Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

Dated as of November 15, 2007

AMONG

THESTREET.COM, INC.

TCV VI, L.P.

AND

TCV MEMBER FUND, L.P.

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TABLE OF CONTENTS

 

 

 

 

 

 

ARTICLE I

PURCHASE AND SALE OF SHARES

 

1

 

 

 

 

 

 

1.1

 

PURCHASE AND SALE

 

1

 

1.2

 

CLOSING

 

1

 

 

 

 

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

1

 

 

 

 

 

 

2.1

 

ORGANIZATION AND CORPORATE POWER

 

2

 

2.2

 

AUTHORIZATION, ETC.

 

2

 

2.3

 

GOVERNMENT APPROVALS

 

3

 

2.4

 

AUTHORIZED AND OUTSTANDING STOCK

 

3

 

2.5

 

SUBSIDIARIES

 

4

 

2.6

 

SECURITIES LAW COMPLIANCE

 

4

 

2.7

 

SEC DOCUMENTS; FINANCIAL INFORMATION

 

4

 

2.8

 

INTERNAL CONTROLS

 

5

 

2.9

 

DISCLOSURE CONTROLS

 

5

 

2.10

 

ABSENCE OF CERTAIN EVENTS; NO MATERIAL ADVERSE CHANGE

 

5

 

2.11

 

LITIGATION

 

7

 

2.12

 

COMPLIANCE WITH LAWS; PERMITS

 

7

 

2.13

 

TAXES

 

7

 

2.14

 

INTELLECTUAL PROPERTY

 

7

 

2.15

 

CONTRACTS AND COMMITMENTS

 

8

 

2.16

 

EMPLOYEE MATTERS

 

8

 

2.17

 

NO BROKERS OR FINDERS

 

8

 

2.18

 

TRANSACTIONS WITH AFFILIATES

 

9

 

2.19

 

INSURANCE

 

9

 

2.20

 

INVESTMENT COMPANY ACT

 

9

 

2.21

 

INVESTMENT COMPANY ACT

 

9

 

2.22

 

NASDAQ

 

9

 

2.23

 

DELAWARE SECTION 203

 

9

 

 

 

 

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER

 

10

 

 

 

 

 

 

3.1

 

ORGANIZATION AND POWER

 

10

 

3.2

 

AUTHORIZATION, ETC.

 

10

 

3.3

 

GOVERNMENT APPROVALS

 

10

 

3.4

 

INVESTMENT REPRESENTATIONS

 

11

 

3.5

 

NO BROKERS OR FINDERS

 

11

 

3.6

 

SHORT SALES

 

11

 

3.7

 

NO BENEFICIAL OWNERSHIP

 

12

 

 

 

 

 

ARTICLE IV

COVENANTS OF THE PARTIES

 

12

 

 

 

 

 

 

4.1

 

LEGENDS

 

12

 

4.2

 

RESTRICTIONS ON ACTIONS

 

12

 

4.3

 

SHORT SALES

 

13

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4.4

 

CONFIDENTIAL INFORMATION

 

13

 

4.5

 

SPECIFIC PERFORMANCE

 

14

 

4.6

 

BOARD OF DIRECTORS

 

14

 

 

 

 

 

ARTICLE V

CONDITIONS TO THE PURCHASERS’ OBLIGATION

 

15

 

 

 

 

 

 

5.1

 

REPRESENTATIONS AND WARRANTIES

 

15

 

5.2

 

COVENANTS

 

15

 

5.3

 

CERTIFIED BYLAWS

 

15

 

5.4

 

SERIES B PREFERRED STOCK CERTIFICATES

 

15

 

5.5

 

AMENDMENT NO. 2 TO RIGHTS AGREEMENT

 

15

 

5.6

 

INVESTOR RIGHTS AGREEMENT

 

15

 

5.7

 

LEGAL OPINION

 

15

 

5.8

 

CERTIFICATE OF DESIGNATION

 

15

 

5.9

 

WARRANTS

 

15

 

 

 

 

 

ARTICLE VI

CONDITIONS TO THE COMPANY’S OBLIGATION

 

16

 

 

 

 

 

 

6.1

 

REPRESENTATIONS AND WARRANTIES; PERFORMANCE

 

16

 

6.2

 

COVENANTS

 

16

 

6.3

 

CONSIDERATION FOR THE SHARES

 

16

 

6.4

 

INVESTOR RIGHTS AGREEMENT

 

16

 

6.5

 

CERTIFICATE OF DESIGNATION

 

16

 

6.6

 

WARRANTS

 

16

 

 

 

 

 

ARTICLE VII

MISCELLANEOUS

 

16

 

 

 

 

 

 

7.1

 

SURVIVAL OF REPRESENTATIONS

 

16

 

7.2

 

SHARES OWNED BY AFFILIATES

 

16

 

7.3

 

COUNTERPARTS

 

17

 

7.4

 

GOVERNING LAW

 

17

 

7.5

 

ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARY

 

18

 

7.6

 

EXPENSES

 

18

 

7.7

 

NOTICES

 

18

 

7.8

 

SUCCESSORS AND ASSIGNS

 

19

 

7.9

 

HEADINGS

 

19

 

7.10

 

AMENDMENTS AND WAIVERS

 

19

 

7.11

 

INTERPRETATION; ABSENCE OF PRESUMPTION

 

19

 

7.12

 

SEVERABILITY

 

20

 

7.13

 

SCHEDULES

 

20

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SCHEDULES

 

Schedule 1.1

 

Purchased Shares and Warrant Shares

Schedule of Exceptions

 

EXHIBITS

 

 

 

Exhibit A

 

Definitions

Exhibit B-1

 

Form of Certificate of Designation, Preferences and Rights of the Series B
Preferred Stock

Exhibit B-2

 

Form of Warrant

Exhibit C

 

Investor Rights Agreement

Exhibit D

 

Amendment No. 2 to Rights Agreement

Exhibit E

 

Form of Opinion of Company Counsel

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SECURITIES PURCHASE AGREEMENT

          This Securities Purchase Agreement dated as of November 15, 2007 (this
“Agreement”) is among TheStreet.com, Inc., a Delaware corporation (the
“Company”), TCV VI, L.P., a Delaware limited partnership (“TCV VI”), and TCV
Member Fund, L.P., a Delaware limited partnership (“TCV Member Fund” and,
together with TCV VI, the “Purchasers”). Capitalized terms used but not defined
herein have the meanings assigned to them in Exhibit A.

          The Purchasers desire to purchase from the Company, and the Company
desires to issue and sell to the Purchasers, (i) an aggregate of 5,500 shares
(the “Purchased Shares”) of the Company’s Series B Preferred Stock, par value
$0.01 per share (“Series B Preferred Stock”), and (ii) one or more warrants (the
“Warrants”) to purchase an aggregate of 1,157,083 shares (the “Warrant Shares”)
of Common Stock all on the terms and subject to the conditions hereinafter set
forth.

          In consideration of the premises and the mutual representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:

ARTICLE I
PURCHASE AND SALE OF SHARES

          Section 1.1 Purchase and Sale. Subject to the terms and conditions
hereinafter set forth, at the Closing the Company shall issue and sell the
Purchased Shares and the Warrants to the Purchasers and the Purchasers shall
purchase the Purchased Shares and the Warrants from the Company for the
aggregate purchase price set forth on Schedule 1.1. The number of Purchased
Shares and the number of Warrant Shares to be purchased by each Purchaser is set
forth opposite each Purchaser’s name on Schedule 1.1. The Series B Preferred
Stock shall have the rights, terms and privileges set forth in the Certificate
of Designation, Preferences and Rights of the Series B Preferred Stock (the
“Certificate of Designation”) attached as Exhibit B-1 and the Warrants shall be
in the form attached as Exhibit B-2.

          Section 1.2 Closing. On the terms and subject to the satisfaction or
waiver of the conditions set forth in this Agreement, the closing of the sale
and purchase of the Purchased Shares and the Warrants (the “Closing”) shall take
place at the offices of Hughes Hubbard & Reed LLP, One Battery Park Plaza, New
York, New York, at 10:00 A.M., on November 15, 2007. The date on which the
Closing is to occur is herein referred to as the “Closing Date.” At the Closing,
the Company will deliver the Purchased Shares and the Warrants being acquired by
each Purchaser in the form of one or more certificates issued in such
Purchaser’s name upon receipt by the Company of payment of the full purchase
price therefor by or on behalf of such Purchaser to the Company by certified
check or by wire transfer of immediately available funds to an account
designated in writing by the Company.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company represents and warrants to the Purchasers that, except as
set forth in the SEC Documents or on the Schedule of Exceptions to this
Agreement:

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          Section 2.1 Organization and Power. The Company and each of its
Subsidiaries is a corporation or limited liability company duly incorporated or
formed, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or formation and has all requisite corporate or limited
liability company power and authority to own its properties and to carry on its
business as presently conducted and as proposed to be conducted. The Company and
each of its Subsidiaries is duly licensed or qualified to do business as a
foreign corporation or limited liability company in each jurisdiction wherein
the character of its property or the nature of the activities presently
conducted by it, makes such qualification necessary, except where the failure to
so qualify has not had and would not individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect.

