<PAGE>
As filed with the Securities and Exchange Commission on March 15, 1999
Registration No. 333-70693
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
AMENDMENT NO. 3
to
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------------
Multex.com, Inc.
(Exact Name of Registrant as Specified in its Charter)
-------------------
Delaware 7375 22-3253344
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation or
Organization)
33 Maiden Lane, 5th Floor
New York, New York 10038
(212) 859-9800
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
-------------------
Isaak Karaev
President and Chief Executive Officer
Multex.com, Inc.
33 Maiden Lane, 5th Floor
New York, New York 10038
(212) 859-9800
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
-------------------
Copies to:
Alexander D. Lynch, Esq. Philip P. Rossetti, Esq.
Brian B. Margolis, Esq. Joseph E. Mullaney III, Esq.
Brobeck, Phleger & Harrison LLP Hale and Dorr LLP
1633 Broadway, 47th Floor 60 State Street
New York, New York 10019 Boston, Massachusetts 02109
(212) 581-1600 (617) 526-6000
-------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
-------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 15, 1999
[LOGO] MULTEX.COM
3,000,000 Shares
Common Stock
Multex.com, Inc. is offering 3,000,000 shares of its common stock. This is
Multex.com's initial public offering, and no public market currently exists for
its shares. The common stock has been approved for quotation on the Nasdaq
National Market under the symbol "MLTX." We anticipate that the initial public
offering price will be between $9.00 and $11.00 per share.
--------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 7.
--------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Multex.com...................................... $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
Multex.com and some of its existing stockholders have granted the
underwriters a 30-day option to purchase up to an additional 450,000 shares of
common stock to cover over-allotments. BancBoston Robertson Stephens Inc.
expects to deliver the shares of common stock to purchasers on , 1999.
--------------
BancBoston Robertson Stephens
CIBC Oppenheimer
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
The date of this prospectus is , 1999.
<PAGE>
Description of graphics on inside front and back cover pages of prospectus:
Inside front cover (first page of six-page gate-fold):
The page depicts the four types of Multex.com subscribers and users:
. brokers and research providers;
. corporations;
. institutional investors;
. and individual investors.
The caption on the bottom of the page is:
Multex.com
The Online Investment Research Network(TM)
First inside page of gate-fold (second page of six-page gate-fold):
The diagram on this page presents how Multex.com distributes investment
research and information. At the top of the diagram is a block of text
listing on a separate line, the general category of "global investment
research providers," and then on separate lines, the following sub-
categories: "brokerage firms, investment banks and third-party research
providers." Connected to this block of text by an arrow is a rectangle
representing the Internet. The Internet rectangle is connected by an
arrow to the Multex.com logo, which in turn is connected by an arrow to
a rectangle called "Distribution." The "Distribution" rectangle is
connected to four circles. The first circle represents brokers and
research providers. The second circle represents institutional
investors. The third circle represents corporations. The fourth circle
represents individual investors.
The text on the top of this page is:
"Multex.com"
"The Online Investment Research Network"
"Multex.com is a leading provider of online investment research
services. Multex.com enables timely access to over 1,000,000 research
reports from more than 400 investment banks, brokerage firms and third-
party research providers worldwide. More than 600,000 investors and
financial professionals have access to Multex.com's online research
services."
"The diagram below highlights the way Multex.com collects and
processes investment research. Multex.com distributes research reports
and investment information over the Internet and through strategic
distribution relationships to brokers and research providers,
institutional investors, corporations and individual investors."
Second inside page (third inside page of six-page gate-fold):
This page pictures the logos of selected research providers.
The text on the top of the page is:
"Selected Research Providers (from over 400 providers worldwide)"
<PAGE>
Logos for each of the following are pictured:
<TABLE>
<S> <C> <C>
Merrill Lynch JP Morgan PaineWebber
Warburg Dillon Read BTAlex.Brown Morgan Stanley Dean Witter
BancBoston Robertson
Stephens Dresdner Kleinwort Benson CIBC Oppenheimer
Hambrecht & Quist Schroder Securities Ltd. Salomon Smith Barney
ING Barings Keefe, Bruyette & Woods Deutsche Morgan Grenfell
SG Securities PTE ABN Amro Chicago Corporation Dain Rauscher Wessels
Piper Jaffray Brown Brothers Harriman & Co. Jardine Fleming Holdings Ltd.
Credit Lyonnais Europe Credit Suisse First Boston J.C. Bradford & Co.
Commerzbank AG Interstate/Johnson Lane Gruntal & Co.
Bear Stearns & Co.
Inc. RBC Dominion Securities Inc. Standard & Poor's
Daiwa Institute of
Research Ltd. Cazenove & Co. Jefferies & Company, Inc.
</TABLE>
Two inside pages of back cover:
The pages fold out to four quadrants with each dedicated to a Multex.com
product.
On the top left of the two pages is a square diagram divided into four
sections. Three sections show different web pages of MultexEXPRESS. The fourth
section has a line-drawing depicting brokers and research providers. The text
along the left side of the boxes reads "Brokers & Research Providers." The text
on the right side of the boxes reads:
"Brokers & Research Providers"
"Over 400 investment banks, brokerage firms and third-party providers
contribute financial research reports to Multex.com for real-time
commingled distribution to their institutional clients via MultexNET.
With MultexEXPRESS these firms can distribute their own proprietary
financial research and corporate documents to their internal staff and
customers over the Internet or through their own corporate intranet.
On the bottom left of the two pages is a square diagram divided into four
sections. Three sections show different web pages of MultexNET. The fourth
section has a line-drawing depicting institutional investors. The text along
the left side of the boxes reads "Institutional Investors." The text on the
right side of the boxes reads:
"Institutional Investors"
"Over 11,000 mutual fund managers, portfolio managers, and other
institutional investors are able to use MultexNET, which offers timely
online access to over 1,000,000 research reports and other investment
information from more than 400 contributors."
On the top right of the two pages is a square diagram divided into four
sections. Three sections show different web pages of Multex Research-On-Demand.
The fourth section has a line-drawing depicting a presentation in a corporate
conference room. The text on the right side of the boxes reads "Corporations."
The text on the left side of the boxes reads:
"Corporations"
"Financial institutions and corporations access Multex Research-On-
Demand both directly and through various online distribution partners.
This service provides access to recently published reports on a pay-
per-view basis."
On the bottom right of the two pages is a square diagram divided into four
sections. Three sections show different web pages of Multex Investor Network.
The fourth section has a line-drawing depicting a person reading a paper on a
chair. The text on the right side of the boxes reads "Individual Investors."
The text on the left side of the boxes reads:
<PAGE>
"Individual Investors"
"The Multex Investor Network (www.multexinvestor.com) is an
interactive member community for individual investors. The service
offers investment content from Multex.com, sponsoring brokerage firms
and investment banks, as well as member generated content. Members also
have access to over 250,000 premium "pay-per-view" reports from over
250 research providers."
The center of the two pages has the Multex.com logo with lines attaching it
to each of the four square diagrams.
The inside fold of the back cover is divided into two parts. The top half
pictures logos of online distribution partners targeting institutional
investors and the bottom half pictures logos for online distribution partners
targeting individual investors.
The text on the top of the page is:
"Online Distribution Partners Targeting Institutional Investors"
Logos for each of the following are pictured:
<TABLE>
<S> <C> <C>
Bloomberg Reuters Disclosure/Global Access
Bridge Automatic Data Processing Inc. Dow Jones Interactive
Wavephore
Newscast CompuServe
</TABLE>
A caption under this section notifies the reader that partnerships
with Bridge and CompuServe are expected to commence in 1999.
The text on the bottom half of this page is:
"Online Distribution Partners Targeting Individual Investors"
Logos for each of the following are pictured:
<TABLE>
<S> <C> <C>
America Online CBS MarketWatch.com Wall Street Journal.com
Quote.com CNNfn Bloomberg.com
Data Broadcasting Corporation Edgar Online Hoover's Online
MediaOne Big Charts ZD Net
</TABLE>
The back cover contains the Multex.com logo in the center.
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus. In this prospectus, references to "Multex.com",
"we", "us" and "our" refer to Multex.com, Inc. and its consolidated
subsidiaries.
Until , 1999 (25 days after the date of this prospectus), all dealers
that buy, sell or trade our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This requirement is in
addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 7
Forward-Looking Statements............................................... 19
Our Address and Telephone Number......................................... 19
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Consolidated Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 33
Management............................................................... 47
Certain Transactions..................................................... 56
Principal Stockholders................................................... 59
Description of Capital Stock............................................. 62
Shares Eligible for Future Sale.......................................... 66
Underwriting............................................................. 68
Legal Matters............................................................ 70
Experts.................................................................. 70
Additional Information................................................... 71
Index to Consolidated Financial Statements............................... F-1
</TABLE>
---------------------
MultexNET(R) and the MultexNET logos are registered trademarks and service
marks of Multex.com. Multex.com, the Multex.com logo, MultexEXPRESS, Multex
Research-On-Demand, Multex Investor Network and The Online Investment Research
Network are trademarks and service marks of Multex.com. This prospectus
contains other trade names, trademarks and service marks of Multex.com and of
other companies.
3
<PAGE>
SUMMARY
Because this is only a summary, it does not contain all the information that
may be important to you. You should read the entire prospectus, including "Risk
Factors" and the Consolidated Financial Statements and the related Notes,
before deciding to invest in our common stock.
Multex.com
Multex.com is a leading provider of online investment research and
information services designed to meet the needs of individual and institutional
investors, including investment banks, brokerage firms and corporations. Our
services enable timely online access to over 1,000,000 research reports and
other investment information on over 15,000 companies from more than 400
investment banks, brokerage firms and third-party research providers worldwide.
We offer research reports from 19 of the 20 leading U.S. investment banks and
brokerage firms according to the Institutional Investor rankings, including
Merrill Lynch, Morgan Stanley Dean Witter, Goldman Sachs and Salomon Smith
Barney. In Europe, we offer research reports from 18 out of the 20 leading
investment banks and brokerage firms as ranked by the Reuters Tempest survey,
and in Asia, we offer research reports from 20 out of the 20 leading investment
banks and brokerage firms as ranked by Asia Money. Through various
arrangements, more than 600,000 individual investors, institutional investors
and financial professionals, including mutual fund managers, portfolio
managers, brokers and their clients, are able to use our services. In addition
to making our services available through our own Web sites, we have established
a number of strategic distribution relationships to reach both the individual
investor market and the institutional investor market, including relationships
with America Online, Automatic Data Processing, Bloomberg, Bridge, Dow Jones
and Reuters.
In recent years, there has been substantial growth in the ownership of equity
and fixed income securities worldwide. The proliferation in equity ownership
and associated trading activity has created a need for more investment research
and market information on the part of investors who seek higher returns on
their portfolios. The emergence of the Internet as a tool for communications
and commerce is also rapidly changing the markets for financial transactions
and information services. Consequently, individuals are showing strong
preferences for transacting various types of business, including trading
securities, via the Internet, rather than in person or over the telephone.
Individual investors have accepted and even welcomed self-directed online
transactions because these transactions can be faster, less expensive and more
convenient than transactions conducted through a human intermediary. As these
individual investors seek to independently manage their financial assets, they
are increasingly seeking investment research and other financial reports
online.
Our services facilitate the timely receipt and exchange of investment
research and information between individual and institutional investors and
investment banks, brokerage firms and third-party research providers worldwide.
We provide access to the investment research and information necessary to make
critical investment decisions and enable research providers to target their
research more effectively. Our services include:
. MultexNET--enables institutional investors to access commingled
investment research reports from multiple sources on a real-time basis;
. MultexEXPRESS--enables investment banks, brokerage firms and other
financial institutions to distribute their proprietary financial research
as well as other corporate documents to their employees and selected
customers;
. Multex Research-On-Demand--offers corporations, financial institutions
and advisors, institutional investors, other professional service firms
and libraries the ability to access more than 450,000 research reports and
other information from over 250 MultexNET research providers; and
. Multex Investor Network--targets the rapidly growing individual investor
market and offers its members access to over 250,000 research reports from
over 250 investment banks, brokerage firms and third-party research
providers.
4
<PAGE>
Our objective is to become the leading provider of online investment research
services for the individual and institutional investment community. Key
elements of our strategy are to:
. continue to grow the size and quality of our investment research
database, as well as add distribution channels, in order to increase the
sales of MultexNET and Multex Research-On-Demand;
. leverage our proprietary Web-based technology platform in order to
increase the number of MultexEXPRESS installations;
. increase awareness of the Multex.com brand among individual investors as
a means to grow membership of the Multex Investor Network, which will
drive the sale of sponsorships and advertising and generate pay-per-view
revenue, in addition to awareness of the family of Multex.com branded and
co-branded Web sites; and
. utilize our existing proprietary technology to create additional revenue
sources from new products and services.
