affect the profitability of our business.
We are subject to burdensome government regulations and legal uncertainties affecting the Internet that could adversely affect our business.
Legal uncertainties surrounding domestic and foreign government regulations could increase our costs of doing business, require us to revise our services, prevent us from delivering our services over the

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Internet or slow the growth of the Internet, any of which could increase our expenses, reduce our revenues or cause our revenues to grow at a slower rate than expected and materially adversely affect our business, financial condition and results of operations. Laws and regulations related to Internet communications, security, privacy, intellectual property rights, commerce, taxation, entertainment, recruiting and advertising are becoming more prevalent, and new laws and regulations are under consideration by the United States Congress, state legislatures and foreign governments. For example, during 2004 and 2005, legislation related to the use of background checks for users of online personals services was proposed in Ohio, Texas, California, Michigan, Florida and Virginia. None of these states enacted these proposed laws, however, state legislatures are still considering the implementation of such legislation. The enactment of any of these proposed laws could require us to alter our service offerings and could negatively impact our performance by making it more difficult and costly to obtain new subscribers and may also subject us to additional liability for failure to properly screen our subscribers. Any legislation enacted or restrictions arising from current or future government investigations or policy could dampen the growth in use of the Internet, generally, and decrease the acceptance of the Internet as a communications, commercial, entertainment, recruiting and advertising medium. In addition to new laws and regulations being adopted, existing laws that are not currently being applied to the Internet may subsequently be applied to it and, in several jurisdictions, legislatures are considering laws and regulations that would apply to the online personals industry in particular. Many areas of law affecting the Internet and online personals remain unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing consumer protection, intellectual property, libel and taxation apply to the Internet or to our services.
In the normal course of our business, we handle personally identifiable information pertaining to our members and paying subscribers residing in the United States and other countries. In recent years, many of these countries have adopted privacy, security, and data protection laws and regulations intended to prevent improper uses and disclosures of personally identifiable information. In addition, some jurisdictions impose database registration requirements for which significant monetary and other penalties may be imposed for noncompliance. These laws may impose costly administrative requirements, limit our handling of information, and subject us to increased government oversight and financial liabilities. Privacy laws and regulations in the United States and foreign countries are subject to change and may be inconsistent, and additional requirements may be imposed at any time. These laws and regulations, the costs of complying with them, administrative fines for noncompliance and the possible need to adopt different compliance measures in different jurisdictions could materially increase our expenses and cause the value of our securities to decline.
Risks Related to Owning Our Securities
The price of our ADSs may be volatile, and if an active trading market for our ADSs does not develop, the price of our ADSs may suffer and decline.
Prior to this offering, there has been no public market for our securities in the United States. Accordingly, we cannot assure you that an active trading market will develop or be sustained or that the market price of our ADSs will not decline. The price at which our ADSs will trade after this offering is likely to be highly volatile and may fluctuate substantially due to many factors, some of which are outside of our control.
In addition, the stock market has experienced significant price and volume fluctuations that have affected the market price for the stock of many technology, communications and entertainment and media companies. Those market fluctuations were sometimes unrelated or disproportionate to the operating performance of these companies. Any significant stock market fluctuations in the future, whether due to our actual performance or prospects or not, could result in a significant decline in the market price of our securities.

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Our principal shareholders can exercise significant influence over us, and, as a result, may be able to delay, deter or prevent a change of control or other business combination.
As of October 19, 2005, Joe Y. Shapira, Alon Carmel, and Tiger Technology Management, L.L.C. and their respective affiliates beneficially owned approximately, in the aggregate, 50.9% of our outstanding share capital. Mr. Shapira is a co-founder of our company and current Executive Chairman of our Board of Directors. Mr. Carmel is a co-founder, former President and former Executive Co-Chairman of our Board of Directors. Tiger Technology Management, L.L.C. is our largest shareholder, and one of our directors, Scott Shleifer, is a limited partner of Tiger Global, L.P., an affiliate of Tiger Technology Management. Although we do not expect that these shareholders will vote together as a group, these shareholders possess significant influence over our company. Such share ownership and control may have the effect of delaying or preventing a change in control of our company, impeding a merger, consolidation, takeover or other business combination involving our company or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company. Furthermore, such share ownership may have the effect of control over substantially all matters requiring shareholder approval, including the election of directors.
All of our ordinary shares and ordinary shares issuable upon the exercise of our warrants and options will be eligible for sale after this offering, which would result in dilution and cause the price of our ADSs to decrease.
If our shareholders sell a substantial number of our shares, including those represented by ADSs and GDSs, in the public market following this offering, the market price of our ADSs could fall. Our ordinary shares in the form of GDSs trade on the Frankfurt Stock Exchange. We are registering under this registration statement for sale in the United States all of our issued and outstanding ordinary shares, ordinary shares underlying all of our outstanding warrants and ordinary shares underlying all of the options held by our officers, directors and shareholders who own more than 10% of our issued and outstanding securities. As of October 19, 2005, we had outstanding 26,209,496 ordinary shares, 430,000 warrants and 6,595,000 options held by officers directors and 10% shareholders. In addition, we intend to file a registration statement under the Securities Act of 1933, as amended, on Form S-8 covering ordinary shares underlying outstanding options and ordinary shares reserved for issuance under our share option schemes. Immediately after this registration statement and the Form S-8 registration statement become effective, all of our ordinary shares will be available for sale in the open market. Sales of ordinary shares by existing shareholders in the public market, or the availability of such ordinary shares for sale, could materially and adversely affect the market price of our securities.
You may not be able to exercise your right to vote the ordinary shares underlying your ADSs.
Under the terms of the ADSs, you have a general right to direct the exercise of the votes on the ordinary shares underlying ADSs that you hold, subject to limitations on voting ordinary shares contained in our Memorandum of Association and Articles of Association, as amended. You may instruct the depositary bank, Bank of New York, to vote the ordinary shares underlying our ADSs, but only if we request Bank of New York to ask for your instructions. Otherwise, you will not be able to exercise your right to vote unless you withdraw the ordinary shares underlying the ADSs. However, you may not receive voting materials in time to ensure that you are able to instruct Bank of New York to vote your shares or receive sufficient notice of a shareholders’ meeting to permit you to withdraw your ordinary shares to allow you to cast your vote with respect to any specific matter. In addition, Bank of New York and its agents may not be able to timely send out your voting instructions or carry out your voting instructions in the manner you have instructed. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ordinary shares are not voted as you requested.

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Your right or ability to transfer your ADSs may be limited in a number of circumstances.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
Our ordinary shares in the form of ADSs or GDSs will be traded on more than one market and this may result in price variations.
Our ordinary shares are currently traded on the Frankfurt Stock Exchange in the form of GDSs and we expect our ordinary shares will be traded on the American Stock Exchange in the form of ADSs upon completion of this offering. Trading in our ordinary shares in the form of ADSs or GDSs on these markets will be made in different currencies (dollars on the American Stock Exchange and euros on the Frankfurt Stock Exchange), and at different times (resulting from different time zones, different trading days and different public holidays in the U.S. and Germany). The trading prices of our ordinary shares in the form of ADSs or GDSs on these two markets may differ due to these and other factors. Any decrease in the trading price of our ordinary shares in the form of ADSs or GDSs on one of these markets could cause a decrease in the trading price of our ordinary shares in the form of ADSs or GDSs on the other market. Any difference in prices of our ordinary shares in the form of ADSs or GDSs on these two markets could create an arbitrage opportunity whereby an investor could take advantage of the price difference by trading between the markets, thereby potentially increasing the volatility of trading prices of our ADSs and having an adverse affect on the price of our ADSs.
If we offer any subscription rights to our shareholders, your right or ability to perform a sale, deposit, cancellation or transfer of any ADSs issued after exercise of rights might be restricted.
If we offer holders of our ordinary shares any rights to subscribe for additional shares or any other rights, the depositary may make these rights available to you after consultation with us. However, the depositary may allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them. In addition, U.S. securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after exercise of rights. However, we cannot make rights available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. In addition, under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which the rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. We can give no assurance that we can establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, you may be unable to participate in our rights offerings, if any, and may experience dilution of your holdings as a result.
Investors may be subject to both United States and United Kingdom taxes.
Investors are strongly urged to consult with their tax advisors concerning the consequences of investing in our company by purchasing ADSs. Our ADSs are being sold in the United States, but we are incorporated under the laws of England and Wales. A U.S. holder of our ADSs will generally be treated as the beneficial owner of the underlying ordinary shares, as represented by ADSs, for purposes of U.S. and U.K. tax laws. Therefore, U.S. federal, state and local tax laws and U.K. tax laws will generally apply to ownership and transfer of our ADSs and the underlying ordinary shares. Tax laws of other jurisdictions may also apply.

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If you hold shares in the form of ADSs, you may have less access to information about our company and less opportunity to exercise your rights as a shareholder than if you held ordinary shares.
There are risks associated with holding our shares in the form of ADSs, since we are a public company incorporated under the laws of England and Wales. We are subject to the Companies Act 1985, as amended, our Memorandum and Articles of Association, and other aspects of English company law. The depositary, the Bank of New York and/or its various nominees, will appear in our records as the holder of all our shares represented by the ADSs and your rights as a holder of ADSs will be contained in the deposit agreement. Your rights as a holder of ADSs will differ in various ways from a shareholder’s rights, and you may be affected in other ways, including:
  you may not be able to participate in rights offers or dividend alternatives if, in the discretion of the depositary, after consultation with us, it is unlawful or not practicable to do so;
 
  you may not receive certain copies of reports and information sent by us to the depositary and may have to go to the office of the depositary to inspect any reports issued;
 
  the deposit agreement may be amended by us and the depositary, or may be terminated by us or the depositary, each with thirty (30) days notice to you and without your consent in a manner that could prejudice your rights, and the deposit agreement limits our obligations and liabilities and those of the depositary.
Your rights as a shareholder will be governed by English law and will differ from and may be inferior to the rights of shareholders under U.S. law.
We are a public limited company incorporated under the laws of England and Wales. Our corporate affairs are governed by our Memorandum and Articles of Association, by the Companies Act 1985, as amended, and other common and statutory laws in England and Wales. The rights of shareholders to take action against the directors and actions by minority shareholders are to a large extent governed by the common law and statutory laws of England and Wales. These rights differ from the typical rights of shareholders in U.S. corporations. Facts that, under U.S. law, would entitle a shareholder in a U.S. corporation to claim damages may give rise to an alternative cause of action under English law entitling a shareholder in an English company to claim damages in an English court. However, this will not always be the case. For example, the rights of shareholders to bring proceedings against us or against our directors or officers in relation to public statements are different under English law than the civil liability provisions of the U.S. securities laws. In addition, shareholders of English companies may not have standing to initiate shareholder derivative actions in various courts, including before the federal courts of the United States. As a result, our public shareholders may face different considerations in protecting their interests in actions against our company, management, directors or our controlling shareholders, than would shareholders of a corporation incorporated in a jurisdiction in the United States, and our ability to protect our interests if we are harmed in a manner that would otherwise enable us to sue in a United States federal court, may be limited.
You may have difficulties enforcing, in actions brought in courts in jurisdictions located outside the United States, liabilities under the U.S. securities laws. In particular, if you sought to bring proceedings in England based on U.S. securities laws, the English court might consider:
  that it did not have jurisdiction; and/or
 
  that it was not the appropriate forum for such proceedings; and/or
 
  that, applying English conflict of laws rules, U.S. law (including U.S. securities laws) did not apply to the relationship between you and us or our directors and officers; and/or
 
  that the U.S. securities laws were of a public or penal nature and should not be enforced by the English court.

