TheStreet, Inc.
THESTREET, INC. (Form: 10-Q, Received: 05/07/2012 14:03:44)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2012

 

Commission File Number 000-25779

 

THESTREET, INC.


(Exact name of Registrant as specified in its charter)


 

 

Delaware

06-1515824



(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification Number)


 

14 Wall Street

New York, New York 10005


(Address of principal executive offices, including zip code)

 

(212) 321-5000


(Registrant’s telephone number, including area code)

          Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant as required to submit and post such files). Yes x No o

          Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Smaller reporting company o


 

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x


          Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

 

 

 

(Title of Class)

 

(Number of Shares Outstanding
as of May 2, 2012)


 


Common Stock, par value $0.01 per share

 

32,753,822



TheStreet, Inc.
Form 10-Q

As of and for the Three Months Ended March 31, 2012

 

 

 

 

Part I - FINANCIAL INFORMATION

 

1

Item 1.

Interim Condensed Consolidated Financial Statements

 

1

 

Condensed Consolidated Balance Sheets

 

1

 

Condensed Consolidated Statements of Operations

 

2

 

Condensed Consolidated Statements of Comprehensive Loss

 

3

 

Condensed Consolidated Statements of Cash Flows

 

4

 

Notes to Condensed Consolidated Financial Statements

 

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

20

Item 4.

Controls and Procedures

 

21

 

 

 

PART II - OTHER INFORMATION

 

21

Item 1.

Legal Proceedings

 

21

Item 1A.

Risk Factors

 

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

22

Item 3.

Defaults Upon Senior Securities

 

23

Item 4.

Mine Safety Disclosures

 

23

Item 5.

Other Information

 

23

Item 6.

Exhibits

 

24

SIGNATURES

 

26

ii


P art I – FINANCIAL INFORMATION

 

 

Item 1.

Interim Condensed Consolidated Financial Statements.

THESTREET, INC.
C ONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

March 31, 2012

 

December 31, 2011

 

 

 


 


 

 

 

(unaudited)

 

(audited)

 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents (Note 2)

 

$

19,256,130

 

$

44,865,191

 

Marketable securities (Note 2)

 

 

15,974,752

 

 

20,895,238

 

Accounts receivable, net of allowance for doubtful accounts of $140,026 as of March 31, 2012 and $158,870 as of December 31, 2011

 

 

5,638,503

 

 

6,225,424

 

Other receivables, net

 

 

271,374

 

 

356,219

 

Prepaid expenses and other current assets

 

 

1,690,024

 

 

1,421,955

 

Restricted cash

 

 

660,370

 

 

660,370

 

 

 



 



 

Total current assets

 

 

43,491,153

 

 

74,424,397

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation and amortization of $14,441,088 as of March 31, 2012 and $13,466,365 as of December 31, 2011

 

 

7,345,141

 

 

8,494,648

 

Marketable securities (Note 2)

 

 

34,083,681

 

 

7,894,365

 

Other assets

 

 

136,978

 

 

172,055

 

Goodwill

 

 

24,057,616

 

 

24,057,616

 

Other intangibles, net of accumulated amortization of $5,825,510 as of March 31, 2012 and $5,529,730 as of December 31, 2011

 

 

5,074,355

 

 

5,370,135

 

Restricted cash (Note 2)

 

 

1,000,000

 

 

1,000,000

 

 

 



 



 

Total assets

 

$

115,188,924

 

$

121,413,216

 

 

 



 



 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

2,344,854

 

$

2,305,589

 

Accrued expenses

 

 

6,594,508

 

 

7,970,802

 

Deferred revenue

 

 

18,280,371

 

 

17,625,666

 

Other current liabilities

 

 

585,065

 

 

509,214

 

 

 



 



 

Total current liabilities

 

 

27,804,798

 

 

28,411,271

 

Deferred tax liability

 

 

288,000

 

 

288,000

 

Other liabilities

 

 

4,299,160

 

 

4,569,497

 

 

 



 



 

Total liabilities

 

 

32,391,958

 

 

33,268,768

 

 

 



 



 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

Preferred stock; $0.01 par value; 10,000,000 shares authorized; 5,500 issued and outstanding as of March 31, 2012 and December 31, 2011; the aggregate liquidation preference totals $55,000,000 as of March 31, 2012 and December 31, 2011

 

 

55

 

 

55

 

Common stock; $0.01 par value; 100,000,000 shares authorized; 39,419,851 shares issued and 32,736,948 shares outstanding as of March 31, 2012, and 38,461,595 shares issued and 32,131,188 shares outstanding as of December 31, 2011

 

 

394,199

 

 

384,616

 

Additional paid-in capital

 

 

269,989,546

 

 

270,230,246

 

Accumulated other comprehensive income

 

 

(340,686

)

 

(394,600

)

Treasury stock at cost; 6,682,903 shares as of March 31, 2012 and 6,330,407 shares as of December 31, 2011

 

 

(11,743,650

)

 

(11,010,149

)

Accumulated deficit

 

 

(175,502,498

)

 

(171,065,720

)

 

 



 



 

Total stockholders’ equity

 

 

82,796,966

 

 

88,144,448

 

 

 



 



 

Total liabilities and stockholders’ equity

 

$

115,188,924

 

$

121,413,216

 

 

 



 



 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements

1


THESTREET, INC.
C ONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
March 31,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

 

 

(unaudited)

 

Net revenue:

 

 

 

 

 

 

 

Premium services

 

$

9,189,981

 

$

9,609,501

 

Media

 

 

3,625,846

 

 

4,511,380

 

 

 



 



 

Total net revenue

 

 

12,815,827

 

 

14,120,881

 

 

 



 



 

 

 

 

 

 

 

 

 

Operating expense:

 

 

 

 

 

 

 

Cost of services

 

 

6,435,162

 

 

6,959,048

 

Sales and marketing

 

 

4,090,249

 

 

4,370,773

 

General and administrative

 

 

3,822,521

 

 

4,008,666

 

Depreciation and amortization

 

 

1,287,262

 

 

1,620,849

 

Restructuring and other charges

 

 

1,713,498

 

 

 

 

 



 



 

Total operating expense

 

 

17,348,692

 

 

16,959,336

 

 

 



 



 

Operating loss

 

 

(4,532,865

)

 

(2,838,455

)

Net interest income

 

 

96,087

 

 

198,027

 

 

 



 



 

Loss from continuing operations before income taxes

 

 

(4,436,778

)

 

(2,640,428

)

Provision for income taxes

 

 

 

 

 

 

 



 



 

Loss from continuing operations

 

 

(4,436,778

)

 

(2,640,428

)

Discontinued operations:

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 

 

(1,616

)

 

 



 



 

Net loss

 

 

(4,436,778

)

 

(2,642,044

)

Preferred stock cash dividends

 

 

96,424

 

 

96,424

 

 

 



 



 

Net loss attributable to common stockholders

 

$

(4,533,202

)

$

(2,738,468

)

 

 



 



 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share:

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.14

)

$

(0.09

)

Loss from discontinued operations

 

 

 

 

(0.00

)

 

 



 



 

Net loss

 

 

(0.14

)

 

(0.09

)

Preferred stock cash dividends

 

 

(0.00

)

 

(0.00

)

 

 



 



 

Net loss attributable to common stockholders

 

$

(0.14

)

$

(0.09

)

 

 



 



 

 

 

 

 

 

 

 

 

Weighted average basic and diluted shares outstanding

 

 

32,342,541

 

 

31,880,600

 

 

 



 



 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements

2


THESTREET, INC.
C ONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
March 31,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

Net loss

 

$

(4,436,778

)

$

(2,642,044

)

Unrealized gain (loss) on marketable securities

 

 

53,914

 

 

(133,668

)

 

 



 



 

Comprehensive loss

 

$

(4,382,864

)

$

(2,775,712

)

 

 



 



 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements

3


THESTREET, INC.
C ONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

 

 

(unaudited)

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net loss

 

$

(4,436,778

)

$

(2,642,044

)

Loss from discontinued operations

 

 

 

 

1,616

 

 

 



 



 

Loss from continuing operations

 

 

(4,436,778

)

 

(2,640,428

)

Adjustments to reconcile loss from continuing operations to net cash provided by operating activities:

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

532,908

 

 

721,115

 

Provision for doubtful accounts

 

 

65,769

 

 

53,142

 

Depreciation and amortization

 

 

1,287,262

 

 

1,620,849

 

Restructuring and other charges

 

 

847,980

 

 

 

Deferred rent

 

 

(79,989

)

 

335,737

 

Noncash barter activity

 

 

48,183

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

521,152

 

 

(17,429

)

Other receivables, net

 

 

84,845

 

 

96,990

 

Prepaid expenses and other current assets

 

 

(544,764

)

 

(75,925

)

Other assets

 

 

28,186

 

 

(9,173

)

Accounts payable

 

 

39,265

 

 

(1,346,943

)

Accrued expenses

 

 

(1,386,689

)

 

(2,925,746

)

Deferred revenue

 

 

507,501

 

 

2,947,216

 

Other current liabilities

 

 

75,207

 

 

22,519

 

 

 



 



 

Net cash used in continuing operations

 

 

(2,409,962

)

 

(1,218,076

)

Net cash used in discontinued operations

 

 

 

 

(2,257

)

 

 



 



 

Net cash used in operating activities

 

 

(2,409,962

)

 

(1,220,333

)

 

 



 



 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(35,700,010

)

 

(9,172,053

)

Sale of marketable securities

 

 

14,485,094

 

 

13,521,347

 

Capital expenditures

 

 

(486,657

)

 

(490,953

)

 

 



 



 

Net cash (used in) provided by investing activities

 

 

(21,701,573

)

 

3,858,341

 

 

 



 



 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Cash dividends paid on common stock

 

 

(802,601

)

 

(862,132

)

Cash dividends paid on preferred stock

 

 

(96,424

)

 

(96,424

)

Proceeds from the sale of common stock

 

 

135,000

 

 

 

Purchase of treasury stock

 

 

(733,501

)

 

(233,533

)

 

 



 



 

Net cash used in financing activities

 

 

(1,497,526

)

 

(1,192,089

)

 

 



 



 

Net (decrease) increase in cash and cash equivalents

 

 

(25,609,061

)

 

1,445,919

 

Cash and cash equivalents, beginning of period

 

 

44,865,191

 

 

20,089,660

 

 

 



 



 

Cash and cash equivalents, end of period

 

$

19,256,130

 

$

21,535,579

 

 

 



 



 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash payments made for interest

 

$

 

$

 

 

 



 



 

Cash payments made for income taxes

 

$

 

$

 

 

 



 



 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements

4


TheStreet, Inc.

N otes to Condensed Consolidated Financial Statements
(unaudited)

 

 

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Business

          TheStreet, Inc., together with its wholly owned subsidiaries (“TheStreet”, “we”, “us” or the “Company”), is a leading digital financial media company whose collection of digital services provides users, subscribers and advertisers with a variety of content and tools through a range of online, social media, tablet and mobile channels. Our mission is to provide actionable ideas from the world of investing, finance and business in order to break down information barriers, level the playing field and help all individuals and organizations grow their wealth. With a robust suite of digital services, TheStreet offers the tools and insights needed to make informed decisions about earning, investing, saving and spending money.

          Since its inception in 1996, TheStreet believes it has distinguished itself from other financial media companies with its journalistic excellence, unbiased approach and interactive multimedia coverage of the financial markets, economy, industry trends, investment and financial planning.

Basis of Presentation

          The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and for quarterly reports on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The financial statements require the use of management estimates and include the accounts of the Company as required by GAAP. Operating results for the three month period ended March 31, 2012 is not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

          The consolidated balance sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements.

          For further information, refer to the consolidated financial statements and accompanying notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission (“SEC”) on March 7, 2012 (“2011 Form 10-K”).

          The Company accrues quarterly expenses related to its full year cash incentive compensation on a straight-line basis based on the Company’s estimate of expected full year cash incentive compensation.

          The Company has evaluated subsequent events for recognition or disclosure.

Recent Accounting Pronouncements

          In May 2011, the FASB issued FASB ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ ASU 2011-04 ”). ASU 2011-04 provides new guidance for fair value measurements intended to achieve common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. The amended guidance provides a consistent definition of fair value to ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The amended guidance changes

5


certain fair value measurement principles and enhances the disclosure requirements, particularly for Level 3 fair value measurements. The amended guidance is effective for interim and annual periods beginning after December 15, 2011. Early adoption was not permitted. The Company has conformed to the new presentation required in ASU 2011-04 in this Form 10-Q for the three months ended March 31, 2012.

          In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”), to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard is effective for interim and annual periods beginning after December 15, 2011 and is to be applied retrospectively. The FASB has deferred the requirement to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income. Companies are required to either present amounts reclassified out of other comprehensive income on the face of the financial statements or disclose those amounts in the notes to the financial statements. During the deferral period, there is no requirement to separately present or disclose the reclassification adjustments into net income. The effective date of this deferral will be consistent with the effective date of the ASU 2011-05. The Company adopted ASU 2011-05 in the first quarter of 2012 and disclosed comprehensive income in its unaudited consolidated statement of comprehensive income and note that this guidance affects financial statement presentation only and has no impact on the Company’s consolidated financial statements.

          In September 2011, the FASB issued ASU 2011-08, Testing for Goodwill Impairment (“ASU 2011-08”). ASU 2011-08 permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 31, 2011. Early adoption was permitted. The implementation of ASU 2011-08 did not have a material impact on the Company’s consolidated financial statements.

 

 

2. CASH AND CASH EQUIVALENTS, MARKETABLE SECURITIES AND RESTRICTED CASH

          The Company’s cash and cash equivalents primarily consist of money market funds and checking accounts totaling $19.3 million. Marketable securities consist of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds, corporate floating rate notes, and two municipal auction rate securities (“ARS”) issued by the District of Columbia with a par value of approximately $1.9 million. The ARS pay interest in accordance with their terms at each respective auction date, typically every 35 days, and mature in the year 2038. As of March 31, 2012, the total fair value of these marketable securities was approximately $50.1 million and the total cost basis of was approximately $50.4 million. The maximum maturity for any investment is three years. The Company accounts for its marketable securities in accordance with the provisions of ASC 320-10. The Company classifies these securities as available for sale and the securities are reported at fair value. Unrealized gains and losses are recorded as a component of accumulated other comprehensive income and excluded from net loss. Additionally, the Company has a total of approximately $1.7 million of cash that serves as collateral for an outstanding letter of credit, and which cash is therefore restricted. The letter of credit serves as a security deposit for the Company’s office space in New York City. As the lease agreement allows for a reduction in the amount of the security deposit as of November 2012, a portion of the restricted cash has been classified as a current asset.

6



 

 

 

 

 

 

 

 

 

 

March 31,
2012

 

December 31,
2011

 

 

 


 


 

Cash and cash equivalents

 

$

19,256,130

 

$

44,865,191

 

Current and noncurrent marketable securities

 

 

50,058,433

 

 

28,789,603

 

Current and noncurrent restricted cash

 

 

1,660,370

 

 

1,660,370

 

 

 



 



 

Total cash and cash equivalents, current and noncurrent marketable securities and current and noncurrent restricted cash

 

$

70,974,933

 

$

75,315,164

 

 

 



 



 


 

 

3. FAIR VALUE MEASUREMENTS

          The Company measures the fair value of its financial instruments in accordance with ASC 820-10, which refines the definition of fair value, provides a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The statement establishes consistency and comparability by providing a fair value hierarchy that prioritizes the inputs to valuation techniques into three broad levels, which are described below:

 

 

Level 1: Inputs are quoted market prices in active markets for identical assets or liabilities (these are observable market inputs).

 

 

Level 2: Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability (includes quoted market prices for similar assets or identical or similar assets in markets in which there are few transactions, prices that are not current or vary substantially).

 

 

Level 3: Inputs are unobservable inputs that reflect the entity’s own assumptions in pricing the asset or liability (used when little or no market data is available).

          Financial assets and liabilities included in our financial statements and measured at fair value as of March 31, 2012 are classified based on the valuation technique level in the table below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 


 


 


 


 

Description:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (1)

 

$

19,256,130

 

$

19,256,130

 

$

 

$

 

Marketable securities (2)

 

 

50,058,433

 

 

48,628,433

 

 

 

 

1,430,000

 

 

 



 



 



 



 

Total at fair value

 

$

69,314,563

 

$

67,884,563

 

$

 

$

1,430,000

 

 

 



 



 



 



 


 

 

(1)

Cash and cash equivalents, totaling approximately $19.3 million, consists primarily of money market funds and checking accounts for which we determine fair value through quoted market prices.

 

 

(2)

Marketable securities consist of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds and corporate floating rate notes for which we determine fair value through quoted market prices. Marketable securities also consist of two municipal ARS issued by the District of Columbia having a fair value totaling approximately $1.4 million as of March 31, 2012. Historically, the fair value of ARS investments approximated par value due to the frequent resets through the auction process. Due to events in credit markets, the auction events, which historically have provided liquidity for these securities, have been unsuccessful. The result of a failed auction is that these ARS holdings will continue to pay interest in accordance with their terms at each respective auction date; however, liquidity of the securities will be limited until there is a successful auction, the issuer redeems the securities, the securities mature or until such time as other markets for these ARS holdings develop. For each of our ARS, we evaluate the risks related to the structure, collateral and liquidity of the investment, and forecast the probability of issuer default, auction failure and a successful auction at par, or a redemption at par, for each future auction period. Temporary impairment charges are recorded in accumulated other comprehensive income, whereas other-than-temporary impairment charges are recorded in

7



 

 

 

our consolidated statement of operations. As of March 31, 2012, the Company determined there was a decline in the fair value of its ARS investments of approximately $0.4 million from its cost basis, which was deemed temporary and was included within accumulated other comprehensive loss. The Company used a discounted cash flow model to determine the estimated fair value of its investment in ARS. The assumptions used in preparing the discounted cash flow model include estimates for interest rate, timing and amount of cash flows and expected holding period of ARS.

          The following table provides a reconciliation of the beginning and ending balance for the Company’s marketable securities measured at fair value using significant unobservable inputs (Level 3):

 

 

 

 

 

 

 

Marketable
Securities

 

 

 


 

Balance at January 1, 2012

 

$

1,410,000

 

Increase in fair value of investment

 

 

20,000

 

 

 



 

Balance at March 31, 2012

 

$

1,430,000

 

 

 



 


 

 

4. STOCK-BASED COMPENSATION

          For a detailed description of past equity-based compensation activity, please refer to the Company’s 2011 Form 10-K. There have been no significant changes in the Company’s equity-based compensation accounting policies and assumptions from those that were disclosed in the 2011 Form 10-K.

          The Company estimates the value of employee stock options on the date of grant using the Black-Scholes option-pricing model. This determination is affected by the Company’s stock price as well as assumptions regarding expected volatility, risk-free interest rate, and expected dividends. The weighted-average grant date fair value per share of employee stock options granted during the three months ended March 31, 2012 and 2011 was $0.48 and $1.07, respectively, using the Black-Scholes model with the weighted-average assumptions presented below. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options.

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
March 31,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

Expected option lives

 

 

3.5 years

 

 

3.5 years

 

Expected volatility

 

 

52.01

%

 

56.01

%

Risk-free interest rate

 

 

0.59

%

 

1.55

%

Expected dividend yield

 

 

5.51

%

 

3.53

%

          As of March 31, 2012, there remained 678,551 shares available for future awards under the Company’s 2007 Performance Incentive Plan (the “2007 Plan”). In connection with awards under both the 2007 Plan and awards issued outside of the Plan, the Company recorded approximately $0.5 million of non-cash stock-based compensation for the three month period ended March 31, 2012, as compared to approximately $0.7 million for the three month period ended March 31, 2011. As of March 31, 2012, there was approximately $4.5 million of unrecognized stock-based compensation expense remaining to be recognized over a weighted-average period of 2.41 years.

