<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1999
REGISTRATION NO. 333-72799
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THESTREET.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7374 06-15150824
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
</TABLE>
------------------------
TWO RECTOR STREET
NEW YORK, NEW YORK 10006
(212) 271-4004
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
KEVIN W. ENGLISH
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
THESTREET.COM, INC.
TWO RECTOR STREET
NEW YORK, NEW YORK 10006
(212) 271-4004
(800) 562-9571
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies To:
<TABLE>
<S> <C>
DAVID J. GOLDSCHMIDT, ESQ. ALEXANDER D. LYNCH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP ALAN P. BLAUSTEIN, ESQ.
919 THIRD AVENUE BROBECK, PHLEGER & HARRISON LLP
NEW YORK, NEW YORK 10022 1633 BROADWAY, 47TH FLOOR
(212) 735-3000 NEW YORK, NEW YORK 10019
(212) 581-1600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
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, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, check the following box. / /
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, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK TO OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion. Dated April 1, 1999.
5,500,000 Shares
[LOGO]
Common Stock
----------------------
This is an initial public offering of shares of common stock of
TheStreet.com, Inc. All of the 5,500,000 shares of common stock are being sold
by the TheStreet.com, Inc.
Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $11 and $13. The common stock has been approved for
quotation on the Nasdaq National Market under the symbol "TSCM".
See "Risk Factors" beginning on page 6 to read about certain factors you
should consider before buying shares of the common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
------------------ ------------------
<S> <C> <C>
Initial public offering price........................................... $ $
Underwriting discounts.................................................. $ $
Proceeds, before expenses, to TheStreet.com............................. $ $
</TABLE>
The underwriters may, under certain circumstances, purchase up to an
additional 741,667 shares from TheStreet.com and up to an additional 83,333
shares from Kevin English, TheStreet.com's Chairman of the Board, Chief
Executive Officer and President, at the initial public offering price less the
underwriting discount. TheStreet.com will not receive any of the proceeds from
the sale of the shares being sold by Mr. English.
----------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
Goldman, Sachs & Co.
Hambrecht & Quist
Thomas Weisel Partners LLC
----------------------
Prospectus dated , 1999.
<PAGE>
OUTSIDE PORTION OF GATEFOLD
Title text reading "TheStreet.com" (centered at top of page)
I. Six photos of the company's editors and reporters at work (diagonal
across page from top left to bottom right)
II. Text:
TheStreet.com is a leading web-based provider of original, timely,
comprehensive and trustworthy financial news, commentary and information aimed
at helping readers make informed investment decisions (bottom left of page)
III. Screenprint--Full-length screenprint of front page of TheStreet.com web
site (right side of page)
GATEFOLD
Title text reading TheStreet.com" (top left-hand corner of gatefold)
I. Screenprint--Snapshot of TheStreet.com web site stock quote function in
the "Tools of the Trade" section (bottom right hand corner of screenprint
overlayed by II below) (upper left-hand corner of gatefold)
II. Photograph of Brenda Buttner with the following text (upper left-hand
corner of gatefold):
<Brenda Buttner>
Contributing Editor
III. Screenprint--Snapshot of TheStreet.com web site "Herb on the Street"
column by Herb Greenberg (bottom left-hand corner of screenprint overlayed by IV
below) (bottom left-hand corner of gatefold)
IV. Photograph of Herb Greenberg with the following text (bottom left-hand
corner of gatefold):
<Herb Greenberg>
Senior Columnist
V. Screenprint--Snapshot of TheStreet.com web site "Tech Stocks" section
(overlayed by VI below) (upper center of gatefold)
VI. Screenprint--Snapshot of TheStreet.com web site "Basics" section (center
of gatefold)
VII. Photograph of the newsroom of TheStreet.com overlayed in the center by
TheStreet.com logo (bottom center of gatefold)
VIII. Photograph of James J. Cramer with the following text (top right-hand
corner of gatefold):
<James J. Cramer>
Contributing Editor and Co-Founder
IX. Screenprint--Snapshot of TheStreet.com web site "WRONG! Rear Echelon
Revelations" column by James J. Cramer (overlayed by VIII above) (top right-hand
corner of gatefold)
X. Photograph of Dave Kansas with the following text (bottom right-hand
corner of gatefold):
<Dave Kansas>
Editor-in-Chief
XI. Text (vertical column along far right of the gatefold):
TheStreet.com combines the most important qualities of traditional print
journalism--accuracy, intelligence, fairness and wit--with the web's advantages
as a financial news medium--timeliness. interactivity and global distribution.
Our journalists produce quality news coverage and in-depth analysis in a
real-time, interactive medium ideally suited to the needs of today's investors.
Our editorial staff consists of more than 50 professional reporters and
editors who, together with two dozen outside contributors throughout the world,
produce approximately 40 original news, analysis and commentary pieces each
business day.
Our financially oriented readers constitute an upscale demographic that is
desirable to financial services and luxury goods advertisers.
2
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information about our company and the common stock being sold in this offering
and our financial statements and the notes to those statements included
elsewhere in this prospectus.
THESTREET.COM
TheStreet.com is a leading web-based provider of original, timely,
comprehensive and trustworthy financial news, commentary and information aimed
at helping readers make informed investment decisions. TheStreet.com combines
the most important qualities of traditional print journalism--accuracy,
intelligence, fairness and wit--with the web's advantages as a financial news
medium--timeliness, interactivity and global distribution. With a staff of more
than 50 professional reporters and editors, together with two dozen outside
contributors, we update our site with approximately 40 original stories
throughout each business day and with many additional features on weekends.
Trained at the nation's leading financial news organizations, our journalists
produce quality news coverage and in-depth analysis in a real-time, interactive
medium ideally suited to the needs of today's investors. We have developed a
community of loyal readers who turn to TheStreet.com for their financial and
investing news and information needs. During 1998, our subscriber base grew more
than 380% to approximately 32,000 at the end of the year; as of March 29, 1999,
we had over 50,000 subscribers. We derive our revenues primarily from sales of
subscriptions to our web site and from sales of advertising targeted to our
desirable reader demographic.
In recent years, individuals have been taking greater control of their
investments. The web has facilitated this behavioral shift by providing
investors with easy access to information that was once generally available only
to investment professionals. According to International Data Corporation, an
independent market research firm, the number of online brokerage accounts in the
United States is expected to grow from 3.5 million at the end of 1997 to
24 million at the end of 2002, with online brokers expected to manage over
$1.5 trillion in assets by the end of 2002. Increasingly, this growing group of
self-directed investors is seeking timely, comprehensive and trustworthy
financial news and information that can help them make informed investing
decisions.
At TheStreet.com, we aim to meet the increasing demands of today's
investors by providing a broad range of original financial news and in-depth
anaylsis through a real-time, interactive medium. Our objective is to establish
TheStreet.com as the leading and most comprehensive financial news and
information destination for investors. We aim to further develop a community of
loyal readers in order to build our subscription base and attract advertisers.
Our strategy includes the following key elements:
o expand our web site as a comprehensive financial news and information
destination;
o leverage our content to maximize revenue across a diverse customer base;
o capitalize on reader demographics desirable to advertisers;
o leverage strategic partnerships; and
o build brand awareness of TheStreet.com and our writers.
In February 1999, The New York Times Company made an investment for a
minority equity stake in TheStreet.com. In March 1999, we entered into a
memorandum of understanding with the New York Times Electronic Media Company
under which we have agreed to the following proposals:
o Promotion of our web site by The New York Times Company to registered users of
its web site;
o Indexing of our headlines on the Business section of The New York Times web
site and indexing of headlines from the Business section of the New York Times
web site on our web site; and
o Licensing our investment tools to The New York Times Company.
Our principal executive offices are located at Two Rector Street, 14th
Floor, New York, New York 10006. Our telephone number at that location is (800)
562-9571. Our web site is www.thestreet.com. The information contained on our
web site is not incorporated by reference into this prospectus.
3
<PAGE>
Unless otherwise indicated, all information in this prospectus
(i) reflects the conversion of all outstanding shares of our convertible
preferred stock and accumulated dividends as of March 31, 1999, into an
aggregate of 4,406,129 shares of common stock upon the completion of this
offering, assuming that the initial public offering price is $12.00 per share;
and (ii) assumes no underwriters' exercise of the over-allotment option. See
"Description of Capital Stock" and "Underwriting".
THE OFFERING
The following information assumes that the underwriters do not exercise the
option granted by us to purchase additional shares in this offering. The
following information excludes shares of common stock issuable upon exercise of
options, which vest over certain periods of time, outstanding as of the date of
this prospectus. See "Underwriting".
<TABLE>
<S> <C>
Common stock offered by TheStreet.com............................. 5,500,000 shares
Common stock to be outstanding after the offering................. 25,075,037 shares(1)
Nasdaq National Market symbol..................................... "TSCM"
Use of proceeds................................................... To provide working capital to develop new
products and expand internationally, to fund
general corporate purposes and to create a
public market for our common stock.
</TABLE>
- ------------------
(1) Based on the number of shares actually outstanding as of March 31, 1999,
including 4,406,129 shares issuable upon the conversion of all our
outstanding convertible preferred stock and accumulated dividends and
excludes (i) shares subject to outstanding options or reserved for issuance
under our amended and restated 1998 stock incentive plan and (ii) the
exercise of the over-allotment option.
4
<PAGE>
SUMMARY FINANCIAL DATA
The following table summarizes our statement of operations. The share
information gives effect to the conversion of our business from a limited
liability company into a C corporation at the beginning of each period
indicated. See our financial statements and the notes to those statements
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
JUNE 18, 1996
(INCEPTION)
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998
--------------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................... $ -- $ 589 $ 4,623
Gross profit (loss)............................................ (298) (558) 668
Loss from operations........................................... (1,712) (5,359) (16,041)
Net loss....................................................... $(1,733) $ (5,764) $(16,268)
------- -------- --------
------- -------- --------
Pro forma basic and diluted net loss per share................... $ (0.28) $ (0.95) $ (1.64)
------- -------- --------
------- -------- --------
Pro forma weighted average basic and diluted
shares outstanding (1)......................................... 6,086 6,086 9,923
------- -------- --------
------- -------- --------
</TABLE>
- ------------------
(1) The pro forma weighted average shares outstanding give effect to the
conversion of all of our outstanding convertible preferred stock and
accumulated dividends as of December 31, 1998 into an aggregate of 3,998,505
shares of common stock as of December 31, 1998.
The following table is a summary of our balance sheet as of December 31,
1998, (i) on an actual basis and (ii) on an as adjusted basis to reflect the
conversion of all outstanding shares of our convertible preferred stock and
accumulated dividends into shares of common stock and to give effect to the sale
of the 5,500,000 shares of common stock offered by this prospectus at an assumed
initial public offering price of $12.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses. See "Use
of Proceeds" and "Capitalization".
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $24,612 $83,592
Working capital....................................................................... 22,918 81,898
Total assets.......................................................................... 27,581 86,561
Total stockholders' equity............................................................ 23,524 82,504
</TABLE>
5
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. The risks described below are all the material risks facing
TheStreet.com. We may also face some non-material risks which we have not
discussed in the following description of our risk factors. If any of the
following risks occur, our business, results of operations or financial
condition could be materially adversely affected.
RISKS RELATED TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT
We commenced operations in June 1996 and launched our web site in November
1996. Accordingly, we have only a limited operating history upon which you can
evaluate our business and prospects. An investor in our common stock must
consider the risks, expenses and difficulties frequently encountered by early
stage companies in new and rapidly evolving markets, including web-based
financial news and information companies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
WE HAVE A HISTORY OF LOSSES AND WE ANTICIPATE LOSSES WILL CONTINUE
As of December 31, 1998, we had an accumulated deficit of $12.4 million
that represented our cumulative loss from May 7, 1998, which was the date we
converted to a C corporation. We have not achieved profitability and expect to
continue to incur net losses in 1999 and subsequent fiscal periods. We expect to
continue to incur significant operating expenses and, as a result, will need to
generate significant revenues to achieve profitability, which may not occur.
Even if we do achieve profitability, we may be unable to sustain or increase
profitability on a quarterly or annual basis in the future. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
OUR FUTURE SUCCESS DEPENDS ON OUR EDITORIAL STAFF AND OUTSIDE CONTRIBUTORS
Our future success depends substantially upon the continued efforts of our
editorial staff and outside contributors to produce original, timely,
comprehensive and trustworthy content. Only a few of our writers are bound by
employment agreements. Competition for financial journalists is intense, and we
may not be able to retain existing or attract additional highly qualified
writers in the future. If we lose the services of a significant number of our
editorial staff and outside contributors or are unable to continue to attract
additional writers with appropriate qualifications, our business, results of
operations and financial condition could be materially adversely affected.
In addition, we believe that some of our writers, including Mr. James J.
Cramer and Mr. Herb Greenberg, have a large and loyal following among our
readers. Mr. Cramer has an employment agreement with us that terminates in
February 2003. Mr. Greenberg has an employment agreement with us that terminates
in March 2001. If we lose the services of prominent members of our editorial
staff, including Mr. Greenberg, or popular outside contributors, including
Mr. Cramer, a significant number of our subscribers may not renew their
subscriptions or the number of our readers may decrease. A significant reduction
in the number of our subscribers or readers could materially adversely affect
our business, results of operations and financial condition.
INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE
An increasing number of financial news and information sources compete for
consumers' and advertisers' attention and spending. We expect this competition
to continue to increase. We compete for advertisers, readers, staff and outside
contributors with many types of companies, including:
o online services or web sites focused on business, finance and investing, such
as MarketWatch.com, The Wall Street Journal Interactive Edition and The Motley
Fool;
6
<PAGE>
o publishers and distributors of traditional media, including print, radio and
television, such as The Wall Street Journal, Fortune, Bloomberg Business Radio
and CNBC;
o providers of terminal-based financial news and data, such as Bloomberg
Business News, Reuters News Service, Dow Jones Markets and Bridge News
Service;
o web "portal" companies, such as Yahoo! and America Online; and
o online brokerage firms, many of which provide financial and investment news
and information, such as Charles Schwab and E*TRADE.
Our ability to compete depends on many factors, including the originality,
timeliness, comprehensiveness and trustworthiness of our content and that of our
competitors, the ease of use of services developed either by us or our
competitors and the effectiveness of our sales and marketing efforts.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to devote greater resources than we
can to the development and promotion of their services. These competitors may
also engage in more extensive research and development, undertake more
far-reaching marketing campaigns, adopt more aggressive pricing policies
(including offering their financial news for free) and make more attractive
offers to existing and potential employees, outside contributors, strategic
partners and advertisers. Our competitors may develop content that is equal or
superior to ours or that achieves greater market acceptance than ours. It is
also possible that new competitors may emerge and rapidly acquire significant
market share. We may not be able to compete successfully for advertisers,
readers, staff or outside contributors, which could materially adversely affect
our business, results of operations and financial condition. Increased
competition could result in price reductions, reduced margins or loss of market
share, any of which could materially adversely affect our business, results of
operations and financial condition.
We also compete with other web sites, television, radio and print media for
a share of advertisers' total advertising budgets. If advertisers perceive the
Internet or our web site to be a limited or an ineffective advertising medium,
they may be reluctant to devote a portion of their advertising budget to
Internet advertising or to advertising on our web site. See
"Business--Competition".
A FAILURE TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS WITH OTHER WEB SITES
COULD DECREASE OUR SUBSCRIBER BASE AND TRAFFIC
We depend on establishing and maintaining subscription distribution
relationships with online financial services firms and content syndication
relationships with high-traffic web sites for a significant portion of our
subscriber base and traffic. There is intense competition for relationships with
these firms and placement on these sites, and we may have to pay significant
fees to establish additional content syndication relationships or maintain
existing relationships in the future. We may be unable to enter into
relationships with these firms or sites on commercially reasonable terms or at
all. Even if we enter into these relationships, they may not attract significant
numbers of readers. Therefore, our site may not receive a significant number of
additional subscribers or readers from such relationships.
Many companies that we may approach for a strategic relationship or who
already have strategic relationships with us also provide financial news and
information from other sources. As a result, these companies may be reluctant to
enter into or maintain strategic relationships with us. Our business, results of
operations and financial condition could be materially adversely affected if we
do not establish additional, and maintain existing, strategic relationships on
commercially reasonable terms or if any of our strategic relationships do not
result in an increase in the number of subscribers or readers of our web site.
OUR MEMORANDA OF UNDERSTANDING MAY NOT MATERIALIZE INTO FINAL AGREEMENTS
In March 1999, we entered into a memorandum of understanding with each of
7
<PAGE>
DLJdirect and The New York Times Electronic Media Company. We cannot assure you
that we will be able to execute final agreements contemplated by such memoranda
on terms favorable to us or at all. See "Business--Subscription Sales" and
"Certain Transactions--The New York Times Investment".
POTENTIAL FLUCTUATIONS IN OUR QUARTERLY FINANCIAL RESULTS MAKE FINANCIAL
FORECASTING DIFFICULT
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside our control.
We believe that advertising sales in traditional media, such as television
and radio, generally are lower in the first and third calendar quarters of each
year. Similar seasonal or other patterns may develop in our industry.
We believe that quarter-to-quarter comparisons of our operating results may
not be a good indication of our future performance, nor would our operating
results for any particular quarter be indicative of future operating results. In
some future quarters our operating results may be below the expectations of
public market analysts and investors. In such an event, the price of our common
stock may fall. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
OUR FUTURE SUCCESS DEPENDS ON MAINTAINING AND INCREASING OUR SUBSCRIBER BASE
Our future success is highly dependent on an increase in the number of
readers who are willing to subscribe to online financial news and information
publications. The number of Internet users willing to pay for online financial
news and information may not continue to increase. If the market for
subscription-based online financial news and information publications develops
more slowly than we expect, our business, results of operations and financial
condition could be materially adversely affected. Further, we presently offer a
portion of our content for free. In the future we intend to increase the free
portion of our content to increase traffic. However, this change may reduce the
number of our new or renewing subscribers, which could have a material adverse
effect on our business, results of operations and financial condition.
Additionally, during the fourth quarter of 1998, we began to participate in a
program where our readers can receive annual subscriptions to our site by
redeeming frequent flyer miles through a third-party service. While we expect
the number of annual subscriptions attributable to this program to increase in
the future, additional readers may not subscribe through this program. Further,
while we do not expect that these subscribers will renew their subscriptions at
a rate consistent with the renewal rate of our general subscriber base, it is
possible that the actual renewal rate of these subscribers may be significantly
lower than our expectations, which could materially adversely affect our
business, results of operations and financial condition.
WE DEPEND ON OUR TOP ADVERTISERS FOR A SIGNIFICANT PORTION OF OUR ADVERTISING
REVENUES
In 1998, our top advertiser accounted for approximately 40%, and our top
five advertisers accounted for approximately 67%, of our total advertising
revenues. Our business, results of operations and financial condition could be
materially adversely affected by the loss of one or more of our top advertisers.
Further, if we do not continue to increase our revenue from financial services
advertisers or attract advertisers from non-financial industries, our business,
results of operations and financial condition could be materially adversely
affected. We believe that we charge advertising rates that are among the highest
of financial web sites. However, there can be no assurance that we will be able
to command premium rates in the future. Further, as we increase the free portion
of our site, which may command lower advertising rates than our premium
sections, current advertisers may seek to switch to these less expensive areas.
As is typical in the advertising industry, our advertising contracts have
cancellation provisions.
8
<PAGE>
FAILURE TO RETAIN AND INTEGRATE OUR SALES FORCE COULD RESULT IN LOWER
ADVERTISING REVENUES
We depend on our internal advertising sales department to maintain and
increase our advertising sales. As of March 25, 1999, our advertising sales
department consisted of 11 employees. The success of our advertising sales
department is subject to a number of risks, including the competition we face
from other companies in hiring and retaining sales personnel and the length of
time it takes new sales personnel to become productive. Our business, results of
operations and financial condition could be materially adversely affected if we
do not maintain an effective advertising sales department.
WE MAY BE UNABLE TO MANAGE OUR GROWTH
We have experienced rapid growth in our operations. Our rapid growth has
placed, and our anticipated future growth will continue to place, a significant
strain on our managerial, operational and financial resources. To manage our
growth, we must continue to implement and improve our managerial controls and
procedures and operational and financial systems. In addition, our future
success will depend on our ability to expand, train and manage our workforce, in
particular our editorial, advertising sales and business development staff. As
of December 31, 1998, we had a total of 100 employees, as compared to 33
employees as of December 31, 1997. We expect that the number of our employees
will continue to increase for the foreseeable future. We will need to integrate
these employees into our workforce successfully. We cannot assure you that we
have made adequate allowances for the costs and risks associated with this
expansion, that our systems, procedures or controls will be adequate to support
our operations, or that our management will be able to successfully offer and
expand our services. If we are unable to manage our growth effectively, our
business, results of operations and financial condition could be materially
adversely affected.
OUR FUTURE SUCCESS DEPENDS ON KEY MANAGEMENT PERSONNEL
Our future success depends upon the continued service of certain key
management personnel. The loss of one or more of our key management personnel
could materially adversely affect our business, results of operations and
financial condition. In addition, we recently hired our new chief financial
officer and a general counsel. These individuals will have to be integrated into
our management team successfully. A few of our employees have entered into
non-competition agreements with us. However, other employees may leave us and
work for our competitors or start their own competing business.
INCREASED TRAFFIC MAY STRAIN OUR SYSTEMS
In the past, we have experienced significant spikes in traffic on our web
site when there have been important financial news events. In addition, the
number of our readers has continued to increase over time and we are seeking to
increase our reader base further. Accordingly, our web site must accommodate a
high volume of traffic, often at unexpected times. Our web site has in the past,
and may in the future, experience slower response times than usual or other
problems for a variety of reasons. These occurrences could cause our readers to
perceive our web site as not functioning properly and, therefore, cause them to
use other methods to obtain their financial news and information. In such a
case, our business, results of operations and financial condition could be
materially adversely affected.
WE FACE A RISK OF SYSTEM FAILURE
Our ability to provide timely information and continuous news updates
depends on the efficient and uninterrupted operation of our computer and
communications hardware and software systems. Similarly, our ability to track,
measure and report the delivery of advertisements on our site depends on the
efficient and uninterrupted operation of a third-party system, Dart by
DoubleClick. These systems and operations are vulnerable to damage or
interruption from human error, natural disasters, telecommunication failures,
break-ins, sabotage, computer viruses,
9
<PAGE>
intentional acts of vandalism and similar events. Although we do not have a
formal disaster recovery plan, we are in the process of developing one. Any
system failure, including network, software or hardware failure, that causes an
interruption in our service or a decrease in responsiveness of our web site
could result in reduced traffic, reduced revenue and harm to our reputation,
brand and our relations with our advertisers. In February 1999, we entered into
a one-year Internet-hosting agreement with Exodus Communications, Inc. to
maintain all of our production servers at Exodus' New Jersey data center. Our
operations depend on Exodus' ability to protect its and our systems in its data
center against damage from fire, power loss, water damage, telecommunications
failure, vandalism and similar unexpected adverse events. Although Exodus
provides comprehensive facilities management services, including human and
technical monitoring of all production servers 24 hours per day, seven days per
week, Exodus does not guarantee that our Internet access will be uninterrupted,
error-free or secure. Any disruption in the Internet access to our web site
provided by Exodus could materially adversely affect our business, results of
operations and financial condition. Our insurance policies may not adequately
compensate us for any losses that we may incur because of any failures in our
system or interruptions in our delivery of content. Our business, results of
operations and financial condition could be materially adversely affected by any
event, damage or failure that interrupts or delays our operations.
DISRUPTIONS ASSOCIATED WITH MOVING OUR SUBSCRIPTION MANAGEMENT SYSTEM IN-HOUSE
MAY HARM OUR BUSINESS
Presently, our subscription management system is hosted by Starwave
Corporation on its systems located in Seattle, Washington. However, during 1999
we plan to move this function to our own internal systems. It is possible that
because of a variety of logistical and technical reasons we may be unable to
complete this move on time or at all. Further, we may face significant technical
problems in integrating our subscription management system with our internal
systems or maintaining our subscription management system. These problems,
should they occur, could adversely affect our ability to process online
subscriptions or to convert efficiently our free-trial members to paid
subscribers, which could materially adversely affect our business, results of
operations and financial condition.
DIFFICULTIES ASSOCIATED WITH OUR BRAND DEVELOPMENT MAY HARM OUR BUSINESS
We believe that maintaining and growing awareness about the TheStreet.com
brand is an important aspect of our efforts to continue to attract subscribers
and readers. The importance of brand recognition will increase in the future
because of the growing number of web sites providing financial news and
information. We cannot assure you that our efforts to build brand awareness will
be successful.
OUR FAILURE TO MAINTAIN OUR REPUTATION FOR TRUSTWORTHINESS COULD HARM OUR
BUSINESS
It is very important that we maintain our reputation as a trustworthy news
organization. The occurrence of events, including our misreporting a news story
or the non-disclosure of stock ownership by one or more of our writers in breach
of our compliance policy, could harm our reputation for trustworthiness. These
events could result in a significant reduction in the number of our readers,
which could materially adversely affect our business, results of operations and
financial condition.
WE MAY BE LIABLE FOR INFORMATION DISPLAYED ON OUR WEB SITE
We may be subject to claims for defamation, libel, copyright or trademark
infringement or based on other theories relating to the information we publish
on our web site. These types of claims have been brought, sometimes
successfully, against online services as well as other print publications in the
past. We could also be subject to claims based upon the content that is
accessible from our web site through links to other web sites. Our insurance may
not adequately protect us against these claims.
10
<PAGE>
YEAR 2000 COMPLICATIONS MAY HARM OUR BUSINESS
Many currently installed computer systems and software products are coded
to accept only two-digit entries to identify a year in the date code field.
Consequently, on January 1, 2000, many of these systems could fail or
malfunction because they may not be able to distinguish between 20th century
dates and 21st century dates. Accordingly, our customers, potential customers,
vendors and strategic partners may need to upgrade their computer systems and
software products to comply with applicable "Year 2000" requirements.
Because we and our subscribers and readers are dependent, to a very
substantial degree, upon the proper functioning of our and their computer
systems, a failure of our or their computer systems to correctly recognize dates
beyond December 31, 1999, could materially disrupt our operations or the ability
of our subscribers and readers to access our web site, which could materially
adversely affect our business, results of operations and financial condition.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Readiness Disclosure".
WE RELY ON OUR INTELLECTUAL PROPERTY
To protect our rights to our intellectual property, we rely on a
combination of trademark and copyright law, trade secret protection,
confidentiality agreements and other contractual arrangements with our
employees, affiliates, clients, strategic partners and others. The protective
steps we have taken may be inadequate to deter misappropriation of our
proprietary information. We may be unable to detect the unauthorized use of, or
take appropriate steps to enforce, our intellectual property rights. We have
registered certain of our trademarks in the United States and we have pending
U.S. applications for other trademarks. Effective trademark, copyright and trade
secret protection may not be available in every country in which we offer or
intend to offer our services. In addition, although we believe that our
proprietary rights do not infringe on the intellectual property rights of
others, other parties may assert infringement claims against us or claims that
we have violated a patent or infringed a copyright, trademark or other
proprietary right belonging to them. These claims, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources on our part, which could materially adversely affect our business,
results of operations and financial condition. We incorporate licensed
third-party technology in some of our services. In these license agreements, the
licensors have generally agreed to defend, indemnify and hold us harmless with
respect to any claim by a third party that the licensed software infringes any
patent or other proprietary right. We cannot assure you that these provisions
will be adequate to protect us from infringement claims. The loss of or
inability to obtain or maintain any of these technology licenses could result in
delays in introduction of new services. See "Business--Intellectual Property".
DIFFICULTIES IN DEVELOPING NEW AND ENHANCED SERVICES AND FEATURES FOR OUR WEB
SITE COULD HARM OUR BUSINESS
We intend to introduce additional and enhanced services in order to retain
our current readers and attract new readers. If we introduce a service that is
not favorably received, our current readers may choose a competitive service
over ours or fail to renew their subscriptions. We may also experience
difficulties that could delay or prevent us from introducing new services.
Furthermore, the new services we may introduce could contain errors that are
discovered after these services are introduced. In these cases, we may need to
significantly modify the design or implementation of such services on our web
site to correct these errors. Our business, results of operations and financial
condition could be materially adversely affected if we experience difficulties
in introducing new services or if these new services are not accepted by our
readers.
RISKS RELATED TO OUR INDUSTRY
WE DEPEND ON THE CONTINUED GROWTH IN USE AND EFFICIENT OPERATION OF THE WEB
The web-based information market is new and rapidly evolving. Our business
would be materially adversely affected if web usage does not continue to grow or
grows slowly. Web
11
<PAGE>
usage may be inhibited for a number of reasons, such as:
o inadequate network infrastructure;
o security concerns;
o inconsistent quality of service; and
o unavailability of cost-effective, high-speed access to the Internet.
Our readers depend on Internet service providers, online service providers
and other web site operators for access to our web site. Many of these services
have experienced significant service outages in the past and could experience
service outages, delays and other difficulties due to system failures unrelated
to our systems. These occurrences could cause our readers to perceive the web in
general or our web site in particular as an unreliable medium and, therefore,
cause them to use other media to obtain their financial news and information. We
also depend on a number of information providers to deliver information and data
feeds to us on a timely basis. Our web site could experience disruptions or
interruptions in service due to the failure or delay in the transmission or
receipt of this information, which could have a material adverse effect on our
business, results of operations and financial condition.
RISKS ASSOCIATED WITH ONLINE ADVERTISING COULD HARM OUR BUSINESS
No standards have been widely accepted to measure the effectiveness of web
advertising. If standards do not develop, existing advertisers may not continue
or increase their levels of web advertising. If standards develop and we are
unable to meet these standards, advertisers may not continue advertising on our
site. Furthermore, advertisers that have traditionally relied upon other
advertising media may be reluctant to advertise on the web. Our business,
results of operations and financial condition could be materially adversely
affected if the market for web advertising declines or develops more slowly than
expected.
Different pricing models are used to sell advertising on the web. It is
difficult to predict which, if any, will emerge as the industry standard. This
uncertainty makes it difficult to project our future advertising rates and
revenues. We cannot assure you that we will be successful under alternative
pricing models that may emerge. Moreover, "filter" software programs that limit
or prevent advertising from being delivered to a web user's computer are
available. Widespread adoption of this software could materially adversely
affect the commercial viability of web advertising, which could materially
adversely affect our advertising revenues.
We compete with other web sites, television, radio and print media for a
share of advertisers' total advertising budgets. If advertisers perceive the web
in general or our web site in particular to be a limited or an ineffective
advertising medium, they may be reluctant to devote a portion of their
advertising budget to online advertising or to advertising on our web site.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE WEB COULD HARM OUR
BUSINESS
Existing domestic and international laws or regulations specifically
regulate communications or commerce on the web. Further, laws and regulations
that address issues such as user privacy, pricing, online content regulation,
taxation and the characteristics and quality of online products and services are
under consideration by federal, state, local and foreign governments and
agencies. Several telecommunications companies have petitioned the Federal
Communications Commission to regulate Internet service providers and online
services providers in a manner similar to the regulation of long distance
telephone carriers and to impose access fees on such companies. This regulation,
if imposed, could increase the cost of transmitting data over the web. Moreover,
it may take years to determine the extent to which existing laws relating to
issues such as intellectual property ownership and infringement, libel,
obscenity and personal privacy are applicable to the web. The Federal Trade
Commission and government agencies in certain states have been investigating
certain Internet companies regarding their use of personal information. We could
incur additional expenses if any new regulations regarding the use of personal
information are introduced or if
12
<PAGE>
these agencies chose to investigate our privacy practices. Any new laws or
regulations relating to the web, or certain application or interpretation of
existing laws, could decrease the growth in the use of the web, decrease the
demand for our web site or otherwise materially adversely affect our business.
WEB SECURITY CONCERNS COULD HINDER INTERNET COMMERCE
Concern about the transmission of confidential information over the
Internet has been a significant barrier to electronic commerce and
communications over the web. Any well-publicized compromise of security could
deter more people from using the web or from using it to conduct transactions
that involve the transmission of confidential information, such as signing up
for a paid subscription, executing stock trades or purchasing goods or services.
Because many of our advertisers seek to advertise on our web site to encourage
people to use the web to purchase goods or services, our business, results of
operations and financial condition could be materially adversely affected if
Internet users significantly reduce their use of the web because of security
concerns. We may also incur significant costs to protect ourselves against the
threat of security breaches or to alleviate problems caused by these breaches.
RISKS RELATED TO THIS OFFERING
INVESTORS WILL INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION
The initial offering price of our common stock will be substantially higher
than the pro forma net tangible book value per share of the outstanding common
stock immediately after the offering. If you purchase common stock in this
offering, you will incur immediate and substantial dilution in the pro forma net
tangible book value per share of the common stock from the price you pay for
common stock. We also have a large number of outstanding stock options to
purchase the common stock with exercise prices significantly below the estimated
initial public offering price of the common stock. To the extent these options
are exercised, there will be further dilution. See "Dilution".
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE
After this offering there will be outstanding 25,075,037 shares of our
common stock. There will be 25,816,704 shares outstanding if the underwriters'
over-allotment option is exercised in full. Of these shares, the shares sold in
this offering will be freely tradeable except for any shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act. The remaining
shares will be "restricted securities," subject to the volume limitations and
other conditions of Rule 144 under the Securities Act.
Our directors, executive officers, and substantially all of our current
stockholders and optionholders have agreed, subject to certain limited
exceptions, for a period of 180 days after the date of this prospectus, that
they will not, without the prior written consent of Goldman, Sachs & Co.,
directly or indirectly, offer to sell, sell or otherwise dispose of any shares
of common stock. After the first anniversary of this offering, some holders of
common stock will have the right to request the registration of their shares
under the Securities Act. Upon the effectiveness of the registration, all shares
covered by the registration statement will be freely transferable. In addition,
following the completion of this offering, we also intend to file a registration
statement on Form S-8 under the Securities Act covering 4,400,000 shares of
common stock reserved for issuance under the amended and restated 1998 stock
incentive plan. This registration statement will automatically become effective
upon filing. Of the number of shares subject to outstanding options upon
completion of the offering, options to purchase 133,500 shares will have vested
as of this date. Accordingly, subject to the exercise of these options, shares
registered under this registration statement will be available for sale in the
open market immediately after the 180-day lock-up agreements expire. See
"Underwriting", "Description of Capital Stock--Registration Rights" and "Shares
Eligible for Future Sale".
We cannot predict if future sales of our common stock, or the availability
of our common stock for sale, will materially adversely affect the market price
for our common stock or our ability to raise capital by offering equity
13
<PAGE>
securities. See "Shares Eligible for Future Sale" and "Underwriting".
CONTROL BY PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS COULD ADVERSELY AFFECT
OUR STOCKHOLDERS
Upon completion of this offering, our officers, directors and
greater-than-five-percent stockholders (and their affiliates) will, in the
aggregate, beneficially own approximately 62.7% (61.0% if the underwriters'
over-allotment option is exercised in full) of the outstanding common stock. As
a result, these persons, acting together, will have the ability to control
substantially all matters submitted to our stockholders for approval (including
the election and removal of directors and any merger, consolidation or sale of
all or substantially all of our assets) and to control our management and
affairs. Accordingly, this concentration of ownership may have the effect of
delaying, deferring or preventing a change in control of us, impeding a merger,
consolidation, takeover or other business combination involving us or
discouraging a potential acquirer from making a tender offer or otherwise
attempting to obtain control of us, which in turn could materially adversely
affect the market price of the common stock. See "Management" and "Principal
Stockholders".
POSSIBLE VOLATILITY OF OUR STOCK PRICE COULD ADVERSELY AFFECT OUR STOCKHOLDERS
We cannot predict the extent to which investor interest in us will lead to
the development of a trading market or how liquid that market might become. The
initial public offering price for the shares of our common stock will be
determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market. The stock market has experienced significant price and volume
fluctuations and the market prices of securities of technology companies,
particularly Internet-related companies, have been highly volatile. Investors
may not be able to resell their shares at or above the initial public offering
price. See "Underwriting".
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against that company. The institution of similar litigation against
us could result in substantial costs and a diversion of our management's
attention and resources, which could materially adversely affect our business,
results of operations and financial condition.
OUR MANAGEMENT HAS BROAD DISCRETION AS TO USE OF PROCEEDS FROM THIS OFFERING
Our management will have broad discretion in how we use the net proceeds of
this offering. Investors will be relying on the judgment of our management
regarding the application of the proceeds of this offering. See "Use of
Proceeds".
ANTI-TAKEOVER PROVISIONS COULD PREVENT OR DELAY A CHANGE OF CONTROL
Provisions of our amended and restated certificate of incorporation and
amended and restated bylaws and Delaware law could make it more difficult for a
third party to acquire us, even if doing so would be beneficial to our
stockholders. See "Description of Capital Stock".
WE DO NOT INTEND TO PAY DIVIDENDS
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future. See
"Dividend Policy".
14
<PAGE>
FORWARD LOOKING STATEMENTS; MARKET DATA
This prospectus contains certain "forward-looking statements" based on our
current expectations, assumptions, estimates and projections about TheStreet.com
and our industry. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in such forward-looking statements as a result of certain factors, as more fully
described in this section and elsewhere in this prospectus. We undertake no
obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.
This prospectus contains market data related to TheStreet.com and the
Internet. This data has been included in the studies published by the Internet
market research firms of International Data Corporation and Forrester Research,
Inc.. This market data includes projections that are based on a number of
assumptions. These assumptions include that:
o no catastrophic failure of the Internet will occur;
o the number of people online and the total number of hours spent online will
increase significantly over the next five years;
o the value of online advertising dollars spent per online user hour will
increase; and
o Internet security and privacy concerns will be adequately addressed.
If any one or more of these assumptions turns out to be incorrect, actual
results may differ materially from the projections based on these assumptions.
15
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the 5,500,000
shares of common stock offered hereby will be approximately $58,980,000 million
($67,257,000 million if the underwriters' over-allotment option is exercised in
full), at an assumed initial public offering price of $12.00 per share and,
after deducting the underwriting discounts and commissions and estimated
offering expenses payable by us. As of the date of this prospectus, we have not
made any specific expenditure plans with respect to the proceeds of this
offering. Therefore, we cannot specify with certainty the particular uses for
the net proceeds to be received upon completion of the offering. Accordingly,
our management will have broad discretion in the application of the net
proceeds.
The principal purposes of this offering are to provide working capital to
develop new products and expand internationally, to fund general corporate
purposes, to create a public market for our common stock and to facilitate our
future access to the public capital markets. In addition, we may use a portion
of the net proceeds to acquire or invest in complementary businesses,
technologies, services or products. However, we currently have no commitments or
agreements with respect to any such transactions.
Pending such uses, the net proceeds will be invested in short-term
investment-grade instruments, certificates or deposit or direct or guaranteed
obligations of the U.S. government.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock and
do not anticipate paying any cash dividends on our common stock for the
foreseeable future.
CORPORATE INFORMATION
We were formed in Delaware on June 18, 1996 as TheStreet.com, L.L.C. and we
converted into TheStreet.com, Inc., a Delaware corporation, on May 7, 1998.
References in this prospectus to "TheStreet.com", "we", "us" and "our" refer to
TheStreet.com, Inc. and our predecessor, TheStreet.com, L.L.C.
WRONG! is a registered trademark of TheStreet.com. TSC, TheStreet.com,
TheStreet, the TSC logo and TheStreet.com logo are our trademarks. Each
trademark, trade name or service mark of any other company appearing in this
prospectus belongs to its holder.
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of TheStreet.com as of
December 31, 1998:
(i) on an actual basis;
(ii) on a pro forma basis to reflect the conversion of all outstanding shares of
our convertible preferred stock and accumulated dividends into shares of common
stock; and
(iii) on a pro forma as adjusted basis to give effect to the sale of the
5,500,000 shares of common stock offered hereby, after deducting the
underwriting discount and commissions and estimated offering expenses that we
will pay assuming an initial public offering price of $12.00 per share.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and the notes to those statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------
PRO
PRO FORMA AS
ACTUAL FORMA ADJUSTED
------- ------- --------
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
Long-term debt................................................................ $ -- $ -- $ --
Stockholders' equity:
Common Stock, $0.01 par value, 100,000,000 shares authorized; 13,763,838
shares issued and outstanding, actual; 17,762,343 pro forma and 23,262,343
pro forma as adjusted(1).................................................... 138 178 233
Convertible Preferred Stock -
Series A 9 1/2% Cumulative Preferred Stock, $0.01 par value, 118,441 shares
issued and outstanding, actual; none pro forma and pro forma as
adjusted................................................................. 1 -- --
Series B 9 1/2% Cumulative Preferred Stock, $0.01 par value, 345,366 shares
issued and outstanding, actual; none pro forma and pro forma as
adjusted................................................................. 3 -- --
Series C Preferred Stock, $0.01 par value, 1,500 shares issued and
outstanding, actual; none pro forma and pro forma as adjusted............ -- -- --
Additional paid-in capital.................................................... 35,785 35,749 94,674
Accumulated deficit........................................................... (12,403) (12,403) (12,403)
------- ------- --------
Total stockholders' equity.................................................... 23,524 23,524 82,504
------- ------- --------
Total capitalization........................................................ $23,524 $23,524 $ 82,504
------- ------- --------
------- ------- --------
</TABLE>
- ------------------
(1) Excludes (i) 1,497,286 shares of common stock issuable upon the exercise of
options then outstanding under our 1998 Stock Incentive Plan of which 50,167
are vested as of December 31, 1998 and (ii) an aggregate of 1,029,986
additional shares reserved for issuance as of December 31, 1998. In March
1999, we increased the number of shares reserved for issuance under our
amended and restated 1998 stock incentive plan from 2,527,272 to 4,400,000.
See "Management--1998 Stock Incentive Plan".
17
<PAGE>
DILUTION
The pro forma net tangible book value of TheStreet.com as of December 31,
1998 was approximately $23,524,000, or $1.32 per share of common stock. Pro
forma net tangible book value per share represents the amount of total tangible
assets less total liabilities, divided by the pro forma shares of common stock
outstanding as of December 31, 1998 after giving effect to the conversion of all
outstanding shares of our convertible preferred stock and accumulated dividends.