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Alternatively, if you were to bring an action in a U.S. Court, and we were to bring a competing action in an English Court, the English Court may grant an order seeking to prohibit you from pursuing the action before the U.S. court.
You should also be aware that English law does not allow for any form of legal proceedings directly equivalent to the class action available in U.S. courts. In addition, awards of punitive damages (or their nearest English law equivalent), are rare in English courts.
In addition, we are required by the Companies Act 1985 to prepare for each financial year audited accounts which comply with the requirements of that Act. These UK audited accounts are distributed to holders of our ordinary shares in advance of our annual shareholder meeting at which the UK audited accounts are voted on by our shareholders and are then filed with the Registrar of Companies for England and Wales. The UK audited accounts will be audited by an accounting firm eligible under UK statutory requirements, currently the UK firm Ernst & Young LLP. The UK audited accounts are likely to be materially different to the US GAAP financial statements which will be prepared in a form similar to those included within this prospectus and which will be filed with the US Securities and Exchange Commission. Our shareholders will not have an opportunity to vote on our US GAAP financial statements. Our ability to pay future dividends will be determined by reference to the distributable reserves shown by our UK audited accounts and this may restrict our ability to pay such dividends.
You may have difficulty in effecting service of process or enforcing judgments obtained in the United States against some of our directors and experts named in this prospectus that are not residents of the United States.
Some of our directors and some of the experts named in this prospectus are residents of countries other than the United States. Furthermore, all or a substantial portion of their assets may be located outside the United States. As a result, it may not be possible for you to:
  effect service of process within the United States upon such directors and experts; or
 
  •   enforce in U.S. courts judgments obtained against such directors and experts in the U.S. courts in any action, including actions under the civil liability provisions of U.S. securities laws; or
 
  •   enforce in U.S. courts judgments obtained against such directors and experts in courts of jurisdictions outside the United States in any action, including actions under the civil liability provisions of U.S. securities laws.
You may also have difficulties enforcing in courts outside the United States judgments obtained in the U.S. courts against any of our directors and some of the experts named in this prospectus or us (including actions under the civil liability provisions of the U.S. securities laws). In particular, there is doubt as to the enforceability in England of U.S. civil judgments predicated purely on U.S. securities laws. In any event, there is no system of reciprocal enforcement in England and Wales of judgments obtained in the U.S. courts. Accordingly, a judgment against any of those persons or us may only be enforced in England and Wales by the commencement of an action before the English court, seeking the recognition of the judgment of the U.S. court at common law in England. Judgment against any of those persons or us, as the case may be, may be granted by the English court without requiring the issues on the merits in the U.S. litigation to be reopened on the basis that those matters have already been decided by the U.S. court. To recognize a U.S. court Judgment, the English court must be satisfied that:
  that the judgment is final and conclusive;
 
  that the U.S. court had jurisdiction (as a matter of English law);
 
  that the U.S. judgment is not impeachable for fraud and is not contrary to English rules of natural justice;

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  that the enforcement of the judgment will not be contrary to public policy or statute in England;
 
  that the judgment is for a liquidated sum;
 
  that the English proceedings were commenced within the relevant limitation period;
 
  that the judgment is not directly or indirectly for the payment of taxes or other charges of a like nature or a fine or penalty;
 
  that the judgment remains valid and enforceable in the court in which it was obtained unless and until it is stayed or set aside; and
 
  •   that, before the date on which the U.S. court gave judgment, the issues in question had not been the subject of a final judgment of an English court or of a court of another jurisdiction whose judgment is enforceable in England.
We have never paid any dividend and we do not intend to pay dividends in the foreseeable future.
To date, we have not declared or paid any cash dividends on our ordinary shares and currently intend to retain any future earnings for funding growth. We do not anticipate paying any dividends in the foreseeable future. Moreover, companies incorporated under the laws of England and Wales cannot pay dividends unless they have distributable profits as defined in the Companies Act 1985 as amended. As a result, you should not rely on an investment in our shares if you require dividend income. Capital appreciation, if any, of our shares may be your sole source of gain for the foreseeable future.
Currency fluctuations may adversely affect the price of the ADSs relative to the price of our GDSs.
The price of our GDSs is quoted in euros. Movements in the euro/ U.S. dollar exchange rate may adversely affect the U.S. dollar price of our ADSs and the U.S. dollar equivalent of the price of our GDSs. For example, if the euro weakens against the U.S. dollar, the U.S. dollar price of the ADSs could decline, even if the price of our GDSs in euros increases or remains unchanged.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “may,” “will,” “continue,” “should,” “plan,” “predict,” “potential” or the negative of these terms or other similar expressions. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in these forward-looking statements, which are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” section and elsewhere in this prospectus, regarding, among other things:
  our significant operating losses and uncertainties relating to our ability to generate positive cash flow and operating profits in the future;
 
  difficulty in evaluating our future prospects based on our limited operating history and relatively new business model;
 
  our ability to attract members, convert members into paying subscribers and retain our paying subscribers, in addition to maintain paying subscribers;
 
  the highly competitive nature of our business;
 
  our ability to keep pace with rapid technological change;
 
  the strength of our existing brands and our ability to maintain and enhance those brands;
 
  our ability to effectively manage our growth;
 
  our dependence upon the telecommunications infrastructure and our networking hardware and software infrastructure;
 
  risks related to our recent accounting restatements;
 
  uncertainties relating to potential acquisitions of companies;
 
  the volatility of the price of our ADSs after this offering;
 
  the strain on our resources and management team of being a public company in the United States;
 
  the ability of our principal shareholders to exercise significant influence over our company; and
 
  other factors referenced in this prospectus and other reports.
You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assume responsibility for the accuracy and completeness of

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the forward-looking statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.
You should read this prospectus, and the documents that we reference in this prospectus and have filed as exhibits to the related registration statement with the Securities and Exchange Commission, completely and with the understanding that our actual future results, levels of activity, performance and achievements may materially differ from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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USE OF PROCEEDS
We will not receive any proceeds from the sale of ordinary shares in the form of ADSs by the selling security holders listed in this prospectus and any prospectus supplement, except for funds received from the exercise of warrants and options held by selling security holders, if and when exercised. We plan to use the net proceeds received from the exercise of any warrants and options for working capital and general corporate purposes. The actual allocation of proceeds realized from the exercise of these securities will depend upon the amount and timing of such exercises, our operating revenues and cash position at such time and our working capital requirements. There can be no assurances that any of the outstanding warrants and options will be exercised. The total maximum proceeds possible from the exercise of options and warrants at June 30, 2005 was approximately $35.5 million and $1.3 million, respectively.
RESCISSION OFFER
Under our 2000 Option Scheme, we granted options to purchase ordinary shares to certain of our employees, directors and consultants. California state securities laws generally require qualification for the offer and sale of securities subject to California law. Under California law, the grant of an option constitutes a sale of the underlying shares at the time of the option grant and not at the exercise of the option. Our option grants were not qualified and may not have been exempt from qualification under California state securities laws. As a result, we may have potential liability to those employees, directors and consultants to whom we granted options under the 2000 Option Scheme. In order to address that issue, we may elect to make a rescission offer to the holders of outstanding options under the 2000 Option Scheme to give them the opportunity to rescind the grant of their options.
As of June 30, 2005, assuming every eligible optionee were to accept a rescission offer, we estimate the total cost to us to complete the rescission would be approximately $4.0 million including statutory interest at 7% per annum. These amounts reflect the costs of offering to rescind the issuance of the outstanding options by paying an amount equal to 20% of the aggregate exercise price for the entire option, which we believe would comply with California state securities laws.
In addition, issuances of securities upon exercise of options granted under our 2000 Option Scheme may not have been exempt from registration and qualification under California state securities laws as a result of the option grants themselves, but also may not have been exempt from registration under federal securities laws. Federal securities laws prohibit the offer or sale of securities unless the sales are registered or exempt from registration. The issuances of ordinary shares upon the exercise of our options were not registered and may not have been exempt from registration under California state and federal securities laws. As a result, we may have potential liability to those employees, directors and consultants to whom we issued securities upon the exercise of these options. In order to address that issue, we may elect to make a rescission offer to those persons who exercised all, or a portion, of those options and continue to hold the shares issued upon exercise, to give them the opportunity to rescind the issuance of those shares (“Option Shares”).
As of June 30, 2005, assuming every eligible person that continues to hold the securities issued upon exercise of options granted under the 2000 Option Scheme were to accept a rescission offer, we estimate the total cost to us to complete the rescission would be approximately $3.8 million including statutory interest at 7% per annum, accrued since the date of exercise of the options. These amounts are calculated by reference to the acquisition price of the Option Shares.
For the purposes of English company law, a rescission offer in respect of our Option Shares would take the form of a purchase by our company of the relevant Option Shares. The Companies Act 1985 (“Companies Act”) provides that we may only purchase our own shares using our “distributable profits” or the proceeds from the issuance of new shares for that purpose. Due to the deficit on our profit and loss account as a consequence of our previous accumulated losses, we do not currently have

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sufficient distributable profits to effect the rescission offer with respect to the Option Shares. However, under the Companies Act, if we receive the approval of our shareholders and the High Court of Justice in England and Wales (the “Court”), we can reduce the deficit on the profit and loss account on our balance sheet by effecting a reduction of our share premium account and offsetting the amount of such reduction against the deficit on the profit and loss account. This process is known as a “share premium reduction.”
When we issue shares at a value which represents a premium over their nominal value, we are required by the Companies Act to transfer the premium (subject to certain limited exceptions) to a share premium account. Under the Companies Act, our ability to utilize our share premium account is very limited and does not include the payment of dividends. However, with the consent of the Court, it is possible to reduce the share premium account, and the reserve arising from such a reduction can be used to eliminate a deficit on our profit and loss account.
The amount standing to the credit of our company’s share premium account at August 31, 2005 was approximately $53 million. It is proposed that we reduce our share premium account by $44 million. This reduction of the share premium account will result in a reserve which can be written off against our profit and loss account, thus eliminating the deficit in our distributable reserves.
The share premium reduction must be approved by at least 75% of the shares held by the shareholders that vote on the resolution and by the Court. In order to satisfy the Court that our creditors will be properly protected we propose to give an undertaking to the Court to transfer to a special non-distributable reserve (the “Special Reserve”) the excess of the amount of the reduction of share premium account over the deficit on our profit and loss account at the date when the share premium reduction takes effect (the “Effective Date”) and not to distribute the Special Reserve until all of our creditors as at the Effective Date are paid off or have otherwise consented to the share premium reduction. Any profits made prior to the Effective Date will be credited to the Special Reserve and will not be distributable unless and until all of our creditors as of the Effective Date have been paid off or have otherwise consented to the share premium reduction.
The shareholder vote in respect of the share premium reduction is expected to take place at our annual general meeting on November 14, 2005. Subject to it being approved by that vote, the share premium reduction will become effective once a copy of the order of the Court confirming the reduction is registered with the Registrar of Companies for England and Wales. Although it is not possible to predict with certainty when an order of the Court will be granted and hence when the share premium reduction will become effective, it is anticipated that this will be on or around December 8, 2005.
We have terminated and no longer grant options under our 2000 Option Scheme, but options previously granted under 2000 Option Scheme remain in full force and effect. We intend to file a registration statement on Form S-8 to cover the issuance of future shares upon exercise of presently unexercised options under the 2000 Option Scheme.
In addition, before we proceed to purchase any of the Option Shares pursuant to a rescission offer, we would seek shareholders’ approval for such purchase(s) in accordance with the requirements of the Companies Act. These requirements are detailed and include the following:
•  the relevant contract to purchase the Option Shares (the “Contract”) must be approved in advance by a shareholder resolution (the “Resolution”) approved by at least 75% of the votes cast on the Resolution, excluding votes carried by the Option Shares to which the Resolution relates;
 
•  a copy of the Contract (including the names of the shareholders who will be party to the Contract) must be available for inspection by our shareholders for at least 15 days prior to the date of the shareholder meeting at which the Resolution is proposed and at the meeting itself; and
 
•  requirements following the purchase of the Option Shares as to public disclosure and inspection of the Contract and certain information relating to the purchase.

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PRICE RANGE OF GLOBAL DEPOSITARY SHARES
Our GDSs are currently traded on the Frankfurt Stock Exchange under the symbol “MHJG”.
The following table summarizes the high and low sales prices of our GDSs in euros as reported by the Frankfurt Stock Exchange for the periods noted below, and as translated into U.S. dollars at the currency exchange rate in effect on the date the price was reported on the Frankfurt Stock Exchange. The currency exchange rate is based on the average bid and ask exchange price as reported by OANDA for such date.
                                   