          Section 2.2 Authorization, Etc. The Company has all necessary
corporate power and authority and has taken all necessary corporate action
required for the due authorization, execution, delivery and performance by the
Company of this Agreement and the Investor Rights Agreement and any other
agreements or instruments executed by the Company in connection herewith or
therewith (collectively, the “Related Agreements”), and the consummation by the
Company of the transactions contemplated hereby and thereby, the filing of the
Certificate of Designation with the Secretary of State of the State of Delaware
and for the due authorization, issuance, sale and delivery of the Purchased
Shares and the Warrants and the reservation, issuance and delivery of the
Conversion Shares and the Warrant Shares. The authorization, execution, delivery
and performance by the Company of this Agreement and the Related Agreements to
which it is or will be a party, and the consummation by the Company of the
transactions contemplated hereby and thereby, including the filing of the
Certificate of Designation and the issuance of the Purchased Shares, the
Conversion Shares and the Warrant Shares do not and will not: (a) violate or
result in the breach of any provision of the certificate of incorporation and
bylaws of the Company; or (b) with such exceptions that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect, whether
after the giving of notice or the lapse of time or both: (i) violate any
provision of, constitute a breach of, or default under, or result in or permit
the cancellation, termination or acceleration of any material judgment, order,
writ, decree or contract required to be filed as an exhibit to one of the SEC
Documents; (ii) other than in connection with or in compliance with the
provisions of the HSR Act in connection with any exercise of the Warrants,
violate any provision of, constitute a breach of, or default under, any
applicable state, federal or local law, rule or regulation; or (iii) result in
the creation of any Lien upon any assets of the Company or any of its
Subsidiaries or the suspension, revocation, material impairment, forfeiture or
nonrenewal of any franchise, permit, license or other right granted by a
governmental authority to the Company or any of its Subsidiaries, other than
Liens under federal or state securities laws. The issuance of the Purchased
Shares does not require any further corporate action and is not subject to any
preemptive right under the Company’s certificate of incorporation or any
contract to which the Company is a party. This Agreement has been, and each of
the Related Agreements to which the Company will, at the Closing be party will
be, duly executed and delivered by the Company. Assuming due execution and
delivery thereof by each of the other parties thereto, this Agreement and the
Related Agreements to which the Company is a party will each be a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, reorganization, moratorium or other similar
legal requirement relating to or affecting creditors’

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rights generally and except as such enforceability is subject to general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).

          Section 2.3 Government Approvals. No consent, approval, license or
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company in
connection with the execution, delivery and performance by the Company of this
Agreement and the Related Agreements to which the Company is a party, or in
connection with the issuance of the Purchased Shares, the Warrants, the
Conversions Shares or the Warrant Shares, except for (a) the filing of the
Certificate of Designation with the Secretary of State of the State of Delaware;
(b) those which have already been made or granted; (c) the filing of a current
report on Form 8-K with the SEC; (d) filings with applicable state securities
commissions; (e) the listing of the Conversion Shares and the Warrant Shares
with the Nasdaq Stock Market; (f) in compliance with the provisions of the HSR
Act in connection with any exercise of the Warrants; and (g) those where the
failure to obtain such consent, approval or license or make such filings would
not be material to the Company and its Subsidiaries taken as a whole.

          Section 2.4 Authorized and Outstanding Stock.

                    (a) The authorized capital stock of the Company (immediately
prior to the Closing) consists of 100,000,000 shares of Common Stock and
10,000,000 shares of preferred stock, par value $0.01 per share (“Preferred
Stock”), and 5,500 shares of Preferred Stock have been designated as the Series
B Preferred Stock and 1,000,000 shares of Preferred Stock have been designated
as Series A Junior Participating Preferred Stock.

                    (b) As of November 13, 2007, the issued and outstanding
capital stock of the Company consists of 30,097,473 shares of Common Stock.
There are no outstanding shares of Preferred Stock. In addition, options to
purchase an aggregate of 1,816,009 shares of Common Stock have been granted and
are unexercised under the Stock Plans, and unvested restricted stock units (or
RSUs) for an aggregate of 264,046 shares have been granted under the Stock
Plans. All of the issued and outstanding shares of capital stock of the Company
are, and when issued in accordance with the terms hereof, the Purchased Shares
will be, duly authorized and validly issued and fully paid and non-assessable.
The shares of Common Stock issuable upon conversion of the Purchased Shares (the
“Conversion Shares”) and upon exercise of the Warrants have been reserved for
issuance and, when issued upon conversion thereof in accordance with the terms
of the Certificate of Designation or the Warrants, as the case may be, will be
validly issued and fully paid and non-assessable and will not be subject to any
preemptive right or any restrictions on transfer under applicable law or any
contract to which the Company is a party, other than those under applicable
state and federal securities and antitakeover laws, the Investor Rights
Agreement and the Rights Agreement. When issued in accordance with the terms
hereof, the Purchased Shares will be free and clear of all Liens imposed by or
through the Company, except for restrictions imposed by Federal or state
securities or “blue sky” laws and except for those imposed pursuant to this
Agreement or the Investor Rights Agreement. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
each class or series of capital stock of the Company are as set forth in the
Company’s restated certificate of incorporation, as amended.

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                    (c) Except as provided in this Agreement: (i) no
subscription, warrant, option, convertible security or other right issued by the
Company to purchase or acquire any shares of capital stock of the Company is
authorized or outstanding; (ii) there is not any commitment of the Company to
issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock
any evidences of indebtedness or assets of the Company; (iii) the Company has no
obligation to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof; and (iv) there are no agreements between the
Company and any holder of its capital stock relating to the acquisition,
disposition or voting of the capital stock of the Company. No person or entity
is entitled to any preemptive right granted by the Company with respect to the
issuance of any capital stock of the Company. Except as provided in the Investor
Rights Agreement, no person or entity has been granted rights by the Company
with respect to the registration of any capital stock of the Company under the
Securities Act of 1933, as amended (the “Securities Act”).

          Section 2.5 Subsidiaries. The Company has no subsidiaries nor any
investment or other interest in, or any outstanding loan or advance equal to or
greater than $1,000,000 to or from, any Person. The Company owns of record and
beneficially, free and clear of all Liens of any nature, all of the issued and
outstanding capital stock of each of the Material Subsidiaries. All of the
issued and outstanding capital stock or equity interests of the Material
Subsidiaries has been duly authorized and validly issued, and in the case of
corporations, is fully paid and non-assessable. There are no outstanding rights,
options, warrants, preemptive rights, conversion rights, rights of first refusal
or similar rights for the purchase or acquisition from any Material Subsidiary
of any securities of the Material Subsidiaries nor are there any commitments to
issue or execute any such rights, options, warrants, preemptive rights,
conversion rights or rights of first refusal.

          Section 2.6 Securities Law Compliance. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Section 3.4
(Investment Representations), the offer and sale of the Purchased Shares
pursuant to this Agreement will be exempt from the registration requirements of
the Securities Act. The Company has not, in connection with the transactions
contemplated by this Agreement, engaged in: (a) any form of general solicitation
or general advertising (as those terms are used within the meaning of Rule
502(c) promulgated under the Securities Act); (b) any action involving a “public
offering” within the meaning of Section 4(2) of the Securities Act; or (c) any
action that would require the registration under the Securities Act of the
offering and sale of the Purchased Shares or the Warrants pursuant to this
Agreement. As used herein, the terms “offer” and “sale” have the meanings
specified in Section 2(3) of the Securities Act.

          Section 2.7 SEC Documents; Financial Information. Since January 1,
2006, the Company has timely filed all reports, schedules, registration
statements and other documents (including all amendments, exhibits and schedules
thereto) required to be filed by the Company with the SEC pursuant to the
Exchange Act and the Securities Act. As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act, the Exchange Act and the rules and regulations of the SEC
thereunder applicable to such SEC Documents, and as of their respective dates
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated

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therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company and its Subsidiaries included in the SEC Documents
(the “Financial Statements”) comply as of their respective dates in all material
respects with applicable accounting requirements and the rules and regulations
of the SEC with respect thereto (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q
promulgated by the SEC), and present fairly in all material respects as of their
respective dates the consolidated financial position of the Company and its
Subsidiaries as at the dates thereof and the consolidated results of their
operations and their consolidated cash flows for each of the respective periods,
in conformity with GAAP. The Company satisfies the “registrant requirements” for
use of Form S-3 set forth in General Instruction I.A to Form S-3 promulgated by
the SEC.

          Section 2.8 Internal Controls. The Company and each of its
Subsidiaries maintains a system of internal control over financial reporting
that the Company believes are sufficient to provide reasonable assurance that:
(a) transactions are executed in accordance with management’s general or
specific authorization; (b) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; and (c) access to assets is permitted only in
accordance with management’s general or specific authorization. The Company
believes that its auditors and the Audit Committee of the Board of Directors
have been advised of: (x) any significant deficiencies in the design or
operation of the Company’s internal control over financial reporting that are
reasonably likely to adversely affect the Company’s ability to record, process,
summarize and report financial data; and (y) any fraud, whether or not material,
that involves management or other employees who have a significant role in the
Company’s internal control over financial reporting. Any material weaknesses in
the Company’s internal control over financial reporting as of the date the last
evaluation was conducted have been identified for the Company’s auditors.

          Section 2.9 Disclosure Controls. The Company has established and
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15 and 15d-15 under the Exchange Act). Such disclosure controls and
procedures are designed to provide reasonable assurance that material
information relating to the Company, including its Subsidiaries, that is
required to be disclosed by the Company in the reports that it furnishes or
files under the Exchange Act is reported within the time periods specified in
the rules and forms of the SEC and that such material information is
communicated to the Company’s management to allow timely decisions regarding
required disclosure.