          A summary of the activity of the Company’s 1998 Stock Incentive Plan (the “1998 Plan”) and 2007 Plan pertaining to stock option grants is as follows:

8



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares
Underlying
Awards

 

Weighted
Average
Exercise
Price

 

Aggregate
Intrinsic
Value
($000)

 

Weighted
Average
Remaining
Contractual
Life (In Years)

 

 

 


 


 


 


 

Awards outstanding, December 31, 2011

 

 

1,008,544

 

$

4.63

 

 

 

 

 

 

 

Options granted

 

 

1,953,500

 

$

1.83

 

 

 

 

 

 

 

Options cancelled

 

 

(50,005

)

$

3.22

 

 

 

 

 

 

 

Options expired

 

 

(1,666

)

$

2.75

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Awards outstanding, March 31, 2012

 

 

2,910,373

 

$

2.77

 

$

0.8

 

 

5.40

 

 

 



 

 

 

 



 



 

Awards vested and expected to vest at March 31, 2012

 

 

2,494,350

 

$

2.91

 

$

0.7

 

 

5.22

 

 

 



 

 

 

 



 



 

Awards exercisable at March 31, 2012

 

 

519,856

 

$

6.35

 

$

0.0

 

 

1.52

 

 

 



 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          A summary of the activity of the 1998 Plan and 2007 Plan pertaining to grants of restricted stock units is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares
Underlying
Awards

 

Weighted
Average
Exercise
Price

 

Aggregate
Intrinsic
Value
($000)

 

Weighted
Average
Remaining
Contractual
Life (In Years)

 

 

 


 


 


 


 

Awards outstanding, December 31, 2011

 

 

2,448,376

 

$

 

 

 

 

 

 

 

Restricted stock units granted

 

 

199,998

 

$

 

 

 

 

 

 

 

Restricted stock units settled by delivery of common stock upon vesting

 

 

(883,256

)

$

 

 

 

 

 

 

 

Restricted stock units cancelled

 

 

(307,337

)

$

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Awards outstanding, March 31, 2012

 

 

1,457,781

 

$

 

$

3,222

 

 

2.03

 

 

 



 

 

 

 



 



 

Awards vested and expected to vest at March 31, 2012

 

 

1,294,000

 

$

 

$

2,860

 

 

2.02

 

 

 



 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Awards exercisable at March 31, 2012

 

 

 

$

 

$

 

 

 

 

 



 

 

 

 



 



 

          A summary of the status of the Company’s unvested share-based payment awards as of March 31, 2012 and changes in the three-month period then ended, is as follows:

9



 

 

 

 

 

 

 

 

Unvested Awards

 

Number of
Shares

 

Weighted
Average Grant
Date Fair Value

 


 


 


 

Shares underlying awards unvested at December 31, 2011

 

 

3,095,801

 

$

2.39

 

Shares underlying options granted

 

 

1,953,500

 

$

0.48

 

Shares underlying restricted stock units granted

 

 

199,998

 

$

1.80

 

Shares underlying options vested

 

 

(160,403

)

$

0.89

 

Shares underlying restricted stock units vested

 

 

(883,256

)

$

2.79

 

Shares underlying options cancelled

 

 

(50,005

)

$

1.08

 

Shares underlying restricted stock units cancelled

 

 

(307,337

)

$

2.57

 

 

 



 

 

 

 

Shares underlying awards unvested at March 31, 2012

 

 

3,848,298

 

$

1.37

 

 

 



 

 

 

 

          For the three months ended March 31, 2012 and 2011, the total fair value of share-based awards vested was approximately $1.9 million and $1.0 million, respectively. For the three months ended March 31, 2012 and 2011, the total intrinsic value of options exercised was $0 and $0, respectively (no options were exercised in either period). For the three months ended March 31, 2012 and 2011, 1,953,500 and 524,500 stock options, respectively, and 199,998 and 1,170,341 restricted stock units, respectively, were granted to employees of the Company. Additionally, for the three months ended March 31, 2012 and 2011, zero and zero stock options, respectively, were exercised, and 883,256 and 327,100 shares were issued under restricted stock unit grants, respectively, yielding approximately $0 and $0, respectively, to the Company.

 

 

5. STOCKHOLDERS’ EQUITY

Treasury Stock

          In December 2000, the Company’s Board of Directors authorized the repurchase of up to $10 million worth of the Company’s Common Stock, from time to time, in private purchases or in the open market. In February 2004, the Company’s Board of Directors approved the resumption of the stock repurchase program (the “Program”) under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the Program. However, the affirmative vote of the holders of a majority of the outstanding shares of Series B Preferred Stock, voting separately as a single class, is necessary for the Company to repurchase its stock (except for the purchase or redemption from employees, directors and consultants pursuant to agreements providing us with repurchase rights upon termination of their service with us), unless after such purchase we have unrestricted cash (net of all indebtedness for borrowed money, purchase money obligations, promissory notes or bonds) equal to at least two times the product obtained by multiplying the number of shares of Series B Preferred Stock outstanding at the time such dividend is paid by the liquidation preference. During the three-month periods ended March 31, 2012 and 2011, the Company did not purchase any shares of Common Stock under the Program. Since inception of the Program, the Company has purchased a total of 5,453,416 shares of Common Stock at an aggregate cost of approximately $7.3 million. In addition, pursuant to the terms of the Company’s 1998 Plan and 2007 Plan, and certain procedures adopted by the Compensation Committee of the Board of Directors, in connection with the exercise of stock options by certain of the Company’s employees, and the issuance of shares of Common Stock in settlement of vested restricted stock units, the Company may withhold shares in lieu of payment of the exercise price and/or the minimum amount of applicable withholding taxes then due. Through March 31, 2012, the Company had withheld an aggregate of 1,017,879 shares which have been recorded as treasury stock. In addition, the Company received an aggregate of 208,270 shares as partial settlement of the working capital and debt adjustment from the acquisition of Corsis Technology Group II LLC, 104,055 of which were received in December 2008 and 104,215 of which were received in September 2009, and 3,338 shares as partial settlement of the working capital adjustment from the acquisition of Kikucall, Inc., which were received in March 2011. These shares have been recorded as treasury stock.

Dividends

10


          On March 30, 2012, the Company paid its quarterly cash dividend of $0.025 per share on its Common Stock and its Series B Preferred Stock on a converted common share basis, to stockholders of record at the close of business on March 15, 2012. These dividends totaled approximately $0.9 million. The Company’s Board of Directors reviews the dividend payment each quarter and there can be no assurance that the Company will continue to pay this cash dividend in the future.

 

 

6. LEGAL PROCEEDINGS

          As previously disclosed, in 2001, the Company, certain of its current or former officers and directors and certain underwriters were named in a securities class action related to the Company’s initial public offering (“IPO”). Similar suits were filed against approximately 300 other issuers and their underwriters, all of which are included in a single coordinated proceeding in the district court (the “IPO Litigations”). The complaints allege that the prospectus and the registration statement for the IPO failed to disclose that the underwriters allegedly solicited and received “excessive” commissions from investors and that some investors in the IPO allegedly agreed with the underwriters to buy additional shares in the aftermarket in order to inflate the price of the Company’s stock. The complaints seek unspecified damages, attorney and expert fees, and other unspecified litigation costs. In 2003, the district court granted the Company’s motion to dismiss the claims against it under Rule 10b-5 but motions to dismiss the claims under Section 11 of the Securities Act of 1933 were denied as to virtually all of the defendants in the consolidated cases, including the Company. In addition, some of the individual defendants in the IPO Litigations signed a tolling agreement and were dismissed from the action without prejudice on October 9, 2002. In 2003, a proposed collective partial settlement of this litigation was structured between the plaintiffs, the issuer defendants in the consolidated actions, the issuer officers and directors named as defendants, and the issuers’ insurance companies. The court granted preliminary approval of the settlement in 2005 but in 2007 the settlement was terminated, in light of a ruling by the appellate court in related litigation in 2006 that reversed the trial court’s certification of classes in that related litigation. In 2009, another settlement was entered into and approved by the trial court. Under the settlement, the Company’s obligation would be paid by the issuers’ insurance companies. The settlement was appealed; in May 2011, the Second Circuit Court of Appeals dismissed one appeal and remanded another appeal to the District Court to determine whether the appellant has standing; in August 2011, the District Court determined that the applicable appellant did not have standing, which decision was appealed. In January 2012, the appeal was dismissed and the settlement is to be effected.

          As previously disclosed, we conducted a review of the accounting in our former Promotions.com subsidiary, which subsidiary we sold in December 2009. As a result of this review, in February 2010 we filed a Form 10-K/A for the year ended December 31, 2008 and a Form 10-Q/A for the quarter ended March 31, 2009, respectively, to restate and correct certain previously-reported financial information as well as filed Forms 10-Q for the quarters ended June 30, 2009 and September 30, 2009, respectively. The SEC commenced an investigation in March 2010 into the facts surrounding our restatement of previously issued financial statements and related matters. We are cooperating fully with the SEC. The investigation could result in the SEC seeking various penalties and relief including, without limitation, civil injunctive relief and/or civil monetary penalties or administrative relief. The nature of the relief or remedies the SEC may seek with respect to the Company, if any, cannot be predicted at this time.

          In December 2010, the Company was named as one of several defendants in a lawsuit captioned EIT Holdings LLC v. WebMD, LLC et al. , (U.S.D.C., D. Del.), on the same day that plaintiff filed a substantially identical suit against a different group of defendants in a lawsuit captioned EIT Holdings LLC v. Yelp!, Inc. et al. , (U.S.D.C., N. D. Cal.). In February 2011, by agreement of plaintiff and the Company, the Company was dismissed from the Delaware action without prejudice and named as a defendant in the California action. In May 2011, the action against the Company and all but defendant Yelp! Inc. (“Yelp!”) were dismissed for misjoinder and plaintiff filed separate cases against the dismissed defendants; the action against the Company is captioned EIT Holdings LLC v. TheStreet.com, Inc. , (U.S.D.C., N. D. Cal.). The complaints allege that defendants infringe U.S. Patent No. 5,828,837 (the “Patent”), putatively owned by plaintiff, related to a certain method of displaying information to an Internet-accessible device. In January 2012, the court in the case against Yelp! granted Yelp’s

11


motion for summary judgment, finding the Patent to be invalid. In the event such judgment becomes final and nonappealable, plaintiff could not obtain an award of relief against any other party, including the Company, with respect to claims related to the Patent. The Company intends to vigorously defend itself and believes it has meritorious defenses. Due to the early stage of this matter and the inherent uncertainties of litigation, the ultimate outcome of this matter is uncertain.

          The Company is party to other legal proceedings arising in the ordinary course of business or otherwise, none of which other proceedings is deemed material.

 

 

7. NET LOSS PER SHARE OF COMMON STOCK

          Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of restricted stock units (using the treasury stock method), the incremental common shares issuable upon the exercise of stock options (using the treasury stock method), and the conversion of the Company’s convertible preferred stock and warrants (using the if-converted method). For the three months ended March 31, 2012 and 2011, approximately 4.3 million and 4.5 million unvested restricted stock units, vested and unvested options and warrants to purchase Common Stock, respectively, were excluded from the calculation, as their effect would be anti-dilutive because the exercise prices were greater than the average market price of the Common Stock during the respective periods and because the Company recorded a net loss.

          The following table reconciles the numerator and denominator for the calculation.

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

Basic and diluted net loss per share:

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(4,436,778

)

$

(2,640,428

)

Loss from discontinued operations

 

 

 

 

(1,616

)

Preferred stock cash dividends

 

 

(96,424

)

 

(96,424

)

 

 



 



 

Numerator for basic and diluted earnings per share -

 

 

 

 

 

 

 

Net loss available to common stockholders

 

$

(4,533,202

)

$

(2,738,468

)

 

 



 



 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

Weighted average basic and diluted shares outstanding

 

 

32,342,541

 

 

31,880,600

 

 

 



 



 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share:

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.14

)

$

(0.09

)

Loss from discontinued operations

 

 

 

 

(0.00

)

Preferred stock cash dividends

 

 

(0.00

)

 

(0.00

)

 

 



 



 

Net loss available to common stockholders

 

$

(0.14

)

$

(0.09

)

 

 



 



 


 

 

8. INCOME TAXES

          The Company accounts for its income taxes in accordance with ASC 740-10. Under ASC 740-10, 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. ASC 740-10 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized based on all available positive and negative evidence.

          As of December 31, 2011, the Company had approximately $143 million of federal and state net operating loss carryforwards, which are available through 2031. Based on operating results for the three months ended March 31, 2012 and nine month projections, management expects to generate a tax loss in 2011 and no tax

12


benefit has been recorded. The Company has a full valuation allowance against its deferred tax assets as management concluded that it was more likely than not that the Company would not realize the benefit of its deferred tax assets by generating sufficient taxable income in future years. The Company expects to continue to provide a full valuation allowance until, or unless, it can sustain a level of profitability that demonstrates its ability to utilize these assets.

          In accordance with Section 382 of the Internal Revenue Code, the ability to utilize the Company’s net operating loss carryforwards could be limited in the event of a change in ownership and as such a portion of the existing net operating loss carryforwards may be subject to limitation. Such an ownership change would create an annual limitation on the usage of the Company’s net operating loss carryforward. The ultimate realization of net operating loss carryforwards is dependent upon the generation of future taxable income during the periods following an ownership change. As such, a portion of the existing net operating loss carryforwards may be subject to limitation. During the year ended December 31, 2009, the Company acquired approximately $3 million of net operating loss carryforwards when it acquired the stock of Kikucall, Inc. In accordance with Section 382 of the Internal Revenue Code, the usage of the Kikucall, Inc. net operating loss carryforward could be limited.

 

 

9. BUSINESS CONCENTRATIONS AND CREDIT RISK

          Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and restricted cash. The Company maintains all of its cash and cash equivalents and restricted cash in six domestic financial institutions. The Company performs periodic evaluations of the relative credit standing of these institutions. As of March 31, 2012, the Company’s cash and cash equivalents and restricted cash primarily consisted of money market funds and checking accounts.

          For the three months ended March 31, 2012 and 2011, no individual client accounted for 10% or more of consolidated revenue. As of March 31, 2012 and 2011, one individual client accounted for more than 10% of our gross accounts receivable balance.

          The Company’s customers are primarily concentrated in the United States and we carry accounts receivable balances. 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, actual losses have been within management’s expectations.

 

 

10. RESTRUCTURING AND OTHER CHARGES

          In March 2009, the Company announced and implemented a reorganization plan, including an approximate 8% reduction in the Company’s workforce, to align the Company’s resources with its strategic business objectives. Additionally, effective March 21, 2009, the Company’s then Chief Executive Officer tendered his resignation, effective May 8, 2009, the Company’s then Chief Financial Officer tendered his resignation, and in December 2009, the Company sold its Promotions.com subsidiary and entered into negotiations to sublease certain office space maintained by Promotions.com. As a result of these activities, the Company incurred restructuring and other charges from continuing operations of approximately $3.5 million during the year ended December 31, 2009 (the “2009 Restructuring”).

          The following tables display the activity of the 2009 Restructuring reserve account during the three months ended March 31, 2012 and 2011:

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 


 

 

 

2012

 

2011

 

 

 


 


 

Beginning balance

 

$

674,365

 

$

844,761

 

Payments

 

 

28,382

 

 

28,382

 

 

 



 



 

Ending balance

 

$

645,983

 

$

816,379

 

 

 



 



 

13


          In December 2011, the Company announced a management transition under which the Company’s chief executive officer would step down from his position by March 31, 2012. Additionally, in December 2011, a senior vice president separated from the Company. As a result of these activities, the Company incurred restructuring and other charges from continuing operations of approximately $1.8 million during the year ended December 31, 2011 (the “2011 Restructuring”).

          The following tables display the activity of the 2011 Restructuring reserve account during the three months ended March 31, 2012:

 

 

 

 

 

Beginning balance

 

$

1,178,647

 

Payments

 

 

40,365

 

 

 



 

Ending balance

 

$

1,138,282

 

 

 



 

          In March 2012, the Company implemented a targeted reduction in force and committed to terminate use of certain vendor services and assets reflecting previously capitalized costs. The actions were taken after a review of the Company’s cost structure with the goal of better aligning the cost structure with the Company’s revenue base. As a result of these activities, the Company incurred restructuring and other charges from continuing operations of approximately $1.7 million during the three ended March 31, 2012 (the “2012 Restructuring”).

          The following tables display the activity of the 2012 Restructuring reserve account during the three months ended March 31, 2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Workforce
Reduction

 

Asset
Write-Off

 

Termination
of Vendor
Services

 

Total

 

 

 


 


 


 


 

Initial charge

 

$

796,927

 

$

627,802

 

$

288,769

 

$

1,713,498

 

Noncash deductions

 

 

 

 

627,802

 

 

220,178

 

 

847,980

 

Payments

 

 

27,367

 

 

 

 

 

 

27,367

 

 

 



 



 



 



 

Balance March 31, 2012

 

$

769,560

 

$

 

$

68,591

 

$

838,151

 

 

 



 



 



 



 


 

 

11. DISCONTINUED OPERATIONS

          In June 2005, the Company committed to a plan to discontinue the operations of the Company’s securities research and brokerage segment. Accordingly, the operating results relating to this segment, which are limited to certain professional fees, have been segregated from continuing operations and reported as a separate line item in the accompanying condensed consolidated statements of operations and cash flows. There were no cash flows from discontinued operations from investing or financing activities for the periods presented.

14



 

 

12. OTHER LIABILITIES

          Other liabilities consist of the following:

 

 

 

 

 

 

 

 

 

 

March 31,
2012

 

December 31,
2011

 

 

 


 


 

Deferred rent

 

$

3,196,845

 

$

3,277,478

 

Deferred revenue

 

 

930,648

 

 

1,077,852

 

Other liabilities

 

 

171,667

 

 

214,167

 

 

 



 



 

Total other liabilities

 

$

4,299,160

 

$

4,569,497

 

 

 



 



 

I tem 2.            Management’s Discussion and Analysis of Financial Condition and Results of Operations.

          Special Note Regarding Forward-Looking Statements – all statements contained in this quarterly report on Form 10-Q (the “Report”) that are not descriptions of historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are inherently subject to risks and uncertainties, and actual results could differ materially from those reflected in the forward-looking statements due to a number of factors, which include, but are not limited to, the factors set forth under the heading “Risk Factors” and elsewhere in this Report, and in other documents we file with the Securities and Exchange Commission from time to time, including, without limitation, the Company’s annual report on Form 10-K for the year ended December 31, 2011 (“2011 Form 10-K”). Certain forward-looking statements may be identified by terms such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or similar terms or the negative of these terms. All statements relating to our plans, strategies and objectives are deemed forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. The forward-looking statements speak only as of the date of the filing of this Report; we have no obligation to update these forward-looking statements, whether as a result of new information, future developments or otherwise.

          The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and notes thereto.

Overview

          TheStreet, Inc., together with its wholly owned subsidiaries (“TheStreet”, “we”, “us” or the “Company”), is a leading digital financial media company whose collection of digital services provides users, subscribers and advertisers with a variety of content and tools through a range of online, social media, tablet and mobile channels. Our mission is to provide actionable ideas from the world of investing, finance and business in order to break down information barriers, level the playing field and help all individuals and organizations grow their wealth. With a robust suite of digital services, TheStreet offers the tools and insights needed to make informed decisions about earning, investing, saving and spending money.

          Since its inception in 1996, TheStreet believes it has distinguished itself from other financial media companies with its journalistic excellence, unbiased approach and interactive multimedia coverage of the financial markets, economy, industry trends, investment and financial planning.