    High   Low
         
Year ended December 31, 2003
                               
 
First Quarter
  1.73     $ 1.85     1.36     $ 1.45  
 
Second Quarter
  1.79     $ 2.10     1.55     $ 1.69  
 
Third Quarter
  4.05     $ 4.53      1.60     $ 1.85  
 
Fourth Quarter
  5.05     $ 6.31      2.85     $ 3.37  
Year ended December 31, 2004
                               
 
First Quarter
  11.85     $ 14.68     4.20     $ 5.39  
 
Second Quarter
  9.85     $ 11.79     6.30     $ 7.63  
 
Third Quarter
  8.00     $ 9.62     2.85     $ 3.49  
 
Fourth Quarter
  7.33     $ 9.68     4.75     $ 6.06  
Year ended December 31, 2005
                               
 
First Quarter
  8.25     $ 10.66     6.16     $ 8.02  
 
Second Quarter
  8.00     $ 10.37     5.26     $ 6.47  
 
Third Quarter
  7.50     $ 9.28     5.25     $ 6.85  
 
Fourth Quarter (through November 3, 2005)
  6.29     $ 7.50     5.46     $ 6.66  
The last reported sales price of our GDSs on the Frankfurt Stock Exchange on November 3, 2005 was 5.65 per GDS, or $6.86 per GDS.
As of October 19, 2005, there were approximately 119 holders of record of our shares, including each account held by our depository and its record holder. These figures do not include beneficial owners who hold shares in nominee name.
DIVIDEND POLICY
We have never declared or paid cash dividends on our ordinary shares. We do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business.
Under English law, any payment of dividends would be subject to the Companies Act 1985, as amended, which requires that all dividends be approved by our board of directors and, in some cases, our shareholders. Moreover, under English law, we may pay dividends on our shares only out of profits available for distribution determined in accordance with the Companies Act 1985, as amended, and accounting principles generally accepted in the United Kingdom, which differ in some respects from U.S. GAAP. We also may incur indebtedness in the future that may prohibit or effectively restrict the payment of dividends on our ordinary shares. Any future determination related to our dividend policy will be made at the discretion of our Board of Directors. In the event that dividends are paid in the future, holders of the ADSs will be entitled to receive payments in U.S. dollars in respect of dividends on the underlying shares in accordance with the deposit agreement. See “Description of Share Capital — Description of Ordinary Shares — Dividends” and “Description of Share Capital — Description of American Depositary Shares — Dividends and Distributions.”

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CAPITALIZATION
The following table summarizes our cash, cash equivalents and marketable securities and capitalization as of June 30, 2005.
You should read this table in conjunction with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.
               
    June 30, 2005
     
    (in thousands
    except per share
    data)
Notes payable, including current portion
  $ 11,775  
Other liabilities
    203  
Shares subject to rescission
    3,819  
Shareholders’ equity:
       
 
Ordinary shares, £0.01 par value, 80,000,000 shares authorized; 25,901,160 shares issued and outstanding
    426  
 
Additional paid-in-capital
    53,921  
 
Deferred share-based compensation
    (41 )
 
Accumulated other comprehensive loss
    (270 )
 
Notes receivable from employees
    (203 )
 
Accumulated deficit
    (42,507 )
       
   
Total shareholders’ equity
    11,326  
       
     
Total capitalization
  $ 41,485  
       
The number of our ordinary shares shown above is based on 25,901,160 shares outstanding as of June 30, 2005. This information excludes:
  8,949,000 ordinary shares issuable upon the exercise of outstanding options as of June 30, 2005, with exercise prices ranging from $0.90 to $9.54 per share and a weighted average exercise price of $3.97 per share;
 
  530,000 ordinary shares issuable upon the exercise of warrants outstanding as of June 30 2005, with an exercise price of $2.52 per share; and
 
  15,072,500 ordinary shares available for issuance under our share option schemes.

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DILUTION
Since this offering is being made solely by the selling shareholders and none of the proceeds will be paid to us, except for funds received from the exercise of warrants and options held by selling shareholders, if and when exercised, our net tangible book value per share will not be affected by this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data. The data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements, related notes, and other financial information included herein. The following selected consolidated statement of operations data and balance sheet data for the six months ended June 30, 2005 and June 30, 2004 are derived from our unaudited consolidated financial statements presented elsewhere is this registration statement. The following selected consolidated statement of operations data for each of the three years in the period ended December 31, 2004, and the selected consolidated balance sheet data as of December 31, 2003 and 2004, are derived from the audited consolidated financial statements of our company included elsewhere in this prospectus. The consolidated statement of operations data for the year ended December 31, 2001 and the selected consolidated balance sheet data as of December 31, 2001 and 2002 are derived from the audited consolidated financial statements of our company not included in this prospectus. The consolidated statement of operations data for the year ended December 31, 2000 and the selected consolidated balance sheet data as of December 31, 2000 are derived from unaudited consolidated financial statements not included in this prospectus. Our ordinary shares in the form of GDSs currently trade on the Frankfurt Stock Exchange, in Germany. Pursuant to the laws governing this exchange, we publicly reported our quarterly and annual operating results. On April 28, 2004, we publicly announced that we had discovered accounting inaccuracies in previously reported financial statements. As a result, following consultation with our new auditors, we restated our financial statements for the first three quarters of 2003 and for each of the years ended December 31, 2002 and 2001 to correct inappropriate accounting entries. Based in part on the fact that our 2001 and 2002 annual and 2003 interim financial statements were restated, it is likely that our 2000 unaudited financial statements would have been subject to adjustments, which could have been material, had they been subjected to an audit and do not reflect accounting treatment or presentation consistent with audited financial statements for the years ended and as of December 31, 2002, 2003 and 2004. You should therefore not rely on data derived from such financial statements. The historical results are not necessarily indicative of results to be expected in any future period.
                                                             
        Six months ended
    Year ended December 31,(1)   June 30,(1)
         
    2000   2001   2002   2003   2004   2004   2005
                             
    (unaudited)                   (unaudited)
    (in thousands, except per share data and paying subscriber data)
Consolidated Statements of Operations Data:
                                                       
Net revenues
  $ 6,670     $ 10,434     $ 16,352     $ 36,941     $ 65,052     $ 30,862     $ 31,990  
Direct marketing expenses
    5,257       2,044       5,396       18,395       31,240       15,864       11,279  
                                           
   
Contribution margin
    1,413       8,390       10,956       18,546       33,812       14,998       20,711  
Operating expenses:
                                                       
 
Indirect marketing
    953       540       403       907       2,451       1,051       503  
 
Customer service
    402       641       1,207       2,536       3,379       1,878       1,137  
 
Technical operations
    628       1,772       1,587       4,341       7,162       3,318       2,950  
 
Product development
    138       359       603       959       2,013       871       1,890  
 
General and administrative (excluding share-based compensation) (2)
    6,215       5,496       7,996       16,885       27,727       12,078       12,512  
 
Share-based compensation
                      1,871       1,704       2,401       (28 )
 
Amortization of intangible assets other than goodwill
    1,127       2,137       524       555       860       482       411  

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        Six months ended
    Year ended December 31,(1)   June 30,(1)
         
    2000   2001   2002   2003   2004   2004   2005
                             
    (unaudited)                   (unaudited)
    (in thousands, except per share data and paying subscriber data)
 
Impairment of long-lived assets
          3,997             1,532       208              
                                           
   
Total operating expenses
    9,463       14,942       12,320       29,586       45,504       22,079       19,375  
                                           
Operating income (loss)
    (8,050 )     (6,552 )     (1,364 )     (11,040 )     (11,692 )     (7,081 )     1,336  
Interest (income) and other expenses, net
    1,113       1,627       (840 )     (188 )     (66 )     32       144  
                                           
(Loss) income before income taxes
    (9,163 )     (8,179 )     (524 )     (10,852 )     (11,626 )     (7,113 )     1,192  
Provision for income taxes
                            1       1       64  
                                           
Net (loss) income
  $ (9,163 )   $ (8,179 )   $ (524 )   $ (10,852 )   $ (11,627 )   $ (7,114 )   $ 1,128  
                                           
Net (loss) income per share — basic and diluted(3)
  $ (0.69 )   $ (0.47 )   $ (0.03 )   $ (0.57 )   $ (0.51 )   $ (0.33 )     0.04  
                                           
Weighted average shares outstanding — basic(3)
    13,213       17,460       18,460       18,970       22,667       21,521       25,389  
Weighted average shares outstanding — diluted(3)
                                                    29,080  
Other Financial Data:
                                                       
Depreciation
  $ 160     $ 544     $ 874     $ 1,441     $ 3,065     $ 1,369     $ 1,767  
Additional Information:
                                                       
Average paying subscribers(4)
                    58,700       125,800       226,100       217,900       219,200  
                                                 
    December 31,    
        June 30,
    2000   2001   2002   2003   2004   2005
                         
    (unaudited)                   (unaudited)
Consolidated Balance Sheet Data:
                                               
Cash, cash equivalents and marketable securities
  $ 11,410     $ 7,569     $ 7,755     $ 5,815     $ 7,423     $ 8,292  
Total assets
    23,409       16,352       17,461       16,969       27,359       41,485  
Deferred revenue
    362       993       1,535       3,232       3,933       3,925  
Capital lease obligations and notes payable
                      487       1,873        
Total liabilities
    6,156       3,238       3,998       11,659       16,872       26,340  
Shares subject to rescission (5)
                      3,819             3,819  
Accumulated deficit
    (12,453 )     (20,632 )     (21,156 )     (32,008 )     (43,635 )     (42,507 )
Total shareholders’ equity
    17,253       13,114       13,463       5,310       6,668       11,326  
 
(1) Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of certain asset and business acquisitions.
(2) In 2004, general and administrative expenses included an expense of approximately $2.4 million related to an employee severance, $2.1 million related to the United States initial public offering of MatchNet, Inc. that was planned for mid-2004, but which was withdrawn shortly after the related registration statement was filed in the third quarter of 2004, as well as one legal settlement resulting in the recognition of $900,000 in expenses in the third quarter and two legal settlements resulting in the recognition of $2.1 million in expenses in the fourth quarter of 2004. In 2003, general and administrative expenses included a charge of $1.7 million primarily related to a settlement with Comdisco.
(3) For information regarding the computation of per share amounts, refer to note 1 of our consolidated financial statements.
(4) Average paying subscribers for each month are calculated as the sum of the paying subscribers at the beginning and the end of the month, divided by two. Average paying subscribers for periods longer than one month are calculated as the sum of the average paying subscribers for each month, divided by the number of months in such period. Additionally, refer to

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of business metrics we use to evaluate our business. We did not track data for the years ended December 31, 2000 and 2001 sufficient to accurately set forth the number of average paying subscribers for the respective periods.
(5) Under our 2000 Executive Share Option Scheme (“2000 Option Scheme”), we granted options to purchase ordinary shares to certain of our employees, directors and consultants. The issuances of securities upon exercise of options granted under our 2000 Option Scheme may not have been exempt from registration and qualification under federal and California state securities laws, and as a result, we may have potential liability to those employees, directors and consultants to whom we issued securities upon the exercise of these options. In order to address that issue, we may elect to make a rescission offer to those persons who exercised all, or a portion, of those options and continue to hold the shares issued upon exercise, to give them the opportunity to rescind the issuance of those shares. However, it is the Securities and Exchange Commission’s position that a rescission offer will not bar or extinguish any liability under the Securities Act of 1933 with respect to these options and shares, nor will a rescission offer extinguish a holder’s right to rescind the issuance of securities that were not registered or exempt from the registration requirements under the Securities Act of 1933. As of August 31, 2005, assuming every eligible person that continues to hold the securities issued upon exercise of options granted under the 2000 Option Scheme were to accept a rescission offer, we estimate the total cost to us to complete the rescission would be approximately $3.8 million including statutory interest at 7% per annum, accrued since the date of exercise of the options. The rescission acquisition price is calculated as equal to the original exercise price paid by the optionee to our company upon exercise of their option.