          Section 2.10 Absence of Certain Events; No Material Adverse Change.
Since September 30, 2007, the Company and its Subsidiaries each has conducted
its business operations in the ordinary course and there has not occurred any
event, development, circumstance or condition that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect.
Without limiting the generality of the foregoing, since September 30, 2007 there
has not occurred:

                    (a) any purchase, sale, transfer, assignment, conveyance or
pledge of the assets or properties of the Company or any of its Subsidiaries,
except in the ordinary course of business;

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                    (b) any incurrence of indebtedness for borrowed money,
notes, mortgages or purchase money indebtedness of the Company or its
Subsidiaries in excess of $1,000,000 in the aggregate;

                    (c) any waiver or modification by the Company or any of its
Subsidiaries of any right or rights of substantial value or of a material debt
owed to it other than in the ordinary course of business;

                    (d) any material change in the accounting principles,
methods, practices or procedures followed by the Company in connection with the
business of the Company and its Subsidiaries or any material change in the
depreciation or amortization policies or rates theretofore adopted by the
Company in connection with the business of the Company and its Subsidiaries, any
change in the Company’s independent public accounting firm, disagreement with
its independent public accounting firm over the Company’s and its Subsidiaries’
application of accounting principles or with the preparation of any of their
financial statements that was required to be disclosed in the SEC Documents,
notification to the Company’s audit committee of any irregularity with respect
to the Company’s or its Subsidiaries’ financial statements, books and records or
method of accounting;

                    (e) except as contemplated by this Agreement, any
declaration, setting aside or payment of any dividends (or, in the case of a
limited liability company, other distributions) in respect of the outstanding
shares of capital stock (or, in the case of a limited liability company, other
equity interests) of the Company or any of its Subsidiaries (other than (i) the
Company’s regular quarterly dividend of $0.025 per share and (ii) dividends
declared or paid by wholly-owned Subsidiaries to the Company or another
wholly-owned Subsidiary of the Company) or any other change in the authorized
capitalization of the Company or any of its Subsidiaries or any direct or
indirect redemption, purchase or other acquisition of any such stock by the
Company;

                    (f) any written notice from the SEC in connection with any
investigation or action by the SEC that seeks to, or could reasonably be
expected to result in, the restatement by the Company of any of its current or
previously disclosed financial statements, and to the actual knowledge of any of
the executive officers of the Company, no such investigation or action has been
threatened by the SEC;

                    (g) any material change in any compensation agreement or
arrangement with any executive officer or director of the Company, other than in
the ordinary course of business;

                    (h) any resignation or termination of employment of Mr.
James Cramer or any of the Company’s other executive officers;

                    (i) any loans or guarantees made by the Company or any of
its Subsidiaries to or for the benefit of their employees, officers or directors
or any members of their immediate families, other than (i) travel advances and
other advances made in the ordinary course of business and (ii) loans to
employees, officers or directors in connection with the exercise of stock
options granted pursuant to the Stock Plans; or

                    (j) any arrangement, contract or commitment to do any of the
foregoing.

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          Section 2.11 Litigation. With such exceptions that, individually or in
the aggregate, are not reasonably expected to have a Material Adverse Effect,
there is no litigation or governmental proceeding pending or, to the knowledge
of the Company, threatened, against the Company or any of its Subsidiaries or
affecting any of the properties or assets of the Company or any of its
Subsidiaries. Neither the Company nor any Subsidiary is in default with respect
to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency that is expressly applicable to the
Company or any Subsidiary or any of their assets or property.

          Section 2.12 Compliance with Laws; Permits. The Company is not, and
will not at the Closing be, in violation of or default under any provision of
its restated certificate of incorporation or bylaws, each as in effect at the
Closing. With such exceptions that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect the Company and its
Subsidiaries are in compliance with each judgment, decree, judicial order,
statute and regulation (whether issued under domestic, foreign or international
law) by which any of them is bound or to which any of them or any of their
respective properties are subject. The Company and each of its Subsidiaries has
all franchises, permits, licenses and other rights granted by governmental
authorities that are required to permit it to own its property and to conduct
its business as it is presently conducted other than franchises, permits,
licenses and other privileges granted by governmental authorities that if not
held by the Company or such Subsidiary have not had and would not, individually
or in the aggregate, be reasonably expected to have a Material Adverse Effect.
All such franchises, permits, licenses and other rights and privileges granted
by governmental authorities are in full force and effect and, to the knowledge
of the Company, no suspension or cancellation of any of them is threatened.

          Section 2.13 Taxes. The Company and each of its Subsidiaries has filed
all Tax returns required to be filed within the applicable periods for such
filings (with due regard to any extension) and has paid all Taxes required to be
paid, except for any such failures to file or pay that would not individually or
in the aggregate have a Material Adverse Effect. No material deficiencies for
any Tax are currently assessed against the Company or any of its Subsidiaries,
and no Tax returns of the Company or any of its Subsidiaries have been audited
during the last three years, and, there is no such audit pending or, to the
knowledge of the Company, contemplated. There is no outstanding claim by an
authority in a jurisdiction where the Company does not file tax returns that it
is or may be subject to the imposition of any material tax by that jurisdiction.

          Section 2.14 Intellectual Property. All Intellectual Property Rights
purported to be owned by the Company or any of its Subsidiaries that were
developed, worked on or otherwise held by any employee, officer, consultant or
otherwise are owned free and clear by the Company or one of its Subsidiaries (as
the case may be) by operation of law or have been validly assigned to the
Company one of its Subsidiaries (as the case may be) other than those
Intellectual Property Rights where the failure to own or assign such rights
would not, individually or in its aggregate be reasonably likely to have a
Material Adverse Effect. The Intellectual Property Rights are sufficient in all
material respects to carry on the business of the Company and each of its
Subsidiaries as presently conducted and as proposed to be conducted. To the
knowledge of the Company, with such exceptions as are not, individually or in
the aggregate reasonably likely to have a Material Adverse Effect, the
Intellectual Property Rights purported to be owned by the

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Company or any of its Subsidiaries do not infringe the intellectual property
rights of any third party. Neither the Company nor any of its Subsidiaries has
received since the later of January 1, 2005 and (with respect to each Subsidiary
of the Company that was acquired from one or more third parties) the date such
Subsidiary was acquired from such third party(ies) any written notice or other
written claim from any third party: (i) asserting that any of the Intellectual
Property Rights purported to be owned by the Company or any of its Subsidiaries
infringe any intellectual property rights of such third party; (ii) challenging
the validity, effectiveness or ownership by the Company or its Subsidiaries of
any of the Intellectual Property Rights; or (iii) asserting that the Company or
its Subsidiaries is in material default with respect to any license granting
Intellectual Property Rights to the Company or its Subsidiaries.

          Section 2.15 Contracts and Commitments. All of the material contracts
of the Company or any of its Subsidiaries that are required to be described in
the SEC Documents, or to be filed as exhibits thereto, are in full force and
effect and upon consummation of the transactions contemplated by this Agreement
and the Related Agreements, shall continue in full force and effect, without
penalty or adverse consequence. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any other party is in material breach of
or in material default under any such contract.

          Section 2.16 Employee Matters. The Company has described in, or filed
as an exhibit to, the SEC Documents filed prior to the date of this Agreement
all of the following types of documents, agreements, plans or arrangements that
are required by federal securities laws to be described in, or filed as an
exhibit to, the SEC Documents: employment agreements, consulting agreements,
deferred compensation, pension or retirement agreements or arrangements
(including all “employee pension benefit plans” as defined in Section 3(2) of
ERISA, bonus, incentive or profit-sharing plans or arrangements, or labor or
collective bargaining agreements in effect by the Company and its Subsidiaries)
(the “ERISA Documents”). Except for any compliance failures that, individually
or in the aggregate, are not reasonably likely to have a Material Adverse
Effect, (a) the Company and its Subsidiaries are in compliance in all material
respects with all applicable laws and regulations relating to labor, employment,
fair employment practices, terms and conditions of employment, and wages and
hours, and with the terms of the ERISA Documents; and (b) each such ERISA
Document is in compliance in all material respects with all applicable
requirements of ERISA. To the Company’s knowledge, none of the Company’s or its
Subsidiaries’ employees are obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her employment obligations to the Company or
its Subsidiaries or that would conflict with the Company’s and its Subsidiaries’
business as now conducted or proposed to be conducted, except for such contracts
and other agreements, judgments, decrees and orders that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          Section 2.17 No Brokers or Finders. No Person has or will have, as a
result of the transactions contemplated by this Agreement, any right, interest
or claim against or upon the Company, any of its Subsidiaries or any Purchaser
for any commission, fee or other compensation as a finder or broker because of
any act or omission by the Company or any of its Subsidiaries.

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          Section 2.18 Transactions with Affiliates. Except as disclosed in the
Proxy Statement, as of April 23, 2007 (the date the Proxy Statement was filed
with the SEC), there were no loans, leases or other agreements, understandings
or continuing transactions between the Company or any of its Subsidiaries, on
the one hand, and any officer or director of the Company or any of its
Subsidiaries or any Person that the Company believes is the owner of five
percent or more of the outstanding Common Stock or any respective family member
or Affiliate of such officer, director or stockholder, on the other hand, that
were required by federal securities laws to be disclosed in the Proxy Statement.

          Section 2.19 Insurance. The Company and each of its Subsidiaries
maintains insurance covering its properties, operations, personnel and
businesses as the Company deems adequate. All such insurance is fully in force,
except where the failure to be in full force has not had and would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.

          Section 2.20 Investment Company Act. The Company is not, and
immediately after giving effect to the sale of the Purchased Shares in
accordance with this Agreement and the application of the proceeds thereof will
not be required to be registered as, an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act.