After giving effect to the issuance and sale of the 5,500,000 shares of common
stock offered in this offering, after deducting underwriting discount and
commissions and estimated offering expenses that we will pay assuming an initial
public offering price of $12.00 per share, the pro forma net tangible book value
of TheStreet.com as of December 31, 1998 would have been $82,504,000 million, or
$3.54 per share. This represents an immediate increase in pro forma net tangible
book value of $2.22 per share to existing stockholders and an immediate dilution
of $3.54 per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share............................................................. $12.00
Pro forma net tangible book value per share at December 31, 1998........................ $1.32
Increase in pro forma net tangible book value per share attributable to new investors... 2.22
Pro forma net tangible book value per share after offering.......................................... 3.54
------
Dilution per share to new investors................................................................. $ 8.46
------
------
</TABLE>
The following table summarizes, on a pro forma basis, as of December 31,
1998, the differences between the number of shares of common stock purchased
from TheStreet.com, the aggregate cash consideration paid and the average price
per share paid by existing stockholders and new investors purchasing shares of
common stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... 17,762,343 76.36% $ 47,249,000 41.72% $ 2.66
New investors.............................. 5,500,000 23.64 66,000,000 58.28 12.00
---------- ------- ------------ -------
Total............................... 23,262,343 100.00% $113,249,000 100.00%
---------- ------- ------------ -------
---------- ------- ------------ -------
</TABLE>
The foregoing discussion and table assumes no exercise of any stock options
outstanding at December 31, 1998. As of December 31, 1998, there were 1,497,286
options outstanding to purchase common stock. To the extent that any of these
options are exercised, there will be further dilution to the new investors.
18
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to, and
should be read in conjunction with, our financial statements and the notes to
those statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing elsewhere in this prospectus. The
selected statement of operations data presented below for the period from
June 18, 1996 (inception) through December 31, 1996 and the years ended
December 31, 1997 and 1998, and the balance sheet data as of December 31, 1997
and 1998 are derived from our financial statements that have been audited by
Arthur Andersen LLP, independent public accountants, and are included elsewhere
in the prospectus. The balance sheet data as of December 31, 1996 has been
derived from our audited financial statements not included in this prospectus.
<TABLE>
<CAPTION>
JUNE 18, 1996
(INCEPTION)
THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1998
----------------- ----------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Advertising.......................................... $ -- $ 118 $ 2,544
Subscription......................................... -- 321 1,686
Other................................................ -- 150 393
--------- ------- ---------
Total net revenues................................ -- 589 4,623
Cost of revenues....................................... 298 1,147 3,955
--------- ------- ---------
Gross profit...................................... (298) (558) 668
Operating expenses:
Product development.................................. 469 402 2,346
Sales and marketing.................................. 397 2,189 9,205
General and administrative........................... 548 2,210 5,158
--------- ------- ---------
Total operating expenses.......................... 1,414 4,801 16,709
--------- ------- ---------
Loss from operations.............................. (1,712) (5,359) (16,041)
Interest expense, net.................................. 21 405 227
--------- ------- ---------
Loss before provision for income taxes............ (1,733) (5,764) (16,268)
Provision for income taxes(1).......................... -- -- --
--------- ------- ---------
Net loss.......................................... $ (1,733) $(5,764) $ (16,268)
--------- ------- ---------
--------- ------- ---------
Pro forma basic and diluted net loss per share......... $ (0.28) $ (0.95) $ (1.64)
--------- ------- ---------
--------- ------- ---------
Pro forma weighted average basic and diluted shares
outstanding(2)....................................... 6,086 6,086 9,923
--------- ------- ---------
--------- ------- ---------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................................... $ 18 $ 157 $24,612
Working capital (deficit)....................................................... (253) (1,343) 22,918
Total assets.................................................................... 305 911 27,581
Long-term debt, less current maturities......................................... 1,357 6,335 --
Total stockholders' equity (deficit)............................................ (1,433) (7,157) 23,524
</TABLE>
- ------------------
(1) Prior to May 7, 1998, we were a limited liability company and as a result
were treated as a partnership for both Federal and state income tax
purposes. Upon conversion to a C corporation, we applied the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). Had SFAS 109 been applied for all periods from
inception, the deferred tax asset generated, primarily from net operating
loss carryforwards, would have been offset by a full valuation allowance.
(2) The pro forma weighted average shares outstanding give effect to the
conversion of all of our outstanding convertible preferred stock and
accumulated dividends as of December 31, 1998, into an aggregate of
3,998,505 shares of common stock upon the completion of this offering.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes to those statements which appear elsewhere in this
prospectus. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and elsewhere in this prospectus, particularly in "Risk
Factors".
OVERVIEW
TheStreet.com is a leading web-based provider of original, timely,
comprehensive and trustworthy financial news, commentary and information aimed
at helping readers make informed investment decisions. TheStreet.com combines
the most important qualities of traditional print journalism--accuracy,
intelligence, fairness, and wit--with the web's advantages as a financial news
medium--timeliness, interactivity and global distribution. With a staff of more
than 50 professional reporters and editors, together with two dozen outside
contributors, we update our site with approximately 40 original stories
throughout each business day and with many additional features on weekends.
During 1998, our subscriber base grew more than 380% to approximately 32,000 at
the end of the year; as of March 29, 1999, we had over 50,000 subscribers.
We were originally organized in June 1996 as a limited liability company
funded by our co-founders, Mr. James J. Cramer and Dr. Martin Peretz. During
1996, we hired our first reporters and began publishing in November of that
year. In August 1997, we launched our high-capacity web site hosted by Starwave
Corporation. Our coverage of the stock market during its turmoil in October 1997
increased our traffic significantly. In October 1998, we hired Mr. Kevin English
as our chief executive officer and president.
We derive our revenues from retail and professional subscriptions,
advertising and other sources, including content syndication fees. We offer both
monthly and annual subscriptions at current regular prices of $9.95 and $99.95,
respectively. From time to time, we offer seasonal and special discounts and
promotions. Substantially all our retail subscribers pay by credit card. Monthly
subscriptions are automatically renewed and annual subscribers are notified by
email three to four weeks prior to the expiration date of their subscriptions.
Unless these annual subscribers elect to cancel, they too are renewed
automatically, although they have the option to cancel during the 30 days
following their renewal date. In each of the months in the fourth quarter of
1998, approximately 90% of our annual subscribers whose subscriptions came up
for renewal, and 97% of our monthly subscribers, renewed their subscriptions. We
also enter into subscription distribution agreements with third parties, such as
E*TRADE, that purchase subscriptions to our service for certain of their members
or subscribers. We recognize the revenue for customers ratably over the period
of the subscription. We treat the payment for the unused portion of the
subscription as deferred revenue. See "Business--Subscription Sales".
Our subscriber base continued to grow through 1998, from a base of
approximately 6,700 at the end of December 1997 to approximately 32,000 at the
end of December 1998 and to over 50,000 as of March 29, 1999. In 1998, we
established a Professional Markets group to make enterprise-wide sales to
financial services companies. Approximately 2,400 of our subscribers at the end
of 1998 were the result of corporate sales to financial services firms. During
the fourth quarter of 1998, we initiated a marketing program where individuals
can receive annual subscriptions to TheStreet.com by redeeming frequent flyer
miles. We do not receive any revenues from these subscribers for their initial
annual subscriptions. Rather, we pay a third-party service a nominal amount per
subscriber to participate in this program. As a result of this program, we
received 5,500 new annual subscriptions during the fourth quarter of 1998.
During 1999, we expect to continue using a
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variety of marketing programs, including non-revenue generating program like
this one, to help build our subscriber base.
Subscription revenues represent customer subscriptions that provide full
access to our financial news, commentary and information. Subscriptions are
generally charged to customers' credit cards or are charged directly to
companies that subscribe. These subscriptions are generally billed in advance on
a monthly, quarterly or annual basis. Deferred revenue relates to subscription
fees for which amounts have been collected but for which revenue has not been
recognized.
Advertising revenue, derived from the sale of sponsorships and of banner
and email advertisements, is recognized ratably over the period advertising is
displayed, provided that no significant company obligations remain and
collection of the resulting receivable is probable.
We established a Professional Markets group in 1998 to sell our service to
institutions on an enterprise-wide basis. During 1998 and 1999, this
Professional Markets group entered into agreements with 16 financial
institutions, including PaineWebber, BT Alex. Brown, Fidelity and Deutsche Bank,
to provide each of them with our content delivered according to their
transmission needs. The agreements entered into by our Professional Markets
group are typically one year in duration. We recognize revenues derived from
these agreements ratably over the term of the agreement.
Our cost of revenues is made up of editorial staff costs, outside
contributor fees and content licensing fees. Since these are expected to
increase more slowly than our revenues, we believe that our gross margins will
increase as our revenues increase.
Our product development expenses are also largely fixed, though there are
some variable costs related to increasing the capacity of our web site. The
largest element of our sales and marketing expenses represents marketing costs
for new subscriber acquisition, which are closely tied to our subscription
growth.
We have only a limited operating history upon which you can evaluate our
business and prospects. We have not achieved profitability, and expect to
continue to incur net losses in 1999 and subsequent fiscal periods. We expect to
continue to incur significant operating expenses and, as a result, will need to
generate significant revenues to achieve profitability, which may not occur.
Even if we do achieve profitability, we may be unable to sustain or increase
profitability on a quarterly or annual basis in the future. We believe that
quarter-to-quarter comparisons of our operating results may not be a good
indication of our future performance, nor would our operating results for any
particular quarter be indicative of future operating results.
In December 1998 and during the first quarter of 1999, we granted options
to purchase shares of common stock at exercise prices which were less than the
fair market value of these shares. This will result in a non-cash compensation
charge over the period that these specific options vest. We estimate this
expense will be approximately $2.6 million for the year ended December 31, 1999.
The impact of this non-cash compensation charge for 1998 is not material.
RESULTS OF OPERATIONS
NET REVENUES
SUBSCRIPTION REVENUES. Net subscription revenues are derived from annual
and monthly subscriptions. We calculate net subscription revenues by deducting
from gross revenues cancellation chargebacks and any refunds. During 1998, these
chargebacks and refunds accounted for approximately 2% of total subscription
revenues. During 1997, net subscription revenues were $321,000. Substantially
all of these revenues related to monthly subscriptions. Net subscription
revenues increased to $1,686,000 in 1998 because of the growth in our subscriber
base. In 1998, approximately 46% of our net subscription revenue was derived
from annual subscriptions.
ADVERTISING REVENUES. Advertising revenues are derived from sponsorship
arrangements and from the delivery of banner and email advertisements. During
1997, our advertising revenues were $118,000, all of which were derived from the
delivery of banner advertisements as a result of monthly
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advertising agreements. Advertising revenues increased from $118,000 in 1997 to
$2,544,000 in 1998 because we began to sell sponsorships and increased our sales
of banner and email advertisements. During 1998, 65% of our advertising revenues
were derived from sponsorship contracts.
OTHER REVENUES. Other revenues consist primarily of content syndication
fees. In 1997, our other revenues consisted entirely of revenues derived from a
syndication and hosting partnership with ABCNEWS.com and Starwave (an affiliate
of ABCNEWS.com). As part of this arrangement, we agreed to syndicate a portion
of our news content to ABCNEWS.com in return for technology and hosting services
from Starwave. During 1998, $300,000 of our other revenues were derived from
this agreement. We expect that the revenues and associated product development
expenses incurred in connection with this arrangement will cease once our
internal subscription management system becomes operational. See
"Business--Infrastructure, Operations and Technology".
COST OF REVENUES
Cost of revenues includes compensation and benefits for editorial staff,
fees paid to outside contributors and content licensing fees payable to content
providers. Cost of revenues increased from $298,000 in 1996 to $1,147,000 in
1997 and to $3,955,000 in 1998, primarily as a result of the growth of our
editorial staff from 10 at the end of 1996 to 21 at the end of 1997 and to 53 at
the end of 1998. Our cost of revenues is expected to increase on an absolute
dollar basis in 1999 because of the expansion of our editorial staff, increased
fees paid to outside contributors and increased licensing fees, but it is
expected to decrease as a percentage of revenues.
PRODUCT DEVELOPMENT EXPENSES
Product development expenses include compensation and benefits for software
developers, expenses for contract programmers and developers, and communications
lines, computer equipment and other technology costs. Product development
expenses decreased from $469,000 in 1996, to $402,000 in 1997 and then increased
to $2,346,000 in 1998 primarily as a result of the development of our original
site in 1996 and the construction of our new site during 1998. We increased our
technology headcount from one person at the end of 1996 to three at the end of
1997 to 13 at the end of 1998. All product development costs are expensed as
incurred. We intend to increase our product development expenditures in 1999 to
introduce our own subscription management system and to further enhance the
programming on the web site. These expenses may fluctuate as a percentage of
revenue over time depending on the projects undertaken.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist primarily of advertising and promotion
on television, online and in print; advertising commissions; promotional
materials; and compensation, benefits and sales commissions to our direct sales
force. Sales and marketing expenses increased from $397,000 in 1996 to
$2,189,000 in 1997 and to $9,205,000 in 1998 primarily due to the commencement
of marketing initiatives in 1997 and to a significant advertising campaign in
the first half of 1998. In 1999, we anticipate hiring additional sales and
marketing staff and incurring additional costs related to advertising and
promotion on television, online and in print. As a result, our sales and
marketing expenses are expected to increase on an absolute dollar basis in 1999,
but they are expected to decrease as a percentage of revenues.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist primarily of compensation and
benefits for general management, finance and administrative personnel, occupancy
costs, professional fees, depreciation and other office expenses. General and
administrative expenses increased from $548,000 in 1996 to $2,210,000 in 1997
and to $5,158,000 in 1998 primarily as a result of increased finance and
administration costs to support the growth of our business and higher rent
payments to accommodate the increase in staff. The finance and administration
costs increased from $170,000 in 1996 to $807,000 in 1997 and to $2,834,000 in
in 1998. The rent costs increased from $35,000 in 1996 to $157,000 in
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1997 and to $442,000 in 1998. We anticipate hiring additional personnel and
incurring additional costs related to our being a public company, including
introducing investor relations programs, increasing professional service fees
and increasing directors and officers liability insurance premiums. Accordingly,
our general and administrative expenses are expected to increase on an absolute
dollar basis in 1999 but are expected to decrease as a percentage of revenues.
INTEREST EXPENSE, NET
Interest expense consists primarily of interest on loans to TheStreet.com,
L.L.C. from its members and another lender that were converted into equity in
May 1998. Interest income consists primarily of interest income from excess cash
balances invested in short-term investment-grade instruments, certificates of
deposit or direct or guaranteed obligations of the U.S. government. In 1996, net
interest expense was $21,000. It increased to $405,000 in 1997 because of the
growth in the members' loan balances. In 1998, the interest on these loans was
$383,000 from the beginning of the year to May 1998, when the loans and
remaining accrued interest were converted into equity of TheStreet.com, Inc. An
additional $5,000 of interest expense was recorded in 1998 for a bank loan.
There was no interest income in 1996 or 1997. In 1998, interest income was
$161,000.
INCOME TAXES
No benefit for Federal and state income taxes is reported in the financial
statements, as we had elected to be taxed as a partnership prior to May 7, 1998,
at which time we converted to a C corporation. Therefore, for the periods
presented through May 7, 1998, the Federal and state tax effects of the tax
losses were recorded by the members of the TheStreet.com, L.L.C. in their
respective income tax returns. Subsequent to our conversion to a C corporation,
we have accounted for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Had we
applied the provisions of SFAS 109 for the period from inception, the deferred
tax asset generated, primarily from net operating loss carryforwards, would have
been offset by a full valuation allowance.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, certain data
from our statements of operations. The statement of operations data has been
derived from our financial statements, which, in our management's opinion, have
been prepared on substantially the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial information for
the periods presented. This information should be read in conjunction with the
audited financial statements and notes to those statements included elsewhere in
this prospectus. The operating results in any quarter are not necessarily
indicative of the results that may be expected for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, 1998 JUNE 30, 1998 SEPTEMBER 30, 1998 DECEMBER 31, 1998
-------------- ------------- ------------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues:
Advertising........................ $ 574 $ 586 $ 575 $ 809
Subscription....................... 259 448 438 541
Other.............................. 85 82 105 121
-------- ------- -------- -------
Total net revenues................. 918 1,116 1,118 1,471
Cost of revenues..................... 646 844 1,077 1,388
-------- ------- -------- -------
</TABLE>
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, 1998 JUNE 30, 1998 SEPTEMBER 30, 1998 DECEMBER 31, 1998
-------------- ------------- ------------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Gross profit....................... 272 272 41 83
-------- ------- -------- -------
Operating expenses:
Product development................ 137 205 444 1,560
Sales and marketing................ 2,570 3,849 1,535 1,251
General and administrative......... 779 1,009 1,313 2,057
-------- ------- -------- -------
Total operating expenses........... 3,486 5,063 3,292 4,868
-------- ------- -------- -------
Loss from operations................. (3,214) (4,791) (3,251) (4,785)
Interest income (expense), net....... (257) (77) 76 31
-------- ------- -------- -------
Net loss............................. ($ 3,471) ($4,868) ($ 3,175) ($4,754)
-------- ------- -------- -------
-------- ------- -------- -------
</TABLE>
Product development expenses increased significantly in the fourth quarter
as a result of the consulting, hardware and software costs associated with
building our new hosting and content management systems and our new web site.
Sales and marketing expenses were greater in the first two quarters of 1998
compared to the last two quarters primarily as a result of an aggressive
television advertising campaign. Subsequent to this campaign, quarterly
advertising costs declined as a percentage of quarterly revenues. General and
administrative expenses increased in the fourth quarter primarily as a result of
the growth in general management, professional services and infrastructure
costs.
LIQUIDITY AND CAPITAL RESOURCES
From inception on June 18, 1996 through April 1998, we funded our
operations primarily from investments and loans from Mr. Cramer and Dr. Peretz
and a loan from a third party. The loans and accrued interest were converted
into equity as part of the May 1998 private placement and, since then, we have
funded our operations primarily from the sale of equity securities and from cash
received from the sale of subscriptions and advertising. In May 1998, we raised
approximately $10 million in a private placement. In December 1998, we raised
approximately $25 million in a second private placement. As of December 31,
1998, we had working capital of $22.9 million available to us. See "Certain
Transactions--1998 Private Placements".
Cash used in operating activities was $15.8 million in 1998 compared to
$4.4 million in 1997 and $1.4 million for the period from June 18, 1996
(inception) to December 31, 1996. Significant uses of cash in operations that
led to the net operating loss in 1998 include costs associated with our
marketing initiatives, technology development and increased staffing in our
editorial and business operations.
Cash provided by financing activities was $40.6 million in 1998 compared to
$5.0 million in 1997 and $1.6 million for the period from June 18, 1996
(inception) through December 31, 1996. In 1996 and 1997, the amounts represented
loans and investments from the founders. In 1998, they consisted primarily of
net proceeds from the private placement of equity securities in May and December
1998.
In September 1998, we entered into a sale and leaseback transaction with
Leasing Technologies International Inc. for substantially all of our fixed
assets, including fixtures and fittings, telephone equipment and office
equipment. Since that date, we have financed substantially all of our fixed
asset purchases through an operating lease. Capital expenditures were $334,000
in 1998, $490,000 in 1997 and $173,000 for the period from June 18, 1996
(inception) through December 31, 1996. We did not have any commitments for
capital expenditures at December 31, 1998. As of December 31, 1998, we had
commitments under non-cancellable operating leases of $2.3 million for 1999.
We also have a revolving working capital line of credit of $2.0 million
from Imperial Bank, secured against certain accounts receivable held by us, that
carries interest at the bank's prime lending rate. As of December 31, 1998,
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approximately $3,000 was outstanding under this line of credit.
We believe that the net proceeds from this offering, together with our
current cash, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months following the
offering. Thereafter, if cash generated from operations is insufficient to
satisfy our liquidity requirements, we may need to raise additional funds
through public or private financings, strategic relationships or other
arrangements. There can be no assurance that such additional funding, if needed,
will be available on terms attractive to us, or at all. Strategic relationships,
if necessary to raise additional funds, may require us to provide rights to
certain of our content. The failure to raise capital when needed could have a
material adverse effect on our business, results of operation and financial
condition. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our then-current stockholders would be
reduced. Furthermore, such equity securities might have rights, preferences or
privileges senior to those of the common stock.
YEAR 2000 READINESS DISCLOSURE
OUR STATE OF READINESS
We have defined Year 2000 compliance as follows:
Information technology ("IT") time and date data processes, including, but
not limited to, calculating, comparing and sequencing data from, into and
between the 20th and 21st centuries contained in our products and services,
and our non-IT systems, will function accurately, continuously and without
degradation in performance and without requiring intervention or
modification in any manner that will or could materially adversely affect
the performance of such products or the delivery of such services as
applicable at any time hereafter.
We have substantially completed the process of determining the Year 2000
readiness of our IT systems, which include the hardware and software necessary
to provide and deliver our service, and of our non-IT systems, except for our
telephone systems which we expect to replace before the end of this year.
TheStreet.com's assessment plan consists of the following steps:
(i) evaluating our date dependent code, software and hardware and
evaluating external dependencies;
(ii) quality assurance testing of our internally-developed proprietary
software and systems;
(iii) obtaining assurances or warranties from third-party vendors and
licensors of material hardware, software and services that are related to
the delivery of our services; and
(iv) evaluating the need for, and preparing and implementing if
required, a contingency plan.
To date, our assessment has determined that our material internally
developed software and systems are Year 2000 compliant and our material
hardware, software and service vendors have informed us that the products we are
using to support our services are Year 2000 compliant. Our hosting service,
Exodus Communications, has represented to us that its systems are Year 2000
compliant. All material commercial software on which we depend is either Year
2000 compliant or will be upgraded to be compliant in the normal course of
business through upgrades or installation of software patches. Substantially all
hardware used in our network operations and office operations has been certified
as Year 2000 compliant by our vendors. We expect to be moving from our present
facilities in 1999, and, therefore, we have not asked for assurances from our
current landlord on the Year 2000 compliance of our existing facilities.
THE COSTS TO ADDRESS YEAR 2000 ISSUES
We have incurred $17,000 in costs in connection with our Year 2000
compliance efforts since inception through December 31, 1998. We expect to incur
$25,000 in additional costs to make our systems Year 2000 compliant by mid-1999,
which will be expensed as incurred.
We are not currently aware of any material operational issues or costs
associated with
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preparing our systems for the Year 2000. Nonetheless, we may experience material
unexpected costs caused by undetected errors or defects in the technology used
in our systems or because of the failure of a material vendor to be Year 2000
compliant.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES
Notwithstanding our Year 2000 compliance efforts, the failure of a material
system or vendor, or the Internet generally, to be Year 2000 compliant could
harm the operation of our systems or prevent or delay the delivery of our
services being offered through us, or have other unforeseen, material adverse
consequences to us.
We are also subject to external Year 2000-related failures or disruptions
that might generally affect industry and commerce, such as utility or
transportation company Year 2000 compliance failures and related service
interruptions. All of these factors could materially adversely affect our
business, results of operations and financial condition.
CONTINGENCY PLANS
We have not yet developed a contingency plan to address situations that may
result if we are unable to achieve Year 2000 compliance. The cost of developing
and implementing such a plan, if necessary, could be material.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes new
standards for the way companies report information about operating segments in
annual financial statements. The disclosures prescribed by SFAS 131 are
effective for the year ending December 31, 1998. We do not believe we operate in
more than one segment.
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BUSINESS
OVERVIEW
TheStreet.com is a leading web-based provider of original, timely,
comprehensive and trustworthy financial news, commentary and information aimed
at helping readers make informed investment decisions. TheStreet.com combines
the most important qualities of traditional print journalism--accuracy,
intelligence, fairness and wit--with the web's advantages as a financial news
medium--timeliness, interactivity and global distribution. With a staff of more
than 50 professional reporters and editors, together with two dozen outside
contributors, we update our site with approximately 40 original stories
throughout each business day and with many additional features on weekends.
Trained at the nation's leading financial news organizations, our journalists
produce quality news coverage and in-depth analysis in a real-time, interactive
medium ideally suited to the needs of today's investors. We have developed a
community of loyal readers who turn to TheStreet.com for their financial and
investing news and information needs. During 1998, our subscriber base grew more
than 380% to approximately 32,000 at the end of the year; as of March 29, 1999,
we had over 50,000 subscribers.
We derive our revenues primarily from the sale of subscriptions to our web
site and from advertising sales. To build brand awareness, increase traffic and
create a ready source of potential subscribers, we aggressively promote our site
and provide a portion of our content for free. We seek to maximize our revenue
per reader--both paying subscribers and free users--by selling advertisements on
all areas of our site. Our financially oriented readers comprise an upscale
demographic that is desirable to advertisers, enabling us to charge advertising
rates that we believe to be among the highest of financial web sites. We believe
we are well positioned for significant growth in both subscription and
advertising sales as the market for online financial news and information
continues to expand.
INDUSTRY BACKGROUND
The web has rapidly established itself as an effective means for investors
to manage their portfolios, research investments and trade securities. At the
same time, individuals have been taking greater control of their investments by
directly researching information on investments, tracking their portfolios,
purchasing no-load mutual funds and playing a more proactive role in their
relationships with financial advisors. The web has facilitated these behavioral
shifts by providing investors with easy access to information that was once
generally available only to investment professionals, such as timely market
news, intra-day and historical quotes, charts, SEC filings and analysts'
earnings estimates. According to International Data Corporation, the number of
online brokerage accounts in the United States is expected to grow from
3.5 million at the end of 1997 to 24 million at the end of 2002, with online
brokers expected to manage over $1.5 trillion in assets by the end of 2002.
Similarly, investors in Europe are beginning to play a more proactive role in
managing their finances, according to a November 1998 Forrester Research report.
Increasingly, this growing group of self-directed investors is seeking
timely, comprehensive and trustworthy financial news and information that can
help them make informed investing decisions. Many existing financial news
sources, however, fail to meet this need. Traditional print publications,
constrained by publication cycles of days or even months, are limited in their
ability to keep pace with financial markets. Television provides a measure of
timeliness but generally lacks depth of analysis. In addition, viewers are
subject to television's predetermined schedules. On the web, some news and
information sources offer little disclosure about their background and any
conflicts of interest, potentially rendering their information untrustworthy.
Some online news outlets do little more than republish stories that have already
appeared in their affiliated print publications and many simply aggregate
stories from disparate news and press release wires without supplying the
original insight, analysis
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and point of view that comes from independent reporting. Other financial sites
offer stock quotes, charts and other investment tools, but provide limited
financial news.
The democratization of Wall Street represents a significant opportunity for
a financial news, commentary and information web site that combines the depth of
coverage of traditional media with the immediacy and interactivity of the web.
We believe that as the audience for investment news grows both in the United
States and abroad, we are poised to become the leading source worldwide for
original, timely, comprehensive and trustworthy financial news, commentary and
information.
THESTREET.COM SOLUTION
At TheStreet.com, we aim to meet the increasing demands of today's
investors. Our large and experienced news organization provides a broad range of
original financial news and in-depth analysis to our readers through a
real-time, interactive medium. We complement this news and analysis with
compelling commentary by well-known writers, including James J. Cramer, Herb
Greenberg, Brenda Buttner and Jim Seymour. We believe this combination of
coverage and commentary, together with our community features and investment
tools, provides a solution for the shortcomings of existing financial news
sources by combining the best attributes of each:
o ORIGINAL. Our stories are written by our staffers, for our web site. They are
not merely aggregated from other online sources, nor are they originally
prepared for another medium and simply re-purposed for the web.
o TIMELY. Our focused reporters continuously track and investigate the latest
financial news. We update our web site dozens of times throughout the business
day to keep our readers abreast of developing news stories.
o COMPREHENSIVE. We seek to achieve both depth and breadth of coverage. We aim
to provide in-depth analysis that is more valuable to investors than a
broadcast sound bite or a wire-service dispatch. We offer a broad range of
content, community features and investment tools to meet the needs of a
variety of individuals, from active investors to buy-and-hold stock purchasers
to first-time Roth IRA contributors.
o TRUSTWORTHY. We aim to uphold the highest ethical and journalistic standards,
striving to ensure that our stories are accurate, reliable and fair, and that
staff members and outside contributors adhere to our rigorous disclosure and
conflict-of-interest policy.
We believe our approach is effective. During 1998, our subscriber base grew
more than 380% to approximately 32,000 at the end of the year; as of March 29,
1999, we had over 50,000 subscribers.
STRATEGY
Our objective is to establish TheStreet.com as the leading and most
comprehensive financial news and information destination for investors. We aim
to further develop a loyal community of readers in order to build our
subscription base and attract advertisers. Our strategy includes the following
key elements:
EXPAND OUR WEB SITE AS A COMPREHENSIVE FINANCIAL NEWS AND INFORMATION
DESTINATION
We are building upon our comprehensive offerings so that readers can
satisfy all of their financial and investing news and information needs without
leaving our web site. For example, we are expanding our coverage of
international markets, adding new community features such as message boards and
enhancing the sophistication of our investment tools with offerings like
real-time stock quotes. Through continued additions like these, we aim to give
investors an informative, robust and entertaining user experience.
LEVERAGE OUR CONTENT TO MAXIMIZE REVENUE ACROSS A DIVERSE CUSTOMER BASE
To leverage our content across and derive greater revenues from a wider
audience, we offer various levels of access to our content at different price
points. We currently offer free content as well as paid premium content and in
the future plan to add more customized offerings for both retail and
professional investors. Free content builds our brand, increases traffic,
broadens our base of prospective subscribers and expands opportunities for
advertising revenues. Our
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premium content offering includes a wide variety of breaking news, analysis,
commentary and investment tools.
We are developing specialized, higher-priced products for both retail
investors and financial professionals. To satisfy retail investors' demand for
the customized delivery of content, we plan to add additional services such as
increased personalization. We further believe that financial professionals
represent a significant market opportunity for subscriptions and advertising
revenue. We have built a sales group to target that audience through
enterprise-wide sales and plan to develop specialized content for professionals.
We believe these additions to our product line will allow us to maximize both
our reach and our revenue per user.
CAPITALIZE ON READER DEMOGRAPHICS DESIRABLE TO ADVERTISERS
Our desirable reader demographic has enabled us to build a growing
advertising business. To reach this attractive audience, our advertisers pay
rates that we believe are among the highest of financial web sites. Our
advertising revenues grew from approximately $118,000 in 1997 to approximately
$2.5 million in 1998. By March 25, 1999 we had signed contracts for
$3.7 million in advertising revenues for the year, $1.2 million more than the
total advertising revenues we generated in all of 1998. We expect that as we
increase our traffic and expand our offering of news and commentary, community
features and investment tools, we will continue to create significant
opportunities both for increased financial services-related advertising as well
as technology and luxury-goods advertising.
LEVERAGE STRATEGIC PARTNERSHIPS
We continue to build our subscriber base and brand awareness through both
subscription distribution and content syndication relationships. Under
subscription distribution relationships with online brokerages and other firms,
we expect to sign up thousands of subscribers without incurring typical consumer
marketing costs. For example, under our recent subscription distribution
agreement with E*TRADE, the online broker purchases discounted subscriptions in
bulk to distribute as a premium service to certain of its customers.
By syndicating our content to other leading sites, we expose our brand name
and quality writing to millions of potential subscribers and drive additional
traffic to our site. Under content syndication agreements with Yahoo!, America
Online, Charles Schwab and other leading companies, we provide selected stories
each day, at times on a delayed basis, for co-branded publication with a link to
our site. Our content syndication agreements capitalize on the cost efficiencies
of online delivery by creating additional value from stories already produced
for our own site.
BUILD BRAND AWARENESS OF THESTREET.COM AND OUR WRITERS
We believe that increased brand awareness helps us attract additional
traffic, subscribers, strategic partners, advertisers and talented employees. We
engage in a comprehensive marketing and media-relations campaign to raise
visibility and cultivate our brand identity. We advertise on television, print
and online media and conduct innovative marketing campaigns. We also build the
visibility of our individual writers. Our writers and their work have been
featured or mentioned in publications such as The Wall Street Journal, The New
York Times and Fortune. Contributor James Cramer and senior columnist Herb
Greenberg appear regularly on CNBC, and Mr. Greenberg appears twice daily on
KRON television, the San Francisco television affiliate of NBC.
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OUR EDITORIAL STAFF AND OUTSIDE CONTRIBUTORS
We believe that our original, timely, comprehensive and trustworthy content
is a competitive advantage. Our editorial staff consists of more than 50
professional reporters and editors who, together with two dozen outside
contributors throughout the world, produce approximately 40 original news,
analysis and commentary pieces each business day that are aimed at helping
readers make informed investment decisions. We also publish additional features
and news updates on weekends. Our editorial staff and outside contributors have
broken numerous important stories, many of which have been cited by other
publications such as The Wall Street Journal and The New York Times.
Recently, we were named as a finalist for the General Excellence in New
Media category of the 1998 National Magazine Awards. The purpose of this
category is "to honor an interactive publication that most effectively serves
its intended audience and reflects an outstanding level of interactivity,
journalistic integrity and service."
Before joining TheStreet.com, many members of our editorial staff worked at
other leading news organizations, including The Wall Street Journal, The New
York Times, CNBC, Dow Jones News Service, SmartMoney, Bloomberg, Reuters and USA
Today. Among our site's notable writers:
JAMES J. CRAMER. Mr. Cramer, a money manager, is an outside
contributor to TheStreet.com and writes multiple columns each business day.
Mr. Cramer also is a founder and director of TheStreet.com. In addition,
Mr. Cramer writes for Time magazine and appears regularly on CNBC.
HERB GREENBERG. Mr. Greenberg, formerly of the San Francisco
Chronicle, is a staffer and daily commentator. Mr. Greenberg also appears
regularly on CNBC and writes a regular column for Fortune magazine. In
addition, he provides business coverage twice each morning for KRON
television, the San Francisco television affiliate of NBC.
BRENDA BUTTNER. Ms. Buttner, a former anchor of CNBC's The Money Club
and winner of the network's first Cable Ace Award, is a regular outside
contributor. Ms. Buttner profiles America's top mutual fund managers and
comments on the mutual fund industry.
DAVE KANSAS. Mr. Kansas, our editor-in-chief, writes a column about
market trends. Mr. Kansas worked at The Wall Street Journal for five years,
most recently as a financial markets reporter. He has provided commentary
for several television networks, including ABC, CBS, NBC, CNBC and CNN. His
writing has appeared in The New Republic, Red Herring, Upside, The Industry
Standard, Slate and the New York Observer.
ALEX BERENSON. Mr. Berenson, a senior staff writer, covers media and
entertainment companies. Mr. Berenson was recently featured in a "Heroes"
column in Brill's Content, a media magazine, for his coverage of Tel-Save
Holdings (now Tel-Save.com). TheStreet.com was also named a finalist for
the 1998 Investigative Reporters and Editors Awards for Mr. Berenson's
coverage of Tel-Save.com.
JIM SEYMOUR. Mr. Seymour, a longtime commentator for PC Magazine and
the founding editor-in-chief of PC/Computing magazine, writes about
America's leading technology stocks as an outside contributor.
GARY B. SMITH. Mr. Smith, an individual investor who manages his own
money using technical analysis, is an outside contributor who writes four
times each week about technical analysis and at-home trading.
To ensure impartiality and prevent any conflict-of-interest or appearance
of conflict, our editorial staff and outside contributors are required to abide
by our strict compliance policy. According to this policy, our editorial
staffers are not individually permitted to own individual stocks (though they
may, and most will, own equity in TheStreet.com). In addition, James Cramer, a
money manager and outside
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contributor to, large stockholder of and director of TheStreet.com, has no
control over the editorial content of TheStreet.com and, like our other
contributors, is required to disclose his current positions in any of the stocks
he writes about. Mr. Cramer's employment agreement prohibits him from discussing
individual stocks with editorial staffers and limits his contact with the
editorial staff to the editor-in-chief or his designee. See "Certain
Transactions--Cramer Employment Agreements".
THESTREET.COM WEB SITE
We produce original coverage of Wall Street, money management and financial
planning. Topics include the U.S. stock, bond and global financial markets,
technology and other individual stocks, mutual funds, options, hedge funds,
analysts, IPOs, online brokers, 401(k)s and taxes.
Our content currently falls into two categories: free and premium. The free
areas of our site, currently accessible without registration or a subscription,
include our regularly updated Markets coverage, most of our educational Basics
section and many of our investment tools. Our premium content is available to
those who have purchased a monthly, annual or multi-year subscription or who are
currently registered for our 30-day free trial. It currently includes
approximately 20 stock, technology, mutual fund, personal finance and
international news stories and commentaries each business day; some investment
tools; and all free areas of the site. Our premium content subscribers and
free-trial members also receive market and news summaries via email twice daily.
The following is a detailed description of the various sections on
TheStreet.com web site.
MARKETS
The Markets section is a free area that features approximately 20 stories
throughout each business day, from about 8 a.m. until 8 p.m. Eastern time. These
stories aim to keep readers abreast of:
o the latest movements of the major indices;
o the most active stocks;
o news from foreign markets;
o the direction of the bond market;
o earnings news;
o merger and acquisitions news; and
o other major market events.
Easy-to-read tables within the stories give readers a summary of index
performance and earnings news, including corporate earnings surprises.
COMMENTARY
The most popular area on the site, our Commentary section is a premium area
that includes columns from staffers and a network of outside contributors who
write about topics such as money management, technical analysis, currency
issues, industry analysis, macroeconomics, fundamental analysis, financial
planning and mutual funds.
TECH STOCKS
The Tech Stocks section is a premium area that covers technology stocks.
Our tech reporters, many of whom are located in our West Coast bureau in San
Francisco, cover areas such as hardware, software, networking, semiconductors,
the Internet and the Year 2000 problem. We also publish a separate technology
stock update several times daily detailing the major news in the sector.
STOCK NEWS
The Stock News section is a premium area that includes coverage of
companies outside of the technology sector, such as retail, media/entertainment,
biotechnology, energy, brokerages/Wall Street and online brokers. It also
includes our daily coverage of the options market.
FUNDS/TAXES
To assist our many readers who leave part or all of their stock selection
to professional money managers, we have a premium area covering daily mutual
fund news. Each day we answer an individual reader's fund question, with the
Friday question dedicated to bonds. Our tax and 401(k) coverage is also located
here.
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INTERNATIONAL
Recognizing that knowledge of international markets is vital to
understanding the U.S. markets, we have a dedicated International section, which
is a premium area. We have hired staffers in New York, San Francisco, London and
Frankfurt and several contributors to provide coverage of foreign markets and
some individual stocks. We expect to expand our international coverage in 1999
with the deployment of staffers in key financial markets in Europe and Asia.
BASICS
This mostly free section caters to readers who are gaining familiarity with
the markets and investing. It features basic guides on stocks, bonds, mutual
funds, options, taxes and financial planning.
COMMUNITY FEATURES
We offer several interactive features that help create a community
atmosphere among our readers. We believe that developing a sense of community
among our readers increases our brand awareness, increases the frequency and
duration of reader visits and fosters loyalty to our site and our writers.
Current community features include:
o email between our readers and our staff;
o polls that invite readers to vote on issues related to the latest financial
and investing news;
o an investment game; and
o regular chats featuring our top-name contributors and expert staffers hosted
on Yahoo!, America Online, and other services.
In addition, we plan to introduce message boards and streaming audio
programs.
INVESTMENT TOOLS
Committed to providing our readers with the most robust interactive
experience that an online financial publication can offer, we feature a variety
of interactive investment tools that enable users to conduct their own financial
research. Among the investment tools we offer are:
o detailed stock quotes;
o intraday and historical stock charts;
o mutual fund quotes and scoreboards;
o summary company data;
o SEC filings; and
o a portfolio tracker.
We are currently working to enhance the investment tools offerings on our
site, both in terms of volume and quality, to strengthen our position as a
comprehensive financial news and information destination. Planned investment
tools include real-time stock quotes and news wire feeds.
SUBSCRIPTION SALES
As of March 29, 1999, we had approximately 50,000 subscribers. Readers can
choose either an annual subscription regularly priced at $99.95 or a monthly
subscription regularly priced at $9.95. From time to time, we offer seasonal and
special discounts and promotions. The number of our subscribers has risen each
month since August 1997, when we began tracking that data. In each of the months
of the fourth quarter of 1998, approximately 90% of our annual subscribers whose
subscriptions came up for renewal, and 97% of our monthly subscribers, renewed
their subscriptions.
We actively market our subscriptions by offering a 30-day free trial to our
readers. Once these readers have signed up for the free trial, we seek to
convert them to paid subscribers by allowing them access to all areas of our
site. We also send them a series of targeted emails that highlight the benefits
of membership. We continue to contact by email those readers whose free trials
have expired without conversion.
We plan to launch an in-house subscription management system in 1999. We
expect that this system will enhance our ability to convert free-trial members
to paid subscribers through the use of customized emails and automated pop-up
reminder messages. See "Risk Factors--Disruptions Associated with Moving Our
Subscription Management System In-house May Harm Our Business".
As part of our efforts to increase our subscriber base, we have entered
into subscription distribution agreements with online financial services firms.
For example, under our
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agreement with E*TRADE, which has a term through January 12, 2000, E*TRADE
purchases bulk subscriptions at a discounted rate that it offers to certain new
E*TRADE brokerage customers and to its existing Power E*TRADE customers (active
customers).
In addition, in March 1999, we entered into a memorandum of understanding
with DLJdirect, Inc., under which DLJdirect would purchase bulk subscriptions at
a discounted rate that it would offer to its large account holders as well as to
those persons who open an account with DLJdirect as a result of a promotion
involving TheStreet.com. DLJdirect would also purchase bulk subscriptions at a
discounted rate for all of its in-house professionals.
We have also increased the number of our subscribers through the efforts of
our Professional Markets group, which has entered into agreements with 16
financial institutions to provide content to their financial professionals. See
"--Professional Markets".
ADVERTISING SALES
We currently derive, and expect to continue to derive, a substantial
portion of our revenues from advertising sales. We have established a desirable
reader demographic that has enabled us to build a growing advertising business
and charge rates that are, to our knowledge, among the highest of financial web
sites. We have been able to attract an increasing number of advertisers, both
within and beyond the financial services industry.
Our advertising revenues grew from approximately $118,000 in 1997 to
approximately $2.5 million in 1998. In 1998, advertising revenues represented
approximately 55% of our total revenue. We believe that our advertising revenues
will continue to grow in 1999. By the March 25, 1999, we had signed contracts
for approximately $3.7 million in advertising revenues for 1999--$1.2 million
more than the total advertising revenues we generated in all of 1998. In
addition, our top three advertisers in terms of committed revenue in January
1999 also advertised with us in 1998. One advertiser increased its advertising
commitment in 1999 from $250,000 to $1 million, and another increased its
advertising commitment from $20,000 to $750,000. See "We Depend on Our Top
Advertisers for a Significant Portion of Our Advertising Revenues".