          We report revenue in two categories: premium services and media. Premium services revenue is comprised of subscriptions, licenses and fees for access to securities investment information and rate services. Media revenue is comprised of fees charged for the placement of advertising and sponsorships within our

15


services, as well as licensing fees paid by third parties to obtain the right to display the Company’s awards logos on their Web sites and marketing materials in relation to certain award designations.

Critical Accounting Estimates

          Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions 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 revenue and expense during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the condensed consolidated financial statements in the period they are deemed to be necessary. Significant estimates made in the accompanying condensed consolidated financial statements include, but are not limited to, the following:

 

 

 

 

incentive cash compensation,

 

useful lives of intangible assets,

 

useful lives of fixed assets,

 

the carrying value of goodwill, intangible assets and marketable securities,

 

allowances for doubtful accounts and deferred tax assets,

 

accrued expense estimates,

 

reserves for estimated tax liabilities, and

 

certain estimates and assumptions used in the calculation of the fair value of equity compensation issued to employees.

          The Company accrues quarterly expenses related to its full year cash incentive compensation on a straight-line basis based on the Company’s estimate of expected full year cash incentive compensation.

          A summary of our critical accounting policies and estimates can be found in our 2011 Form 10-K.

Results of Operations

Comparison of Three Months Ended March 31, 2012 and March 31, 2011

          Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

 

 

 


 

 

 

 

 

 

2012

 

Percent
of Total
Revenue

 

2011

 

Percent
of Total
Revenue

 

Percent
Change

 

 

 


 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premium services

 

$

9,189,981

 

 

72

%

$

9,609,501

 

 

68

%

 

-4

%

Media

 

 

3,625,846

 

 

28

%

 

4,511,380

 

 

32

%

 

-20

%

 

 



 



 



 



 

 

 

 

Total revenue

 

$

12,815,827

 

 

100

%

$

14,120,881

 

 

100

%

 

-9

%

 

 



 



 



 



 

 

 

 

          Premium services . Premium service revenue is comprised of subscriptions, licenses and fees for access to securities investment information and rate services. Revenue is recognized ratably over the contract period.

          Premium services revenue for the three months ended March 31, 2012 decreased by 4% when compared to the three months ended March 31, 2011. This decrease is primarily the result of a 10% decrease in the weighted-average number of subscriptions during the three months ended March 31, 2012 as compared to the three months ended March 31, 2011, partially offset by a 7% increase in the average revenue recognized per subscription during the three months ended March 31, 2012 as compared to the three months ended March 31, 2011. The decrease in the weighted-average number of subscriptions during the period is primarily the result of

16


reduced acquisitions of new subscribers to our products. The increase in the average revenue recognized per subscription during the three months ended March 31, 2012 as compared to the three months ended March 31, 2011 is primarily the result of the mix of products sold.

          Media . Media revenue is comprised of fees charged for the placement of advertising and sponsorships within our services, as well as licensing fees paid by third parties to obtain the right to display the Company’s awards logos on their Web sites and marketing materials in relation to certain award designations.

          Media revenue for the three months ended March 31, 2012 decreased by 20% when compared to the three months ended March 31, 2011. The decrease in media revenue was primarily the result of reduced demand from new advertisers as well as from repeat advertisers.

          Operating Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

 

 

 


 

 

 

 

 

 

2012

 

Percent
of Total
Revenue

 

2011

 

Percent
of Total
Revenue

 

Percent
Change

 

 

 


 


 


 


 


 

Operating expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

$

6,435,162

 

 

50

%

$

6,959,048

 

 

49

%

 

-8

%

Sales and marketing

 

 

4,090,249

 

 

32

%

 

4,370,773

 

 

31

%

 

-6

%

General and administrative

 

 

3,822,521

 

 

30

%

 

4,008,666

 

 

28

%

 

-5

%

Depreciation and amortization

 

 

1,287,262

 

 

10

%

 

1,620,849

 

 

11

%

 

-21

%

Restructuring and other charges

 

 

1,713,498

 

 

13

%

 

 

 

 

 

N/A

 

 

 



 

 

 

 



 

 

 

 

 

 

 

Total operating expense

 

$

17,348,692

 

 

 

 

$

16,959,336

 

 

 

 

 

2

%

 

 



 

 

 

 



 

 

 

 

 

 

 

          Cost of services. Cost of services expense includes compensation, benefits, outside contributor costs related to the creation of our content, licensed data and the technology required to publish our content.

          Cost of services expense decreased by approximately $0.5 million, or 8%, over the periods. The decrease was primarily the result of reduced compensation expense due to a 7% decrease in average headcount, combined with lower costs related to revenue share payments made to certain distribution partners, the aggregate of which decreased by approximately $0.5 million. Although the dollar amount of cost of services expense decreased over the periods, cost of services expense as a percentage of revenue increased to 50% in the three months ended March 31, 2012, from 49% in the prior year period, as our cost cutting initiatives did not completely offset the decline in revenue.

          Sales and marketing. Sales and marketing expense consists primarily of compensation expense for the direct sales force, marketing services, and customer service departments, advertising and promotion expenses and credit card processing fees.

          Sales and marketing expense decreased by approximately $0.3 million, or 6%, over the periods. The decrease was primarily the result of reduced incentive compensation and sales commission expense resulting from decreased revenue, combined with lower credit card processing and consulting fees, the aggregate sum of which decreased by approximately $0.5 million. These cost decreases were partially offset by an investment in the sales and marketing of our premium subscription-based products, including a 2% increase in headcount, as well as higher advertising and promotion costs, the aggregate sum of which increased by approximately $0.3 million. Sales and marketing expense includes $0.05 million of barter expense in the three months ended March 31, 2012, as compared to none in the prior year period. Although the dollar amount of sales and marketing expense decreased over the periods, sales and marketing expense as a percentage of revenue increased to 32% in the three months ended March 31, 2012, from 31% in the prior year period, as our cost cutting initiatives did not completely offset the decline in revenue.

17


          General and administrative . General and administrative expense consists primarily of compensation for general management, finance and administrative personnel, occupancy costs, professional fees, insurance and other office expenses.

          General and administrative expense decreased by approximately $0.2 million, or 5%, over the periods. The decrease was primarily the result of reduced consulting fees, stock-based compensation, professional, training and insurance costs, the aggregate sum of which decreased by approximately $0.3 million. These cost decreases were partially offset by increased recruiting fees totaling approximately $0.2 million. Although the dollar amount of general and administrative expense decreased over the periods, general and administrative expense as a percentage of revenue increased to 30% in the three months ended March 31, 2012, from 28% in the prior year period, as our cost cutting initiatives did not completely offset the decline in revenue.

          Depreciation and amortization. Depreciation and amortization expense decreased by approximately $0.3 million, or 21%, over the periods. The decrease is largely attributable to reductions to the estimated useful life of certain past capitalized Web site development projects during the three months ended March 31, 2011 resulting in increased amortization during that prior year period. As a percentage of revenue, depreciation and amortization expense decreased to 10% in the three months ended March 31, 2012, from 11% in the prior year period.

          Restructuring and other charges . In March 2012, the Company implemented a targeted reduction in force and committed to terminate use of certain vendor services and assets reflecting previously capitalized costs. The actions were taken after a review of the Company’s cost structure with the goal of better aligning the cost structure with the Company’s revenue base. As a result of these activities, the Company incurred restructuring and other charges from continuing operations of approximately $1.7 million during the three months ended March 31, 2012.

          Net Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months
Ended March 31,

 

 

 

 

 

 


 

Percent
Change

 

 

 

2012

 

2011

 

 

 

 


 


 


 

Net interest income

 

$

96,087

 

$

198,027

 

 

-51

%

 

 



 



 

 

 

 

          The decrease in net interest income is primarily the result of lower interest rates on bank deposits combined with reduced cash balances.

          Net Loss

          Net loss for the three months ended March 31, 2012 totaled $4.4 million, or $0.14 per basic and diluted share, compared to net loss totaling $2.6 million, or $0.09 per basic and diluted share, for the three months ended March 31, 2011.

          Liquidity and Capital Resources

          We generally have invested in money market funds and other short-term, investment grade instruments that are highly liquid and of high quality, with the intent that such funds are available for sale for operating purposes. As of March 31, 2012, our cash, cash equivalents, marketable securities, and restricted cash amounted to approximately $71.0 million, representing 62% of total assets. Our cash and cash equivalents primarily consisted of money market funds and checking accounts. Our marketable securities consisted of approximately $50.1 million of liquid short-term U.S. Treasuries, government agencies, certificates of deposit (insured up to FDIC limits), investment grade corporate and municipal bonds, and corporate floating rate notes, with a maximum maturity of three years. Marketable securities also include two auction rate securities issued by the District of Columbia with a fair value of approximately $1.4 million that mature in the year 2038. Our total cash-related position is as follows:

18



 

 

 

 

 

 

 

 

 

 

March 31,
2012

 

December 31,
2011

 

 

 


 


 

Cash and cash equivalents

 

$

19,256,130

 

$

44,865,191

 

Current and noncurrent marketable securities

 

 

50,058,433

 

 

28,789,603

 

Current and noncurrent restricted cash

 

 

1,660,370

 

 

1,660,370

 

 

 



 



 

Total cash and cash equivalents, current and noncurrent marketable securities and current and noncurrent restricted cash

 

$

70,974,933

 

$

75,315,164

 

 

 



 



 

          Financial instruments that subject us to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. We maintain all of our cash, cash equivalents and restricted cash in six domestic financial institutions and we perform periodic evaluations of the relative credit standing of these institutions.

          Cash generated from operations was not sufficient to cover our expenses during the three-month period ended March 31, 2012. Net cash used in operating activities for the three-month period ended March 31, 2012 totaled approximately $2.4 million, as compared to net cash used in operating activities totaling approximately $1.2 million for the three-month period ended March 31, 2011. The increase in net cash used in operating activities is primarily related to the following:

 

 

 

 

a decrease in the growth of deferred revenue resulting from reduced subscription sales; and

 

an increase in the net loss from continuing operations.

          These increases in net cash used in operating activities were partially offset by reduced declines in both accounts payable and accrued expenses during the three months ended March 31, 2012 as compared to the three months ended March 31, 2011.

          Net cash used in investing activities of approximately $21.7 million for the three-month period ended March 31, 2012 was primarily the result of approximately $21.2 million of the net purchase of marketable securities combined with approximately $0.5 million of capital expenditures.

          Net cash used in financing activities of approximately $1.5 million for the three-month period ended March 31, 2012 primarily consisted of cash dividends paid and the purchase of treasury stock by retaining shares issuable upon the vesting of restricted stock units in connection with minimum tax withholding requirements, partially offset by cash received from the sale of the Company’s Common Stock.

          We have a total of approximately $1.7 million of cash that serves as collateral for an outstanding letter of credit, and which cash is therefore restricted. The letter of credit serves as a security deposit for our office space in New York City. As the lease agreement allows for a reduction in the amount of the security deposit as of November 2012, a portion of the restricted cash has been classified as a current asset.

          We believe that our current cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months. We are committed to cash expenditures in an aggregate amount of approximately $2.3 million through March 31, 2013, primarily related to operating leases. Additionally, our Board of Directors declared a quarterly cash dividend in the amount of $0.025 per share of Common Stock and preferred stock (on a common share equivalent basis) during the first quarter of 2012, which resulted in cash expenditures of approximately $0.9 million. Our Board of Directors reviews the dividend payment each quarter and there can be no assurance that we will continue to pay this cash dividend in the future.

          As of December 31, 2011, we had approximately $143 million of federal and state net operating loss carryforwards. Based on operating results for the three months ended March 31, 2012 and nine-month projections, management expects to generate a tax loss in 2012 and no tax benefit has been recorded. We maintain a full valuation allowance against our deferred tax assets as management concluded that it was more likely than not that we would not realize the benefit of our deferred tax assets by generating sufficient taxable

19


income in future years. We expect to continue to provide a full valuation allowance until, or unless, we can sustain a level of profitability that demonstrates our ability to utilize these assets.

          In accordance with Section 382 of the Internal Revenue Code, the ability to utilize the Company’s net operating loss carryforwards could be limited in the event of a change in ownership and as such a portion of the existing net operating loss carryforwards may be subject to limitation. Such an ownership change would create an annual limitation on the usage of the Company’s net operating loss carryforward. The ultimate realization of net operating loss carryforwards is dependent upon the generation of future taxable income during the periods following an ownership change. As such, a portion of the existing net operating loss carryforwards may be subject to limitation. During the year ended December 31, 2009, the Company acquired approximately $3 million of net operating loss carryforwards when it acquired the stock of Kikucall, Inc. In accordance with Section 382 of the Internal Revenue Code, the usage of the Kikucall, Inc. net operating loss carryforward could be limited.

Treasury Stock

          In December 2000, our Board of Directors authorized the repurchase of up to $10 million worth of our Common Stock, from time to time, in private purchases or in the open market. In February 2004, our Board of Directors approved the resumption of the stock repurchase program (the “Program”) under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the Program. However, the affirmative vote of the holders of a majority of the outstanding shares of Series B Preferred Stock, voting separately as a single class, is necessary in order for us to be able to repurchase our Common Stock (except for the purchase or redemption from employees, directors and consultants pursuant to agreements providing us with repurchase rights upon termination of their service with us), unless after such purchase we have unrestricted cash (net of all indebtedness for borrowed money, purchase money obligations, promissory notes or bonds) equal to at least two times the product obtained by multiplying the number of shares of Series B Preferred Stock outstanding at the time such dividend is paid by the liquidation preference. During the three months ended March 31, 2012 we did not purchase any shares of Common Stock under the Program. Since inception of the Program, we have purchased a total of 5,453,416 shares of Common Stock at an aggregate cost of approximately $7.3 million. In addition, pursuant to the terms of the Company’s 1998 Stock Incentive Plan and our 2007 Performance Incentive Plan, and certain procedures adopted by the Compensation Committee of our Board of Directors, in connection with the exercise of stock options by certain of our employees, and the issuance of shares of Common Stock in settlement of vested restricted stock units, we may withhold shares in lieu of payment of the exercise price and/or the minimum amount of applicable withholding taxes then due. Through March 31, 2012, we have withheld an aggregate of 1,017,879 shares which have been recorded as treasury stock. In addition, we received an aggregate of 208,270 shares as partial settlement of the working capital and debt adjustment from the acquisition of Corsis Technology Group II LLC, 104,055 of which were received in October 2008 and 104,215 of which were received in September 2009, and 3,338 shares as partial settlement of a working capital adjustment related to our acquisition of Kikucall, Inc., which shares we received in March 2011. These shares have been recorded as treasury stock.

 

 

I tem 3.

Quantitative and Qualitative Disclosures About Market Risk.

          We believe that our market risk exposures are immaterial as we do not have instruments for trading purposes, and reasonable possible near-term changes in market rates or prices will not result in material near-term losses in earnings, material changes in fair values or cash flows for all instruments.

           We maintain all of our cash, cash equivalents and restricted cash in six domestic financial institutions, and we perform periodic evaluations of the relative credit standing of these institutions. However, no assurances can be given that the third party institutions will retain acceptable credit ratings or investment practices.

20



 

 

I tem 4.

Controls and Procedures.

          Evaluation of Disclosure Controls and Procedures: The Company carried out an evaluation, as required by Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

          In addition, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has determined that during the period covered by this report, that there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, these internal controls over financial reporting.

P ART II - OTHER INFORMATION

 

 

It em 1.

Legal Proceedings.

           As previously disclosed, in 2001, the Company, certain of its current or former officers and directors and certain underwriters were named in a securities class action related to the Company’s initial public offering (“IPO”). Similar suits were filed against approximately 300 other issuers and their underwriters, all of which are included in a single coordinated proceeding in the district court (the “IPO Litigations”). The complaints allege that the prospectus and the registration statement for the IPO failed to disclose that the underwriters allegedly solicited and received “excessive” commissions from investors and that some investors in the IPO allegedly agreed with the underwriters to buy additional shares in the aftermarket in order to inflate the price of the Company’s stock. The complaints seek unspecified damages, attorney and expert fees, and other unspecified litigation costs. In 2003, the district court granted the Company’s motion to dismiss the claims against it under Rule 10b-5 but motions to dismiss the claims under Section 11 of the Securities Act of 1933 were denied as to virtually all of the defendants in the consolidated cases, including the Company. In addition, some of the individual defendants in the IPO Litigations signed a tolling agreement and were dismissed from the action without prejudice on October 9, 2002. In 2003, a proposed collective partial settlement of this litigation was structured between the plaintiffs, the issuer defendants in the consolidated actions, the issuer officers and directors named as defendants, and the issuers’ insurance companies. The court granted preliminary approval of the settlement in 2005 but in 2007 the settlement was terminated, in light of a ruling by the appellate court in related litigation in 2006 that reversed the trial court’s certification of classes in that related litigation. In 2009, another settlement was entered into and approved by the trial court. Under the settlement, the Company’s obligation would be paid by the issuers’ insurance companies. The settlement was appealed; in May 2011, the Second Circuit Court of Appeals dismissed one appeal and remanded another appeal to the District Court to determine whether the appellant has standing; in August 2011, the District Court determined that the applicable appellant did not have standing, which decision was appealed. In January 2012, the appeal was dismissed and the settlement is to be effected.

          As previously disclosed, we conducted a review of the accounting in our former Promotions.com subsidiary, which subsidiary we sold in December 2009. As a result of this review, in February 2010 we filed a Form 10-K/A for the year ended December 31, 2008 and a Form 10-Q/A for the quarter ended March 31, 2009, respectively, to restate and correct certain previously-reported financial information as well as filed Forms 10-Q for the quarters ended June 30, 2009 and September 30, 2009, respectively. The SEC commenced an investigation in March 2010 into the facts surrounding our restatement of previously issued financial statements

21


and related matters. We are cooperating fully with the SEC. The investigation could result in the SEC seeking various penalties and relief including, without limitation, civil injunctive relief and/or civil monetary penalties or administrative relief. The nature of the relief or remedies the SEC may seek with respect to the Company, if any, cannot be predicted at this time.

          In December 2010, the Company was named as one of several defendants in a lawsuit captioned EIT Holdings LLC v. WebMD, LLC et al. , (U.S.D.C., D. Del.), on the same day that plaintiff filed a substantially identical suit against a different group of defendants in a lawsuit captioned EIT Holdings LLC v. Yelp!, Inc. et al. , (U.S.D.C., N. D. Cal.). In February 2011, by agreement of plaintiff and the Company, the Company was dismissed from the Delaware action without prejudice and named as a defendant in the California action. In May 2011, the action against the Company and all but defendant Yelp! Inc. (“Yelp”) were dismissed for misjoinder and plaintiff filed separate cases against the dismissed defendants; the action against the Company is captioned EIT Holdings LLC v. TheStreet.com, Inc. , (U.S.D.C., N. D. Cal.). The complaints allege that defendants infringe U.S. Patent No. 5,828,837 (the “Patent”), putatively owned by plaintiff, related to a certain method of displaying information to an Internet-accessible device. In January 2012, the court in the case against Yelp! granted Yelp’s motion for summary judgment, finding the Patent to be invalid. In the event such judgment becomes final and nonappealable, plaintiff could not obtain an award of relief against any other party, including the Company, with respect to claims related to the Patent. The Company intends to vigorously defend itself and believes it has meritorious defenses. Due to the early stage of this matter and the inherent uncertainties of litigation, the ultimate outcome of this matter is uncertain.

          The Company is party to other legal proceedings arising in the ordinary course of business or otherwise, none of which other proceedings is deemed material.

 

 

I tem 1A.

Risk Factors.

          In addition to the other information set forth in this report, you should carefully consider the information set forth in Part 1, Item 1A. “Risk Factors” in our Form 10-K for the year ended December 31, 2011, which we filed with the SEC on March 7, 2012.