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PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial information gives effect to the acquisition on May 19, 2005, by Spark Networks plc (formerly MatchNet plc) of MingleMatch, Inc., a corporation based in Provo, Utah. The purchase price for the acquisition was $12 million in cash, which will be paid over 12 months (as discussed further in note 5, notes payable), as well as 150,000 shares of the Company’s ordinary shares which, on the date of the acquisition, carried a value of approximately $1.2 million. For the fiscal year ended December 31, 2004, MingleMatch reported net revenues of approximately $2.5 million and a loss of $443,000.
The unaudited pro forma combined financial information is for illustrative purposes only and reflects certain estimates and assumptions. These unaudited pro forma combined financial statements should be read in conjunction with the accompanying notes, our historical consolidated financial statements and MingleMatch’s historical financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all of which are included elsewhere in this prospectus.
The unaudited pro forma combined statements of operation for the year ended December 31, 2004 and the six months ended June 30, 2005 give effect to the acquisition of MingleMatch, Inc. as if it had been completed on January 1, 2004. Our combined financial statements include the results of operations of MingleMatch, Inc. from its acquisition date (May 19, 2005) to June 30, 2005.
The unaudited pro forma combined financial statements are not necessarily indicative of operating results which would have been achieved had the foregoing transaction actually been completed at the beginning of the subject periods and should not be construed as representative of future operating results.
                                                                     
    Year ended December 31, 2004   Six Months ended June 30, 2005
         
    Spark   Mingle   Pro Forma   Pro Forma   Spark   Mingle   Pro Forma   Pro Forma
    Networks   Match   Adjustments   Combined   Networks   Match   Adjustments   Combined
                                 
    (in thousands except per share amounts)   (in thousands except per share amounts)
Net revenues
  $ 65,052     $ 2,504     $     $ 67,556     $ 31,990     $ 1,453     $     $ 33,443  
Direct marketing expenses
    31,240       1,432               32,672       11,279       741               12,020  
                                                 
 
Contribution margin
    33,812       1,072               34,884       20,711       712               21,423  
Operating expenses:
                                                               
 
Indirect marketing
    2,451       54               2,505       503       79               582  
 
Customer service
    3,379       100               3,479       1,137       147               1,284  
 
Technical operations
    7,162       353               7,515       2,950       350               3,300  
 
Product development
    2,013       77               2,090       1,890       113               2,003  
 
General and administrative (excluding share-based compensation)
    27,727       947               28,674       12,512       986               13,498  
 
Share-based compensation
    1,704                     1,704       (28 )                   (28 )
 
Amortization of intangible assets other than goodwill
    860       4       1,197 (1)     2,061       411       2       313 (1)     726  
 
Impairment of long lived assets
    208                     208                            
                                                 
   
Total operating expenses
    45,504       1,535       1,197       48,236       19,375       1,677       313       21,365  
                                                 
Operating (loss) income
    (11,692 )     (463 )     (1,197 )     (13,352 )     1,336       (965 )     (313 )     58  
Interest (income) and other expenses, net
    (66 )     (20 )             (86 )     144       (209 )             (65 )
                                                 
Pre-tax (loss) income
    (11,626 )     (443 )     (1,197 )     (13,266 )     1,192       (756 )     (313 )     123  
Income taxes
    1                     1       64                     64  
                                                 
Net (loss) income
  $ (11,627 )   $ (443 )   $ (1,197 )   $ (13,267 )   $ 1,128     $ (756 )   $ (313 )   $ 59  
                                                 

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    Year ended December 31, 2004   Six Months ended June 30, 2005
         
    Spark   Mingle   Pro Forma   Pro Forma   Spark   Mingle   Pro Forma   Pro Forma
    Networks   Match   Adjustments   Consolidated   Networks   Match   Adjustments   Consolidated
                                 
    (in thousands except per share amounts)   (in thousands except per share amounts)
Net (loss) income per ordinary share — basic
  $ (0.51 )                   $ (0.58 )   $ 0.04                     $ 0.00  
Net (loss) income per ordinary share — diluted
  $ (0.51 )                   $ (0.58 )   $ 0.04                     $ 0.00  
Weighted average ordinary shares outstanding — basic
    22,667               150       22,817       25,389                       25,389  
Weighted average ordinary shares outstanding — diluted
    22,667               150       22,817       29,080                       29,080  
 
(1)  Represents the amortization of intangible assets that would have occurred if the purchase had happened on January 1, 2004. Calculated as follows:
                 
    Year Ended   Stub Period Ending
    December 31, 2004   May 18, 2005
         
Domain Names
  $ 786     $ 297  
Subscriber Databases
    370        
Developed Software
    41       16  
             
Total Amortization
  $ 1,197     $ 313  
             
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.
           
    As of May 19, 2005
     
    (in thousands)
Current assets (including cash acquired of $221)
  $ 295  
Property and equipment, net
    162  
Goodwill
    8,172  
Domain names and databases
    4,655  
       
 
Total assets acquired
    13,284  
Current liabilities
    41  
       
 
Net assets acquired
  $ 13,243  
Of the $4,655,000 of acquired intangible assets, $2,360,000 was assigned to member databases and will be amortized over three years, $370,000 was assigned to subscriber databases which will be amortized over three months, $205,000 was assigned to developed software which will be amortized over five years, and $1,720,000 was assigned to domain names which are not subject to amortization.
Of the $8,171,600 of acquired goodwill, $400,000 was assigned to assembled workforce.

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited and audited consolidated financial statements and the related notes thereto included elsewhere in this prospectus.
This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “may,” “will,” “continue,” “should,” “plan,” “predict,” “potential” or the negative of these terms or other similar expressions. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in these forward-looking statements, which are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” section and elsewhere in this prospectus.
General
We are a public limited company incorporated under the laws of England and Wales and our ordinary shares in the form of GDSs currently trade on the Frankfurt Stock Exchange. We are a leading provider of online personals services in the United States and internationally. Our Web sites enable adults to meet online and participate in a community, become friends, date, form a long-term relationship or marry.
Our revenues have grown from $659,000 in 1999 to $65.1 million in 2004. For the six month period ended June 30, 2005, we had approximately 219,200 average paying subscribers, representing an increase of 0.6% from the same period in 2004. We define a member as an individual who has posted a personal profile during the immediately preceding 12 months or an individual who has previously posted a personal profile and has subsequently logged on to one of our Web sites at least once in the preceding 12 months. Paying subscribers are defined as individuals who have paid a monthly fee for access to communication and Web site features beyond those provided to our members, and average paying subscribers for each month are calculated as the sum of the paying subscribers at the beginning and the end of the month, divided by two. Our key Web sites are JDate.com, which targets the Jewish singles community in the United States, at a current subscription fee of $34.95 for a one month subscription, and AmericanSingles.com, which targets the U.S. mainstream online singles community, at a current subscription fee of $29.85 for a one month subscription. Our subscription fees are charged on a monthly basis, with discounts for longer-term subscriptions ranging from three to twelve months. Longer-term subscriptions are charged up-front and we recognize revenue over the terms of such subscriptions.
We have grown both internally and through acquisitions of entities, and selected assets of entities, offering online personals services and related businesses. As a result of each of these acquisitions, we have been able to expand and cross-promote into vertical affinity markets, combine the target entity’s existing database of online personals customers into one of our Web sites’ databases, with the goal of attracting new members to our Web sites, retaining as many of them as possible and converting them into paying subscribers. Through our business acquisitions, we have expanded into new markets,

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leveraged and enhanced our existing brands to improve our position within new markets, and gained valuable intellectual property. During the last three years, we made the following acquisitions:
  •   In May 2005, we acquired MingleMatch, Inc., a company that operates religious, ethnic, special interest and geographically targeted online singles communities. The acquisition of MingleMatch fits with our strategy of creating affinity-focused online personals that provide quality experiences for our members. We expect that our purchase of MingleMatch will allow for numerous cost savings and revenue synergies. Expected cost savings include savings from cost reductions in customer service and marketing, where we plan to be able to market to existing members of our other Web sites, particularly AmericanSingles. Expected revenue synergies include cross-promotion and bundled subscription opportunities with members of our other Web sites, particularly AmericanSingles.
 
  In September 2004, we purchased a 20% equity interest, with an option to acquire the remaining interest, in Duplo AB, an online provider of social networking products and services in Sweden, with the intent of expanding into new markets and strengthening our existing brands.
 
  In January 2004, we purchased Point Match Ltd., a competitor of JDate.co.il in Israel.
Our future performance will depend on many factors, including:
  continued acceptance of online personals services;
 
  our ability to attract a large number of new members and paying subscribers, and retain those members and paying subscribers;
 
  our ability to increase brand awareness, both domestically and internationally;
 
  our ability to sustain and, when possible, increase subscription fees for our services; and
 
  our ability to introduce new targeted Web sites, affiliate programs, fee-based services and advertising as additional sources of revenues.
Our ability to compete effectively will depend on the timely introduction and performance of our future Web sites, services and features, the ability to address the needs of our members and paying subscribers and the ability to respond to Web sites, services and features introduced by competitors. To address this challenge, we have invested and will continue to invest existing personnel resources, namely internet engineers and programmers, in order to enhance our existing services and introduce new services, which may include new Web sites as well as new features and functions designed to increase the probability of communication among our members and paying subscribers and to enhance their online personals experiences. Our software development team consisted of 34 employees as of June 30, 2005, who are focused on expanding and improving the features and functionality of our Web sites. The Company believes that it has sufficient cash resources on hand to accomplish the enhancements that are currently contemplated.
Critical Accounting Policies, Estimates and Assumptions
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, prepaid advertising, Web site and software development costs, goodwill, intangible and other long-lived assets, accounting for business combinations, contingencies and income taxes. We base our estimates on historical experience

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and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Management has discussed the development and selection of our critical accounting policies, estimates and assumptions with our Board of Directors and the Board has reviewed these disclosures.
We believe the following critical accounting policies reflect the more significant judgments and estimates we used in the preparation of our consolidated financial statements:
Revenue Recognition and Deferred Revenue
Substantially all of our revenues are derived from subscription fees. Revenues are presented net of credits and credit card chargebacks. We recognize revenue in accordance with accounting principles generally accepted in the United States and with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition.”
Recognition occurs ratably over the subscription period, beginning when there is persuasive evidence of an arrangement, delivery has occurred (access has been granted), the fees are fixed and determinable, and collection is reasonably assured. Paying subscribers primarily pay in advance using a credit card and all purchases are final and nonrefundable. Subscription fees collected in advance are deferred and recognized as revenue, using the straight-line method, over the term of the subscription. We reserve for potential credit card chargebacks based on our historical chargeback experience.
Direct Marketing Expenses
We incur substantial expenses related to our advertising in order to generate traffic to our Web sites. These advertising costs are primarily online advertising, including affiliate and co-brand arrangements, and are directly attributable to the revenues we receive from our subscribers. We have entered into numerous affiliate arrangements, under which our affiliate advertises or promotes our Web site on its Web site, and earns a fee whenever visitors to its Web site click though the advertisement to one of our Web sites and registers or subscribes on our Web site. Affiliate deals may fall in the categories of either CPS, CPA, CPC, or CPM, as discussed below. We do not typically have any exclusivity arrangements with our affiliates, and some of our affiliates may also be affiliates for our competitors. Under our co-branded arrangements, our co-brand partners may operate their own separate Web sites where visitors can register and subscribe to our Web sites. Our co-brand arrangements are usually CPS type arrangements.
Our advertising expenses are recognized based on the terms of each individual contract. The majority of our advertising expenses are based on four pricing models:
  Cost per subscription (CPS) where we pay an online advertising provider a fee based upon the number of new paying subscribers that it generates;
 
  Cost per acquisition (CPA) where we pay an online advertising provider a fee based on the number of new member registrations it generates;
 
  Cost per click (CPC) where we pay an online advertising provider a fee based on the number of clicks to our Web sites it generates; and
 
  Cost per thousand for banner advertising (CPM) where we pay an online advertising provider a fee based on the number of times it displays our advertisements.
We estimate in certain circumstances the total clicks or impressions delivered by our vendors in order to determine amounts due under these contracts.