          Section 2.21 Investment Advisers Act. The Company is not ineligible
pursuant to Section 9(a) or 9(b) of the Investment Company Act to serve as an
investment adviser to a registered investment company. As of the date of the
Company’s most recent Uniform Application for Investment Adviser Registration on
Form ADV and, to the knowledge of the Company, since that date, no “affiliated
person” (as defined in the Investment Company Act) of the Company is or was
ineligible pursuant to Section 9(a) or 9(b) of the Investment Company Act to
serve as an “affiliated person” of an investment adviser to a registered
investment company. No “associated person” (as defined in the Advisers Act) of
the Company is ineligible pursuant to Section 203 of the Advisers Act to serve
as an “associated person” of a registered investment adviser. As of the date of
the Company’s most recent Uniform Application for Investment Adviser
Registration on Form ADV and, to the knowledge of the Company, since that date,
each “investment advisory representative” (as defined in the Advisers Act) of
the Company is or was licensed under all applicable state securities or “blue
sky” laws.

          Section 2.22 Nasdaq. As of the date hereof, the Company’s Common Stock
is listed on the Nasdaq Global Market, and no event has occurred, and the
Company is not aware of any event that is reasonably likely to occur, that would
result in the Common Stock being delisted from the Nasdaq Global Market.

          Section 2.23 Delaware Section 203. The Board of Directors of the
Company (or a committee thereof), at a meeting duly called and held on November
15, 2007, has approved for purposes of Section 203 of the Delaware General
Corporation Law: (a) the sale and issuance of the Purchased Shares and the
Warrants to the Purchasers hereunder and the issuance of the Conversion Shares
upon conversion of the Purchased Shares and the issuance of the Warrant Shares
upon exercise of the Warrants; and (b) in the event the Purchasers are not
“interested stockholders” (as defined in Section 203 of the Delaware General
Corporation Law) immediately

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after giving effect to their acquisition of the Purchased Shares, a transaction
in compliance with Section 4.2(a) in which either (or both) of the Purchasers
become “interested stockholders.”

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER

          Each Purchaser, severally and not jointly, represents and warrants to
the Company that:

          Section 3.1 Organization and Power. Such Purchaser is a limited
partnership duly formed, validly existing and in good standing under the laws of
the jurisdiction of its formation and has all requisite limited partnership
power and authority to own its properties and to carry on its business as
presently conducted.

          Section 3.2 Authorization, Etc. Such Purchaser has all necessary
limited partnership power and authority, and has taken all necessary limited
partnership action required for the due authorization, execution, delivery and
performance by such Purchaser of this Agreement and the Related Agreements to
which it is a party and the consummation by such Purchaser of the transactions
contemplated hereby and thereby. The authorization, execution, delivery and
performance by such Purchaser of this Agreement and the Related Agreements to
which it is or will be a party, and the consummation by such Purchaser of the
transactions contemplated hereby and thereby do not and will not: (a) violate or
result in the breach of any provision of the certificate of limited partnership
and limited partnership agreement of such Purchaser; or (b) with such exceptions
that, individually or in the aggregate, are not reasonably likely to have a
material adverse effect on its ability to perform its obligations under this
Agreement and the Related Agreements to which it is a party, whether after the
giving of notice or the lapse of time or both: (i) violate any provision of,
constitute a breach of, or default under, or result in or permit the
cancellation, termination or acceleration of any material contract to which such
Purchaser is a party; or (ii) violate any provision of, constitute a breach of,
or default under, any applicable law. This Agreement has been, and each of the
Related Agreements to which such Purchaser will, at the Closing be party will
be, duly executed and delivered by such Purchaser. Assuming due execution and
delivery thereof by the other Persons contemplated to be party thereto, this
Agreement and the Related Agreements will each be a valid and binding obligation
of such Purchaser enforceable against such Purchaser in accordance with its
terms, except as such enforceability may be limited by applicable laws relating
to bankruptcy, insolvency, reorganization, moratorium or other similar legal
requirement relating to or affecting creditors’ rights generally and except as
such enforceability is subject to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).

          Section 3.3 Government Approvals. No consent, approval, license or
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of such Purchaser in
connection with the execution, delivery and performance by such Purchaser of
this Agreement and the Related Agreements to which it is a party, except for:
(a) those which have already been made or granted; (b) the filing with the SEC
of a Schedule 13D or Schedule 13G and a Form 3 to report such Purchaser’s
ownership of the Purchased Shares; and (c) those where the failure to obtain
such consent, approval or license would not have a material adverse effect on
the ability of the Purchasers to perform their obligations hereunder.

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          Section 3.4 Investment Representations.

                    (a) Such Purchaser is an “accredited investor” as that term
is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

                    (b) Such Purchaser has been advised by the Company that
neither the Purchased Shares nor the Warrants have been registered under the
Securities Act, that the Purchased Shares and the Warrants will be issued on the
basis of the statutory exemption provided by Section 4(2) under the Securities
Act or Regulation D promulgated thereunder, or both, relating to transactions by
an issuer not involving any public offering and under similar exemptions under
certain state securities laws, that this transaction has not been reviewed by,
passed on or submitted to any federal or state agency or self-regulatory
organization where an exemption is being relied upon, and that the Company’s
reliance thereon is based in part upon the representations made by such
Purchaser in this Agreement and the Related Agreements. Such Purchaser
acknowledges that it has been informed by the Company of, or is otherwise
familiar with, the nature of the limitations imposed by the Securities Act and
the rules and regulations thereunder on the transfer of securities.

                    (d) Such Purchaser is purchasing the Purchased Shares and
the Warrants for its own account and not with a view to, or for sale in
connection with, any distribution thereof in violation of federal or state
securities laws.

                    (e) By reason of its business or financial experience, such
Purchaser has the capacity to protect its own interest in connection with the
transactions contemplated hereunder.

                    (f) The Company has provided to such Purchaser all documents
and information that such Purchaser has requested relating to an investment in
the Company. Such Purchaser recognizes that investing in the Company involves
substantial risks, and has taken full cognizance of and understands all of the
risk factors related to the acquisition of the Purchased Shares and the
Warrants. Such Purchaser has carefully considered and has, to the extent it
believes such discussion necessary, discussed with the Purchaser’s professional
legal, tax and financial advisers the suitability of an investment in the
Company, and such Purchaser has determined that the acquisition of the Purchased
Shares and the Warrants is a suitable investment for the Purchaser. Such
Purchaser has not relied on the Company for any tax or legal advice in
connection with the purchase of the Purchased Shares or the Warrants. In
evaluating the suitability of an investment in the Company, such Purchaser has
not relied upon any representations (other than the representations and
warranties of the Company set forth in Article II) or other information from the
Company or any of its agents.

          Section 3.5 No Brokers or Finders. No Person has or will have, as a
result of the transactions contemplated by this Agreement, any right, interest
or claim against or upon the Company, any of its Subsidiaries or any Purchaser
for any commission, fee or other compensation as a finder or broker because of
any act or omission by such Purchaser.

          Section 3.6 Short Sales. Neither such Purchaser nor any of its
Restricted Affiliates has engaged in any Short Sales since June 7, 2007.

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          Section 3.7 No Beneficial Ownership. Neither Purchaser beneficially
owns (as such term is defined in Rule 13d-3 under the Exchange Act) any Common
Stock or is the record owner of any Common Stock.

ARTICLE IV
COVENANTS OF THE PARTIES

          Section 4.1 Legends. Each Purchaser acknowledges and agrees that the
Purchased Shares and the Warrants will bear a legend in substantially the
following form:

 

 

 

“The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended, and have been acquired for investment and
not with a view to, or in connection with, the sale or distribution thereof.
Such shares may not be sold, offered for sale, pledged or hypothecated in the
absence of an effective registration statement thereunder or an exemption from
such registration.”

          Section 4.2 Restrictions on Actions.

                    (a) Each Purchaser agrees that until the earlier of the
seventh anniversary of the date of this Agreement and the date on which such
Purchaser no longer owns any Purchased Shares, Conversion Shares, Warrants or
Warrant Shares (the “Restricted Period”), without the prior written consent of
the Board of Directors of the Company, it will not at any time, nor will it
cause, suffer or permit any of its Restricted Affiliates to, acquire directly or
indirectly, by purchase or otherwise, record ownership or beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act ) more than 35% the
Company’s outstanding Common Stock; provided, however, that a Purchaser becoming
a beneficial owner of more than 35% as a result of the Company taking any direct
or indirect action that results in the number of outstanding shares of capital
stock being reduced (e.g. stock repurchases) shall not be a breach of this
Section 4.2.

                    (b) The Purchasers agree that, during the Restricted Period
without the prior written consent of the Board of Directors of the Company,
neither of them will at any time, nor will a Purchaser cause, suffer or permit
any of its Restricted Affiliates to, directly or indirectly: (i) make, or in any
way participate in, any solicitation of proxies to vote any securities of the
Company under any circumstances for a change in the directors or management of
the Company, or in connection with a merger or acquisition of the Company, or
deposit any securities of the Company in a voting trust or subject them to a
voting agreement or other agreement of similar effect (it is understood and
agreed that this clause (i) shall not prohibit any Purchaser or any of their
respective Restricted Affiliates from voting any securities of the Company in
their discretion); (ii) form, join or in any way participate in a “group”
(within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any
of securities of the Company that describes any plans or proposals required to
be disclosed in response to any of clauses (a) through (j) of Item 4 of any
Schedule 13D (or any amendment thereto); (iii) publicly propose to enter into,
directly or indirectly, any merger, consolidation, business combination or other
similar transaction involving the Company; (iv) formulate or disclose any
intention, plan or arrangement to change the directors or management of the
Company; or (v) advise, assist or encourage any other Persons in connection with
any of the foregoing. (It is understood and agreed that nothing

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in this Section 4.2(b) shall prohibit the Series B Designee from taking any
action, or refraining from taking any action, required in connection with his or
her fiduciary duties.)