 

 

I tem 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

          On March 7, 2012, in connection with the hiring of Elisabeth DeMarse as the Company’s Chief Executive Officer, the Company sold Ms. DeMarse a total of 75,000 shares of the Company’s Common Stock, for an aggregate purchase price of $135,000, representing a per share price equal to the closing price of the Company’s Common Stock as reported by Nasdaq on the date of sale. The securities so sold were not registered and were issued in reliance upon an exemption from registration requirements. Proceeds from the sale will be used for general corporate purposes.

          The following table presents information related to repurchases of its Common Stock made by the Company during the three months ended March 31, 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period

 

(a) Total
Number
of Shares
(or Units)
Purchased

 

(b)
Average
Price
Paid per
Share (or
Unit)

 

(c) Total Number
of Shares (or
Units) Purchased
as Part of Publicly
Announced Plans
or Programs

 

(d) Maximum Number
(or Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs *

 


 


 


 


 


 

January 1 – 31, 2012

 

 

 

$

 

 

 

$

2,678,878

 

February 1 – 29, 2012

 

 

 

$

 

 

 

$

2,678,878

 

March 1 – 31, 2012

 

 

 

$

 

 

 

$

2,678,878

 

 

 



 

 

 

 



 

 

 

 

Total

 

 

 

$

 

 

 

$

2,678,878

 

 

 



 

 

 

 



 

 

 

 

22



 

 

*

In December 2000, the Company’s Board of Directors authorized the repurchase of up to $10 million worth of the Company’s Common Stock, from time to time, in private purchases or in the open market. In February 2004, the Company’s Board of Directors approved the resumption of the stock repurchase program (the “Program”) under new price and volume parameters, leaving unchanged the maximum amount available for repurchase under the Program. The program does not have a specified expiration date and is subject to certain limitations.


 

 

I tem 3.

Defaults Upon Senior Securities.

 

 

          Not applicable.

 

I tem 4.

Mine Safety Disclosures

 

 

          Not applicable.

 

 

I tem 5.

Other Information.

 

 

          Not applicable.

23



 

 

I tem 6.

Exhibits.

          The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Securities and Exchange Commission:

 

 

 

 

 

Exhibit
Number

 

Description


 


 

 

 

*3.1

 

 

Restated Certificate of Incorporation of the Company, incorporated by reference to the Exhibits to the Company’s Annual Report on Form 10-K filed March 14, 2011.

*3.2

 

 

Certificate of Amendment dated May 31, 2011 to Restated Certificate of Incorporation, incorporated by reference to the Exhibit to the Company’s Current Report on Form 8-K filed June 2, 2011.

*3.3

 

 

Amended and Restated Bylaws of the Company, incorporated by reference to the Exhibits to the Company’s Annual Report on Form 10-K filed March 30, 2000.

*4.1

 

 

Amended and Restated Registration Rights Agreement dated December 21, 1998, by and among the Company and the stockholders named therein, incorporated by reference to the Exhibits to the Company’s Registration Statement on Form S-1 filed February 23, 1999.

*4.2

 

 

Certificate of Designation of the Company’s Series A Junior Participating Preferred Stock, incorporated by reference to the Exhibits to the Company’s Registration Statement on Form S-1 filed February 23, 1999.

*4.3

 

 

Certificate of Designation of the Company’s Series B Preferred Stock, as filed with the Secretary of State of the State of Delaware on November 15, 2007, incorporated by reference to the Exhibits to the Company’s Current Report on Form 8-K filed November 20, 2007.

*4.4

 

 

Option to Purchase Common Stock dated November 1, 2007, incorporated by reference to the Company’s Current Report on Form 8-K filed November 6, 2007.

*4.5

 

 

Investor Rights Agreement dated November 15, 2007 by and among the Company, TCV VI, L.P. and TCV Member Fund, L.P., incorporated by reference to the Exhibits to the Company’s Current Report on Form 8-K filed November 20, 2007.

*4.6

 

 

Warrant dated November 15, 2007 issued by the Company to TCV VI, L.P., incorporated by reference to the Exhibits to the Company’s Current Report on Form 8-K filed November 20, 2007.

*4.7

 

 

Warrant dated November 15, 2007 issued by the Company to TCV Member Fund, L.P., incorporated by reference to the Exhibits to the Company’s Current Report on Form 8-K filed November 20, 2007.

*4.8

 

 

Specimen certificate for the Company’s shares of common stock, incorporated by reference to the Exhibits to Amendment 3 to the Company’s Registration Statement on Form S-1 filed April 19, 1999.

10.1

 

 

Employment Letter dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

10.2

 

 

Agreement for Grant of Incentive Stock Options dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

10.3

 

 

Agreement for Grant of Non-Qualified Stock Options dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

10.4

 

 

Stock Purchase Agreement dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

10.5

 

 

Severance Agreement dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

31.1

 

 

Rule 13a-14(a) Certification of CEO.

31.2

 

 

Rule 13a-14(a) Certification of CFO.

32.1

 

 

Section 1350 Certification of CEO.

24



 

 

 

 

 

32.2

 

 

Section 1350 Certification of CFO.

**101.INS

 

XBRL Instance Document

**101.SCH

 

XBRL Taxonomy Extension Schema Document

**101.CAL

 

XBRL Taxonomy Extension Calculation Document

**101.DEF

 

XBRL Taxonomy Extension Definitions Document

**101.LAB

 

XBRL Taxonomy Extension Labels Document

**101.PRE

 

XBRL Taxonomy Extension Presentation Document


 

 

*     

 

Incorporated by reference

**     

 

Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections

25


S IGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

 

 

 

 

THESTREET, INC.

 

 

 

Date: May 7, 2012

 

By:

 

/s/ Elisabeth DeMarse

 

 

 

 


 

 

 

 

 

Name:

Elisabeth DeMarse

 

 

 

 

 

Title:

Chief Executive Officer (principal executive officer)

 

 

 

 

Date: May 7, 2012

 

By:

 

/s/ Thomas Etergino

 

 

 

 


 

 

 

 

 

Name:

Thomas Etergino

 

 

 

 

 

Title:

Chief Financial Officer (principal financial officer)

26


EXHIBIT INDEX

          The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Securities and Exchange Commission:

 

 

 

 

 

Exhibit
Number

 

Description


 


 

 

 

*3.1

 

 

Restated Certificate of Incorporation of the Company, incorporated by reference to the Exhibits to the Company’s Annual Report on Form 10-K filed March 14, 2011.

*3.2

 

 

Certificate of Amendment dated May 31, 2011 to Restated Certificate of Incorporation, incorporated by reference to the Exhibit to the Company’s Current Report on Form 8-K filed June 2, 2011.

*3.3

 

 

Amended and Restated Bylaws of the Company, incorporated by reference to the Exhibits to the Company’s Annual Report on Form 10-K filed March 30, 2000.

*4.1

 

 

Amended and Restated Registration Rights Agreement dated December 21, 1998, by and among the Company and the stockholders named therein, incorporated by reference to the Exhibits to the Company’s Registration Statement on Form S-1 filed February 23, 1999.

*4.2

 

 

Certificate of Designation of the Company’s Series A Junior Participating Preferred Stock, incorporated by reference to the Exhibits to the Company’s Registration Statement on Form S-1 filed February 23, 1999.

*4.3

 

 

Certificate of Designation of the Company’s Series B Preferred Stock, as filed with the Secretary of State of the State of Delaware on November 15, 2007, incorporated by reference to the Exhibits to the Company’s Current Report on Form 8-K filed November 20, 2007.

*4.4

 

 

Option to Purchase Common Stock dated November 1, 2007, incorporated by reference to the Company’s Current Report on Form 8-K filed November 6, 2007.

*4.5

 

 

Investor Rights Agreement dated November 15, 2007 by and among the Company, TCV VI, L.P. and TCV Member Fund, L.P., incorporated by reference to the Exhibits to the Company’s Current Report on Form 8-K filed November 20, 2007.

*4.6

 

 

Warrant dated November 15, 2007 issued by the Company to TCV VI, L.P., incorporated by reference to the Exhibits to the Company’s Current Report on Form 8-K filed November 20, 2007.

*4.7

 

 

Warrant dated November 15, 2007 issued by the Company to TCV Member Fund, L.P., incorporated by reference to the Exhibits to the Company’s Current Report on Form 8-K filed November 20, 2007.

*4.8

 

 

Specimen certificate for the Company’s shares of common stock, incorporated by reference to the Exhibits to Amendment 3 to the Company’s Registration Statement on Form S-1 filed April 19, 1999.

10.1

 

 

Employment Letter dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

10.2

 

 

Agreement for Grant of Incentive Stock Options dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

10.3

 

 

Agreement for Grant of Non-Qualified Stock Options dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

10.4

 

 

Stock Purchase Agreement dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

10.5

 

 

Severance Agreement dated as of March 7, 2012 between the Company and Elisabeth DeMarse.

31.1

 

 

Rule 13a-14(a) Certification of CEO.

31.2

 

 

Rule 13a-14(a) Certification of CFO.

32.1

 

 

Section 1350 Certification of CEO.




 

 

 

 

 

32.2

 

 

Section 1350 Certification of CFO.

**101.INS

 

XBRL Instance Document

**101.SCH

 

XBRL Taxonomy Extension Schema Document

**101.CAL

 

XBRL Taxonomy Extension Calculation Document

**101.DEF

 

XBRL Taxonomy Extension Definitions Document

**101.LAB

 

XBRL Taxonomy Extension Labels Document

**101.PRE

 

XBRL Taxonomy Extension Presentation Document


 

 

*     

 

Incorporated by reference

**     

 

Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections

28


Exhibit 10.1

Ms. Elisabeth DeMarse

Dear Elisabeth,

                    We are pleased to extend to you an offer of employment with TheStreet, Inc. (“we,” “us,” the “Company”) on the terms described below:

1. POSITIONS: You will serve in a full-time capacity as President and Chief Executive Officer of the Company and its subsidiaries. You will be appointed to the Company’s Board of Directors (the “Board”), as a Class II director, effective upon the resignation of Daryl Otte from such position, which is anticipated to occur prior to the close of business on March 7, 2012.

2. START DATE: You will commence employment with the Company effective prior to the close of business on March 7, 2012 (the “Start Date”). The Company may publicly announce your hiring at any time subsequent to your execution of the letter.

3. COMPENSATION: You will be paid a base salary of four hundred thousand dollars ($400,000) per annum, which will be reviewed annually for potential increase at the discretion of the Compensation Committee of the Board (the “Compensation Committee”). You will not have any target annual cash incentive bonus.

4. BENEFITS: You will be eligible to participate in any employment benefits plans provided by the Company, subject to the terms, conditions and eligibility requirements of any relevant benefits plan documents. At present, these benefits include, but are not limited to, group medical, dental and vision plans, 100% Company-paid coverage under the Company’s life insurance, short-term disability and long-term disability plans (subject to applicable waiting periods) and four (4) weeks of paid vacation annually (prorated for any partial year). You also will have the opportunity to participate in the Company’s 401(k) savings, flexible spending account, and dependent care account and transit benefits plans, subject to the terms, conditions and eligibility requirements of such plans. The Company reserves the right to amend or terminate any of its benefit programs at any time with or without notice in its sole discretion.

5. SIGN-ON BONUS: On the Start Date, you shall be paid a sign-on bonus (the “Sign-On Bonus”) of two hundred thousand dollars ($200,000). In the event that, within two (2) years of the Start Date, you resign your employment with the Company for any reason or the Company terminates your employment for Cause (as defined in the Severance Agreement (as defined below)), then, within thirty (30) days of such resignation or termination, you shall repay to the Company a percentage of the Sign-On Bonus, in accordance with the following schedule:

29



 

 

 

Date Resignation
or Termination
Occurs

 

Percentage
of Sign-On
Bonus
Subject to
Repayment


 


Prior to the 1 year anniversary of the Start Date

 

100%

On or after the 1 year anniversary of the Start Date but prior to the two year anniversary of the Start Date

 

50%

On or after the 2 year anniversary of the Start Date

 

0%

No repayment of the Sign-On Bonus will be required if your employment terminates as a result of your death or Disability (as defined in the Non-Qualified Stock Option Agreement (as defined below)).

6. OPTION GRANTS: On the Start Date, you shall be granted an option to purchase an aggregate of one million seven hundred and fifty thousand (1,750,000) shares of the Company’s common stock, as follows: (i) you shall be granted an option to purchase one million five hundred and twenty-five thousand three hundred and sixty (1,525,360) shares of the Company’s common stock (the “Non-Qualified Stock Option”), pursuant to the terms and conditions of a stock option agreement in the form attached hereto as Exhibit A (the “Non-Qualified Stock Option Agreement”) and (ii) you shall be granted an option to purchase two hundred and twenty-four thousand six hundred and forty (224,640) shares of the Company’s common stock (the “Incentive Stock Option”), pursuant to the terms and conditions of a stock option agreement in the form attached hereto as Exhibit B (the “Incentive Stock Option Agreement”). For avoidance of doubt, as provided in the Incentive Stock Option Agreement, the Incentive Stock Option shall be deemed to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) to the maximum extent permissible under the Code (with the balance, if any, deemed to be a non-qualified stock option within the meaning of the Code). The exercise price per share with respect to each of the Non-Qualified Stock Option and the Incentive Stock Option shall be equal to the fair market value of the Company’s common stock on the date of grant, as determined in good faith by the Compensation Committee.

7. STOCK PURCHASE: Upon execution of this letter, you shall be entitled to purchase, and shall purchase, from the Company a total of seventy-five thousand (75,000) shares of the Company’s common stock, at a price per share equal to the closing price of the Company’s common stock as reported by Nasdaq on the date of your execution of this letter. In connection with such purchase, you and the Company shall execute a stock purchase agreement in the form attached hereto as Exhibit C (the “Stock Purchase Agreement”).

8. POLICIES: As an employee, you will be required to comply fully with the provisions of the Company’s Investment policy, Code of Business Conduct and Ethics, Compliance Manual and other compliance policies and procedures relevant to your position with the Company (the “Employment Materials”). You will be required to sign forms confirming that you will abide by the requirements of these policies and procedures.

9. AT WILL STATUS: Your employment with the Company is “at will.” This means that either you or the Company may terminate your employment at any time, with or without notice, and with or without cause. Your status as an “at will” employee cannot be changed or retracted, either orally or in writing, by any policy or conduct,

30


unless you receive a document expressly stating that your employment is no longer at-will, which is signed both by you and the Chairman of the Compensation Committee (the “Compensation Committee Chairman”).

10. SEVERANCE: The Company shall execute a severance agreement with you in the form attached hereto as Exhibit D (the “Severance Agreement”).

This letter, the Non-Qualified Stock Option Agreement, the Incentive Stock Option Agreement, the Stock Purchase Agreement, the Severance Agreement and the Employment Materials contain all of the terms of your employment with the Company and supersede any prior understandings or agreements, whether written or oral, between you and Company. This letter agreement may not be amended or modified except by an express written agreement signed by you and the Compensation Committee Chairman. The terms of this letter and the resolution of any disputes hereunder shall be governed by New York law, without reference to principles of choice of law.

We are excited to have you join the Company in this most critical role. Please signify your acceptance of these terms by signing below. If this letter is not executed on the date hereof, it shall be deemed withdrawn and void ab ibinitio.

 

 

 

 

Sincerely,

 

 

 

 

 

/s/ William R. Gruver

 

 


 

 

William R. Gruver

 

 

Chairman, Compensation Committee

ACCEPTED AND AGREED
On March 7, 2012

 

 

/s/ Elisabeth DeMarse

 


 

Elisabeth DeMarse

 

31


Exhibit 10.2

THESTREET, INC.
AGREEMENT FOR GRANT
OF
INCENTIVE STOCK OPTION
PURSUANT TO 2007 PERFORMANCE INCENTIVE PLAN

March 7, 2012

Elisabeth DeMarse
c/o TheStreet, Inc.
14 Wall Street
15 th Floor
New York, NY 10005

Dear Elisabeth:

          This letter (the “ Letter ) sets forth the terms and conditions of the stock option (“ Option ”) hereby awarded to you by TheStreet, Inc. (the “ Company ”) in accordance with the provisions of the Company’s 2007 Performance Incentive Plan (the “ Plan ”).

          This award is subject to the terms and conditions set forth in the Plan, any rules and regulations adopted by the Board of Directors of the Company (the “ Board ”) or the committee of the Board which administers the Plan (the “ Committee ”), and this Letter. The provisions of the Plan are hereby incorporated by reference and any term used in this Letter and not defined herein shall have the meaning set forth in the Plan. Unless otherwise indicated, section references contained in this Letter shall refer to the corresponding sections of this Letter.

          The Option shall be deemed to be an incentive stock option within the meaning of the Internal Revenue Code of 1986, as amended (the “ Code ”), to the maximum extent permissible under the Code (with the balance, if any, deemed to be a non-qualified stock option within the meaning of the Code).

          1. Option Grant

          You have been granted an Option to purchase 224,640 shares of the Company’s Common Stock (“ Common Stock ”) to the extent the Option is exercisable as set forth below. The Option may not be sold, transferred, assigned, pledged or otherwise encumbered by you, in whole or in part; provided that the foregoing shall not affect your right to name a beneficiary under Section 13 of the Plan. The Option may be exercised only by you, except that in the event of your death, the Option may be exercised (at any time prior to its expiration or termination as provided in Sections 8 and 11) by the executor or administrator of your estate or by a person who acquired the right to exercise your Option by will or pursuant to the laws of descent and distribution. Until such time as stock certificates for the shares of Common Stock represented by the purchase of all or portion of the Option have been delivered to you in accordance with Section 4, you shall have none of the rights of a stockholder with respect to the Common Stock with respect to such shares.

          2. Option Exercise Price

          The price at which you may purchase the shares of Common Stock underlying the Option is $1.80 per share.

32


          3. Term of Option

          Your Option shall expire, to the extent that it has not previously terminated, on March 7, 2019. However, your Option may terminate prior to such expiration date as provided in Sections 8 and 11. Regardless of the provisions of Sections 5 or 8 or any other provision hereof, in no event can your Option be exercised after the expiration date set forth in this Section 3.

          4. Exercisability of Option

          Your Option will become exercisable with respect to the following number(s) of shares of Common Stock on the following date(s) as set forth below, provided that you are in the Service (as defined below) of the Company or one of its subsidiaries on such date and the Option has not been terminated in accordance with Sections 8 or 11:

 

 

 

 

Date

 

 

Number of Shares of Common Stock


 

 


 

March 7, 2013

 

56,160

 

The seventh (7 th ) calendar day of each month between April 7, 2013 and February 7, 2016, inclusive

 

  4,680

 

March 7, 2016

 

  4,680

For purposes hereof, you shall be considered to be in the “ Service ” of the Company or one of its subsidiaries if you are an employee of, or otherwise providing services to, the Company (or one if its subsidiaries, as applicable) on the applicable vesting date; provided that if you are not an employee of the Company or one of its subsidiaries on the applicable vesting date, you are providing services to the Company or one of its subsidiaries on the applicable vesting date pursuant to a written agreement signed by the Company or one of its subsidiaries that expressly agrees that the vesting of the Option shall continue during such period of service.

          To the extent that your Option has become exercisable with respect to a number of shares of Common Stock, you may exercise the Option to purchase all or any portion of such shares of Common Stock at any time on or before the date the Option expires or terminates; provided that you may only purchase a whole number of shares of Common Stock.