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Prepaid Advertising Expenses
In certain circumstances, we pay in advance for Internet-based advertising on other Web sites, and expense the prepaid amounts as direct marketing expenses over the contract periods as the contracted Web site delivers on its commitment. We evaluate the realization of prepaid amounts at each reporting period and expense prepaid amounts if the contracted Web site is unable to deliver on its commitment.
Web Site and Software Development Costs
We capitalize costs related to developing or obtaining internal-use software. Capitalization of costs begins after the conceptual formulation stage has been completed. Product development costs are expensed as incurred or capitalized into property and equipment in accordance with Statement of Position (“SOP”) 98-1 “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. SOP 98-1 requires that costs incurred in the preliminary project and post-implementation stages of an internal-use software project be expensed as incurred and that certain costs incurred in the application development stage of a project be capitalized. We exercise judgment in determining which stage of development a software project is in at any point in time.
In accordance with Emerging Issues Task Force (“EITF”) 00-2 “Accounting for Web Site Development Costs,” we expense costs related to the planning and post-implementation phases of our Web site development efforts. Direct costs incurred in the development phase are capitalized. Costs associated with minor enhancements and maintenance for the Web site are included in expenses in the accompanying consolidated statements of operations.
Capitalized Web site and software development costs are included in internal-use software in property and equipment and amortized over the estimated useful life of the products, which is usually three years. In accordance with the above accounting literature, we estimate the amount of time spent by our engineers in developing our software and enhancements to our Web sites.
On a regular basis, management reviews the capitalized costs of Web sites and software developed to ensure that these costs relate to projects that will be completed and placed in service. Any projects determined not to be viable will be reviewed for impairment in accordance with SFAS No. 144.
Valuation of Goodwill, Identified Intangibles and Other Long-lived Assets
We test goodwill and intangible assets for impairment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” and test property, plant and equipment for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” We assess goodwill, and other indefinite-lived intangible assets at least annually, or more frequently when circumstances indicate that the carrying value may not be recoverable. Factors we consider important and which could trigger an impairment review include the following:
  a significant decline in actual projected revenue;
 
  a significant decline in the market value of our depositary shares;
 
  a significant decline in performance of certain acquired companies relative to our original projections;
 
  an excess of our net book value over our market value;
 
  a significant decline in our operating results relative to our operating forecasts;
 
  a significant change in the manner of our use of acquired assets or the strategy for our overall business;
 
  a significant decrease in the market value of an asset;

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  a shift in technology demands and development; and
 
  a significant turnover in key management or other personnel.
When we determine that the carrying value of goodwill, other intangible assets and other long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. In the case of the other intangible assets and other long-lived assets, this measurement is only performed if the projected undiscounted cash flows for the asset are less than its carrying value. No indicators of impairment in goodwill were present in 2003. We had impairment charges related to long-lived assets of $1.5 million in 2003 in accordance with SFAS No. 144.
Accounting for Business Combinations
We have acquired the stock or specific assets of a number of companies from 1999 through 2004 some of which were considered to be business acquisitions. Under the purchase method of accounting, the cost, including transaction costs, are allocated to the underlying net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
The judgments made in determining the estimated fair value and expected useful life assigned to each class of assets and liabilities acquired can significantly impact net income. Different classes of assets will have useful lives that differ. For example, the useful life of member database, which is three years, is not the same as the useful life of a paying subscriber list, which is three months, or a domain name, which is indefinite. Consequently, to the extent a longer-lived asset is ascribed greater value under the purchase method than a shorter-lived asset, there may be less amortization recorded in a given period or no amortization for indefinite lived intangibles.
Determining the fair value of certain assets and liabilities acquired is subjective in nature and often involves the use of significant estimates and assumptions.
The value of our intangible and other long-lived assets, including goodwill, is exposed to future adverse changes if we experience declines in operating results or experience significant negative industry or economic trends or if future performance is below historical trends. We review intangible assets and goodwill for impairment at least annually or more frequently when circumstances indicate that the carrying value may not be recoverable using the guidance of applicable accounting literature. We continually review the events and circumstances related to our financial performance and economic environment for factors that would provide evidence of the impairment of goodwill, identifiable intangibles and other long-lived assets.
We use the equity method of accounting for our investments in affiliates over which we exert significant influence. Significant influence is generally having a 20% to 50% ownership interest. At June 30, 2005, we owned a 20% interest in Duplo AB which we account for using the equity method.
Legal Contingencies
We are currently involved in certain legal proceedings, as discussed in the notes to the financial statements and under “Business — Legal Proceedings.” To the extent that a loss related to a contingency is reasonably estimable and probable, we accrue an estimate of that loss. Because of the uncertainties related to both the amount and range of loss on certain pending litigation, we may be unable to make a reasonable estimate of the liability that could result from an unfavorable outcome of such litigation. As additional information becomes available, we will assess the potential liability related to our pending litigation and make or, if necessary, revise our estimates. Such revisions in our estimates of the potential liability could materially impact our results of operations and financial position.

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Accounting for Income Taxes
We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of the assets and liabilities. In accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes,” we record a valuation allowance to reduce deferred tax assets to the amount expected to more likely than not be realized in our future tax returns. As of December 31, 2004 and 2003, we had a valuation allowance that completely offset our deferred tax asset. Should we determine in the future that we will likely realize all or part of our net deferred tax assets, we will adjust the valuation allowance so that we will have a deferred tax asset available that will be realized in our future tax returns.
At December 31, 2004, we had net operating loss carry-forwards of approximately $42.0 million and $38.0 million available to reduce future federal and state taxable income, respectively. Under Section 382 of the Internal Revenue Code, the utilization of the net operating loss carry-forwards can be limited based on changes in the percentage ownership of our company. Of the net operating losses available, approximately $1.5 million and $800,000 for federal and state purposes, respectively, are attributable to losses incurred by an acquired subsidiary. Such losses are subject to other restrictions on usage including the requirement that they are only available to offset future income of the subsidiary. In addition, the available net operating losses do not include any amounts generated by the acquired subsidiary prior to the acquisition date due to substantial uncertainty regarding our ability to realize the benefit in the future.
Segment Reporting
We divide our business into three operating segments: (1) the JDate segment, which consists of our JDate.com Web site and its co-branded Web sites, (2) the AmericanSingles segment, which consists of our AmericanSingles.com Web site and its co-branded Web sites, and (3) the Other Businesses segment, which consists of all of our other Web sites and businesses.
                                             
        Six months ended
    Year ended December 31,   June 30,
         
    2002   2003   2004   2004   2005
                     
    (in thousands)
Net Revenues:
                                       
 
JDate
  $ 8,372     $ 16,091     $ 23,820     $ 11,597     $ 12,703  
 
AmericanSingles
    6,644       19,253       35,224       17,255       15,353  
 
Other Businesses
    1,336       1,597       6,008       2,010       3,934  
                               
   
Total
  $ 16,352     $ 36,941     $ 65,052     $ 30,862     $ 31,990  
                               
Direct Marketing Expenses:
                                       
 
JDate
  $ 224     $ 739     $ 1,740     $ 697     $ 1,208  
 
AmericanSingles
    3,970       15,887       24,954       13,394       7,570  
 
Other Businesses
    1,202       1,769       4,546       1,773       2,501  
                               
   
Total
  $ 5,396     $ 18,395     $ 31,240     $ 15,864     $ 11,279  
                               
Contribution:
                                       
 
JDate
  $ 8,148     $ 15,352     $ 22,080     $ 10,900     $ 11,495  
 
AmericanSingles
    2,674       3,366       10,270       3,861       7,783  
 
Other Businesses
    134       (172 )     1,462       237       1,433  
                               
   
Total
  $ 10,956     $ 18,546     $ 33,812     $ 14,998     $ 20,711  
                               

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Key Business Metrics
We regularly review certain operating metrics in order to evaluate the effectiveness of our operating strategies and monitor the financial performance of our business. The key business metrics that we utilize include the following:
  Average Paying Subscribers: Paying subscribers are defined as individuals who have paid a monthly fee for access to communication and Web site features beyond those provided to our members. Average paying subscribers for each month are calculated as the sum of the paying subscribers at the beginning and the end of the month, divided by two. Average paying subscribers for periods longer than one month are calculated as the sum of the average paying subscribers for each month, divided by the number of months in such period.
 
  Average Monthly Net Revenue per Paying Subscriber: Average monthly net revenue per paying subscriber represents the total net subscriber revenue for the period divided by the number of average paying subscribers for the period, divided by the number of months in the period.
 
  Direct Subscriber Acquisition Cost: Direct subscriber acquisition cost is defined as total direct marketing costs divided by the number of new paying subscribers during the period. This represents the average cost of acquiring a new paying subscriber during the period.
 
  Monthly Subscriber Churn: Monthly subscriber churn represents the ratio expressed as a percentage of (i) the number of paying subscriber cancellations during the period divided by the number of average paying subscribers during the period and (ii) the number of months in the period.
Unaudited selected statistical information regarding our key operating metrics for the years ended December 31, 2002, 2003, and 2004 and the six month periods ended June 30, 2005 and 2004 is shown in the table below. The references to “Other Businesses” in this table indicate metrics data for our Other Businesses segment, excluding travel and events. Our “Other Businesses” segment includes all MingleMatch Web sites, along with JDate.co.il (Israel), Cupid (Israel), Date.ca (Canada), Matchnet.co.uk (United Kingdom), Matchnet.de (Germany), Matchnet.com.au (Australia), Glimpse.com (United States) and CollegeLuv.com (United States). At the time of acquisition in May 2005, MingleMatch had approximately 23,000 average paying subscribers.
                                           
        Six months ended
    Year ended December 31,   June 30,
         
    2002   2003   2004   2004   2005
                     
Average Paying Subscribers (in thousands):
                                       
 
JDate
    27.7       50.7       69.8       71.2       69.3  
 
AmericanSingles
    29.5       71.5       132.5       129.9       115.3  
 
Other Businesses
    1.5       3.6       23.8       16.8       34.6  
                               
 
Total
    58.7       125.8       226.1       217.9       219.2  
                               
Average Monthly Net Revenue per Paying Subscriber:
                                       
 
JDate
  $ 25.20     $ 26.44     $ 28.42     $ 27.14     $ 30.56  
 
AmericanSingles
    18.77       22.43       22.16       22.60       22.19  
 
Other Businesses
    33.17       23.72       16.75       15.36       18.11  
 
All Segments
    22.17       24.09       23.53       23.52       24.19  

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        Six months ended
    Year ended December 31,   June 30,
         
    2002   2003   2004   2004   2005
                     
Direct Subscriber Acquisition Cost:
                                       
 
JDate
  $ 2.90     $ 4.39     $ 8.09     $ 6.43     $ 11.30  
 
AmericanSingles
    38.68       45.70       43.29       44.40       32.68  
 
Other Businesses
    78.43       80.32       34.74       32.10       34.64  
 
All Segments
    25.56       33.84       33.85       34.13       27.35  
Monthly Subscriber Churn:
                                       
 
JDate
    18.2 %     22.4 %     25.8 %     25.9 %     26.2 %
 
AmericanSingles
    24.3       32.1       35.6       35.7       36.8  
 
Other Businesses
    32.6       33.4       26.8       40.1       23.6  
 
All Segments
    21.6       28.2       31.7       32.0       31.2  
The larger increase in average paying subscribers for AmericanSingles as compared to the increase for JDate was primarily due to JDate possessing a larger portion of its market, while AmericanSingles possessed a smaller portion of its market and its average paying subscribers has, as a result, grown more quickly.
We have embarked in increases in marketing spending for JDate, primarily in the area of off-line marketing. Such marketing initiatives are targeted at brand building and name recognition. The marketing programs most prominently include print and billboard advertising. We include the costs of these marketing programs in the direct marketing expense for the JDate segment. As these are new marketing initiatives and spending that we have not previously undertaken, it has resulted in an increase in our customer acquisition cost for JDate. Even after these increased spending programs, the cost of customer acquisition for JDate is significantly lower than for our other segments due to the strong brand perception and word of mouth reputation of JDate. Our recent marketing initiatives are targeted specifically at maintaining that strong word of mouth name reputation and brand recognition.
The cost of customer acquisition for JDate is significantly lower than for our other segments due to its strong brand and we expect the cost of customer acquisition for JDate to remain below that for our other segments. AmericanSingles and our other Web sites operate in much more competitive environments, and must spend more on marketing to attract new subscribers.
Churn rate is somewhat independent from an increasing number of subscribers opting for multi-month contracts. Churn rate is calculated as the ratio of monthly subscriber cancellations during the period, divided by the average paying subscribers in a period. During a period where the number of total new subscribers and subscribers canceling are both increasing, but more new subscribers are choosing longer term contracts, then churn rate can increase while average revenue per subscriber falls. We are constantly striving to improve our Web sites to retain our existing subscribers. However, we do not forecast churn rates, and lack the ability to accurately do so.