--------------------
Except as otherwise noted, all information in this prospectus:
. reflects the automatic conversion of all of our outstanding shares of
preferred stock into an aggregate of 14,861,112 shares of common stock
upon the completion of this offering;
. reflects a one-for-two reverse stock split of all of our outstanding
shares of common stock to be effected before the completion of this
offering; and
. assumes no exercise of the underwriters' over-allotment option.
--------------------
Information contained on our Web sites should not be considered a part of this
prospectus.
5
<PAGE>
The Offering
Common stock offered by Multex.com...... 3,000,000 shares
Common stock to be outstanding after 21,112,237 shares
this offering..........................
Use of proceeds......................... For expansion of our sales and mar-
keting efforts, expansion of our in-
ternational operations, capital ex-
penditures, general corporate pur-
poses and possible acquisitions. See
"Use of Proceeds."
Proposed Nasdaq National Market
symbol................................. MLTX
Summary Consolidated Financial Data
(in thousands, except per share data)
Listed below is our consolidated statement of operations data for the years
ended December 31, 1996, 1997 and 1998. You will also find our consolidated
balance sheet data both as of December 31, 1998 and assuming completion of this
offering, as of December 31, 1998. To calculate the "As Adjusted" data we have
assumed the following:
. the sale by Multex.com of 3,000,000 shares of common stock in this
offering at an assumed initial public offering price of $10.00 per share,
after deducting the underwriting discounts and estimated offering
expenses payable by Multex.com, and the application of the net proceeds
from this offering; and
. the conversion of our preferred stock into an aggregate of 14,861,112
shares of common stock upon the completion of this offering.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Statement of Operations Data:
Revenues........................................... $ 2,647 $ 6,014 $ 13,182
Gross profit....................................... 1,837 4,782 10,287
Loss from operations............................... (6,470) (8,162) (8,901)
Net loss........................................... $(6,410) $(8,037) $ (9,743)
Pro forma net loss per share....................... -- -- $ (0.55)
Pro forma weighted average shares outstanding...... -- -- 17,708
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
---------------------
Actual As Adjusted
-------- -----------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents, and marketable securities..... $ 22,332 $ 49,332
Working capital.......................................... 19,736 46,736
Total assets............................................. 27,968 54,968
Deferred revenues........................................ 2,683 2,683
Convertible preferred stock.............................. 59,860 --
Total stockholders' (deficit) equity .................... (37,215) 49,645
</TABLE>
6
<PAGE>
RISK FACTORS
Any investment in our shares of common stock involves a high degree of risk.
You should consider carefully the following information about these risks,
together with the other information contained in this prospectus, before you
decide to buy our common stock. If any of the following risks actually occur,
our business, results of operations and financial condition would likely
suffer. In these circumstances, the market price of our common stock could
decline, and you may lose all or part of the money you paid to buy our common
stock.
Risks Related to Our Operations
Because we have a limited operating history, there is limited information upon
which you can evaluate our business
Although we commenced our operations in April 1993, all of our current
services were launched since June 1996. Accordingly, we have a limited
operating history upon which you can evaluate our business. In order to be
successful, we must increase our revenues from subscription fees for MultexNET
and MultexEXPRESS, generate additional sales of investment research on a pay-
per-view basis through Multex Research-On-Demand and attract more users to
Multex Investor Network. However, as an early stage company in the new and
rapidly evolving market for the distribution of investment research and other
information over the Internet, we face numerous risks and uncertainties. Some
of these risks relate to our ability to:
. anticipate and adapt to the changing Internet market;
. attract more subscribers;
. continue to collect investment research and other financial information
from our research and information providers;
. implement our sales and marketing initiatives, both domestically and
internationally;
. attract, retain and motivate qualified personnel;
. respond to actions taken by our competitors;
. continue to build an infrastructure to effectively manage our growth and
handle any future increased usage; and
. integrate acquired businesses, technologies, products and services.
If we are unsuccessful in addressing these risks or in executing our business
strategy, our business, results of operations and financial condition would be
materially and adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
We have a history of losses and expect future losses
Since our incorporation, we have not been profitable on an annual or
quarterly basis. We incurred net losses of $6.4 million, $8.0 million and $9.7
million for the years ended December 31, 1996, 1997 and 1998. We expect
operating losses and negative cash flows to continue for the foreseeable future
as we continue to incur significant operating expenses and make capital
investments in our business. We may not ever generate sufficient revenues to
achieve profitability. Even if we do achieve profitability, we may not sustain
or increase profitability on a quarterly or annual basis in the future. At
December 31, 1998, we had an accumulated deficit of $32.1 million. We have
financed our operations to date primarily through the sale of equity
securities. See "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
7
<PAGE>
Fluctuations in our operating results may negatively impact our stock price
Our revenues, margins and operating results have fluctuated significantly in
the past and are expected to continue to fluctuate significantly in the future
due to a variety of factors, many of which are outside of our control. These
factors include:
. demand for our services;
. the size and timing of both new and renewal subscriptions;
. the number, timing and significance of new services introduced by both us
and our competitors;
. our ability to develop, market and introduce new and enhanced services on
a timely basis;
. the level of service and price competition;
. changes in operating expenses;
. changes in the mix of services offered;
. changes in our sales incentive strategy;
. sharp declines in the volume of securities transactions or the prices of
securities generally; and
. general economic factors.
Our cost of revenues consists principally of distribution fees and royalties
which fluctuate depending upon the demand for our services, and fixed
telecommunications costs. In addition, a substantial portion of our operating
expenses is related to personnel costs, marketing programs and overhead, which
cannot be adjusted quickly and are therefore relatively fixed in the short
term. Our operating expense levels are based, in significant part, on our
expectations of future revenues on a quarterly basis. If actual revenues on a
quarterly basis are below management's expectations, or if our expenses precede
increased revenues, both gross margins and results of operations would be
materially and adversely affected because a relatively small amount of our
costs and expenses varies with our revenues in the short term.
Due to all of the foregoing factors and the other risks discussed in this
prospectus, you should not rely on period-to-period comparisons of our results
of operations as an indication of future performance. It is possible that in
some future periods our results of operations may be below the expectations of
public market analysts and investors. In this event, the market price of our
common stock is likely to fall. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Selected Unaudited Quarterly
Results of Operations."
We are dependent on research and information providers and our business would
be materially and adversely affected if we lost one or more significant
research or information providers
The loss of a major research or information provider would harm our business
We are dependent upon the continued provision of high-quality investment
research reports from investment banks, brokerage firms and third-party
research providers. Some of these arrangements are not embodied in written
contracts and many of these arrangements can be terminated by the provider on
short notice. At present, approximately 60% of our over 400 information
providers permit us to offer the research for sale after a specified embargo
period, generally 15 days. The remaining information providers do not permit
these sales. Many of our providers of research reports and other information
compete with one another and, to some extent, with us for subscribers. None of
these information providers have arrangements to provide research or
information exclusively to us. The loss of one or more significant information
providers would decrease the research and other information which we can offer
our users and would have a material and adverse effect on our business, results
of operations and financial condition.
8
<PAGE>
Royalty payments to research providers increase our costs
Royalties payable to our information providers to obtain distribution rights
to research reports included in Multex Research-On-Demand constitute a
significant portion of our cost of revenues. If we are required to increase the
royalties payable to these information providers, these increased royalty
payments could have a material and adverse effect on our business, results of
operations and financial condition. See "Business--Research and Information
Providers."
Because some of our competitors are parties to exclusive distribution
agreements, we may not be able to get content from important research providers
A number of leading investment banks, brokerage firms and third-party
research providers are parties to exclusive distribution arrangements with our
competitors, including First Call Corporation and The Investext Group, both of
which are subsidiaries of Thomson Financial Services, Inc., a leading worldwide
provider of financial information services. Consequently, we cannot provide our
users with the investment research and other information provided by these
investment banks, brokerage firms and third-party research providers, which may
put us at a competitive disadvantage. In the event that additional investment
banks, brokerage firms and third-party research providers enter into exclusive
distribution arrangements or that we are hindered in our ability to offer our
own services due to the lack of content from these investment banks, brokerage
firms and third-party research providers, our business, results of operations
and financial condition would be materially and adversely affected. See
"Business--Strategy" and "--Services."
The inadvertent distribution of research reports could result in a claim for
damages against us or harm our reputation
Our proprietary software technology enables us to distribute a particular
research report or other financial information only to those users who have
been authorized or entitled to access the report by the information provider.
In particular, approximately 40% of our information providers currently supply
us with research reports and other financial information that is available only
to the customers of important information provider. We might inadvertently
distribute a particular report to a user who is not so authorized or entitled,
which could subject us to a claim for damages by the information provider or
which could harm our reputation in the marketplace, either of which could have
a material and adverse effect on our business, results of operations and
financial condition.
Our business would be materially and adversely affected if the emerging market
for online investment research does not continue to grow
The market for the distribution of investment research and other information
over the Internet has only recently begun to develop, is rapidly evolving and
is characterized by an increasing number of market entrants who have introduced
or developed electronic investment research distribution services by facsimile
and over public and private networks, online services and the Internet. As is
typical of a rapidly evolving market, demand and market acceptance for new
services are subject to a high level of uncertainty.
Because the market for our services is new and rapidly evolving, it is
difficult to predict with any assurance the growth rate, if any, and the
ultimate size of this market. We cannot assure you that the market for our
services will develop or that our services will ever achieve market acceptance.
If the market fails to develop, develops more slowly than expected, or becomes
saturated with competitors, if our services do not achieve market acceptance,
or if pricing becomes subject to significant competitive pressures, our
business, results of operations and financial condition would be materially and
adversely affected.
Our future results of operations will depend, in substantial part, on our
ability to increase the market acceptance of our services. The future viability
of MultexNET will depend upon, among other factors, our ability to expand our
direct and indirect sales and marketing channels, to attract and retain high-
quality information providers and to deliver our services across multiple
delivery platforms. The future viability of MultexEXPRESS will depend upon,
among other factors, the continued desire of investment banks, brokerage
9
<PAGE>
firms and other information providers to distribute proprietary investment
research and corporate documents over the Internet or through private networks
to their employees and customers. The future viability of Multex Research-On-
Demand will depend upon, among other factors, the acceptance of the Internet as
a medium for the distribution and sale of investment research, as well as on
our ability to build a direct and indirect sales force to sell our services, to
attract and retain high-quality information providers, and to develop and
increase our base of users. The future viability of Multex Investor Network
will depend upon, among other factors, the acceptance of the Internet as a
medium for the distribution and sale of investment research to individual
investors, and our ability to attract and retain advertisers and sponsors, new
members and additional distribution partners. In addition, in order to download
research reports and other information from Multex Investor Network, users are
required to first download the Adobe Acrobat reader, which may be difficult for
some users to accomplish. If we are unable to increase the number of users of
MultexNET, MultexEXPRESS, Multex Research-On-Demand and Multex Investor
Network, or to attract and retain information providers, our business, results
of operations and financial condition would be materially and adversely
affected. See "Business--Strategy" and "--Services."
We are dependent on strategic distribution relationships and our business would
be materially and adversely affected if we were to lose one of our strategic
distributors
We have distribution arrangements for our services with a number of third-
party distributors, including America Online, Inc., Automatic Data Processing,
Inc., Bloomberg L.P., Dow Jones & Co. Inc. and Reuters Limited, all of which
are currently generating revenues for us, and with Bridge Information Systems,
Inc., which is not currently generating revenues for us. We are dependent on
our strategic relationships for the marketing and distribution of investment
research reports and other information. Our future results of operations will
be affected by the extent to which customers of these third-party distributors
choose to subscribe to our various services. We cannot assure you that the
customers of these third-party distributors will continue to subscribe to our
services or that these third-party distributors will continue to actively
market our services. If we are unable to retain and increase the utilization of
our services by these customers, our business, results of operations and
financial condition would be materially and adversely affected. See "Business--
Strategy" and "--Services."