          5. Accelerated Vesting in Certain Events

          Notwithstanding Section 4, upon the occurrence of any of the following events, the then-unvested portion of the Option shall become exercisable and may be exercised; provided that such portion of the Option only may be exercised within one hundred and eighty (180) calendar days from the occurrence of such event (but in no event beyond the date set forth in Section 3): (i) the termination of your employment by the Company or any subsidiary thereof without Cause (as defined below) prior to a Change of Control (as defined in the Plan) if such termination is related to the Change of Control; or (ii) a Change of Control, unless (A) either (x) the Company is the surviving corporation in the Change of Control and the award reflected in this Letter is equitably adjusted pursuant to Section 4.4 of the Plan or (y) the award reflected in this Letter is assumed or replaced by a Successor (as defined below) and (B) the award as so adjusted, assumed or replaced (x) has substantially the same potential economic benefits and vesting terms as did the award immediately prior to the Change of Control and (y) provides that the award immediately shall become fully vested and exercisable upon the termination of your employment (by the Company or any subsidiary thereof or by a Successor or any affiliate thereof) without Cause at any time (provided that such portion of the Option only may be exercised within one hundred and eighty (180) calendar days from such termination (but in no event beyond the date set forth in Section 3)). If you are employed by a Successor or any affiliate thereof following a Change of Control, references in this Letter to the Company shall be understood to be references to the Successor or any such affiliate regarding matters related to the occurrence of non-occurrence of events from and after the date you become employed by the Successor or such affiliate.

33


          For purposes of this Letter, “ Cause ” shall be determined by the Committee in the exercise of its good faith judgment, in accordance with the following guidelines: (i) your willful misconduct or gross negligence in the performance of your obligations, duties and responsibilities as President and Chief Executive Officer (including those as an employee of the Company set forth in the Company’s Code of Business Conduct and Ethics dated June 1, 2006, as same may be amended from time to time provided such amendment affects all executive officers of the Company), (ii) your dishonesty or misappropriation, in either case that is willful and material, relating to the Company or any of its funds, properties, or other assets, (iii) your inexcusable repeated or prolonged absence from work (other than as a result of, or in connection with, a Disability), (iv) any unauthorized disclosure by you of Confidential Information or proprietary information of the Company in violation of Section 12(d) which is reasonably likely to result in material harm to the Company, (v) your conviction of a felony (including entry of a guilty or nolo contender plea) involving fraud, dishonesty, or moral turpitude, (vi) a violation of federal or state securities laws, or (vii) the failure by you to attempt to perform faithfully your duties and responsibilities as President and Chief Executive Officer, or other material breach by you of this Letter, provided any such failure or breach described in clauses (i), (ii), (iii), (iv), (vi) and (vii) is not cured, to the extent cure is possible, by you within thirty (30) days after written notice thereof from the Company to you; provided, however, that no failure or breach described in clauses (i), (ii), (iii), (iv), (vi) and (vii) shall constitute Cause unless (x) the Company first gives you written notice of its intention to terminate your employment for Cause and the grounds of such termination no fewer than ten (10) days prior to the date of termination; and (y) you are provided an opportunity to appear before the Board, with or without legal representation at your election to present arguments on your own behalf; and (z) if you elect to so appear, such failure or breach is not cured, to the extent cure is possible, within thirty (30) days after written notice from the Company to you that, following such appearance, the Board has determined in good faith that Cause exists and has not, following the initial notice from the Company, been cured; provided further, however, that notwithstanding anything to the contrary in this Letter and subject to the other terms of this proviso, the Company may take any and all actions, including without limitation suspension (but not without pay), it deems appropriate with respect to you and your duties at the Company pending such appearance and subsequent to such appearance during which such failure or breach has not been cured. No act or failure to act on your part will be considered “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interests of the Company.

          For purposes of this Letter, “ Disability ” shall mean physical or mental incapacity of a nature which prevents you, in the good faith judgment of the Committee, from performing your duties and responsibilities as President and Chief Executive Officer for a period of ninety (90) consecutive days or one hundred and fifty (150) days during any year, with each year under this Letter commencing on each anniversary of the date hereof.

          6. Manner of Exercise

          You may exercise your Option by giving notice to the Company (or to such service provider as the Company may designate), following such procedures as may be communicated to you from time to time.

          The shares of Common Stock represented by the exercise of your Option may consist of authorized but unissued shares or treasury shares of the Company, as determined from time to time by the Committee.

          7. Satisfaction of Option Exercise Price

          The Option may be exercised by payment of the option exercise price in cash (including check, bank draft, money order, or wire transfer). In addition, your Option may be exercised using such broker cashless exercise procedure or other procedure as the Company may establish from time to time.

          8. Termination of Service

          (a) General. If your Service terminates for any reason other than for Cause, the Option will terminate one hundred and eighty (180) calendar days after such termination of Service. Except as set forth in the Severance Agreement (as defined in Section 24 below), following the termination of your Service, no additional portions of the Option will become exercisable, and the Option will be exercisable only to the extent exercisable on the date of

34


such termination of Service. If your Service terminates for Cause, the Option shall be immediately terminated and may not be exercised.

          (b) Adjustments by the Committee. The Committee may, in its discretion, exercised before or after your termination of Service, declare all or any portion of the Option immediately exercisable and/or permit all or any part of the Option to remain exercisable for such period designated by it after the time when the Option would have otherwise terminated as provided in Section 8(a), but not beyond the expiration date of your Option as set forth in Section 3 above.

          (c) Committee Determinations. The Committee shall have absolute discretion to determine the date and circumstances of the termination of your Service, and its determination shall be final, conclusive and binding upon you.

          9. Restrictions on Option Exercise; Delivery of Shares

          (a) Even though your Option may be otherwise exercisable, your right to exercise the Option will be suspended if the Committee determines that your exercise of the Option would violate applicable laws or regulations. The suspension will last until the exercise would be lawful. Any such suspension will not extend the term of your Option.

          (b) Even though your Option may be otherwise exercisable, the Committee may refuse to permit such exercise if it determines, in its discretion, that any of the following circumstances is present:

 

 

 

 

(i)

the shares of Common Stock to be acquired upon such exercise are required to be registered or qualified under any federal or state securities law, or to be listed on any securities exchange or quotation system, and such registration, qualification, or listing has not occurred;

 

 

 

 

(ii)

the consent or approval of any government regulatory body is required and has not been obtained;

 

 

 

 

(iii)

the satisfaction of withholding tax is required and has not occurred;

 

 

 

 

(iv)

representations by you or other information is determined by counsel for the Company to be necessary or desirable in order to comply with any federal or state securities laws or regulations, and you have not provided such representations or information; or

 

 

 

 

(v)

an agreement by you with respect to the disposition of shares of Common Stock to be acquired upon exercise of your Option is determined by the Committee to be necessary or desirable in order to comply with any federal or state securities laws or regulations, or is required by the terms of this Letter, and you have not executed such agreement.

          (c) Shares of Common Stock to be delivered to you in connection with any exercise of the Option shall be delivered to you as soon as practicable and, at the Company’s election, the Company may effect such delivery by causing such number of shares of Common Stock to be deposited via DWAC into a brokerage account in your name. Common Stock delivered upon the exercise of the Option will be fully transferable (subject to any applicable securities law restrictions) and not subject to forfeiture (other than as set forth in Section 11), and will entitle the holder to all rights of a stockholder of the Company.

          (d) The Company will use reasonable commercial efforts to (i) file and cause to remain effective and current a Registration Statement on Form S-8 (or successor form) with the Securities and Exchange Commission covering shares subject to the Option until such times as all of the shares of Common Stock underlying your Option are either delivered hereunder or the Option has expired or been terminated pursuant to the terms of this Letter, and (ii) until three (3) months after you cease being an “affiliate” of the Company, to maintain a resale prospectus thereunder (or otherwise register under the Securities Act of 1933, as amended) the Common Stock underlying your Option.

35


          10. Income Tax Withholding

          In connection with the exercise of your Option, you will be required to pay, pursuant to such arrangements as the Company may establish from time to time, any applicable federal, state and local withholding tax liability. If you fail to satisfy your withholding obligation in a time and manner satisfactory to the Committee, the Company shall have the right to withhold the required amount from your salary or other amounts payable to you.

          11. Additional Termination Events and Claw-Back

          Notwithstanding anything else in this Letter, the unexercised portion of the Option shall be terminated (regardless of the extent to which it is exercisable) if any one of the following occurs: (i) you engage in Competitive Activity (as defined below) with the Company or any of its subsidiaries during your employment by the Company or any of its subsidiaries or within two (2) years after your service as President and Chief Executive Officer terminates; or (ii) you breach any of the Restrictive Covenants set out in Section 12 (collectively, the “ Restrictive Covenants ”) within two (2) years after the cessation of your employment with the Company or any subsidiary.

          The Company reserves the right (as provided below) to claw-back shares of Common Stock delivered under this Letter pursuant to each exercise of the Option by you if you engage in Competitive Activity or violate any of the Restrictive Covenants within eighteen (18) months after the delivery of such shares of Common Stock. If the Committee determines, in its good faith discretion, that all or some portion of the shares of Common Stock delivered to you will be clawed-back, then you shall be required to repay to the Company the Repayment Amount (as defined below) with respect to such shares of Common Stock. You may satisfy the payment obligation set forth in the preceding sentence by paying the Company cash, by delivering to the Company shares of Common Stock, or by remitting to the Company a combination of cash and shares of Common Stock, such that the Fair Market Value (measured as of the day before your delivery to the Company of shares of Common Stock) of any shares of Common Stock you deliver to the Company, plus the amount of any cash you pay to the Company, equals the Repayment Amount. The “ Repayment Amount ” with respect to the shares of Common Stock delivered to you upon any exercise of the Option shall mean the lesser of the Exercise Date Spread Value (as defined below) with respect to such exercise of the Option and the Delivery Date Spread Value (as defined below) with respect to such exercise of the Option, in each case reduced by the amount of taxes paid by you with respect to such exercise of the Option; provided that neither the Exercise Date Spread Value nor the Delivery Date Spread Value shall be less than zero. With respect to each exercise you made of the Option, the “ Exercise Date Spread Value ” is the amount, if any, by which the Fair Market Value (measured as of the date of exercise) of the number of shares of Common Stock underlying the Option with respect to which the Option was exercised on such date, exceeded the aggregate option exercise price for such shares. With respect to each exercise you made of the Option, the “ Delivery Date Spread Value ” is the amount, if any, by which the Fair Market Value (measured as of the day before you remit the Repayment Amount to the Company) of the number of shares of Common Stock underlying the Option with respect to which the Option was exercised, exceeded the aggregate option exercise price for such shares. In addition to any other remedy available to the Company under applicable law, the Company shall have the right to offset any other amounts payable to you by the amount of any required repayment by you which has not been repaid.

          For purposes of this Letter, “ Competitive Activity ” means your service as a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or you permit your name to be used in connection with the activities of, any other business or organization anywhere in the United States, or in any other geographic area in which the Company or any of its subsidiaries operates or with respect to which the Company provides financial news and commentary coverage (or from which such other business or organization provides financial news and commentary coverage of the United States), which engages in a business that competes with any business in which the Company or any subsidiary is engaged (a “ Competing Business ”); provided, however, that, notwithstanding the foregoing, it shall not be a Competitive Activity for you to (i) become the registered or beneficial owner of up to three percent (3%) of any class of capital stock of a competing corporation registered under the Securities Exchange Act of 1934, as amended, provided that you do not otherwise participate in the business of such corporation or (ii)

36


work in a non-competitive business of a company which is carrying on a Competing Business, the revenues of which represent less than twenty percent (20%) of the consolidated revenues of that company, or, as a result thereof, owning compensatory equity in that company.

          For purposes of this Letter, “ Fair Market Value ” of a share of Common Stock on any date shall be (i) if the principal market for the Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day (or, if such exchange is not open on such day, on the next day such exchange is open) as reported by such exchange or on a consolidated tape reflecting transactions on such exchange, or (ii) if the principal market for the Common Stock is not a national securities exchange, the closing average of the highest bid and lowest asked prices per share of Common Stock on such day (or, if such exchange is not open on such day, on the next day such exchange is open) as reported by the market upon which the Common Stock is quoted, or an independent dealer in the Common Stock, as determined by the Company in good faith; provided, however, that if clauses (i) and (ii) are all inapplicable, or if no trades have been made and no quotes are available for such day, the Fair Market Value of the Common Stock shall be determined by the Committee in good faith by any method consistent with applicable regulations adopted by the United States Treasury Department relating to stock options or stock valuation.

          12. Restrictive Covenants

 

 

 

 

a. Non-Solicitation of Employees

 

 

 

 

 

You agree that, during your employment by the Company or any subsidiary and through the end of two (2) years after the cessation of your employment with the Company or any subsidiary, you will not solicit for employment or hire, in any business enterprise or activity, any employee of the Company or any subsidiary who was employed by the Company or a subsidiary during your period of employment by the Company or a subsidiary provided that (a) the foregoing shall not be violated by any general advertising not targeted at any Company or subsidiary employees nor by you serving as a reference upon request, and (b) you may solicit and hire any one or more former employees of the Company or its subsidiaries who had ceased being such an employee for a period of at least six (6) months prior to any such solicitation or hiring.

 

 

 

 

b. Non-Solicitation of Clients and Vendors

 

 

 

 

 

You agree that, during your employment by the Company or any subsidiary and through the end of two (2) years after the cessation of your employment with the Company or any subsidiary, you will not solicit, in any business enterprise or activity, any client, customer, licensee, licensor, third-party service provider or vendor (a “ Business Relation ”) of the Company or any subsidiary who was a Business Relation of the Company or any subsidiary during your period of employment by the Company or any subsidiary to (i) cease being a Business Relation of the Company or any subsidiary or (ii) become a Business Relation of a Competing Business unless (without you having solicited such third party to cease such relationship) such third party ceased being a Business Relation of the Company or any subsidiary for a period of at least six (6) months prior to such solicitation.

 

 

 

 

c. Non-Disparagement

 

 

 

 

 

During your employment by the Company or any subsidiary and indefinitely thereafter, neither party shall make any statements, written or oral, to any third party which disparage, criticize, discredit or otherwise operate to the detriment of you or the Company, its present or former officers, shareholders, directors and employees and their respective business reputation and/or goodwill, provided, however, that nothing in this Section 12(c) shall prohibit either party from (i) making any truthful statements or disclosures required by applicable law regulation or (ii) taking any action to enforce its rights under this Letter or any other agreement in effect between the parties.

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d. Confidentiality

 

 

 

 

 

 

1)

During your employment by the Company or any subsidiary and indefinitely thereafter, you shall keep secret and retain in strictest confidence, any and all Confidential Information relating to the Company, except where your disclosure or use of such Confidential Information is in furtherance of the performance by you of your 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 Letter, “ 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 your employment, 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 generally available to the public or is generally known in the relevant trade or industry other than as a result of an improper disclosure by you, or (b) was available to or became known to you prior to the disclosure of such information on a non-confidential basis without breach of any duty of confidentiality to the Company), and you shall not disclose such confidential information to any Person (as defined below) other than the Company, except with the prior written consent of the Company, as may be required by law or court or administrative order (in which event you shall so notify the Company as promptly as practicable), or in performance of your duties on behalf of the Company. Further, this Section 12(d) shall not prevent you from disclosing Confidential Information in connection with any litigation, arbitration or mediation to enforce this Letter or other agreement between the parties, provided such disclosure is necessary for you to assert any claim or defense in such proceeding.

 

 

 

 

 

 

 

For purposes of this Letter, “ Person ” shall mean an individual, corporation, partnership, limited liability company, limited liability partnership, association, trust or other unincorporated organization or entity.

 

 

 

 

 

 

2)

Upon your termination of employment for any reason, you shall return to the Company all copies, reproductions and summaries of Confidential Information in your possession and use reasonable efforts to erase the same from all media in your possession, and, if the Company so requests, shall certify in writing that you have done so, except that you may retain such copies, reproductions and summaries during any period of litigation, arbitration or mediation referred to in Section 12(d)(1). 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); provided, you shall be entitled to retain copies of (i) information showing your compensation or relating to reimbursement of expenses, (ii) information that is required for the preparation of your personal income tax return, (iii) documents provided to you in your capacity as a participant in any employee benefit plan, policy or program of the Company and (iv) this Letter and any other agreement by and between you and the Company with regard to your employment or termination thereof.

 

 

 

 

 

 

3)

All Intellectual Property (as hereinafter defined) and Technology (as hereinafter defined) created, developed, obtained or conceived of by you during your employment, and all business opportunities presented to you during your employment, shall be owned by and belong exclusively to the Company, provided that they reasonably relate to any of the business of the Company on the date of such creation, development, obtaining or conception, and you 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 Letter, (x) the term “ Intellectual Property ” means and includes any and all trademarks, trade names, service marks,

38



 

 

 

 

 

 

 

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.

          The parties acknowledge that the restrictions contained in this Section 12 are a reasonable and necessary protection of the immediate interests of the Company, and any violation of these restrictions could cause substantial injury to the Company and that the Company would not have entered into this Letter, without receiving the additional consideration offered by you in binding yourself to any of these restrictions. In the event of a breach or threatened breach by you of any of these restrictions, the Company shall be entitled to apply to any court of competent jurisdiction for an injunction restraining you 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.

          13. No Guarantee of Continuation of Service

          This grant of this Option does not constitute an assurance of continued Service for any period or in any way interfere with the Company’s right to terminate your Service.

          14. Administration

          The Committee has the sole power to exercise its good faith judgment to interpret the Plan and this Letter and to act upon all matters relating this grant to the extent provided in the Plan and not inconsistent with the terms of this Letter. Any decision, determination, interpretation, or other action taken pursuant to the provisions of the Plan and this Letter by the Committee shall be final, binding, and conclusive.

          15. Section 409A

          Notwithstanding anything to the contrary in the Plan or this Letter to the contrary, no benefits to be paid or provided to you, if any, pursuant to this Letter that, when considered together with any other severance payments or separation benefits, are considered deferred compensation not exempt under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until you have a “separation from service” within the meaning of Section 409A. For purposes of this Letter, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended or any regulations or Treasury guidance promulgated thereunder (“ Section 409A ”).

          Notwithstanding any provision of the Plan or this grant to the contrary, if you are a “specified employee” as determined by the Board or the Committee, in accordance with Section 409A, you shall not be entitled to any Deferred Payments until the earlier of (i) the date which is six (6) months and one (1) day after your termination of employment for any reason other than death (except that during such six (6) month period you may receive total payments from the Company that do not exceed the amount specified in Treas. Reg. Section 1.409A-1(b)(9) or that constitute a short-term deferral within the meaning of Section 409A), or (ii) the date of your death.

          Notwithstanding any provision of the Plan or this Letter to the contrary, to the extent any compensation or award which constitutes deferred compensation within the meaning of Section 409A shall vest upon the occurrence of a Change of Control and such Change of Control does not constitute a “change in the ownership or effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A, then notwithstanding such vesting, payment will be made to you on the earliest of (i) your “separation from service” with the Company (determined in accordance with Section 409A) or, if you are a specified employee within the meaning of Section 409A, such later date as provided in the preceding paragraph, (ii) the date payment otherwise would have been made, or (iii) the date of your death.

          This Option is intended to be exempt from or comply with the requirements of Section 409A so that none of the benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. If any provision of this Letter or of any award of compensation, including equity compensation or benefits would cause you to incur any

39


additional tax or interest under Section 409A, the parties agree to negotiate in good faith to reform such provision in such manner as to maintain, to the maximum extent practicable, the original intent and economic terms of the applicable provision without violating the provisions of Section 409A.

          16. Amendment

          The Committee may from time to time amend the terms of this grant in accordance with the terms of the Plan in effect at the time of such amendment, but no amendment which is unfavorable to you can be made without your written consent.

          The Plan is of unlimited duration, but may be amended, terminated or discontinued by the Board of Directors of the Company at any time. However, no amendment, termination or discontinuance of the Plan will unfavorably affect this grant.

          Notwithstanding the foregoing, the Committee expressly reserves the right to amend the terms of the Plan and this grant with your consent which shall not be unreasonably withheld to the extent it determines that such amendment is necessary or desirable for an exemption from or compliance with the distribution, acceleration and election requirements of Section 409A of the Code.