                    (c) The provisions of Section 4.2(a) and (b) shall terminate
in the event that the Board of Directors of the Company shall: (i) approve a
tender offer for a majority of the outstanding capital stock of the Company;
(ii) liquidate the Company or sell all or substantially all of the assets of the
Company to another Person; (iii) approve a merger or consolidation of the
Company with any other Person that would result in the voting securities of the
Company outstanding immediately prior thereto representing less than a majority
of the voting power to elect a majority of the board of directors or similar
body of the Person surviving such merger or resulting from such consolidation;
or (iv) sell or otherwise issue to any Person voting securities of the Company
that would result in such Person having a majority of the combined voting power
of the voting securities of the Company. For purposes hereof, “voting power”
means the power to vote in the election of directors generally.

                    (d) The provisions of Section 4.2(a) and (b) be reinstated
and shall apply in full force according to their terms in the event that: (i) if
the provisions of Section 4.2(a) and (b) shall have terminated as a result of a
tender offer under clause (c)(i) above, such tender offer (as originally made or
as extended or modified) shall have terminated (without any securities being
accepted thereunder for purchase) prior to the commencement of a tender offer by
any Purchaser or any of its Restricted Affiliates that would have been permitted
pursuant to clause (c)(i) as a result of such third-party tender offer; (ii) any
tender offer by any Purchaser or any of its Restricted Affiliates (as originally
made or as extended or modified) that was permitted to be made pursuant to
clause (c)(ii) through (iv) shall have terminated (without any securities being
accepted thereunder for purchase); or (iii) if the provisions of Section 4.2(a)
and (b) shall have terminated as a result of clause (c)(i), (iii) or (iv), the
Board of Directors of the Company shall have determined to rescind or abandon
the previous action described in clause (c)(ii) through (iv) (and no such action
shall have closed). Upon reinstatement of the provisions of Section 4.2(a) and
(b), the preceding provisions of this Section 4.2 shall continue to govern,
including, without limitation, those that provide for the termination of any of
the provisions of this Section 4.3 in the event that any of the events described
in clause (c) shall occur.

          Section 4.3 Short Sales. Each Purchaser agrees that, for so long as
such Purchaser or any of its Restricted Affiliates owns any Purchased Shares,
Conversion Shares, Warrants or Warrant Shares it will not, and it will not
cause, suffer or permit any of its Restricted Affiliates to, enter into any
Short Sales.

          Section 4.4 Confidential Information.

                    (a) From and after the consummation of the Closing, each
Purchaser shall, and shall use its commercially reasonable efforts to cause its
Affiliates, Representatives and Permitted Disclosees to, maintain the
confidentiality of, and not use for the benefit of itself or others, any
confidential financial, business-related and other information concerning the
Company or its Subsidiaries, whether furnished before or after the Closing Date,
whether oral or written, and regardless of the manner or form in which it is
furnished, together with notes, analyses, compilations, studies or other
documents prepared by the Company or any of its Subsidiaries or any of their
Representatives (collectively, the “Confidential Information”);

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provided, however, that: (i) each Purchaser shall be liable in the event any of
its Affiliates, Representatives or Permitted Disclosees shall not maintain the
confidentiality of, or use for the benefit of itself or others, any Confidential
Information even though such Purchaser is only required to use commercially
reasonable efforts to cause them to comply herewith; and (ii) this Section
4.4(a) shall not restrict: (A) any disclosure of information required to be
disclosed by applicable law, rule, regulation or court or other governmental
order (but only such portion of the Confidential Information that they are
legally required to disclose), but if permitted by applicable law, the
Purchasers shall give the Company notice and a reasonable opportunity to contest
such disclosure or seek an appropriate protective order; or (B) any disclosure
of information that: (I) is publicly available as of the Closing Date; (II)
after the Closing Date, becomes publicly available through no fault of any of
the Purchasers or their Affiliates or Representatives; (III) is received by the
Purchasers from a third party not, to the knowledge of the Purchasers, subject
to any obligation of confidentiality with respect to such information; or (IV)
was known by such Purchaser on a non-confidential basis from a source that was
entitled to disclose it to such Purchaser. Notwithstanding the foregoing, each
Purchaser will advise its Affiliates, Representatives and Permitted Disclosees
that such Confidential Information is confidential and that by receiving such
Confidential Information such Affiliate, Representative or Permitted Disclosee
is agreeing to maintain the confidentiality of, and not to use for the benefit
of itself or others, any Confidential Information.

                    (b) Nothing contained in this Section 4.4 shall prevent any
Purchaser or any Permitted Disclosee from entering into any business, entering
into any agreement with a third party, or investing in or engaging in investment
discussions with any other Person (whether or not competitive with the Company);
provided, however, that neither such Purchaser nor any of its Affiliates,
Representatives or Permitted Disclosee discloses or otherwise makes use of,
except as permitted in accordance with this Section 4.4, any Confidential
Information in connection with such activities.

          Section 4.5 Specific Performance. The Purchasers agree that
irreparable damage would occur and that the Company would not have any adequate
remedy at law in the event that any of the provisions of Sections 4.2
(Restrictions on Actions), 4.3 (Short Sales) or 4.4 (Confidential Information)
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the Purchasers agree that the Company shall without the
necessity of proving the inadequacy of money damages or posting a bond be
entitled to an injunction or injunctions to prevent breaches of such Sections
and to enforce specifically the terms, provisions and covenants contained
therein, this being in addition to any other remedy to which they are entitled
at law or in equity.

          Section 4.6 Board of Directors. Promptly after the Closing, once Jay
Hoag shall become a member of the Board of Directors of the Company as the
Series B Designee (as such term is defined in the Certificate of Designation),
the Company shall cause the Series B Designee to be covered by any directors and
officers insurance policy maintained by the Company from time to time at all
times that a Series B Designee serves on the Company’s Board of Directors.

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ARTICLE V
CONDITIONS TO THE PURCHASERS’ OBLIGATION

          The obligations of the Purchasers to consummate the transactions
contemplated hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions precedent:

          Section 5.1 Representations and Warranties. Each of the
representations and warranties of the Company contained in Article II of this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date, except for representations and
warranties that speak as of a specific date or time other than the Closing Date
(which need only be true and correct in all material respects as of such date or
time); provided, however, that if a representation or warranty is qualified by
“materiality” or “Material Adverse Effect” or similar qualifier, such
representation or warranty (as so qualified) shall be true and correct in all
respects.

          Section 5.2 Covenants. The Company shall have performed and complied
in all material respects with all other covenants and agreements required by
this Agreement to be performed or complied with by it at or prior to the
Closing.

          Section 5.3 Certified Bylaws. The Purchasers shall have received a
copy of the Company’s bylaws, certified by its Secretary.

          Section 5.4 Series B Preferred Stock Certificates. The Company shall
have delivered one or more stock certificates to each Purchaser representing the
portion of the Purchased Shares to be purchased by such Purchaser.

          Section 5.5 Amendment No. 2 to Rights Agreement. The Company and
American Stock Transfer & Trust Company shall have executed Amendment No. 2 to
Rights Agreement in the form attached as Exhibit D.

          Section 5.6 Investor Rights Agreement. The Company shall have entered
into the Investor Rights Agreement.

          Section 5.7 Legal Opinion. The Company shall have provided an opinion
addressed to the Purchasers rendered by its General Counsel in form and
substance reasonably satisfactory to the Purchasers, in substantially the form
attached hereto as Exhibit E.

          Section 5.8 Certificate of Designation. The Certificate of Designation
shall have been duly filed with the Secretary of State of the State of Delaware.

          Section 5.9 Warrants. The Company shall have entered into and
delivered the Warrants to the Purchasers.

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ARTICLE VI
CONDITIONS TO THE COMPANY’S OBLIGATION

          The obligations of the Company to consummate the transactions
contemplated hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions precedent:

          Section 6.1 Representations and Warranties; Performance. Each of the
representations and warranties of the Purchasers contained in Article III of
this Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date, except for
representations and warranties that speak as of a specific date or time other
than the Closing Date (which need only be true and correct in all material
respects as of such date or time); provided, however, that if a representation
or warranty is qualified by “materiality” or “material adverse effect” or
similar qualifier, such representation or warranty (as so qualified) shall be
true and correct in all respects.

          Section 6.2 Covenants. The Purchasers shall have performed and
complied in all material respects with all other covenants and agreements
required by this Agreement to be performed or complied with by them at or prior
to the Closing.

          Section 6.3 Consideration for the Shares. Each Purchaser shall have
paid the purchase price of the Purchased Shares to be purchased by such
Purchaser in full at the Closing either by certified check or by wire transfer
of immediately available funds to an account designated in writing by the
Company.

          Section 6.4 Investor Rights Agreement. The Purchasers shall have
entered into the Investor Rights Agreement.

          Section 6.5 Certificate of Designation. The Certificate of Designation
shall have been duly filed with the Secretary of State of the State of Delaware.

          Section 6.6 Warrants. The Purchasers shall have entered into and
delivered the Warrants to the Company.

ARTICLE VII
MISCELLANEOUS

          Section 7.1 Survival of Representations. The representations,
warranties, covenants and agreements made herein or in any certificates or
documents executed in connection herewith shall survive the execution and
delivery hereof and the Closing of the transactions contemplated hereby.
Notwithstanding the foregoing, the representations and warranties contained in
or made pursuant to this Agreement shall terminate on, and no claim or action
with respect thereto may be brought after, the date that is 10 days after the
date on which the Company files with the SEC its annual report on Form 10-K for
the year ending December 31, 2008.

          Section 7.2 Shares Owned by Affiliates. For the purposes of applying
all provisions of this Agreement which condition the receipt of information or
access to information or exercise

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of any rights upon ownership of a specified number or percentage of shares, the
shares owned of record by any Affiliate of a Purchaser shall be deemed to be
owned by such Purchaser.