We cannot assure you that we will be successful in entering into additional
strategic relationships, or that any additional relationships, if entered into,
will be on terms favorable to us. Our receipt of revenues from our strategic
relationships is directly affected by the levels of effort of these
distributors. We cannot assure you that our strategic distributors will devote
the resources necessary to successfully market our services. Each of these
distributors offers services, either of their own or from our competitors,
which are in one or more respects competitive with our service offerings. In
addition, our strategic distributors have the right to terminate their
agreements with us under various specified circumstances, in some circumstances
on short notice. Furthermore, we cannot assure you that we will be able to
renew these agreements when they expire on acceptable terms, if at all. If we
are unable to maintain our existing strategic relationships or to enter into
new strategic relationships, our business, results of operations and financial
condition would be materially and adversely affected. See "Business--Strategic
Distribution Relationships."
Our business would be materially and adversely affected if we are not
successful in establishing brand awareness for Multex Investor Network
The future success of the Multex Investor Network will depend, in part, on
our ability to increase its brand awareness. In order to build our brand
awareness we must succeed in our marketing efforts, provide high-quality
services and increase traffic to the Multex Investor Network. We intend to
increase our marketing budget substantially as part of our brand-building
efforts. Our ability to increase advertising and sponsorship revenue from the
Multex Investor Network will depend in part on our ability to increase the
number of users of our Web sites. If our marketing efforts are unsuccessful or
if we cannot increase our brand awareness, our business, financial condition
and results of operations would be materially and adversely affected.
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Our business could be materially and adversely affected by increased
competition
The market for the distribution of investment research and other information
over the Internet is intensely competitive. We expect competition to continue
to increase because our market poses no substantial barriers to entry.
Competition may also increase as a result of industry consolidation. Increased
competition could result in price reductions, reduced gross margins and loss of
market share, any of which would have a material and adverse effect on our
business, results of operations and financial condition.
Other companies provide and distribute investment research
We face direct and indirect competition for both providers of investment
research and other reports, and for subscribers, with the following types of
companies:
. large and well-established distributors of financial information,
including Thomson Financial Services, through its subsidiaries First Call
and Investext, and Institutional Brokers Estimate System, a subsidiary of
Primark Corp.;
. companies that provide investment research, including investment banks
and brokerage firms, many of whom have their own Web sites;
. other providers of either free or subscription research services on the
Internet;
. services provided by some of our strategic distributors which are
competitive in one or more respects with our service offerings;
. numerous prospective competitors, including Standard & Poor's, Market
Guide, Moody's and Zacks Investment Research, that offer investment
research-based services;
. various written publications, including traditional media, investment
newsletters, personal financial magazines and industry research appearing
in financial periodicals; and
. services provided by in-house management information services personnel
and independent systems integrators.
Various public sources provide extensive company information for free
We also face competition due to the fact that extensive company-specific
information, as well as general investment research relating to particular
industries, may be obtained, frequently without charge, from various public
sources, including:
. annual reports;
. Standard & Poor's company-specific reports; and
. Value Line investment research reports.
These reports are all available from public libraries and from the companies
about which these reports relate.
We believe that our ability to compete successfully will depend upon many
factors, many of which are outside of our control. These factors include our
ability to sustain our relationships with leading providers of investment
research, the timing and market acceptance of new services and enhancements to
existing services developed by us and our competitors, ease of use,
performance, price, reliability, customer service and support, and sales and
marketing efforts. Our competitors vary in size and in the scope and breadth of
services offered.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may enable them to respond more quickly to new or
emerging technologies and changes in investor requirements, or to devote
greater resources to the development, promotion and sale of their services than
we can. Our competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and make more attractive
offers to potential
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employees, subscribers, strategic partners and information providers. Our
competitors may develop services that are equal or superior to the services
offered by us or that achieve greater market acceptance than our services do.
In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
improve their ability to address the needs of our existing and prospective
customers. As a result, it is possible that new competitors may emerge and
rapidly acquire significant market share. Increased competition is likely to
result in price reductions, reduced gross margins and loss of market share,
which could materially and adversely affect our business, results of operations
and financial condition. See "Business--Competition."
We have a high level of customer concentration and our business could be
materially and adversely affected if we were to lose a major subscriber or
distributor
Historically, a few of our subscribers and distributors have accounted for a
substantial majority of our revenues. Specifically, 75% of our revenues in the
year ended December 31, 1996, 68% in the year ended December 31, 1997, and 28%
in the year ended December 31, 1998 were generated by Bloomberg, Reuters,
Merrill Lynch & Co. and Gruntal & Co., each of which individually generated 10%
or more of our consolidated revenues during some of these years. In addition,
approximately 450,000 of the 530,000 end-users of MultexEXPRESS are generated
from one MultexEXPRESS installation. The loss of any major subscriber or
distributor, or any reduction or delay in subscriptions by any subscriber or
distributor, or our failure to successfully market our services to new
subscribers or distributors could have a material and adverse effect on our
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview" and Note 12 of Notes to the Consolidated Financial Statements.
Our business could be materially and adversely affected by a downturn in the
financial services industry
We are dependent upon the continued demand for the distribution of investment
research and other information over the Internet, making our business
susceptible to a downturn in the financial services industry. For example, a
decrease in the number of analysts that prepare investment research reports or
in the capital dedicated to the dissemination of this research could result in
a decrease in the number of research reports and other financial information
available for distribution and a concomitant decrease in demand by our
subscribers for these reports and other information. In addition, U.S.
financial institutions are continuing to consolidate, increasing the leverage
of our information providers to negotiate price and decreasing the overall
potential market for some of our services. These factors, as well as other
changes occurring in the financial services industry, could have a material and
adverse effect on our business, results of operations and financial condition.
Rapid growth in our future operations could strain our managerial, operational
and financial resources
We have experienced rapid growth in our operations. At December 31, 1998, we
had a total of 149 employees, as compared to 107 employees at December 31, 1997
and 79 employees at December 31, 1996. We expect that the number of our
employees will continue to increase for the foreseeable future. This rapid
growth has placed, and our anticipated future growth will continue to place, a
significant strain on our managerial, operational and financial resources. As a
result, we will need to continue to improve our operational and financial
systems and managerial controls and procedures. In addition, our future success
will also depend on our ability to expand, train and manage our workforce, in
particular our sales and marketing organization, both domestically and
internationally. We will also have to maintain close coordination among our
technical, accounting, finance, marketing, sales and editorial personnel. If we
are unable to accomplish any of these objectives, our business, results of
operations and financial condition could be materially and adversely affected.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The loss of any of our key personnel could have a material and adverse effect
Our future success will depend, in substantial part, on the continued service
of our senior management, including Mr. Isaak Karaev, our Chairman, President
and Chief Executive Officer, and key technical and sales
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personnel, none of whom has entered into an employment agreement with us other
than a non-competition/non-disclosure agreement. We maintain a key person life
insurance policy in the amount of $1.5 million on the life of Mr. Karaev. The
loss of the services of one or more of our key personnel could have a material
and adverse effect on our business, results of operations and financial
condition. Our future success will also depend on our continuing ability to
attract, retain and motivate highly qualified technical, sales and marketing,
customer support, financial and accounting, and managerial personnel.
Competition for this personnel, in particular information technology
professionals, is intense, and we cannot assure you that we will be able to
retain our key personnel or that we will be able to attract, assimilate or
retain other highly qualified personnel in the future. We have from time to
time in the past experienced, and we expect to continue to experience in the
future, difficulty in hiring and retaining highly skilled employees with
appropriate qualifications. See "Management."
Our international operations are new and may not be successful
We have only limited business experience outside of the United States
We have only recently commenced operations in a number of international
markets and a key component of our strategy is to continue to expand our
international operations. To date, we have only limited experience in
developing and obtaining research and other financial information relating to
companies whose securities are traded on foreign markets and in marketing,
selling and distributing our services internationally. We cannot assure you
that we will be able to successfully market, sell and deliver our services in
these markets. In some markets, including Hong Kong, we intend to rely on the
sales and marketing efforts of independent representatives. The failure of our
independent representatives to successfully solicit information providers or
market our services in these markets could have a material and adverse effect
on our business, results of operations and financial condition.
Doing business internationally subjects us to additional regulatory
requirements, tax liabilities and other risks
There are risks inherent in doing business in international markets,
including unexpected changes in regulatory requirements, potentially adverse
tax consequences, export restrictions and controls, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, political
instability, fluctuations in currency exchange rates, and seasonal reductions
in business activity during the summer months in Europe and various other parts
of the world, any of which could have a material and adverse effect on the
success of our international operations and, consequently, on our business,
results of operations and financial condition. Furthermore, we cannot assure
you that governmental regulatory agencies in one or more foreign countries will
not determine that the services provided by us constitute the provision of
investment advice, which could result in our having to register in these
countries as an investment advisor or in our having to cease selling our
services in these countries, either of which could have a material and adverse
effect on our business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Our failure to successfully integrate any future acquisitions could strain our
managerial, operational and financial resources
We may, from time to time, pursue acquisitions of businesses, customer lists,
products or technologies that complement or expand our existing business. We
evaluate potential acquisition opportunities from time to time, including those
that could be material in size and scope. Acquisitions involve a number of
risks, including the diversion of management's attention from day-to-day
operations to the assimilation of the operations and personnel of the acquired
companies and the incorporation of acquired operations, customer lists,
products or technologies. Acquisitions could also have a material and adverse
effect on our business, results of operations or financial condition, and could
result in dilutive issuances of equity securities, the incurrence of debt and
the loss of key employees. In addition, many acquisitions must be accounted for
using the purchase method of accounting and, because most software-related
acquisitions involve the purchase of significant intangible assets, these
acquisitions typically result in substantial amortization charges and charges
for acquired research and development projects, which could have a material and
adverse effect on our business, results of operations and
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financial condition. We cannot assure you that any acquisitions will be
successfully completed or that, if one or more acquisitions are completed, the
acquired businesses, customer lists, products or technologies will generate
sufficient revenue to offset the associated costs or other adverse effects.
If we cannot keep pace with the evolving standards of our industry and demands
of our customers, we may be unable to enhance our existing services or
introduce new services
The market in which we operate is characterized by rapidly changing
technology, evolving industry standards, frequent new service announcements,
introductions and enhancements, and evolving customer demands. These market
characteristics are exacerbated by the emerging nature of the Internet and the
electronic distribution of investment research. Accordingly, our future success
will depend on our ability to adapt to rapidly changing technologies and
industry standards, and our ability to continually improve the performance,
features and reliability of our services in response to both evolving customer
demands and competitive service offerings. Our inability to successfully adapt
to these changes in a timely manner could have a material and adverse effect on
our business, results of operations and financial condition. Furthermore, we
cannot assure you that we will not experience difficulties that could delay or
prevent the successful design, development, testing, introduction or marketing
of new services, or that any enhancements to existing services will adequately
meet the requirements of our current and prospective customers and achieve any
degree of significant market acceptance. If we are unable, for technological or
other reasons, to develop and introduce new services or enhancements to
existing services in a timely manner or in response to changing market
conditions or customer requirements, or if our services or enhancements contain
defects or do not achieve a significant degree of market acceptance, our
business, results of operations and financial condition would be materially and
adversely affected.
Because our business is dependent upon one computer system, we are particularly
susceptible to problems caused by system failures, security breaches or other
damage to our system
Our electronic distribution of investment research utilizes proprietary
technology which resides principally on one computer system. The continued and
uninterrupted performance of our computer system is critical to our success.
Any system failure that causes interruptions in our ability to provide our
services to our customers, including failures that affect our ability to
collect research from our information providers or provide electronic
investment research to our users, could reduce customer satisfaction and, if
sustained or repeated, would reduce the attractiveness of our services. An
increase in the volume of research reports handled by our computer system, or
in the rate of requests for this research, could strain the capacity of our
software or hardware, which could lead to slower response times or system
failures. Furthermore, we face the risk of a security breach of our computer
system which could disrupt the distribution of research and other reports. Our
business, results of operations and financial condition could be materially and
adversely affected if any of these problems occur.
Our operations are dependent on our ability to protect our computer system
against damage from computer viruses, fire, power loss, telecommunications
failures, vandalism and other malicious acts, and similar unexpected adverse
events. In addition, a failure of our telecommunications providers to provide
the data communications capacity in the time frame required by us for any
reason could cause interruptions in the delivery of our services. Despite
precautions we have taken, unanticipated problems affecting our systems have
from time to time in the past caused, and in the future could cause, delays and
interruptions in the delivery of our services. Although we carry general
liability insurance, our insurance may not cover any claims by dissatisfied
providers or subscribers or may not be adequate to indemnify us for any
liability that may be imposed in the event that a claim were brought against
us. Our business, results of operations and financial condition could be
materially and adversely affected by any system failure, security breach or
other damage that interrupts or delays our operations.