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Results of Operations
The following is a more detailed discussion of our financial condition and results of operations for the periods presented.
The following table presents our historical operating results as a percentage of net revenues for the periods indicated:
                                             
        Six months ended
    Year ended December 31,   June 30,
         
    2002   2003   2004   2004   2005
                     
Consolidated Statements of Operations Data:
                                       
Net revenues
    100.0 %     100.0 %     100.0 %     100.0 %     100.0 %
Direct marketing expenses
    33.0       49.8       48.0       51.4       35.3  
                               
 
Contribution margin
    67.0       50.2       52.0       48.6       64.7  
Operating expenses:
                                       
 
Indirect marketing
    2.5       2.5       3.8       3.4       1.6  
 
Customer service
    7.4       6.9       5.2       6.1       3.6  
 
Technical operations
    9.7       11.7       11.0       10.8       9.2  
 
Product development
    3.7       2.6       3.1       2.8       5.9  
 
General and administrative (excluding share-based compensation)
    48.8       45.7       42.7       39.1       39.1  
 
Share-based compensation
    0.0       5.1       2.6       7.8       (0.1 )
 
Amortization of intangible assets other than goodwill
    3.2       1.5       1.3       1.6       1.3  
 
Impairment of long-lived assets and goodwill
    0.0       4.1       0.3       0.0       0.0  
                               
   
Total operating expenses
    75.3       80.1       70.0       71.6       60.6  
                               
Operating loss
    (8.3 )     (29.9 )     (18.0 )     (23.0 )     4.1  
Interest (income) and other expenses, net
    (5.1 )     (0.5 )     (0.1 )     0.1       0.5  
                               
(Loss) income before income taxes
    (3.2 )     (29.4 )     (17.9 )     (23.1 )     3.6  
Provision for income taxes
    0.0       0.0       0.0             0.2  
                               
Net (loss) income
    (3.2 )%     (29.4 )%     (17.9 )%     (23.1 )%     3.4 %
                               
Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004.
Business Metrics
For the six months ended June 30, 2005, average paying subscribers for the JDate segment decreased 2.7% to 69,300, compared to 71,200 for the same period last year. For the six months ended June 30, 2005, average paying subscribers for the AmericanSingles segment decreased 11.2% to 115,300, compared to 129,900 for the same period last year. For the six months ended June 30, 2005, average paying subscribers for Web sites in our Other Businesses segment increased 106.0% 34,600, compared 16,800 for the same period last year. The decrease in average paying subscribers for JDate is due to an increase in our churn rate. The decrease in average paying subscribers for AmericanSingles is due to a decline in the total marketing expenditures in 2005 compared to 2004. The increase in average paying subscribers for our other web sites is due primarily to the acquisitions of MingleMatch, Inc. in May 2005 and the growth of our Cupid Web site in Israel, as well as an increase in international Web sites which began operations in early 2004.

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For six months ended June 30, 2005, average monthly net revenue per paying subscriber for the JDate segment increased 12.6% to $30.56, compared to $27.14 for the six months in 2004. The increase was due to an increase in net revenue associated with new subscriptions at a higher price point, offset by the decline in average paying subscribers as discussed above. For the six months ended June 30, 2005, average monthly net revenue per paying subscriber for the AmericanSingles segment decreased slightly to $22.19 from $22.60 for the six months ended June 30, 2004. For the six months ended June 30, 2005, average monthly net revenue per paying subscriber for Web sites in our Other Businesses segment increased 17.9% to $18.11, compared to $15.36 for the six months ended June 30, 2004. The increase was primarily due to the addition of MingleMatch during the second quarter of 2005.
For the six months ended June 30, 2005, direct subscriber acquisition cost for JDate increased 75.7% to $11.30, compared to $6.43 for the same period in 2004. The increase in direct subscriber acquisition costs for JDate is due to new marketing initiatives for the JDate site in order solidify and expand JDate’s brand awareness. For the six months ended June 30, 2005, direct subscriber acquisition costs for AmericanSingles decreased 26.4% to $32.68, compared to $44.40 for the same period ended June 30, 2004 due to a decrease in marketing expenditures associated with the AmericanSingles Web site. For the six months ended June 30, 2005, direct subscriber acquisition cost for the Web sites in our Other Businesses segment increased 7.9% to $34.64, compared to $32.10 for the same period of 2004. The increase in direct subscriber acquisition costs for our Other Businesses segment in the first half of 2005 is due to an increased marketing effort to attract new subscribers to the international Web sites that were launched in early 2004.
For the six months ended June 30, 2005, monthly subscriber churn for JDate increased slightly to 26.2%, compared to 25.9% for the same period in 2004. For the six months ended June 30, 2005, monthly subscriber churn for AmericanSingles increased to 36.8%, compared to 35.7% for the same period in 2004. For the six months ended June 30, 2005, monthly subscriber churn for the Web sites in our Other Businesses segment decreased to 23.6%, as compared with 40.1% for the same period in 2004. The decrease in the churn rate in the second quarter of 2005 is due to the addition of MingleMatch.
Net Revenues
Net revenues for JDate increased 9.5% to $12.7 million for the six months ended June 30, 2005 compared to $11.6 million for the first six months of 2004. The increase in net revenues for JDate is due to an increase in pricing in mid 2004 which contributed to increased revenues despite the decline in average paying subscribers discussed above. Net revenues for AmericanSingles decreased 11.0% to $15.4 million for the six months ended June 30, 2005, compared to $17.3 million in 2004. The decrease in AmericanSingles net revenue is due to the decrease in average paying subscribers for the reasons discussed above. Net revenues for our Other Businesses segment increased 95.7% to $3.9 million for the six months ended June 30, 2005 compared to $2.0 million in 2004. The increase in net revenues for our Other Businesses is attributed to the acquisition of MingleMatch and the growth of our international Web sites which were launched in early 2004.
Direct Marketing Expenses
Direct marketing expenses for JDate increased 73.3% to $1.2 million for the six months ended June 30, 2005 compared to $697,000 in 2004. The increase in marketing spend was due to new marketing initiatives for JDate designed to solidify and expand JDate’s brand awareness. Direct marketing expenses for AmericanSingles decreased 43.5% to $7.6 million for the six months ended June 30, 2005 compared to $13.4 million in the same period last year. In the second quarter of 2004, the Company initiated an aggressive marketing program, primarily for American Singles. Upon review, it became apparent that such aggressive spending was not generating sufficient incremental revenue and, accordingly our marketing spending has been reduced, to allow us to become more profitable. We

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expect that marketing expenditures as a percentage of net revenues going forward will be more consistent with recorded results in the first six months at 2005 than in prior years. Direct marketing expenses for our Web sites in our Other Businesses segment increased 41.1% to $2.5 million for the six months ended June 30, 2005 compared to $1.8 million in the first six months of 2004. The increase in spending related to our Web sites in our Other Businesses segment is attributed to the acquisition of MingleMatch and additional advertising in order to generate traffic to our newer international Web sites which commenced operations early in 2004.
Operating Expenses
Operating expenses consist primarily of indirect marketing, customer service, technical operations, product development and general and administrative expenses. Operating expenses decreased 12.2% to $19.4 million in the first six months of 2005 compared to $22.1 million in the same period in 2004. Stated as a percentage of net revenues, operating expenses decreased to 60.6% in the first six months of 2005 compared to 71.6% in the same period last year. The decrease is due primarily to a decrease in share-based compensation in the first six months of 2005 which is further discussed below.
Indirect Marketing. Indirect marketing expenses consist primarily of salaries for our sales and marketing personnel and other associated costs such as public relations. Indirect marketing expenses decreased 52.1% to $503,000 in the first six months of 2005 compared to $1.1 million in the second quarter of 2004. Stated as a percentage of net revenues, indirect marketing expenses decreased to 1.6% in the first six months of 2005 compared to 3.4% in the same period in 2004. The decrease is due to a decrease in headcount in our marketing department, and the termination of the Chief Marketing Officer in the fourth quarter of 2004 who has not been replaced.
Customer Service. Customer service expenses consist primarily of costs associated with our member services center. Customer services expenses decreased 39.5% to $1.1 million in the first six months of 2005 compared to $1.9 million in the first six months of 2004. Stated as a percentage of net revenues, customer service expenses decreased to 3.6% in the quarter ended June 30, 2005 compared to 6.1% in the same period in the prior year. The decrease is due to a decrease in headcount from 2004 to 2005. During the first six months of 2004, we had higher staffing in our member services center in order to better serve our customers due to the launch of new Web sites and new platforms. During the remainder of 2004, we worked to increase our efficiency in handling our call volume, and therefore reduced our headcount accordingly by the first six months of 2005.
Technical Operations. Technical operations expenses consist primarily of the people and systems necessary to support our network, Internet connectivity and other data and communication support. Technical operations expenses decreased 11.1% to $3.0 million in the first six months of 2005 compared to $3.3 million in 2004. The decrease is primarily due to a reduction in headcount as well as a restructuring of workforce which resulted in a decrease of salary expense. This reduction was partially offset by an increase in depreciation expense associated with the increase in hardware to support our network and an increase in capitalized software amortization associated with redesigning our operating platform. As a percentage of net revenues, technical operations decreased to 9.2% in the quarter ended June 30, 2005 compared to 10.8% in the same period last year.
Product Development. Product development expenses consist primarily of costs incurred in the development, creation and enhancement of our Web sites and services. Product development expenses increased 117.0% to $1.9 million in the first six months of 2005 compared to $871,000 in 2004. As a percentage of net revenues, product development expenses increased to 5.9% for the six months ended June 30, 2005 compared to 2.8% in 2004. The increase is due primarily to an increase in headcount associated with pursuing new business opportunities as well as improving the infrastructure of our existing businesses.
General and Administrative. General and administrative expenses consist primarily of corporate personnel-related costs, professional fees, credit card processing fees, and occupancy and other

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overhead costs. General and administrative expenses increased 3.6% to $12.5 million in the first six months of 2005 compared to $12.1 million in the same period in 2004. The increase in general and administrative expenses is due primarily to increase in consulting services as well as an increase in credit card processing fees, including charges and fines. Stated as a percentage of net revenues, general and administrative expenses for the six months ended June 30, 2005 and 2004 was 39.1%.
Share-Based Compensation. Share-based compensation resulted from the issuance of warrants and options that were treated as variable under accounting principles which, on a quarterly basis, required us to recognize an increase or decrease in compensation expense based on the then fair-value of the subject securities. Share-based compensation decreased 101.2% to $(28,000) in the first six months of 2005 compared to $2.4 million in the first six months of 2004. The difference in expense is due to the fact that the majority of options and warrants which were considered variable in 2004 were fully valued and accounted for in 2004 and as a result did not impact the results of the first six months of 2005.
Amortization of Intangible Assets Other Than Goodwill. Amortization expenses consist primarily of amortization of intangible assets related to the MingleMatch acquisition as well as previous acquisitions, primarily SocialNet and PointMatch. Amortization expense decreased 14.7% to $411,000 in the first six months of 2005 compared to $482,000 in the first six months of 2004. The decrease is due to intangibles related to older acquisitions being fully amortized by the first quarter of 2005 partially offset by amortization of intangible assets resulting from the MingleMatch acquisition in the second quarter of 2005.
Interest Income/ Loss and Other Expenses, Net. Interest income/loss and other expenses consist primarily of interest income associated with notes payable, temporary investments in interest bearing accounts and marketable securities and income on our investments in non-controlled affiliates. Expenses increased to $144,000 for the six months ended June 30, 2005 from expense of $32,000 for the same period in 2004. The increase was due primarily to recognition of losses upon liquidation of marketable securities and loss from Duplo.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Business Metrics
Average paying subscribers for JDate increased 37.7%, to approximately 69,800 for the year ended December 31, 2004 from approximately 50,700 for the year ended December 31, 2003. Average paying subscribers for AmericanSingles increased 85.3%, to approximately 132,500 for the year ended December 31, 2004 from approximately 71,500 for the year ended December 31, 2003. Average paying subscribers for Web sites in our Other Businesses segment increased to approximately 23,800 for the year ended December 31, 2004 from approximately 3,600 for the year ended December 31, 2003. The increase in paying subscribers for all of our segments corresponds to the increased marketing expenditures for all of our segments, along with improved marketing efficiency, such that greater marketing expenditures were made without significant increases in our average subscriber acquisition costs. The larger increase in average paying subscribers for AmericanSingles as compared to the increase for JDate was primarily due to JDate possessing a larger portion of its market. The increase in paying subscribers in our Other Businesses segment was due to growth in our international Web sites, including PointMatch, which was acquired at the beginning of 2004, and our Web sites in the United Kingdom and Canada.
Average monthly net revenue per paying JDate subscriber increased 7.5%, to $28.42 for the year ended December 31, 2004 from $26.44 for the year ended December 31, 2003. Average monthly net revenue per paying AmericanSingles subscriber decreased 1.2% to $22.16 for the year ended December 31, 2004 from $22.43 for the year ended December 31, 2003. Average monthly net revenue per paying subscriber for Web sites in our Other Businesses segment decreased 29.4%, to $16.75 for the year ended December 31, 2004 from $23.72 for the year ended December 31, 2003. The increase