DEMOGRAPHICS
Our audience presents a desirable reader demographic for advertisers in the
financial services, technology and luxury goods industries. According to @plan,
a third-party neutral marketing research firm, the percentage of our readers who
have portfolios over $250,000 is higher than at any other site surveyed in
@plan's Spring 1999 study. Also, according to the same study, we have the
highest percentage of readers who own securities. In addition, compared to the
average Internet user surveyed by @plan, our readers are seven times more likely
to trade stocks online. The survey research portion of the @plan system is
conducted by The Gallup Organization.
OTHER FACTORS ATTRACTIVE TO ADVERTISERS
In addition to our desirable reader demographics, advertisers seek a
presence on TheStreet.com for a number of other reasons, including:
o LONG DURATION AND HIGH FREQUENCY OF VISITS. In 1998 our readers spent an
average of 24 minutes per visit on our site. We believe this duration compares
favorably to the time spent by readers on other financial sites. Further,
according to a study conducted in October 1998 by NFO Interactive for
TheStreet.com, approximately 77% of our subscribers visit our site at least
once every day.
o PAID SUBSCRIBERS. Our subscribers have already demonstrated a willingness to
pay for products and services online by virtue of their having subscribed to
TheStreet.com. This trait is highly attractive to advertisers seeking to
encourage online sales of their products and services.
o OUR MARKETING EFFORTS. Advertisers like the fact that we conduct an extensive
marketing and media relations campaign to increase the visibility of our site.
o OUR EDITORIAL CONTENT. Many advertisers like to associate their products and
services with
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our original, timely and trustworthy editorial content.
OUR ADVERTISING SALES DEPARTMENT
We have maintained an internal, direct advertising sales department since
1997. As of March 25, 1999, our advertising sales department consisted of 11
employees. By using a direct sales force rather than outsourcing advertising
sales, we control our advertising relationships and are better able to serve our
clients.
ADVERTISING OPPORTUNITIES AT THESTREET.COM
We offer a variety of advertising options that may be purchased
individually or in packages, such as "run-of-site" banner advertisements that
run throughout our web site, for which our current rate card CPM (cost per
thousand impressions) ranges from $51 to $57; premium positioning advertising
featuring targeted advertisements for which our current rate card CPM ranges
from $60 to $68; sponsorships, which run in a fixed area of our web site for a
set duration; and advertising on our twice-daily email bulletins delivered to
our subscribers and free-trial readers, for which our current rate card CPM
ranges from $30 to $52.
OUR ADVERTISERS
In 1998, 61 advertisers advertised on our web site. In 1998, our top
advertiser accounted for approximately 40%, and our top five advertisers
accounted for approximately 67%, of our advertising revenues. Historically,
advertisers on TheStreet.com have mainly come from the financial services
industry. However, in 1998 we added well-known non-financial brands, including
Volvo, Mercedes, and Stolichnaya Vodka to our roster of advertisers. In
addition, in 1999 we have added several new advertisers, including Chase
Manhattan Bank, Multex.com, and Compaq.
The following is a list of our top ten brokerage and non-brokerage
advertisers in 1998:
TOP 10 BROKERAGE ADVERTISERS
American Express Financial Direct Fidelity
Ameritrade On-Site Trading
Datek Polar Trading
DLJdirect Quick & Reilly
Dreyfus Web Street Securities
TOP 10 NON-BROKERAGE ADVERTISERS
American Stock Exchange Kinsella Communications
Chicago Board of Options Exchange Mercedes
horsesmouth SAP America
INVESTools Stockgenie
Janus Volvo
In addition, we believe that investor relations professionals increasingly
are recognizing that both the sophisticated individual investor and the
professional investor are turning to the web for timely information. As a
leading online financial news and information site, we believe we will benefit
from this trend. Some companies that have run investor relations advertising on
our site include ITT Industries, SAP America and Intimate Brands.
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MARKETING
We pursue a variety of marketing initiatives designed to build brand
awareness, increase traffic to our site and accelerate subscription growth.
These initiatives include advertising in every major category of media,
establishing strategic distribution relationships with leading companies,
maintaining a well-trained team of in-house customer service representatives,
developing brand extensions and engaging in an ongoing media-relations campaign.
ADVERTISING CAMPAIGN
Advertisements for TheStreet.com appear in a variety of online and offline
media, including:
o cable television networks, including CNBC;
o local and network radio, including Westwood One, WFAN and WNEW;
o newspapers, including The Wall Street Journal and The New York Times;
o print magazines, including Fortune and SmartMoney;
o outdoor locations, including phone kiosks, moving and stationary billboards
and train platforms;
o in-flight advertising, including flights on United Airlines, Northwest
Airlines and US Airways; and
o online sites, including SmartMoney.com and Bloomberg.com.
CONTENT SYNDICATION
We have established content syndication agreements with leading companies
to increase recognition of our brand and attract new readers to TheStreet.com
site. Key partners with whom we have content syndication and promotion
agreements include:
o YAHOO! Under our agreement with Yahoo!, which has a term through
December 31, 1999, we syndicate approximately five stories daily, some
delayed, for co-branded publication on Yahoo! Finance. Each of our stories
published on Yahoo! Finance contains direct links to our site and sign-up
page. In addition, we host approximately four online chats on Yahoo! Chat each
month, featuring our writers or special guests. In 1998, such special guests
included John Bogle, senior chairman of the Vanguard Group; Maria Bartiromo,
anchor for CNBC; and Christos Cotsakos, chairman and CEO of E*TRADE Group.
These chats have helped us raise the profile of our staff and expose our brand
to millions of Yahoo! users.
In February 1999, we signed an agreement with Yahoo! that provides for our
stories to be "indexed" on Yahoo! Finance. Under this agreement, every request
by a user of Yahoo! Finance for a stock or mutual fund quote pulls up a list
of stories from TheStreet.com about that stock or fund. These headlines link
directly to our site so that readers can click straight through to
TheStreet.com. If the story is in our free area, the readers click straight
into the story. If it's a premium story, and if the reader is not a free-trial
member or subscriber of TheStreet.com, the reader is offered the opportunity
to register for a free trial.
o AMERICA ONLINE. Under our agreement with America Online, which has a term
through July 23, 1999, we have a dedicated TheStreet.com area on AOL's
Personal Finance channel, where we post stories each day. The area features
prominent links to our web site. As part of the agreement, AOL users receive a
20% discount when they purchase a new subscription to TheStreet.com. The
agreement also provides for regular live TheStreet.com chat events on AOL,
typically two each month.
o INTUIT. Under our agreement with Intuit, which has a term through March 20,
2000, Intuit includes certain of our stories in a package of financial news
and information that it provides to certain sites such as Quicken.com,
AOL.com, Excite and Webcrawler. Such stories include our logo and a prominent
link to a free-trial sign-up page.
o ABCNEWS.COM. Our agreement with ABCNEWS.com, which has a term through May 1,
1999, provides for the co-branded publication of five of our stories each day
on the ABCNEWS.com site. Our logo and links to our site appear prominently on
the Business section of the ABCNEWS.com page.
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o 3COM. Under our agreement with 3Com, which terminates one year from the
commercial release of the forthcoming Palm VII hand-held organizer, users of
the organizer will be able to access branded financial markets stories by
TheStreet.com via a remote wireless connection to the Internet.
o UNITED FEATURE SYNDICATE. Our agreement with United Feature Syndicate, which
has a term through February 14, 2000, provides for the syndication of articles
from our site to numerous print newspapers. The newspaper articles are
credited to TheStreet.com, extending the brand to readers of newspapers around
the country.
We distribute content to many other leading web sites, including those of
DLJdirect, Charles Schwab and the Chicago Board Options Exchange.
THESTREET.COM INTERNET SECTOR AND E-COMMERCE INDICES
In conjunction with the Philadelphia Stock Exchange and the Susquehanna
Investment Group, we created TheStreet.com Internet Sector, an index of 20
Internet stocks. Options based on the index began trading in December 1998.
Since its launch, TheStreet.com Internet Sector has been mentioned or featured
on prominent news outlets including The New York Times, The Wall Street Journal,
the Los Angeles Times and CNBC. Additionally, in conjunction with the American
Stock Exchange and Susquehanna Investment Group, in February 1999 we created
TheStreet.com E-Commerce Index, an index of 15 electronic commerce stocks.
MEDIA RELATIONS
TheStreet.com engages in an ongoing media-relations campaign. In 1998,
TheStreet.com, our writers and our stories were mentioned or featured in more
than 400 reports by more than 40 news outlets, including The Wall Street
Journal, The New York Times, USA Today, The Financial Times, ABC News, CNN and
Newsweek. Two of our daily commentators, James Cramer and Herb Greenberg, make
regularly scheduled television appearances, and our West Coast bureau chief,
Cory Johnson, appears daily on a radio program that we sponsor. These
appearances help increase our brand awareness and build our reputation and that
of our writers.
TELEVISION PILOT
We have filmed and edited a television pilot featuring Brenda Buttner as
host and James Cramer and Herb Greenberg as commentators. We are currently
seeking a cable or network television broadcast partner to air the pilot and any
subsequent episodes. We believe that the broadcasting of this television show
would significantly boost our brand awareness as well as further raise the
profile of our writers.
CUSTOMER SERVICE
Customer service is a critical element of our marketing strategy. Because
TheStreet.com is published online, we can interact with our readers much more
easily than traditional print publications or broadcast media companies. In
November 1998, for example, we had approximately 15,000 reader contacts, from a
base of about 50,000 individuals, including subscribers and readers in their
30-day free trial. As of March 25, 1999, our customer service department had 21
personnel.
PROFESSIONAL MARKETS
TheStreet.com appeals to a broad range of financial professionals,
including analysts, money managers and financial advisors. Our October 1998
subscriber study conducted by NFO Interactive showed that approximately 25% of
our subscribers were financial professionals. In 1998 and 1999, our Professional
Markets group entered into agreements with 16 financial institutions, including
PaineWebber, BT Alex. Brown, Fidelity and Deutsche Bank, to provide them with
our content delivered according to their transmission needs. Through such
arrangements, we currently reach approximately 5,800 financial professionals.
In addition, we are devoting significant resources to our Professional
Markets group, as we believe that subscription sales to this market will be
significant and that financial professionals will provide a desirable reader
demographic to advertisers.
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We plan to develop new products that will be customized to better satisfy
the exacting needs of financial professionals. We expect these products will
feature information, news, commentary, data and investment tools of particular
relevance to financial professionals.
COMPETITION
An increasing number of financial news and information sources compete for
consumers' and advertisers' attention and spending. We expect this competition
to continue to increase. We compete for advertisers, readers, staff and outside
contributors with many types of companies, including:
o online services or web sites focused on business, finance and investing, such
as MarketWatch.com, The Wall Street Journal Interactive Edition and The Motley
Fool;
o publishers and distributors of traditional media, including print, radio and
television, such as The Wall Street Journal, Fortune, Bloomberg Business Radio
and CNBC;
o providers of terminal-based financial news and data, such as Bloomberg
Business News, Reuters News Service, Dow Jones Markets and Bridge News
Service;
o web "portal" companies, such as Yahoo! and America Online; and
o online brokerage firms, many of which provide financial and investment news
and information, such as Charles Schwab and E*TRADE.
Our ability to compete depends on many factors, including the originality,
timeliness, comprehensiveness and trustworthiness of our content and that of
competitors, the ease of use of services developed either by us or our
competitors and the effectiveness of our sales and marketing efforts.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to devote greater resources than we
can to the development and promotion of their services. These competitors may
also engage in more extensive research and development, undertake more
far-reaching marketing campaigns, adopt more aggressive pricing policies
(including offering their financial news for free) and make more attractive
offers to existing and potential employees, outside contributors, strategic
partners and advertisers. Our competitors may develop content that is equal or
superior to ours or that achieves greater market acceptance than ours. It is
also possible that new competitors may emerge and rapidly acquire significant
market share. We may not be able to compete successfully for readers, staff and
outside contibutors which could have a material adverse effect on our business,
results of operations and financial condition. Increased competition could
result in price reductions, reduced margins or loss of market share, any of
which could materially adversely affect our business, results of operations and
financial condition.
We also compete with other web sites, television, radio and print media for
a share of advertisers' total advertising budgets. If advertisers perceive the
Internet or our web site to be a limited or an ineffective advertising medium,
they may be reluctant to devote a portion of their advertising budget to
Internet advertising or to advertising on our web site.
INFRASTRUCTURE, OPERATIONS & TECHNOLOGY
TheStreet.com's technological infrastructure is built and maintained for
reliability, security and flexibility. This infrastructure is hosted primarily
at Exodus Communications' facility in Jersey City, New Jersey, which is equipped
with an uninterruptible power supply.
We have made, and expect to continue to make, technological improvements
that we expect will reduce costs and increase our advertising sales and
subscription base. Our content-management system allows our stories to be
prepared for publication in a number of output formats. This feature enables us
to distribute our stories to multiple destinations economically. Our
subscription management system is currently based on the Starwave Corporation's
commerce system-based application. We are currently developing a new
subscription management system that is
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scheduled to launch in 1999. We expect that this new system will be based on
technology provided by Art Technology Group and Clear Commerce and will be
hosted at Exodus Communications' facility. We expect that this system will allow
us to communicate automatically with readers during their free-trial period and
to make a wide variety of customized subscription offers available to potential
subscribers. We are also constructing our systems to capture information on
reader behavior that will be stored in a data warehouse. We expect that this
will allow us to segment our reader population, enabling us to personalize our
services for the individual reader and allowing our advertisers to target better
their intended audience. Our operations are dependent on our ability and that of
Exodus to protect our systems against damage from fire, earthquakes, power loss,
telecommunications failure, break-ins, computer viruses, hacker attacks and
other events beyond our control. See "Risk Factors--Disruptions Associated with
Moving Our Subscription Management System In-house May Harm Our Business" and
"Risk Factors--We Face a Risk of System Failure".
INTELLECTUAL PROPERTY
To protect our rights to intellectual property, we rely on a combination of
trademark, copyright law, trade secret protection, confidentiality agreements
and other contractual arrangements with our employees, affiliates, clients,
strategic partners and others. The protective steps we have taken may be
inadequate to deter misappropriation of our proprietary information. We may be
unable to detect the unauthorized use of, or take appropriate steps to enforce,
our intellectual property rights. We have registered certain of our trademarks
in the United States and we have pending U.S. applications for other trademarks.
Effective trademark, copyright and trade secret protection may not be available
in every country in which we offer or intend to offer our services. In addition,
although we believe that our proprietary rights do not infringe on the
intellectual property rights of others, other parties may assert infringement
claims against us or claims that we have violated a patent or infringed a
copyright, trademark or other proprietary right belonging to them. These claims,
even if not meritorious, could result in the expenditure of significant
financial and managerial resources on our part, which could materially adversely
affect our business, results of operations and financial condition. We
incorporate certain licensed third-party technology in some of our services. In
these license agreements, the licensors have generally agreed to defend,
indemnify and hold us harmless with respect to any claim by a third party that
the licensed software infringes any patent or other proprietary right. We cannot
assure you that these provisions will be adequate to protect us from
infringement claims. The loss of or inability to obtain or maintain any of these
technology licenses could result in delays in introduction of new services. See
"Risk Factors--We Rely On Our Intellectual Property".
EMPLOYEES
As of March 25, 1999, we had 137 full-time employees, of which 56 worked in
editorial, nine in marketing and media relations, 11 in advertising, five in
professional markets, 19 in technology, five in art, 21 in customer service and
11 in finance/administration. We have never had a work stoppage and no personnel
are represented under collective bargaining agreements. We consider our
relations with our employees to be good.
FACILITIES
Our principal administrative, sales, marketing, technology and editorial
facilities are located in approximately 22,500 square feet of office space in
New York, New York. We are seeking larger facilities, into which we expect to
move in the second half of 1999. Our West Coast bureau is located in
approximately 3,200 square feet of office space in San Francisco, California.
Our communications and network infrastructure is hosted at Exodus Communications
in Jersey City, New Jersey, except for our commerce database, which is currently
hosted by the Starwave Corporation in Seattle, Washington.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information regarding the executive
officers, directors and key employees of TheStreet.com:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Executive Officers and Directors
Kevin W. English..................................... 46 Chairman of the Board of Directors, Chief Executive
Officer and President (Class III)
Dave Kansas.......................................... 32 Editor-in-Chief and Director (Class II)
Paul Kothari......................................... 45 Vice President and Chief Financial Officer
Michael S. Zuckert................................... 40 Vice President and General Counsel
Jerry Colonna(1)..................................... 35 Director (Class II)
James J. Cramer...................................... 44 Director (Class I)
Edward F. Glassmeyer(1)(2)........................... 57 Director (Class II)
Martin Peretz........................................ 59 Director (Class I)
Fred Wilson(2)....................................... 37 Director (Class III)
Michael Golden....................................... 49 Director (Class I)
Key Employees
Brendan Amyot........................................ 34 Vice President and General Manager--Consumer Markets
Simon Clark.......................................... 33 Vice President and General Manager--International
Markets
Dawn M. Kikel........................................ 33 Vice President--Advertising Sales
Dan Woods............................................ 38 Vice President and Chief Technology Officer
</TABLE>
- ------------------
(1) Member of the compensation committee
(2) Member of the audit committee
KEVIN W. ENGLISH has served as chief executive officer and president of
TheStreet.com since October 1998. He was appointed chairman of the board in
December 1998. Before joining TheStreet.com, he served as the vice president and
general manager of the Nexis Enterprise Group, a division of Lexis-Nexis, from
February 1998 to October 1998. From September 1997 to February 1998,
Mr. English served on a special assignment, reporting to the chairman of Reed
Elsevier, the parent company of Lexis-Nexis. Mr. English served as vice
president of sales and marketing of Lexis-Nexis from May 1995 to September 1997
and as a senior director from 1994 to May 1995.
DAVE KANSAS has served as editor-in-chief of TheStreet.com since April 1997
and has served as a director of TheStreet.com since May 1998. He served as its
executive editor from September 1996 to April 1997. From October 1992 to
September 1996, Mr. Kansas held a variety of positions at The Wall Street
Journal, most recently as a financial markets reporter.
PAUL KOTHARI has served as vice president and chief financial officer of
TheStreet.com since February 1999. From February 1998 to February 1999,
Mr. Kothari was the chief financial officer at International Telecommunication
Data Systems, Inc., a wireless billing and customer care service company. From
August 1993 to January 1998, Mr. Kothari was the vice president of finance at
Bellcore, a telecommunications company.
MICHAEL S. ZUCKERT has served as vice president and general counsel of
TheStreet.com since February 1999. From 1987 to January 1999, Mr. Zuckert held a
variety of positions within the legal department of Morgan Stanley Dean Witter &
Co., most recently as a principal.
JERRY COLONNA has served as a director of TheStreet.com since May 1998. In
1996,
40
<PAGE>
Mr. Colonna co-founded Flatiron Partners, an Internet-focused, early-stage
venture capital firm, and has served as a managing partner since its inception.
In February 1995, Mr. Colonna joined CMG@Ventures, an Internet-focused venture
capital firm, as a founding partner. Prior to joining CMG@Ventures, Mr. Colonna
worked for nearly 10 years at CMP Publications, a technology publishing firm.
Mr. Colonna also serves as a director of GeoCities, Inc.
JAMES J. CRAMER is a co-founder and outside contributor of TheStreet.com.
Mr. Cramer has served as a director of TheStreet.com since May 1998, and served
as co-Chairman from June 1996 to December 1998. Mr. Cramer founded and has
served as a president and director of Cramer, Berkowitz & Co., a hedge fund,
since its inception in 1987.
EDWARD F. GLASSMEYER has served as a director of TheStreet.com since
December 1998. Mr. Glassmeyer co-founded Oak Investment Partners, a venture
capital firm with $1.6 billion of committed capital, in November 1978.
Mr. Glassmeyer serves as a director of Mobius Management Systems, Inc., a
software infrastructure provider for Internet-based bill presentment and payment
and is a director of several privately held Oak portfolio companies in the
information technology sector.
MARTIN PERETZ is a co-founder of TheStreet.com. Dr. Peretz has served as a
director of TheStreet.com since May 1998. He served as co-chairman of
TheStreet.com from June 1996 to December 1998. Since 1974, Dr. Peretz has served
as the editor-in-chief and chairman of The New Republic. He has been a member of
the faculty of Harvard University since 1966. Dr. Peretz also serves as a
director of 11 mutual funds managed by the Dreyfus-Mellon Bank Group, of
LeukoSite, a publicly traded biotechnology company, and of The Electronic
Newstand, Inc., a web site specializing in the sale of magazine subscriptions.
FRED WILSON has served as a director of TheStreet.com since May 1998. In
1996, Mr. Wilson co-founded Flatiron Partners, an Internet-focused, early-stage
venture capital firm, and has served as a managing partner since its inception.
Prior to Flatiron Partners, Mr. Wilson worked at Euclid Partners, an early stage
venture capital firm, for 10 years where he served as general partner from 1991
to 1996.
MICHAEL GOLDEN has served as a director of TheStreet.com. since March 1999.
Mr. Golden has worked for The New York Times Company since 1984. Since October
1997, he has served as its vice chairman and senior vice president. From January
1996 to October 1997, he was the New York Times' vice president for operations
development. From October 1994 to January 1996, Mr. Golden was the executive
vice president and publisher of Tennis Magazine, a New York Times publication.
From September 1991 to October 1994, he was the executive vice president and
general manager of the New York Times' Women's Publishing Division.
BRENDAN AMYOT has served as vice president and general manager--consumer
markets of TheStreet.com since January 1999. Mr. Amyot served in several
positions at TheStreet.com from August 1996 to January 1999. From January 1995
to August 1996, Mr. Amyot was the associate consumer marketing director at
Entertainment Weekly. From March 1993 to December 1994, Mr. Amyot was the
circulation director at Vibe.
SIMON CLARK has served as vice president and general manager--international
markets since February 1999. From December 1997 to February 1999, he served as
chief financial officer and vice president of operations of TheStreet.com, and
from June 1997 to November 1997 he served as director of finance. From January
1992 to June 1997, Mr. Clark held several positions at Reuters, most recently
director of corporate web sites.
DAWN M. KIKEL has served as vice president--advertising sales of
TheStreet.com since October 1997. From June 1996 to September 1997, Ms. Kikel
worked for Institutional Investor Inc. as publisher of Infrastructure Finance, a
global magazine focusing on project and public finance in the infrastructure
market, and as industry director--money management for Institutional Investor
Magazine from January 1993 to May 1996.
DAN WOODS has served as vice president and chief technology officer of
TheStreet.com since May 1998. From June 1995 to April 1998, Mr. Woods served as
director of editorial
41
<PAGE>
technology for Time New Media's Pathfinder web site. From 1992 to May 1995, he
worked as a database editor at the News & Observer, a newspaper in Raleigh,
North Carolina.
CLASSIFIED BOARD OF DIRECTORS
Our board of directors is divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board of
directors will be elected each year. These provisions, together with the
provision of our amended and restated certificate of incorporation allow the
board of directors to fill vacancies of or increase the size of the board of
directors, and may deter a stockholder from removing incumbent directors and
filling such vacancies with its own nominees in order to gain control of the
board.
Our board has resolved that Mr. Golden, Mr. Cramer and Dr. Peretz will
serve as Class I Directors whose terms expire at the 2000 annual meeting of
stockholders. Mr. Colonna, Mr. Glassmeyer and Mr. Kansas will serve as Class II
directors whose terms expire at the 2001 annual meeting of stockholders.
Mr. English and Mr. Wilson will serve as Class III directors whose terms expire
at the 2002 annual meeting of stockholders.
BOARD COMMITTEES
We have established an audit committee and a compensation committee. The
audit committee reviews our internal accounting procedures and considers and
reports to the board of directors with respect to other auditing and accounting
matters, including the selection of our independent auditors, the scope of
annual audits, fees to be paid to our independent auditors and the performance
of our independent auditors. The audit committee currently consists of
Mr. Glassmeyer and Mr. Wilson. The compensation committee reviews and recommends
to the board of directors the salaries, benefits and stock option grants of all
employees, consultants, directors and other individuals compensated by us. The
compensation committee also administers our stock option and other employee
benefits plans. The compensation committee currently consists of Mr. Glassmeyer
and Mr. Colonna.
DIRECTOR COMPENSATION
Directors do not currently receive any compensation for serving on the
board of directors, although they are reimbursed for reasonable travel expenses
incurred in connection with attending board of directors and committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee makes all compensation decisions. Prior to the
formation of the compensation committee in June 1998, our board of directors
made decisions relating to compensation of our executive officers. None of our
executive officers serves as a member of the board of directors or compensation
committee of any entity that has one or more of its executive officers serving
as a member of our board of directors or compensation committee. Our
compensation committee currently consists of Mr. Colonna and Mr. Glassmeyer,
neither of whom has ever been an officer or employee of TheStreet.com.
Mr. Cramer served as a member of the compensation committee from June 1998 to
February 1999, when Mr. Glassmeyer was appointed to the compensation committee.
During his tenure on the compensation committee, Mr. Cramer, an outside
contributor to TheStreet.com, participated in all decisions relating to
compensation of our executive officers, but was excluded from discussions by the
board of directors regarding his own compensation. See "Certain Transactions".
EMPLOYMENT AGREEMENTS
In October 1998, we entered into an employment agreement with Mr. Kevin
English, our chairman of the board, chief executive officer and president. This
agreement provides for an annual base salary of $350,000. Mr. English is also
eligible to receive a bonus of up to $100,000 for each fiscal year during which
he is employed upon the achievement of quarterly and annual objectives, plus any
additional bonus compensation awarded in the sole discretion of the compensation
committee. As part of this agreement, we granted Mr. English, a stock option to
purchase 400,000 shares of common stock at an exercise price of $0.15 per share.
The stock
42
<PAGE>
option becomes exercisable at a rate of 25% annually, commencing in October
1999. In December 1998, we completed an equity financing and Mr. English
received a stock option to purchase 121,316 shares of common stock at an
exercise price of $0.15 per share. The option becomes exercisable 25% annually
commencing in October 1999. In March 1999, in accordance with his October stock
option agreement, we granted Mr. English a stock option to purchase an
additional 345,351 shares of common stock at an exercise price of $3.00 per
share, of which the option to purchase 83,333 shares has vested as of March 31,
1999. The option to purchase the remaining 262,018 shares becomes exercisable
25% annually commencing in October 1999.
As of January 1999, Mr. English also receives the use of a one-bedroom
corporate apartment, a monthly parking spot, term life insurance in the amount
of $500,000 and disability insurance paying not less than $180,000 per year. If
Mr. English is terminated for reasons other than a disability, for cause or due
to a liquidation, dissolution or shutdown of our business, or if he should
resign for good reason, he will be entitled to receive his remaining earned but
unpaid salary, any bonus earned through the most recently ended fiscal quarter
and an amount equal to his then current annual base salary. We maintain a key
person life insurance policy for Mr. English. Mr. English's employment agreement
terminates in December 2003.
In September 1996, we entered into an employment agreement with Dave
Kansas, our editor-in-chief and a director. Mr. Kansas' employment agreement
provides for an annual base salary of $130,000, subject to annual review by the
compensation committee. Under the agreement, Mr. Kansas is eligible to receive
an annual bonus of up to 30% of his annual base salary. However, the
compensation committee has discretion to grant Mr. Kansas a bonus in excess of
such amount and, in 1998, Mr. Kansas received $78,769 as a bonus. The employment
agreement terminates on August 30, 1999.
In May 1998, we entered into an employment agreement with Simon Clark, our
vice president and general manager--international markets. Mr. Clark's
employment agreement provides for an annual base salary of $150,000. The
compensation committee will review Mr. Clark's salary annually. The employment
agreement terminates on August 30, 1999.
In May 1998, we entered into an employment agreement with Brendan Amyot,
our vice president and general manager--consumer markets. Mr. Amyot's employment
agreement provides for an annual base salary of $130,000. The compensation
committee will review Mr. Amyot's salary annually. The employment agreement
terminates on August 30, 1999.
43
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned for all services
rendered to us in all capacities during 1998 by our chief executive officer and
our four most highly compensated executive officers, other than our chief
executive officer, who earned more than $100,000 in 1998 and who were serving as
executive officers at the end of 1998. As of January 1999, Mr. Clark and
Mr. Amyot ceased to be executive officers of TheStreet.com.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL -------------
COMPENSATION(1) SECURITIES
FISCAL --------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)
- ------------------------------------------------------------- ------ ------- ------- ------------
<S> <C> <C> <C> <C>
Kevin W. English, Chairman of the Board,
Chief Executive Officer and President(2)................... 1998 $71,791 $25,000 521,316
Dave Kansas, Editor-in-Chief and Director.................... 1998 130,000 78,769 105,758
Simon Clark, Chief Financial Officer and Vice
President--Operations(3)................................... 1998 150,000 25,944 30,303
Brendan Amyot, Vice President--Business Development and
Marketing.................................................. 1998 130,000 26,064 30,303
</TABLE>
- ------------------------
(1) The column for "Other Annual Compensation" has been omitted because there is
no compensation required to be reported in that column. The aggregate amount
of perquisites and other personal benefits provided to each officer listed
above is less than 10% of the total annual salary and bonus of that officer.
(2) Mr. English joined TheStreet.com in October 1998. See "--Employment
Agreements".
(3) Mr. Clark served as our chief financial officer and vice
president--operations until February 1999 when he became vice president and
general manager--international markets of TheStreet.com.
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<PAGE>
OPTION GRANTS IN FISCAL YEAR
The following table sets forth information regarding stock options granted
to our officers listed on the Summary Compensation Table. We have never granted
any stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
------------------------------------------------------ ANNUAL RATES OF
PERCENT OF STOCK
NUMBER OF TOTAL OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(3)
OPTIONS IN FISCAL PRICE PER EXPIRATION --------------------
NAME GRANTED(#) YEAR(%)(2) SHARE DATE 5% 10%
- --------------------------------- ---------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Kevin W. English(4).............. 400,000 24.0% $0.15 10/18/08 $ 37,733 $ 95,625
121,316(5) 7.3 0.15 12/20/08 574,636 925,790
Dave Kansas(6)................... 75,758 4.6 0.03 5/06/03 628 1,388
30,000 1.8 0.03 6/30/03 249 549
Simon Clark(7)................... 30,303 1.8 0.03 5/06/03 251 555
Brendan Amyot(8)................. 30,303 1.8 0.03 5/06/03 251 555
</TABLE>
- ------------------
(1) All options were granted under the Amended and Restated 1998 Stock Incentive
Plan. The options shown in this table, except as otherwise indicated below,
become exercisable at a rate of 25% annually over four years from the date
of grant. See "--1998 Stock Incentive Plan".
(2) In 1998, we granted options to employees to purchase an aggregate of
1,663,953 shares of common stock.
(3) Potential realizable value is based on the assumption that our common stock
appreciates at the annual rate shown, compounded annually, from the date of
grant until the expiration of the five or ten-year term as applicable. These
numbers are calculated based on Securities and Exchange Commission
requirements and do not reflect our projection or estimate of future stock
price growth. Potential realizable values are computed by multiplying the
number of shares of common stock subject to a given option by the exercise
price, as determined by our Board of Directors, assuming that the aggregate
stock value derived from that calculation compounds at the annual 5% or 10%
rate shown in the table for the entire five or ten-year term of the option
and subtracting from that result the aggregate option exercise price.
(4) The option granted to Mr. English vests fully if any of the following
occurs: (i) there is a change of control as defined in his employment
agreement; (ii) we fail to renew Mr. English's employment agreement; or
(iii) Mr. English's employment agreement is terminated for good reason,
which includes a reduction in his responsibilities or compensation,
relocation of Mr. English or a merger or asset sale in which the acquiring
entity does not assume our obligations under Mr. English's employment
agreement. If Mr. English is terminated for good reason before October 1999,
50% of the shares underlying the option vest fully. If he is terminated
before October 2000, 75% vest, and if he is terminated before October 2001,
100% vest. In addition, Mr. English may exercise this option by cash, or
through cashless exercise subject to the approval of our management and
board of directors.
(5) The option to purchase 121,316 shares was granted to Mr. English at an
exercise price of $0.15 per share. The fair market value on the date of this
grant was $3.00 per share. The potential realizable value at assumed annual
rates of stock price appreciation has been calculated using the $3.00 fair
market value per share.
(6) As a result of the limited liability company agreement of TheStreet.com,
L.L.C., Dave Kansas, Simon Clark, Brendan Amyot, and two other employees
were entitled to receive Class C-1 Units in the TheStreet.com, L.L.C. The
limited liability company agreement provided that in the event of the merger
of the TheStreet.com, L.L.C. with and into TheStreet.com, Inc., each
employee's
(Footnotes continued on next page)
45
<PAGE>
(Footnotes continued from previous page)
entitlement to the Class C-1 Units would terminate and be replaced by an
option to purchase shares of common stock of TheStreet.com based upon the
conversion ratio set forth in the merger agreement. TheStreet.com, L.L.C.
merged with and into TheStreet.com in May 1998. In connection with the
merger, Mr. Kansas was granted an option to purchase 75,758 shares of common
stock in exchange for the 1,250 Class C-1 Units that he was entitled to
receive under the limited liability agreement. The option fully vested on
October 1, 1998, on which date Mr. Kansas exercised the option. The 75,758
shares of common stock issued to Mr. Kansas upon the option exercise were
contributed to us as a result of a share contribution agreement, dated
May 7, 1998, between us and Peretz Partners, L.L.C. The terms of the share
contribution agreement require Peretz Partners to contribute to us an
aggregate of 196,970 shares of common stock in connection with options
granted to Brendan Amyot, Dave Kansas, Simon Clark and two other employees.
See "Certain Transactions--Share Contribution Agreement".
(7) In connection with the merger of the TheStreet.com, L.L.C. into
TheStreet.com, Inc., Mr. Clark was granted an option to purchase 30,303
shares of common stock in exchange for the 500 Class C-1 Units that he was
entitled to receive under the limited liability company agreement. The
option vested fully on June 1, 1998, on which date Mr. Clark exercised the
option. The 30,303 shares of common stock issued to Mr. Clark were
contributed to us as a result of the share contribution agreement.
(8) In connection with the merger of the TheStreet.com, L.L.C. into
TheStreet.com, Inc., Mr. Amyot was granted an option to purchase 30,303
shares of common stock in exchange for the 500 Class C-1 Units that he was
entitled to receive under the limited liability company agreement. This
option vests fully on April 1, 1999. The 30,303 shares of common stock to be
issued to Mr. Amyot when he exercises this option will be contributed to us
as a result of the share contribution agreement.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the exercise of stock
options during the fiscal year ended December 31, 1998 by our officers listed on
the Summary Compensation Table and the fiscal year-end value of unexercised
options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1998 DECEMBER 31,1998(1)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kevin W. English.............. -- -- -- 521,316 -- $ 1,485,750
Dave Kansas................... 75,758 --(2) -- 30,000 -- $ 89,100
Simon Clark................... 30,303 --(2) -- -- -- --
Brendan Amyot................. -- -- -- 30,303 -- $ 90,000
</TABLE>
- ------------------
(1) There was no public market for the common stock on December 31, 1998. The
fair market value of the common stock as of December 31, 1998 was $3.00 per
share.
(2) At the time of exercise, the fair market value was equal to the exercise
price.
46
<PAGE>
1998 STOCK INCENTIVE PLAN
The amended and restated TheStreet.com, Inc. 1998 stock incentive plan,
which became effective on May 6, 1998, provides for the granting of incentive
stock options, non-qualified stock options, restricted stock and tax offset
payments. Our amended and restated 1998 stock incentive plan is administered by
our compensation committee. The total number of shares of our common stock that
may be issued under our amended and restated 1998 stock incentive plan to our
employees, directors and consultants (or of any entity in which we own at least
a 20% beneficial interest) is 4,400,000. The terms and conditions of options and
restricted stock will be set forth by the compensation committee in each
individual award agreement. The compensation committee may designate an award as
a "performance award" by making its grant or vesting subject to the achievement
of performance goals established by the compensation committee. The compensation
committee may also pay an awardee a tax offset payment as compensation for some
or all of the taxes that the awardee owes with respect to an award. In the event
of a change of control, if so determined by the compensation committee at the
time of grant or by amendment (with the holder's consent) of the grant, all
outstanding options will vest and become fully exercisable and the restrictions
applicable to any outstanding restricted stock awards shall lapse and the shares
shall be deemed fully vested. Under our amended and restated 1998 stock
incentive plan, a change of control occurs when there is:
o an acquisition in which a majority of our common stock is acquired by an
entity or person owning less than 5% of our total common stock outstanding
prior to the acquisition;
o an election of members of the board of directors in which a majority of the
board members after the election were not members of the board on the date of
option grant;
o a merger or consolidation with another corporation where our stockholders
immediately prior to the merger or consolidation no longer comprise a majority
of the voting shares of the surviving corporation; or
o a sale of all or substantially all of our assets.
As of March 31, 1999, 2,632,321 options were outstanding, of which 133,500
were vested.
47
<PAGE>
CERTAIN TRANSACTIONS
LLC FINANCING
From our inception as a limited liability company in June 1996, until May
1998, we were financed through contributions from our founders and through loans
bearing interest at the prime interest rate plus 1%. In return for their
contributions, our founders received Class A, B, C and D membership units of the
limited liability company and a lender received Class E units.
In May 1998, our Board of Directors approved our reorganization from a
limited liability company into a C corporation. As part of this reorganization,
each Class C membership unit was converted into 181.81818 shares of our common
stock. In addition, our Class A and Class B membership units were converted into
shares of our Series A 9 1/2% Cumulative Preferred Stock and Series C Preferred
Stock at a ratio of one preferred share per $100 of both Class A and Class B
membership units. Our Class D and Class E membership units were converted into
shares of our Series A 9 1/2% Cumulative Preferred Stock at a ratio of one
preferred share per $100 of Class D and Class E membership units.
1998 PRIVATE PLACEMENTS
In December 1998, we raised gross proceeds of $25 million by completing a
private placement of 243,891 shares of our Series B Preferred Stock and
4,072,778 shares of our common stock to a group of investors comprising of our
founders, corporate and institutional investors, venture capital funds and high
net worth individuals, including some of our directors and officers. In
connection with this transaction we amended and restated the registration rights
agreement and the stockholders' agreement in each case to include, among other
things, the new purchasers. The amended and restated stockholders' agreement
will terminate upon completion of this offering.
In May 1998, we raised gross proceeds of approximately $10 million by
completing a private placement of 101,475 shares of our Series B 9 1/2%
Cumulative Preferred Stock ("Series B Preferred Stock") and 3,418,333 shares of
our common stock to a group of investors comprising of our founders, corporate
and institutional investors, venture capital funds and high net worth
individuals, including some of our directors and officers. In connection with
this transaction, we granted the purchasers of these shares registration rights.
At this time we also entered into a stockholders' agreement with these
stockholders which by its terms will terminate upon the completion of this
offering. See "Description of Capital Stock -- Registration Rights".
Assuming an initial public offering price of $12.00 per share of common
stock, all of the outstanding shares of the convertible preferred stock,
including accumulated dividends as of March 31, 1999, will convert into an
aggregate of 4,406,129 shares of common stock upon the completion of this
offering.
THE NEW YORK TIMES INVESTMENT
In February 1999, we sold 37,728 shares of our Series B Preferred Stock and
1,320,901 shares of our common stock to the New York Times Company for an
aggregate consideration of $15 million in cash and services. Additionally, as
part of this transaction Mr. Michael Golden, the vice chairman and senior vice
president of The New York Times Company, is a director of TheStreet.com. In
March 1999, we entered into a memorandum of understanding with the New York
Times Electronic Media Company under which we have agreed to the following
proposals:
o Promotion of our web site by The New York Times Company to registered users of
its web site;
o Indexing of our headlines on the Business section of The New York Times web
site and indexing of headlines from the Business section of the New York Times
web site on our web site; and
o Licensing our investment tools to The New York Times Company.
48
<PAGE>
See "Risk Factors--Our Memoranda of Understanding May Not Materialize Into
Final Agreements".
CRAMER EMPLOYMENT AGREEMENTS
In May 1998, we entered into a one-year employment agreement with James
Cramer, an outside contributor. Under the terms of the agreement, we granted
Mr. Cramer a stock option to purchase 66,667 shares of common stock at an
exercise price of $0.033 per share. In February 1999, we entered into a new
employment agreement with Mr. Cramer, superseding the earlier agreement.
Mr. Cramer's new employment agreement provides for an annual salary of $250,000,
which increases annually by 10%. Under the new agreement, we granted Mr. Cramer
an option to purchase 333,333 shares of common stock at an exercise price of
$3.00 per share. The option becomes exercisable at a rate of 25% annually
commencing in February 2000. The employment agreement terminates in February
2003. We maintain a "key person" life insurance policy for Mr. Cramer.
REGISTRATION RIGHTS AGREEMENT
As a result of the amended and restated registration rights agreement we
have granted our existing stockholders registration rights. See "Description of
Capital Stock--Registration Rights".
SHARE CONTRIBUTION AGREEMENT
On May 7, 1998, we entered into a share contribution agreement with Peretz
Partners, L.L.C. in which it agreed to contribute to us up to an aggregate of
196,970 shares of common stock. We are required to issue the same number of
shares to Brendan Amyot, Dave Kansas and Simon Clark and two other employees
upon the exercise of options granted to them under our 1998 Stock Incentive
Plan.
OFFICE LEASE
On August 14, 1996, we signed a lease with the State Teachers Retirement
System of Ohio to rent space at Two Rector Street, New York, New York 10006.
Cramer Berkowitz & Co., a company controlled by Mr. James Cramer, guaranteed our
obligations under the lease. On September 25, 1997, the landlord transferred
these premises, including its interest in the lease, to Rector Trinity
Associates, L.L.C. Rector Trinity Associates has released Cramer Berkowitz & Co.
from this guarantee as a result of receiving a letter of credit from
TheStreet.com in the amount of approximately $1.4 million.
49
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of March 31, 1999 and as adjusted to reflect
the sale of the shares of common stock offered hereby by:
o each person who we know owns beneficially more than 5% of our common
stock;
o each of our directors, including our chief executive officer;
o our four most highly compensated executive officers, other than our chief
executive officer, who were serving as executive officers at the end of
1998; and
o all of our executive officers and directors as a group.