If we fail to adequately protect our intellectual property rights or face a
claim of intellectual property infringement by a third-party, we could lose our
intellectual property rights or be liable for significant damages
Our future success will depend, in substantial part, on our intellectual
property rights. We seek to protect our intellectual property rights, but these
actions may be inadequate to protect the rights covered by our patents, patent
applications, trademarks or other proprietary rights or to prevent others from
claiming violations of their
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proprietary rights. Our intellectual proprietary rights may not be viable or of
value in the future since the validity, enforceability and scope of protection
of proprietary rights in Internet-related industries is uncertain and still
evolving.
Furthermore, we cannot assure you that third parties will not claim that we
have infringed their patents or other proprietary rights. From time to time we
have been, and we expect to continue to be, subject to claims by third parties
in the ordinary course of our business, including claims of alleged
infringement of the trademarks and other proprietary rights of third parties.
Although there has not been any litigation relating to these claims to date,
these claims and any resultant litigation, should they occur, could subject us
to significant liability for damages and could result in the invalidation of
our proprietary rights. In addition, even if we prevail, this litigation could
be time-consuming and expensive to defend, and could result in the diversion of
our time and attention, any of which could materially and adversely affect our
business, results of operations and financial condition. Any claims or
litigation from third parties may also result in limitations on our ability to
use the trademarks and other intellectual property subject to these claims or
litigation unless we enter into agreements with the third parties responsible
for these claims or litigation which may be unavailable on commercially
reasonable terms.
We generally enter into confidentiality agreements with our employees,
consultants and strategic partners, and generally control access to and
distribution of our proprietary information. Despite our efforts to protect our
proprietary information from unauthorized use or disclosure, parties may
attempt to disclose, obtain or use our proprietary information which, if
successful, could have a material and adverse effect on our business, results
of operation and financial condition. The steps we have taken may not prevent
misappropriation of our proprietary information.
Problems relating to the "Year 2000 Issue" could adversely affect our business
We have made a preliminary assessment of our Year 2000 readiness. We plan to
perform a more comprehensive Year 2000 simulation on our software during the
first half of 1999. We are also in the process of contacting our third-party
vendors, licensors and providers of software, hardware and services regarding
their Year 2000 readiness. Following this testing and after contacting these
vendors and licensors, we will be better able to make a complete evaluation of
our Year 2000 readiness to determine what costs will be necessary to be Year
2000 compliant, and to determine whether contingency plans need to be
developed. Our inability to correct a significant Year 2000 problem, if one
exists, could result in an interruption in, or a failure of, certain of our
normal business activities and operations. In addition, a significant Year 2000
problem concerning our database or the research reports and other information
provided to us by our information providers could cause our users to consider
seeking alternate providers of investment research or cause an unmanageable
burden on our customer service and technical support capabilities. Any
significant Year 2000 problem could require us to incur significant
unanticipated expenses to remedy these problems and could divert management's
time and attention, either of which could have a material and adverse effect on
our business, results of operation and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Impact of the Year 2000" for information on our state of readiness, potential
risks and contingency plans regarding the Year 2000 issue.
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Risks Related to the Internet Industry
If Internet usage does not continue to grow, we may not be successful
The Internet is relatively new and is rapidly evolving. Our business would be
materially and adversely affected if Internet usage does not continue to grow.
Internet usage may be inhibited for a number of reasons, including:
. the Internet infrastructure may not be able to support the demands placed
on it or its performance and reliability may decline as usage grows;
. security and authentication concerns with respect to transmission over
the Internet of confidential information, including credit card numbers,
and attempts by unauthorized computer users to penetrate our network
security; and
. privacy concerns, including those related to the placement by Web sites
of information on a user's hard drive without the user's knowledge or
consent in order to gather user information.
Our market is characterized by rapidly changing technologies, evolving
industry standards, frequent new product and service introductions, and
changing customer demands. To be successful, we must adapt to our rapidly
changing market by continually enhancing our existing services and adding new
services to address our customers' changing demands. We could incur substantial
costs if we need to modify our services or infrastructure in order to adapt to
these changes. Our business, results of operation and financial condition would
be materially and adversely affected if we incurred significant costs without
generating additional revenues or if we cannot rapidly adapt to these changes.
If the Internet infrastructure is not adequately maintained, we may be unable
to provide investment research and information services in a timely manner
Our future success will depend, in substantial part, upon the maintenance of
the Internet infrastructure, including a reliable network backbone with the
necessary speed, data capacity and security, and the timely development of
enabling products, including high-speed modems, for providing reliability and
timely Internet access and services. To the extent that the Internet continues
to experience increased numbers of users, frequency of use or increased
bandwidth requirements of users, we cannot assure you that the Internet
infrastructure will continue to be able to support the demands placed on it or
that the performance or reliability of the Internet will not be adversely
affected. Furthermore, the Internet has experienced a variety of outages and
other delays as a result of damage to portions of its infrastructure or
otherwise, and these outages or delays could adversely affect the Web sites of
our contributors, subscribers or distributors. In addition, the Internet could
lose its viability as a form of media due to delays in the development or
adoption of new standards and protocols that can handle increased levels of
activity. We cannot assure you that the infrastructure and complementary
products and services necessary to maintain the Internet as a viable commercial
medium will be developed or maintained. Moreover, critical issues concerning
the commercial use of the Internet, including security, cost, ease of use and
access, intellectual property ownership and other legal liability issues,
remain unresolved and could materially and adversely affect both the growth of
Internet usage generally and our business, results of operations and financial
condition in particular.
We may be subject to legal claims in connection with the content we publish and
distribute on the Internet
As a publisher and distributor of online content, we face potential direct
and indirect liability for claims of defamation, negligence, copyright, patent
or trademark infringement, violation of the securities laws and other claims
based upon the reports and data that we publish. For example, by distributing a
negative investment research report, we may find ourselves subject to
defamation claims, regardless of the merits of these claims. Computer failures
may also result in incorrect data being published and distributed widely. In
these and other instances, we may be required to engage in protracted and
expensive litigation, which could have the effect of diverting management's
attention and require us to expend significant financial resources. Our general
liability insurance may not necessarily cover any of these claims or may not be
adequate to protect us against all liability that may be imposed. Any claims or
resulting litigation could have a material and adverse effect on our business,
results of operations and financial condition.
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We may become subject to burdensome government regulation and legal
uncertainties
The laws governing the Internet remain largely unsettled, even in areas where
there has been some legislative action. It may take years to determine whether
and how existing laws, including those governing intellectual property,
privacy, libel and taxation, apply to the Internet generally and the electronic
distribution of investment research in particular. Legislation could dampen the
growth in the use of the Internet generally and decrease the acceptance of the
Internet as a communications and commercial medium, which could have a material
and adverse effect on our business, results of operations and financial
condition. In addition, because the growing popularity and use of the Internet
has burdened the existing telecommunications infrastructure and many areas with
high Internet usage have begun to experience interruptions in phone service,
some local telephone carriers have petitioned governmental agencies to regulate
Internet service providers and online service providers in a manner similar to
long distance telephone carriers and to impose access fees on Internet service
providers and online service providers. If any of these petitions or the relief
that they seek is granted, the costs of communicating on the Internet could
increase substantially, potentially adversely affecting the growth in the use
of the Internet. Further, due to the global nature of the Internet, it is
possible that, although transmissions relating to our services originate in the
State of New York, governments of other states, the United States or foreign
countries might attempt to regulate our services or levy sales or other taxes
on our activities. We cannot assure you that violations of local or other laws
will not be alleged or charged by local, state, federal or foreign governments,
that we might not unintentionally violate these laws or that these laws will
not be modified, or new laws enacted, in the future. Any of these developments
could have a material and adverse effect on our business, results of operations
and financial condition. See "Business--Government Regulation."
Risks Related to the Offering
There has been no prior public market for our common stock
Prior to this offering, there has been no public market for our common stock.
We cannot predict the extent to which investor interest in our common stock
will lead to the development of an active trading market or how liquid that
market might become. The market price of the common stock may decline below the
initial public offering price. The initial public offering price for the shares
will be determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market following the completion of this offering. See "Underwriting."
The market price of our shares may experience extreme price and volume
fluctuations
The stock market has, from time to time, experienced extreme price and volume
fluctuations. The market prices of the securities of Internet-related companies
have been especially volatile, including fluctuations that are often unrelated
to the operating performance of the affected companies. Broad market
fluctuations of this type may adversely affect the market price of our common
stock.
The market price of our common stock could be subject to significant
fluctuations due to a variety of factors, including:
. public announcements concerning us or our competitors, or the Internet
industry;
. fluctuations in operating results;
. a downturn in the financial services industry generally or the market for
securities trading in particular;
. introductions of new products or services by us or our competitors;
. changes in analysts' earnings estimates; and
. announcements of technological innovations.
In the past, companies that have experienced volatility in the market price
of their stock have been the object of securities class action litigation. If
we were the object of securities class action litigation, it could result in
substantial costs and a diversion of our management's attention and resources
and have a material adverse effect on our business, results of operation and
financial condition.
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After this offering, our executive officers, directors and 5% or greater
stockholders will still control all matters requiring a stockholder vote
We anticipate that our executive officers, directors and existing
stockholders who each own greater than 5% of the outstanding common stock
before this offering and their affiliates will, in the aggregate, beneficially
own approximately 60.8% of our outstanding common stock following the
completion of this offering, or 59.1% if the underwriters' over-allotment
option is exercised in full, assuming no exercise of outstanding options as of
December 31, 1998. As a result, our executive officers, directors and 5% or
greater stockholders will be able to exercise significant control over all
matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of us. See "Management" and "Principal Stockholders."
We may spend a substantial portion of the net proceeds in ways with which you
may not agree
We currently have no specific uses for a substantial portion of the net
proceeds of this offering. Accordingly, investors in this offering will be
relying on management's judgment with only limited information about our
specific intentions regarding the use of proceeds. We may spend most of the net
proceeds from this offering in ways with which you may not agree. Our failure
to apply these funds effectively could have a material and adverse effect on
our business, results of operations and financial condition. See "Use of
Proceeds."
A third party could be prevented from acquiring your shares of stock at a
premium to the market price because of our anti-takeover provisions
Various provisions of our certificate of incorporation, bylaws and Delaware
law could make it more difficult for a third party to acquire us, even if doing
so might be beneficial to you and our other stockholders. See "Description of
Capital Stock."
The future sale of shares of our common stock may negatively affect our stock
price
If our stockholders sell substantial amounts of our common stock, including
shares issuable upon the exercise of outstanding options and a warrant in the
public market following this offering, the market price of our common stock
could fall. These sales also might make it more difficult for us to sell equity
securities in the future at a time and price that we deem appropriate. After
this offering, we will have outstanding 21,112,237 shares of common stock. Of
these shares, the 3,000,000 shares being offered in this offering will be
freely tradeable. Our directors, executive officers and substantially all of
our stockholders have agreed that they will not sell, directly or indirectly,
any common stock without the prior written consent of BancBoston Robertson
Stephens Inc. for a period of 180 days from the date of this prospectus.
However, BancBoston Robertson Stephens Inc. may, in its sole discretion and at
any time or from time to time, without notice, release all or any portion of
the securities subject to the lock-up agreements. See "Shares Eligible for
Future Sale" and "Underwriting."
Investors in this offering will suffer immediate and substantial dilution
Investors purchasing shares in this offering will incur immediate and
substantial dilution in net tangible book value per share. To the extent
outstanding options and warrants to purchase common stock are exercised, there
will be further dilution. See "Dilution."
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FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements." These forward-looking
statements include, without limitation, statements about the market opportunity
for the distribution of investment research and other information over the
Internet, our strategy, competition and expected expense levels, and the
adequacy of our available cash resources. Our actual results could differ
materially from those expressed or implied by these forward-looking statements
as a result of various factors, including the risk factors described above and
elsewhere in this prospectus. We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
OUR ADDRESS AND TELEPHONE NUMBER
We were incorporated in Delaware in 1993. Our principal executive offices are
located at 33 Maiden Lane, 5th Floor, New York, New York 10038, and our
telephone number at that address is (212) 859-9800.
19
<PAGE>
USE OF PROCEEDS
The net proceeds we will receive from the sale of the 3,000,000 shares of
common stock offered by us are estimated to be $27.0 million, or $29.6 if the
underwriters' over-allotment option is exercised in full, in each case after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by us. These amounts assume a public offering price of $10.00
per share, which is the mid-point of the range set forth on the cover page of
this prospectus. We will not receive any proceeds from the sale of shares by
the over-allotment selling stockholders.