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for JDate was primarily due to a price increase which was put into effect in January 2004. The decrease for AmericanSingles was due to an increase in the proportion of subscribers paying for multi-month subscriptions, for which they receive a discount on the monthly rate compared to the single-month subscription price. The decrease for Web sites in our Other Businesses segment was primarily due to the growth of new Web sites with lower subscription prices than those Web sites that represented our Other Businesses segment in 2003.
Direct subscriber acquisition cost for JDate increased 84.3%, to $8.09 in 2004 from $4.39 in 2003. Direct subscriber acquisition cost for AmericanSingles decreased 5.3%, to $43.29 in 2004 from $45.70 in 2003. Direct subscriber acquisition cost for the Web sites in our Other Businesses segment decreased 56.7%, to $34.74 in 2004 from $80.32 in 2003. The increase in direct subscriber acquisition cost for JDate was due primarily to the cost of new marketing initiatives, including offline billboard campaigns designed to solidify and expand JDate’s brand awareness. Despite this increase, the cost of customer acquisition for JDate is significantly lower than for our other segments due to the strong brand perception and name recognition for and word of mouth reputation for JDate. AmericanSingles and our other Web sites operate in much more competitive environments, and must spend more on marketing to attract new subscribers. The decrease in direct subscriber acquisition cost for AmericanSingles and the Web sites in our Other Businesses segment was due improved marketing efficiency, such that greater marketing expenditures were made without significant increases in our average subscriber acquisition costs. For AmericanSingles, we began to put a greater emphasis on pay for performance advertising models, such as cost per subscription (CPS) and cost per acquisition (CPA) arrangements, where we are better able to monitor and manage our cost of subscriber acquisition.
Monthly subscriber churn for JDate increased to 25.8% for the year ended December 31, 2004 from 22.4% for the year ended December 31, 2003. Monthly subscriber churn for AmericanSingles increased to 35.6% for the year ended December 31, 2004 from 32.1% for the year ended December 31, 2003. Monthly subscriber churn for Web sites in our Other Businesses segment decreased to 26.8% for the year ended December 31, 2004 from 33.4% for the year ended December 31, 2003. The increase in monthly subscriber churn for JDate and AmericanSingles was due primarily to implementation in late 2003 of the pay-to-respond feature which required members to upgrade to paying subscriber status before they could respond to emails from other paying subscribers. Members who subscribe specifically to utilize the pay-to-respond feature are less likely to renew their subscriptions than those who subscribe to initiate communications. The decrease in monthly subscriber churn for the Web sites in our Other Business segment was due to growth and maturity of those businesses. Some of the Web sites in our Other Businesses segment were launched in late 2003, including our sites in Canada and the UK. During the early startup period for a Web site which requires a critical mass of members in order to attract new members, churn rates are higher. As subscribers see the same other members of the community repeatedly, they are more prone to quit the service. As the Web site community grows, churn rates typically decline as subscribers take longer to feel they have exhausted their possibilities within the community.
Net Revenues
Substantially all of our net revenues are derived from subscription fees. The remainder of our net revenues, accounting for less than 2% of net revenues for the years ended December 31, 2004 and 2003, are attributable to certain promotional events. Revenues are presented net of credits and credit card chargebacks. We expect net revenues from promotional events to comprise an even smaller percentage of net revenues in the future. We also expect to generate revenues from advertising on our Web sites in the future. Our subscriptions are offered in durations of one, three, six and twelve months. Plans with durations of longer than one month are available at discounted rates. Most subscription programs renew automatically for subsequent periods until subscribers terminate them.

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Net revenues for JDate increased 48.0%, to $23.8 million for the year ended December 31, 2004 from $16.1 million for the year ended December 31, 2003. Net revenues for AmericanSingles increased 83.0%, to $35.2 million for the year ended December 31, 2004, compared to $19.3 million for the year ended December 31, 2003. Net revenues for our Other Businesses segment increased 276.2%, to $6.0 million for the year ended December 31, 2004 compared to $1.6 million for the year ended December 31, 2003. The increase in JDate’s net revenues is primarily attributable to an increase in JDate’s monthly subscription price during the first quarter of 2004. The increase in net revenues for AmericanSingles is primarily due to an increase in subscriptions, as discussed above. The increase in net revenues for our Other Businesses segment is due primarily to the growth of our businesses in Israel, whose growth was aided by our acquisition of Point Match Ltd. in the first quarter of 2004, as well as growth in our UK and Canada Web sites.
Direct Marketing Expenses
Direct marketing expenses primarily consist of advertising costs and direct costs to obtain new paying subscribers. Direct marketing expenses for JDate increased 135.5%, to $1.7 million for the year ended December 31, 2004 from approximately $739,000 for the year ended December 31, 2003. Direct marketing expenses for AmericanSingles increased 57.1%, to $25.0 million for the year ended December 31, 2004 compared to $15.9 million for the year ended December 31, 2003. Direct marketing expenses for Web sites in our Other Businesses segment increased 157.0%, to $4.5 million for the year ended December 31, 2004 from $1.8 million for the year ended December 31, 2003. The increases for JDate and AmericanSingles are due to an overall increase in the cost of online advertising, which is our primary source for advertising, as well as new marketing initiatives for JDate. In addition, for our American Singles Web site, we initiated an aggressive marketing program in the second quarter of 2004. We reduced our marketing for AmericanSingles in subsequent quarters in 2004 in order to reduce our subscriber acquisition cost. The cost of customer acquisition for JDate is significantly lower than for our other segments due to the strong brand perception and name recognition for and word of mouth reputation for JDate. AmericanSingles and our other Web sites operate in much more competitive environments, and must spend more on marketing to attract new subscribers. For Web sites in our Other Businesses segment, in addition to the increase in the cost of online advertising, our direct marketing expenses also increased because of the additional expenses associated with the Web site assets acquired in the Point Match Ltd. acquisition.
As a percentage of revenues, total direct marketing expenses for JDate increased to 7.3% in 2004 from 4.6% in 2003. The increase was due to new marketing initiatives for JDate. As a percentage of revenues, total direct marketing expenses for AmericanSingles decreased to 70.8% in 2004 from 82.5% in 2003. The decrease was due to improved marketing efficiency, including greater emphasis on pay for performance advertising models, such that greater marketing expenditures were made without significant increases in our average subscriber acquisition costs. As a percentage of revenues, total direct marketing expenses for our Other Businesses segment decreased to 75.7% in 2004 from 110.8% in 2003. The decrease was due to improved marketing efficiency, including greater emphasis on pay for performance advertising models, as well as emphasis on making the contribution of Web sites in this segment a positive number. Overall, for all of our segments, total direct marketing expenses decreased to 48.0% from 49.8% for the years ended December 31, 2004 and 2003 respectively.
Operating Expenses
Operating expenses primarily consist of indirect marketing, customer service, technical operations, product development and general and administrative expenses. Operating expenses increased 53.8% to approximately $45.5 million in 2004 from approximately $29.6 million in 2003. Stated as a percentage of net revenues, operating expenses decreased to 70.0% for 2004 from 80.1% in 2003. The increase in total dollars was primarily the result of a higher level of general and administrative expenses, as well as an increase in indirect marketing and technical operations as discussed below. The

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decrease as a percentage of revenues was primarily the result of economies of scale in customer service and technical operations costs required to support an increasing revenue base.
Indirect Marketing. Indirect marketing expenses primarily consist of salaries for our sales and marketing personnel and other associated costs such as public relations. Indirect marketing expenses increased 170.2%, to approximately $2.5 million in 2004 compared to $907,000 in 2003. Stated as a percentage of net revenues, indirect marketing expenses increased to 3.8% for 2004 from 2.5% in 2003. The increase in total dollars and as a percentage of net revenues was largely as a result of an increase in headcount in our marketing department. We expect these costs to increase in total dollars as we expand our marketing initiatives but to decrease as a percentage of net revenues as we add additional paying subscribers.
Customer Service. Customer service expenses primarily consist of costs associated with our member service center. Customer service expenses increased 33.2%, to $3.4 million in 2004 compared to $2.5 million in 2003. Stated as a percentage of net revenues, customer service expenses decreased to 5.2% for 2004 from 6.9% in 2003. The increase in total dollars was largely as a result of an increase in headcount, which increase was driven by the larger number of members and paying subscribers. The decrease as a percentage of revenues was primarily the result of increased efficiency of usage of our customer service personnel in supporting a larger member and subscriber base. We expect these costs to continue to increase in total dollars as we support our increasing base of members and subscribers but to decrease as a percentage of net revenues as we add additional paying subscribers.
Technical Operations. Technical operations expenses primarily consist of the people and systems necessary to support our network, Internet connectivity and other data and communication support. Technical operations expenses increased 65.0% to $7.2 million in 2004 from $4.3 million in 2003. Stated as a percentage of net revenues, technical operations expenses decreased to 11.0% in 2004 from 11.7% in 2003. The increase in total dollars was due to an increase in headcount necessary to support the growth in the number of members, paying subscribers and traffic to our Web sites. The decrease as a percentage of revenues was primarily the result of economies of scale in headcount required to support a larger member and subscriber base. We expect technical operations costs to increase in total dollars with any increase in traffic, members or paying subscribers but to decrease as a percentage of net revenues as we add additional paying subscribers.
Product Development. Product development expenses primarily consist of costs incurred in the development, creation and enhancement of our Web sites and services. Product development expenses increased 109.9%, to $2.0 million in 2004 compared to $959,000 in 2003. Stated as a percentage of net revenues, product development expenses increased to 3.1% in 2004 from 2.6% in 2003. The increase in total dollars and as a percentage of net revenues was largely as a result of costs associated with technical enhancements to our Web sites as well as an increase in headcount necessary to support these enhancements. We expense these costs as incurred unless they are required to be capitalized under generally accepted accounting principles in the United States. In addition to the expenses set forth above, our capitalized product development costs were approximately $658,000 and $825,000 in 2004 and 2003, respectively. The amortization of those costs is included in this line item. We expect our product development costs to increase in total dollars as we launch new Web sites and develop additional features and functionality on our Web sites to enhance our members’ experience and satisfaction and increase the number, and percentage, of members that become paying subscribers but to remain constant as a percentage of net revenues as we add additional paying subscribers.
General and Administrative Expenses. General and administrative expenses primarily consist of corporate personnel-related costs, professional fees, credit card processing fees, and occupancy and other overhead costs. General and administrative expenses increased 64.2%, to $27.7 million in 2004 from $16.9 million in 2003. Stated as a percentage of net revenues, general and administrative expenses decreased to 42.7% in 2004 from 45.7% in 2003. The increase in total dollars was largely as a result of an increase in hiring people to support our growth, an employee severance charge of

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approximately $2.4 million, as well as expenses of $2.1 million related to the United States initial public offering of MatchNet, Inc. that was planned for mid-2004, but which was withdrawn shortly after the related registration statement was filed in the third quarter of 2004, as well as one legal settlement resulting in the recognition of $900,000 in expenses in the third quarter and two legal settlements resulting in the recognition of $2.1 million in expenses in the fourth quarter of 2004. The decrease as a percentage of revenues was primarily the result of economies of scale in supporting a larger member and subscriber base. We expect these general and administrative expenses, excluding the above-referenced severance and expenses related to the withdrawn offering, to increase in total dollars as we continue to hire additional personnel, and as sales and the inherent credit card processing fees increase. We also expect general and administrative expenses to increase in total dollars due to the anticipated increase in professional fees resulting from the filing of this registration statement and related documents and our subsequent obligations as a public reporting company in the United States. However, we expect general and administrative expenses, excluding credit card processing fees, to decrease as a percentage of net revenues as we add additional paying subscribers.
Share-based Compensation. Share-based compensation resulted from the issuance of warrants and options that were treated as variable under accounting principles which, on a quarterly basis, required us to recognize an increase or decrease in compensation expense based upon the then-fair value of the subject securities. Share-based compensation was approximately $1.7 million in 2004, which is net of $1.1 million related to the cancellation of certain warrants and options, compared to $1.9 million in 2003. Stated as a percentage of net revenues, share-based compensation decreased to 2.6% in 2004 from 5.1% in 2003. As a result of recent changes in accounting rules, we expect share-based compensation expenses to increase, beginning in the third quarter of 2005, when we will be required to recognize compensation expense for share options and other share-based compensation, which expenses we had not been required to recognize prior to the change in accounting rules.
Amortization of Intangible Assets Other Than Goodwill. Amortization expenses consist primarily of amortization of intangible assets related to previous acquisitions, primarily SocialNet and Point Match. Amortization expenses increased 55.0% to $860,000 in 2004, compared to $555,000 in 2003. The increase was primarily due to amortization related to the Point Match acquisition, which was completed in January 2004.
Impairment of Long-lived Assets. In December 2004, based on changes in management and reevaluation of existing projects we determined that certain internally developed software projects would not be completed. As such, we recorded an impairment charge of $208,000.
Interest Income and Other Expenses, Net. Interest income and other expenses, net primarily consist of gain (loss) associated with temporary investments in interest bearing accounts and marketable securities. Interest income and other expenses, net decreased 64.9%, to approximately $66,000 in 2004 from $188,000 in 2003, principally due to foreign exchange effects.
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002
Business Metrics
Average paying subscribers for JDate increased 83.0% to approximately 50,700 for the year ended December 31, 2003, compared to approximately 27,700 for the year ended December 31, 2002. Average paying subscribers for AmericanSingles increased 142.4%, to approximately 71,500 for the year ended December 31, 2003 from approximately 29,500 for the year ended December 31, 2002. Average paying subscribers for Web sites in our Other Businesses segment increased 140.0%, to approximately 3,600 for the year ended December 31, 2003 from approximately 1,500 for the year ended December 31, 2002. The increase in paying subscribers across all of our segments is primarily due to increases in the number of members on our sites. The larger increase in average paying subscribers for AmericanSingles as compared to the increase for JDate was primarily due to JDate