          Section 7.3 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and will become effective when one or more counterparts have been signed by a
party and delivered to the other parties. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of this Section 7.3,
provided that receipt of copies of such counterparts is confirmed.

          Section 7.4 Governing Law.

                    (a) Except to the extent the DGCL is mandatorily applicable,
this Agreement and any disputes arising hereunder or controversies related
hereto shall be governed by and construed in accordance with the internal laws,
and not the laws of conflicts, of the State of New York that apply to contracts
made and performed entirely within such state.

                    (b) Any action, suit or other proceeding with respect to
this Agreement and any matter arising out of or in connection with this
Agreement shall be brought exclusively in the state courts sitting in the State
of Delaware or federal courts sitting in the State of Delaware. By execution and
delivery of this Agreement, each party hereto hereby accepts for itself and in
respect of such Person’s property, generally and unconditionally, the sole and
exclusive jurisdiction of the aforesaid courts and appellate courts thereof.
Each party hereto irrevocably consents to service of process in any action, suit
or other proceeding in any of the aforementioned courts by the mailing of copies
thereof by registered or certified mail, postage prepaid, or by recognized
overnight delivery service, to such party at such party’s address referred to in
Section 7.7. Each party hereto hereby irrevocably and unconditionally waives any
objection which such Person may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in connection with
this Agreement brought in the courts referred to above and hereby further
irrevocably waives and agrees, to the extent permitted by applicable law, not to
plead or claim in any such court that any such action, suit or other proceeding
brought in any such court has been brought in an inconvenient forum. Nothing
herein shall affect the right of any party hereto to serve process in any other
manner permitted by law. Notwithstanding anything in this Section 7.4(b) to the
contrary, each party agrees that a final judgment in any such action, suit or
other proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law.

                    (c) To the extent that any party hereto has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself, or to such
Person’s property, each such party hereto hereby irrevocably waives such
immunity in respect of such Person’s obligations with respect to this Agreement.

                    (d) Waiver of Jury Trial. EACH PARTY HERETO, FOR ITSELF AND
ITS AFFILIATES, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR OTHER PROCEEDING (WHETHER BASED ON

-17-

--------------------------------------------------------------------------------

CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE ACTIONS OF THE
PARTIES HERETO OR THEIR RESPECTIVE AFFILIATES PURSUANT TO THIS AGREEMENT OR IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

          Section 7.5 Entire Agreement; No Third Party Beneficiary. This
Agreement and the Related Agreements contain the entire agreement by and among
the parties with respect to the subject matter hereof and all prior
negotiations, writings and understandings relating to the subject matter of this
Agreement, including the letter of intent dated October 9, 2007 between the
Company and TCV VI and the Confidentiality Letter dated July 11, 2007 between
the Company and TCMI, Inc. are merged in and are superseded and canceled by,
this Agreement and the Related Agreements. This Agreement is not intended to
confer upon any Person not a party hereto (or their successors and permitted
assigns) any rights or remedies hereunder.

          Section 7.6 Expenses. Whether or not the Closing shall occur, all
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including accounting and legal fees shall be
paid by the party incurring such expenses, except that the Company shall pay up
to $125,000 of the reasonable and documented out-of-pocket fees and expenses
incurred by the Purchasers, including, without limitation, the reasonable and
documented fees and expenses of counsel for the Purchasers.

          Section 7.7 Notices. All notices and other communications hereunder
will be in writing and given by certified or registered mail, return receipt
requested, nationally recognized overnight delivery service, such as Federal
Express or facsimile (or like transmission) with confirmation of transmission by
the transmitting equipment or personal delivery against receipt to the party to
whom it is given, in each case, at such party’s address or facsimile number set
forth below or such other address or facsimile number as such party may
hereafter specify by notice to the other parties hereto given in accordance
herewith. Any such notice or other communication shall be deemed to have been
given as of the date so personally delivered or transmitted by facsimile or like
transmission, on the next business day when sent by overnight delivery services
or five days after the date so mailed if by certified or registered mail.

 

 

 

If to the Company, to:

 

 

 

TheStreet.com, Inc.

 

14 Wall Street, 14th Floor

 

New York, NY 10005

 

Fax No.: (212) 321-5013

 

Attention: Chief Executive Officer

 

 

 

with a copy to:

 

 

 

Hughes Hubbard & Reed LLP

 

One Battery Park Plaza

 

New York, NY 10004

 

Fax No.: (212) 422-4726

 

Attention: Kenneth A. Lefkowitz

-18-

--------------------------------------------------------------------------------

 

 

 

If to a Purchaser, to:

 

 

 

Technology Crossover Ventures

 

528 Ramona Street

 

Palo Alto, CA 94301

 

Fax No.: (650) 614-8222

 

Attention: Carla S. Newell

 

 

 

with a copy to:

 

 

 

Latham & Watkins LLP

 

140 Scott Drive

 

Menlo Park, CA 94025

 

Fax No.: (650) 463-2600

 

Attention: Peter F. Kerman

          Section 7.8 Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Any purported assignment or delegation in
violation of this Agreement shall be null and void ab initio.

          Section 7.9 Headings. The Section, Article and other headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement.

          Section 7.10 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
each party hereto. Any party hereto may, only by an instrument in writing, waive
compliance by any other party or parties hereto with any term or provision
hereof on the part of such other party or parties hereto to be performed or
complied with. No failure or delay of any party in exercising any right or
remedy hereunder shall operate as a waiver thereof, nor will any single or
partial exercise of any right or power, or any abandonment or discontinuance of
steps to enforce such right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The waiver by any party
hereto of a breach of any term or provision hereof shall not be construed as a
waiver of any subsequent breach. The rights and remedies of the parties
hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have hereunder.

          Section 7.11 Interpretation; Absence of Presumption.

                    (a) For the purposes hereof: (i) words in the singular shall
be held to include the plural and vice versa and words of one gender shall be
held to include the other gender as the context requires; (ii) the terms
“hereof,” “herein,” and “herewith” and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole (including
all of the Schedules and Exhibits) and not to any particular provision of this
Agreement, and Article, Section, paragraph, Exhibit and Schedule references are
to the Articles, Sections, paragraphs, Exhibits, and Schedules to this Agreement
unless otherwise specified; (iii) the word “including” and words of similar
import when used in this Agreement shall mean “including, without

-19-

--------------------------------------------------------------------------------

limitation,” unless the context otherwise requires or unless otherwise
specified; and (iv) the word “or” shall not be exclusive.

                    (b) With regard to each and every term and condition of this
Agreement and any and all agreements and instruments subject to the terms
hereof, the parties hereto understand and agree that the same have or 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.

          Section 7.12 Severability. Any provision hereof that is held to be
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, shall be ineffective only to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions hereof, provided, however, that the parties will attempt in good
faith to reform this Agreement in a manner consistent with the intent of any
such ineffective provision for the purpose of carrying out such intent.

          Section 7.13 Schedules. The Schedule of Exceptions to this Agreement
(the “Schedule of Exceptions”) shall be arranged in sections and subsections
corresponding to the numbered section and lettered subsections of this
Agreement. Any information disclosed in any such section or subsection shall be
deemed fully disclosed for the purposes of all of the other such sections and
subsections and shall be deemed to qualify all representations and warranties of
the Company if the applicability of such information to such other section or
subsection is reasonably apparent on its face. Neither the specification
(directly or indirectly by reference to a defined term hereof) of any dollar
amount in the representations and warranties set forth in Article II nor the
inclusion of any items in the Schedule of Exceptions shall be deemed to
constitute an admission by the Company or the Purchasers, or otherwise imply,
that any such amount or such items so included are material for the purposes of
this Agreement. The inclusion of, or reference to, any item within any
particular section or subsection to the Schedule of Exceptions does not
constitute an admission by the Company or the Purchasers that such item meets
any or all of the criteria set forth in this Agreement for inclusion in such
section or subsection.

[The next page is the signature page]

-20-

--------------------------------------------------------------------------------

          The parties have caused this Securities Purchase Agreement to be
executed as of the date first written above.

 

 

 

 

THESTREET.COM, INC.

 

 

 

 

By:

 

 

 

--------------------------------------------------------------------------------

 

 

Name:  Thomas J. Clarke, Jr.

 

 

Title:    Chairman of the Board

 

 

             and Chief Executive Officer

 

 

 

 

TCV VI, L.P.

 

 

 

 

By:

   Technology Crossover Management

 

 

   VI, L.L.C.

 

Its:

   General Partner

 

 

 

 

By:

 

 

 

--------------------------------------------------------------------------------

 

 

Name:

 

 

Title:

 

 

 

 

TCV MEMBER FUND, L.P.

 

 

 

 

By:

  Technology Crossover Management

 

 

  VI, L.L.C.

 

Its:

  General Partner

 

 

 

 

By:

 

 

 

--------------------------------------------------------------------------------

 

 

Name:

 

 

Title:

S-1

--------------------------------------------------------------------------------

EXHIBIT A
DEFINED TERMS

          1. The following capitalized terms have the meanings indicated:

          “Advisers Act” means the Investment Advisers Act of 1940, as amended.

          “Affiliate” of any Person means any Person, directly or indirectly,
controlling, controlled by or under common control with such Person.

          “Code” means the Internal Revenue Code of 1986, as amended.

          “Common Stock” means the Company’s common stock, $0.01 par value per
share.

          “DGCL” means the Delaware General Corporation Law.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “GAAP” means generally accepted accounting principles as in effect in
the United States.

          “HSR Act” means the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and rules and regulations promulgated
thereunder.