We currently intend to use the net proceeds of this offering as follows:
. expansion of our sales and marketing efforts;
. expansion of our international operations;
. capital expenditures;
. general corporate purposes, including working capital; and
. possible acquisitions of or investments in complementary businesses,
products and technologies.
Pending these uses, the net proceeds will be invested in short-term,
investment grade instruments, certificates of deposit or direct or guaranteed
obligations of the United States. There are no agreements or pending
negotiations with respect to any acquisitions, investments or similar
transactions.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common stock and do
not intend to pay any cash dividends on our common stock in the foreseeable
future. We currently intend to retain future earnings, if any, to fund the
development and growth of our business. Future dividends, if any, will be
determined by our board of directors. As a result of not collecting a dividend,
there is a risk that stockholders will not experience a return on their
investment, unless they sell their shares of common stock.
20
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1998, the capitalization
of Multex.com both at December 31, 1998 and on a basis which assumes the
completion of this offering at December 31, 1998 by giving effect to the
following:
. the sale of 3,000,000 shares of common stock offered by us in this
offering at an assumed initial public offering price of $10.00 per share,
after deducting the underwriting discounts and commissions and offering
expenses payable by us, and the application of the net proceeds from this
offering; and
. the conversion of our preferred stock into an aggregate of 14,861,112
shares of common stock upon the completion of this offering. See "Use of
Proceeds." This information should be read in conjunction with our
Consolidated Financial Statements and the related Notes appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1998
------------------
As
Actual Adjusted
-------- --------
(in thousands)
<S> <C> <C>
Convertible preferred stock, $.01 par value, Series A,
Series B, Series C, Series D and Series E, $53,000,000
aggregate liquidation preference, 297,222 shares issued
and outstanding on an actual basis and no shares issued
and outstanding assuming completion of this offering..... $ 59,860 --
Stockholders' (deficit) equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding on an
actual basis and assuming completion of this offering.. -- --
Common stock, $.01 par value, 50,000,000 shares
authorized; 3,251,125 shares issued and outstanding on
an actual basis and 21,112,237 shares issued and
outstanding assuming completion of this offering....... 32 211
Additional paid-in capital................................ (3,634) 83,047
Accumulated deficit....................................... (32,137) (32,137)
Deferred compensation..................................... (1,460) (1,460)
Translation adjustment.................................... (16) (16)
-------- --------
Total stockholders' (deficit) equity.................... (37,215) 49,645
-------- --------
Total capitalization.................................. $ 22,645 $ 49,645
======== ========
</TABLE>
The table above excludes a warrant to purchase 318,050 shares of common stock
with an exercise price of $4.80 per share, which was issued in October 1998,
and 2,410,625 shares of common stock issuable pursuant to stock options
outstanding as of December 31, 1998. Of these stock options, options to
purchase approximately 811,596 shares were exercisable as of December 31, 1998,
and had a weighted average price of $2.30 per share. See "Management--1999
Stock Option Plan" and "Description of Capital Stock--Options."
21
<PAGE>
DILUTION
Our net tangible book value as of December 31, 1998, after giving effect to
the conversion of all outstanding shares of preferred stock, was $22.6 million,
or $1.25 per share of common stock. Net tangible book value per share is
calculated by subtracting our total liabilities from our total tangible assets,
which equals total assets less intangible assets, and dividing this amount by
the number of shares of common stock outstanding as of December 31, 1998.
Assuming the sale by us of 3,000,000 shares of common stock offered in this
offering at an assumed initial public offering price of $10.00 per share, which
is the mid-point of the range listed on the cover page of this prospectus, and
the application of the estimated net proceeds from this offering, our net
tangible book value as of December 31, 1998 would have been $49.6 million, or
$2.35 per share of common stock. Assuming completion of this offering, there
will be an immediate increase in the net tangible book value of $1.10 per share
to our existing stockholders and an immediate dilution in the net tangible book
value of $7.65 per share to new investors. The following table illustrates this
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $10.00
Pro forma net tangible book value per share as of December 31,
1998........................................................... $1.25
Pro forma increase attributable to new investors................ 1.10
-----
Pro forma net tangible book value per share after the offering.... 2.35
------
Pro forma dilution per share to new investors..................... $ 7.65
======
</TABLE>
The following table summarizes the total number of shares of common stock
purchased from us, the total consideration paid to us and the average price per
share paid by existing stockholders and by new investors, in each case based
upon the number of shares of common stock outstanding as of December 31, 1998
and assuming conversion of all shares of preferred stock.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 18,112,237 85.8% $54,175,085 64.1% $ 2.99
New investors.............. 3,000,000 14.2 30,000,000 35.9 $10.00
---------- ----- ----------- -----
Total.................... 21,112,237 100.0% $84,175,085 100.0%
========== ===== =========== =====
</TABLE>
If the underwriters' over-allotment option is exercised in full, the number
of shares of common stock held by existing stockholders will be reduced to
17,945,737, or 83.2% of the total number of shares of common stock to be
outstanding after this offering, and will increase the number of shares of
common stock held by the new investors to 3,450,000 shares, or 16.0% of the
total number of shares of common stock to be outstanding immediately after this
offering. See "Principal Stockholders."
The tables and calculations above assume no exercise of outstanding options
and exclude a warrant to purchase 318,050 shares of common stock with an
exercise price of $4.80 per share, which was issued in October 1998. At
December 31, 1998, there were 2,410,625 shares of common stock reserved for
issuance upon exercise of outstanding options with a weighted average exercise
price of $2.30 per share. To the extent that this warrant or these options are
exercised, there will be further dilution to new investors. See "Management--
1999 Stock Option Plan."
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our Consolidated Financial Statements and the
related Notes included elsewhere in this prospectus. The selected consolidated
statement of operations data for the years ended December 31, 1994 and 1995 and
the selected consolidated balance sheet data as of December 31, 1994, 1995 and
1996 are derived from our audited Consolidated Financial Statements not
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1994 1995 1996 1997 1998
------- ------- -------- -------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ 2,155 $ 1,005 $ 2,647 $ 6,014 $13,182
Cost of revenues........ 752 404 810 1,232 2,895
------- ------- -------- -------- -------
Gross profit............ 1,403 601 1,837 4,782 10,287
Operating expenses:
Sales and marketing... 943 1,892 2,339 3,507 7,622
Research and
development.......... 975 1,520 1,415 1,601 2,180
General and
administrative....... 1,553 2,709 4,553 7,836 9,386
------- ------- -------- -------- -------
Total operating
expenses........... 3,471 6,121 8,307 12,944 19,188
------- ------- -------- -------- -------
Loss from operations.... (2,068) (5,520) (6,470) (8,162) (8,901)
Net interest income
(expense).............. 52 26 60 125 (126)
Other income (expense).. 23 -- -- -- (716)
------- ------- -------- -------- -------
Net loss................ $(1,993) $(5,494) $ (6,410) $ (8,037) $(9,743)
======= ======= ======== ======== =======
Basic and diluted loss
per common share....... $ (1.18) $ (3.13) $ (3.86) $ (4.69) $ (4.36)
======= ======= ======== ======== =======
Pro forma net loss per
share (1)(2)........... $ (0.55)
=======
Pro forma weighted
average shares
outstanding(1)(2)...... 17,708
=======
<CAPTION>
December 31,
---------------------------------------------
1994 1995 1996 1997 1998
------- ------- -------- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents, and
marketable securities.. $ 4,975 $ 255 $ 8,730 $ 10,197 $22,332
Working capital
(deficit).............. 4,803 (1,487) 7,249 8,021 19,736
Total assets............ 6,295 2,799 12,548 14,733 27,968
Deferred revenues....... -- 286 1,085 1,447 2,683
Long-term debt.......... 340 717 1,384 1,053 --
Convertible preferred
stock.................. 8,146 8,798 25,066 37,234 59,860
Total stockholders'
equity (deficit)....... (2,657) (8,791) (16,601) (26,750) (37,215)
</TABLE>
- --------
(1) See Note 4 of Notes to our Consolidated Financial Statements included
elsewhere in this prospectus for an explanation of the method used to
determine the number of shares used to compute pro forma net loss per
share.
(2) Assumes the conversion of all outstanding shares of preferred stock and
excludes a warrant to purchase 318,050 shares of common stock with an
exercise price of $4.80 per share, which was issued in October 1998.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations
of Multex.com should be read in conjunction with the Consolidated Financial
Statements and the related Notes included elsewhere in this prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of various factors, including,
but not limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus.
Overview
Multex.com is a leading provider of online investment research and
information services designed to meet the needs of individual and institutional
investors, including investment banks, brokerage firms and corporations. We
offer four main services as follows:
. MultexNET, which was launched in June 1996;
. MultexEXPRESS, which was launched in January 1997;
. Multex Research-On-Demand, which was launched in April 1997; and
. Multex Investor Network, which was launched in November 1998.
MultexNET, typically offered as a one to three year subscription, allows
entitled institutional investors to access full-text investment research
reports on a real-time basis from investment banks, brokerage firms and other
third-party research providers over the Internet or through other distribution
channels. MultexEXPRESS, also provided pursuant to one to three year
subscriptions, enables financial institutions to distribute their proprietary
financial research, as well as other corporate documents, over the Internet,
through intranets and other private networks. Multex Research-On-Demand gives
corporations, financial institutions and advisors, and institutional investors
the ability to access research reports on a pay-per-view basis from a majority
of the contributors to MultexNET, over the Internet or through other
distribution channels. Multex Investor Network gives individual investors who
register as members access to a range of financial reports and services,
including research reports on a pay-per-view basis, over the Internet from a
majority of the contributors to MultexNET. Multex Investor Network also
includes banner advertising and sponsorship advertising throughout the site.
Sponsors to Multex Investor Network include full-service brokerage firms and
other financial institutions interested in attracting individual investors to
their products, services and brands.
Pricing of our services is based on a number of factors. The annual
subscription fee for MultexNET typically ranges from $1,000 to $3,540 per
subscriber based on the number of users within the subscribing organization. As
of December 31, 1998, we had approximately 2,580 paying subscribers to
MultexNET, as compared to approximately 2,040 paying subscribers on December
31, 1997. In addition, we have an agreement with Reuters pursuant to which
approximately 6,000 Reuters' customers had obtained MultexNET user passwords to
use MultexNET on a trial basis as of December 31, 1998, whereas no Reuters'
customers had obtained passwords as of December 31, 1997. Pursuant to the
agreement, Reuters paid us $1.0 million, $500,000 of which was earned in 1997
and $500,000 in 1998. For MultexEXPRESS, the subscription fees vary based on
the number of users, but typically average $150,000 annually per subscriber
installation. As of December 31, 1998, we had 30 installations of MultexEXPRESS
under contract and in operation, as compared to 18 installations as of December
31, 1997. Fees for information and research offered through Multex Research-On-
Demand and Multex Investor Network typically range from $10.00 to $150.00 per
report, depending on the length and type of document. Sponsorship fees for
Multex Investor Network range from $7,500 to $100,000 per month based on the
level of sponsorship.
Revenues from subscriptions to MultexNET and MultexEXPRESS are recognized in
equal installments over the term of the subscription. Revenues from Multex
Research-On-Demand and pay-per-view transactions on
24
<PAGE>
Multex Investor Network are recognized upon sale. Revenues from sponsorships to
Multex Investor Network are recognized in equal installments over the term of
the sponsorship. Some of the users of Multex Research-On-Demand pay a flat
annual fee for the service, which entitles them to receive research and other
reports at a discounted rate. Revenues from these users are recognized in equal
installments over the term of the subscription. All costs associated with
revenues from MultexNET, MultexEXPRESS, Multex Research-On-Demand and Multex
Investor Network are expensed as and when incurred. We pay distribution fees to
our distributors and, with respect to Multex Research-On-Demand and pay-per-
view transactions on Multex Investor Network, royalties to the investment
banks, brokerage firms or third-party research providers that authored the
research.
On February 27, 1998, we established a new subsidiary, Multex Data Group,
Inc. On March 27, 1998, Multex Data Group acquired from Research Data Group,
Inc. assets consisting of an earnings estimate database and related software
that generates independent investment reports, in exchange for 49% of the
common stock of Multex Data Group. In connection with this transaction, we
issued to a principal of Research Data Group, Inc., 75,000 shares of common
stock at a purchase price of $4.00 per share and a one year option to acquire
125,000 shares of common stock at an exercise price of $5.00 per share. On
December 15, 1998, we acquired the remaining 49% of Research Data Group, Inc.
in exchange for 125,000 shares of common stock we valued at approximately
$625,000. The acquisition has been accounted for using the purchase method of
accounting and accordingly, we are consolidating the results of operations of
Multex Data Group effective March 27, 1998.