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possessing a larger portion of its market, while AmericanSingles possessed a smaller portion of its market and its average paying subscribers has, as a result, grown more quickly.
Average monthly net revenue per paying JDate subscriber increased 4.9%, to $26.44 in 2003 compared to $25.20 in 2002. Average monthly net revenue per paying AmericanSingles subscriber increased 19.5%, to $22.43 in 2003 from $18.77 in 2002. Average monthly net revenue per paying subscriber for Web sites in our Other Businesses segment decreased 28.5%, to $23.72 in 2003 from $33.17 in 2002. The increase for JDate was due to an increase in the proportion of subscribers paying a one month subscription, as opposed to multi-month subscribers, who receive a lower price per month in exchange for their longer commitments. The increase in AmericanSingles was primarily due to a price increase in 2003. The decrease for Web sites in our Other Businesses segment was primarily due to the growth of new Web sites with lower subscription prices than those Web sites that represented our Other Businesses segment in 2002.
Direct subscriber acquisition cost for JDate increased 51.4%, to $4.39 for 2003 from $2.90 in 2002. Direct subscriber acquisition cost for AmericanSingles increased 18.1%, to $45.70 in 2003 compared to $38.68 in 2002. Direct subscriber acquisition cost for the Web sites in our Other Businesses segment increased 2.4%, to $80.32 in 2003 from $78.43 in 2002. The increase in direct subscriber acquisition cost for all of our segments was due primarily to an increase in online marketing efforts designed to drive additional members to our Web sites.
Monthly subscriber churn for JDate increased to 22.4% in 2003 from 18.2% in 2002. Monthly subscriber churn for AmericanSingles increased to 32.1% in 2003 from 24.3% in 2002. Monthly subscriber churn for the Web sites in our Other Businesses segment increased to 33.4% in 2003 from 32.6% in 2002. The increase in monthly subscriber churn for all of our segments was primarily due to the introduction, in late 2003, of our pay-to-respond feature, which required members to upgrade to paying subscriber status before they could respond to emails from other paying subscribers. Members who subscribe specifically to utilize the pay-to-respond feature are less likely to renew their subscriptions than those who subscribe to initiate communications.
Net Revenues
Net revenues for JDate increased 92.2%, to $16.1 million in 2003 from $8.4 million in 2002. Net revenues for AmericanSingles increased 189.8% to $19.3 million in 2003 from $6.6 million in 2002. Net revenues for Web sites in our Other Businesses segment increased 19.5%, to $1.6 million in 2003 from $1.3 million in 2002. The increase in net revenues was due to an increase in the overall use of our services and the increase in the number of paying subscribers. In addition, a portion of the increase in revenues for AmericanSingles is attributable to an increase in AmericanSingles’ monthly subscription price during 2003.
Direct Marketing Expenses
Direct marketing expenses for JDate increased 229.9%, to $739,000 in 2003 from $224,000 in 2002. Direct marketing expenses for AmericanSingles increased 300.2%, to $15.9 million in 2003 from $4.0 million in 2002. Direct marketing expenses for Other Businesses increased 47.2%, to $1.8 million in 2003 from $1.2 million in 2002. This increase was primarily the result of expanded online advertising campaigns.
As a percentage of revenues, total direct marketing expenses for JDate increased to 4.6% in 2003 from 2.7% in 2002. As a percentage of revenues, total direct marketing expenses for AmericanSingles increased to 82.5% in 2003 from 59.8% in 2003. As a percentage of revenues, total direct marketing expenses for our Other Businesses segment increased to 110.8% in 2003 from 90.0% in 2003. The increases in all segments were due to increase marketing spending designed to grow revenues. Total direct marketing expenses for all of our segments increased to 49.8% from 33.0% in 2003 and 2002, respectively.

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Operating Expenses
Operating expenses increased 140.1%, to $29.6 million in 2003 from $12.3 million in 2002. Stated as a percentage of net revenues, operating expenses increased to 80.1% in 2003 compared to 75.3% in 2002. The increase in total dollars and as a percentage of net revenues was primarily the result of continued investment in customer service and technical infrastructure, as well as an increase in general and administrative expenses as discussed below.
Indirect Marketing. Indirect marketing expenses increased 125.1%, to approximately $907,000 in 2003 from approximately $403,000 in 2002. Stated as a percentage of net revenues, indirect marketing expenses remained constant at 2.5% in 2003 and 2002. The increase in total dollars was largely as a result of an increase in staffing for the marketing department.
Customer Service. Customer service expenses increased 110.1%, to $2.5 million in 2003 from $1.2 million in 2002. Stated as a percentage of net revenues, customer service expenses decreased to 6.9% in 2003 from 7.4% in 2002. The increase in total dollars was largely as a result of an increase in headcount due required to support our larger numbers of members and paying subscribers. The decrease as a percentage of net revenues was primarily the result of increased efficiency of usage of our customer service personnel in supporting a larger member and subscriber base.
Technical Operations. Technical operations expenses increased 173.5%, to $4.3 million in 2003 from $1.6 million in 2002. Stated as a percentage of net revenues, technical operations expenses increased to 11.7% in 2003 from 9.7% in 2002. The increase in total dollars and as a percentage of net revenues was largely as a result of the growth in the number of members and traffic to our Web sites.
Product Development. Product development expenses increased 59.0%, to $959,000 in 2003 from $603,000 in 2002. Stated as a percentage of net revenues, product development expenses decreased to 2.6% in 2003 from 3.7% in 2002. The increase in total dollars was largely as a result of costs associated with technical enhancements to our Web sites. The decrease as a percentage of net revenues was primarily the result of economies of scale as additional product enhancements costs are spread over a larger subscriber/member base. We expense these costs as incurred, unless they are required to be capitalized. Capitalized costs in 2003 and 2002 were approximately $825,000 and $572,000, respectively. The amortization of these costs are included in this line item.
General and Administrative Expenses. General and administrative expenses increased 111.2%, to $16.9 million in 2003 from $8.0 million in 2002. Stated as a percentage of net revenues, general and administrative expenses decreased to 45.7% in 2003 from 48.8% in 2002. The increase in total dollars was largely as a result of an increase in hiring people to support our growth and the addition of new Web sites, as well as an increase in credit card processing fees as sales grew. The decrease as a percentage of net revenues was primarily the result of economies of scale in supporting a larger member and subscriber base. General and administrative expenses for 2003 also included $1.7 million in charges primarily related to a settlement with Comdisco. Pursuant to the settlement, we issued a promissory note in September 2004 in the amount of $1.7 million. The note bears simple interest at the rate of 2.75% per year and is payable in installments, excluding accrued interest, on (i) September 15, 2005 in the amount of $400,000; (ii) September 15, 2006 in the amount of $400,000; and (iii) September 15, 2007 in the amount of $900,000.
Share-based Compensation. Share-based compensation was $1.9 million in 2003 compared to zero in 2002. The 2003 charge reflected non-cash expenses associated with the issuance of share options and warrants to advisors. We treated these options and warrants as variable in accordance with SFAS No. 123 and, as a result, were required to recognize an increase or decrease in operating expense based on the fair value of such options and warrants on a quarterly basis.
Amortization of Intangible Assets Other Than Goodwill. Amortization expenses consist primarily of amortization of purchased intangible assets related to previous acquisitions. Amortization expenses

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increased 5.9% to $555,000 in 2003, compared to $524,000 in 2002. The increase was primarily due to purchases of various databases.
Impairment of Long-lived Assets. In October 2003, based on business developments that took place in 2003 and on management’s opinion that rapid changes in technology reduced the fair value of some of our property and equipment, mostly computer equipment and capitalized software costs, we recorded an impairment charge of approximately $1.5 million.
Interest Income and Other Expenses, Net. Interest income and other expenses, net decreased 77.6%, to income of approximately $188,000 in 2003 from income of approximately $840,000 in 2002. Interest income and other expenses, net in 2002 was positively affected by a gain of approximately $400,000 recognized on the sale of domain names.
Quarterly Results of Operations
You should read the following tables presenting our quarterly results of operations in conjunction with the consolidated financial statements and related notes contained elsewhere in this prospectus. We have prepared the unaudited information on substantially the same basis as our audited consolidated financial statements which, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, except as otherwise indicated, necessary for the presentation of the results of operations for such periods. You should also keep in mind, as you read the following tables, that our operating results for any quarter are not necessarily indicative of results for any future quarters or for a full year.
                                                                                       
    Three months ended(1)
     
    Mar 31,   Jun 30,   Sep 30,   Dec 31,   Mar 31,   Jun 30,   Sep 30,   Dec 31,   Mar 31,   Jun 30,
    2003(2)   2003(2)   2003(2)   2003   2004   2004   2004   2004   2005   2005
                                         
                                    (unaudited)   (unaudited)
Consolidated Statements of Operations Data:
                                                                               
Net revenues
  $ 7,036     $ 8,423     $ 9,792     $ 11,690     $ 15,050     $ 15,812     $ 17,138     $ 17,052     $ 16,526     $ 15,464  
Direct marketing expenses
    3,576       4,680       3,955       6,184       6,539       9,325       8,748       6,628       5,228       6,051  
                                                             
   
Contribution margin
    3,460       3,743       5,837       5,506       8,511       6,487       8,390       10,424       11,298       9,413  
Operating expenses:
                                                                               
 
Indirect marketing
    (61 )     131       488       349       529       522       881       519       265       238  
 
Customer service
    563       458       736       779       975       903       723       778       577       560  
 
Technical operations
    819       994       1,024       1,504       1,344       1,974       1,861       1,983       1,402       1,548  
 
Product development
    168       229       82       480       340       531       505       637       830       1,060  
 
General and administrative (excluding share-based compensation)
    2,483       2,628       6,025       5,749       6,383       5,695       8,469       7,180       5,992       6,520  
 
Share-based compensation
                      1,871       1,712       689       (1,239 )     542       87       (115 )
 
Amortization of intangible assets other than goodwill
    131       58       200       166       244       238       188       190       110       301  
                                                             
 
Impairment of long-lived assets
                      1,532                         208              
                                                             
     
Total operating expenses
    4,103       4,498       8,555       12,430       11,527       10,552       11,388       12,037       9,263       10,112  
                                                             
Income (loss) from operations
    (643 )     (755 )     (2,718 )     (6,924 )     (3,016 )     (4,065 )     (2,998 )     (1,613 )     2,035       (699 )
Interest (income) and other expenses, net
    (53 )     (57 )     (22 )     (56 )     4       28       (46 )     (52 )     24       168  
                                                             
Income (loss) before income taxes
    (590 )     (698 )     (2,696 )     (6,868 )     (3,020 )     (4,093 )     (2,952 )     (1,561 )     2,059       (867 )
Income taxes
    1       39             (40 )     1                         72       (8 )
                                                             
Net income (loss)
  $ (591 )   $ (737 )   $ (2,696 )   $ (6,828 )   $ (3,021 )   $ (4,093 )   $ (2,952 )   $ (1,561 )   $ 1,987     $ (859 )