The following information gives effect to the conversion of all outstanding
shares of our preferred stock and accumulated dividends as of March 31, 1999
into an aggregate of 4,406,129 shares of common stock upon the completion of
this offering assuming that the initial public offering price is $12.00 per
share.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED BEFORE BENEFICIALLY OWNED AFTER
THE OFFERING(1) THE OFFERING(1)
-------------------------- --------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE(2) NUMBER PERCENTAGE(2)
- ------------------------------------------------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Kevin W. English....................................... 83,333 * -- *
Dave Kansas............................................ 151,515 * 151,515 *
Simon Clark............................................ 90,909 * 90,909 *
Brendan Amyot.......................................... 181,818 * 181,818 *
James J. Cramer(3)..................................... 3,580,577 18.3% 3,580,577 14.3%
Cramer Partners, L.L.C................................. 2,524,886 12.9 2,524,886 10.1
Martin Peretz(4)....................................... 3,241,110 16.6 3,241,110 12.9
Peretz Partners, L.L.C................................. 2,453,310 12.5 2,453,310 9.8
Fred Wilson(5)......................................... 538,159 2.7 538,159 2.1
Jerry Colonna(5)....................................... 538,159 2.7 538,159 2.1
Edward F. Glassmeyer(6)................................ 1,847,329 9.4 1,847,329 7.4
Oak Investment Partners VIII, L.P. and Oak VIII
Affiliates Fund, L.P.(6)............................. 1,847,329 9.4 1,847,329 7.4
Chase Venture Capital Associates, L.P.(7).............. 1,593,057 8.1 1,593,057 6.4
Softbank Technology Ventures IV L.P. and Softbank
Technology Advisors Fund L.P(8)...................... 1,601,235 8.2 1,601,235 6.4
Constellation Venture Capital L.P. and Constellation
Venture Offshore, L.P(9)............................. 1,276,992 6.5 1,276,992 5.1
Spinnaker Clipper Fund, L.P., Spinnaker Founders Fund,
L.P. and Spinnaker Offshore Founders Fund Cayman
Ltd.(10)............................................. 1,231,553 6.3 1,231,553 4.9
The New York Times Company(11)......................... 1,638,288 8.4 1,638,288 6.5
All executive officers and directors as a group (9
persons)............................................. 9,714,750 49.6 9,631,417 38.4
</TABLE>
- ------------------
* Represents beneficial ownership of less than 1%.
(1) Percentage ownership is based on 19,575,037 shares outstanding as of
March 31, 1999 prior to the offering and 25,075,037 shares after the
offering. Shares of common stock subject to options currently exercisable
or exercisable within 60 days of March 31, 1999 are deemed outstanding for
the purpose of computing the percentage ownership of the person holding
such options but are not deemed outstanding for computing the percentage
ownership of any other person. Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) Assumes the underwriters' over-allotment option is not exercised.
(3) Includes 2,524,886 shares owned by Cramer Partners, L.L.C.
(4) Includes 2,453,310 shares owned by Peretz Partners, L.L.C. and 787,800
shares owned by other family members and entities.
(Footnotes continued on next page)
50
<PAGE>
(Footnotes continued from previous page)
(5) Includes 394,510 shares owned by Flatiron Fund, L.L.C., 130,348 shares
owned by The Flatiron Fund 1998/99, L.L.C. and 13,301 shares owned by
Flatiron Associates, L.L.C. of which Mr. Colonna and Mr. Wilson are general
partners.
(6) Includes 1,812,230 shares owned by Oak Investment Partners VIII, L.P. and
35,099 shares owned by Oak VIII Affiliates Fund, L.P. Mr. Glassmeyer is a
managing member of Oak Associates VIII, L.L.C., which is the general
partner of Oak Investment Partners VIII, L.P. and of Oak VIII Affiliates,
L.L.C., which is the general partner of Oak VIII Affiliates Fund, L.P.
Mr. Glassmeyer disclaims beneficial ownership of these shares.
(7) I. Robert Greene is a general partner of Chase Venture Capital Associates,
L.P. Mr. Greene disclaims beneficial ownership of these shares.
(8) Includes 1,569,845 shares owned by Softbank Technology Ventures IV L.P. and
31,390 owned by Softbank Technology Advisors Fund L.P. Mr. Charles R. Lax
is the managing member of STV IV LLC which is the general partner of each
of Softbank Technology Ventures IV L.P. and Softbank Technology Advisors
Fund L.P. Both Mr. Lax and STV IV LLC disclaim beneficial ownership of
these shares.
(9) Includes 838,945 shares owned by Constellation Venture Capital L.P. and
438,047 shares owned by Constellation Venture Offshore, L.P. Clifford H.
Friedman is a general partner of each of Constellation Venture Capital L.P.
and Constellation Venture Offshore, L.P. Mr. Friedman disclaims beneficial
ownership of these shares.
(10) Includes 123,156 shares owned by Spinnaker Clipper Fund, L.P., 717,207
shares owned by Spinnaker Founders Fund, L.P. and 391,190 shares owned by
Spinnaker Offshore Founders Fund Cayman Ltd. Lawrence Bowman is the
managing member of Bowman Capital Management LLC which is the general
partner of each of Spinnaker Clipper Fund, L.P., Spinnaker Founders Fund,
L.P. and Spinnaker Offshore Founders Fund Cayman Ltd. Both Mr. Bowman and
Bowman Capital Management LLC disclaim beneficial ownership of these
shares.
(11) Mr. Golden is a director of TheStreet.com. He serves as vice chairman and
senior vice president of The New York Times Company.
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available for this purpose
at the times and in the amounts as the board of directors may from time to time
determine. Each stockholder is entitled to one vote for each share of common
stock held on all matters submitted to a vote of stockholders. Cumulative voting
for the election of directors is not provided for in our amended and restated
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election. The
common stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Upon the occurrence of a liquidation, dissolution or
winding-up of TheStreet.com, the holders of shares of common stock would be
entitled to share ratably in the distribution of all of the TheStreet.com's
assets remaining available for distribution after satisfaction of all its
liabilities and the payment of the liquidation preference of any outstanding
preferred stock. Each outstanding share of common stock is, and all shares of
common stock to be outstanding upon completion of this offering will be, fully
paid and nonassessable.
PREFERRED STOCK
The board of directors has the authority, within the limitations and
restrictions stated in our amended and restated certificate of incorporation, to
provide by resolution for the issuance of shares of preferred stock, in one or
more classes or series, and to fix the rights, preferences, privileges and
restrictions of this preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences and the
number of shares constituting any series or the designation of such series. The
issuance of preferred stock could have the effect of decreasing the market price
of the common stock and could adversely affect the voting and other rights of
the holders of common stock.
OPTIONS
As of March 31, 1999:
(i) options to purchase a total of 2,632,321 shares of common stock were
outstanding of which 133,500 are exercisable; and
(ii) up to 1,767,679 additional shares of common stock may be subject to options
granted in the future.
See "Management--Executive Compensation".
REGISTRATION RIGHTS
On December 21, 1998, we entered into an amended and restated registration
rights agreement with our existing stockholders in which we granted them
registration rights in respect of 7,489,444 shares of common stock held by them.
These stockholders are referred to as the "existing stockholders". A copy of the
registration rights agreement has been filed as an exhibit to the registration
statement of which this prospectus forms a part. According to the registration
rights agreement, at any time, on or after the first anniversary of this
offering, some of the existing stockholders who hold in the aggregate at least
3,558,043 shares of common stock may request us to register under the Securities
Act all or any portion of the common stock purchased by the existing
stockholders in the May and December 1998 private placements. These shares are
referred to as the "restricted stock". However, the securities to be registered
must have a reasonably anticipated aggregate public offering price of at least
$500,000.
In addition, the holder of any restricted stock may request that we file a
registration statement on Form S-3, covering all stock as requested by any
holder of restricted stock who requests that we register their holdings. We are
not obligated to effect a registration statement on Form S-3 more than once in
any 180-day period or unless the proceeds of this registration shall reasonably
be expected to exceed $500,000.
These registration rights are subject to our right to delay the filing of a
registration statement in certain circumstances for up to 90 days.
52
<PAGE>
In addition, the holders of restricted stock will have certain "piggyback"
registration rights. If we propose to register any common stock under the
Securities Act (other than pursuant to this offering or in connection with the
registration of securities issued (i) under an employee benefits plan or
(ii) in consideration for an acquisition), each holder of restricted stock may
require us to include all or a portion of their restricted stock in such
registration; provided however, that the managing underwriter, if any, of any
such offering has certain rights to limit the number of restricted stock
proposed to be included in such registration.
We would bear all registration expenses incurred in connection with these
registrations. Each participating seller of restricted stock would bear their
proportionate share of all underwriting discounts and selling commissions.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND THE
THESTREET.COM'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
Some provisions of our amended and restated certificate of incorporation
and amended and restated bylaws, which provisions are summarized in the
following paragraphs, may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider it its best interest, including those attempts that might result
in a premium over the market price for the shares held by stockholders.
CLASSIFIED BOARD OF DIRECTORS
Our board of directors is divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board of
directors will be elected each year. These provisions, when coupled with the
provision of our amended and restated certificate of incorporation authorizing
the board of directors to fill vacant directorships or increase the size of the
board of directors, may deter a stockholder from removing incumbent directors
and simultaneously gaining control of the board of directors by filling the
vacancies created by such removal with its own nominees.
CUMULATIVE VOTING
Our amended and restated certificate of incorporation expressly denies
stockholders the right to cumulate votes in the election of directors.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our amended and restated certificate of incorporation eliminates the
ability of stockholders to act by written consent. It further provides that
special meetings of our stockholders may be called only by the chairman of the
board of directors, the president or a majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTORS NOMINATIONS
Our amended and restated bylaws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must provide timely
notice in writing. To be timely, a stockholder's notice must be delivered to or
mailed and received at our principal executive offices not less than 60 days nor
more than 90 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, that in the event that the annual
meeting is called for a date that is not within thirty (30) days before or after
such anniversary date, notice by the stockholder in order to be timely must be
received not later than the close of business on the 10th day following the date
on which notice of the date of the annual meeting was mailed to stockholders or
made public, whichever first occurs. In the case of a special meeting of
stockholders called for the purpose of electing directors, notice by the
stockholder in order to be timely must be received not later than the close of
business on the tenth (10th) day following the day on which notice of the date
of the special meeting was mailed or public disclosure of the date of the
special meeting was made, whichever first occurs. Our amended and restated
bylaws also specify certain requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or
53
<PAGE>
from making nominations for directors at an annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
a corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage. Our amended and restated certificate of
incorporation imposes supermajority vote requirements in connection with
business combination transactions and the amendment of provisions of our amended
and restated certificate of incorporation and amended and restated bylaws,
including those provisions relating to the classified board of directors, action
by written consent and the ability of stockholders special meetings.
RIGHTS AGREEMENT
Under Delaware law, every corporation may create and issue rights entitling
the holders of such rights to purchase from the corporation shares of its
capital stock of any class or classes, subject to any provisions in its
certificate of incorporation. The price and terms of such shares must be stated
in the certificate of incorporation or in a resolution adopted by the board of
directors for the creation or issuance of such rights.
We have entered into a stockholder rights agreement. As with most
stockholder rights agreements, the terms of our rights agreement are complex and
not easily summarized, particularly as they relate to the acquisition of our
common stock and to exercisability. This summary may not contain all of the
information that is important to you. Accordingly, you should carefully read our
rights agreement, which has been filed as an exhibit to the registration
statement of which this prospectus forms a part.
Our rights agreement provides that each share of our prospective common
stock outstanding will have one right to purchase one one-hundredth of a
preferred share attached to it. The purchase price per one one-hundredth of a
preferred share under the stockholder rights agreement is four times the average
closing price of our common stock for the first five days of trading after the
consummation of this offering.
Initially, the rights under our rights agreement are attached to
outstanding certificates representing our common stock and no separate
certificates representing the rights will be distributed. The rights will
separate from our common stock and be represented by separate certificates
approximately 10 days after someone acquires or commences a tender offer for 15%
of our outstanding common stock.
After the rights separate from our common stock, certificates representing
the rights will be mailed to record holders of the common stock. Once
distributed, the rights certificates alone will represent the rights.
All shares of our common stock issued prior to the date the rights separate
from the common stock will be issued with the rights attached. The rights are
not exercisable until the date the rights separate from the common stock. The
rights will expire on the tenth anniversary of the date of the completion of
this offering unless earlier redeemed or exchanged by us.
If an acquiror obtains or has the rights to obtain 15% or more of our
common stock, then each right will entitle the holder to purchase a number of
shares of our common stock equal to two times the purchase price of each right.
Each right will entitle the holder to purchase a number of shares of common
stock of the acquiror having a then current market value of twice the purchase
price if an acquiror
54
<PAGE>
obtains 15% or more of our common stock and any of the following occurs:
o we merge into another entity;
o an acquiring entity merges into us; or
o we sell more than 50% of our assets or earning power.
Under our rights agreement, any rights that are or were owned by an
acquiror of more than 15% of our outstanding common stock will be null and void.
Our rights agreement contains exchange provisions which provides that after
an acquiror obtains 15% or more, but less than 50% of our respective outstanding
common stock, our board of directors may, at its option, exchange all or part of
the then outstanding and exercisable rights for common shares. In such an event,
the exchange ratio is one common share per right, adjusted to reflect any stock
split, stock dividend or similar transaction.
Our board of directors may, at its option, redeem all of the outstanding
rights under our rights agreement prior to the earlier of (1) the time that an
acquiror obtains 15% or more of our outstanding common stock or (2) the final
expiration date of the rights agreement. The redemption price under our rights
agreement is $0.01 per right, subject to adjustment. The right to exercise the
rights will terminate upon the action of our board ordering the redemption of
the rights and the only right of the holders of the rights will be to receive
the redemption price.
Holders of rights will have no rights as our stockholders including the
right to vote or receive dividends, simply by virtue of holding the rights.
Our rights agreement provides that the provisions of the rights agreement
may be amended by the board of directors prior to 10 days after someone acquires
or commences a tender offer for 15% of our outstanding common stock without the
approval of the holders of the rights. However, after that date, the rights
agreement may not be amended in any manner which would adversely effect the
interests of the holders of the rights, excluding the interests of any acquiror.
In addition, our rights agreement provides that no amendment may be made to
adjust the time period governing redemption at a time when the rights are not
redeemable.
Our rights agreement contains rights that have anti-takeover effects. The
rights may cause substantial dilution to a person or group that attempts to
acquire us without conditioning the offer on a substantial number of rights
being acquired. Accordingly, the existence of the rights may deter acquirors
from making takeover proposals or tender offers. However, the rights are not
intended to prevent a takeover, but rather are designed to enhance the ability
of our board to negotiate with an acquiror on behalf of all the stockholders. In
addition, the rights should not interfere with a proxy contest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer Corporation. Its address is 40 Wall Street, New York, New York 10005,
and its telephone number at this location is (212) 936-5100.
LISTING
Our common stock will be listed on the Nasdaq National Market under the
trading symbol "TSCM".
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of contractual and legal restrictions on resale described below, sales of
substantial amounts of common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
25,075,037 shares of our common stock, assuming no exercise of the Underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless such shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rule 144 promulgated under the Securities Act, which rules are summarized below.
As a result of the contractual restrictions described below and the
provisions of Rule 144, the restricted securities will be available for sale in
the public market subject to the volume limitations and other conditions of
Rule 144. The shares could be available for resale immediately upon the
expiration of the 180-day lock-up period.
LOCK-UP AGREEMENTS
All of our officers, directors and substantially all of our stockholders
have signed lock-up agreements under which they agreed not to transfer or
dispose of, directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for shares of common stock, for
a period of 180 days after the date of this prospectus. Transfers or
dispositions can be made sooner with the prior written consent of Goldman, Sachs
& Co.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
o 1% of the number of shares of common stock then outstanding, which will equal
approximately 250,750 shares immediately after this offering; or
o the average weekly trading volume of the common stock on the Nasdaq National
Market during the four calendar weeks preceding the filing of a notice on
Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.
STOCK OPTIONS
Following the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering 4,400,000 shares of
common stock reserved for issuance under the 1998 Stock Incentive Plan. The
registration statement will become effective automatically upon filing. As of
March 31, 1999, options to purchase 2,632,321 shares of common stock were issued
and outstanding. Accordingly, shares registered under the registration statement
will, subject to vesting provisions and Rule 144 volume limitations applicable
to our affiliates, be available for sale in the open market
56
<PAGE>
immediately after the 180-day lock-up agreements expire. See "Description of
Capital Stock--Registration Rights".
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 3,558,043 shares of our
common stock, or their transferees, are entitled to request that we register
their shares under the Securities Act. After these shares are registered, they
will become freely tradable without restriction under the Securities Act. Any
sales of securities by these stockholders could have a material adverse effect
on the trading price of our common stock. See "Description of Capital
Stock--Registration Rights".
57
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LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The financial statements of TheStreet.com, Inc. as of December 31, 1997 and
1998 and for the period from June 18, 1996 (inception) through December 31, 1996
and for the years ended December 31, 1997 and 1998 included in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in auditing and accounting.
CHANGE IN ACCOUNTANTS
In July, 1998, we decided to replace Anchin, Block & Anchin LLP with Arthur
Andersen LLP as our independent public accountants to audit financial statements
for the period from June 18, 1996 (inception) through December 31, 1996 and for
the years ended December 31, 1997 and December 31, 1998. The decision to change
independent public accountants from Anchin, Block & Anchin LLP to Arthur
Andersen LLP was approved by our board of directors.
We believe, and have been advised by Anchin, Block & Anchin LLP that it
concurs in such belief, that, for the period from June 18, 1996 (inception)
through December 31, 1997, we and Anchin, Block & Anchin LLP did not have any
disagreement on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of Anchin, Block & Anchin LLP would have caused it
to make reference in connection with its report on our financial statements to
the subject matter of the disagreement.
The report of Anchin, Block & Anchin LLP on our financial statements for
the period from June 18, 1996 (inception) through December 31, 1997 did not
contain an adverse opinion or a disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles. During that
period there were no "reportable events" within the meaning of
Item 304(a)(1)(v) of Regulation S-K promulgated under the Securities Act.
ADDITIONAL INFORMATION
We filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form S-1 under the Securities Act with respect to the
shares of common stock offered hereby. This prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules filed therewith. For further information with respect to TheStreet.com
and the common stock offered hereby, reference is made to the Registration
Statement and the exhibits and schedule filed therewith. Statements contained in
this prospectus regarding the contents of any contract or any other document to
which reference is made are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration Statement and the
exhibits and schedule filed therewith may be inspected without charge at the
public reference facilities maintained by the Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the
58
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Commission's regional offices located at the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the Registration Statement may be obtained from such offices upon the payment of
the fees prescribed by the Commission. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. The Commission maintains a World Wide web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is http://www.sec.gov.
59
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THESTREET.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Balance Sheets as of December 31, 1997 and 1998............................................................ F-3
Statements of Operations for the Period from
June 18, 1996 (Inception) to December 31, 1996
and the Years Ended December 31, 1997 and 1998........................................................... F-4
Statements of Stockholders' Equity (Deficit) for the
Period from June 18, 1996 (Inception) to December 31, 1996
and the Years Ended December 31, 1997 and 1998........................................................... F-5
Statements of Cash Flows for the Period from
June 18, 1996 (Inception) to December 31, 1996 and
the Years Ended December 31, 1997 and 1998............................................................... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TheStreet.com, Inc.:
We have audited the accompanying balance sheets of TheStreet.com, Inc. (a
Delaware corporation), as of December 31, 1997 and 1998, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
period from June 18, 1996 (inception) to December 31, 1996 and the two years
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TheStreet.com, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from June 18, 1996 (inception) to December 31, 1996 and the two
years ended December 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
New York, New York
February 9, 1999
F-2
<PAGE>
THESTREET.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1998
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 156,692 $ 24,611,958
Accounts receivable, net of allowance for doubtful accounts of
$0 and $40,000 as of December 31, 1997 and 1998,
respectively.................................................. 130,699 811,419
Other receivables and unbilled revenue.......................... -- 663,137
Prepaid expenses and other current assets....................... 27,455 687,639
------------ ------------
Total current assets....................................... 314,846 26,774,153
Property and equipment, net of accumulated depreciation and
amortization of $162,632 and $78,110 as of December 31, 1997
and 1998, respectively........................................ 495,697 599,937
Other assets.................................................... 100,251 207,329
------------ ------------
Total assets............................................... $ 910,794 $ 27,581,419
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Line of credit.................................................. $ -- $ 3,333
Accounts payable................................................ 691,800 1,927,065
Accrued expenses................................................ 789,887 1,250,577
Deferred revenue................................................ 176,125 675,513
------------ ------------
Total current liabilities.................................. 1,657,812 3,856,488
Deferred rent................................................... 74,825 200,636
Long-term debt.................................................. 6,335,000 --
------------ ------------
Total liabilities.......................................... 8,067,637 4,057,124
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common Stock; $0.01 par value; 100,000,000 shares authorized,
6,060,606 and 13,763,838 shares issued and outstanding at
December 31, 1997 and 1998, respectively; 17,762,343 shares
outstanding on a pro forma basis........................... 60,606 137,638 $ 177,623
Convertible Preferred Stock--
Series A; $0.01 par value; 9 1/2% cumulative; 1,500 and
118,441 shares issued and outstanding in 1997 and 1998,
respectively; none outstanding on a pro forma basis...... 15 1,184 --
Series B; $0.01 par value; 9 1/2% cumulative; 0 and 345,366
shares issued and outstanding in 1997 and 1998,
respectively; none outstanding on a pro forma basis...... -- 3,454 --
Series C; $0.01 par value; 1,500 shares issued and
outstanding in 1997 and 1998; none outstanding on a pro
forma basis.............................................. 15 15 --
Additional paid-in capital.................................... 280,364 35,784,643 35,749,311
Accumulated deficit........................................... (7,497,843) (12,402,639) (12,402,639)
------------ ------------ ------------
Total stockholders' equity (deficit)....................... (7,156,843) 23,524,295 $ 23,524,295
------------ ------------ ------------
Total liabilities and stockholders' equity (deficit)....... $ 910,794 $ 27,581,419
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
THESTREET.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JUNE 18,
1996
(INCEPTION) FOR THE YEARS ENDED
TO DECEMBER 31
DECEMBER 31 ---------------------------
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
Net revenues:
Advertising revenues.......................................... $ -- $ 117,652 $ 2,544,409
Subscription revenues......................................... -- 320,682 1,685,446
Other revenues................................................ -- 150,400 393,511
----------- ----------- ------------
Total net revenues......................................... -- 588,734 4,623,366
Cost of revenues................................................ 297,830 1,146,383 3,955,270
----------- ----------- ------------
Gross profit (loss)........................................ (297,830) (557,649) 668,096
----------- ----------- ------------
Operating expenses:
Product development expenses.................................. 468,909 402,379 2,346,354
Sales and marketing expenses.................................. 397,508 2,188,968 9,204,711
General and administrative expenses........................... 547,522 2,209,707 5,158,158
----------- ----------- ------------
Total Operating expenses................................... 1,413,939 4,801,054 16,709,223
----------- ----------- ------------
Loss from operations....................................... (1,711,769) (5,358,703) (16,041,127)
Interest expense, net of interest income of $0, $0 and $161,423
in 1996, 1997 and 1998, respectively.......................... 21,623 405,748 227,324
----------- ----------- ------------
Loss before provision for income taxes..................... (1,733,392) (5,764,451) (16,268,451)
Provision for income taxes...................................... -- -- --
----------- ----------- ------------
Net loss................................................... $(1,733,392) $(5,764,451) $(16,268,451)
----------- ----------- ------------
----------- ----------- ------------
Net loss per share--basic and diluted........................... $ (0.29) $ (0.95) $ (2.07)
----------- ----------- ------------
----------- ----------- ------------
Weighted average basic and diluted shares outstanding........... 6,060,606 6,060,606 8,575,128
----------- ----------- ------------
----------- ----------- ------------
Pro forma per share data (unaudited):
Pro forma net loss per share--basic and diluted............... $ (0.28) $ (0.95) $ (1.64)
----------- ----------- ------------
----------- ----------- ------------
Pro forma weighted average basic and diluted shares
outstanding................................................ 6,085,606 6,085,606 9,923,454
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
THESTREET.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM JUNE 18, 1996 (INCEPTION) TO DECEMBER 31, 1996
AND THE YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
---------------------------------------------------------
COMMON STOCK SERIES A SERIES B SERIES C
--------------------- ------------------ ------------------ -----------------
SHARES PAR VALUE SHARES PAR VALUE SHARES PAR VALUE SHARES PAR VALUE
---------- --------- ------- --------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 18, 1996 (inception)..... -- $ -- -- $ -- -- $ -- -- $--
Issuance of Common Stock............... 6,060,606 60,606 1,500 15 -- -- 1,500 15
Net loss............................... -- -- -- -- -- -- -- --
---------- --------- ------- ------- ------- ------- ------ ---
Balance at December 31, 1996............. 6,060,606 60,606 1,500 15 -- -- 1,500 15
Issuance of warrants................... -- -- -- -- -- -- -- --
Net loss............................... -- -- -- -- -- -- -- --
---------- --------- ------- ------- ------- ------- ------ ---
Balance at December 31, 1997............. 6,060,606 60,606 1,500 15 -- -- 1,500 15
Issuance of common stock............... 181,818 1,818 -- -- -- -- -- --
Capital contribution................... -- -- -- -- -- -- -- --
Net loss from January 1, 1998 through
May 7, 1998.......................... -- -- -- -- -- -- -- --
Termination of LLC..................... -- -- -- -- -- -- -- --
Conversion of debt to equity........... -- -- 116,941 1,169 -- -- -- --
Net proceeds from private placement in
May 1998............................. 3,418,333 34,183 -- -- 101,475 1,015 -- --
Net proceeds from private placement in
December 1998........................ 4,072,778 40,728 -- -- 243,891 2,439 -- --
Exercise of options.................... 30,303 303 -- -- -- -- -- --
Preferred Stock dividends.............. -- -- -- -- -- -- -- --
Net loss from May 8, 1998 through
December 31, 1998.................... -- -- -- -- -- -- -- --
---------- --------- ------- ------- ------- ------- ------ ---
Balance at December 31, 1998............. 13,763,838 $ 137,638 118,441 $ 1,184 345,366 $ 3,454 1,500 $15
---------- --------- ------- ------- ------- ------- ------ ---
---------- --------- ------- ------- ------- ------- ------ ---
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
PAID-IN ACCUMULATED EQUITY
CAPITAL DEFICIT (DEFICIT)
----------- ------------ -------------
<S> <C> <C> <C>
Balance at June 18, 1996 (inception)..... $ -- $ -- $ --
Issuance of Common Stock............... 239,364 -- 300,000
Net loss............................... -- (1,733,392) (1,733,392)
----------- ------------ -----------
Balance at December 31, 1996............. 239,364 (1,733,392) (1,433,392)
Issuance of warrants................... 41,000 -- 41,000
Net loss............................... -- (5,764,451) (5,764,451)
----------- ------------ -----------
Balance at December 31, 1997............. 280,364 (7,497,843) (7,156,843)
Issuance of common stock............... 3,637 -- 5,455
Capital contribution................... 375,000 -- 375,000
Net loss from January 1, 1998 through
May 7, 1998.......................... -- (5,317,171) (5,317,171)
Termination of LLC..................... (12,815,014) 12,815,014 --
Conversion of debt to equity........... 11,692,786 -- 11,693,955
Net proceeds from private placement in
May 1998............................. 10,039,072 -- 10,074,270
Net proceeds from private placement in
December 1998........................ 24,756,833 -- 24,800,000
Exercise of options.................... 606 -- 909
Preferred Stock dividends.............. 1,451,359 (1,451,359) --
Net loss from May 8, 1998 through
December 31, 1998.................... -- (10,951,280) (10,951,280)
----------- ------------ -----------
Balance at December 31, 1998............. $35,784,643 $(12,402,639) $23,524,295
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
THESTREET.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JUNE 18, 1996 FOR THE YEARS ENDED
(INCEPTION) TO DECEMBER 31
DECEMBER 31 ----------------------------
1996 1997 1998
--------------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................................... $(1,733,392) $(5,764,451) $(16,268,451)
Adjustments to reconcile net loss to net cash used in
operating activities:
Allowance for doubtful accounts............................ -- -- 40,000
Depreciation and amortization.............................. 15,158 158,884 244,505
Noncash expense for warrants............................... -- 41,000 --
Increase in accounts receivable............................ -- (130,699) (720,720)
Increase in other receivables and unbilled revenue......... -- -- (663,137)
(Increase) decrease in prepaid expenses and other current
assets................................................... (85,509) 58,054 (660,184)
Increase in other assets................................... (21,635) (63,659) (122,035)
Increase in accounts payable and accrued expenses.......... 378,924 1,102,763 1,695,955
Increase in deferred revenue............................... -- 176,125 499,388
Increase in deferred rent.................................. 24,087 50,738 125,810
----------- ----------- ------------
Net cash used in operating activities................. (1,422,367) (4,371,245) (15,828,869)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................................... (172,901) (490,429) (333,787)
Organization costs........................................... (21,366) -- --
----------- ----------- ------------
Net cash used in investing activities................. (194,267) (490,429) (333,787)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock....................... 300,000 -- 6,364
Net borrowings under line of credit.......................... -- -- 3,333
Proceeds from notes payable.................................. 1,335,000 5,500,000 5,733,955
Repayment of notes payable................................... -- (500,000) --
Net proceeds from private placements......................... -- -- 34,874,270
----------- ----------- ------------
Net cash provided by financing activities............. 1,635,000 5,000,000 40,617,922
----------- ----------- ------------
Net increase in cash.................................. 18,366 138,326 24,455,266
Cash and cash equivalents, beginning of period................. -- 18,366 156,692
----------- ----------- ------------
Cash and cash equivalents, end of period....................... $ 18,366 $ 156,692 $ 24,611,958
----------- ----------- ------------
----------- ----------- ------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Income taxes............................................... -- -- --
Interest................................................... -- -- $ 3,098
Supplemental Disclosure of Noncash Investing Activities:
During 1998, the holder of a note payable by the Company
contributed $375,000 of principal to the Company as an
equity contribution........................................
During 1998, the holders of certain notes payable by the
Company converted $11,693,955 of outstanding principal and
interest, into 116,941 of Series A 9 1/2% Cumulative
Convertible Preferred Stock................................
During 1998, the Company entered into a sale-leaseback
transaction for certain of its computers and furniture and
fixtures. The transaction resulted in a deferred loss of
$197,429 which will be recognized in proportion to the rent
expense under the operating lease over a three-year
period.....................................................
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION, NATURE OF BUSINESS AND SUMMARY OF OPERATIONS AND SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF BUSINESS
TheStreet.com, Inc. (the "Company") is a leading web-based provider of
original, timely, comprehensive and trustworthy financial news, commentary and
information aimed at helping readers make informed investment decisions. The
Company combines the most important qualities of traditional print
journalism--accuracy, intelligence, fairness and wit--with the web's advantages
as a financial news medium--timeliness, interactivity and global distribution.
The Company was formed on June 18, 1996 in the state of Delaware as a
limited liability company ("LLC"). On May 7, 1998, the Company's Board of
Directors approved the reorganization of the LLC into a C corporation.
Accordingly, holders of Class C membership units were converted into 181.81818
shares of Common Stock for each unit. In addition, Class A and Class B
membership units were converted to Series A 9 1/2% Cumulative Preferred Stock
and Series C Preferred Stock at a ratio of one preferred share for each $100 of
Class A and Class B membership units, respectively. Class D and Class E
membership units were converted to Series A 9 1/2% Cumulative Preferred Stock at
a ratio of one preferred share per $100 of Class D and Class E membership units.
All share and per share data has been retroactively adjusted to reflect the
reorganization and the one-for-three reverse stock split (see Note 11).
The Pro Forma December 31, 1998 information reflected in the accompanying
balance sheet reflects the conversion of all Convertible Preferred Stock plus
accrued dividends into Common Stock upon completion of the proposed initial
public offering (see Note 11).
The Company is proposing an initial public offering of up to 5,500,000
shares of Common Stock. See "Risk Factors" in the accompanying prospectus.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions, specifically for allowance for doubtful accounts for accounts
receivable and the useful lives of fixed assets, that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
REVENUE RECOGNITION
The Company generates its revenues primarily from subscriptions and
advertising.
Subscription revenues represent customer subscriptions that provide
subscribers access to financial news, commentary and information. Subscriptions
are generally charged to customers' credit cards or are charged directly to
companies that subscribe to the service. These are generally billed in advance
on a monthly, quarterly or annual basis. Revenue from subscriptions is
recognized ratably over the subscription period. Deferred revenue relates to
subscription fees for which amounts have been collected but for which revenue
has not been recognized.
Advertising revenue, derived from the sale of sponsorship and banner and
email advertisements and on the Company's web site, is recognized ratably in the
period the advertising is displayed, provided that no significant Company
obligations remain and collection of the resulting receivable is probable.
Company obligations typically include guarantees of a minimum number of
"impressions" or
F-7
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(1) ORGANIZATION, NATURE OF BUSINESS AND SUMMARY OF OPERATIONS AND SIGNIFICANT
ACCOUNTING POLICIES--(CONTINUED)
times that an advertisement is viewed by users of the Company's web site. Such
amounts are recognized as revenue in the month earned.
Other revenues consist primarily of content syndication fees. In 1997,
other revenues entirely consisted of revenues derived from a syndication and
hosting partnership with ABCNEWS.com and Starwave (an affiliate of ABCNEWS.com).
Pursuant to this arrangement, the Company agreed to syndicate a portion of its
news content to ABCNEWS.com in return for technology and hosting services from
Starwave. The fair value of the content delivered and the fair value of the
technology and hosting services were both estimated by management to be
approximately $300,000 during 1998 and, therefore, no gain or loss was
recognized as a result of these transactions.
CASH AND CASH EQUIVALENTS
The Company considers all short-term marketable equity securities with a
maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Property and equipment are depreciated on a straight-line
basis over the estimated useful lives of the assets (3 years for computer
equipment and 5-7 years for furniture and fixtures).
ACCOUNTING FOR LONG-LIVED ASSETS
The Company accounts for long-lived assets under the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS No. 121"). SFAS No. 121 establishes financial accounting and reporting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable tangibles to be disposed of.
Management has performed a review of all long-lived assets and has determined
that no impairment of the respective carrying values has occurred as of
December 31, 1998.
INCOME TAXES
The Company was organized on June 18, 1996 as a limited liability company
for Federal and state income tax purposes. Accordingly, the Company was treated
as a partnership and the net losses of the Company were included in the
individual tax returns of the members. On May 7, 1998, the Company converted
from an LLC to a C corporation. At the time of the conversion, the Company
adopted Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets or liabilities of a change in tax
rates is recognized in the period that the tax change occurs.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts and other
receivables, and accounts payable approximate fair value due to the short-term
maturity of these instruments. The carrying amounts of outstanding borrowings
approximate fair value.
F-8
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(1) ORGANIZATION, NATURE OF BUSINESS AND SUMMARY OF OPERATIONS AND SIGNIFICANT
ACCOUNTING POLICIES--(CONTINUED)
BUSINESS CONCENTRATIONS AND CREDIT RISK
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of cash and accounts receivable. The Company maintains
cash with various financial institutions. The Company performs periodic
evaluations of the relative credit standing of these institutions. The Company's
clients are primarily concentrated in the United States. The Company performs
ongoing credit evaluations, generally does not require collateral, and
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of customers, historical trends and other information. To date,
such losses have been within management's expectations.
NET LOSS PER COMMON SHARE
Historical--
The Company computes net loss per share in accordance with SFAS No. 128,
"Earnings Per Share", and SEC Staff Accounting Bulletin No. 98 ("SAB No. 98").
Under the provisions of SFAS No. 128 and SAB No. 98, basic net loss per common
share ("Basic EPS") is computed by dividing net loss by the weighted average
number of common shares outstanding. Diluted net loss per common share ("Diluted
EPS") is computed by dividing net loss by the weighted average number of common
shares and dilutive common share equivalents then outstanding.
Pro forma--
Pro forma net loss per share is calculated assuming conversion of all
Convertible Preferred Stock and accumulated dividends which converts
automatically upon the completion of the initial public offering (see Note 11).
ADVERTISING COSTS
Advertising costs are expensed as incurred. The Company expenses the
production costs of advertising the first time the advertising takes place. For
the period from June 18, 1996 (inception) to December 31, 1996 and the years
ended December 31, 1997 and 1998, advertising costs were $57,709, $1,797,728 and
$5,668,463, respectively.
STOCK-BASED COMPENSATION
The Company has adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), and elected to
continue the accounting set forth in Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25"). The Company has
provided the necessary pro forma disclosures as if the fair value method had
been applied (Note 7).
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information".
This statement establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. This statement is
effective for financial statements for periods beginning after December 15, 1997
and need not be applied to interim periods in the initial year of application.
Comparative information for earlier years presented is to be restated. The
Company does not believe it operates in more than one segment.
F-9
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) NET LOSS PER SHARE
As discussed in Note 1, historical net loss per share is calculated in
accordance with SFAS No. 128. The following table reconciles the numerator and
denominator for the calculation:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Numerator:
Net loss........................................... $ (1,733,392) $ (5,764,451) $(16,268,451)
Preferred Stock dividends.......................... -- -- (1,451,359)
------------ ------------ ------------
Net loss available to common
shareholders............................. $ (1,733,392) $ (5,764,451) $(17,719,810)
------------ ------------ ------------
------------ ------------ ------------
Denominator:
Weighted average basic and diluted shares
outstanding..................................... 6,060,606 6,060,606 8,575,128
------------ ------------ ------------
------------ ------------ ------------
Net loss per share--basic and diluted................ $ (0.29) $ (0.95) $ (2.07)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Pro forma net loss per share is calculated assuming conversion of the
Convertible Preferred Stock and accumulated dividends into Common Stock in
connection with the proposed initial public offering as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Numerator--Pro forma:
Net loss available to common shareholders.......... $ (1,733,392) $ (5,764,451) $(17,719,810)
Preferred Stock dividends.......................... -- -- 1,451,359
------------ ------------ ------------
Pro forma net loss......................... $ (1,733,392) $ (5,764,451) $(16,268,451)
------------ ------------ ------------
------------ ------------ ------------
Denominator--Pro forma:
Weighted average basic and diluted shares
outstanding..................................... 6,060,606 6,060,606 8,575,128
Assumed conversion of--
Convertible Preferred Stock..................... 25,000 25,000 1,272,496
Preferred Stock dividends....................... -- -- 75,830
------------ ------------ ------------
Pro forma basic and diluted weighted
average shares outstanding............... 6,085,606 6,085,606 9,923,454
------------ ------------ ------------
------------ ------------ ------------
Pro forma net loss per share--basic and diluted...... $ (0.28) $ (0.95) $ (1.64)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Outstanding options of 0, 0 and 1,497,286 for the periods ended
December 31, 1996, 1997 and 1998, respectively, have been excluded from the
above calculations as they would be antidilutive.
F-10
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
------------ ------------
<S> <C> <C>
Computer equipment............................................ $373,089 $548,501
Furniture and fixtures........................................ 285,240 129,546
-------- --------
658,329 678,047
Less accumulated depreciation and amortization................ (162,632) (78,110)
-------- --------
Property and equipment, net................................... $495,697 $599,937
-------- --------
-------- --------
</TABLE>
Depreciation and amortization expense aggregated $13,022, $154,611 and
$229,547, respectively, for the period ending December 31, 1996, and the years
ending 1997 and 1998.
During 1998, the Company entered into a sale leaseback transaction. Under
this transaction, assets with a net book value of $944,092 were sold at a loss
of $197,429. This loss is being recognized over the lease term (three years).
(4) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
------------ ------------
<S> <C> <C>
Accrued bonuses............................................... $136,157 $ 565,794
Accrued other................................................. 226,359 162,719
Accrued consulting fees....................................... -- 322,064
Accrued financing costs....................................... -- 200,000
Accrued interest.............................................. 427,371 --
-------- ----------
$789,887 $1,250,577
-------- ----------
-------- ----------
</TABLE>
(5) LONG-TERM DEBT AND LINE OF CREDIT
In September 1998, the Company entered into a line of credit agreement with
a bank and had available borrowings under the agreement of up to the lesser of
$2,000,000 or 80% of eligible accounts receivable, as defined. The borrowings
($3,333 at December 31, 1998) bear interest at the bank's prime lending rate
(8.5% at December 31, 1998). Interest is payable monthly and the agreement
matures in September 1999. The agreement includes certain financial covenants.
As of December 31, 1997, the Company had long-term debt as follows:
<TABLE>
<S> <C>
Note payable--members, due June 1, 1999, interest at prime plus 1% and payable
beginning January 1, 1998.................................................... $ 4,835,000
Note payable--other, due June 1, 1999, interest at prime plus 1% and payable
beginning January 1, 1998.................................................... 1,500,000
-------------
$ 6,335,000
-------------
-------------
</TABLE>
The Note payable--members includes borrowings from the founders of the
Company. During 1996 and 1997, the founders loaned $1,335,000 and $4,000,000,
respectively, to the Company. During 1997, the Company repaid $500,000 of such
borrowings. The borrowings were used for working capital purposes.
During 1998, additional funds were advanced to the Company under Note
payable--members and interest continued to accrue on all notes payable.
F-11
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) LONG-TERM DEBT AND LINE OF CREDIT--(CONTINUED)
In April 1998, the holder of the Note payable--other forgave $375,000 of
principal in consideration of certain membership units under the limited
liability company. The units were given to the holder by two members from
existing membership interests of the Company. There were no new membership
interests issued by the Company as a result of this transaction.
In May 1998, the Note payable--members of $10,443,342, including accrued
interest, and the Note payable--other of $1,250,613, including accrued interest,
were converted into Class D and Class E membership interests. Subsequent
thereto, the membership interests were converted into 116,941 shares of
Series A 9 1/2% cumulative preferred stock.
(6) INCOME TAXES
On May 7, 1998, the Company converted from an LLC to a C corporation for
Federal and state income tax purposes. For the period from May 7, 1998 to
December 31, 1998, the Company incurred approximately $10.9 million of net
operating loss carryforwards available to offset future taxable income through
2013.
In accordance with SFAS No. 109, the Company recognized a deferred tax
asset of $4.3 million primarily resulting from the above mentioned net operating
loss carryforward. A full valuation allowance has been recorded related to the
deferred tax asset as a result of management's uncertainty as to the realization
of such asset. Accordingly, no provision has been recorded. There are no other
significant temporary differences.