          17. 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 or personal delivery against receipt, or mailed by registered or certified mail (return receipt requested), to the party to whom it is given at, in the case of the Company, Compensation Committee Chair, TheStreet, Inc., 14 Wall Street, 15 th Floor, New York, NY 10005, or, in the case of you, at your principal residence address as then reflected on the records of the Company 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 after sent by overnight delivery service for next business day delivery or on the fifth business day after sent by registered or certified mail.

          18. Representations

          The Company hereby represents and warrants that the execution and delivery of this Letter and the performance by the Company of its obligations hereunder have been duly authorized by all necessary corporate action of the Company.

          19. Amendment

          This Letter may be amended only by a written agreement signed by the parties hereto.

          20. Binding Effect

          This Letter shall be binding upon and inure to the benefit of the Company and any Successor. As used herein, a “ Successor ” shall mean any successor organization that succeeds to the Company (or to any direct or indirect successor) by merger or consolidation or operation of law, or by acquisition of all or substantially all of the assets of the Company (or of any direct or indirect successor).

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          21. Governing Law

          This Letter shall be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts to be performed wholly within the state and without regard to its conflict of laws provisions that would defer to the laws of another jurisdiction, except to the extent the laws of the State of Delaware mandatorily govern.

          22. Severability

          If any provision of this Letter 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 Letter 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 of law that renders any provision of this Letter invalid, illegal or unenforceable in any way.

          23. Execution in Counterparts

          This Letter 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.

          24. Entire Agreement

          This Letter, together with (i) the Severance Agreement between the Company and you, as executed as of the same date as this Letter (the “Severance Agreement”) and (ii) award agreements entered into by and between you and the Company with respect to outstanding incentive awards and incentive awards granted on or before the date hereof, 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 and thereof.

          25. 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 Letter.

          26. Consent to Jurisdiction

          The parties hereto each hereby irrevocably submit to the exclusive jurisdiction of any New York State or Federal court sitting in the Borough of Manhattan, City of New York in any action or proceeding to enforce the provisions of this Letter, and waives the defense of inconvenient forum to the maintenance of any such action or proceeding.


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          This Letter contains the formal terms and conditions of your award and accordingly should be retained in your files for future reference. The Company may require you to provide evidence of your acknowledgment of this Letter using such means of notification as may be communicated to you by the Company or its service provider.

 

 

 

 

 

Very truly yours,

 

 

 

 

 

 

THESTREET, INC.

 

 

 

 

 

 

By:

/s/ William R. Gruver

 

 

 


 

 

Name: William R. Gruver
Title: Chairman, Compensation Committee

AGREED TO AND ACCEPTED:

 

 

/s/ Elisabeth DeMarse

 


 

Elisabeth DeMarse

 

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Exhibit 10.3

THESTREET, INC.
AGREEMENT FOR GRANT
OF
NON-QUALIFIED STOCK OPTION

March 7, 2012

Elisabeth DeMarse
c/o TheStreet, Inc.
14 Wall Street
15 th Floor
New York, NY 10005

Dear Elisabeth:

          This letter (the “ Letter ) sets forth the terms and conditions of the stock option (“ Option ”) hereby awarded to you by TheStreet, Inc. (the “ Company ”).

          This award is made outside of, and not from, the Company’s 2007 Performance Incentive Plan (the “ Plan ”). Nevertheless, this award is subject to the terms and conditions set forth in the Plan, any rules and regulations adopted by the Board of Directors of the Company (the “ Board ”) or the committee of the Board which administers the Plan (the “ Committee ”), and this Letter. The provisions of the Plan are hereby incorporated by reference and any term used in this Letter and not defined herein shall have the meaning set forth in the Plan. Unless otherwise indicated, section references contained in this Letter shall refer to the corresponding sections of this Letter. The Option shall be deemed to be a non-qualified stock option within the meaning of the Internal Revenue Code of 1986, as amended.

          1. Option Grant

          You have been granted an Option to purchase 1,525,360 shares of the Company’s Common Stock (“ Common Stock ”) to the extent the Option is exercisable as set forth below. The Option may not be sold, transferred, assigned, pledged or otherwise encumbered by you, in whole or in part; provided that the foregoing shall not affect your right to name a beneficiary under Section 13 of the Plan. The Option may be exercised only by you, except that in the event of your death, the Option may be exercised (at any time prior to its expiration or termination as provided in Sections 8 and 11) by the executor or administrator of your estate or by a person who acquired the right to exercise your Option by will or pursuant to the laws of descent and distribution. Until such time as stock certificates for the shares of Common Stock represented by the purchase of all or portion of the Option have been delivered to you in accordance with Section 4, you shall have none of the rights of a stockholder with respect to the Common Stock with respect to such shares.

          2. Option Exercise Price

          The price at which you may purchase the shares of Common Stock underlying the Option is $1.80 per share.

          3. Term of Option

          Your Option shall expire, to the extent that it has not previously terminated, on March 7, 2019. However, your Option may terminate prior to such expiration date as provided in Sections 8 and 11. Regardless of the provisions of Sections 5 or 8 or any other provision hereof, in no event can your Option be exercised after the expiration date set forth in this Section 3.

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          4. Exercisability of Option

          Your Option will become exercisable with respect to the following number(s) of shares of Common Stock on the following date(s) as set forth below, provided that you are in the Service (as defined below) of the Company or one of its subsidiaries on such date and the Option has not been terminated in accordance with Sections 8 or 11:

 

 

 

 

Date

 

 

Number of Shares of Common Stock


 

 


 

 

 

March 7, 2013

 

381,340

 

 

 

The seventh (7 th ) calendar day of each month between April 7, 2013 and February 7, 2016, inclusive

 

31,778

 

 

 

March 7, 2016

 

31,790

For purposes hereof, you shall be considered to be in the “ Service ” of the Company or one of its subsidiaries if you are an employee of, or otherwise providing services to, the Company (or one if its subsidiaries, as applicable) on the applicable vesting date; provided that if you are not an employee of the Company or one of its subsidiaries on the applicable vesting date, you are providing services to the Company or one of its subsidiaries on the applicable vesting date pursuant to a written agreement signed by the Company or one of its subsidiaries that expressly agrees that the vesting of the Option shall continue during such period of service.

          To the extent that your Option has become exercisable with respect to a number of shares of Common Stock, you may exercise the Option to purchase all or any portion of such shares of Common Stock at any time on or before the date the Option expires or terminates; provided that you may only purchase a whole number of shares of Common Stock.

          5. Accelerated Vesting in Certain Events

          Notwithstanding Section 4, upon the occurrence of any of the following events, the then-unvested portion of the Option shall become exercisable and may be exercised; provided that such portion of the Option only may be exercised within one hundred and eighty (180) calendar days from the occurrence of such event (but in no event beyond the date set forth in Section 3): (i) the termination of your employment by the Company or any subsidiary thereof without Cause (as defined below) prior to a Change of Control (as defined in the Plan) if such termination is related to the Change of Control; or (ii) a Change of Control, unless (A) either (x) the Company is the surviving corporation in the Change of Control and the award reflected in this Letter is equitably adjusted pursuant to Section 4.4 of the Plan or (y) the award reflected in this Letter is assumed or replaced by a Successor (as defined below) and (B) the award as so adjusted, assumed or replaced (x) has substantially the same potential economic benefits and vesting terms as did the award immediately prior to the Change of Control and (y) provides that the award immediately shall become fully vested and exercisable upon the termination of your employment (by the Company or any subsidiary thereof or by a Successor or any affiliate thereof) without Cause at any time (provided that such portion of the Option only may be exercised within one hundred and eighty (180) calendar days from such termination (but in no event beyond the date set forth in Section 3)). If you are employed by a Successor or any affiliate thereof following a Change of Control, references in this Letter to the Company shall be understood to be references to the Successor or any such affiliate regarding matters related to the occurrence of non-occurrence of events from and after the date you become employed by the Successor or such affiliate.

          For purposes of this Letter, “ Cause ” shall be determined by the Committee in the exercise of its good faith judgment, in accordance with the following guidelines: (i) your willful misconduct or gross negligence in the performance of your obligations, duties and responsibilities as President and Chief Executive Officer (including those as an employee of the Company set forth in the Company’s Code of Business Conduct and Ethics dated June 1, 2006, as same may be amended from time to time provided such amendment affects all executive officers of the Company), (ii) your dishonesty or misappropriation, in either case that is willful and material, relating to the

44


Company or any of its funds, properties, or other assets, (iii) your inexcusable repeated or prolonged absence from work (other than as a result of, or in connection with, a Disability), (iv) any unauthorized disclosure by you of Confidential Information or proprietary information of the Company in violation of Section 12(d) which is reasonably likely to result in material harm to the Company, (v) your conviction of a felony (including entry of a guilty or nolo contender plea) involving fraud, dishonesty, or moral turpitude, (vi) a violation of federal or state securities laws, or (vii) the failure by you to attempt to perform faithfully your duties and responsibilities as President and Chief Executive Officer, or other material breach by you of this Letter, provided any such failure or breach described in clauses (i), (ii), (iii), (iv), (vi) and (vii) is not cured, to the extent cure is possible, by you within thirty (30) days after written notice thereof from the Company to you; provided, however, that no failure or breach described in clauses (i), (ii), (iii), (iv), (vi) and (vii) shall constitute Cause unless (x) the Company first gives you written notice of its intention to terminate your employment for Cause and the grounds of such termination no fewer than ten (10) days prior to the date of termination; and (y) you are provided an opportunity to appear before the Board, with or without legal representation at your election to present arguments on your own behalf; and (z) if you elect to so appear, such failure or breach is not cured, to the extent cure is possible, within thirty (30) days after written notice from the Company to you that, following such appearance, the Board has determined in good faith that Cause exists and has not, following the initial notice from the Company, been cured; provided further, however, that notwithstanding anything to the contrary in this Letter and subject to the other terms of this proviso, the Company may take any and all actions, including without limitation suspension (but not without pay), it deems appropriate with respect to you and your duties at the Company pending such appearance and subsequent to such appearance during which such failure or breach has not been cured. No act or failure to act on your part will be considered “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interests of the Company.

          For purposes of this Letter, “ Disability ” shall mean physical or mental incapacity of a nature which prevents you, in the good faith judgment of the Committee, from performing your duties and responsibilities as President and Chief Executive Officer for a period of ninety (90) consecutive days or one hundred and fifty (150) days during any year, with each year under this Letter commencing on each anniversary of the date hereof.

          6. Manner of Exercise

          You may exercise your Option by giving notice to the Company (or to such service provider as the Company may designate), following such procedures as may be communicated to you from time to time.

          The shares of Common Stock represented by the exercise of your Option may consist of authorized but unissued shares or treasury shares of the Company, as determined from time to time by the Committee.

          7. Satisfaction of Option Exercise Price

          The Option may be exercised by payment of the option exercise price in cash (including check, bank draft, money order, or wire transfer). In addition, your Option may be exercised using such broker cashless exercise procedure or other procedure as the Company may establish from time to time.

          8. Termination of Service

          (a) General. If your Service terminates for any reason other than for Cause, the Option will terminate one hundred and eighty (180) calendar days after such termination of Service. Except as set forth in the Severance Agreement (as defined in Section 24 below), following the termination of your Service, no additional portions of the Option will become exercisable, and the Option will be exercisable only to the extent exercisable on the date of such termination of Service. If your Service terminates for Cause, the Option shall be immediately terminated and may not be exercised.

          (b) Adjustments by the Committee. The Committee may, in its discretion, exercised before or after your termination of Service, declare all or any portion of the Option immediately exercisable and/or permit all or any part of the Option to remain exercisable for such period designated by it after the time when the Option would

45


have otherwise terminated as provided in Section 8(a), but not beyond the expiration date of your Option as set forth in Section 3 above.

          (c) Committee Determinations. The Committee shall have absolute discretion to determine the date and circumstances of the termination of your Service, and its determination shall be final, conclusive and binding upon you.

          9. Restrictions on Option Exercise; Delivery of Shares

          (a) Even though your Option may be otherwise exercisable, your right to exercise the Option will be suspended if the Committee determines that your exercise of the Option would violate applicable laws or regulations. The suspension will last until the exercise would be lawful. Any such suspension will not extend the term of your Option.

          (b) Even though your Option may be otherwise exercisable, the Committee may refuse to permit such exercise if it determines, in its discretion, that any of the following circumstances is present:

 

 

 

 

(i)

the shares of Common Stock to be acquired upon such exercise are required to be registered or qualified under any federal or state securities law, or to be listed on any securities exchange or quotation system, and such registration, qualification, or listing has not occurred;

 

 

 

 

(ii)

the consent or approval of any government regulatory body is required and has not been obtained;

 

 

 

 

(iii)

the satisfaction of withholding tax is required and has not occurred;

 

 

 

 

(iv)

representations by you or other information is determined by counsel for the Company to be necessary or desirable in order to comply with any federal or state securities laws or regulations, and you have not provided such representations or information; or

 

 

 

 

(v)

an agreement by you with respect to the disposition of shares of Common Stock to be acquired upon exercise of your Option is determined by the Committee to be necessary or desirable in order to comply with any federal or state securities laws or regulations, or is required by the terms of this Letter, and you have not executed such agreement.

          (c) Shares of Common Stock to be delivered to you in connection with any exercise of the Option shall be delivered to you as soon as practicable and, at the Company’s election, the Company may effect such delivery by causing such number of shares of Common Stock to be deposited via DWAC into a brokerage account in your name. Common Stock delivered upon the exercise of the Option will be fully transferable (subject to any applicable securities law restrictions) and not subject to forfeiture (other than as set forth in Section 11), and will entitle the holder to all rights of a stockholder of the Company.

          (d) The Company will use reasonable commercial efforts to (i) file and cause to remain effective and current a Registration Statement on Form S-8 (or successor form) with the Securities and Exchange Commission covering shares subject to the Option until such times as all of the shares of Common Stock underlying your Option are either delivered hereunder or the Option has expired or been terminated pursuant to the terms of this Letter, and (ii) until three (3) months after you cease being an “affiliate” of the Company, to maintain a resale prospectus thereunder (or otherwise register under the Securities Act of 1933, as amended) the Common Stock underlying your Option.

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          10. Income Tax Withholding

          In connection with the exercise of your Option, you will be required to pay, pursuant to such arrangements as the Company may establish from time to time, any applicable federal, state and local withholding tax liability. If you fail to satisfy your withholding obligation in a time and manner satisfactory to the Committee, the Company shall have the right to withhold the required amount from your salary or other amounts payable to you.

          11. Additional Termination Events and Claw-Back

          Notwithstanding anything else in this Letter, the unexercised portion of the Option shall be terminated (regardless of the extent to which it is exercisable) if any one of the following occurs: (i) you engage in Competitive Activity (as defined below) with the Company or any of its subsidiaries during your employment by the Company or any of its subsidiaries or within two (2) years after your service as President and Chief Executive Officer terminates; or (ii) you breach any of the Restrictive Covenants set out in Section 12 (collectively, the “ Restrictive Covenants ”) within two (2) years after the cessation of your employment with the Company or any subsidiary.

          The Company reserves the right (as provided below) to claw-back shares of Common Stock delivered under this Letter pursuant to each exercise of the Option by you if you engage in Competitive Activity or violate any of the Restrictive Covenants within eighteen (18) months after the delivery of such shares of Common Stock. If the Committee determines, in its good faith discretion, that all or some portion of the shares of Common Stock delivered to you will be clawed-back, then you shall be required to repay to the Company the Repayment Amount (as defined below) with respect to such shares of Common Stock. You may satisfy the payment obligation set forth in the preceding sentence by paying the Company cash, by delivering to the Company shares of Common Stock, or by remitting to the Company a combination of cash and shares of Common Stock, such that the Fair Market Value (measured as of the day before your delivery to the Company of shares of Common Stock) of any shares of Common Stock you deliver to the Company, plus the amount of any cash you pay to the Company, equals the Repayment Amount. The “ Repayment Amount ” with respect to the shares of Common Stock delivered to you upon any exercise of the Option shall mean the lesser of the Exercise Date Spread Value (as defined below) with respect to such exercise of the Option and the Delivery Date Spread Value (as defined below) with respect to such exercise of the Option, in each case reduced by the amount of taxes paid by you with respect to such exercise of the Option; provided that neither the Exercise Date Spread Value nor the Delivery Date Spread Value shall be less than zero. With respect to each exercise you made of the Option, the “ Exercise Date Spread Value ” is the amount, if any, by which the Fair Market Value (measured as of the date of exercise) of the number of shares of Common Stock underlying the Option with respect to which the Option was exercised on such date, exceeded the aggregate option exercise price for such shares. With respect to each exercise you made of the Option, the “ Delivery Date Spread Value ” is the amount, if any, by which the Fair Market Value (measured as of the day before you remit the Repayment Amount to the Company) of the number of shares of Common Stock underlying the Option with respect to which the Option was exercised, exceeded the aggregate option exercise price for such shares. In addition to any other remedy available to the Company under applicable law, the Company shall have the right to offset any other amounts payable to you by the amount of any required repayment by you which has not been repaid.

          For purposes of this Letter, “ Competitive Activity ” means your service as a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or you permit your name to be used in connection with the activities of, any other business or organization anywhere in the United States, or in any other geographic area in which the Company or any of its subsidiaries operates or with respect to which the Company provides financial news and commentary coverage (or from which such other business or organization provides financial news and commentary coverage of the United States), which engages in a business that competes with any business in which the Company or any subsidiary is engaged (a “ Competing Business ”); provided, however, that, notwithstanding the foregoing, it shall not be a Competitive Activity for you to (i) become the registered or beneficial owner of up to three percent (3%) of any class of capital stock of a competing corporation registered under the Securities Exchange Act of 1934, as amended, provided that you do not otherwise participate in the business of such corporation or (ii) work in a non-competitive business of a company which is carrying on a Competing Business, the revenues of

47


which represent less than twenty percent (20%) of the consolidated revenues of that company, or, as a result thereof, owning compensatory equity in that company.

          For purposes of this Letter, “ Fair Market Value ” of a share of Common Stock on any date shall be (i) if the principal market for the Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day (or, if such exchange is not open on such day, on the next day such exchange is open) as reported by such exchange or on a consolidated tape reflecting transactions on such exchange, or (ii) if the principal market for the Common Stock is not a national securities exchange, the closing average of the highest bid and lowest asked prices per share of Common Stock on such day (or, if such exchange is not open on such day, on the next day such exchange is open) as reported by the market upon which the Common Stock is quoted, or an independent dealer in the Common Stock, as determined by the Company in good faith; provided, however, that if clauses (i) and (ii) are all inapplicable, or if no trades have been made and no quotes are available for such day, the Fair Market Value of the Common Stock shall be determined by the Committee in good faith by any method consistent with applicable regulations adopted by the United States Treasury Department relating to stock options or stock valuation.

          12. Restrictive Covenants

 

 

 

 

a.

Non-Solicitation of Employees

 

 

 

 

 

You agree that, during your employment by the Company or any subsidiary and through the end of two (2) years after the cessation of your employment with the Company or any subsidiary, you will not solicit for employment or hire, in any business enterprise or activity, any employee of the Company or any subsidiary who was employed by the Company or a subsidiary during your period of employment by the Company or a subsidiary provided that (a) the foregoing shall not be violated by any general advertising not targeted at any Company or subsidiary employees nor by you serving as a reference upon request, and (b) you may solicit and hire any one or more former employees of the Company or its subsidiaries who had ceased being such an employee for a period of at least six (6) months prior to any such solicitation or hiring.

 

 

 

 

b.

Non-Solicitation of Clients and Vendors

 

 

 

 

 

You agree that, during your employment by the Company or any subsidiary and through the end of two (2) years after the cessation of your employment with the Company or any subsidiary, you will not solicit, in any business enterprise or activity, any client, customer, licensee, licensor, third-party service provider or vendor (a “ Business Relation ”) of the Company or any subsidiary who was a Business Relation of the Company or any subsidiary during your period of employment by the Company or any subsidiary to (i) cease being a Business Relation of the Company or any subsidiary or (ii) become a Business Relation of a Competing Business unless (without you having solicited such third party to cease such relationship) such third party ceased being a Business Relation of the Company or any subsidiary for a period of at least six (6) months prior to such solicitation.