          “Intellectual Property Rights” means all registered copyrights,
copyright registrations and copyright applications, trademark registrations and
applications for registration, patents and patent applications, trademarks,
service marks, trade names and Internet domain names that are used by the
Company or any of its Subsidiaries in their business as presently conducted,
including all (i) databases, computer programs and other computer software user
interfaces, know-how, trade secrets, customer lists, proprietary technology,
processes and formulae, source code, object code, algorithms, development tools,
instructions and templates created by or on behalf of the Company or any of its
Subsidiaries and (ii) inventions, trade dress, logos and designs created by or
on behalf or any of the Company or any of its Subsidiaries.

          “Investment Company Act” mean the Investment Company Act of 1940, as
amended.

          “Investor Rights Agreement” means the Investor Rights Agreement among
the Company and each of the Purchasers in the form attached to the Agreement as
Exhibit C.

          “Lien” means any mortgage, pledge, security interest or other
encumbrance.

          “Material Adverse Effect” means a material adverse effect upon the
business, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole.

          “Material Subsidiaries” means Promotions.com LLC, a Delaware limited
liability company, Corsis Technology Group II, LLC, a New York limited liability
company, SP-TSC

A-1

--------------------------------------------------------------------------------

Holdings LLC, a Delaware limited liability company, Stockpickr LLC, a Delaware
limited liability company, BFPC Newco LLC, a Delaware limited liability company,
Bankers Financial Products Corporation, a Wisconsin corporation, and
BankingMyWay.com LLC, a Wisconsin limited liability company.

          “Permitted Disclosee” means any former partners of a Purchaser who
retained an economic interest in such Purchaser, and any current or prospective
partner, limited partner, general partner or management company of such
Purchaser (or any employee or representative of any of the foregoing).

          “Person” means an individual, corporation, partnership, limited
liability company, joint venture, trust or unincorporated organization or a
government or agency or political subdivision thereof.

          “Proxy Statement” means the Company’s definitive proxy statement for
its 2007 annual meeting of stockholders, as filed with the SEC on April 23,
2007.

          “Restricted Affiliate” means: (a) any Person who is directly or
indirectly responsible for the formation, management, operations, oversight or
administration of the Purchasers (including, without limitation, any principals,
partners or employees of any such Person); (b) any investment fund directly or
indirectly formed or controlled by any one or more Persons referred to in the
preceding clause (a); and (c) any direct or indirect Subsidiary of any Person
referred to in the preceding clauses (a) or (b) in which any one or more such
Persons have the right to elect (directly or indirectly) a majority of the board
of directors (or a comparable governing body with a different name) of such
Subsidiary or own a majority of the voting securities entitled to elect the
board of directors (or comparable governing body with a different name) of such
Subsidiary.

          “Representative” means, with respect to a particular Person, any
director, officer, manager, partner, employee, agent, consultant, advisor, or
other representative of such Person, including legal counsel, accountants, and
financial advisors.

          “Rights Agreement” means the Rights Agreement dated as of May 14, 1999
(as amended on August 7, 2000) between the Company and American Stock Transfer &
Trust Company, a New York banking corporation, as rights agent.

          “SEC” means the United States Securities and Exchange Commission.

          “SEC Documents” means all reports, schedules, registration statements
and other documents (including all amendments, exhibits and schedules thereto)
filed by the Company with the SEC on or after January 1, 2006.

          “Short Sale” means: (a) a sale of Common Stock that is marked as a
short sale; (b) any entering into or establishment of any arrangement
constituting a “put equivalent position,” as defined by Rule 16a-1(h)
promulgated under the Exchange Act; (c) entering into any swap, option or any
other agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise; or (d) the announcement of any intent to
do any of the foregoing. Notwithstanding

A-2

--------------------------------------------------------------------------------

the foregoing, the parties agree that, except as otherwise provided in this
Agreement, nothing in Section 4.3 shall restrict the ability of a Purchaser or
any of its Restricted Affiliates to outright sell, distribute or transfer the
Purchased Shares, the Conversion Shares and the Warrant Shares.

          “Stock Plans” means the Company’s Amended and Restated 1998 Stock
Incentive Plan and the Company’s 2007 Performance Incentive Plan.

          “Subsidiary” has the meaning assigned to such term in Rule 1-02(x) of
Regulation S-X promulgated by the SEC.

          “Tax” and “Taxes” means all federal, state, local and foreign taxes,
including, without limitation, income, franchise, property, sales, withholding,
payroll and employment taxes.

A-3

--------------------------------------------------------------------------------

 

 

 

 

 

2.

The following terms are defined in the Sections of the Agreement indicated:

INDEX OF TERMS

 

 

 

 

 

Term

 

 

Page

 

--------------------------------------------------------------------------------

 

 

--------------------------------------------------------------------------------

 

Agreement

 

 

Preamble

 

Certificate of Designation

 

 

1.1

 

Closing

 

 

1.2

 

Closing Date

 

 

1.2

 

Company

 

 

Preamble

 

Confidential Information

 

 

4.4

(a)

Conversion Shares

 

 

2.4

(b)

ERISA Documents

 

 

2.16

 

Financial Statements

 

 

2.7

 

Preferred Stock

 

 

2.4

(a)

Purchased Shares

 

 

Recitals

 

Purchasers

 

 

Preamble

 

Related Agreements

 

 

2.2

 

Restricted Period

 

 

4.2

 

Schedule of Exceptions

 

 

7.13

 

Securities Act

 

 

2.4

(c)

Series B Preferred Stock

 

 

Recitals

 

TCV IV

 

 

Preamble

 

TCV Member Fund

 

 

Preamble

 

Warrant Shares

 

 

Recitals

 

Warrants

 

 

Recitals

 

A-4

--------------------------------------------------------------------------------

SCHEDULE 1.1
PURCHASED SHARES AND WARRANT SHARES

 

 

 

 

 

 

 

 

 

 

 

Purchaser

 

Number of
Purchased Shares

 

Number of
Warrant Shares

 

Aggregate
Purchase Price

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

 

TCV VI, L.P.

 

 

5,455.95095

 

 

1,147,816

 

$

54,559,509.50

 

 

 

 

 

 

 

 

 

 

 

 

TCV Member Fund, L.P.

 

 

44.04905

 

 

9,267

 

$

440,490.50

 

 

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

Total

 

 

5,500.00000

 

 

1,157,083

 

$

55,000,000.00

 

 

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

Schedule of Exceptions

          This is the “Schedule of Exceptions” referred to in the Securities
Purchase Agreement dated as of November 15, 2007 (the “Purchase Agreement”)
among TheStreet.com, Inc., a Delaware corporation, TCV VI, L.P., a Delaware
limited partnership, and TCV Member Fund, L.P., a Delaware limited partnership.
Capitalized terms used but not defined herein have the meanings assigned to them
in the Purchase Agreement.

 

 

 

Section 2.2

Authorization, Etc.

 

 

 

 

1.

The Amended and Restated Registration Rights Agreement dated as of December 21,
1998 among TheStreet.com, Inc. and the several persons named therein, as amended
on August 7, 2000, requires the consent of the parties thereto with respect to
the transactions contemplated by the Purchase Agreement. The Company has
obtained such consents.

 

 

 

 

2.

See Section 2.3(a) through (g) of the Purchase Agreement.

 

 

Section 2.4

Authorized and Outstanding Stock

 

 

 

 

1.

TheStreet.com 2007 Performance Incentive Plan approved by shareholders May 24,
2007.

 

 

 

 

2.

TheStreet.com, Inc. Option to Purchase Common Stock dated November 1, 2007
(Investor Larry Starkweather; 175,600 shares at $12.57).

 

 

 

 

3.

The Amended and Restated Registration Rights Agreement dated December 21, 1998,
as amended.

 

 

 

 

4.

Shares issued pursuant to (i) Membership Interest Purchase Agreement, dated as
of April 25, 2007 between SP-TSC Holdings LLC and A.R. Partners LLC, (ii)
Membership Interest Purchase Agreement, dated as of August 2, 2007, among TP
Newco LLC, David Barnett and Gregg Alwine, and (iii) Stock Purchase Agreement,
dated as of November 1, 2007, among BFPC Newco LLC, Larry Starkweather, Kyle
Selberg, Rachelle Zorn and Robert Quinn (the “BFPC Purchase Agreement”).

 

 

 

 

5.

Escrow Agreement, dated as of August 2, 2007, among TP Newco LLC, Gregg Alwine
and JP Morgan Chase Bank, N.A., as escrow agent

 

 

 

 

6.

Go2Net, Inc. and Vulcan Ventures Inc. were each granted rights by the Company
with respect to the registration of Common Stock under the Securities Act
pursuant to the Securities Purchase Agreement, dated as of August 7, 2000, among
the Company, Go2Net, Inc. and Vulcan Ventures Inc. To the Company’s knowledge,
as of the date of the Purchase Agreement, Go2Net, Inc. and Vulcan Ventures Inc.
do not beneficially own any capital stock of the Company.

 

 

 

 

7.

The Options and other securities referenced in Section 2.4(a) and (b) of the
Purchase Agreement.

 

Section 2.5

Subsidiaries

Schedule Exceptions to SPA (executed)

--------------------------------------------------------------------------------

 

 

 

 

1.

Subsidiaries of the Company:

 

 

 

Promotions.com LLC, a Delaware limited liability company;

 

 

Corsis Technology Group II, LLC, a New York limited liability company;
SP-TSC Holdings LLC, a Delaware limited liability company;

 

 

Stockpickr LLC, a Delaware limited liability company;

 

 

BFPC Newco LLC, a Delaware limited liability company;

 

 

Bankers Financial Products Corporation, a Wisconsin corporation;
BankingMyWay.com LLC, a Wisconsin limited liability company;

 

 

TheStreet.com Ratings, Inc., a Delaware corporation;

 

 

SmartPortfolio.com, Inc., a Delaware corporation; and

 

 

Independent Research Group LLC, a Delaware limited liability company.