We have expanded our operations in recent years and have grown from 79
employees at December 31, 1996 to 107 employees at December 31, 1997 and to 149
employees at December 31, 1998. In January 1997, we opened a London office and
in 1998 we engaged the services of two independent representatives in Hong
Kong. We expect to add additional personnel both in the United States and
abroad as our operations expand. We currently expect to significantly increase
our operating expenses both on an absolute basis and as a percentage of
revenues in order to expand our sales and marketing operations, to continue to
expand internationally and to continuously upgrade and enhance our services and
technologies. As a result of these and other factors, there can be no assurance
that we will not incur significant losses on a quarterly and annual basis for
the foreseeable future.
We have incurred significant losses since our inception, and as of December
31, 1998 had an accumulated deficit of $32.1 million. We also incurred $841,000
of expenses relating to a proposed financing in 1998, which were expensed in
the three months ended September 30, 1998. In addition, we have recorded
cumulative deferred compensation of $1.9 million, which represents the
difference between the exercise price and the fair market value of our common
stock at the date of grant for shares of common stock issuable upon the
exercise of stock options granted to some of our employees. Of the total
deferred compensation amount, $25,000 was amortized in 1997 and $440,000 was
amortized during the year ended December 31,1998. The remaining deferred
compensation amount is expected to be amortized over the remaining vesting
periods of the related options. We believe that period-to-period comparisons of
our operating results are not necessarily meaningful and that the results for
any period should not be relied upon as an indication of future performance.
Historically, a few of our subscribers and distributors have accounted for a
substantial majority of our revenues. Specifically, for the year ended December
31, 1997, Bloomberg, Reuters, Merrill Lynch & Co. and Gruntal & Co. accounted
for 21%, 20%, 16% and 11% of our consolidated revenues, respectively, and for
the year ended December 31, 1998, Merrill Lynch accounted for 10% of the our
consolidated revenues. The loss of any of these subscribers or distributors
could have a material and adverse effect on our business, results of operations
and financial condition. See "Risk Factors--We have a high level of customer
concentration and our business would be materially and adversely affected if we
were to lose a major subscriber or distributor" and Note 12 of Notes to the
Consolidated Financial Statements.
We were incorporated in April 1993. In October 1993, Multex Systems, Inc., a
New York corporation, merged with and into Multex Publisher, Inc., a Delaware
corporation, which subsequently changed its name to Multex Systems, Inc. From
1993 to June 1996, we were engaged in the development of software which became
25
<PAGE>
the underlying technology of MultexNET, and also provided software development
services to ADP. Starting in September 1995, we generated revenues from the
distribution of research reports and other information through Bloomberg. In
January 1999, we changed our name to Multex.com, Inc.
Results of Operations
The following table sets forth the consolidated statement of operations data
for the periods indicated as a percentage of revenues:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1996 1997 1998
-------- -------- -------
<S> <C> <C> <C>
Revenues........................................ 100.0% 100.0% 100.0%
Cost of revenues................................ 30.6 20.5 22.0
-------- -------- -------
Gross profit.................................... 69.4 79.5 78.0
Operating expenses:
Sales and marketing........................... 88.4 58.3 57.8
Research and development...................... 53.5 26.6 16.5
General and administrative.................... 172.0 130.3 71.2
-------- -------- -------
Total operating expenses...................... 313.9 215.2 145.5
-------- -------- -------
Loss from operations............................ (244.5) (135.7) (67.5)
Net interest income (expense)................... 2.3 2.1 (1.0)
Other expense................................... -- -- 5.4
-------- -------- -------
Net loss........................................ (242.2)% (133.6)% (73.9)%
======== ======== =======
</TABLE>
Years Ended December 31, 1998, 1997 and 1996
Revenues
Multex.com's revenues consist of subscription fees for MultexNET and
MultexExpress, and sales of investment research on a pay-per-view basis through
Multex Research-On-Demand. We also provide professional services to select
MultexEXPRESS clients, including software development, customization and
integration services. These services are typically billed to clients on a time
and material basis. On occasion, as a service to our clients, we have acquired
equipment for resale. To date, we have not derived significant revenues from
international operations.
Total revenues increased 119.2% to $13.2 million in 1998 from $6.0 million in
1997, and increased 127.2% in 1997 from $2.6 million in 1996. The increase in
revenues in 1998 was primarily due to several factors: a significant increase
in the number of institutions and individuals using our pay-per-view service,
Multex Research-On-Demand, and the availability of that service for all of
1998, as compared to 1997, when the availability commenced in April; an
increase in the number of installations utilizing MultexEXPRESS to distribute
their proprietary research to their employees and customers, combined with the
fact that 18 of these installations were revenue-producing for all of 1998, as
compared to only four that were revenue-producing for all of 1997; an increase
in the number of MultexNET users, primarily as a result of the addition of
Reuters as a distribution channel; and the launch of Multex Investor Network in
November 1998. The increase in revenues in 1997 was primarily due to increased
demand for MultexNET, and the introduction of MultexEXPRESS and Multex
Research-On-Demand.
Cost of Revenues
Cost of revenues consists primarily of fees payable to distributors of
MultexNet and Multex Research-On-Demand, royalties payable to the authors of
investment research offered through Multex Research-On-Demand and Multex
Investor Network, Web site development costs of MultexEXPRESS customers,
purchases of equipment for resale and telecommunications costs.
26
<PAGE>
Cost of revenues increased 135.0% to $2.9 million in 1998 from $1.2 million
in 1997, and increased 52.2% in 1997 from $809,000 in 1996. As a percentage of
revenues, cost of revenues increased to 22.0% in 1998 from 20.5% in 1997 and
increased to 30.6% in 1996. The increase in cost of revenues in dollar terms in
each period was primarily due to royalty and distribution fee payments as a
result of increased sales of Multex Research-On-Demand, the increased cost of
equipment purchased for resale, increased Web site development costs resulting
from the increased number of MultexEXPRESS installations, and additional
telecommunications charges resulting from increased sales of subscriptions for
MultexNET and MultexEXPRESS. We incurred approximately $1.7 million of royalty
and distribution expense in the year ended December 31, 1998 as compared to
approximately $450,000 in the year ended December 31, 1997. The gross margin
for the year ended December 31, 1998 was slightly less than that achieved for
the year ended December 31, 1997 due to higher margins achieved on the sale of
our services due to raising the prices of various services and improved
operating efficiencies, which was more than offset by the lower margins
associated with Multex Research-On-Demand sales and equipment resales. Cost of
revenues as a percentage of revenues decreased from 1996 to 1997 as we have
been able to raise the prices of our services and improve operating
efficiencies. We have also reduced the proportion of our revenues resulting
from equipment resales, which have significantly lower margins as compared to
revenues generated by our services.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions, advertising, public relations, tradeshow expenses and
costs of marketing materials. Sales and marketing expenses increased 117.4% to
$7.6 million in 1998 from $3.5 million in 1997, and increased 49.9% in 1997
from $2.3 million in 1996. As a percentage of revenues, sales and marketing
expenses decreased to 57.8% in 1998 from 58.3% in 1997 and 88.4% in 1996. The
increase in sales and marketing expenses in dollar terms in each period was due
to an expansion of our sales force both domestically and internationally, and
increased marketing activities, including the complete redesign of our
marketing materials and additional costs resulting from commencing and
expanding our international marketing efforts. We expect sales and marketing
expenses to increase significantly in dollar terms as we continue to expand the
Multex Investor Network, increase brand awareness, hire additional sales and
marketing personnel, and expand internationally.
Research and Development. Research and development expenses consist primarily
of salaries and benefits. Research and development expenses increased to $2.2
million in 1998 from $1.6 million in 1997, and increased from $1.4 million in
1996, representing an increase of 36.2% in 1998 and a decrease of 13.1% in
1997. As a percentage of revenues, research and development expenses decreased
to 16.5% in 1998 from 26.6% in 1997 and 53.5% in 1996. The increase in research
and development expenses in dollar terms was primarily due to an increase in
the number of developers employed by us, salary increases and, following the
acquisition of our Multex Data Group subsidiary in March 1998, approximately
$234,000 of expenses in 1998 incurred by developers based at Multex Data Group.
We believe that continued investment in product development is critical to
attaining our strategic objectives and, as a result, expect research and
development expenses to increase significantly in dollar terms in future
periods.
General and Administrative. General and administrative expenses consist
primarily of salaries and benefits, fees for professional services and facility
expenses, including depreciation of assets. General and administrative expenses
increased 19.8% to $9.4 million in 1998 from $7.8 million in 1997, and
increased 72.1% in 1997 from $4.6 million in 1996. As a percentage of revenues,
general and administrative expenses decreased to 71.2% in 1998 from 130.3% and
172.0% in 1997 and 1996, respectively. The increase in general and
administrative expenses in dollar terms in each period was primarily due to
increased personnel, professional service fees and facility expenses necessary
to support our domestic and international growth, including costs associated
with our London and Multex Data Group offices of approximately $800,000 and
$680,000, respectively, in the year ended December 31, 1998, as compared to
approximately $600,000 and $0, respectively, in the year ended December 31,
1997. We expect that general and administrative expenses will increase in
future periods as we hire additional personnel and incur additional costs
related to the growth of our business and our operations as a public company.
27
<PAGE>
Loss from Operations
As described above, we have invested heavily in establishing a brand name for
our services, expanding internationally, continuing to develop new services and
maintaining our technological advantage, and increasing the number of our
employees and offices as we seek to increase our market share. For the
foregoing reasons, loss from operations increased 9.0% to $8.9 million in 1998
from $8.2 million in 1997 and 26.2% in 1997 from $6.5 million in 1996. As a
percentage of revenues, loss from operations was (67.5)%, (135.7)% and (244.5)%
for 1998, 1997 and 1996, respectively.
Interest Income (Expense) and Other Income
Net interest expense was $126,000 in 1998 as compared to net interest income
of $125,000 in 1997, which was 108% higher than net interest income of $60,000
in 1996. The changes in net interest income/expense are attributable to the
changes in cash available for investing and fluctuations in borrowings.
Income Taxes
At December 31, 1998, we had net operating loss carryforwards of
approximately $26,200,000 and research and development credits of approximately
$700,000 for income tax purposes that expire in 2009 through 2013. The
utilization of approximately $15,600,000 and $400,000 of these loss
carryforwards and credits, respectively, are subject to an annual limitations
of approximately $1,900,000, pursuant to Section 382 of the Internal Revenue
Code of 1986. The utilization of the loss carryforwards and credits may be
subject to further limitations upon the completion of this offering.