 

 

 

 

c.

Non-Disparagement

 

 

 

 

 

During your employment by the Company or any subsidiary and indefinitely thereafter, neither party shall make any statements, written or oral, to any third party which disparage, criticize, discredit or otherwise operate to the detriment of you or the Company, its present or former officers, shareholders, directors and employees and their respective business reputation and/or goodwill, provided, however, that nothing in this Section 12(c) shall prohibit either party from (i) making any truthful statements or disclosures required by applicable law regulation or (ii) taking any action to enforce its rights under this Letter or any other agreement in effect between the parties.

48



 

 

 

 

 

d.

Confidentiality

 

 

 

 

 

1)

During your employment by the Company or any subsidiary and indefinitely thereafter, you shall keep secret and retain in strictest confidence, any and all Confidential Information relating to the Company, except where your disclosure or use of such Confidential Information is in furtherance of the performance by you of your 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 Letter, “ 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 your employment, 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 generally available to the public or is generally known in the relevant trade or industry other than as a result of an improper disclosure by you, or (b) was available to or became known to you prior to the disclosure of such information on a non-confidential basis without breach of any duty of confidentiality to the Company), and you shall not disclose such confidential information to any Person (as defined below) other than the Company, except with the prior written consent of the Company, as may be required by law or court or administrative order (in which event you shall so notify the Company as promptly as practicable), or in performance of your duties on behalf of the Company. Further, this Section 12(d) shall not prevent you from disclosing Confidential Information in connection with any litigation, arbitration or mediation to enforce this Letter or other agreement between the parties, provided such disclosure is necessary for you to assert any claim or defense in such proceeding.

 

 

 

 

 

 

 

For purposes of this Letter, “ Person ” shall mean an individual, corporation, partnership, limited liability company, limited liability partnership, association, trust or other unincorporated organization or entity.

 

 

 

 

 

 

2)

Upon your termination of employment for any reason, you shall return to the Company all copies, reproductions and summaries of Confidential Information in your possession and use reasonable efforts to erase the same from all media in your possession, and, if the Company so requests, shall certify in writing that you have done so, except that you may retain such copies, reproductions and summaries during any period of litigation, arbitration or mediation referred to in Section 12(d)(1). 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); provided, you shall be entitled to retain copies of (i) information showing your compensation or relating to reimbursement of expenses, (ii) information that is required for the preparation of your personal income tax return, (iii) documents provided to you in your capacity as a participant in any employee benefit plan, policy or program of the Company and (iv) this Letter and any other agreement by and between you and the Company with regard to your employment or termination thereof.

 

 

 

 

 

 

3)

All Intellectual Property (as hereinafter defined) and Technology (as hereinafter defined) created, developed, obtained or conceived of by you during your employment, and all business opportunities presented to you during your employment, shall be owned by and belong exclusively to the Company, provided that they reasonably relate to any of the business of the Company on the date of such creation, development, obtaining or conception, and you 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 Letter, (x) the term “ Intellectual Property ” means and includes any and all trademarks, trade names, service marks,

49



 

 

 

 

 

 

 

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.

          The parties acknowledge that the restrictions contained in this Section 12 are a reasonable and necessary protection of the immediate interests of the Company, and any violation of these restrictions could cause substantial injury to the Company and that the Company would not have entered into this Letter, without receiving the additional consideration offered by you in binding yourself to any of these restrictions. In the event of a breach or threatened breach by you of any of these restrictions, the Company shall be entitled to apply to any court of competent jurisdiction for an injunction restraining you 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.

          13. No Guarantee of Continuation of Service

          This grant of this Option does not constitute an assurance of continued Service for any period or in any way interfere with the Company’s right to terminate your Service.

          14. Administration

          The Committee has the sole power to exercise its good faith judgment to interpret the Plan and this Letter and to act upon all matters relating this grant to the extent provided in the Plan and not inconsistent with the terms of this Letter. Any decision, determination, interpretation, or other action taken pursuant to the provisions of the Plan and this Letter by the Committee shall be final, binding, and conclusive.

          15. Section 409A

          Notwithstanding anything to the contrary in the Plan or this Letter to the contrary, no benefits to be paid or provided to you, if any, pursuant to this Letter that, when considered together with any other severance payments or separation benefits, are considered deferred compensation not exempt under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until you have a “separation from service” within the meaning of Section 409A. For purposes of this Letter, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended or any regulations or Treasury guidance promulgated thereunder (“ Section 409A ”).

          Notwithstanding any provision of the Plan or this grant to the contrary, if you are a “specified employee” as determined by the Board or the Committee, in accordance with Section 409A, you shall not be entitled to any Deferred Payments until the earlier of (i) the date which is six (6) months and one (1) day after your termination of employment for any reason other than death (except that during such six (6) month period you may receive total payments from the Company that do not exceed the amount specified in Treas. Reg. Section 1.409A-1(b)(9) or that constitute a short-term deferral within the meaning of Section 409A), or (ii) the date of your death.

          Notwithstanding any provision of the Plan or this Letter to the contrary, to the extent any compensation or award which constitutes deferred compensation within the meaning of Section 409A shall vest upon the occurrence of a Change of Control and such Change of Control does not constitute a “change in the ownership or effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A, then notwithstanding such vesting, payment will be made to you on the earliest of (i) your “separation from service” with the Company (determined in accordance with Section 409A) or, if you are a specified employee within the meaning of Section 409A, such later date as provided in the preceding paragraph, (ii) the date payment otherwise would have been made, or (iii) the date of your death.

          This Option is intended to be exempt from or comply with the requirements of Section 409A so that none of the benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. If any provision of this Letter or of any award of compensation, including equity compensation or benefits would cause you to incur any

50


additional tax or interest under Section 409A, the parties agree to negotiate in good faith to reform such provision in such manner as to maintain, to the maximum extent practicable, the original intent and economic terms of the applicable provision without violating the provisions of Section 409A.

          16. Amendment

          The Committee may from time to time amend the terms of this grant in accordance with the terms of the Plan in effect at the time of such amendment, but no amendment which is unfavorable to you can be made without your written consent.

          The Plan is of unlimited duration, but may be amended, terminated or discontinued by the Board of Directors of the Company at any time. However, no amendment, termination or discontinuance of the Plan will unfavorably affect this grant.

          Notwithstanding the foregoing, the Committee expressly reserves the right to amend the terms of the Plan and this grant with your consent which shall not be unreasonably withheld to the extent it determines that such amendment is necessary or desirable for an exemption from or compliance with the distribution, acceleration and election requirements of Section 409A of the Code.

          17. 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 or personal delivery against receipt, or mailed by registered or certified mail (return receipt requested), to the party to whom it is given at, in the case of the Company, Compensation Committee Chair, TheStreet, Inc., 14 Wall Street, 15 th Floor, New York, NY 10005, or, in the case of you, at your principal residence address as then reflected on the records of the Company 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 after sent by overnight delivery service for next business day delivery or on the fifth business day after sent by registered or certified mail.

          18. Representations

          The Company hereby represents and warrants that the execution and delivery of this Letter and the performance by the Company of its obligations hereunder have been duly authorized by all necessary corporate action of the Company.

          19. Amendment

          This Letter may be amended only by a written agreement signed by the parties hereto.

          20. Binding Effect

          This Letter shall be binding upon and inure to the benefit of the Company and any Successor. As used herein, a “ Successor ” shall mean any successor organization that succeeds to the Company (or to any direct or indirect successor) by merger or consolidation or operation of law, or by acquisition of all or substantially all of the assets of the Company (or of any direct or indirect successor).

51


          21. Governing Law

          This Letter shall be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts to be performed wholly within the state and without regard to its conflict of laws provisions that would defer to the laws of another jurisdiction, except to the extent the laws of the State of Delaware mandatorily govern.

          22. Severability

          If any provision of this Letter 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 Letter 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 of law that renders any provision of this Letter invalid, illegal or unenforceable in any way.

          23. Execution in Counterparts

          This Letter 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.

          24. Entire Agreement

          This Letter, together with (i) the Severance Agreement between the Company and you, as executed as of the same date as this Letter (the “Severance Agreement”) and (ii) award agreements entered into by and between you and the Company with respect to outstanding incentive awards and incentive awards granted on or before the date hereof, 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 and thereof.

          25. 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 Letter.

          26. Consent to Jurisdiction

          The parties hereto each hereby irrevocably submit to the exclusive jurisdiction of any New York State or Federal court sitting in the Borough of Manhattan, City of New York in any action or proceeding to enforce the provisions of this Letter, and waives the defense of inconvenient forum to the maintenance of any such action or proceeding.


52


          This Letter contains the formal terms and conditions of your award and accordingly should be retained in your files for future reference. The Company may require you to provide evidence of your acknowledgment of this Letter using such means of notification as may be communicated to you by the Company or its service provider.

 

 

 

 

 

Very truly yours,

 

 

 

THESTREET, INC.

 

 

 

By: 

/s/ William R. Gruver

 

 

 


 

 

Name: William R. Gruver

 

Title: Chairman, Compensation Committee

 

 

AGREED TO AND ACCEPTED:

 

 

 

/s/ Elisabeth DeMarse

 


 

Elisabeth DeMarse

 

53


Exhibit 10.4

STOCK PURCHASE AGREEMENT

          THIS STOCK PURCHASE AGREEMENT is made as of March 7, 2012 (this “ Agreement ”), by and between TheStreet, Inc., a Delaware corporation (the “ Company ”), and Elisabeth DeMarse (the “ Purchaser ”).

RECITALS

          WHEREAS, prior to entering into an offer letter and other employment arrangements to become the President and Chief Executive Officer of the Company, the Purchaser was not an employee or director of the Company;

           WHEREAS, as a material inducement for the Purchaser to enter into employment arrangements with the Company relating to the foregoing, the Company desires to sell to the Purchaser and the Purchaser desires to purchase from the Company 75,000 shares (the “ Shares ”) of the Company’s common stock, par value $0.01 (the “ Common Stock ”), to the Purchaser; and

          WHEREAS, the Company’s independent compensation committee of the Board of Directors has determined that it is in the best interest of the Company to sell the Shares to the Purchaser pursuant to this Agreement.

          NOW, THEREFORE, in consideration of the foregoing and the covenants and representations contained in this Agreement, the parties agree as follows:

AGREEMENT

          1. Purchase and Sale of Stock . Subject to the terms and conditions of this Agreement, the Purchaser agrees to purchase from the Company and the Company agrees to sell the Shares to the Purchaser (such purchase and sale, the “Purchase”) at a purchase price per Share equal to the closing sale price per share of the Common Stock as reported on The Nasdaq Stock Market (“Nasdaq”) on the date hereof, or $1.80 per share (the aggregate purchase price for the Shares, the “Purchase Price”).

          2. Closing . The Company shall deliver to the Purchaser a certificate representing the Shares against payment of the Purchase Price therefor by check or immediately available funds.

          3. Representations and Warranties of the Company . The Company hereby represents and warrants to the Purchaser that:

          3.1 Authorization . All corporate action on the part of the Company necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder, and the authorization, issuance, sale and delivery of the Shares has been taken, and this Agreement constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its terms.

          3.2 Valid Issuance of Common Stock . The Shares, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws.

          3.3 Offering . Subject in part to the truth and accuracy of the Purchaser’s representations set forth in Section 4 of this Agreement, the offer, sale and issuance of the Shares as contemplated by this Agreement are exempt from the registration requirements of any applicable state and federal securities laws, and neither the

54


Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.

          4. Representations and Warranties of the Purchaser . Purchaser hereby represents, warrants and acknowledges that:

          4.1 Authorization . Purchaser has full power and authority to enter into this Agreement and the Agreement constitutes her valid and legally binding obligation, enforceable in accordance with its terms.

          4.2 Purchase Entirely for Own Account . This Agreement is made with Purchaser in reliance upon Purchaser’s representation to the Company, which by Purchaser’s execution of this Agreement Purchaser hereby confirms, that the Shares will be acquired for investment for Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Shares.

          4.3 Accredited Purchaser . Purchaser is an “accredited investor” within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Act”), as presently in effect.

          4.4 Restricted Shares; Company Information . Purchaser understands that the Shares are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act, only in certain limited circumstances. Purchaser represents that she is familiar with Rule 144 under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act. Purchaser hereby acknowledges and confirms that she (i) has had an opportunity to ask questions and receive answers from the Company regarding the Shares, (ii) has been furnished with, and/or has access to, such information as she considers necessary or appropriate about the Company and the Shares, (iii) has relied upon the advice of her own legal counsel, tax advisors, and/or investment advisors in connection with her purchase of the Shares and (iv) understands that she may be required to hold the Shares indefinitely, unless the Shares are subsequently registered under the Securities Act and a related prospectus is available for use or an exemption from such registration is available.

          4.5 Legends . Purchaser understands that the certificates evidencing the Shares will bear the following or substantially similar legend:

 

 

 

These securities have not been registered under the Securities Act of 1933, as amended. They may not be sold, offered for sale, pledged or hypothecated in the absence of a registration statement in effect with respect to the securities under such Act or an opinion of counsel satisfactory to the Company that such registration is not required or unless sold pursuant to Rule 144 of such Act.

          5. Miscellaneous .

          5.1 Governing Law . This Agreement shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents entered into and to be performed entirely within Delaware.

           Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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          5.3 Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Purchaser.

          5.4 Entire Agreement . This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein.

 

 

 

5.5 Absence of Presumption . The parties understand and agree that each and every term and provision of this Agreement has been mutually negotiated, prepared and drafted, and if at any time the parties hereto desire or are required to interpret or construe any such term or condition or any agreement or instrument subject hereto, no consideration will be given to the issue of which party hereto actually prepared, drafted or requested any term or condition of this Agreement or any agreement or instrument subject hereto.

                    IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

 

 

 

 

THESTREET, INC.

 

 

 

 

By:

/s/ William R. Gruver

 

 


 

 

Name:

William R. Gruver

 

 

Title:

Chair, Compensation Committee

 

 

 

 

/s/ Elisabeth DeMarse

 


 

                            ELISABETH DEMARSE

56


Exhibit 10.5

SEVERANCE AGREEMENT

          SEVERANCE AGREEMENT (this “ Agreement ”), dated as of March 7, 2012 (the “Effective Date”), by and between TheStreet, Inc., a Delaware corporation (the “ Company ” or “ TheStreet ”), and Elisabeth E. DeMarse (“ DeMarse ” and together with the Company, each a “ Party ” and collectively the “ Parties ”).

                    WHEREAS, the Company desires that DeMarse enter into this Agreement, and DeMarse desires to enter into this Agreement, on the terms and conditions set forth herein;

                    WHEREAS, the Company granted DeMarse stock options pursuant to two stock option agreements, each dated as of March 7, 2012 (collectively, the “ Option Agreements ”);

                    WHEREAS, DeMarse agreed to be bound by certain restrictive covenants in the Option Agreements; and

          NOW THEREFORE, the parties hereto agree as follows:

           Section 1 . Severance Benefits .

          (a) General Severance . In the event that the Company (or Successor (as defined below), if applicable) terminates DeMarse’s employment with the Company (or Successor, if applicable) without Cause (as defined in the Option Agreements), on or before the fifth (5 th ) anniversary of the Effective Date (the date of such termination, the “ Termination Date ”), then:

 

 

 

 

(i)

the Company (or Successor, if applicable) shall (A) pay DeMarse an amount equal to twelve (12) months of DeMarse’s base salary (at the annual rate in effect immediately prior to termination, but in no event less DeMarse’s original annual rate of $400,000); and (B) pay on DeMarse’s behalf (for a period of eighteen (18) months or such lesser period as DeMarse may elect) the full cost of premiums for continuation of any benefits that DeMarse is eligible under COBRA to elect to (and does elect to) continue (unless doing so would violate any anti-discrimination provision or other legal requirement applicable to the Company or to any of the Company’s health plans, in which event the Company and you shall agree in good faith on the terms of an alternative arrangement pursuant to which the Company would provide you with substantially similar economic value); and

 

 

 

 

(ii)

for purposes of determining the number of vested (and, in the case of stock options and stock appreciation rights, exercisable) shares of restricted stock, restricted stock units, stock options, stock appreciation rights or other stock-based awards under each stock-based award agreement outstanding on the Termination Date between the Parties (the “ Stock-Based Award Agreements ”), (X) DeMarse shall be treated on the Termination Date as if her full-time employment with the Company had continued through the first (1 st ) anniversary of the Termination Date (the “ First Anniversary ”) and been terminated by the Company without Cause (as defined in each Stock-Based Award Agreement for the purposes of such agreement) immediately thereafter and (Y) the vesting of any shares of restricted stock, restricted stock units, stock options, stock appreciation rights or other stock-based awards under the Stock-Based Award Agreements that would not have vested (or, in the case of stock options and stock appreciation rights, become exercisable) had DeMarse remained in employment through the First Anniversary shall be suspended and such shares of restricted stock, restricted stock units, stock options, stock appreciation rights or other stock-based awards shall be automatically forfeited and expire on the six (6) month anniversary of the Termination Date (the “ Six-Month Anniversary ”) unless a definitive agreement, tender offer or a letter of intent respecting a Change of Control (as defined in the Company’s 2007 Performance Incentive Plan) transaction involving the Company (a “ Change of Control Agreement ”) is entered into or received (as the case may be) by the Company subsequent to the date of this Agreement but

57



 

 

 

 

 

prior to the Six-Month Anniversary, in which case such shares of restricted stock, restricted stock units, stock options, stock appreciation rights or other stock-based awards shall be automatically forfeited and expire on the First Anniversary unless a Change of Control as contemplated by the Change in Control Agreement is consummated by the First Anniversary in which case such shares of restricted stock, restricted stock units, stock options, stock appreciation rights or other stock-based awards shall immediately vest (and in the case of stock options or stock appreciation rights become immediately exercisable) upon the consummation of the Change of Control. Nothing contained herein is intended to adversely affect any of DeMarse’s rights under the Stock-Based Award Agreements.

For purposes of this Agreement, “ Successor ” shall mean any person or entity that acquires all or substantially all of the Company’s assets or into which the Company is merged or combined with the Company ceasing to exist (or the successor to any such entity, whether by merger, assignment or otherwise).

          (b) Payment of Benefits . If DeMarse becomes entitled to a payment under Section 1(a)(i)(A), the Company (or Successor, if applicable) shall pay DeMarse the applicable amount in a lump sum within thirty (30) days of DeMarse’s becoming entitled to such payment.

           Section 2 . Parachute Payment Limitation .