Had the Company applied the provisions of SFAS 109 for the period from
inception through May 7, 1998 the Company would have recorded a deferred tax
asset, primarily from net operating loss carryforwards and a corresponding full
valuation allowance.
(7) STOCKHOLDERS' EQUITY (DEFICIT)
The total number of shares of all classes of stock whichwhich the
Corporation is authorized to issue is 101,000,000, consisting of 1,000,000
shares of preferred stock, par value of $0.01 per share and 100,000,000 shares
of common stock, par value of $0.01 (see Note 11).
1998 PRIVATE PLACEMENTS
In May 1998, the Company raised approximately $10 million of gross proceeds
by completing a private placement of 101,475 shares of Series B 9 1/2%
Cumulative Preferred Stock and 3,418,333 shares of Common Stock to a group of
investors. In connection with the transaction, the Company granted the
purchasers of such stock certain registration rights.
At such time, the Company also entered into a Stockholders' Agreement with
such stockholders which, by its terms, will terminate upon the consummation of
the initial public offering. Subject to certain conditions, the shares of each
series of the Convertible Preferred Stock and dividends carry the following
rights and will automatically convert into Common Stock as follows:
The Series A and B 9 1/2% Cumulative Preferred Stock accumulate
dividends annually at $9.50 per share. These shares are senior to Common
Stock and Series C Convertible Preferred Stock and are pari passu to one
another. The shares have no voting rights and a liquidation preference of
$100 per share plus accumulated dividends. The shares plus any accrued and
unpaid dividends mandatorily convert to Common Stock upon a qualified
initial public offering ("IPO") at the liquidation preference payment
divided by the IPO price.
The Series C Convertible Preferred Stock is senior only to the Common
Stock. These shares have no voting rights and a liquidation preference of
$100 per share. The shares mandatorily
F-12
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
convert to common stock upon an IPO at the liquidation preference payment
divided by the IPO price.
In December 1998, the Company raised approximately $25 million of gross
proceeds by completing a private placement of 243,891 shares of Series B 9 1/2%
Cumulative Preferred Stock and 4,072,778 shares of Common Stock to a group
consisting of certain existing stockholders and other investors. As of
December 31, 1998, approximately $525,000 of the proceeds had not yet been
received and is reflected in other receivables in the accompanying balance
sheet. In connection with this transaction the Company amended and restated the
Registration Rights Agreement and the Stockholders' Agreement in each case to
include, among other things, the new purchasers.
REGISTRATION RIGHTS
In December 1998, the Company entered into an Amended and Restated
Registration Rights Agreement (the "Registration Rights Agreement") with
existing stockholders pursuant to which the Company granted certain registration
rights in respect of certain shares of Common Stock held by the existing
stockholders. Such stockholders are hereinafter referred to as the "existing
stockholders". Pursuant to the Registration Rights Agreement, at any time, on or
after the first anniversary of the IPO, certain existing stockholders of Common
Stock may request the Company to register all or any portion of the Common Stock
purchased by the existing stockholders in the Private Placements (hereinafter
referred to as the "Restricted Stock"). However, the securities to be registered
must have a reasonably anticipated aggregate public offering price of at least
$500,000.
In addition, the holders of Restricted Stock will have certain "piggyback"
registration rights. If the Company proposes to register and common stock under
the Securities Act of 1933 each holder of Restricted Stock may require the
Company to include all or a portion of their Restricted Stock in such
registration, provided however, that the managing underwriter, if any, of such
offering has certain rights to limit the number of Restricted Stock proposed to
be included in such registration.
STOCK OPTIONS
Under the terms of the Company's 1998 Stock Option and Incentive Plan (the
"Stock Option Plan"), 2,527,272 shares of common stock of the Company have been
reserved for incentive stock options, nonqualified stock options (incentive and
nonqualified stock options are collectively referred to as "Options"),
restricted stock, or any combination thereof. Awards may be granted to such
directors, employees and consultants of the Company as the Compensation
Committee of the Board of Directors shall in its discretion select. Only
employees of the Company are eligible to receive grants of incentive stock
options.
Had compensation for the Stock Option Plan been determined consistent with
the provisions of SFAS No. 123, the effect on the Company's net loss and basic
and diluted net loss per share would have been changed to the following pro
forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
Net loss, as reported........................................................ $(16,268,451)
------------
------------
Net loss, pro forma.......................................................... $(16,270,457)
------------
------------
Basic and diluted loss per share, as reported................................ $ (2.07)
------------
------------
Basic and diluted loss per share, pro forma.................................. $ (2.07)
------------
------------
</TABLE>
F-13
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
A summary of the activity of the Stock Option Plan for the year ended
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Options outstanding, January 1, 1998............................ -- $ --
Options granted............................................... 1,663,953 0.12
Options exercised............................................. (30,303) 0.03
Options cancelled............................................. (136,364) 0.03
---------
Options outstanding, December 31, 1998.......................... 1,497,286 0.12
---------
---------
</TABLE>
During 1998, the Company entered into an agreement with one of its
stockholders whereby the stockholder agreed to provide the shares of Common
Stock due the optionholder upon the optionholder's exercise. During 1998, the
stockholder delivered 136,364 shares upon exercise of the options which are
reflected as cancellations in the above table. As of December 31, 1998, there
are 60,606 options outstanding included in the above table for which the
stockholder is responsible. These options will be vested in 1999.
There were no options granted prior to January 1, 1998. As of December 31,
1998, 50,167 of the above options were exercisable. The above options vest up to
a four-year period and have terms not to exceed 10 years. Generally, options are
granted at fair market value with exercise prices determined by the Company's
Compensation Committee. For options granted at less than fair market value, a
compensation charge will be recognized for the difference between the exercise
price and fair market value over the vesting period.
The fair value of each option grant has been estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Expected option lives..................................... 4 years
Risk-free interest rates.................................. 6.0%
Expected volatility....................................... 0%
Dividend yield............................................ 0%
</TABLE>
Because the determination of fair value of all options granted after such
time as the Company becomes a public entity will include an expected volatility
in addition to factors described in the above table, the results may not be
representative of future periods.
The following table summarizes information about options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------
WEIGHTED
AVERAGE
NUMBER OF REMAINING WEIGHTED
SHARES CONTRACTUAL AVERAGE
RANGE OF EXERCISE PRICE OUTSTANDING LIFE EXERCISE PRICE
- ------------------------------------------------ ---------- ----------- --------------
<S> <C> <C> <C>
$0.03-0.033..................................... 388,788 4.7 years $ 0.03
0.15........................................... 1,106,832 5.8 years 0.15
3.00........................................... 1,666 5.0 years 3.00
----------
1,497,286
----------
----------
</TABLE>
F-14
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
In December 1998, the Company, pursuant to the private placement which
occured in December 1998, granted 121,316 options to an officer of the Company
at an exercise price of $0.15 per share. On the date of grant, after giving
effect to the private placement, the fair market value of Common Stock was
deemed to be $3.00 per share. As a result the Company will recognize
compensation expense for the difference between fair market value on the date of
grant and the exercise price of these options over the vesting period of the
options. The effect of this on the results of operations for the year ended
December 31, 1998 has been deemed immaterial.
(8) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company is committed under operating leases, principally for office
space and equipment. Certain leases are subject to rent reviews and require
payment of expenses under escalation clauses. Rent expense and equipment rental
were $40,820, $160,257 and $700,073, respectively, for the three years ended
December 31, 1998. Future minimum base rents under terms of noncancelable
operating leases are as follows for the years ending December 31:
<TABLE>
<S> <C>
1999..................................................... $2,278,997
2000..................................................... 492,145
2001..................................................... 464,866
2002..................................................... 474,796
2003..................................................... 429,036
Thereafter............................................... 1,642,356
</TABLE>
A company controlled by a shareholder has guaranteed obligations under the
operating lease for the Company's office space. Subsequent to year end, the
Company released the shareholder of this obligation after providing a letter of
credit in the amount of approximately $1.4 million to the landlord.
LITIGATION
The Company, from time to time, becomes involved in various routine legal
proceedings in the ordinary course of its business. The Company believes that
the outcome of all pending legal proceedings and unasserted claims in the
aggregate will not have a material adverse effect on its results of operations,
financial position or liquidity.
CONTENT AND DISTRIBUTION AGREEMENTS
The Company has various content and distribution agreements with vendors.
The agreements require the Company to provide certain content and subscriptions
to the vendors in exchange for various services. The agreements expire at
various dates through 2000.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with certain of its officers. The
agreements provide for payments of approximately $623,000, $350,000 and $262,000
during December 31, 1999, 2000 and 2001, respectively, and expire at various
dates through September 30, 2001.
(9) EMPLOYEE BENEFIT PLAN
Effective January 1, 1997, the Company adopted a noncontributory savings
plan with a salary reduction arrangement in accordance with Section 401(k) of
the Internal Revenue Code. The 401(k) plan covers all eligible employees and is
funded solely by employee contributions.
F-15
<PAGE>
THESTREET.COM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(10) MAJOR CUSTOMERS
Revenue from one customer accounted for approximately $1,007,250 (22%) of
total revenue for the year ending December 31, 1998 and had $102,333 of accounts
receivable outstanding at December 31, 1998.
No customer accounted for more than 10% of revenues in 1997 and 1996.
Substantially all of the Company's revenues have been derived from within
the United States.
(11) SUBSEQUENT EVENTS (UNAUDITED)
INITIAL PUBLIC OFFERING
The Company is contemplating an initial public offering of its securities,
the shares of common stock and offering price per share to be determined.
STOCK SPLIT
All share amounts have been retroactively adjusted to reflect the
one-for-three reverse common stock split which was approved by the Company's
Board of Directors on February 16, 1999. This item is subject to stockholder
approval.
RIGHTS AGREEMENT
In February 1999, the Company's Board of Directors adopted a Rights
Agreement whereby certain rights to purchase preferred stock will be issued with
each share of common stock issued after May 7, 1998.
EQUITY INVESTMENTS
In February 1999, the Company sold 37,728 shares of Series B 9 1/2%
Cumulative Preferred Stock and 1,320,901 shares of Common Stock to the New York
Times in exchange for $3 million in cash and $12 million of services. Under the
agreement, the New York Times and its affiliates will provide $12 million of
services over a four-year period in return for its ownership position. The
$12 million will be reflected in equity as a contribution receivable.
In February 1999 the Company sold 83,333 shares of Common Stock for $1
million.
STOCK OPTION PLAN
In March 1999, the Company increased the number of shares reserved for the
issuance of stock options under the Stock Option Plan from 2,527,272 to
4,400,000.
F-16
<PAGE>
UNDERWRITING
TheStreet.com and the underwriters named below (the "Underwriters") have
entered into an underwriting agreement with respect to the shares being offered.
Subject to certain conditions, each underwriter has severally agreed to purchase
the number of shares indicated in the following table. Goldman, Sachs & Co.,
Hambrecht & Quist LLC and Thomas Weisel Partners LLC are the representatives of
the Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
- ------------------------------------------------------------------ ----------------
<S> <C>
Goldman, Sachs & Co...............................................
Hambrecht & Quist LLC.............................................
Thomas Weisel Partners LLC........................................
------
Total........................................................
------
------
</TABLE>
-------------------------
If the Underwriters sell more than the total number set forth in the table
above, the Underwriters have an option to buy up to an additional 741,667 shares
from TheStreet.com and up to an additional 83,333 shares from Mr. Kevin English,
TheStreet.com's chairman of the board, chief executive officer and president, to
cover such sales. They may exercise that option for 30 days. If any shares are
purchased pursuant to this option, the Underwriters will severally purchase
shares in approximately the same proportion as set forth in the table above.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the Underwriters by TheStreet.com. Such amounts
are shown assuming both no exercise and full exercise of the Underwriters'
option to purchase additional shares.
<TABLE>
<CAPTION>
Paid by TheStreet.com
- ---------------------------------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share........... $ $
Total............... $ $
</TABLE>
The following tables show the per share and total underwriting discounts
and commissions to be paid to the Underwriters by Mr. English assuming full
exercise of the Underwriters' option to purchase additional shares from Mr.
English.
<TABLE>
<CAPTION>
Paid by Mr.
English
------------------
<S> <C>
Per Share..................... $
Total......................... $
</TABLE>
Shares sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the Underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the Underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.
TheStreet.com, and its directors, officers and substantially all of their
stockholders have agreed with the Underwriters not to dispose of or hedge any of
their common stock or securities convertible into or exchangeable for shares of
common stock during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of the representatives. This agreement does not apply to
any existing employee benefit plans. See "Shares Eligible for Future Sale" for a
discussion of certain transfer restrictions.
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the TheStreet.com and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be TheStreet.com's historical performance, estimates of the
business potential and
U-1
<PAGE>
earnings prospects of the TheStreet.com, an assessment of the TheStreet.com's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
The common stock will be quoted on the Nasdaq National Market under the
symbol "TSCM."
In connection with the offering, the Underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the other underwriters a portion of the
underwriting discount received by it because the representatives have
repurchased shares sold by or for the account of such underwriter in stabilizing
or short covering transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
A research analyst from Hambrecht & Quist is a contributor to TheStreet.com
web site but does not receive any compensation.
The Underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
At the request of TheStreet.com, the Underwriters have reserved at the
initial public offering price up to shares of common stock for sale
to employees, directors, friends, and persons having business relationships with
TheStreet.com through a directed share program. In addition, at the request of
TheStreet.com, the Underwriters have reserved at the initial public offering
price up to 240,000 shares of common stock for sale through a directed share
program to 5,000 U.S. residents who will be randomly selected from a pool of
subscribers of TheStreet.com as of February 22, 1999. These persons will have to
meet eligibility requirements of the National Association of Securities Dealers
to purchase shares. The number of shares available for sale to the general
public in this offering will be reduced by the number of reserved shares sold.
Any reserved shares not so purchased will be offered to the general public on
the same basis as the other shares offered hereby.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has co-managed five public offerings of equity
securities and has acted as an underwriter in an additional five public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or controlling
persons, except with respect to its contractual relationship with us pursuant to
the underwriting agreement entered into in connection with this offering.
TheStreet.com estimates that its share of the total expenses of the
offering, excluding underwriting discounts and commissions, will be
approximately $2,400,000.
TheStreet.com has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
U-2
<PAGE>
INSIDE BACK COVER
I. Advertisement--The image of a standing man wearing a suit, facing away
from the camera and hiding a knife. This advertisement includes the following
text (left-hand side of page):
What corporate merger is about to get ugly?
Find out on TheStreet.com. Uncut financial news. Provocative market insight.
For a Free 30 Day Trial checkout www.thestreet.com.
www.thestreet.com
1-800-996-4TSC
Also introducing TheStreet.com Intranet Service. For more information, call
1-800-562-9571.
(c) TheStreet.com, All Rights Reserved.
II. Text Box--Headlined "Advertising" with the following text (top
right-hand corner of page):
As part of a comprehensive marketing campaign, TheStreet.com advertises in
a variety of media, including cable television networks, newspapers, magazines,
billboards and other web sites.
III. Advertisement--Includes a TheStreet.com logo and below the logo four
gift-wrapping bows in a line, enclosed by quotation marks. Below the pictures of
bows is the following text (center of the page):
"Think Stocks Not Socks"
- -Business Week, December 7, 1998
IV. Advertisement--Includes the image of an ear and the following text
(center of the page):
PSSST! WHAT'S WALL STREET
whispering?
READ (circled)
www.TheStreet.com
Get One Month Free.
V. Text Box--Headlined "Strategic Partnerships" with the following text
(bottom of the page):
TheStreet.com builds its subscriber base and brand awareness through both
subscription distribution and content syndication relationships with leading
companies.
ABCNEWS.com
America Online
DLJdirect
E*TRADE
Intuit
The New York Times Co.
3Com
Yahoo!
<PAGE>
- ------------------------------------------------------
------------------------------------------------------
- ------------------------------------------------------
------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Forward Looking Statements..................... 15
Use of Proceeds................................ 16
Dividend Policy................................ 16
Corporate Information.......................... 16
Capitalization................................. 17
Dilution....................................... 18
Selected Financial Data........................ 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.................... 21
Business....................................... 28
Management..................................... 40
Certain Transactions........................... 48
Principal Stockholders......................... 50
Description of Capital Stock................... 52
Shares Eligible for Future Sale................ 56
Legal Matters.................................. 58
Experts........................................ 58
Change in Accountants.......................... 58
Additional Information......................... 58
Index to Financial Statements.................. F-1
Underwriting................................... U-1
</TABLE>
------------------------
Through and including , 1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
Shares
THESTREET.COM, INC.
Common Stock
------------------------
[LOGO]
------------------------
GOLDMAN, SACHS & CO.
HAMBRECHT & QUIST
THOMAS WEISEL PARTNERS LLC
Representatives of the Underwriters
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses to be incurred in connection
with the offering described in this Registration Statement, all of which will be
paid by the Company. All amounts are estimates, other than the SEC registration
fee, the NASD fee, and the Nasdaq listing fee.
<TABLE>
<S> <C>
SEC Registration fee....................................... $ 20,850
NASD fee................................................... $ 8,000
Nasdaq listing fee......................................... $ 95,000
Accounting fees and expenses............................... $ 250,000
Legal fees and expenses.................................... $ 850,000
Director and officer insurance expenses.................... $ 150,000
Printing and engraving..................................... $ 700,000
Transfer Agent fees and expenses........................... $ 3,500
Blue sky fees and expenses................................. $ 15,000
Miscellaneous expenses..................................... $ 307,650
----------
Total.................................................... $2,400,000
----------
----------
</TABLE>
- ------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law ("DGCL"), as amended,
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the DGCL provides, among other things, that the Company may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the Company) by reason of the fact that the
person is or was a director, officer, agent or employee of the Company or is or
was serving at the Company's request as a director, officer, agent, or employee
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' ties, judgment, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding. The power to indemnify applies (a) if such
person is successful on the merits or otherwise in defense of any action, suit
or proceeding, or (b) if such person acted in good faith and in a manner he
reasonably believed to be in the best interest, or not opposed to the best
interest, of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The power to
indemnify applies to actions brought by or in the right of the Company as well,
but only to the extent of defense expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably incurred and not
to any satisfaction of judgment or settlement of the claim itself, and with the
further limitation that in such actions no indemnification shall be made in the
event of any adjudication of negligence or misconduct in the performance of his
duties to the Company, unless the court believes that in light of all the
circumstances indemnification should apply.
Section 174 of the DGCL provides, among other things, that a director, who
willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption, may be held liable for such actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her dissent to such
actions to be entered in the books containing the minutes of the meetings of the
board of
II-1
<PAGE>
directors at the time such action occurred or immediately after such absent
director receives notice of the unlawful acts.
Our Amended and Restated Certificate of Incorporation includes a provision
that eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
-- for any breach of the director's duty of loyalty to TheStreet.com or its
stockholders;
-- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
-- under the section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
-- for any transaction from which the director derived an improper personal
benefit.
These provisions are permitted under Delaware law.
Our Amended and Restated Bylaws provide that:
-- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law;
-- we may indemnify our other employees and agents to the same extent that
we indemnified our officers and directors, unless otherwise determined
by our Board of Directors; and
-- we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware Law.
The indemnification provisions contained in the Company's Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws are not
exclusive of any other rights to which a person may be entitled by law,
agreement, vote of stockholders or disinterested directors or otherwise. In
addition, the Company maintains insurance on behalf of its directors and
executive officers insuring them against any liability asserted against them in
their capacities as directors or officers or arising out of such status.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its inception, we issued and sold the following securities to certain
corporate and institutional investors and high net worth individuals, including
certain of our directors and officers, in transactions exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereunder:
From our inception as a limited liability company in June 1996, until May
1998, we were financed through contributions from our founders and through loans
at the prime interest rate plus 1%. In return for their contributions, our
founders received certain amounts of our Class A, B, C and D membership units of
the limited liability company and a lender received Class E units.
In May 1998, our Board of Directors approved our reorganization from a
limited liability company into a C Corporation. As part of this reorganization,
each Class C membership unit was converted into 181.81818 shares of our common
stock. In addition, our Class A and Class B membership units were converted into
shares of our Series A 9 1/2% Cumulative Preferred Stock and Series C Preferred
Stock at a ratio of one preferred share per $100 of both Class A and Class B
membership units. Our Class D and Class E membership units were converted into
shares of our Series A 9 1/2% Cumulative Preferred Stock at a ratio of one
preferred share per $100 of Class D and Class E membership units.
In May 1998, we sold 101,475 shares of our Series B 9 1/2% Cumulative
Preferred Stock ("Series B Preferred Stock") and 3,418,333 shares of our common
stock to a group of investors comprising of our founders, corporate and
institutional investors, venture capital funds and high net worth individuals
including certain of our directors and officers for an aggregate price of
approximately $10,000,000.
II-2
<PAGE>
In December 1998, we sold 243,891 shares of our Series B Preferred Stock
and 4,072,778 shares of our common stock to a group of investors comprising of
our founders, corporate and institutional investors, venture capital funds and
high net worth individuals including certain of our directors and officers for
an aggregate price of approximately $25,000,000.
In February 1999, we sold 83,333 shares of our common stock to a corporate
investor for an aggregate price of $1,000,000.
In February 1999, we also sold 37,728 shares of our Series B Preferred
Stock and 1,320,901 shares of our common stock to The New York Times Company for
an aggregate consideration of $15,000,000 in cash and services.
From time to time, we have granted stock options to employees. The
following table sets forth information regarding the grants during the past
three fiscal years:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES GRANTED EXERCISE PRICE
-------------- ----------------
<S> <C> <C>
June 18, 1996 (inception) through December 31, 1996............... -- --
January 1, 1997 through December 31, 1997......................... -- --
January 1, 1998 through December 31, 1998......................... 1,663,953 $ 0.12
</TABLE>
No underwriters were involved in connection with the sales of securities
referred to in this Item 15.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- -------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1 -- Underwriting Agreement**
3.1 -- Form of Amended and Restated Certificate of Incorporation of TheStreet.com
3.2 -- Form of Amended and Restated By-laws of TheStreet.com
4.1 -- Form of Amended and Restated Registration Rights Agreement dated as of December 21, 1998 among
TheStreet.com and stockholders named therein*
4.2 -- Form of TheStreet.com's Rights Plan
4. -- Specimen Certificate for TheStreet.com's common stock**
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP**
10.1 -- License Agreement, dated February 17, 1999, between Yahoo! Inc. and TheStreet.com, Inc.+*
10.2 -- The Amended and Restated 1998 Stock Incentive Plan of the TheStreet.com**
10.3 -- Interactive Services Agreement, dated April 16, 1998, between America Online, Inc. and TheStreet.com,
L.L.C.+*
10.3.1 -- Letter, dated July 24, 1998 from America Online, Inc.*
10.4 -- Content License and Marketing Agreement, dated as of January 12, 1999, between E*TRADE Group, Inc.
and TheStreet.com, Inc.+*
10.5 -- Employment Agreement, dated, October 6, 1998, between Kevin English and TheStreet.com, Inc.
10.6 -- Employment Agreement, dated February 22, 1999, between James Cramer and TheStreet.com, Inc.
10.7 -- Content License Agreement, dated January 1, 1998, between Yahoo! Inc. and TheStreet.com, Inc.+*
16.1 -- Letter, dated March 2, 1999 from Anchin, Block and Anchin LLP*
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1)**
24.1 -- Power of Attorney*
24.2 -- Power of Attorney of Michael Golden
99.1 -- Consent of Michael Golden*
99.2 -- Consent of International Data Corporation
99.3 -- Consent of Forrester Research, Inc.
99.4 -- Consent of @plan
99.5 -- Consent of NFO Interactive
</TABLE>
- ------------------
* Previously filed
** To be filed by amendment.
+ Confidential treatment has been requested for certain portions of these
documents.
II-3
<PAGE>
(b) Financial Statement Schedules.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing certificates in such denominations and registered in such names
as required by the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a claim for
indemnification by the registrant against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against pubic policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497 (h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bonafide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW
YORK, STATE OF NEW YORK, ON APRIL 1, 1999.
TheStreet.com, Inc.
By: _________________*________________
Name: Kevin English
Title: Chairman of the Board of
Directors, Chief Executive
Officer and President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATE INDICATED BELOW.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------------- -------------
<S> <C> <C>
* Chairman of the Board of Directors, Chief Executive April 1, 1999
Kevin English Officer and President
/s/ Paul Kothari Chief Financial Officer April 1, 1999
Paul Kothari
* Editor-in-Chief and Director April 1, 1999
Dave Kansas
* Director April 1, 1999
James J. Cramer
* Director April 1, 1999
Martin Peretz
* Director April 1, 1999
Fred Wilson
* Director April 1, 1999
Jerry Colonna
* Director April 1, 1999
Edward F. Glassmeyer
* Director April 1, 1999
Michael Golden
* By: /s/ Paul Kothari Attorney-In-Fact April 1, 1999
Paul Kothari
</TABLE>
II-5
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
For the Period from June 18, 1996 (Inception) to December 31, 1996
and the Years Ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
BALANCE AT PROVISIONS BALANCE AT
BEGINNING CHARGED TO END OF
OF PERIOD EXPENSE WRITE-OFFS PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1996...................................... $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
December 31, 1997...................................... $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
December 31, 1998...................................... $ 0 $ 40,000 $ 0 $ 40,000
-------- -------- -------- --------
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TheStreet.com, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of TheStreet.com, Inc. included in this registration
statement and have issued our report thereon dated February 9, 1999. Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The schedule listed in the index above is the responsibility
of the Company's management and is presented for purpose of complying with the
Securities and Exchange Commissions rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects, the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
February 9, 1999
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- ------ ----------------------------------------------------------------------------------------------------------
<S> <C>
1.1 -- Underwriting Agreement**
3.1 -- Form of Amended and Restated Certificate of Incorporation of TheStreet.com
3.2 -- Form of Amended and Restated By-laws of TheStreet.com
4.1 -- Form of Amended and Restated Registration Rights Agreement dated as of December 21, 1998 among
TheStreet.com and stockholders named therein*
4.2 -- Form of TheStreet.com's Rights Plan
4. -- Specimen Certificate for TheStreet.com's common stock**
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP**
10.1 -- License Agreement, dated February 17, 1999, between Yahoo! Inc. and TheStreet.com, Inc.+*
10.2 -- The Amended and Restated 1998 Stock Incentive Plan of the TheStreet.com**
10.3 -- Interactive Services Agreement, dated April 16, 1998, between America Online, Inc. and
TheStreet.com, L.L.C.+*
10.3.1 -- Letter, dated July 24, 1998 from America Online, Inc.*
10.4 -- Content License and Marketing Agreement, dated as of January 12, 1999, between E*TRADE Group, Inc.
and TheStreet.com, Inc.+*
10.5 -- Employment Agreement, dated, October 6, 1998, between Kevin English and TheStreet.com, Inc.
10.6 -- Employment Agreement, dated February 22, 1999, between James Cramer and TheStreet.com, Inc.
10.7 -- Content License Agreement, dated January 1, 1998, between Yahoo! Inc. and TheStreet.com, Inc.+*
16.1 -- Letter, dated March 2, 1999 from Anchin, Block and Anchin LLP*
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1)**
24.1 -- Power of Attorney*
24.2 -- Power of Attorney of Michael Golden
99.1 -- Consent of Michael Golden*
99.2 -- Consent of International Data Corporation
99.3 -- Consent of Forrester Research, Inc.
99.4 -- Consent of @plan
99.5 -- Consent of NFO Interactive
</TABLE>
- ------------------
* Previously filed
** To be filed by amendment.
+ Confidential treatment has been requested for certain portions of these
documents.
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
-------------------------------------------------------------------------------
Pursuant to Sections 242 and 245 of the
Delaware General Corporation Law
-------------------------------------------------------------------------------
THE STREET.COM, INC. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the "GCL"),
does hereby certify as follows:
(1) The name of the Corporation is The Street.com, Inc. The
Corporation was originally incorporated under the name The Street.com, Inc. The
original certificate of incorporation of the Corporation was filed with the
office of the Secretary of State of the State of Delaware on April 30, 1998.
(2) This Amended and Restated Certificate of Incorporation was
duly adopted by the Board of Directors of the Corporation (the "Board of
Directors") and by the stockholders of the Corporation in accordance with
Sections 228, 242 and 245 of the GCL.
(3) This Amended and Restated Certificate of Incorporation
restates and integrates and further amends the certificate of incorporation of
the Corporation, as heretofore amended or supplemented.
(4) The text of the Certificate of Incorporation is amended
and restated in its entirety as follows:
FIRST: The name of the Corporation is TheStreet.com, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, State of Delaware 19801. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may
1
<PAGE>
be organized under the General Corporation Law of the State of Delaware (the
"GCL").
FOURTH: (a) AUTHORIZED CAPITAL STOCK. The total number of shares of
stock which the Corporation shall have authority to issue is [ ] shares
of capital stock, consisting of (i) 40,000,000 shares of common stock, par value
$0.01 per share (the "Common Stock") and (ii) [ ] shares of preferred
stock, par value $0.01 per share (the "Preferred Stock").
(b) COMMON STOCK. The powers, preferences and rights, and
the qualifications, limitations and restrictions, of each class of the Common
Stock are as follows:
(1) NO CUMULATIVE VOTING. The holders of
shares of Common Stock shall not have cumulative voting rights.
(2) DIVIDENDS; STOCK SPLITS. Subject to
the rights of the holders of Preferred Stock, and subject to any other
provisions of this Amended and Restated Certificate of Incorporation, as it may
be amended from time to time, holders of shares of Common Stock shall be
entitled to receive such dividends and other distributions in cash, stock or
property of the Corporation when, as and if declared thereon by the Board of
Directors from time to time out of assets or funds of the Corporation legally
available therefor.
(3) LIQUIDATION, DISSOLUTION, ETC. In
the event of any liquidation, dissolution or winding up (either voluntary or
involuntary) of the Corporation, the holders of shares of Common Stock shall be
entitled to receive the assets and funds of the Corporation available for
distribution after payments to creditors and to the holders of any Preferred
Stock of the Corporation that may at the time be outstanding, in proportion to
the number of shares held by them, respectively.
(4) MERGER, ETC. In the event of a
merger or consolidation of the Corporation with or into another entity (whether
or not the Corporation is the surviving entity), the holders of each share of
Common Stock shall be entitled to receive the same per share consideration on a
per share basis.
(5) NO PREEMPTIVE OR SUBSCRIPTION RIGHTS. No
holder of shares of Common Stock shall be entitled to preemptive or
subscription rights.
(6) POWER TO SELL AND PURCHASE SHARES.
Subject to the requirements of applicable law, the Corporation shall have the
2
<PAGE>
power to issue and sell all or any part of any shares of any class of stock
herein or here after authorized to such persons, and for such consideration, as
the Board of Directors shall from time to time, in its discretion, determine,
whether or not greater consideration could be received upon the issue or sale of
the same number of shares of another class, and as other wise permitted by law.
Subject to the requirements of applicable law, the Corporation shall have the
power to purchase any shares of any class of stock herein or hereafter
authorized from such persons, and for such consideration, as the Board of
Directors shall from time to time, in its discretion, determine, whether or not
less consideration could be paid upon the purchase of the same number of shares
of another class, and as otherwise permitted by law.
(c) PREFERRED STOCK. The Board of Directors is hereby
expressly authorized to provide for the issuance of all or any shares of the
Preferred Stock in one or more classes or series, and to fix for each such class
or series such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights and such qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such class or series, including, without
limitation, the authority to provide that any such class or series may be (i)
subject to redemption at such time or times and at such price or prices; (ii)
entitled to receive dividends (which may be cumulative or non-cumulative) at
such rates, on such conditions, and at such times, and payable in preference to,
or in such relation to, the dividends payable on any other class or classes or
any other series; (iii) entitled to such rights upon the dissolution of, or
upon any distribution of the assets of, the Corporation; or (iv) convertible
into, or exchangeable for, shares of any other class or classes of stock, or of
any other series of the same or any other class or classes of stock, of the
Corporation at such price or prices or at such rates of exchange and with such
adjustments; all as may be stated in such resolution or resolutions.
[(d) The powers, preferences and relative, participating,
optional and other special rights, and the
3
<PAGE>
qualifications, limitations and restrictions, of the shares of preferred stock
designated (i) "Series C Preferred Stock", (ii) "Series B 9 1/2% Cumulative
Preferred Stock" and (iii) "Series A 9 1/2% Cumulative Preferred Stock" are as
set forth in this Article FOURTH and in Exhibits A, B and C, respectively, to
this Restated Certificate of Incorporation.] [This provision would need to be
included if the Restated Certificate of Incorporation is filed prior to the
Closing of the initial public offering, i.e., prior to the conversion of the
preferred stock currently outstanding. A Certificate of Elimination for each of
the three series of preferred stock would then be filed with the Delaware
Secretary of State immediately following conversion of the shares of preferred
stock.]
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(b) The number of directors of the Corporation shall be as
from time to time fixed by the Board of Directors, and such number shall never
be less than _______________________________nor more than______________________
Election of directors need not be by written ballot unless the By-Laws so
provide.
(c) The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. The initial division of the Board of Directors
into classes shall be made by the decision of the affirmative vote of a majority
of the entire Board of Directors. The term of the initial Class I directors
shall terminate on the date of the 2000 annual meeting; the term of the initial
Class II directors shall terminate on the date of the 2001 annual meeting; and
the term of the initial Class III directors shall terminate on the date of the
2002 annual meeting. At each succeeding annual meeting of stockholders begin-
4
<PAGE>
ning in 2000, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director.
(d) A director shall hold office until the annual meeting for
the year in which his or her term expires and until his or her successor shall
be elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
(e) Subject to the terms of any one or more classes or series
of Preferred Stock, any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the Board of
Directors then in office, provided that a quorum is present, and any other
vacancy occurring on the Board of Directors may be filled by a majority of the
Board of Directors then in office, even if less than a quorum, or by a sole
remaining director. Any director of any class elected to fill a vacancy
resulting from an increase in the number of directors of such class shall hold
office for a term that shall coincide with the remaining term of that class. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his predecessor.
Subject to the rights, if any, of the holders of shares of Preferred Stock then
outstanding, any or all of the directors of the Corporation may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of at least a majority of the voting power of the Corporation's then
outstanding capital stock entitled to vote generally in the election of
directors. Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
5
<PAGE>
vacancies and other features of such directorships shall be governed by the
terms of this Amended and Restated Certificate of Incorporation applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article FIFTH unless expressly provided by such terms.
(f) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the GCL,
this Amended and Restated Certificate of Incorporation, and any By-Laws adopted
by the stockholders; PROVIDED, HOWEVER, that no By-Laws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such By-Laws had not been adopted.
SIXTH: No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the GCL as the same exists or may hereafter be
amended. If the GCL is amended hereafter to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest extent authorized
by the GCL, as so amended. Any repeal or modification of this Article SIXTH by
the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification with respect to acts or omissions occurring prior to such repeal
or modification.
SEVENTH: The Corporation shall indemnify its directors and officers to
the fullest extent authorized or permitted by law, as now or hereafter in
effect, and such right to indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
PROVIDED, HOWEVER, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer (or
6
<PAGE>
his or her heirs, executors or personal or legal representatives) in connection
with a proceeding (or part thereof) initiated by such person unless such
proceeding (or part thereof) was authorized or consented to by the Board of
Directors. The right to indemnification conferred by this Article SEVENTH shall
include the right to be paid by the Corporation the expenses incurred in
defending or otherwise participating in any proceeding in advance of its final
disposition.
The Corporation may, to the extent authorized from time to
time by the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar to
those conferred in this Article SEVENTH to directors and officers of the
Corporation.
The rights to indemnification and to the advance of expenses
conferred in this Article SEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under this Amended and Restated
Certificate of Incorporation, the By-Laws of the Corporation, any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
Any repeal or modification of this Article SEVENTH by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director or officer of
the Corporation existing at the time of such repeal or modification with
respect to any acts or omissions occurring prior to such repeal or modification.
EIGHTH: A. In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-Laws of the Corporation, and except as
otherwise expressly provided in Section B of this Article EIGHTH, a Business
Combination (as hereinafter defined) shall require the affirmative vote of not
less than eighty percent (80%) of the votes entitled to be cast by the holders
of all the then outstanding shares of Voting Stock (as hereinafter defined),
voting together as a single-class, excluding Voting Stock beneficially owned by
any Interested Stockholder (as hereinafter defined). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that a
lesser percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
7
<PAGE>
B. The provisions of Section A of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is
required by law or by any other provision of this Certificate of
Incorporation or the By-Laws of the Corporation, or any agreement with
any national securities exchange, if all of the conditions specified
in either of the following Paragraphs 1 or 2 are met or, in the case of
a Business Combination not involving the payment of consideration to
the holders of the Corporation's outstanding Capital Stock (as
hereinafter defined), if the condition specified in the following
Paragraph 1 is met:
1. The Business Combination shall have been approved by a
majority (whether such approval is made prior to or subsequent
to the acquisition of beneficial ownership of the Voting
Stock that caused the Interested Stockholder to become an
Interested Stockholder) of the Continuing Directors (as
hereinafter defined).
2. All of the following conditions shall have been met:
(a) The aggregate amount of cash and the Fair Market
Value (as hereinafter defined), as of the date of
the consummation of the Business Combinations, of
consideration other than cash to be received per
share by holders of Common Stock in such Business
Combination shall be at least equal to the highest
amount determined under clauses (i), (ii), (iii) and
(iv) below:
(i)(if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested
Stockholder for any share of Common Stock in
connection with the acquisition by the
Interested Stockholder of beneficial
ownership of shares of Common Stock (x)
within the two-year period immediately prior
to the first public
8
<PAGE>
announcement of the proposed Business
Combination (the "Announcement Date") or (y)
in the transaction in which it became an
Interested Stockholder, whichever is higher,
in either case as adjusted for any
subsequent stock split, stock dividend,
subdivision or reclassification with respect
to Common Stock;
(ii) the Fair Market Value per share of
Common Stock on the Announcement Date or on
the date on which the Interested Stockholder
became an Interested Stockholder (the
"Determination Date"), whichever is higher,
as adjusted for any subsequent stock split,
stock dividend, subdivision or
reclassification with respect to Common
Stock;
(iii) (if applicable) the price per share
equal to the Fair Market Value per share of
Common Stock determined pursuant to the
immediately preceding clause (ii),
multiplied by the ratio of (x) the highest
per share price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the
Interested Stockholder for any share of
Common Stock in connection with the
acquisition by the Interested Stockholder
of beneficial ownership of shares of Common
Stock within the two-year period immediately
prior to the Announcement Date, as adjusted
for any subsequent stock split, stock
dividend, subdivision or reclassification
with respect to Common Stock to (y) the Fair
Market Value per share of Common Stock on
the first day in such two-year period on
which the Interested Stockholder acquired
beneficial ownership of any share of Common
Stock, as adjusted for any subsequent stock
split, stock dividend, subdivision or
reclassification with
9
<PAGE>
respect to Common Stock; and
(iv) the Corporation's net income per share
of Common Stock for the four full
consecutive fiscal quarters immediately
preceding the Announcement Date, multiplied
by the higher of the then price/earnings
multiple (if any) of such Interested Stock
holder or the highest price/earnings
multiple of the Corporation within the
two-year period immediately preceding the
Announcement Date (such price/earnings
multiples being determined as customarily
computed and reported in the financial
community).
(b) The aggregate amount of cash and the Fair Market
Value, as of the date of the consummation of the
Business Combination, of consideration other than
cash to be received per share by holders of shares of
any class or series of outstanding Capital Stock,
other than Common Stock, shall be at least equal to
the highest amount determined under clauses (i),
(ii), (iii) and (iv) below:
(i) (if applicable) the highest per share
price (including any brokerage commissions,
transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested
Stockholder for any share of such class or
series of Capital Stock in connection with
the acquisition by the Interested
Stockholder of beneficial ownership of
shares of such class or series of Capital
Stock (x) within the two-year period
immediately prior to the Announcement Date
or (y) in the transaction in which it
became an Interested Stockholder, whichever
is higher, in either case as adjusted for
any subsequent stock split, stock dividend,
subdivision or reclassification with
10
<PAGE>
respect to such class or series of Capital
Stock;
(ii) the Fair Market Value per share
of such class or series of Capital Stock on
the Announcement Date or on the
Determination Date, whichever is higher, as
adjusted for any subsequent stock split,
stock dividend, subdivision or
reclassification with respect to such class
or series of Capital Stock;
(iii) (if applicable) the price per share
equal to the Fair Market Value per share of
such class or series of Capital Stock
determined pursuant to the immediately
preceding clause (ii), multiplied by the
ratio of (x) the highest per share price
(including any brokerage commissions, trans-
fer taxes and soliciting dealers' fees) paid
by or on behalf of the Interested
Stockholder for any share of such class or
series of Capital Stock in connection with
the acquisition by the Interested
Stockholder of beneficial ownership of
shares of such class or series of Capital
Stock within the two-year period immedi-
ately prior to the Announcement Date, as
adjusted for any subsequent stock split,
stock dividend, subdivision or
reclassification with respect to such class
or series of Capital Stock to (y) the Fair
Market Value per share of such class or
series of Capital Stock on the first day in
such two-year period on which the Interested
Stockholder acquired beneficial ownership
of any share of such class or series of
Capital Stock, as adjusted for any
subsequent stock split, stock dividend,
subdivision or reclassification with
respect to such class or series of Capital
Stock; and (iv) (if applicable) the highest
preferential amount per share to which the
holders of shares of such
11
<PAGE>
class or series of Capital Stock would be
entitled in the event of any voluntary or
involuntary liquidation, dissolution or
winding up of the affairs of the Corporation
regardless of whether the Business
Combination to be consummated constitutes
such an event.
The provisions of this Paragraph 2 shall be required
to be met with respect to every class or series of
outstanding Capital Stock, whether or not the
Interested Stockholder has previously acquired bene-
ficial ownership of any shares of a particular class
or series of Capital Stock.
(c) The consideration to be received by holders of a
particular class or series of outstanding Capital
Stock shall be in cash or in the same form as
previously has been paid by or on behalf of the
Interested Stockholder in connection with its direct
or indirect acquisition of beneficial ownership of
shares of such class or series of Capital Stock. If
the consideration so paid for shares of any class or
series of Capital Stock varied as to form, the form
of consideration for such class or series of Capital
Stock shall be either cash or the form used to
acquire beneficial ownership of the largest number
of shares of such class or series of Capital Stock
previously acquired by the Interested Stockholder.