28
<PAGE>
Selected Unaudited Quarterly Results of Operations
The following table sets forth unaudited quarterly statement of operations
data for each of the eight quarters ended December 31, 1998. In the opinion of
management, the unaudited financial results include all adjustments, consisting
only of normal recurring adjustments, necessary for the fair presentation of
our consolidated results of operations for those periods. The consolidated
quarterly data should be read in conjunction with the audited Consolidated
Financial Statements and the Notes thereto appearing elsewhere in this
prospectus. The results of operations for any quarter are not necessarily
indicative of the results of operations for any future period.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands)
Revenues................ $ 950 $ 1,212 $ 1,404 $ 2,448 $ 2,714 $ 3,115 $ 3,492 $3,861
Cost of revenues........ 242 284 302 404 694 752 684 765
------- ------- ------- ------- ------- ------- ------- --------
Gross profit............ 708 928 1,102 2,044 2,020 2,363 2,808 3,096
Operating expenses:
Sales and marketing... 652 943 733 1,179 1,164 1,334 1,819 3,305
Research and
development.......... 370 393 423 415 440 513 573 654
General and
administrative....... 1,932 1,849 1,875 2,180 2,004 2,379 2,380 2,623
------- ------- ------- ------- ------- ------- ------- --------
Total operating
expenses........... 2,954 3,185 3,031 3,774 3,608 4,226 4,772 6,582
------- ------- ------- ------- ------- ------- ------- --------
Loss from operations.... (2,246) (2,257) (1,929) (1,730) (1,588) (1,863) (1,964) (3,486)
Net interest income
(expense).............. 23 (5) 39 68 (196) 56 54 (40)
Other income (expense).. -- -- -- -- 125 -- (841) --
------- ------- ------- ------- ------- ------- ------- --------
Net loss................ $(2,223) $(2,262) $(1,890) $(1,662) $(1,659) $(1,807) $(2,751) $ (3,526)
======= ======= ======= ======= ======= ======= ======= ========
<CAPTION>
Percentage of Total Revenues
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........ 25.5 23.4 21.5 16.5 25.6 24.1 19.6 19.8
------- ------- ------- ------- ------- ------- ------- --------
Gross profit............ 74.5 76.6 78.5 83.5 74.4 75.9 80.4 80.2
Operating expenses:
Sales and marketing... 68.7 77.8 52.2 48.2 42.9 42.8 52.1 85.6
Research and
development.......... 38.9 32.4 30.1 16.9 16.2 16.5 16.4 16.9
General and
administrative....... 203.3 152.6 133.6 89.1 73.8 76.4 68.1 68.0
------- ------- ------- ------- ------- ------- ------- --------
Total operating
expenses........... 310.9 262.8 215.9 154.2 132.9 135.7 136.6 170.5
------- ------- ------- ------- ------- ------- ------- --------
Loss from operations.... (236.4) (186.2) (137.4) (70.7) (58.5) (59.8) (56.2) (90.3)
Net interest income
(expense).............. 2.5 (0.4) 2.8 2.7 (7.2) 1.8 1.5 (1.0)
Other income (expense).. -- -- -- -- 4.6 -- (24.1) --
------- ------- ------- ------- ------- ------- ------- --------
Net loss................ (233.9)% (186.6)% (134.6)% (68.0)% (61.1)% (58.0)% (78.8)% (91.3)%
======= ======= ======= ======= ======= ======= ======= ========
</TABLE>
Our revenues have increased in all quarters presented as a result of
increased acceptance of MultexNET, which was launched in June 1996,
MultexEXPRESS, which was launched in January 1997, and increased purchases of
the Multex Research-On-Demand service, which was launched in April 1997. Our
gross margins fluctuate due to several factors. Increased prices and improved
operating efficiencies lead to an increase in gross margin, which is also
enhanced when significant volumes of professional services are supplied, as in
the three months ended December 31, 1997. In other quarters, when we have
significant amounts of equipment resale transactions, including, for example,
in the three months ended March 31, 1998, gross margin tends to decrease.
Operating expenses have increased in dollar terms during the quarters
presented. Sales and marketing expenses have increased in dollar terms as a
result of increased personnel and increased marketing, advertising and
promotional activity. Research and development expenses increased in dollar
terms as a result of expanded
29
<PAGE>
technological development efforts to support the launch of new services and to
enhance the features and functionality of its services.
Our quarterly revenues, margins and results of operations have fluctuated
significantly in the past and are expected to continue to fluctuate
significantly in the future. Causes of these fluctuations have included and may
include, among other factors, demand for our services, the size and timing of
both new and renewal subscriptions, the number, timing and significance of new
services introduced by us and our competitors, our ability to develop, market
and introduce new and enhanced services on a timely basis, the level of service
and price competition, changes in operating expenses, changes in the mix of
services offered, changes in our sales incentive strategy, sharp declines in
the volume or price levels of securities transactions and general economic
factors. Any one or more of these factors could have a material and adverse
effect on our business, results of operation and financial condition, and makes
the prediction of results of operations on a quarterly basis unreliable. See
"Risk Factors--Fluctuations in our operating results may negatively impact our
stock price."
Liquidity and Capital Resources
We have financed our operations primarily through the sale of equity
securities as we have generated only negative cash flow from operations since
our inception. Through December 31, 1998, we have received an aggregate of
$52.7 million in net proceeds from the sale of five series of convertible
preferred stock. At December 31, 1998, we had $2.3 million of cash and cash
equivalents. Our principal commitments consist of obligations under operating
leases.
Net cash used in operating activities was $6.0 million, $7.1 million and $5.5
million for the years ended December 31, 1998, 1997 and 1996, respectively. The
principal use of cash for all periods was to fund our losses from operations.
Net cash used in investing activities was $13.2 million, $945,000 and $9.2
million for the years ended December 31, 1998, 1997 and 1996, respectively.
Cash used in investing activities was primarily related to purchases of
property, equipment and marketable securities and cash provided by investing
activities was primarily related to the sale of marketable securities. In 1998,
1997 and 1996, we purchased marketable securities following preferred stock
financings pending use of those funds.
Net cash provided by financing activities was $19.0 million, $9.7 million and
$15.4 for the years ended December 31, 1998, 1997 and 1996, respectively. Net
cash provided by and used by financing activities primarily consisted of net
proceeds from the sale of equity securities and borrowings under bank lines of
credit, which were offset in part by repayments of bank debt and lease
obligations.
Although we have no material commitments for capital expenditures, we
anticipate that we will experience a substantial increase in our capital
expenditures and lease commitments consistent with our anticipated growth in
operations, infrastructure and personnel, including the implementation of an
off-site backup computer system and various capital expenditures associated
with expanding our facilities. We currently anticipate that we will continue to
experience significant growth in our operating expenses for the foreseeable
future and that our operating expenses will be a material use of our cash
resources. We believe that the net proceeds of the offering, together with our
existing cash, cash equivalents and marketable securities, will be sufficient
to meet our anticipated cash needs for working capital and capital expenditures
at least for the next twelve months.
Impact of the Year 2000
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems may recognize a date using "00" as the year 1900 rather than the year
2000. As a result, computer systems and/or software used by many companies and
governmental agencies may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
State of Readiness. We have begun to assess the Year 2000 readiness of our
information technology systems, including the hardware and software that enable
us to provide and deliver our MultexNET,
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<PAGE>
MultexEXPRESS, Multex Research-On-Demand and Multex Investor Network services,
and our non-information technology systems. Our assessment plan consists of the
following:
. quality assurance testing of our internally developed proprietary
software incorporated in our MultexNET, MultexEXPRESS, Multex Research-
On-Demand and Multex Investor Network services;
. contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to
the delivery of our MultexNET, MultexEXPRESS, Multex Research-On-Demand
and Multex Investor Network services;
. contacting providers of material non-information technology systems;
. assessment of repair or replacement requirements;
. repair or replacement;
. implementation; and
. creation of contingency plans in the event of Year 2000 failures.
We plan to perform a more comprehensive Year 2000 simulation on our software
incorporated in our MultexNET, MultexEXPRESS, Multex Research-On-Demand and
Multex Investor Network services during the first half of 1999 to test system
readiness. Based on the results of this simulation, we intend to revise the
code of our software for our product offerings as necessary to improve our Year
2000 compliance. We have been informed by many of our vendors of material
hardware and software components of our information technology systems that the
products used by us are currently Year 2000 compliant. We will require vendors
of our other material hardware and software components of our information
technology systems to provide assurances of their Year 2000 compliance. We plan
to complete this vendor process during the first half of 1999. We are currently
assessing the materiality of our non-information technology systems and will
seek assurances of Year 2000 compliance from providers of material non-
information technology systems. Until this testing is complete and these
vendors and providers are contacted and have responded, we will not be able to
completely evaluate whether our information technology systems or non-
information technology systems will need to be revised or replaced.
Costs. To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the operating costs associated with
time spent by employees in the evaluation process and Year 2000 compliance
matters generally. At this time, we do not possess the information necessary to
estimate the potential costs of revisions to our software relating to
MultexNET, MultexEXPRESS, Multex Research-On-Demand and Multex Investor Network
should revisions be required or the replacement of third-party software,
hardware or services that are determined not to be Year 2000 compliant.
Although we do not anticipate that these expenses will be material, these
expenses, if higher than anticipated, could have a material and adverse effect
on our business, results of operations and financial condition.
Risks. We are not currently aware of any significant Year 2000 compliance
problems relating to our software for our product offerings or our information
technology or non-information technology systems that would have a material and
adverse effect on our business, results of operations and financial condition,
without taking into account our efforts to avoid or fix these problems. There
can be no assurance that we will not discover Year 2000 compliance problems in
our software for our product offerings that will require substantial revisions
or replacements. In addition, there can be no assurance that third-party
software, hardware or services incorporated into our material information
technology and non-information technology systems will not need to be revised
or replaced, which could be time-consuming and expensive. Our inability to fix
our software for our product offerings or to fix or replace third-party
software, hardware or services on a timely basis could result in lost revenues,
increased operating costs and other business interruptions, any of which could
have a material and adverse effect on our business, results of operations and
financial condition. Moreover, the failure to adequately address Year 2000
compliance issues in our software relating to MultexNET, MultexEXPRESS, Multex
Research-On-Demand and Multex Investor Network, and our information technology
and non-information technology systems could result in claims of mismanagement,
misrepresentation or breach of contract and related litigation, which could be
costly and time-consuming to defend.
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<PAGE>
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by these entities
to be Year 2000 compliant could result in a systemic failure beyond our
control, including, for example, a prolonged Internet, telecommunications or
electrical failure, which could also prevent us from delivering our MultexNET,
MultexEXPRESS, Multex Research-On-Demand and Multex Investor Network services,
decrease the use of the Internet or prevent users from accessing our MultexNET,
MultexEXPRESS, Multex Research-On-Demand and Multex Investor Network services,
any of which would have a material and adverse effect on our business, results
of operations and financial condition.
Contingency Plan. As discussed above, we are engaged in an ongoing Year 2000
assessment and have not developed any contingency plans. The results of our
Year 2000 simulation testing and the responses received from third-party
vendors and service providers will be taken into account in determining the
need for and nature and extent of any contingency plans.
Our inability to correct a significant Year 2000 problem, if one develops,
could result in an interruption in, or a failure of, certain of our normal
business activities or operations. In addition, a significant Year 2000 problem
concerning our database or the research reports and other information provided
to us by our research and information providers could cause our customers to
seek alternate providers of investment research or cause an unmanageable burden
on our customer service and technical support capabilities. Any material Year
2000 problem could require us to incur significant unanticipated expenses to
remedy and could divert our management's time and attention, either of which
could have a material and adverse effect on our business, results of operation
and financial condition.
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<PAGE>
BUSINESS
The following section contains forward-looking statements which involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth in "Risk Factors" and elsewhere in this Prospectus.
Multex.com is a leading provider of online investment research and
information services designed to meet the needs of individual and institutional
investors, including investment banks, brokerage firms and corporations. Our
services enable timely online access to over 1,000,000 research reports and
other investment information on over 15,000 companies. These reports are
published by more than 400 investment banks, brokerage firms and third-party
research providers worldwide. In the United States, we offer research reports
from 19 out of the 20 leading investment banks and brokerage firms, according
to the Institutional Investor rankings, including Merrill Lynch, Morgan Stanley
Dean Witter, Goldman Sachs and Salomon Smith Barney. In Europe, we offer
research reports from 18 out of the 20 leading investment banks and brokerage
firms, as ranked by the Reuters Tempest survey, and in Asia, we offer research
reports from 20 out of the 20 leading investment banks and brokerage firms, as
ranked by Asia Money. Through various arrangements, more than 600,000
individual investors, institutional investors and financial professionals,
including mutual funds managers, portfolio managers, brokers and their clients,
are able to use our services. In addition to making our services available
through our own Web sites, we have established a number of strategic
distribution relationships to reach both the institutional market and the
individual investor market. For the institutional market, we have established a
number of strategic distribution relationships, including ADP, Bloomberg,
Bridge, Dow Jones and Reuters.
For the individual investor market, we recently launched the Multex Investor
Network, an Internet service targeting the rapidly growing individual investor
market. Multex Investor Network is an interactive community for individual
investors. Visitors to Multex Investor Network can join as a "member" at no
cost. Members of Multex Investor Network have free access to a range of member
services, investment research reports and other financial information from
Multex.com, sponsoring brokerage firms and investment banks, as well as member
generated content. We have established a number of strategic distribution
relationships to promote the Multex Investor Network, including a strategic
distribution relationship with America Online to serve as the anchor tenant for
brokerage research on the AOL Personal Finance channel. America Online is also
a recent investor in Multex.com. In addition, we have established distribution
relationships for the Multex Investor Network with other Internet portals and
financial sites, including The Wall Street Journal Interactive, CNNfn, CBS
MarketWatch, Quote.com, Hoover's and EDGAR Online.
Industry Overview
In recent years, there has been substantial growth in the ownership of equity
and fixed income securities worldwide. According to the Investment Company
Institute, total financial assets of U.S. households were $14.0 trillion at the
end of 1995, and are expected to grow to over $22.5 trillion by the year 2000.