          Anything in this Agreement or the Option Agreements to the contrary notwithstanding, in the event that:

          (a) the aggregate payments or benefits to be made or distributed by the Company or its affiliates to or for the benefit of DeMarse (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) which are deemed to be parachute payments as defined in Internal Revenue Code (“ Code ”) Section 280G or any successor thereto (the “ Change of Control Benefits ”) would be deemed to include an “excess parachute payment” under Code Section 280G; and

           (b) if such Change of Control Benefits were reduced to an amount (the “ Non-Triggering Amount ”), the value of which is one dollar ($1.00) less than an amount equal to three (3) times DeMarse’s “base amount,” as determined in accordance with Code Section 280G and the Non-Triggering Amount less the product of the marginal rate of any applicable state and federal income tax times the Non-Triggering Amount would be greater than the aggregate value of the Change of Control Benefits (without such reduction) minus (x) the amount of tax required to be paid by DeMarse thereon by Code Section 4999 and further minus (y) the product of the Change of Control Benefits times the marginal rate of any applicable state and federal income tax, then the Change of Control Benefits shall be reduced to the Non-Triggering Amount. Any reduction made pursuant to this Section 2(b) shall be made in accordance with the following order of priority: (i) stock options whose exercise price exceeds the fair market value of the optioned stock (“Underwater Options”), (ii) Full Credit Payments (as defined below) that are payable in cash, (iii) non-cash Full Credit Payments that are taxable, (iv) non-cash Full Credit Payments that are not taxable, (v) Partial Credit Payments (as defined below) and (vi) non-cash employee welfare benefits. In each case, reductions shall be made in reverse chronological order such that the payment or benefit owed on the latest date following the occurrence of the event triggering the excise tax will be the first payment or benefit to be reduced (with reductions made pro-rata in the event payments or benefits are owed at the same time). “Full Credit Payment” means a payment, distribution or benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, that if reduced in value by one dollar reduces the amount of the parachute payment (as defined in Code Section 280G) by one dollar, determined as if such payment, distribution or benefit had been paid or distributed on the date of the event triggering the excise tax. “Partial Credit Payment” means any payment, distribution or benefit that is not a Full Credit Payment. In no event shall DeMarse have any discretion with respect to the ordering of payment reductions.

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           Section 3 . Certain Covenants .

          In partial consideration for the right to receive the benefits described in Section 1, DeMarse agrees as follows. For avoidance of doubt, the covenants set forth below are independent of the covenants set forth in the Option Agreements and any covenants that may be set forth in any subsequent written agreements between the Parties:

          (a) Non-competition . During her employment by the Company or any subsidiary and through the end of one (1) year after the cessation of her employment with the Company or any subsidiary, DeMarse will not engage in a Competitive Activity (as defined below) with the Company or any of its subsidiaries. As used herein, “ Competitive Activity ” means DeMarse’s service as a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or DeMarse permitting her name to be used in connection with the activities of, any other business or organization anywhere in the United States, or in any other geographic area in which the Company or any of its subsidiaries operates or with respect to which the Company provides financial news and commentary coverage (or from which such other business or organization provides financial news and commentary coverage of the United States), which engages in a business that competes with any business in which the Company or any subsidiary is engaged (a “ Competing Business ”); provided, however, that, notwithstanding the foregoing, it shall not be a Competitive Activity for DeMarse to (i) become the registered or beneficial owner of up to three percent (3%) of any class of capital stock of a competing corporation registered under the Securities Exchange Act of 1934, as amended, provided that DeMarse does not otherwise participate in the business of such corporation or (ii) work in a non-competitive business of a company which is carrying on a Competing Business, the revenues of which represent less than twenty percent (20%) of the consolidated revenues of that company, or, as a result thereof, owning compensatory equity in that company.

          (b) Non-solicitation of Employees . During her employment by the Company or any subsidiary and through the end of one (1) year after the cessation of her employment with the Company or any subsidiary, DeMarse will not solicit for employment or hire, in any business enterprise or activity, any employee of the Company or any subsidiary who was employed by the Company or a subsidiary during DeMarse’s period of employment by the Company or a subsidiary; provided that (a) the foregoing shall not be violated by any general advertising not targeted at any Company or subsidiary employees nor by DeMarse serving as a reference upon request, and (b) DeMarse may solicit and hire any one or more former employees of the Company or its subsidiaries who had ceased being such an employee for a period of at least six (6) months prior to any such solicitation or hiring.

          (c) Non-solicitation of Clients and Vendors . During her employment by the Company or any subsidiary and through the end of one (1) year after the cessation of her employment with the Company or any subsidiary, DeMarse will not solicit, in any business enterprise or activity, any client, customer, licensee, licensor, third-party service provider or vendor (a “ Business Relation ”) of the Company or any subsidiary who was a Business Relation of the Company or any subsidiary during DeMarse’s period of employment by the Company or any subsidiary to (i) cease being a Business Relation of the Company or any subsidiary or (ii) become a Business Relation of a Competing Business unless (without you having solicited such third party to cease such relationship) such third party ceased being a Business Relation of the Company or any subsidiary for a period of at least six (6) months prior to such solicitation.

          (d) The parties acknowledge that the restrictions contained in this Section 3 are a reasonable and necessary protection of the immediate interests of the Company, and any violation of these restrictions could cause substantial injury to the Company and that the Company would not have entered into this Agreement, without receiving the additional consideration offered by DeMarse in binding herself to these restrictions. In the event of a breach or threatened breach by DeMarse of any of these restrictions, the Company shall be entitled to apply to any court of competent jurisdiction for an injunction restraining DeMarse 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.

59


           Section 4 . 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 or personal delivery against receipt, or mailed by registered or certified mail (return receipt requested), to the party to whom it is given at, in the case of the Company, Compensation Committee Chair, TheStreet, Inc., 14 Wall Street, 15 th Floor, New York, NY 10005, or, in the case of DeMarse, at her principal residence address as then reflected on the records of the Company 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 after sent by overnight delivery service for next business day delivery or on the fifth business day after sent by registered or certified mail.

           Section 5 . 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 6 . Amendment .

          This Agreement may be amended only by a written agreement signed by the parties hereto.

           Section 7 . Binding Effect .

          The rights and duties under this Agreement are not assignable by DeMarse other than as a result of her death. None of DeMarse’s rights under this Agreement shall be subject to any encumbrances or the claims of DeMarse’s creditors. This 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.

           Section 8 . Governing Law .

          This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts to be performed wholly within the state and without regard to its conflict of laws provisions that would defer to the laws of another jurisdiction.

           Section 9 . Severability .

          If any provision of this 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. Moreover, if any one or more of the provisions of this Agreement 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 of law that renders any provision of this Agreement invalid, illegal or unenforceable in any way.

           Section 10 . Execution in Counterparts .

          This 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.

60


           Section 11 . Entire Agreement .

          This Agreement, together with the Option Agreements, 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 and thereof.

           Section 12 . 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 Agreement.

           Section 13 . Consent to Jurisdiction .

          The parties hereto each hereby irrevocably submit to the exclusive jurisdiction of any New York State or Federal court sitting in the Borough of Manhattan, 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 proceeding.

           Section 14 . No Duty to Mitigate .

          DeMarse shall have no duty to mitigate or have any off-set made against amounts payable by the Company to DeMarse hereunder.

           Section 15 . Release .

          As a condition to the obligation of the Company to make the payments provided for in this Agreement and otherwise perform its obligations hereunder to DeMarse upon termination of DeMarse’s employment (other than due to her death), DeMarse or her legal representatives shall deliver to the Company a written release, substantially in the form attached hereto as Exhibit A, and the time for revocation of such release shall have expired, no later than thirty (30) days following termination of DeMarse’s employment; provided, however, that such release shall be enforceable only if the Company executes such release (for avoidance of doubt, DeMarse’s time to revoke her signature shall be seven (7) days from the date she executes the release, regardless of the timing of the Company’s execution of the release).

           Section 16 . Section 409A .

          (a) Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to DeMarse, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation not exempt under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until DeMarse has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to DeMarse, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until DeMarse has a “separation from service” within the meaning of Section 409A. For purposes of this Agreement, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended or any regulations or Treasury guidance promulgated thereunder (“ Section 409A ”).

          (b) Notwithstanding any provision of this Agreement to the contrary, if DeMarse is a “specified employee” as determined by the Board or the Compensation Committee of the Board in accordance with Section 409A, DeMarse shall not be entitled to any Deferred Payments until the earlier of (i) the date which is six (6) months and one (1) day after her termination of employment for any reason other than death (except that during such six (6) month period DeMarse may receive total payments from the Company that do not exceed the amount specified in Treas. Reg. Section 1.409A-1(b)(9) or that constitute a short-term deferral within the meaning of Section 409A), or (ii) the date of her death.

61


          (c) The foregoing provisions are intended to be exempt from or comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. If any provision of this Agreement or of any award of compensation, including equity compensation or benefits would cause DeMarse to incur any additional tax or interest under Section 409A, the parties agree to negotiate in good faith to reform such provision in such manner as to maintain, to the maximum extent practicable, the original intent and economic terms of the applicable provision without violating the provisions of Section 409A.

          (d) To the extent that reimbursements or in-kind benefits under this Agreement constitute non-exempt “nonqualified deferred compensation” for purposes of Section 409A, (1) all reimbursements hereunder shall be made on or prior to the last day of the calendar year following the calendar year in which the expense was incurred by DeMarse, (2) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (3) the amount of expenses eligible for reimbursement or in-kind benefits provided in any calendar year shall not in any way affect the expenses eligible for reimbursement or in-kind benefits to be provided, in any other calendar year.

          (e) Notwithstanding any provision of this Agreement to the contrary, to the extent any compensation or award which constitutes deferred compensation within the meaning of Section 409A shall vest upon the occurrence of a Change of Control and such Change of Control does not constitute a “change in the ownership or effective control” or a “change in the ownership of a substantial portion of the assets” of the Corporation within the meaning of Section 409A, then notwithstanding such vesting, payment will be made to DeMarse on the earliest of (i) DeMarse’s “separation from service” with the Company (determined in accordance with Section 409A) or, if DeMarse is a specified employee within the meaning of Section 409A, such later date as provided in paragraph (b) of this Section 16, (ii) the date payment otherwise would have been made, or (iii) DeMarse’s death.

          IN WITNESS WHEREOF, the undersigned have executed this Agreement as of March 7, 2012.

 

 

 

/s/ Elisabeth DeMarse

 


 

Elisabeth DeMarse

 

 

 

 

THESTREET, INC.


 

 

 

By:

/s/ William R. Gruver

 

 


 

Name: William R. Gruver

 

Title: Chairman, Compensation Committee

62


EXHIBIT A

Form of Release

This Release (this “ Release ”) is entered into by Elisabeth E. DeMarse (“DeMarse”) and TheStreet, Inc., a Delaware corporation (the “ Company ”), effective as of [DATE] (the “ Effective Date ”).

In consideration of the promises set forth in the Severance Agreement between DeMarse and the Company, dated as of March 7, 2012 (the “ Agreement ”), DeMarse and the Company agree as follows:

          1. General Releases and Waivers of Claims .

                    (a) DeMarse’s Release of Company . In consideration of the payments and benefits provided to DeMarse under the Agreement and after consultation with counsel, DeMarse on behalf of herself and each of her respective heirs, executors, administrators, representatives, agents, successors and assigns (collectively, the “ DeMarse Parties ”) hereby irrevocably and unconditionally release and forever discharge the Company and its current and former subsidiaries and affiliates and each of their respective current and former officers, employees, directors, shareholders and agents (“ Company Parties ”) from any and all claims, actions, causes of action, rights, judgments, fees and costs (including attorneys’ fees), obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “ Claims ”), including, without limitation, any Claims based upon contract, tort, or under any federal, state, local or foreign law, that the DeMarse Parties may have, or in the future may possess, arising out of any aspect of DeMarse’s employment relationship with and service as an employee, officer, director or agent of the Company, or the termination of such relationship or service, that occurred, existed or arose on or prior to the date hereof; provided, however, that DeMarse does not release, discharge or waive (i) any rights to payments and benefits provided under the Agreement, (ii) any right DeMarse may have to enforce this Release or the Agreement, (iii) DeMarse’s eligibility for indemnification in accordance with the Company’s certificate of incorporation, bylaws or other corporate governance document, any applicable insurance policy or any contract or provision to which DeMarse is a party or as to which DeMarse otherwise is entitled to indemnification benefits, with respect to any liability she incurred or might incur as an employee, officer or director of the Company, (iv) any claims for accrued, vested benefits under any employee benefit or pension plan of the Company Parties subject to the terms and conditions of such plan and applicable law including, without limitation, any such claims under COBRA or the Employee Retirement Income Security Act of 1974, or (v) any rights under or in respect of the Agreement for Grant of Non-Qualified Stock Options between DeMarse and the Company, dated as of March 7, 2012 (the “ Non-Qualified Option Agreement ”), the Agreement for Grant of Incentive Stock Option Pursuant to 2007 Performance Incentive Plan between DeMarse and the Company, dated as of March 7, 2012 (the “ Incentive Option Agreement ” and together with the Non-Qualified Option Agreement, the “ Option Agreements ”) or any written agreements that may be executed by the parties after the date of the Option Agreements (collectively, the “ Applicable Agreements ”).

                    (b) Executive’s Specific Release of ADEA Claims . In further consideration of the payments and benefits provided to DeMarse under the Agreement, DeMarse on behalf of herself and the other DeMarse Parties hereby unconditionally release and forever discharge the Company Parties from any and all Claims that the DeMarse Parties may have as of the date DeMarse signs this Release arising under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ ADEA ”). By signing this Release, DeMarse hereby acknowledges and confirms the following: (i) DeMarse was advised by the Company in connection with her termination to consult with an attorney of her choice prior to signing this Release and to have such attorney explain to her the terms of this Release, including, without limitation, the terms relating to her release of claims arising under ADEA, and DeMarse has in fact consulted with an attorney; (ii) DeMarse was given a period of not fewer than twenty-one (21) days to consider the terms of this Release and to consult with an attorney of her choosing with respect thereto; and (iii) DeMarse knowingly and voluntarily accepts the terms of this Release. DeMarse also understands that she has seven (7) days following the date on which she signs this Release within which to revoke the release contained in this paragraph, by providing the Company a written notice of her revocation of the release and waiver contained in this paragraph.

63


                    (c) Company’s Release of Executive . The Company for itself and on behalf of the Company Parties hereby irrevocably and unconditionally release and forever discharge the DeMarse Parties from any and all Claims, including, without limitation, any Claims based upon contract, tort, or under any federal, state, local or foreign law, that the Company Parties may have, or in the future may possess, arising out of any aspect of DeMarse’s employment relationship with and service as an employee, officer, director or agent of the Company, or the termination of such relationship or service, that occurred, existed or arose on or prior to the date hereof, excepting (i) any Claim which would constitute or result from conduct by DeMarse that constituted the basis for termination for Cause under the Agreement or could be a crime of any kind, or (ii) rights arising under or in respect of the Option Agreements. Anything to the contrary notwithstanding in this Release, nothing herein shall release DeMarse or any other DeMarse Party from any Claims based on any right the Company may have to enforce this Release or the Agreement or any of the Applicable Agreements.

                    (d) No Assignment . The parties represent and warrant that they have not assigned any of the Claims being released under this Release.

          2. Proceedings . Neither DeMarse nor the Company have filed any complaint, charge, claim or proceeding against the other party before any local, state or federal agency, court or other body relating to DeMarse’s employment or the termination thereof (each, individually, a “ Proceeding ”).

          3. Remedies .

                    (a) In the event DeMarse initiates or voluntarily participates in any Proceeding involving any of the matters waived or released in this Release, or if she fails to abide by any of the terms of this Release, or if she revokes the ADEA release contained in Paragraph 1(b) of this Release within the seven (7)-day period provided under Paragraph 1(b), the Company may, in addition to any other remedies it may have, reclaim any amounts paid to her, and terminate any benefits or payments that are due pursuant to the termination provisions of the Agreement, without waiving the release granted herein. In addition, in the event that DeMarse has failed to comply with Section 3 of the Agreement or with Sections 11 and/or 12 of either or both of the Option Agreements (other than as a result of an unintentional and immaterial disclosure of confidential information), the Company may, in addition to any other remedies it may have, to the extent permitted in the Agreement and the Option Agreements reclaim any amounts paid to her pursuant to the Agreement or the Option Agreements, without waiving the release granted herein. DeMarse acknowledges and agrees that the remedy at law available to the Company for breach of any of her post-termination obligations under the Agreement or any of the Applicable Agreements or her obligations hereunder or thereunder would be inadequate and that damages flowing from such a breach may not readily be susceptible to being measured in monetary terms. Accordingly, DeMarse acknowledges, consents and agrees that, in addition to any other rights or remedies that the Company may have at law or in equity, the Company shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining DeMarse from breaching her post-termination obligations under the Agreement or any of the Applicable Agreements or her obligations hereunder or thereunder. Such injunctive relief in any court shall be available to the Company, in lieu of, or prior to or pending determination in, any arbitration proceeding.

                    (b) DeMarse understands that by entering into this Release she will be limiting the availability of certain remedies that she may have against the Company and limiting also her ability to pursue certain claims against the Company.

                    (c) The Company acknowledges and agrees that the remedy at law available to DeMarse for breach of any of its post-termination obligations under the Agreement or any of the Applicable Agreements or its obligations hereunder or thereunder would be inadequate and that damages flowing from such a breach may not readily be susceptible to being measured in monetary terms. Accordingly, the Company acknowledges, consents and agrees that, in addition to any other rights or remedies that DeMarse may have at law or in equity, DeMarse shall be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining the Company from breaching its post-termination obligations under the Agreement or any of the Applicable Agreements or its obligations hereunder or thereunder. Such injunctive relief in any court shall be available to DeMarse, in lieu of, or prior to or pending determination in, any arbitration proceeding.

64


                    (d) The Company understands that by entering into this Release it will be limiting the availability of certain remedies that it may have against DeMarse and limiting also its ability to pursue certain claims against DeMarse.

          4. Severability Clause . In the event any provision or part of this Release is found to be invalid or unenforceable, only that particular provision or part so found, and not the entire Release, will be inoperative.

          5. Nonadmission . Nothing contained in this Release will be deemed or construed as an admission of wrongdoing or liability on the part of the Company or DeMarse.

          6. Governing Law . All matters affecting this Release, including the validity thereof, are to be governed by, and interpreted and construed in accordance with, the laws of the New York applicable to contracts executed in and to be performed in that State.

          7. Notices . All notices or communications hereunder shall be made in accordance with Section 4 of the Agreement.

          DEMARSE ACKNOWLEDGES THAT SHE HAS READ THIS RELEASE AND THAT SHE FULLY KNOWS, UNDERSTANDS AND APPRECIATES ITS CONTENTS, AND THAT SHE HEREBY EXECUTES THE SAME AND MAKES THIS RELEASE AND THE RELEASE AND AGREEMENTS PROVIDED FOR HEREIN VOLUNTARILY AND OF HER OWN FREE WILL.

          IN WITNESS WHEREOF, the parties have executed this Release as of _______________.

 

 

 

 

 


 

 

Elisabeth DeMarse

 

 

 

 

 

 

THESTREET, INC.

 

 

 

 

 

 

By:

 

 

 

 


 

 

Name:

 

 

 

 


 

 

Title:

 

 

 

 


 

65


Exhibit 31.1

CERTIFICATION

I, Elisabeth DeMarse, certify that:

 

 

 

1.

I have reviewed this quarterly report on Form 10-Q of TheStreet, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


 

 

 

 

Date: May 7, 2012

By:

     /s/ Elisabeth DeMarse

 

 

 


 

 

 

     Name:  Elisabeth DeMarse

 

 

 

     Title:    Chief Executive Officer (principal executive officer)



Exhibit 31.2

CERTIFICATION

I, Thomas Etergino, certify that:

 

 

 

1.

I have reviewed this quarterly report on Form 10-Q of TheStreet, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


 

 

 

 

Date: May 7, 2012

By:

     /s/ Thomas Etergino

 

 

 


 

 

 

     Name:  Thomas Etergino

 

 

 

     Title:    Chief Financial Officer (principal financial officer)



Exhibit 32.1

Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of TheStreet, Inc. (the “Company”) for the quarterly period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elisabeth DeMarse, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

 

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


 

 

 

            /s/ Elisabeth DeMarse

 


 

   Name:

Elisabeth DeMarse

 

   Title:

Chief Executive Officer (principal executive officer)

 

May 7, 2012

 



Exhibit 32.2

Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of TheStreet, Inc. (the “Company”) for the quarterly period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas Etergino, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

 

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


 

 

 

            /s/ Thomas Etergino

 


 

   Name:

Thomas Etergino

 

   Title:

Chief Financial Officer (principal financial officer)

 

May 7, 2012