(d) After the Determination Date and prior to the
consummation of such Business Combination: (i) except
as approved by a majority of the Continuing
Directors, there shall have been no failure to de-
clare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative)
payable in accordance with the terms of any
outstanding Capital Stock; (ii) there shall have been
no
12
<PAGE>
reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the
Common Stock), except as approved by a majority of
the Continuing Directors; (iii) there shall have been
an increase in the annual rate of dividends paid on
the Common Stock as necessary to reflect any
reclassification (including any reverse stock
split), recapitalization, reorganization or any
similar transaction that has the effect of reducing
the number of outstanding shares of Common Stock,
unless the failure so to increase such annual rate is
approved by a majority of the Continuing Directors;
and (iv) such Interested Stockholder shall not have
become the beneficial owner of any additional shares
of Capital Stock except as part of the transaction
that results in such Interested Stockholder becoming
an Interested Stockholder and except in a transaction
that, after giving effect thereto, would not result
in any increase in the Interested Stockholder's
percentage beneficial ownership of any class or se-
ries of Capital Stock.
(e) After the Determination Date, such Interested
Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a
stock holder of the Corporation), of any loans,
advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation
of or in connection with such Business Combination or
otherwise.
(f) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934
and the rules and regulations thereunder (the "Act")
(or any subsequent provisions re placing such Act,
rules or regulations)
13
<PAGE>
shall be mailed to all stockholders of the
Corporation at least 30 days prior to the
consummation of such Business Combination (whether or
not such proxy or information statement is required
to be mailed pursuant to such Act or subsequent
provisions). The proxy or information statement shall
contain on the first page thereof, in a prominent
place, any statement as to the advisability (or
inadvisability) of the Business Combination that the
Continuing Directors, or any of them, may choose to
make and, if deemed advisable by a majority of the
Continuing Directors, the opinion of an investment
banking firm selected by a majority of the Continuing
Directors as to the fairness (or not) of the terms of
the Business Combination from a financial point of
view to the holders of the outstanding shares of
Capital Stock other than the Interested Stockholder
and its Affiliates or Associates (as hereinafter
defined), such investment banking firm to be paid a
reasonable fee for its services by the Corporation.
(g) Such Interested Stockholder shall not have made
any major change in the Corporation's business or
equity capital structure without the approval of a
majority of the Continuing Directors.
C. The following definitions shall apply with respect to this Article
EIGHTH:
1. The term "Business Combination" shall mean:
(a) any merger or consolidation of the Corporation or
any Subsidiary (as herein after defined) with (i) any
Interested Stockholder or (ii) any other company
(whether or not itself an Interested Stockholder)
which is or after such merger or consolidation would
be an Affiliate or Associate of an Interested
Stockholder; or
14
<PAGE>
(b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition or security
arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other ar-
rangement (in one transaction or a series of
transactions) with or for the benefit of any
Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder involving any assets,
securities or commitments of the Corporation, any
Subsidiary or any Interested Stock holder or any
Affiliate or Associate of any Interested Stockholder
having an aggregate Fair Market Value and/or
involving aggregate commitments of $10,000,000 or
more or constituting more than 5 percent of the book
value of the total assets (in the case of
transactions involving assets or commitments other
than capital stock) or 5 percent of the stockholders'
equity (in the case of transactions in capital stock)
of the entity in question (the "Substantial Part"),
as reflected in the most recent fiscal year-end
consolidated balance sheet of such entity existing at
the time the stockholders of the Corporation would
be required to approve or authorize the Business
Combination involving the assets, securities and/or
commitments constituting any Substantial Part; or
(c) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation which
is voted for or consented to by any Interested
Stockholder; or
(d) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any
other transaction (whether or not with or otherwise
involving an Interested Stock holder) that has the
effect, directly or
15
<PAGE>
indirectly, of increasing the proportionate share of
any class or series of Capital Stock, or any
securities convertible into Capital Stock or into
equity securities of any Subsidiary, that is benefi-
cially owned by any Interested Stockholder or any
Affiliate or Associate of any Interested
Stockholder; or
(e) any agreement, contract or other arrangement
providing for any one or more of the actions
specified in the foregoing clauses (a) to (d).
2. The term "Capital Stock" shall mean all capital stock of
the Corporation authorized to be issued from time to time
under Article FOURTH of this Certificate of Incorporation, and
the term "Voting Stock" shall mean all Capital Stock which by
its terms may be voted on all matters submitted to
stockholders of the Corporation generally.
3. The term "person" shall mean any individual, firm, company
or other entity and shall include any group comprised of any
person and any other person with whom such person or any
Affiliate or Associate of such person has any agreement,
arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capi-
tal Stock.
4. The term "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary and other than
any profit-sharing, employee stock ownership or other
employee benefit plan of the Corporation or any Subsidiary or
any trustee of or fiduciary with respect to any such plan
when acting in such capacity) who (a) is the beneficial owner
of Voting Stock representing ten percent (10%) or more of the
votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock; or (b) is an Affiliate or
Associate of the Corporation and at any time within the
two-year period immediately prior to the date
16
<PAGE>
in question was the beneficial owner of Voting Stock
representing ten percent (10%) or more of the votes entitled
to be cast by the holders of all then outstanding shares of
Voting Stock.
5. A person shall be a "beneficial owner" of any Capital Stock
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; (b) which such
person or any of its Affiliates or Associates has, directly or
indirectly, (i) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding
or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock. For the purposes of
determining whether a person is an Interested Stockholder
pursuant to Paragraph 4 of this Section C, the number of
shares of Capital Stock deemed to be outstanding shall include
shares deemed beneficially owned by such person through
application of this Paragraph 5 of Section C, but shall not
include any other shares of Capital Stock that may be issuable
pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or
otherwise.
6. The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under
the Act as in effect on the date that this Article EIGHTH is
approved by the Board (the term "registrant" in said Rule
12b-2 meaning in this case the Corporation).
7. The term "Subsidiary" means any company of which a majority
of any class of equity security is beneficially owned by the
17
<PAGE>
Corporation; provided, however, that for the purposes of the
definition of Interested Stockholder set forth in Paragraph 4
of this Section C, the term "Subsidiary" shall mean only a
company of which a majority of each class of equity security
is beneficially owned by the Corporation.
8. The term "Continuing Director" means any member of the
Board of Directors of the Corporation (the "Board of
Directors"), while such person is a member of the Board of
Directors, who is not an Affiliate or Associate or repre-
sentative of the Interested Stockholder and was a member of
the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any
successor of a Continuing Director while such successor is a
member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and
is recommended or elected to succeed the Continuing Director
by a majority of Continuing Directors.
9. The term "Fair Market Value" means (a) in the case of cash,
the amount of such cash; (b) in the case of stock, the highest
closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or,
if such stock is not quoted on the Composite Tape, on the New
York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange
registered under the Act on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on
the National Association of Securities Dealers, Inc. Automated
Quotations System or any similar system then in use, or if no
such quotations are available, the fair market value on the
date in question of a share of such stock as determined by a
majority of the Continuing Directors in good faith; and (c)
in the
18
<PAGE>
case of property other than cash or stock, the fair market
value of such property on the date in question as determined
in good faith by a majority of the Continuing Directors.
10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than
cash to be received" as used in Paragraphs 2.a and 2.b of
Section B of this Article EIGHTH shall include the shares of
Common Stock and/or the shares of any other class or series of
Capital Stock retained by the holders of such shares.
D. A majority of the Continuing Directors shall have the power and duty
to determine for the purposes of this Article EIGHTH, on the basis of
information known to them after reasonable inquiry, (a) whether a
person is an Interested Stockholder, (b) the number of shares of
Capital Stock or other securities beneficially owned by any person, (c)
whether a person is an Affiliate or Associate of another, (d) whether
the assets that are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $10,000,000 or more,
and (e) whether the assets or securities that are the subject of any
Business Combination constitute a Substantial Part. Any such
determination made in good faith shall be binding and conclusive on all
parties. E. Nothing contained in this Article EIGHTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law. F. The fact that any Business Combination complies with
the provisions of Section B of this Article EIGHTH shall not be
construed to impose any fiduciary duty, obligation or responsibility
on the Board of Directors, or any member thereof, to approve such
Business Combination or recommend its adoption or approval to the
shareholders of the Corporation, nor shall such compliance limit, pro-
hibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and
responses taken with respect to such Business Combination.
19
<PAGE>
G. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that a lesser percentage or separate class vote may be
specified by law, this Certificate of Incorporation or the By-Laws of
the Corporation), the affirmative vote of the holders of not less than
eighty percent (80%) of the votes entitled to be cast by the holders
of all the then outstanding shares of Voting Stock, voting together as
a single class, excluding Voting Stock beneficially owned by any
Interested Stockholder, shall be required to amend or repeal, or adopt
any provisions inconsistent with, this Article EIGHTH; provided,
however, that this Section G shall not apply to, and such eighty
percent (80%) vote shall not be required for, any amendment, repeal or
adoption unanimously recommended by the Board of Directors if all of
such directors are persons who would be eligible to serve as Continuing
Directors within the meaning of Section C, Paragraph 8 of this Article
EIGHTH.
NINTH: Unless otherwise required by law, special meetings of
stockholders, for any purpose or purposes may be called by either (i) the
Chairman of the Board of Directors, if there be one, (ii) the President, or
(iii) the Board of Directors. The ability of the stockholders to call a special
meeting is hereby specifically denied.
TENTH: Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation, and the ability of the stockholders to
consent in writing to the taking of any action is hereby specifically denied.
ELEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
TWELFTH: In furtherance and not in limitation of the powers conferred
upon it by the laws of the State of Delaware, the Board of Directors shall have
the power to
20
<PAGE>
adopt, amend, alter or repeal the Corporation's By-Laws. The affirmative vote of
at least a majority of the entire Board of Directors shall be required to adopt,
amend, alter or repeal the Corporation's By-Laws. The Corporation's By-Laws
also may be adopted, amended, altered or repealed by the affirmative vote of the
holders of at least eighty percent (80%) of the voting power of the shares
entitled to vote at an election of directors.
THIRTEENTH: A. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Amended and Restated
Certificate of Incorporation in the manner now or hereafter prescribed in this
Amended and Restated Certificate of Incorporation, the Corporation's By-Laws or
the GCL, and all rights herein conferred upon stockholders are granted subject
to such reservation; provided, however, that, notwithstanding any other
provision of this Amended and Restated Certificate of Incorporation (and in
addition to any other vote that may be required by law), the affirmative vote of
the holders of at least eighty percent (80%) of the voting power of the shares
entitled to vote at an election of directors shall be required to amend, alter,
change or repeal, or to adopt any provision as part of this Amended and Restated
Certificate of Incorporation inconsistent with the purpose and intent of
Articles FIFTH, EIGHTH, NINTH, TENTH and TWELFTH of this Amended and Restated
Certificate of Incorporation or this Article THIRTEENTH.
21
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended
and Restated Certificate of Incorporation to be executed on its behalf this
__ day of __, 1999.
TheStreet.com, Inc.
By:________________________
Name:
Title:
22
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
THESTREET.COM, INC.
A Delaware Corporation
Effective_____________ , 1999
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE I - OFFICES.................................................................................1
Section 1. Registered Office........................................................1
Section 2. Other Offices............................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS...............................................................1
Section 1. Place of Meetings........................................................1
Section 2. Annual Meetings..........................................................1
Section 3. Special Meetings.........................................................2
Section 4. Quorum...................................................................2
Section 5. Proxies..................................................................3
Section 6. Voting...................................................................4
Section 7. Nature of Business at Meetings
of Stockholders..........................................................4
Section 8. List of Stockholders Entitled
to Vote..................................................................5
Section 9. Stock Ledger.............................................................6
Section 10. Record Date. ...........................................................6
Section 11. Inspectors of Election...................................................7
ARTICLE III - DIRECTORS.............................................................................7
Section 1. Number and Election of Directors.........................................7
Section 2. Nomination of Directors..................................................8
Section 3. Vacancies................................................................9
Section 4. Duties and Powers.......................................................10
Section 5. Organization............................................................10
Section 6. Resignations and Removals
of Directors............................................................10
Section 7. Meetings................................................................11
Section 8. Quorum..................................................................11
Section 9. Actions of Board........................................................11
Section 10. Meetings by Means of Conference
Telephone...............................................................12
Section 11. Committees..............................................................12
Section 12. Compensation............................................................12
Section 13. Interested Directors....................................................13
ARTICLE IV - OFFICERS..............................................................................13
Section 1. General.................................................................13
Section 2. Election................................................................14
Section 3. Voting Securities Owned by
the Corporation.........................................................14
Section 4. Chairman of the Board of Directors......................................14
Section 5. President...............................................................15
Section 6. Vice Presidents.........................................................15
Section 7. Secretary...............................................................16
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<PAGE>
PAGE
----
Section 8. Treasurer...............................................................16
Section 9. Assistant Secretaries...................................................17
Section 10. Assistant Treasurers....................................................17
Section 11. Other Officers..........................................................18
ARTICLE V - STOCK..................................................................................18
Section 1. Form of Certificates....................................................18
Section 2. Signatures..............................................................18
Section 3. Lost, Destroyed, Stolen or Mutilated
Certificates............................................................18
Section 4. Transfers...............................................................19
Section 5. Transfer and Registry Agents............................................19
Section 6. Beneficial Owners.......................................................19
ARTICLE VI - NOTICES...............................................................................20
Section 1. Notices.................................................................20
Section 2. Waivers of Notice.......................................................20
ARTICLE VII - GENERAL PROVISIONS...................................................................20
Section 1. Dividends...............................................................20
Section 2. Disbursements...........................................................21
Section 3. Fiscal Year.............................................................21
Section 4. Corporate Seal..........................................................21
ARTICLE VIII - INDEMNIFICATION.....................................................................21
Section 1. Power to Indemnify in Actions,
Suits or Proceedings Other than
Those by or in the Right of the
Corporation.............................................................21
Section 2. Power to Indemnify in Actions,
Suits or Proceedings by or in
the Right of the Corporation............................................22
Section 3. Authorization of Indemnification........................................23
Section 4. Good Faith Defined......................................................23
Section 5. Indemnification by a Court..............................................24
Section 6. Expenses Payable in Advance.............................................24
Section 7. Nonexclusivity of Indemnification
and Advancement of Expenses.............................................25
Section 8. Insurance...............................................................25
Section 9. Certain Definitions.....................................................25
Section 10. Survival of Indemnification and
Advancement of Expenses.................................................26
Section 11. Limitation on Indemnification...........................................26
ii
<PAGE>
PAGE
----
Section 12. Indemnification of Employees and
Agents..................................................................26
ARTICLE IX - AMENDMENTS............................................................................27
Section 1. Amendments..............................................................27
Section 2. Entire Board of Directors...............................................27
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
THESTREET.COM, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have
offices at such other places, both within and without the State of Delaware, as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. The annual meetings of
stockholders shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect directors, and
transact such other business as may properly be brought before the meeting.
Written notice of the annual meeting stating the place, date and hour of
<PAGE>
the meeting shall be given to each stockholder entitled to vote at such meeting
not less than ten nor more than sixty days before the date of the meeting.
SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by
law or by the certificate of incorporation of the Corporation, as amended and
restated from time to time (the "Certificate of Incorporation"), special meet-
ings of stockholders, for any purpose or purposes, may be called by either (i)
the Chairman of the Board of Directors, (ii) the President, or (iii) the Board
of Directors in accordance with the provisions of the Certificate of
Incorporation in effect as of the date hereof. Such request shall state the
purpose or purposes of the proposed meeting. At a special meeting of the
stockholders, only such business shall be conducted as shall be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at such meeting.
SECTION 4. QUORUM. Except as otherwise required by law or by
the Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting not
2
<PAGE>
less than ten nor more than sixty days before the date of the meeting.
SECTION 5. PROXIES. Any stockholder entitled to vote may do
so in person or by his or her proxy appointed by an instrument in writing
subscribed by such stockholder or by his or her attorney thereunto authorized,
delivered to the Secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date, unless said proxy
provides for a longer period. Without limiting the manner in which a
stockholder may authorize another person or persons to act for him or her as
proxy, either of the following shall constitute a valid means by which a
stockholder may grant such authority:
(i) A stockholder may execute a writing authorizing
another person or persons to act for him or her as proxy. Execution may
be accomplished by the stockholder or his or her authorized officer,
director, employee or agent signing such writing or causing his or her
signature to be affixed to such writing by any reasonable means,
including, but not limited to, by facsimile signature.
(ii) A stockholder may authorize another person or
persons to act for him or her as proxy by transmitting or authorizing
the transmission of a telegram or other means of electronic
transmission to the person who will be the holder of the proxy or to a
proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the
proxy to receive such transmission, provided that any such telegram or
other means of electronic transmission must either set forth or be sub-
mitted with information from which it can be determined that the
telegram or other electronic transmission was authorized by the stock-
holder.
Any copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission authorizing another person or persons to act as proxy
for a stockholder may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used;
3
<PAGE>
provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission.
SECTION 6. VOTING. At all meetings of the stockholders at
which a quorum is present, except as otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the affirmative vote of the holders of a
majority of the total number of votes of the capital stock present in person or
represented by proxy and entitled to vote on such question, voting as a single
class. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his or her discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
SECTION 7. NATURE OF BUSINESS AT MEETINGS OF STOCKHOLDERS. No
business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (c) otherwise properly brought before the
annual meeting by any stockholder of the Company (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 7
and on the record date for the determination of stockholders entitled to vote at
such annual meeting and (ii) who complies with the notice procedures set forth
in this Section 7.
In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company not less than sixty (60) days nor more than ninety (90) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; PROVIDED, HOWEVER, that
4
<PAGE>
in the event that the annual meeting is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the Company
which are owned beneficially or of record by such stockholder, (iv) a
description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 7, PROVIDED, HOWEVER, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 7 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted.
SECTION 8. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to
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vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
of the Corporation who is present.
SECTION 9. STOCK LEDGER. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 8 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 10. RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and which
record date: (1) in the case of determination of stockholders entitled to vote
at any meeting of stockholders or adjournment thereof, shall not be more than
sixty nor less than ten days before the date of such meeting; and (2) in the
case of any other action, shall not be more than sixty days prior to such other
action. If no record date is fixed: (1) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (2) the record date for
determining stockholders for any other purpose shall be at the close
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of business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting
of stockholders, the Board by resolution or the Chairman or President shall
appoint one or more inspectors of election to act at the meeting and make a
written report thereof. One or more other persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is present, ready and willing to act at a meeting of stockholders, the
Chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Unless otherwise required by law, inspectors may be officers, employees
or agents of the Corporation. Each inspector, before entering upon the discharge
of his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
or her ability. The inspector shall have the duties prescribed by law and shall
take charge of the polls and, when the vote is completed, shall make a
certificate of the result of the vote taken and of such other facts as may be
required by law.
ARTICLE III
DIRECTORS
---------
SECTION 1. NUMBER AND ELECTION OF DIRECTORS. The Board of
Directors shall initially consist of ___ members, which number may be changed
from time to time by resolution adopted by the Board of Directors, in accor-
dance with the provisions of Article V of the Amended and Restated Certificate
of Incorporation. Except as provided in Section 3 of this Article III,
directors shall be elected by the stockholders at the annual meetings of
stockholders, and each director so elected shall hold office until such
director's successor is duly elected and qualified, or until such director's
death, or until such director's earlier resignation or removal. Directors need
not be stockholders.
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SECTION 2. NOMINATION OF DIRECTORS. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Company, except as may be otherwise provided in the
Certificate of Incorporation with respect to the right of holders of preferred
stock of the Corporation to nominate and elect a specified number of directors
in certain circumstances. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders, or at any special
meeting of stockholders called for the purpose of electing directors, (a) by or
at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Company (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 2
and on the record date for the determination of stockholders entitled to vote
at such meeting and (ii) who complies with the notice procedures set forth in
this Section 2.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company (a) in the case of an annual meeting, not less than sixty (60) days nor
more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; PROVIDED, HOWEVER, that in the event
that the annual meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the annual meeting
was made, whichever first occurs; and (b) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever first occurs.
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To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Company which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the Company which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of
the Exchange Act and the rules and regulations promulgated thereunder. Such
notice must be accompanied by a written consent of each proposed nominee to
being named as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the
Company unless nominated in accordance with the procedures set forth in this
Section 2. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
SECTION 3. VACANCIES. The filling of any
vacancy on the Board of Directors that results from an
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increase in the number of directors shall be governed by the Amended and
Restated Certificate of Incorporation. Whenever the holders of any one or more
class or classes or series of preferred stock of the Corporation shall have the
right, voting separately as a class, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall also be governed by the Amended and
Restated Certificate of Incorporation.
SECTION 4. DUTIES AND POWERS. The business of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws required to be exercised or done by the stockholders.
SECTION 5. ORGANIZATION. At each meeting of the Board of
Directors, the Chairman of the Board of Directors, or, in his or her absence, a
director chosen by a majority of the directors present, shall act as Chairman.
The Secretary of the Corporation shall act as Secretary at each meeting of the
Board of Directors. In case the Secretary shall be absent from any meeting of
the Board of Directors, an Assistant Secretary shall perform the duties of
Secretary at such meeting; and in the absence from any such meeting of the
Secretary and all the Assistant Secretaries, the Chairman of the meeting may
appoint any person to act as Secretary of the meeting.
SECTION 6. RESIGNATIONS AND REMOVALS OF DIRECTORS. Any
director of the Corporation may resign at any time, by giving written notice to
the Chairman of the Board of Directors, the President or the Secretary of the
Corporation. Such resignation shall take effect at the time therein specified
or, if no time is specified, immediately; and, unless otherwise specified in
such notice, the acceptance of such resignation shall not be necessary to make
it effective. Except as otherwise required by law and subject to the rights, if
any, of the holders of shares of preferred stock then outstanding, any director
or the entire Board of Directors may be removed from office at any time, but
only for cause, and only by the affirmative vote of the holders of at least a
majority in
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voting power of the issued and outstanding capital stock of the Corporation
entitled to vote in the election of directors.
SECTION 7. MEETINGS. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware. Regular meetings of the Board of Directors may be
held at such time and at such place as may from time to time be determined by
the Board of Directors and, unless required by resolution of the Board of
Directors, without notice. Special meetings of the Board of Directors may be
called by the Chairman of the Board of Directors, the Vice Chairman, if there be
one, or a majority of the directors then in office. Notice thereof stating the
place, date and hour of the meeting shall be given to each director either by
mail not less than forty-eight (48) hours before the date of the meeting, by
telephone, facsimile or telegram on twenty-four (24) hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
SECTION 8. QUORUM. Except as may be otherwise required by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall consti-
tute a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting of the time
and place of the adjourned meeting, until a quorum shall be present.
SECTION 9. ACTIONS OF BOARD. Unless otherwise provided by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
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SECTION 10. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 10 shall
constitute presence in person at such meeting.
SECTION 11. COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors
of the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a designation
by the Board of Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to the
extent permitted by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation.
Each committee shall keep regular minutes and report to the Board of Directors
when required.
SECTION 12. COMPENSATION. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Direc-
tors or a stated salary, or such other emoluments as the Board of Directors
shall from time to time determine. No such payment shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
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SECTION 13. INTERESTED DIRECTORS. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because such person's or their
votes are counted for such purpose if (i) the material facts as to such person's
or their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to such person's or their relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE IV
OFFICERS
--------
SECTION 1. GENERAL. The officers of the Corporation shall be
chosen by the Board of Directors and shall include a President, a Secretary and
a Treasurer. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director) and one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law, the Certificate of
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Incorporation or these By-Laws. The officers of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, need such officers be directors of the Corporation.
SECTION 2. ELECTION. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall elect the officers
of the Corporation who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until their earlier
resignation or removal. Any officer elected by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the President or any Vice
President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the Corporation, and except
where by law the signature of the President is required, the Chairman of the
Board of
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Directors shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Corporation which may be authorized by
the Board of Directors. During the absence or disability of the President, the
Chairman of the Board of Directors shall exercise all the powers and discharge
all the duties of the President. The Chairman of the Board of Directors shall
also perform such other duties and may exercise such other powers as from time
to time may be assigned to him or her by these By-Laws or by the Board of
Directors.
SECTION 5. PRESIDENT. The President shall, subject to the
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the Corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. The President shall execute all bonds, mortgages,
contracts and other instruments of the Corporation requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these By-Laws,
the Board of Directors or the President. In the absence or disability of the
Chairman of the Board of Directors, or if there be none, the President shall
preside at all meetings of the stockholders and the Board of Directors. If there
be no Chairman of the Board of Directors, the President shall be the Chief
Executive Officer of the Corporation. The President shall also perform such
other duties and may exercise such other powers as from time to time may be
assigned to him or her by these By-Laws or by the Board of Directors.
SECTION 6. VICE PRESIDENTS. At the request of the President
or in his or her absence or in the event of his or her inability or refusal to
act (and if there be no Chairman of the Board of Directors), the Vice President
or the Vice Presidents if there is more than one (in the order designated by the
Board of Directors) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If there
be no Chairman of the Board of Directors and no Vice President, the Board of
Directors
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shall designate the officer of the Corporation who, in the absence of the
President or in the event of the inability or refusal of the President to act,
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President.
SECTION 7. SECRETARY. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision the Secretary shall be. If the Secretary
shall be unable or shall refuse to cause to be given notice of all meetings of
the stockholders and special meetings of the Board of Directors, and if there be
no Assistant Secretary, then either the Board of Directors or the President may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his or her signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
SECTION 8. TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of Direc-
tors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall
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render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of Treasurer
and for the restoration to the Corporation, in case of the Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in the Treasurer's possession or under
control of the Treasurer belonging to the Corporation.
SECTION 9. ASSISTANT SECRETARIES. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, any Vice President, if there be one, or
the Secretary, and in the absence of the Secretary or in the event of his or her
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
SECTION 10. ASSISTANT TREASURERS. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of the Treasurer's disability or refusal to act, shall
perform the duties of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer. If required
by the Board of Directors, an Assistant Treasurer shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the office
of Assistant Treasurer and for the restoration to the Corporation, in case of
the Assistant Treasurer's death, resignation, retirement or removal from office,
of all books, papers, vouchers, money and other property of whatever kind in the
Assistant Treasurer's possession or
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under control of the Assistant Treasurer belonging to the
Corporation.
SECTION 11. OTHER OFFICERS. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
-----
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation, (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by such holder of stock in the Corporation.
SECTION 2. SIGNATURES. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
SECTION 3. LOST, DESTROYED, STOLEN OR MUTILATED CERTIFICATES.
The Board of Directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or such person's legal
representative, to advertise the same in
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such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
SECTION 4. TRANSFERS. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, properly endorsed for transfer
and payment of all necessary transfer taxes; provided, however, that such
surrender and endorsement or payment of taxes shall not be required in any case
in which the officers of the Corporation shall determine to waive such
requirement. Every certificate exchanged, returned or surrendered to the
Corporation shall be marked "Cancelled," with the date of cancellation, by the
Secretary or Assistant Secretary of the Corporation or the transfer agent
thereof. No transfer of stock shall be valid as against the Corporation for any
purpose until it shall have been entered in the stock records of the Corporation
by an entry showing from and to whom transferred.
SECTION 5. TRANSFER AND REGISTRY AGENTS. The Corporation may
from time to time maintain one or more transfer offices or agencies and registry
offices or agencies at such place or places as may be determined from time to
time by the Board of Directors.
SECTION 6. BENEFICIAL OWNERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
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ARTICLE VI
NOTICES
-------
SECTION 1. NOTICES. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, facsimile, telex or cable.
SECTION 2. WAIVERS OF NOTICE.
(a) Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent to notice. Attendance
of a person at a meeting, present by person or represented by proxy, shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express purpose of objecting at the beginning of the meeting
to the transaction of any business because the meeting is not lawfully called
or convened.
(b) Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice unless so required by law, the Certificate of
Incorporation or these By-Laws.
ARTICLE VII
GENERAL PROVISIONS
Section 2. Dividends. Subject to the requirements of the GCL
and the provisions of the Certificate of Incorporation, dividends upon the
capital stock of the Corporation may be declared by the Board of Directors at
any regular or special meeting of the Board of Directors,
20
<PAGE>
and may be paid in cash, in property, or in shares of the Corporation's capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for purchasing any of the shares
of capital stock, warrants, rights, options, bonds, debentures, notes, scrip or
other securities or evidences of indebtedness of the Corporation, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for any other proper purpose, and the Board of Directors may
modify or abolish any such reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
SECTION 3. FISCAL YEAR. The fiscal year of
the Corporation shall be fixed by resolution of the Board
of Directors.
SECTION 4. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
---------------
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS
OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that such person is or was a director or officer of the
Corporation, or is or
21
<PAGE>
was a director or officer of the Corporation serving at the request of the
Corporation as a director or officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, such person had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that such person did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS
BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
22
<PAGE>
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders.
To the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith, without
the necessity of authorization in the specific case.
SECTION 4. GOOD FAITH DEFINED. For purposes of any
determination under Section 3 of this Article VIII, a person shall be deemed to
have acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation, or, with respect to
any criminal action or proceeding, to have had no reasonable cause to believe
his or her conduct was unlawful, if such person's action is based on the records
or books of account of the Corporation or another enterprise, or on information
supplied to such person by the officers of the Corporation or another enterprise
in the course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or reports
made to the Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation or another enterprise. The term
23
<PAGE>
"another enterprise" as used in this Section 4 shall mean any other corporation
or any partnership, joint venture, trust, employee benefit plan or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Section 1 or 2 of this Article VIII, as the
case may be.
SECTION 5. INDEMNIFICATION BY A COURT. Not withstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery of the State of Delaware
or any other court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by
a director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
24
<PAGE>
SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT
OF EXPENSES. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation or any By-Law, agreement, con-
tract, vote of stockholders or disinterested directors or pursuant to the
direction (howsoever embodied) of any court of competent jurisdiction or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Section 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the GCL, or otherwise.
SECTION 8. INSURANCE. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power or
the obligation to indemnify such person against such liability under the
provisions of this Article VIII.
SECTION 9. CERTAIN DEFINITIONS. For purposes of this Article
VIII, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as
25
<PAGE>
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For pur-
poses of this Article VIII, references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article VIII.
SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding
anything contained in this Article VIII to the contrary, except for proceedings
to enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer (or his or her heirs, executors or personal or legal representatives)
or advance expenses in connection with a proceeding (or part there of) initiated
by such person unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors of the Corporation.
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of
26
<PAGE>
expenses to employees and agents of the Corporation similar to those conferred
in this Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
----------
SECTION 1. AMENDMENTS. These By-Laws may be altered, amended
or repealed, in whole or in part, or new By-Laws may be adopted by the Board of
Directors or by the stockholders as provided in the Certificate of Incor-
poration.
SECTION 2. ENTIRE BOARD OF DIRECTORS. As used in this Article
IX and in these By-Laws generally, the term "entire Board of Directors" means
the total number of directors which the Corporation would have if there were no
vacancies.
27
<PAGE>
Exhibit 4.2
RIGHTS AGREEMENT
Between
THESTREET.COM, INC.
And
[ ], AS RIGHTS AGENT
Dated as of [ ], 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
Section Page
- ------- ----
1. Certain Definitions..................................................................... 1
2. Appointment of Rights Agent...............................................................7
3. Issuance of Rights Certificates...........................................................7
4. Form of Rights Certificates...............................................................10
5. Countersignature and Registration.........................................................11
6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost
or Stolen Rights Certificates.............................................................12
7. Exercise of Rights; Purchase Price; Expiration
Date of Rights............................................................................13
8. Cancellation and Destruction of Rights
Certificates..............................................................................16
9. Reservation and Availability of Capital Stock.............................................16
10. Preferred Stock Record Date...............................................................18
11. Adjustment of Purchase Price, Number and Kind
of Shares or Number of Rights.............................................................19
12. Certificate of Adjusted Purchase Price or Number of Shares................................31
13. Consolidation, Merger or Sale or Transfer of
Assets, Cash Flow or Earning Power........................................................32
14. Fractional Rights and Fractional Shares...................................................35
15. Rights of Action..........................................................................37
16. Agreement of Rights Holders...............................................................37
17. Rights Certificate Holder Not Deemed a Stock
holder....................................................................................38
18. Concerning the Rights Agent...............................................................39
19. Merger or Consolidation or Change of Name of
Rights Agent..............................................................................39
20. Duties of Rights Agent....................................................................40
<PAGE>
21. Change of Rights Agent....................................................................43
22. Issuance of New Rights Certificates.......................................................44
23. Redemption and Termination................................................................45
24. Exchange..................................................................................46
25. Notice of Certain Events..................................................................47
26. Notices...................................................................................49
27. Supplements and Amendments................................................................49
28. Successors................................................................................50
29. Determinations and Action by the Board, etc ..............................................50
30. Benefits of this Agreement................................................................51
31. Severability..............................................................................51
32. Governing Law.............................................................................52
33. Counterparts..............................................................................52
34. Descriptive Headings......................................................................52
</TABLE>
EXHIBITS
--------
Exhibit A -- Form of Certificate of Designation,
Preferences and Rights
Exhibit B -- Form of Rights Certificates
Exhibit C -- Form of Summary of Rights
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of [ ], 1999 (the "Agreement"),
between TheStreet.com, Inc., a Delaware corporation (the "Company"), and
[__________________], a [New York] banking corporation (the "Rights Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, on [ ], 1999 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of common
stock, par value $0.01 per share, of the Company (the "Common Stock")
outstanding at the close of business on the date of the consummation of the
initial public offering of the Common Stock of the Company (the "Record Date"),
and has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the Distribution Date (as
hereinafter defined) each Right initially representing the right to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the
Company (the "Preferred Stock") having the rights, powers and preferences set
forth in the form of Certificate of Designation, Preferences and Rights attached
hereto as Exhibit A, upon the terms and subject to the conditions hereinafter
set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any
Person who or which, together with all Affiliates and Associates of such Person,
shall be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the
Company, (iii) any employee benefit
<PAGE>
plan of the Company, or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan, (iv) any Person who becomes the Beneficial Owner of
fifteen percent (15%) or more of the shares of Common Stock then outstanding as
a result of a reduction in the number of shares of Common Stock outstanding due
to the repurchase of shares of Common Stock by the Company unless and until
such Person, after becoming aware that such Person has become the Beneficial
Owner of fifteen percent (15%) or more of the then outstanding shares of Common
Stock, acquires beneficial ownership of additional shares of Common Stock
representing one per cent (1%) or more of the shares of Common Stock then
outstanding, (v) any Person who owns shares of Common Stock on the date hereof
in the event that upon the consummation of the initial public offering of the
Common Stock of the Company such Person is the Beneficial Owner of 15% or more
of the then outstanding shares of Common Stock, unless and until such Person
shall purchase or otherwise become the Beneficial Owner of additional shares of
Common Stock constituting 1% or more of the shares of Common Stock then
outstanding, or (vi) any such Person who has reported or is required to report
such ownership (but less than 20%) on Schedule 13G under the Securities and
Exchange Act of 1934, as amended and in effect on the date of the Agreement (the
"Exchange Act") (or any comparable or successor report) or on Schedule 13D under
the Exchange Act (or any comparable or successor report) which Schedule 13D
does not state any intention to or reserve the right to control or influence
the management or policies of the Company or engage in any of the actions
specified in Item 4 of such schedule (other than the disposition of the Common
Stock) and, within 10 Business Days of being requested by the Company to advise
it regarding the same, certifies to the Company that such Person acquired shares
of Common Stock in excess of 14.9% inadvertently or without knowledge of the
terms of the Rights and who, together with all Affiliates and Associates,
thereafter does not acquire additional shares of Common Stock while the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding;
provided, however, that if the Person requested to so certify fails to do so
within 10 Business Days, then such Person shall become an Acquiring Person
immediately after such 10-Business-Day period.
2
<PAGE>
(b) "Act" shall mean the Securities Act of 1933.
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act.
(c) A Person shall be deemed the "Beneficial
Owner" of, and shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately
or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, (B)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event (as hereinafter defined), or (C)
securities issuable upon exercise of Rights from and after the
occurrence of a Triggering Event which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to the
Distribution Date (as herein after defined) or pursuant to Section 3(a)
or Section 22 hereof (the "Original Rights") or pursuant to Section
11(i) hereof in connection with an adjustment made with respect to any
Original Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to vote
or dispose of or has "beneficial ownership" of (as determined pursuant
to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; PROVIDED, HOWEVER, that a
3
<PAGE>
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, (B) is not reportable by such Person on Schedule 13D
under the Exchange Act (or any comparable or successor report) and (C)
does not constitute a trust, proxy, power of attorney or other device
with the purpose or effect of allowing two or more persons, acting in
concert, to avoid being deemed "beneficial owners" of such security or
otherwise avoid the status of "Acquiring Person" under the terms of
this Agreement or as part of a plan or scheme to evade the reporting
requirements under Schedule 13D or Section 13(d) or 13(g) of the
Exchange Act; or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether or
not in writing), for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in the proviso to subpara-
graph (ii) of this paragraph (d)) or disposing of any voting securities
of the Company; provided, however, that nothing in this paragraph (d)
shall cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially own,"
any securities acquired through such Person's participation in good
faith in a firm commitment underwriting until the expiration of forty
days after the date of such acquisition, and then only if such
securities continue to be owned by such Person at such expiration of
forty days and provided further, however, that any stockholder of the
Company, with affiliate(s), associate(s) or other person(s) who may be
deemed
4
<PAGE>
representatives of it serving as director(s) of the Company, shall not
be deemed to beneficially own securities held by other Persons as a
result of (i) persons affiliated or otherwise associated with such
stockholder serving as directors or taking any action in connection
therewith, (ii) discussing the status of its shares with the Company or
other stockholders of the Company similarly situated or (iii) voting or
acting in a manner similar to other stockholders similarly situated,
absent a specific finding by the Board of Directors of an express
agreement among such stockholders to act in concert with one another as
stockholders so as to cause, in the good faith judgment of the Board of
Directors, each such stockholder to be the Beneficial Owner of the
shares held by the other stockholder(s).
(e) "Business Day" shall mean any day
other than a Saturday, Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to
close.
(f) "Close of business" on any given date
shall mean 5:00 P.M., New York City time, on such date; provided, however, that
if such date is not a Business Day, it shall mean 5:00 P.M., New York City time,
on the next succeeding Business Day.
(g) "Common Stock" shall mean the common
stock, par value $0.01 per share, of the Company, except that "Common Stock"
when used with reference to any Person other than the Company shall mean the
capital stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such Person.
(h) "Common Stock Equivalents" shall have
the meaning set forth in Section 11(a)(iii) hereof.
(i) "Current Market Price" shall have the
meaning set forth in Section 11(d)(i) hereof.
(j) "Current Value" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(k) "Distribution Date" shall have the
meaning set forth in Section 3(a) hereof.
(l) "Equivalent Preferred Stock" shall
have the meaning set forth in Section 11(b) hereof.
(m) "Exchange Act" shall mean the Securities
and Exchange Act of 1934.
5
<PAGE>
(n) "Exchange Ratio" shall have the meaning set
forth in Section 24 hereof.
(o) "Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(p) "Final Expiration Date" shall have the
meaning set forth in Section 7(a) hereof.
(q) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(r) "Preferred Stock" shall mean shares
of Series A Junior Participating Preferred Stock, par value $0.01 per share, of
the Company, and, to the extent that there are not a sufficient number of shares
of Series A Junior Participating Preferred Stock authorized to permit the full
exercise of the Rights, any other series of preferred stock of the Company
designated for such purpose containing terms substantially similar to the terms
of the Series A Junior Participating Preferred Stock.
(s) "Principal Party" shall have the meaning set
forth in Section 13(b) hereof.
(t) "Purchase Price" shall have the meaning set
forth in Section 4(a)(ii) hereof.
(u) "Qualified Offer" shall have the meaning set
forth in Section 11(a)(ii) hereof.
(v) "Record Date" shall have the meaning set
forth in the WHEREAS clause at the beginning of this Agreement.
(w) "Rights" shall have the meaning set forth in
the WHEREAS clause at the beginning of this Agreement.
(x) "Rights Agent" shall have the meaning set
forth in the parties clause at the beginning of this Agreement.
(y) "Rights Certificate" shall have the meaning
set forth in Section 3(a) hereof.
(z) "Rights Dividend Declaration Date" shall
have the meaning set forth in the WHEREAS clause at the beginning of this
Agreement.
(aa) "Section 11(a)(ii) Event" shall mean any
event described in Section 11(a)(ii) hereof.
(bb) "Section 13 Event" shall mean any event
described in clauses (x), (y) or (z) of Section 13(a) hereof.
(cc) "Spread" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(dd) "Stock Acquisition Date" shall mean the
first date of public announcement (which, for purposes of this definition,
6
<PAGE>
shall include, without limitation, a report filed or amended pursuant to Section
13(d) under the Exchange Act) by the Company or an Acquiring Person that an
Acquiring Person has become such other than pursuant to a Qualified Offer.
(ee) "Subsidiary" shall mean, with reference
to any Person, any corporation of which an amount of voting securities
sufficient to elect at least a majority of the directors of such corporation is
beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.
(ff) "Substitution Period" shall have the
meaning set forth in Section 11(a)(iii) hereof.
(gg) "Summary of Rights" shall have the
meaning set forth in Section 3(b) hereof.
(hh) "Trading Day" shall have the meaning
set forth in Section 11(d)(i) hereof.
(ii) "Triggering Event" shall mean any
Section 11(a)(ii) Event or any Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions here of, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-rights agents as
it may deem necessary or desirable.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the close of
business on the tenth Business Day after the Stock Acquisition Date (or, if the
tenth Business Day after the Stock Acquisition Date occurs before the Record
Date, the close of business on the Record Date), or (ii) the close of business
on the tenth Business Day (or such later date as the Board shall determine)
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would become an Acquiring
7
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Person, in either instance other than pursuant to a Qualified Offer (the earlier
of (i) and (ii) being herein referred to as the "Distribution Date"), (x) the
Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for the Common Stock registered in the names of
the holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate certificates, and
(y) the Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company). As soon
as practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage-prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more right certificates,
in substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(p) hereof,
at the time of distribution of the Rights Certificates, the Company shall make
the necessary and appropriate rounding adjustments (in accordance with Section
14(a) hereof) so that Rights Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights. As of
and after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) The Company will make available, as
promptly as practicable following the Record Date, a copy of a Summary of
Rights, in substantially the form attached hereto as Exhibit C (the "Summary of
Rights") to any holder of Rights who may so request from time to time prior to
the Expiration Date. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7(a) hereof), the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued
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shall also constitute the transfer of the Rights associated with such shares of
Common Stock.