 

 

 

 

Section 2.10  Absence of Certain Events; No Material Adverse Change

 

 

 

 

 

1.

Resignation of President and Chief Operating Officer James Lonergan effective
October 12, 2007.

 

 

 

 

2.

The transactions contemplated by the following:

 

 

 

 

 

 

a.

The BFPC Purchase Agreement;

 

 

 

 

 

 

b.

Escrow Agreement, by and among the BFPC Newco LLC (“BFPC”), Larry Starkweather,
as the Agent, and JP Morgan Chase Bank, N.A., as the escrow agent;

 

 

 

 

 

 

c.

Employment Agreement, dated as of November 1, 2007, between the Company and
Larry Starkweather;

 

 

 

 

 

 

d.

Assignment, Assumption, and Amendment to Employment Agreement, by and among the
Company, BFPC, and Kyle Selberg;

 

 

 

 

 

 

e.

Assignment, Assumption, and Amendment to Employment Agreement, by and among the
Company, BFPC and Rachelle Zorn;

 

 

 

 

 

 

f.

Assignment, Assumption, and Amendment to Employment Agreement, by and among the
Company, BFPC and Robert Quinn;

 

 

 

 

 

 

g.

Option to Purchase Common Stock in the Company, granted to Larry Starkweather;

 

 

 

 

 

 

h.

Stock Subscription Agreement, by and between BFPC and Kyle Selberg, dated as of
October 31, 2007;

 

 

 

 

 

 

i.

Stock Subscription Agreement, by and between BFPC and Rachelle Zorn, dated as of
October 31, 2007; and

 

 

 

 

 

 

j.

Stock Subscription Agreement, by and between BFPC and Robert Quinn, dated as of
October 31, 2007.

 

 

Section 2.11  Litigation

          1. IPO Securities Litigation

          In December 2001, the Company was named as a defendant in a securities
class action filed in United States District Court for the Southern District of
New York related to its initial public offering (“IPO”) in May 1999. The lawsuit
also named as individual defendants certain of

--------------------------------------------------------------------------------

its former officers and directors, James J. Cramer, a current director, and
certain of the underwriters of the IPO, including The Goldman Sachs Group, Inc.,
Hambrecht & Quist LLC (now part of JP Morgan Chase & Co.), Thomas Weisel
Partners LLC, Robertson Stephens Inc. (an investment banking subsidiary of
BankBoston Corp., later FleetBoston Corp., which ceased operations in 2002), and
Merrill Lynch Pierce Fenner & Smith, Inc. Approximately 300 other issuers and
their underwriters have had similar suits filed against them, all of which are
included in a single coordinated proceeding in the District (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.
An amended complaint was filed April 19, 2002. The Company and the officers and
directors were named in the suits pursuant to Section 11 of the Securities Act
of 1933, Section 10(b) of the Exchange Act of 1934, and other related
provisions. The complaints seek unspecified damages, attorney and expert fees,
and other unspecified litigation costs.

          On July 1, 2002, the underwriter defendants in the consolidated
actions moved to dismiss all of the IPO Litigations, including the action
involving the Company. On July 15, 2002, the Company, along with other
non-underwriter defendants in the coordinated cases, also moved to dismiss the
litigation. On February 19, 2003, the district court ruled on the motions. The
district court granted the Company’s motion to dismiss the claims against it
under Rule 10b-5, due to the insufficiency of the allegations against the
Company. The motions to dismiss the claims under Section 11 of the Securities
Act were denied as to virtually all of the defendants in the consolidated cases,
including the Company. In addition, the individual defendants in the IPO
Litigations, including Mr. Cramer, signed a tolling agreement and were dismissed
from the action without prejudice on October 9, 2002.

          In June 2003, a proposed collective 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. On or about June 25, 2003, a committee of the Company’s
Board of Directors conditionally approved the proposed settlement. The
settlement agreements collectively provide as follows:

          The Company and the other issuer defendants would assign their
interests in claims against the underwriters for excess compensation in
connection with their IPOs to the plaintiffs, and agree not to assert certain
other claims against the underwriters, such as underpricing, indemnification and
antitrust claims, except in certain defined circumstances. A number of issuers’
assigned claims have been asserted already; these were dismissed by the district
court on February 24, 2006. The dismissal is currently on appeal to the Second
Circuit Court of Appeals, although the plaintiffs have indicated their intent to
withdraw the appeal in light of recent events, detailed below. The Company and
the other issuer defendants would also cooperate with the plaintiffs to provide
the plaintiffs with informal discovery as the litigation continues as to the
underwriter defendants. Further, the plaintiffs would receive an undertaking
from the insurers of the Company and the other issuer defendants guaranteeing
that the plaintiff class would recover, in the aggregate, $1 billion from their
various suits against the underwriters (including the claims assigned by the
issuer defendants). The Company’s per capita portion of the maximum amount
payable to the plaintiffs under the settlement, assuming the entire $1 billion
is payable, would be approximately $3–4 million. The plaintiffs’ actual
recoveries from the underwriter defendants (through settlements or damages
assessed as a result of litigation) would be applied against the guarantee; and
to the extent that the underwriter defendants settle all of the cases for at
least $1 billion, no payment would be required under the issuer defendants’
settlement. In exchange for

--------------------------------------------------------------------------------

the consideration described above, the plaintiffs would release the non-bankrupt
issuer defendants from all claims against them (the bankrupt issuers would
receive a covenant not to sue) and their individual defendants. Under the terms
of the settlement agreements, all costs and expenses of the settlement
(including legal expenses after June 1, 2003) would be borne by the insurance
carriers of the Company and the other issuer defendants using each issuer
defendant’s existing insurance coverage, with deductibles waived.

          The plaintiffs have continued to litigate against the underwriter
defendants. The district court directed that the litigation proceed within a
number of “focus cases” rather than in all of the 310 cases that have been
consolidated. The Company’s case is not one of these focus cases. On October 13,
2004, the district court certified the focus cases as class actions. The
underwriter defendants appealed that ruling, and on December 5, 2006, the Court
of Appeals for the Second Circuit reversed the district court’s class
certification decision. On April 6, 2007, the Second Circuit denied plaintiffs’
petition for rehearing. In light of the Second Circuit opinion, counsel to the
issuers has informed the district court that the settlement with the plaintiffs
described above cannot be approved because the defined settlement class, like
the litigation class, cannot be certified with the Court of Appeals. Because the
Company’s settlement with the plaintiffs involves the certification of the case
as a class action as part of the approval process, the impact of this ruling on
the Company’s settlement is unclear. The settlement was terminated pursuant to a
Stipulation and Order dated June 25, 2007.

          We cannot predict whether we will be able to renegotiate a settlement
that complies with the Second Circuit’s mandate. If we cannot, we intend to
defend the action vigorously. Any unfavorable outcome of this litigation could
have an adverse impact on the Company’s business, financial condition, results
of operations, and cash flows.

          2. IPO Securities Litigation Section 16(b) Claim

          On August 1, 2007, the Company received a letter from counsel to
Vanessa Simmonds demanding that the Company’s Board of Directors prosecute a
claim against the Company’s IPO underwriters, in addition to certain of its
officers, directors and principal shareholders as identified in the IPO
prospectus, for violations of Section 16(b) of the Securities Exchange Act of
1934. The letter alleges that these entities and individuals, by coordinating
their efforts to acquire and dispose of the Company ’s securities in connection
with its IPO, constituted a group owning in excess of 10% of the Company ’s
outstanding common stock under Exchange Act rules, and were therefore subject to
short swing trading prohibition of Section 16(b) during the period from May 11,
1999 (the date of the IPO) through May 10, 2000. Accordingly, the letter
alleges, the group members should be compelled to disgorge the profits they made
through purchases and sales of Company stock during the period.

          Statutorily, 60 days after issuing the demand letter, a cause of
action automatically vested in Ms. Simmonds to bring this suit derivatively if
the Company did not bring suit. After considering the demand, the Special
Litigation Committee of the Company’s Board of Directors determined that the
claim was without merit and that it was not in the best interest of the Company
to bring suit against the underwriters and directors as demanded by Ms.
Simmonds. On its face, the claim appears to be quite weak: (i) the underlying
conduct took place more than seven years ago, and therefore may be time-barred,
(ii) underwriters are specifically exempted from the provisions of Section
16(b), and (iii) shares held by the Company’s directors and officers were locked
up for at least six months following the date of the IPO, and therefore could
not have been used to obtain short-swing profits.

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          On October 10, 2007, the Company received a formal Complaint filed by
Vanessa Simmonds in the United States District Court in the Western District of
Washington. The Complaint does not specify the amount of damages claimed. In
addition, as described above, the claims are weak and the Company is named only
as a Nominal Defendant. For these reasons, a loss contingency for potential
damages or settlement costs relating to this potential claim is not probable or
reasonably estimable under the guidance of SFAS No. 5.

          3. Groves Employment Litigation

          On December 8, 2005, Judy Groves, a former employee of the Company’s
registered broker-dealer subsidiary, Independent Research Group LLC (“IRG”),
brought a lawsuit in New York State Supreme Court against IRG and the Company,
alleging the breach of her employment agreement with IRG. Plaintiff Groves seeks
$212,500, plus interest, costs and attorneys’ fees. Both IRG and the Company
intend to defend the action vigorously. Currently, the action is in the
discovery phase.

Section 2.16  Employee Matters

 

 

 

 

1.

TheStreet.com, Inc. 401(k) Savings Plan: Effective 01/01/1997.

 

 

 

 

2.

Corsis Technology Group 401(k) Plan: Effective 01/01/2002.

 

 

 

 

3.

Simple IRA Bankers Financial Products Corp.: Effective: 03/01/04.

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