(c) Rights shall be issued in respect of
all shares of Common Stock which are issued (whether originally issued or from
the Company's treasury) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such
shares of Common Stock shall also be deemed to be certificates for Rights, and
shall bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement between
TheStreet.com, Inc. (the "Company") and the Rights Agent thereunder
(the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
offices of the Company. Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge,
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by
any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
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Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the
forms of election to purchase and of assignment to be printed on the reverse
thereof) shall each be substantially in the form set forth in Exhibit B hereto
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-hundredths
of a share of Preferred Stock as shall be set forth therein at the price set
forth therein (such exercise price per one one-hundredth of a share, the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to
Section 3(a), Section 11(i) or Section 22 hereof that represents Rights
beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who be comes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
such Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect avoidance of Section
7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section
11 hereof upon transfer, exchange, replacement or adjustment of any other Rights
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Certificate referred to in this sentence, shall contain (to the extent feasible)
the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of the Rights Agreement.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed
on behalf of the Company by its Chairman of the Board, its President or
any Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be counter-
signed by the Rights Agent, either manually or by facsimile signature, and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company who shall have signed any of the Rights Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the
Rights Agent will keep, or cause to be kept, at its principal office or offices
designated as the appropriate place for surrender of Rights Certificates upon
exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced
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on its face by each of the Rights Certificates and the date of each of the
Rights Certificates.
Section 6. TRANSFER, SPLIT-UP, COMBINATION
AND EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR
STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section
4(b), Section 7(e) and Section 14 hereof, at any time after the close of
business on the Distribution Date, and at or prior to the close of business on
the Expiration Date, any Rights Certificate or Certificates (other than Rights
Certificates representing Rights that may have been exchanged pursuant to
Section 24 hereof) may be transferred, split up, combined or exchanged for
another Rights Certificate or Certificates, entitling the registered holder to
purchase a like number of one one-hundredths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitles such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 hereof and
Section 24 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
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(b) Upon receipt by the Company and the
Rights Agent of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Rights Certificate, and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION
DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, at
any time after the Distribution Date the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part upon surrender of the Rights Certificate, with the
form of election to purchase and the certificate on the re verse side thereof
duly executed, to the Rights Agent at the principal office or offices of the
Rights Agent designated for such purpose, together with payment of the aggregate
Purchase Price with respect to the total number of one one-hundredths of a share
(or other securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i) 5:00
P.M., New York City time, on the tenth anniversary of the date of the
consummation of the initial public offering of the Common Stock of the Company,
or such later date as may be established by the Board of Directors prior to the
expiration of the Rights (such date, as it may be extended by the Board, the
("Final Expiration Date"), or (ii) the time at which the Rights are redeemed or
exchanged as provided in Section 23 and Section 24 hereof (the earlier of (i)
and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one
one-hundredth of a share of Preferred Stock pursuant to the exercise of a Right
shall initially be the amount equal to the product of four times the average
daily closing price of the Common Stock for the first five days of
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<PAGE>
trading subsequent to the consummation of the initial public offering of the
Common Stock, and shall be subject to adjustment from time to time as provided
in Section 11 and Section 13(a) hereof and shall be payable in accordance with
paragraph (c) below.
(c) Upon receipt of a Rights Certificate
representing exercisable Rights, with the form of election to purchase and the
certificate duly executed, accompanied by payment, with respect to each Right so
exercised, of the Purchase Price per one one-hundredth of a share of Preferred
Stock (or other shares, securities, cash or other assets, as the case may be) to
be purchased as set forth below and an amount equal to any applicable transfer
tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly
(i) (A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-hundredths of a share of Preferred
Stock to be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of shares of Preferred Stock issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one
one-hundredths of a share of Preferred Stock as are to be purchased (in which
case certificates for the shares of Preferred Stock represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or,
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the Purchase Price
(as such amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be
made in cash or by certified bank check or bank draft payable to the order of
the Company or shares of Common Stock (having a value determined pursuant to
Section 11(a)(iii) hereof). In the event that the Company is obligated to issue
other securities (including
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<PAGE>
Common Stock) of the Company, pay cash and/or distribute other property pursuant
to Section 11(a) hereof, the Company will make all arrangements necessary so
that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate. The Company reserves
the right to require prior to the occurrence of a Triggering Event that, upon
any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock would be issued.
(d) In case the registered holder of any
Rights Certificate shall exercise less than all the Rights evidenced thereby, a
new Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of, the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this
Agreement to the contrary, from and after the first occurrence of a Section
11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or any other Person
as a result of its
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<PAGE>
failure to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this
Agreement to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder upon the
occurrence of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate contained
in the form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS
CERTIFICATES. All Rights Certificates surrendered for the purpose of exercise,
transfer, split-up, combination or exchange shall, if surrendered to the
Company or any of its agents, be delivered to the Rights Agent for cancellation
or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled
by it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF
CAPITAL STOCK.
(a) The Company covenants and agrees that
it will cause to be reserved and kept available out of its authorized and
unissued shares of Preferred Stock (and, following the occurrence of a
Triggering Event, out of its authorized and unissued shares of Common Stock
and/or other securities or out of its authorized and issued shares held in its
treasury), the number of shares of Preferred Stock (and, following the
occurrence of a
16
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Triggering Event, Common Stock and/or other securities) that, as provided in
this Agreement including Section 11(a)(iii) hereof, will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock and/or
other securities) issuable and deliverable upon the exercise of the Rights may
be listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to
(i) file, as soon as practicable following the earliest date after the
first occurrence of a Section 11(a)(ii) Event on which the consideration to be
delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) hereof, a registration statement under the
Act, with respect to the securities purchasable upon exercise of the Rights on
an appropriate form, (ii) cause such registration statement to become effective
as soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the date of the
expiration of the Rights. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension has been rescinded. In
addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision
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of this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained, the exercise thereof shall not be permitted under applicable law,
or a registration statement shall not have been declared effective.
(d) The Company covenants and agrees that
it will take all such action as may be necessary to ensure that all one
one-hundredths of a share of Preferred Stock (and, following the occurrence of
a Triggering Event, Common Stock and/or other securities) delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and
agrees that it will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Rights Certificates and of any certificates for a number of one
one-hundredths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Rights Certificates to a Person other
than, or the issuance or delivery of a number of one one-hundredths of a share
of Preferred Stock (or Common Stock and/or other securities, as the case may be)
in respect of a name other than that of the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) in a name
other than that of the registered holder upon the exercise of any Rights until
such tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
Section 10. PREFERRED STOCK RECORD DATE. Each person in whose
name any certificate for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such
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fractional shares of Preferred Stock (or Common Stock and/or other securities,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares
(fractional or otherwise) on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Stock (or Common Stock and/or
other securities, as the case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate shall not be entitled to any rights of a stockholder of the Company
with respect to shares for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding Preferred
Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including
any such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision,
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combination or reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment
of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such date and at
a time when the Preferred Stock transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) In the event any Person shall, at any time after
the Rights Dividend Declaration Date, become an Acquiring Person,
unless the event causing such Person to become an Acquiring Person is a
transaction set forth in Section 13(a) hereof, or is an acquisition of
shares of Common Stock pursuant to a tender offer or an exchange offer
for all outstanding shares of Common Stock at a price and on terms
determined by at least a majority of the members of the Board of
Directors who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of an Acquiring
Person, after receiving advice from one or more investment banking
firms, to be (a) at a price which is fair to stockholders and not
inadequate (taking into account all factors which such members of the
Board deem relevant, including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise in
the best interests of the Company and its stockholders (a "Qualified
20
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Offer"), then, promptly following the occurrence of such event, proper
provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise thereof at the then current Purchase
Price in accordance with the terms of this Agreement, in lieu of a
number of one one-hundredths of a share of Preferred Stock, such number
of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the
then number of one one-hundredths of a share of Preferred Stock for
which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (y) dividing that product
(which, following such first occurrence, shall thereafter be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such
first occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common
Stock which are authorized by the Company's Restated Certificate of
Incorporation, but which are not outstanding or reserved for issuance
for purposes other than upon exercise of the Rights, are not sufficient
to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) of this Section 11(a), the Company shall
(A) determine the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value"), and (B) with respect to each
Right (subject to Section 7(e) hereof), make adequate provision to
substitute for the Adjustment Shares, upon the exercise of a
Right and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other
equity securities of the Company (including, without limitation,
shares, or units of shares, of preferred stock, such as the Preferred
Stock, which the Board has deemed to have essentially the same value or
economic rights as shares of Common
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Stock (such shares of preferred stock being referred to as "Common
Stock Equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value (less the amount of any reduction in
the Purchase Price), where such aggregate value has been determined by
the Board based upon the advice of a nationally recognized investment
banking firm selected by the Board; PROVIDED, HOWEVER, that if the
Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y)
the date on which the Company's right of redemption pursuant to Section
23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the
extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. For purposes of the
preceding sentence, the term "Spread" shall mean the excess of (i) the
Current Value over (ii) the Purchase Price. If the Board determines in
good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) day period set forth above may be extended
to the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional shares
(such thirty (30) day period, as it may be extended, is herein called
the "Substitution Period"). To the extent that action is to be taken
pursuant to the first and/or third sentences of this Section
11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights, and (2) may suspend the exercisability of the Rights until
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the expiration of the Substitution Period in order to seek such
shareholder approval for such authorization of additional shares and/or
to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of each Adjustment Share shall be the current
market price per share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the per share or per unit value of any Common Stock
Equivalent shall be deemed to equal the current market price per share
of the Common Stock on such date.
(b) In case the Company shall fix a
record date for the issuance of rights, options or warrants to all holders of
Preferred Stock entitling them to subscribe for or purchase (for a period
expiring within forty-five (45) calendar days after such record date) Preferred
Stock (or shares having the same rights, privileges and preferences as the
shares of Preferred Stock ("Equivalent Preferred Stock")) or securities
convertible into Preferred Stock or Equivalent Preferred Stock at a price per
share of Preferred Stock or per share of Equivalent Preferred Stock (or having
a conversion price per share, if a security convertible into Preferred Stock or
Equivalent Preferred Stock) less than the Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Preferred Stock outstanding on such record date, plus the number of shares of
Preferred Stock which the aggregate offering price of the total number of shares
of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the
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number of additional shares of Preferred Stock and/or Equivalent Preferred Stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration, part or all of
which may be in a form other than cash, the value of such consideration shall be
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for
a distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or evidences
of indebtedness, or of subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock, and the denominator of which shall be such Current Market Price
(as determined pursuant to Section 11(d) hereof) per share of Preferred Stock.
Such adjustments shall be made successively whenever such a record date is
fixed,
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and in the event that such distribution is not so made, the Purchase Price shall
be adjusted to be the Purchase Price which would have been in effect if such
record date had not been fixed.
(d)(i) For the purpose of any computation
hereunder, other than computations made pursuant to Section 11(a)(iii)
hereof, the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such Common
Stock for the thirty (30) consecutive Trading Days immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such Common
Stock for the ten (10) consecutive Trading Days immediately following such date;
PROVIDED, HOWEVER, that in the event that the Current Market Price per share of
the Common Stock is determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities convertible into
shares of such Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred prior to the
commencement of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, as set forth above, then, and in each such case, the Current Market
Price shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the shares of Common
Stock are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low
25
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asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or such
other system then in use, or, if on any such date the shares of Common Stock are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Common
Stock selected by the Board. If on any such date no market maker is making a
market in the Common Stock, the fair value of such shares on such date as
determined in good faith by the Board shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a Business Day. If the
Common Stock is not publicly held or not so listed or traded, Current Market
Price per share shall mean the fair value per share as determined in good faith
by the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the Current Market Price per share of Preferred Stock shall be deter-
mined in the same manner as set forth above for the Common Stock in
clause (i) of this Section 11(d) (other than the last sentence
thereof). If the Current Market Price per share of Preferred Stock
cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described in
clause (i) of this Section 11(d), the Current Market Price per share of
Preferred Stock shall be conclusively deemed to be an amount equal to
100 (as such number may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect to the
Common Stock occurring after the date of this Agreement) multiplied by
the Current Market Price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or
traded, Current Market Price per share of the Preferred Stock shall
mean the fair value per share as determined in good faith by the
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Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes. For all
purposes of this Agreement, the Current Market Price of a Unit shall be
equal to the Current Market Price of one share of Preferred Stock
divided by 100.
(e) Anything herein to the contrary not
withstanding, no adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of
a share of Common Stock or other share or one-millionth of a share of Preferred
Stock, as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three (3) years from the date of the transaction which
mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made
pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right
thereafter exercised shall become entitled to receive any shares of capital
stock other than Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and
the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the
Company subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
one one-hundredths of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
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(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of the
Purchase Price as a result of the calculations made in Sections 11(b)
and (c), each Right outstanding immediately prior to the making
of such adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of one one-hundredths of a share of
Preferred Stock (calculated to the nearest one-millionth) obtained by (i)
multiplying (x) the number of one one-hundredths of a share covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the
date of any adjustment of the Purchase Price to adjust the number of Rights, in
lieu of any adjustment in the number of one one-hundredths of a share of
Preferred Stock purchasable upon the exercise of a Right. Each of the Rights
outstanding after the adjustment in the number of Rights shall be exercisable
for the number of one one-hundredths of a share of Preferred Stock for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest one-ten-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to
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<PAGE>
the date of adjustment, and upon surrender thereof, if required by the Company,
new Rights Certificates evidencing all the Rights to which such holders shall
be entitled after such adjustment. Rights Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Purchase Price) and
shall be registered in the names of the holders of record of Rights Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or
change in the Purchase Price or the number of one one-hundredths of a share of
Preferred Stock issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-hundredth of a share and the number of one
one-hundredth of a share which were expressed in the initial Rights Certificates
issued hereunder.
(k) Before taking any action that would
cause an adjustment reducing the Purchase Price below the then stated value, if
any, of the number of one one-hundredths of a share of Preferred Stock issuable
upon exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable such number of one
one-hundredths of a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11
shall require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised
after such record date the number of one one-hundredths of a share of Preferred
Stock and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above the number of one one-hundredths of a share
of Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares (fractional or
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<PAGE>
otherwise) or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the
contrary notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly required by
this Section 11, as and to the extent that in their good faith judgment the
Board of Directors of the Company shall determine to be advisable in order that
any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance
wholly for cash of any shares of Preferred Stock at less than the Current Market
Price, (iii) issuance wholly for cash of shares of Preferred Stock or securities
which by their terms are convertible into or exchangeable for shares of
Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or
warrants referred to in this Section 11, hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that
it shall not, at any time after the Distribution Date, (i) consolidate with any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), (ii) merge with or into any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to
sell or transfer), in one transaction, or a series of related transactions,
assets, cash flow or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
if (x) at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale,
the shareholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.
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(o) The Company covenants and agrees
that, after the Distribution Date, it will not, except as permitted by Section
23 or Section 26 hereof, take (or permit any Subsidiary to take) any
action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the
contrary notwithstanding, in the event that the Company shall at any time after
the Rights Dividend Declaration Date and prior to the Distribution Date (i)
declare a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or
(iii) combine the outstanding shares of Common Stock into a smaller number of
shares, the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction the
numerator which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER
OF SHARES. Whenever an adjustment is made as provided in Section 11 and Section
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate
and (c) if a Distribution Date has occurred, mail a brief summary thereof to
each holder of a Rights Certificate in accordance with Section 27 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
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Section 13. CONSOLIDATION, MERGER OR SALE OR
TRANSFER OF ASSETS, CASH FLOW OR EARNING POWER.
(a) In the event that, following the
Stock Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
here of), and the Company shall not be the continuing or surviving corporation
of such consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
assets, cash flow or earning power aggregating more than 50% of the
assets, cash flow or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case (except as may be contemplated by
Section 13(d) hereof), proper provision shall be made so that: (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one one-hundredths of a share of
Preferred Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such one one-hundredths of a share for which a Right was exercisable immediately
prior to the first occurrence of
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a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by (2) 50% of the
Current Market Price (determined pursuant to Section 11(d)(i) hereof) per share
of the Common Stock of such Principal Party on the date of consummation of such
Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the provisions of Section
11(a)(ii) hereof shall be of no effect following the first occurrence of any
Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction
described in clause (x) or (y) of the first sentence of
Section 13(a), the Person that is the issuer of any securities into
which shares of Common Stock of the Company are converted in such
merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described
in clause (z) of the first sentence of Section 13(a),
the Person that is the party receiving the greatest portion of the
assets, cash flow or earning power transferred pursuant to such
transaction or transactions;
PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange
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<PAGE>
Act, and such Person is a direct or indirect Subsidiary of another Person the
Common Stock of which is and has been so registered, "Principal Party" shall
refer to such other Person; and (2) in case such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common Stocks of two or
more of which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Stock having the greatest
aggregate market value.
(c) The Company shall not consummate any
such consolidation, merger, sale or transfer unless the Principal Party shall
have a sufficient number of authorized shares of its Common Stock which have
not been issued or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 13 and unless prior thereto the Company
and such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger or sale of assets mentioned in paragraph
(a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement
under the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate
form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) take such all such other action as may
be necessary to enable the Principal Party to issue the
securities purchasable upon exercise of the Rights, including but not
limited to the registration or qualification of such securities under
all requisite securities laws of jurisdictions of the various states
and the listing of such securities on such exchanges and trading
markets as may be necessary or appropriate; and
(iii) will deliver to holders of the Rights
historical financial statements for the Principal Party and
each of its Affiliates which comply in all respects with the
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requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this
Agreement to the contrary, Section 13 shall not be applicable to a transaction
described in subparagraphs (x) and (y) of Section 13(a) if (i) such transaction
is consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which is a Qualified Offer as such term is defined in Section
11(a)(ii) hereof (or a wholly owned subsidiary of any such Person or Persons),
(ii) the price per share of Common Stock offered in such transaction is not less
than the price per share of Common Stock paid to all holders of shares of Common
Stock whose shares were purchased pursuant to such tender offer or exchange
offer and (iii) the form of consideration being offered to the remaining holders
of shares of Common Stock pursuant to such transaction is the same as the form
of consideration paid pursuant to such tender offer or exchange offer. Upon
consummation of any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to
issue fractions of Rights, except prior to the Distribution Date as provided in
Section 11(p) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, the Company shall pay to
the registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing price of
the Rights for any day shall be the last sale price, regular way, or, in
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case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights, selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights, the fair
value of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to
issue fractions of shares of Preferred Stock (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock) upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock). In lieu of fractional shares
of Preferred Stock that are not integral multiples of one one-hundredth of a
share of Preferred Stock, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
one-hundredth of a share of Preferred Stock. For purposes of this Section 14(b),
the current market value of one one-hundredth of a share of Preferred Stock
shall be one one-hundredth of the closing price of a share of Preferred Stock
(as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering
Event, the Company shall not be required to issue
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fractions of shares of Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock. In lieu of
fractional shares of Common Stock, the Company may pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one (1) share of Common Stock. For purposes of this Section 14(c), the
current market value of one share of Common Stock shall be the closing price of
one share of Common Stock (as determined pursuant to Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance
of the Rights expressly waives his right to receive any fractional Rights
or any fractional shares upon exercise of a Right, except as permitted by this
Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect
of this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
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(a) prior to the Distribution Date, the
Rights will be transferable only in connection with the transfer of Common
Stock;
(b) after the Distribution Date, the
Rights Certificates are transferable only on the registry books of the Rights
Agent if surrendered at the principal office or offices of the Rights Agent
designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and certificates fully
executed;
(c) subject to Section 6(a) and Section
7(f) hereof, the Company and the Rights Agent may deem and treat the person in
whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent, subject to
the last sentence of Section 7(e) hereof, shall be required to be affected by
any notice to the contrary; and
(d) notwithstanding anything in this
Agreement to the contrary, neither the Company nor the Rights Agent shall have
any liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by reason of
any preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided,
however, the Company must use its best efforts to have any such order, decree or
ruling lifted or otherwise overturned as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the number of
one one-hundredths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
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Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and disbursements and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, or expense, incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected
and shall incur no liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this Agreement in
reliance upon any Rights Certificate or certificate for Common Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE
OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights
Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting
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from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding
to the corporate trust, stock transfer or other shareholder
services business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; but only if such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created by
this Agreement, any of the Rights Certificates shall have been countersigned
but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the
Rights Agent shall be changed and at such time any of the Rights Certificates
shall have been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with
legal counsel (who may be legal counsel for the Company), and the opinion of
such counsel shall be full and complete authorization and protection to the
Rights Agent as
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to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its
duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without limitation, the identity
of any Acquiring Person and the determination of Current Market Price) be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable
hereunder only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable
for or by reason of any of the statements of fact or recitals contained in this
Agreement or in the Rights Certificates or be required to verify the same
(except as to its countersignature on such Rights Certificates), but all such
statements and recitals are and shall be deemed to have been made by the Company
only.
(e) The Rights Agent shall not be under
any responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11, Section 13 or Section 24 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any
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shares of Common Stock or Preferred Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares of Common Stock
or Preferred Stock will, when so issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the carrying
out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
such officer.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for
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believing that repayment of such funds or adequate indemnification against such
risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the
certificate attached to the form of assignment or form of election to purchase,
as the case may be, has either not been completed or indicates an affirmative
response to clause 1 and/or 2 thereof, the Rights Agent shall not take any
further action with respect to such requested exercise or transfer without first
consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and
to each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and, if such resignation occurs after the Distribution Date, to
the registered holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
(30) days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and, if such removal occurs
after the Distribution Date, to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
legal business entity organized and doing business under the laws of the United
States or of the State of New York or of any other state of the United States,
in good standing, having an office in the State of New York, which is authorized
under such
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laws to exercise corporate trust or stock transfer or shareholder services
powers and which has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $50,000,000 or (b) an affiliate of a legal
business entity described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and, if such appointment occurs after the Distribution Date,
mail a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration of
the Rights, the Company (a) shall, with respect to shares of Common Stock so
issued or sold pursuant to the exercise of stock options or under any employee
plan or arrangement, granted or awarded as of the Distribution Date, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing
the
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appropriate number of Rights in connection with such issuance or sale; PROVIDED,
HOWEVER, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company
may, at its option, at any time prior to the earlier of (i) the close of
business on the tenth Business Day following the Stock Acquisition Date (or, if
the Stock Acquisition Date shall have occurred prior to the Record Date, the
close of business on the tenth Business Day following the Record Date), or (ii)
the Final Expiration Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $.01 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder has expired. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the Current Market Price, as defined in Section 11(d)(i) hereof, of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the
Board of Directors of the Company ordering the redemption of the Rights,
evidence of which shall have been filed with the Rights Agent and without any
further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Promptly after the action
of the Board of Directors ordering the redemption of the Rights, the Company
shall give notice of such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to all such holders at each
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holder's last address as it appears upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made.
Section 24. EXCHANGE.
(a) The Board of Directors of the Company
may, at its option, at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e) hereof) for Common Stock at an exchange ratio of one share of Common Stock
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors of the Company shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Stock for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the
Board of Directors of the Company ordering the exchange of any Rights pursuant
to subsection (a) of this Section 24 and without any further action and without
any notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the
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holder receives the notice. Each such notice of exchange will state the method
by which the exchange of the Common Stock for Rights will be effected and, in
the event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section
24, the Company, at its option, may substitute Preferred Stock (or
Equivalent Preferred Stock, as such term is defined in paragraph (b) of Section
11 hereof) for Common Stock exchangeable for Rights, at the initial rate of one
one-hundredth of a share of Preferred Stock (or Equivalent Preferred Stock) for
each share of Common Stock, as appropriately adjusted to reflect stock splits,
stock dividends and other similar transactions after the date hereof.
(d) In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this Section 24, the shares of Company shall take all such action as may be
necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights.
(e) The Company shall not be required to
issue fractions of shares of Common Stock or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of such fractional shares of
Common Stock, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional shares of Common Stock would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole share of Common Stock. For the purposes of this
subsection (e), the current market value of a whole share of Common Stock shall
be the closing price of a share of Common Stock (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at
any time after the Distribution Date, (i) to pay any dividend payable in stock
of any class to the holders of Preferred Stock or to make any other distribution
to the holders of Preferred Stock (other than a regular quarterly
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cash dividend out of earnings or retained earnings of the Company), or
(ii) to offer to the holders of Preferred Stock rights or warrants
to subscribe for or to purchase any additional shares of Preferred
Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision
of outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or to
effect any sale or other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), or (v) to effect
the liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock whichever
shall be the earlier.
(b) In case any of the events set forth
in Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company
shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event
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to holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in
the preceding paragraph to Preferred Stock shall be deemed thereafter to refer
to Common Stock and/or, if appropriate, other securities.
Section 26. NOTICES. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing by the Rights Agent with the Company) as follows:
TheStreet.com, Inc.
Two Rector Street
New York, New York 10006
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing by the Rights Agent with the Company) as follows:
Attention: Corporate Trust Department
[Stock Transfer Administration]
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Rights Certificate
(or, if prior to the Distribution Date, to the holder of certificates
representing shares of Common Stock) shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed to such holder at the address
of such holder as shown on the registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the
Distribution Date, and subject to the last sentence of this Section 27, the
Company and the Rights Agent shall, if the Company so directs, supplement or
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amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder in any
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, this Agreement may not be supplemented or amended to lengthen any time
period hereunder, pursuant to clause (iii) of this sentence, (A) a time period
relating to when the Rights may be redeemed at such time as the Rights are not
then redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock. Notwithstanding anything herein to the
contrary, this Agreement may not be amended at a time when the Rights are not
redeemable.
Section 28. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns here
under.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF
DIRECTORS, ETC. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding shares
of Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with
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the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or
not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board in good faith, shall (x) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Rights and all other parties,
and (y) not subject the Board, or any of the directors on the Board to any
liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in
this Agreement shall be construed to give to any Person other than the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, registered holders of the Common Stock)
any legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would
51
<PAGE>
adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the close of business on the tenth Business Day following the date
of such determination by the Board of Directors. Without limiting the foregoing,
if any provision requiring a specific group of Directors of the Company to act
is held to by any court of competent jurisdiction or other authority to be
invalid, void or unenforceable, such determination shall then be made by the
Board of Directors of the Company in accordance with applicable law and the
Company's Restated Certificate of Incorporation and By-laws.
Section 32. GOVERNING LAW. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings
of the several sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Attest: THESTREET.COM, INC.
By By
Name: Name:
Title: Title:
Attest: [ ]
By By
Name: Name:
Title: Title:
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<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
THESTREET.COM, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Kevin W. English, Chairman of the Board of Directors, and
[ ], Secretary, of TheStreet.com, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware, in accordance with
the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the said Corporation,
the said Board of Directors on [ ], 1998, adopted the following resolution
creating a series of [ ] shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of its
Restated Certificate of Incorporation, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" and the
number of shares constituting such series shall be [ ].
<PAGE>
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the fifteenth day of [March, June, September and December] in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $[ ]or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends or
other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $0.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after [ ], 1999 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
2
<PAGE>
(B) The Corporation shall declare a dividend or distribution
on the Series A Junior Participating Preferred Stock as provided in Paragraph
(A) above immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $[_____] per
share on the Series A Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following voting rights:
3
<PAGE>
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A
Junior Participating Preferred Stock shall be in arrears in an amount
equal to six (6) quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and
for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period,
all holders of Preferred Stock (including holders of the Series A
Junior Participating Preferred Stock) with dividends in arrears in an
amount equal to six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2)
directors.
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(ii) During any default period, such voting right of
the holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders of
any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of directors shall be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect the exercise
by the holders of Preferred Stock of such voting right. At any meeting
at which the holders of Preferred Stock shall exercise such voting
right initially during an existing default period, they shall have the
right, voting as a class, to elect directors to fill such vacancies, if
any, in the Board of Directors as may then exist up to two (2)
directors or, if such right is exercised at an annual meeting, to elect
two (2) directors. If the number which may be so elected at any special
meeting does not amount to the required number, the holders of the
Preferred Stock shall have the right to make such increase in the
number of directors as shall be necessary to permit the election by
them of the required number. After the holders of the Preferred Stock
shall have exercised their right to elect directors in any default
period and during the continuance of such period, the number of
directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights
of any equity securities ranking senior to or pari passu with the
Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their
right to elect directors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred Stock
5
<PAGE>
outstanding, irrespective of series, may request, the calling of a
special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the President, a Vice-President or the Secretary
of the Corporation. Notice of such meeting and of any annual meeting at
which holders of Preferred Stock are entitled to vote pursuant to this
Paragraph (C)(iii) shall be given to each holder of record of Preferred
Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be
called for a time not earlier than 20 days and not later than 60 days
after such order or request or in default of the calling of such
meeting within 60 days after such order or request, such meeting may
be called on similar notice by any stockholder or stockholders owning
in the aggregate not less than ten percent (10%) of the total number
of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this Paragraph (C)(iii), no such special meeting shall
be called during the period within 60 days immediately preceding the
date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if applicable,
shall continue to be entitled to elect the whole number of directors
until the holders of Preferred Stock shall have exercised their right
to elect two (2) directors voting as a class, after the exercise of
which right (x) the directors so elected by the holders of Preferred
Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided
in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining directors theretofore elected by the holders of the
class of stock which elected the director whose office shall have
become vacant. References in this Paragraph (C) to directors elected by
the holders of a particular class of stock shall include directors
elected by such directors to
6
<PAGE>
fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a class to
elect directors shall cease, (y) the term of any directors elected by
the holders of Preferred Stock as a class shall terminate, and (z) the
number of directors shall be such number as may be provided for in the
certificate of incorporation or by-laws irrespective of any increase
made pursuant to the provisions of Paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner
provided by law or in the certificate of incorporation or by-laws). Any
vacancies in the Board of Directors effected by the provisions of
clauses (y) and (z) in the preceding sentence may be filled by a
majority of the remaining directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series A Junior Participating Preferred Stock outstanding shall have been paid
in full, the Corporation shall not
(i) declare or pay dividends
on, make any other distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
7
<PAGE>
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Junior Participating Preferred Stock,
except dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or
winding up) with the Series A Junior Participating Preferred Stock,
provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series
A Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity with the
Series A Junior Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
8
<PAGE>
Section 5. REACQUIRED SHARES. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon
any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to $100 per share of Series A Participating
Preferred Stock, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph (C) below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii), the "Adjustment Number"). Following the payment of
the full amount of the Series A Liquidation Preference and the Common Adjustment
in respect of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to 1 with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.
9
<PAGE>
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the
Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or changed
into other stock or securities, cash and/or any other property, then in any
such case the shares of Series A Junior Participating Preferred Stock shall at
the same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to
100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend
on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
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<PAGE>
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of
Series A Junior Participating Preferred Stock shall not be redeemable.
Section 9. RANKING. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the Corporation's
Preferred Stock as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise.
Section 10. AMENDMENT. At any time when any shares of Series A
Junior Participating Preferred Stock are outstanding, neither the Restated
Certificate of Incorporation of the Corporation nor this Certificate of
Designation shall be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. FRACTIONAL SHARES. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred Stock.
11
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this [ ] day of
______________, 1999.
Chairman of the Board
Attest:
- ---------------------------
Secretary
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<PAGE>
Exhibit B
---------
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER _________ __, 2009 (THE TENTH ANNIVERSARY OF THE DATE OF
THE CONSUMMATION OF THE INITIAL PUBLIC OFFERING OF THE COMMON STOCK OF THE
COMPANY), UNLESS EXTENDED PRIOR THERETO BY THE BOARD OF DIRECTORS, OR EARLIER IF
REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF
THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID.
Rights Certificate
THESTREET.COM, INC.
This certifies that , or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of __________, 1999(the
"Rights Agreement"), between TheStreet.com, Inc., a Delaware corporation (the
"Company"), and ___________________________________, a [New York] banking
corporation (the "Rights Agent"), to purchase from the Company at any time prior
to 5:00 P.M. (New York City
<PAGE>
time) on [_________ __, 2009] (the tenth anniversary of the date of the
consummation of the initial public offering of the Common Stock)(unless such
date is extended prior thereto by the Board of Directors) at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a fully paid, non-assessable share of Series
A Junior Participating Preferred Stock (the "Preferred Stock") of the Company,
at a purchase price of $[_____] (the amount equal to the product of four times
the average closing price of the Common Stock for the first five-days of trading
subsequent to the consummation of the initial public offering of the Common
Stock) per one one-hundredth of a share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number and Purchase
Price as of _________ __, 199_ (the close of business on the
fifth day of trading subsequent to the consummation of the initial
public offering of the Common Stock), based on the Preferred Stock
as constituted at such date. The Company reserves the right to require
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<PAGE>
prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that a number of Rights be exercised so that only whole shares
of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of shares of Preferred Stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
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This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-hundredths
of a share of Preferred Stock as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate
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<PAGE>
shall be exercised in part, the holder shall be entitled to receive upon
surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right at any time prior to the earlier of the close
of business on (i) the tenth Business Day following the Stock Acquisition Date
(as such time period may be extended pursuant to the Rights Agreement), and (ii)
the Final Expiration Date. In addition, under certain circumstances following
the Stock Acquisition Date, the Rights may be exchanged, in whole or in part,
for shares of the Common Stock, or shares of preferred stock of the Company
having essentially the same value or economic rights as such shares. Immediately
upon the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced
5
<PAGE>
hereby (other than fractions which are integral multiples of one one-hundredth
of a share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement. The Company, at its election, may
require that a number of Rights be exercised so that only whole shares of
Preferred Stock would be issued.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give consent to or withhold consent from any corporate
action, or, to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
6
<PAGE>
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
7
<PAGE>
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of _________ __, ____
ATTEST: THESTREET.COM, INC.
By
Secretary Title:
Countersigned:
[ ]
By
Authorized Signature
8
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within named
Company, with full power of substitution.
Dated: __________________, _____
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a
<PAGE>
Person who is or was an Acquiring Person or an Affiliate or Associate of any
such Acquiring Person (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: _______________, _____
Signature
Signature Guaranteed:
<PAGE>
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: THESTREET.COM, INC.:
The undersigned hereby irrevocably elects to exercise
__________ Rights represented by this Rights Certificate to purchase the shares
of Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
<PAGE>
Please insert social security
or other identifying number
(Please print name and address)
Dated: _______________, _____
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [
] are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the
<PAGE>
Rights evidenced by this Rights Certificate from any Person who is, was or
became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ______________, _____
Signature
Signature Guaranteed:
<PAGE>
NOTICE
------
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On [ ], 1999, the Board of Directors of TheStreet.com, Inc.
(the "Company") declared a dividend distribution of one Right for each
outstanding share of Company Common Stock to stockholders of record at the close
of business on [____ , 1999] (the date of the consummation of the initial public
offering of the Common Stock) (the "Record Date"). Each Right entitles the
registered holder to purchase from the Company a unit consisting of one
one-hundredth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $0.01 per share (the "Series A Preferred Stock") at a Purchase
Price of $__ per Unit (the amount equal to the product of four times the average
closing price of the Common Stock for the first five days of trading subsequent
to the consummation of the initial public offering of the Common Stock), subject
to adjustment. The description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") between the Company and_____________ ,
as Rights Agent.
<PAGE>
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. Subject to certain exceptions specified in the
Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 business days following
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), other than
persons who acquire 15% beneficial ownership as a result of repurchases of stock
by the Company or certain inadvertent actions by institutional or certain other
stockholders [or, in certain circumstances, persons who are holders of shares of
Common Stock prior to the initial public offering and upon consummation thereof,
become beneficial owners of 15% or more of the outstanding shares of Common
Stock,] or (ii) 10 business days (or such later date as the Board shall
determine) following the commencement of a tender offer or exchange offer that
would result in a person or group becoming an Acquiring Person. Until the
Distribution Date, (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the Record
Date will contain a notation incorporating
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<PAGE>
the Rights Agreement by reference and (iii) the surrender for transfer
of any certificates for Common Stock outstanding will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. Pursuant to the Rights Agreement, the Company
reserves the right to require prior to the occurrence of a Triggering Event (as
defined below) that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.
The Rights are not exercisable until the Distribution Date and
will expire at 5:00 P.M. (New York City time) on [________ , 2009] (the tenth
anniversary of the date of the consummation of the initial public offering of
the Common Stock), unless such date is extended or the Rights are earlier
redeemed or exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
3
<PAGE>
In the event that a Person becomes an Acquiring Person, except
pursuant to an offer for all outstanding shares of Common Stock which the
independent directors determine to be fair and not inadequate to and to other-
wise be in the best interests of the Company and its stockholders, after
receiving advice from one or more investment banking firms (a "Qualified
Offer"), each holder of a Right will thereafter have the right to receive, upon
exercise, Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. Notwithstanding any of the foregoing, following the occurrence of
the event set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of the event set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $200 per Right, each
Right not owned by an Acquiring Person (or by certain related parties) following
an event set forth in the preceding paragraph would entitle its holder to
purchase $400 worth of Common Stock (or other consideration,
4
<PAGE>
as noted above) for $200. Assuming that the Common Stock had a per
share value of $[current market] at such time, the holder of each
valid Right would be entitled to purchase _____ shares of Common Stock for $200.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company engages in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than
with an entity which acquired the shares pursuant to a Qualified Offer), (ii)
the Company engages in a merger or other business combination transaction in
which the Company is the surviving corporation and the Common Stock of the
Company is changed or exchanged, or (iii) 50% or more of the Company's assets,
cash flow or earning power is sold or transferred, each holder of a Right
(except Rights which have previously been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the second preceding
paragraph are referred to as the "Triggering Events."
At any time after a person becomes an Acquiring
Person and prior to the acquisition by such person or
5
<PAGE>
group of fifty percent (50%) or more of the outstanding Common Stock, the Board
may exchange the Rights (other than Rights owned by such person or group which
have become void), in whole or in part, at an exchange ratio of one share of
Common Stock, or one one-hundredth of a share of Preferred Stock (or of a share
of a class or series of the Company's preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).
At any time until ten business days following the Stock
Acquisition Date, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors). Immediately upon
the action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that
the
6
<PAGE>
Rights become exercisable for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company or in the event of the
redemption of the Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended
by the Board of Directors of the Company prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights, or to shorten or lengthen any time
period under the Rights Agreement. The foregoing not withstanding, no amendment
may be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement has been filed [is being filed]
with the Securities and Exchange Commission as an Exhibit to a Registration
Statement on Form 8-A/Current Report on Form 8-K dated , 199 . A copy of the
Rights Agreement is available free of charge from the Rights Agent. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.
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<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated October 6, 1998 (the "Employment
Agreement"), by and between The Street.Com, Inc., a Delaware corporation (the
"Company"), and Kevin English ("English").
WHEREAS, the Company desires that English enter into this Em-
ployment Agreement with it, and English desires to enter into this Employment
Agreement, on the terms and conditions set forth herein.
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Duties; Term.
(a) The Company hereby appoints English, and English hereby
accepts the appointment, to serve the Company in the position of Chief Executive
Officer and to perform such duties, functions and responsibilities as are
generally incident to such position, for a period commencing on October 19, 1998
(the "Start Date") and ending on September 30, 2001, unless terminated in
accordance with Section 4 hereof, and shall be extended automatically on
September 30, 2001 and on each September 30 thereafter (each an "Extension
Date') for an additional one-year period unless the Company or the Employee
gives notice to the other party hereto not less than ninety (90) days prior to
the Extension Date of his or its election not to extend the Employment Period
(as hereinafter defined), in which event the Employment Period shall terminate
on such Extension Date. Such period of employment, as may be extended on an
Extension Date or earlier terminated pursuant to Section 4, shall be referred to
in this Agreement as the "Employment Period". English agrees to perform
faithfully the duties assigned to him pursuant to this Employment Agree ment to
the best of his abilities and to devote substantially all of his business time
and attention to the Company's business.
(b) In the event that English continues in the full-time
employ of the Company after the end of the Employment Period (it being expressly
understood and agreed that the Company does not now, nor hereafter shall have,
any obligation to continue English in its employ whether or not on a full-time
basis, after said Employment Period ends), then, unless otherwise expressly
agreed to by English and the Company in writing, English's continued employment
by the Company shall, notwithstanding anything to the contrary expressed or
implied herein, be terminable
<PAGE>
by the Company at will, but shall in all other respects be subject to the terms
and conditions of this Agreement.
(c) English shall also be appointed to serve as a member of
the Company's Board of Directors on or about the Start Date.
Section 2. Compensation.
(a) Salary. As compensation for the services rendered to the
Company by English pursuant to Section I hereof, the Company shall pay to
English an annual salary of $350,000, payable in accordance with the Company's
standard payroll policies, which salary will be reviewed annually and subject to
increase (but not decrease) by the Compensation Committee (the "Compensation
Committee") of the Board of Directors (said amount, together with any increases
thereto as may be determined from time to time under this Section 2(a), being
referred to as "Salary").
(b) Bonuses. In addition to the amounts set forth in Sections
2(a) and 2(b) above, English shall be eligible to receive from the Company the
following bonus compensation:
(i) A bonus of $25,000 payable at the Company's first
regularly scheduled payroll date following the date
of this Agreement; and
(ii) additional bonus compensation of up to $100,000 (the
"Maximum Bonus") in respect of each full fiscal year
occurring during the Employment Period, to be earned
in quarterly increments of up to $25,000 each, upon
achievement of quarterly and annual objectives
mutually determined by English and the Compensation
Committee of the Board of Directors (collectively,
"Performance Bonuses"), and structured so that a
Performance Bonus not earned in a specific fiscal
quarter can be earned in a subsequent fiscal
quarter. Each Performance Bonus, if any, shall be
paid within 30 days following the end of the fiscal
quarter of the Company in which such Performance
Bonus shall have been earned.
2
<PAGE>
English may also be eligible for additional bonus compensation in excess of the
Maximum Bonus, in the sole discretion of the Compensation Committee.
Nothing contained herein, however, and no action taken in
respect of any Performance Bonus (or otherwise in respect of this Section 2(b))
shall create or be construed to create at trust of any kind. English's right to
receive any Performance Bonuses pursuant to this Section 2(b) shall be no
greater than the right of an unsecured general creditor of the Company to
receive payment from the Company. Any Performance Bonuses paid under this
Section 2(b) shall be paid from the general funds of the Company, and no special
or separate fund shall be established, and no segregation of assets shall be
made, to assure payment of any Performance Bonuses hereunder.
(c) Options. In addition to the foregoing compensation, the
Company and English are entering into an Option Agreement in the form of Exhibit
A hereto, the terms of which are incorporated herein by reference.
Section 3. Benefits, Expense Reimbursement.
During the Employment Period, English shall participate in any
vacation, group insurance, accident, sickness and hospitalization insurance, and
any other employee benefit plans of the Company in effect during the Employment
Period and available to the Company's executive officers, and English shall have
the right to reimbursement, upon proper accounting, of reasonable expenses and
disbursements incurred by him in the course of his duties hereunder. In
addition, during the Employment Period, the Company will provide English with
the following additional benefits (the "Special Benefits"):
(a) exclusive use of a one-bedroom apartment within walking
distance to the Company's current headquarters with a monthly rent of
approximately $2,500 per month (and, until such apartment shall be procured by
the Company, the Company shall provide English with short-term housing within
walking distance to the Company's current headquarters);
(b) monthly parking in reasonable proximity to the apartment
maintained by the Company for English's use;
3
<PAGE>
(c) term life insurance in the amount of $500,000 on the life
of English, with English's spouse as the named beneficiary; and
(d) disability insurance paying benefits to English of not
less than $180,000 per annum (subject to availability).
Section 4. Employment Termination.
(a) The Employment Period shall be terminated upon the occur-
rence of any of the following:.
(i) death of English;
(ii) termination of English's employment hereunder by
English voluntarily at any time for any reason
whatsoever (including, without limitation,
resignation or retirement), other than a termination
for Good Reason (as defined below);
(iii) termination of English's employment by the Company
because of English's Disability (as defined below);
(iv) termination of English's employment hereunder by the
Company at any time for Cause (as defined below),
such termination to take effect upon not less than
seven (7) days' advance written notice by the Company
to English;
(v) termination of English's employment hereunder at any
time prior to the expiration of the Employment
Period (A) by the Company, other than termination by
reason of Disability as contemplated by clause (iii)
above, termination by the Company for Cause as
contemplated by clause (iv) above or termination by
reason of liquidation, dissolution or shutdown of the
business then conducted by the Company as
contemplated by clause (vi) below, or (B) by English
for Good Reason, provided, however, that English
shall have provided the Company written notice of
his desire to terminate for Good Reason under this
clause (v)(B) within thirty (30) days following the
occurrence of the event constituting Good Reason,
such termi-
4
<PAGE>
nation to take effect upon not less than thirty (30)
days' advance written notice by English to the
Company; or
(vi) termination of English's employment hereunder by
reason of the liquidation or dissolution of the
Company or other shutdown of the business then
conducted by the Company other than as a result of a
Change of Control (as hereinafter defined).
The following actions, failures or events by or affecting
English shall constitute Cause for termination within the meaning of clause (iv)
above: (i) English's willful misconduct or gross negligence in the performance
of his obligations under this Employment Agreement or as an officer of the
Company, (ii) dishonesty or misappropriation by English relating to the Company
or any of its funds, properties, opportunities or other assets, (iii)
inexcusable repeated or prolonged absence from work by English, (iv) the
commission by English of an act of fraud or embez zlement, (v) any intentional
or grossly negligent unauthorized disclosure by English of confidential or
proprietary information of the Company, (vi) a conviction of English (including
entry of a guilty or nolo contendre plea) of a crime involving fraud, dishonesty
or moral turpitude or a felony or (vii) the failure by English to perform
faithfully the material duties of his office or the material duties which are
otherwise assigned to him or other material breach by English of this Employment
Agreement and such failure or breach is not cured by English within thirty days
after written notice thereof from the Company to English, provided, however,
that any breach of the provisions of Sections 5 and 6 of this Agreement shall be
deemed to be a material breach of this Agreement and shall not be subject to a
right of cure.
For purposes of this Employment Agreement, "Disability" shall
mean physical or mental capacity of a nature which prevents English, in the good
faith judgment of the Company's Board of Directors, from performing his duties
under this Employment Agreement for a period of 90 consecutive days or 150 days
during any year with each year under this Employment Agreement commencing on
each anniversary of the date hereof.
The following events affecting English shall constitute "Good
Reason" within the meaning of clause (v)(B) above: (i) if English, at any time
during the Employment Period (except during a period of Disability), has
suffered a material change or diminution in duties and responsibilities from
those contemplated under Section l (a) above, (ii) if the Compensation Committee
shall at any time during the
5
<PAGE>
Employment Period reduce the compensation or any of the Special Benefits to
which English is entitled under this Agreement, (iii) if the Company shall
consummate a sale of all or substantially all of its assets to a third party
(other than in connection with a plan of liquidation, winding up or dissolution
of the Company) and such third party shall not assume the obligations of the
Company under this Agreement or (iv) if English shall be relocated by the
Company or a successor thereto to a location more than fifty (50) miles from
either the Company's current headquarters or Weston, Connecticut.
For purposes of this Employment Agreement, a "Change of
Control" shall mean the happening of any of the following:
(A) the acquisition by any person or group deemed a
person under Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act")
(other than the Company and its subsidiaries as
determined immediately prior to that date) of
beneficial ownership, directly or indirectly (with
beneficial ownership determined as provided in Rule
13d-3, or any successor rule, under the Exchange
Act), of a majority of the total combined voting
power of all classes of stock of the Company having
the right under ordinary circumstances to vote at
an election of the Board of Directors of the Company,
if such person or group deemed a person was not a
beneficial owner of at least five percent (5%) of
such total combined voting power of the Company on
the date of this Agreement;
(B) the election to the Board of Directors of the Company
of members as a result of which a majority of the
Board of Directors shall consist of persons who are
not members of the Board of Directors as of the Start
Date (including English as a member of the Board of
Directors as of the Start Date);
(C) the date of approval by the stockholders of the
Company of an agreement providing for the merger or
consolidation of the Company with another corporation
or other entity where (x) stockholders of the Company
immediately prior to such merger or consolidation
would not beneficially own following such merger or
consolidation shares entitling such
6
<PAGE>
stockholders to 50% or more of all votes (without
consolidation of the rights of any class of stock to
elect directors by a separate class vote) to which
all stockholders of the surviving corporation would
be entitled in the election of directors, or (y)
where the members of the Board of Directors,
immediately prior to such merger or consolidation,
would not, immediately after such merger or
consolidation, constitute a majority of the board of
directors of the surviving corporation; or
(D) the sale of all or substantially all of the assets of
the Company (other than in connection with a plan of
liquidation, winding up or dissolution of the
Company).
(b) If English's employment with the Company hereunder is
terminated by the Company for Cause or by English pursuant to clause (a)(ii)
above at any time during the Employment Period, the Company shall promptly pay
to English his Salary, any Performance Bonus earned through the most recently
ended fiscal quarter that remains unpaid through the effective date of such
notice, and other benefits accrued through the effective date of such notice,
and English shall not be entitled to any other compensation or benefits from the
Company under this Employment Agreement.
(c) If English's employment with the Company hereunder is
terminated due to English's death, English's Disability or the liquidation or
dissolution of the Company or other shutdown of the business then conducted by
the Company (other than a Change of Control), the Company shall promptly pay to
English or, in the case of his death, his estate, his Salary, any Performance
Bonus earned through the most recently ended fiscal quarter that remains unpaid
at the date of termination, and other benefits accrued through the end of the
month in which such death, Disability, liquidation, dissolution or shutdown
occurred, and English shall not be entitled to any other compensation or
benefits from the Company under this Employment Agreement.
(d) In the event that English's employment with the Company
hereunder is terminated by the Company pursuant to clause (a)(v)(A) above or by
English for Good Reason pursuant to clause (a)(v)(B) above at any time during
the Employment Period, then the Company shall pay to English (i) his Salary, any
7
<PAGE>
Performance Bonus earned through the most recently ended fiscal quarter that
remains unpaid at the effective date of such notice and other benefits accrued
through the effective date of such notice and (ii) so long as English shall not
have breached the provisions of Sections 5 or 6 of this Agreement, the Company
shall pay to English, as severance pay or liquidated damages or both, the amount
of Salary, if any, which English would have otherwise been entitled to receive
pursuant to Section 2(a) above for a period of one year following the date of
termination, calculated at the rate at which English had been entitled to
receive such Salary as of the date of termination, payable at regular intervals
in accordance with the Company's payroll practices.
(e) Upon the termination of this Employment Agreement pursuant
to Section 4 hereof, the Company shall have no further obligations under this
Employment Agreement; provided, however, that Sections 5 though 17 hereof shall
survive and remain in full force and effect.
Section 5. Covenant Not to Compete.
(a) English hereby agrees that, during the period from the
date hereof through the end of the first year after the cessation of English's
employment with the Company hereunder, he will not (x) carry on or engage in the
business of providing original editorial financial news content over the
Internet (a "Competitive Business"), (y) become a stockholder of a corporation
or a member of a partnership, limited liability company or any other Person (as
defined below), act as a consultant to any of the foregoing or provide
assistance to any enterprise, in each case which carries on or engages in a
Competitive Business; provided, however, that, notwithstanding the foregoing,
(i) English shall be permitted to carry on, engage in, become a stockholder or
member of, act as a consultant to or provide assistance to an enterprise that
devotes less than twenty percent (20%) of its resources on a consolidated basis
to developing a Competitive Business or generates less than 20% of its revenues
or earnings from a Competitive Business, so long as in either case English does
not serve as an employee, consultant, principal, officer or director of the unit
or subdivision of such enterprise that is engaged in the Competitive Business,
and (ii) English may own less than three percent of the outstanding shares of
stock of any corporation whose shares are publicly traded on a United States
national securities exchange, the Nasdaq Stock Market or any over-the-counter
public securities market or (z) directly or indirectly solicit for employment,
or advise or
8
<PAGE>
recommend to any other person that they employ or solicit for employment, any
employee of the Company.
(b) The parties acknowledge that the restrictions contained in
Sections 5(a) and 6 hereof are a reasonable and necessary protection of the
immediate interests of the Company, and any violation of these restrictions
would cause substantial injury to the Company and that the Company would not
have entered into this Employment Agreement, without receiving the additional
consideration offered by English in binding himself to any of these
restrictions. In the event of a breach or threatened breach by English of any of
these restrictions, the Company shall be entitled to apply to any court of
competent jurisdiction for an injunction restraining English from such breach or
threatened breach; provided, however, that the right to apply for an injunction
shall not be construed as prohibiting the Company from pursuing any other
available remedies for such breach or threatened breach. In the event that,
notwithstanding the foregoing, a covenant included in this Section 5 shall be
deemed by any court to be unreasonably broad in any respect, it shall be
modified in order to make it reasonable and shall be enforce accordingly. If any
one or more of the provision of this Section 5 shall be held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the
remaining provisions of this Section 5 shall not be affected thereby.
Section 6. Confidentiality; Intellectual Property.
(a) Except as otherwise provided in this Employment Agreement,
at all times during and after me Employment Period, English shall keep secret
and retain in strictest confidence, any and all confidential information
relating to the Company, and shall use such confidential information only in
furtherance of the performance by him of his duties to the Company and not for
personal benefit or the benefit of any interest adverse to the Company's
interests. For purposes of this Agreement, "confidential information" shall mean
any information including without limitation plans, specifications, models,
samples, data, customer lists and customer information, computer programs and
documentation, and other technical and/or business information, in whatever
form, tangible or intangible, that can be communicated by whatever means
available at such time, that relates to the Company's current business or future
business contemplated during the Employment Period, products, services and
development; or information received from others that the Company is obligated
to treat as confidential or proprietary (provided that such confidential
information shall not include any information that (a) has become
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generally available to the public other than as a result of a disclosure by
English, or (b) was available to or became known to English prior to the
disclosure of such information on a non-confidential basis without breach of any
duty of confidentiality from any party to the Company), and English shall not
disclose such confidential information to any Person other than the Company,
except as may be required by law or court or administrative order (in which
event English shall so notify the other party hereto as promptly as
practicable). Upon termination of the Employment Period for any reason, English
shall return to the Company all copies, reproductions and summaries of
confidential information in his possession and erase the same from all media in
his possession, and, if the Company so requests, shall certify in writing that
he has done so. All confidential information is and shall remain the property of
the Company (or, in the case of information that the Company receives from a
third party which it is obligated to treat as confidential, then the property of
such third party).
(b) All Intellectual Property (as hereinafter defined) and
Technology (as hereinafter defined) created, developed, obtained or conceived of
by English during the Employment Period, and all business opportunities
presented to English during the Employment Period, shall be owned by and belong
exclusively to the Company, proved that they reasonably relate to any of the
business of the Company as at the date of such creation, development, obtaining
or conception, and English shall (i) promptly disclose any such Intellectual
Property, Technology or business opportunity to the Company, and (ii) execute
and deliver to the Company, without additional compensation, such instruments as
the Company may require from time to time to evidence its ownership of any such
Intellectual Property, Technology or business opportunity. For purposes of this
Employment Agreement, (x) the term "Intellectual Property" means and includes
any and all trademarks, trade names, service marks, service names, patents,
copyrights, and applications therefor, and (y) the term "Technology" means and
includes any and all trade secrets, proprietary information, invention,
discoveries, know-how, formulae, processes and procedures.
Section 7. No Third Party Beneficiary.
This Employment Agreement is not intended and shall not be
construed to confer any rights or remedies hereunder upon any Person, other than
the parties hereto or their permitted assigns. "Person" shall mean an
individual, corporation, partnership, limited liability company, limited
liability partnership, association, trust or other unincorporated organization
or entity.
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Section 8. Notices.
Unless otherwise provided herein, any notice, exercise of
rights or other communication required or permitted to be given hereunder shall
be in writing and shall be given by overnight delivery service such as Federal
Express, telecopy (or like transmission) or personal delivery against receipt to
the party to whom it is given at such party's address set forth below such
party's name on the signature page or such other address as such party may
hereafter specify by notice to the other party hereto. Any notice or other
communication shall be deemed to have been given as of the date so personally
delivered or transmitted by telecopy or like transmission or on the next
business day when sent by overnight delivery service.
Section 9. Representations.
The Company hereby represents and warrants that the execution
and delivery of this Agreement and the performance by the Company of its
obligations hereunder have been duly authorized by all necessary corporate
action of the Company.
Section 10. Amendment.
This Employment Agreement may be amended only by a written
agreement signed by the parties hereto.
Section 11. Blinding Effect.
This Employment Agreement is not assignable by English. None
of English's rights under this Employment Agreement shall be subject to any
encumbrances or the claims of English's creditors. This Employment Agreement
shall be binding upon and inure to the benefit of the Company and any successor
organization which shall succeed to the Company by merger or consolidation or
operation of law, or by acquisition of all or substantially all of the assets of
the Company (provided that a successor by way of acquisition of assets shall
have undertaken in writing to assume the obligations of the Company hereunder).
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Section 12. Governing Law.
This Employment Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to its
conflict of laws provisions.
Section 13. Severability.
If any provision of this Employment Agreement shall for any
reason be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not be affected or
impaired thereby. To the extent permitted by applicable law, each party hereto
waives any provision of law that renders any provision of this Employment
Agreement invalid, illegal or unenforceable in any way.
Section 14. Execution in Counterparts.
This Employment Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same installment.
Section 15. Entire Agreement.
This Employment Agreement and the Option Agreement sets forth
the entire agreement, and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof.
Section 16. Titles and Headings.
Titles and headings to Sections herein are for purposes of
reference only, and shall in no way limit, define or otherwise affect the
meaning or interpretation of any of the provisions of this Employment Agreement.
Section 17. Conflicts of Interest.
English specifically covenants, warrants and represents to the
Company that he has the full, complete and entire right and authority to enter
into this Employment Agreement, that he has no agreement, duty, commitment or
responsibility of any kind or nature whatsoever with any corporation,
partnership, firm, company, joint venture or other entity or other Person which
would conflict in
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any manner whatsoever with any of his duties, obligations or responsibilities to
the Company pursuant to this Employment Agreement, that he is not in possession
of any document or other tangible property of any other Person of a confidential
or proprietary nature which would conflict in any manner whatsoever with any of
his duties, obligations or responsibilities to the Company pursuant to his
Employment Agreement, and that he is fully ready, willing and able to perform
each and all of his duties, obligations and responsibilities to the Company
pursuant to this Employment Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this
Employment Agreement as of the date first written above.
/s/ Kevin English
------------------------------------
Kevin English
Address: 2 Rector Street
New York, NY 10006
Telecopy No.: (212) 271-4005
THE STREET.COM, INC.
By: /s/ James Cramer
--------------------------------
Title: Co-Chairman
Address: 2 Rector Street
New York, NY 10006
Telecopy No.: (212) 271-4005
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Exhibit 10.6
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 22, 1999 (the "Employment
Agreement"), by and between The Street.Com, Inc., a Delaware corporation (the
"Company"), and James Cramer ("Cramer").
WHEREAS, Cramer has been employed by the Company pursuant to an
employment agreement dated May 7, 1998 (the "Prior Agreement");
WHEREAS, the Company and Cramer wish to supersede the Prior Agreement
with this Employment Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Duties.
(a) The Company hereby appoints Cramer, and Cramer hereby accepts the
appointment, as an outside columnist for the Company. This Employment Agreement
shall commence on February 22, 1999 (the "Commencement Date"), and shall expire
on February 21, 2003, unless sooner terminated in accordance with Section 4
thereof (the "Term"). During the Term, except during any week when Cramer is on
vacation as set forth in Section 2(c) hereof, Cramer will author no fewer than
twelve (12) articles per week intended for publication in The Street.Com. The
Company agrees that, during the Term, it shall include an appropriate reference
to Cramer (e.g. the current reference to "Cramer's Latest") on the home page of
its web-site. During the Term, the Company agrees to provide an assistant for
Cramer, who shall be an employee of the Company, and who shall be subject to all
laws, rules, regulations and policies, including The Street.Com's Securities
Investment Policy (the "Securities Policy"), as are applicable to employees of
the Company, and shall be located at the Company's offices. For purposes of the
Securities Policy, Cramer's assistant shall be subject to the trading
restrictions applicable to "Editorial Staffers," notwithstanding the fact that
such assistant shall perform only duties associated with the designation of
"Business Staffer" under the Policy.
(b) Cramer agrees to perform faithfully the duties assigned to him
pursuant to this Employment Agreement to the best of his abilities. In
connection with the preparation of articles during the Term, Cramer shall
communicate solely with the Company's Editor-in-Chief or his or her designee.
Cramer shall be permitted to provide editorial advice and commentary to the
Editor-in-Chief or his or her
<PAGE>
designee in a manner consistent with the Securities Policy, but shall not be
permitted to communicate with individual reporters or other editors of the
Company with regard to the Company's editorial content. During the Term, Cramer
must comply with all laws applicable to the Company's employees, as well as, to
the extent provided herein, the Securities Policy. For purposes of the
Securities Policy, Cramer shall be deemed an "Outside Columnist" as that term is
defined in such Policy, and shall be subject only to the restrictions in the
Policy which pertain to Outside Columnists. Cramer represents and acknowledges
that he has reviewed a draft of the Securities Policy, and in particular those
provisions which pertain to Outside Columnists, as of January 19, 1999 (the
Draft Securities Policy"), and has reviewed draft provisions regarding
disclosures as of the date of this Agreement (the "Draft Disclosure
Provisions"), and agrees that he shall be obligated to comply with any
provisions of the Securities Policy which pertain to Outside Columnists,
including those pertaining to disclosure, as they may be implemented or amended
from time to time throughout the Term, provided, however, that if the Securities
Policy and/or disclosure provisions implemented or amended by the Company
during the Term differ from the Draft Securities Policy or Draft Disclosure
Provisions in any way which Cramer believes, in his sole discretion, will have a
materially adverse effect on Cramer's outside business activities on behalf of
Cramer Berkowitz & Co. and its affiliates, then Cramer shall be entitled to
voluntarily resign with out Good Reason as set forth in Section 4(a) hereof, and
such resignation shall not be considered a breach of this Agreement.
(c) Subject to Cramer's personal and professional availability, and
consistent with past practice, during the Term Cramer also agrees to provide
other reasonable services upon reasonable advance notice from the Company's
Editor-in-Chief, including, without limitation, participation in the Company's
interactive chat rooms on its web-site and those on America Online, Inc. and
Yahoo! Inc. and any other web-sites established by the Company acting alone or
together with a business partner. The above activities may include streaming
audio to the Company's web-site, and any other web-sites established by the
Company acting alone or together with a business partner. The Company expressly
acknowledges, however, that Cramer shall not be required to perform any of the
services set forth in this Section 2(c) if performance of such services would
unreasonably interfere with any of Cramer's outside activities, including,
without limitation, Cramer's activities on behalf of Cramer Berkowitz & Co. and
its affiliates. The parties agree that Cramer's participation in radio and
television programs developed by the Company will be the subject of a separate
agreement.
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(d) The Company agrees that Cramer shall render his services to the
Company hereunder on a non-exclusive basis, provided, however, that Cramer
covenants that during the Term he shall not be under or subject to any
contractual restriction that is inconsistent with the performance of his duties
hereunder. In this regard, without limiting the generality of the foregoing, the
Company acknowledges and agrees that, notwithstanding the services Cramer shall
provide hereunder, Cramer (a) shall be entitled to engage, and will continue to
engage, in other journalistic, writing and media endeavors, including, without
limitation, writing for magazines, television appearances, the writing of books,
and, subject to the restriction in Section 5(a) hereof, various other on-line
media projects, provided that in the event Cramer does accept such engagements,
he shall use reasonable efforts to ensure that the byline for any articles he
authors, and the comparable on air indication for nonprint media, refer to
Cramer an an Outside Columnist for the Company; and (b) shall be entitled to
engage, and will continue to engage, in extensive investing and trading in
securities, rights and options relating thereto and contracts in stock indexes,
foreign currencies and financial instruments (collectively, "Securities
Activities") on behalf of Cramer Partners, L.P., a privately held limited
partnership engaged in extensive Securities Activities (the "Partnership");
Cramer Capital Corporation, the general partner of the Partnership and a
corporation of which Cramer is the president and Cramer's wife and Cramer are
the sole stockholders; and other entities. Further, the Company acknowledges and
agrees that Cramer shall be entitled to engage, and will continue to engage, in
Securities Activities on behalf of other persons or entities (including Cramer
and members of his family) and that Cramer's wife will also engage in extensive
Securities Activities. (All such Securities Activities that the Partnership,
Cramer's wife, Cramer's affiliates or Cramer may engage in from time to time are
collectively referred to herein as the "Relevant Securities Activities.") In
connection with the foregoing, the Company further acknowledges and agrees that:
(i) The Relevant Securities Activities will often involve the
Partnership's and/or Cramer's beneficial ownership in and/or trading of
securities or other financial instruments that are the subject of, or otherwise
mentioned, referred to or discussed in, articles written by Cramer for the
Company, and that the Relevant Securities Activities involving such securities
or other financial instruments may occur at any time before or after the
publication date of an issue of any article on The Street.Com in which such
securities or other financial instruments are mentioned, referred to or
otherwise discussed by Cramer in such article.
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(ii) Cramer shall not have access to articles written for the
Company by other writers, or information regarding such articles, prior to
publication, except for articles that Cramer is writing or projects in which
Cramer is involved. Furthermore, the Company will endeavor to keep Cramer
unaware, in any and all of his capacities, of the final content or publication
schedule of articles, columns or other writings scheduled for publication on The
Street.Com that cover or discuss publicly traded securities other than the
articles or columns or other written materials prepared by Cramer for
publication in The Street. Com.
(iii) Notwithstanding any policy of the Company to the contrary,
the Relevant Securities Activities, insofar as they are conducted in a manner
that does not violate the express provisions of the Securities Policy and
applicable law, will not be deemed to in any way violate or breach any other
procedures, policies or practicies of the Company now or hereafter in effect
with respect to Cramer, including, but not limited to, any other conflict of
interest rules or securities trading policies or other rules or procedures that
otherwise may apply to writers for the Company regarding their rights to engage
in the trading of securities or other Relevant Securities Activities, and
further, that any such policies shall not be applicable to Cramer in connection
with his services hereunder.
(iv) Provided Cramer is not in material breach of any of his
obligations hereunder, including any obligation under applicable law, and
without limiting the express provisions of this Agreement, the Company
irrevocably waives and releases Cramer, his affiliates and members of his
immediate family from any duty, fiduciary or otherwise, that Cramer or any of
them may owe, or be deemed to owe, the Company that may in any way prohibits or
limit the Relevant Securities Activities, insofar as they involve the trading
and/or ownership of securities or other financial instruments that are the
subject of or are otherwise referred to or discussed in the articles prepared by
Cramer pursuant to this Agreement, and acknowledges and agrees that such
Relevant Securities Activities do not, and will not, constitute a
misappropriation of the Company's property or a breach of any fiduciary or other
duty Cramer may owe the Company hereunder.
(v) The Company warrants and agrees that each of the articles
prepared by Cramer and published by the Company shall provide appropriate
disclosure relating to the Relevant Securities Activities, as set forth in the
Securities Policy. The Company further agrees that it shall not disclose any
information regarding securities positions provided by Cramer to the Company
pursuant to the Securities Policy to anyone other than that Company's senior
management and
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<PAGE>
senior editorial staff, or its legal advisers, on a confidential, "need to know"
basis, or as required by any court of competent jurisdiction or other federal or
state governmental or regulatory authority.
(f) The Company agrees, to the extent permitted by applicable law, to
defend, indemnify and hold harmless Cramer against any and all loss, damage,
liability and expense, including, without limitation, reasonable attorneys'
fees, disbursements, court costs, and any amounts paid in settlement and the
costs and expenses of enforcing this Section of this Agreement, which may be
suffered or incurred by Cramer in connection with the provision of his services
hereunder, including, without limitation, any claims, litigations, disputes,
actions, investigations or other matters relating to any securities laws or
regulations, or the violation or alleged violation thereof (the "Securities
Actions"), provided that such loss, damage, liability and expense (i) arises out
of or in connection with the performance by Cramer of his obligations under this
Agreement and (ii) is not the result of any breach by Cramer of his obligations
hereunder, and provided further that, with respect to any Securities Actions,
the Company shall be under no obligation to defind, indemnify or hold harmless
Cramer if Cramer has not acted with a reasonable, good faith belief that his
actions were in no way violative of any securities laws or regulations. With
respect thereto, the termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a nolo contendere plea or its equivalent,
shall not, of itself, create a presumption that Cramer did not act with a
reasonable, good faith belief that his actions were in no way violative of any
securities laws or regulations. further, to the extent that Cramer has been
successful on the merits or otherwise in defense of any Securities Action, or in
defense of any claim, issue or matter therein, he shall be defended, indemnified
and held harmless by the Company as required herein. Expenses (including
reasonable attorneys' fees, disbursements and court costs) incurred by Cramer in
defending any Securities Action shall be paid by the Company in advance of the
final disposition of such Securities Action upon receipt of an undertaking by or
on behalf of Cramer to repay such amount if it shall ultimately be determined
that Cramer is not entitled to be indemnified by the Company pursuant hereto.
Section 2. Compensation.
(a) Salary. During the Term, as compensation for his services
hereunder, the Company shall pay to Cramer a salary of Two Hundred Fifty
Thousand Dollars ($250,000) per annum (the "Annual Salary"), payable in
accordance with the Company's standard payroll policies, provided that on each
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<PAGE>
anniversary of the Commencement Date, the Annual Salary shall be increased ten
percent (10%) from its then current rate. All applicable withholding taxes shall
be deducted from such payments.
(b) Stock Options. On May 7, 1998 Cramer was granted a nonqualified
option to purchase 200,000 shares of the Company's common stock, par value $.01
("Common Stock") at an exercise price of $.011 per share (the "Initial Option"),
which grant shall remain in effect in accordance with the terms of the
Nonqualified Employee Stock Option Agreement Between The Street.Com, Inc. and
James Cramer, a copy of which is attached hereto as Exhibit A (the "Option
Agreement"), as well as the Amended and Restated The Street.Com, Inc. 1998 Stock
Incentive Plan (the "Plan"). In addition, as of the date hereof, the Company
shall grant to Cramer an additional nonqualified option in accordance with the
terms of the Option Agreement and the Plan.
(c) Vacation. During each year of the Term, Cramer shall ebntitled to
four (4) weeks of paid vacation, provided that Cramer shall not take more than
two (2) weeks of vacation consecutively.
(d) Benefits. Cramer shall not be eligible to participate in any
benefit plans provided by the Company
Section 3. Expense Reimbursement.
During the Term, Cramer shall have the right to reimbursement, upon
proper accounting, of reasonable expenses and disbursements incurred by him in
the course of his duties hereunder.
Section 4. Employment Termination.
(a) At any time during the Term and except as otherwise provided in
Sections 4(b) and 4(c) hereof, the Company shall only have the right to
terminate this Employment Agreement and Cramer's employment with the Company
hereunder, and to give Cramer notice of such termination as of a date not
earlier than seven (7) days from such notice, because of (i) Cramer's willful
misconduct or gross negligence in the performance of his obligations under this
Employment Agreement, (ii) dishonesty or misappropriation by Cramer relating to
the Company or any of its funds, properties, or other assets, (iii) in excusable
repeated or prolonged absence from work by Cramer (other that as a result of, or
in connection with, a disability), (iv) any intentional or reckless unauthorized
6
<PAGE>
disclosure by Cramer of confidential or proprietary information of the company
which is reasonably likely to result in material harm to the Company, (v) a
conviction of Cramer (including entry of a guilty or nolo contendere plea) of a
felony involving fraud, dishonesty, moral turpitude, or involving a violation of
federal or state securities laws, (vi) the entry of an order, judgment or
decree, of any court of competent jurisdiction or any federal or state
authority, enjoining Cramer from violating the federal securities laws, or
suspending or otherwise limiting Cramer's right to act as an investment adviser,
underwriter, broker or dealer in securities, (vii) a finding by a court of
competent jurisdiction in a civil action or a finding by the Securities and
Exchange Commission that Cramer has violated any federal or state securities
law, or (vii) the failure by Cramer to perform faithfully his duties hereunder
or other breach by Cramer of this Employment Agreement and such failure or
breach is not cured, to the extent cure is possible, by Cramer within thirty
days after written notice thereof from the company to Cramer (each individually,
and all collectively, "Cause"). If this Employment Agreement and Cramer's
employment with the Company hereunder is terminated for Cause, or if Cramer
voluntarily resigns from the Company without Good Reason, during the Term, the
Company shall pay Cramer all earned but unpaid portions of the Annual Salary
through the date of termination, and following any such termination, Cramer
shall not be entitled to receive any other payment, except as provided for
hereunder with respect to any period after such termination.
(b) This Employment Agreement and Cramer's employment with the Company
hereunder may also be terminated by the Company without Cause, or by Cramer in
the event of a material breach of this Agreement by the Company, which is not
cured, to the extent cure is possible, within thirty days after written notice
thereof from Cramer to the Company (such breach constituting "Good Reason"). In
the event that Cramer's employment with the Company shall terminate during the
Term on account of termination by the Company without Cause, or by Cramer with
Good Reason, then the Company shall pay Cramer all earned but unpaid portions of
the Annual Salary through the date of termination, and Cramer shall not be
entitled to receive any other payment, except as provided in the Option
Agreement, with respect to any period after such termination.
(c) This Employment Agreement and Cramer's employment with the Company
hereunder shall terminate immediately and automatically on the death or
Disability (as defined below) of Cramer or the liquidation or dissolution of the
Company or other shutdown of the business then conducted by the Company. If this
Employment Agreement and Cramer's employment with the Company hereunder is
7
<PAGE>
terminated an account of Cramer's death or Disability, or because of a
liquidation or dissolution of the Company or other shutdown of the business then
conducted by the Company, during the Term, then the Company shall pay Cramer all
earned but unpaid portions of the Annual Salary through the date of termination,
and following any such termination, neither Cramer, nor his estate, conservator
or designated beneficiary, as the case may be, shall be entitled to receive any
other payment, except as provided in the Option Agreement, with respect to any
period after such termination.
(d) Upon the termination of this Employment Agreement pursuant to
Section 4 hereof, the Company shall have no further obligations under this
Employment Agreement, provided, however, that Sections 5, 6, 7, 8, 9, 10, 11,
12, 13, 14, 15, 16, 17, 18 and 19 hereof shall survive and remain in full force
and effect.
Section 5. Covenant Not to Compete.
(a) Cramer hereby agrees that, during the period from the Commencement
Date through the end of the Term, he will not (i) author articles or columns for
any other on-line financial publication that competes directly with the business
of the Company as it is then constituted without first notifying the Company and
securing its consent, which consent shall not be unreasonably withheld, and (ii)
will not act as a lender to, or stockholder, director, principal, owner, or
partner of, any other start-up on-line business that completes directly with the
business of the Company as it is then constituted. The Company understands and
acknowledges that Cramer is a party to agreements pursuant to which Cramer
writes articles for certain print publications, including, without limitation,
Time and GQ (the "Other Publications"), which may subsequently publish Cramer's
articles on-line on their respective web-sites. The Company agrees that
publication of Cramer's articles in the manner set forth in the preceding
sentence shall not constitute a breach of this Section #5.
(b) Cramer hereby agrees that for a period of eighteen (18) months
following the cessation of Cramer's employment with the Company hereunder, he
will not author articles or columns for any other on-line financial publication
with competes directly with the Company without first notifying the Company and
securing its consent, which consent shall not be unreasonably withheld.
(c) Cramer hereby agrees that, during the period from the Commencement
Date through the end of the first eighteen (18) months after the cessation of
Cramer's employment with the Company hereunder, he will not solicit for
8
<PAGE>
employment, in any business enterprise or activity, any person who was employed
by the Company during the Term.
(d) The parties acknowledge that the restrictions contained in this
Section 5 are a reasonable and necessary protection of the immediate interests
of the Company, and any violation of these restrictions would cause substantial
injury to the Company and that the Company would not have entered into this
Employment Agreement, without receiving the additional consideration offered by
Cramer in binding himself to any of these restrictions. In the event of a breach
or threatened breach by Cramer of any of these restrictions, the Company shall
be entitled to apply to any court of competent jurisdiction for an injunction
restraining Cramer from such breach or threatened breach; provided, however,
that the right to apply for an injunction shall not be construed as prohibiting
the Company from pursuing any other available remedies for such breach or
threatened breach.
Section 6. Confidentiality; Ownership of Articles and Columns.
(a) Except as otherwise provided in this Employment Agreement, Cramer
shall, and shall cause his attorneys, accounts and agents (collectively,
"Agents") to agree to, keep secret and retain in strictest confidence, any and
all confidential information relating to the Company or otherwise not available
to the general public, provided that such confidential information shall not
include any information that (a) has become generally available to the public
other than as a result of a disclosure by Cramer or his Agents, or (b) was
available to Cramer or any of his Agents on a non-confidential basis from a
third party having no obligation of confidentiality to the Company, and Cramer
shall not, and shall cause his Agents not to, disclose such confidential
information to any Person other than the Company or its Agents, except as may be
required by law (in which event Cramer shall so notify the other party hereto as
promptly as practicable).
(b) All articles or columns that Cramer authors for the Company and
which are in face published shall be owned by and belong exclusively to the
Company, and Cramer shall execute and deliver to the Company, without additional
compensation, such instruments as the Company may require from time to time to
evidence its ownership of any such articles or columns.
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Section 7. No Third Party Beneficiary.
This Employment Agreement is not intended and shall not be construed to
confer any rights or remedies hereunder upon any Person, other than the parties
hereto or their permitted assigns. "Person" shall mean an individual,
corporation, partnership, limited liability company, limited liability
partnership, association, trust or other unincorporated organization or entity.
Section 8. Withholding of Taxes.
Any payments to Cramer pursuant to the terms of this Employment
Agreement shall be reduced by such amounts, if any, as are required to be
withheld with respect thereto under all present and future federal, statement
and local tax laws and regulations and other laws and regulations.
Section 9. Notices
Unless otherwise provided herein, any notice, exercise of rights or
other communication required or permitted to be given hereunder shall be in
writing and shall be given by overnight delivery service such as Federal
Express, telecopy )or like transmission) or personal delivery against receipt,
or mailed by registered or certified mail (return receipt requested), to the
party to whom it is given at such party's address set forth below such party's
name on the signature page or such other address as such party may hereafter
specify by notice to the other party hereto, with copies to the following:
For the Company: David J. Goldschmidt, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
For Cramer: Charles H. Googe, Jr.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Any notice or other communication shall be deemed to have been given as
of the date so personally delivery or transmitted by telecopy or like
transmission or on the next business day when sent by overnight delivery
service.
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Section 10. Amendment.
This Employment Agreement may be amended only by a written agreement
signed by the parties hereto.
Section 11. Binding Effect.
This Employment Agreement is not assignable by Cramer. Any assignment
in violation of this Employment Agreement shall be null and void ab initio. None
of Cramer's right under this Employment Agreement shall be subject to any
encumbrances or the claims of Cramer's creditors. This Employment Agreement
shall be binding upon and inure to the benefit of the Company and any successor
organization which shall succeed to substantially all of the business and
property of the Company, whether by merger, consolidation, acquisition of all or
substantially all of the assets of the Company or otherwise, including by
operation of law.
Section 12. Governing Law.
This Employment Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its
conflict of laws provisions.
Section 13. Severability.
If any provisions of this Employment Agreement, including those
contained in Sections 5 and 6 hereof, shall for any reason be held invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions hereof shall not be affected or impaired thereby. Moreover,
if any one or more of the provisions of this Agreement, including those
contained in Section 5 and 6 hereof, shall be held to be excessively broad as to
duration, activity or subject, such provisions shall be construed by limiting
and reducing them so as to be enforceable to the maximum extent allowable by
applicable law. To the extent permitted by applicable law, each party hereto
waives any provision or law that renders any provision of this Employment
Agreement invalid, illegal or unenforceable in any way.
13
<PAGE>
Section 14. Execution in Counterparts.
This Employment Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original and all of which shall
constitute one and the same instrument.
Section 15. Entire Agreement.
This Employment Agreement sets forth the entire agreement, and
supersedes all prior agreements and understandings, both written and oral,
including the Prior Agreement, between the parties with respect to the subject
matter hereof.
Section 16. Titles and Headings.
Titles and headings to Sections herein are for purposes of references
only, and shall in no way limit, define or otherwise affect the meaning or
interpretation of any of the provisions of this Employment Agreement.
Section 17. No Cross-Default
No default by Cramer under this Employment Agreement shall
automatically constitute a default under any other agreement with the Company.
Section 18. Duty to Mitigate.
Cramer shall have no duty to mitigate any damages payable by the
Company to Cramer hereunder.
Section 19. Consent to Jurisdiction.
Cramer hereby irrevocably submits to the jurisdiction of any New York
State or Federal court sitting in the City of New York in any action or
proceeding to enforce the provisions of this Agreement, and waives the defense
of inconvenient forum to the maintenance of any such action or proceedings.
12
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date first written above.
THE STREET.COM, INC.
By: /s/ Kevin W. English
-------------------------------
Name: Kevin W. English
Title: Chairman, CEO & President
Address: 2 Rector Street
New York, NY 10005
Telephone: 212-271-4004
Telecopy: 212-271-4005
Attention: Chief Financial Officer
/s/ James Cramer
------------------------------------
James Cramer
Address: Cramer, Berkowitz & Co.
100 Wall Street
Eighth Floor
New York, New York 10005
Telephone: 212-742-4480
Telecopy: 212-425-1773
13
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TheStreet.com, Inc.:
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made part of this registration
statement.
ARTHUR ANDERSEN LLP
New York, New York
March 29, 1999
<PAGE>
Exhibit 24.2
Power of Attorney
The undersigned hereby constitutes and appoints Kevin English and Paul
Kothari, and each of them, his true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him and in his name, place,
and stead, in any and all capacities, to sign any and all (i) amendments
(including post-effective amendments) and additions to The Street.com, Inc.'s
("TheStreet.com") Registration Statement on Form S-1 as filed on February 23,
1999 and (ii) Registration State ments, and any and all amendments thereto
(including post-effective amendments), relating to TheStreet.com's offering
contemplated pursuant to Rule 462 (b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or his substitute or
substi tutes may lawfully do or cause to be done by virtue hereof.
/s/ Michael Golden
---------------------------
Michael Golden
March 8, 1999
<PAGE>
Exhibit 99.2
Consent of International Data Corporation
March 29, 1999
To: TheStreet.com, Inc.:
We hereby consent to the use of Online Brokerage Forecast 1997-2002: Redefining
the Brokerage Landscape, an International Data corporation report, and to all
references to us included in or made part of TheStreet.com's registration
statement on Form S-1 (File No. 333-72799).
/s/ Brigitte Zepernick
- ----------------------
Brigitte Zepernick
Sr. Account Executive
The following information is what will be included in the S1:
According to International Data Corporation, the number of online brokerage
accounts in the U.S. is expected to grow from 3.5 million at the end of 1997 to
24 million at the end of 2002, with online brokers expected to manage over $1.5
trillion in assets by the end of 2002.
<PAGE>
Exhibit 99.3
March 26, 1999
Sean McLaughlin
TheStreet.com
2 Rector Street
14th Floor
New York, NY 10006
To Whom It May Concern:
Pursuant to our contract, Forrester Research, Inc. ("Forrester") consents to the
inclusion of our name and intellectual property in the preliminary prospectus
and the final prospectus of TheStreet.com prepared in connection with its
initial public offering of securities.
Forrester does not consent to be an expert in the registration statement or as
having prepared or certified any part of the registration statement.
Very truly yours,
/s/Michael Shirer
- -----------------
Michael Shirer
Public Relations Manager
<PAGE>
Exhibit 99.4
March 30, 1999
To TheStreet.com, Inc.
We hereby consent to the use of the attached statement to be included in or made
part of TheStreet.com's Registration Statement on Form S-1 (File No. 333-72799).
/s/ Nancy Lazaros
- -----------------------------------
Nancy Lazaros
Chief Financial Officer
<PAGE>
According to @plan, a third-party neutral marketing research firm, the
percentage of our readers who have portfolios over $250,000 is higher than at
any other site surveyed in @plan's Spring 1999 study. Also, according to the
same study, we have the highest percentage of readers who own securities. In
addition, compared to the average Internet user surveyed by @plan, our readers
are seven times more likely to trade stocks online. The survey research portion
of the @plan system is conducted by The Gallup Organization.
2
<PAGE>
Exhibit 99.5
March 29, 1999
To: TheStreet.com, Inc.:
We hereby consent to the use of the October 1998 TheStreet.com Subscriber Study
conducted by NFO Interactive and to all references to us included in or made
part of TheStreet.com's Registration Statement on Form S-1 (File No. 333-72799).
/s/ Charles B. Hamlin
----------------------
Charles B. Hamlin
President
NFO Interactive