These assets are invested in, among other things, over 8,500 publicly traded
companies in the United States, including over 2,900 companies that have
completed initial public offerings in the last five years, and thousands more
internationally. The growth in financial assets has resulted from a number of
factors, including an increase in the number of mutual funds and increased cash
flows into those mutual funds, households allocating more of their assets to
equity investments, sustained high returns in the equity markets over a number
of years, and lower trading costs as a result of regulatory changes and
improved technologies. The proliferation in equity ownership and associated
trading activity has created a need for more investment research and market
information on the part of investors who seek higher returns on their
portfolios.
The emergence of the Internet as a tool for communications and commerce is
changing the markets for financial transactions and information services.
Individuals are rapidly embracing the Internet because it is
33
<PAGE>
simple to access and it makes vast amounts of information quickly available.
According to International Data Corporation, the number of users of the
Internet grew to 34 million users worldwide by the end of 1996, and is expected
to reach approximately 139 million users by the end of 2000.
Individuals are showing strong preferences for transacting various types of
business, including trading securities, via the Internet, rather than in person
or over the telephone. These transactions are being streamlined and can now be
performed directly virtually anywhere at any time. Individual investors have
accepted and even welcomed self-directed online transactions because these
transactions can be faster, less expensive and more convenient than
transactions conducted through a human intermediary. We believe that these
trends evidence a fundamental change in the way many individual investors
manage their financial assets. As individual investors seek to independently
manage their financial assets, these investors are increasingly looking for
investment research and other financial reports online.
Investment research is one of the primary tools individual and institutional
investors use to assist them in deciding whether to invest in a company or
industry and when to buy and sell a particular security. Investment banks and
brokerage firms, as the primary providers of investment research, have invested
billions of dollars developing their research capabilities, which they use to
build their brand name recognition, enhance customer loyalty and generate
investment banking and trading revenues. Many of these firms are expanding the
breadth and scope of their research by hiring additional analysts and
increasing the number of companies and industries covered by their research and
providing research on international markets. The ability to offer investment
research to investors who traditionally have not had timely access to
investment research is increasingly becoming a competitive advantage and a key
distinguishing feature for brokerage firms. As the industry becomes more
competitive, investment banks and brokerage firms want to distribute their
research in the fastest and most efficient manner possible in order to meet
increasing investor demand for better access to investment research and market
information.
Individual and institutional investors are increasingly demanding access to
investment research and other market information--including Securities and
Exchange Commission filings, business and financial news, stock quotes, stock
price graphs and annual reports--on a "real-time" or near "real-time" basis.
Investment research traditionally has been mailed to investors, which results
in a delay in the receipt of the research and significant printing, duplicating
and mailing costs. In order to distribute research reports on a more timely
basis, some reports are increasingly being sent by facsimile transmission to
investors. However, these conventional distribution methods do not allow
investment banks or brokerage firms to control which investors access and view
their research. Moreover, large institutional investors often receive hundreds
of paper reports, totaling thousands of pages, each week. These paper-based
reports must be manually sorted, distributed, stored, reviewed and prioritized,
which can be time consuming and expensive. Likewise, large users of investment
research and other financial information also include investment banks and
brokerage firms, which utilize their proprietary research and other corporate
documents, as well as research purchased from other sources, to support their
own banking, sales, trading and marketing functions. These firms seek to
quickly and efficiently distribute research and other documents to their
investment bankers, brokers and traders in geographically dispersed locations.
In response to the shortcomings of the traditional research distribution
methods, investment banks and brokerage firms have tried new distribution
methods, including e-mail and distribution through their Web sites, with
varying degrees of success. Distribution by e-mail is inefficient because it
not only requires the recipient to open and view the e-mail messages, but it
also lacks a way for the recipient to differentiate one message from another.
Also, e-mail messages cannot be searched on a full-text basis and are not
easily archived or retrieved by others. Web-site distribution by investment
banks and brokerage firms requires the investor to visit and search numerous
Web sites that provide research, which is time-consuming and inefficient.
Investment banks and brokerage firms need a solution to their internal and
client investment research distribution needs. Institutional investors need a
real-time, commingled source for their investment research needs. Individual
investors need access to research from investment banks, brokerage firms and
other third-party providers.
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<PAGE>
The Multex.com Solution
Our investment research services provide users with online access to a wide
range of research and other investment information from leading investment
banks, brokerage firms and third-party research providers worldwide. Our
Internet-based technology solution ensures timely receipt of information for
critical investment decisions and enables research providers to target their
research more efficiently. At the same time, recipients of the information can
use our proprietary search tools to locate and retrieve the desired
information, saving the time and expense of manually searching through printed
reports. Online availability also eliminates costs otherwise incurred in
printing, mailing, sorting and filing printed reports. Finally, we enable
research and information providers to market more efficiently, not only by
reaching their target customers more effectively, but also by providing
feedback regarding their access and usage patterns. Our services provide the
following key benefits:
Extensive Research Database. We provide entitled investors access to an
online database of research reports and other investment information on over
15,000 companies. We typically add reports to our database at the rate of more
than 15,000 new reports each week. Research reports in our database include all
text, charts, graphs, tables, color and document formatting contained in the
original report. For some of our customers, we also provide access to delayed
stock quotes through Quote.com and real-time Securities and Exchange Commission
filings through EDGAR Online as part of their subscription.
Efficient, Cost-Effective Research Distribution. We enable investment banks,
brokerage firms and third-party research providers to electronically distribute
their research reports to their brokers, bankers and traders and their
customers via the Internet or intranets on a real-time basis. Our services
permit research to be distributed to multiple locations simultaneously. By
using these services, research providers can target investors worldwide,
monitor investor requests for research reports and determine who has accessed
their reports. Because our services are distributed over the Internet or
intranets, research providers save printing and mailing costs and can more
easily target their research to their customers. Our services are password
protected and research included in our database can be accessed only by
authorized users.
Comprehensive Search Capabilities. We have incorporated extensive search
capabilities into our services, thereby enabling users to rapidly and easily
locate relevant commingled research from hundreds of sources and to reduce the
costs of indexing, organizing and distributing research reports. Users can
search for a particular research report by a number of criteria, including
company name, industry, ticker symbol or analyst. Additionally, users can
search on a full text basis for words or phrases. We also enable users to
create searchable, customized research profiles and portfolios, to further
facilitate finding and retrieving the document.
Ease and Efficiency of Use. Our services are designed to facilitate the
electronic contribution and online distribution of investment research. Our
proprietary software allows sell-side research departments and third-party
information providers to easily contribute research reports, financial models,
graphic presentations and other documents in real-time directly to our
database. Research providers can use existing word processing and desktop
publishing software, including Microsoft Word, Excel, PowerPoint, WordPerfect,
HTML and multimedia creation software, and are not required to modify their
method of document creation. For users accessing research, our proprietary
technology incorporates a graphical user interface and provides access through
leading browser technologies to simplify finding, retrieving, viewing and
printing research reports.
Strategy
Our objective is to be the leading provider of online investment research
services for the individual and institutional investment community. We use
leading Internet technologies to provide a unique, integrated platform for the
efficient distribution of investment research and financial information
worldwide. The following are the key elements of our strategy:
Provide Extensive Investment Research and Information. We intend to continue
to leverage our success as an investment research and information source for
institutional investors. We continuously target leading
35
<PAGE>
investment banks and brokerage firms in an effort to add their research to our
research database. By establishing relationships with other third-party
providers of investment and financial information, including EDGAR Online,
Standard & Poor's, ValueLine and others, we can offer extensive third-party
investment research and information. Through our Multex Data Group subsidiary
we are also developing the ability to provide proprietary earnings estimates
and related financial reports. We believe that by continually incorporating
additional sources of investment and financial information into our database,
we will be well positioned to become the premier source of high-value
investment information.
Expand Distribution Channels. We employ a broad array of distribution
channels for our services and are continuously identifying and developing new
channels. For the institutional investor market, we have entered into
agreements with leading distributors of financial information, including ADP,
Bloomberg, Bridge, Disclosure, Dow Jones and Reuters. In order to enhance the
distribution of investment research to individual investors, we have entered
into an agreement with America Online to be an anchor tenant on the investment
research area within the AOL Personal Finance channel, and have also entered
into agreements to distribute our services with a number of leading Internet-
based financial Web sites and distributors, including CNNfn, Data Broadcasting
Corporation, which includes CBS MarketWatch and Disclosure.
Increase Multex Brand Awareness. We believe that increasing the brand name
awareness of Multex.com and our services in the financial community will
contribute to our future success. We have successfully built a brand name among
institutional investors and research providers and are targeting our marketing
efforts to expand the recognition of our corporate and service names through
advertising, direct mail, trade shows, seminars and conferences as well as
joint marketing initiatives with information providers and distributors. We
seek to incorporate our branded logo on each Web site that utilizes our
technology to increase the brand name awareness of Multex.com and our services.
Target Individual Investor Market. Through our Multex Investor Network, we
are targeting the expanding individual investor market. We intend to expand our
related sales and marketing efforts in order to increase traffic on the Multex
Investor Network and expand our member base. In addition, to address the
individual investor market, we intend to capitalize on our arrangement with
America Online and to develop links to the Multex Investor Network from other
leading Internet portals and personal finance Web sites. We are also seeking to
expand the amount of research available to individual investors on the Multex
Investor Network from leading investment banks and brokerage firms. We believe
that the Multex Investor Network will significantly increase individual
investors' access to institutional quality research and enhance our position as
a leading online provider of this research.
Extend Global Presence. To provide U.S. and foreign investors with access to
investment research prepared by leading investment banks and brokerage firms
throughout the world, we target international contributors and subscribers from
our headquarters in New York, from an office in London and through independent
representatives in Hong Kong. We intend to open offices in other leading
financial centers. We believe that institutional investors in Europe, the
Pacific Rim and numerous emerging markets require access to high quality online
investment research and information. Since many investors are investing in
markets throughout the world, they also require research and information from
investment banks and brokerage firms in local markets. In addition, many
investment banks and brokerage firms in U.S. and foreign markets are seeking to
distribute their research worldwide.
Maintain Technology Leadership. We intend to continuously develop and
incorporate new technologies to enhance our services. We intend to maintain our
leadership position by continuing to improve our technology through investment
in research and development activities, use of new Internet, intranet and
extranet technologies and integration of each of our services. In particular,
we are extending the available document formats to support spreadsheets,
presentation applications, HTML-based pages, URL references, and audio and
video files. We are also developing integrated and directed user alerts and e-
mail and fax capabilities. Using our technological capabilities and expertise,
we focus on enhancing our scalable and open architecture.
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Focus on Multiple Revenue Opportunities. We are pursuing multiple revenue
opportunities for future growth with a particular focus on establishing a
recurring revenue stream from subscriptions. We believe that subscriptions,
professional service fees, pay-per-view transactions and advertising represent
key opportunities. By expanding the number of research providers and the amount
and formats of information available, we believe that we can generate
additional revenue from new and enhanced services. In addition, we believe that
by targeting individual investors and corporations, we may be able to increase
the pay-per-view revenues from Multex Research-On-Demand and the Multex
Investor Network. We also expect to generate advertising and sponsorship
revenue from the Multex Investor Network and our other Web sites.
Services
The following table sets forth information concerning our principal service
offerings:
Multex.com Service Offerings
<TABLE>
<CAPTION>
Name of Revenue
Service Description Target Market Model
---------------- ------------------------- -------------------------------------- -------------------
<S> <C> <C> <C>
MultexNET Access to real-time, Buyside institutions Annual subscription
commingled research and corporations
MultexEXPRESS Real-time distribution of Sellside investment Annual subscription
proprietary research to a banks and brokerage firms
provider's employees and
clients
Multex Research- Access to commingled, Corporations, financial institutions Pay-per-view
On-Demand pay-per-view research on and advisors, institutional investors,
a delayed basis other professional service firms
and libraries
Multex Investor Access to free and Individual investors Advertising,
Network pay-per-view research sponsorship and
on a delayed basis pay-per-view
</TABLE>
MultexNET
MultexNET enables subscribers to access, on a real-time basis over the
Internet, commingled full-text investment research reports supplied by leading
investment banks, brokerage firms and third-party research providers. Over
11,000 mutual fund managers, portfolio managers and other institutional
investors, as well as research analysts and other financial services
professionals, are able to use MultexNET, which offers timely online access to
over 1,000,000 research reports and other investment information from more than
400 information provides. Subscribers to MultexNET are offered advanced
searching and filtering capabilities, and the ability to retrieve investment
research reports over the Internet. Our proprietary software enables us to
distribute a particular research or other financial report only to those users
who have been authorized or entitled to access the report by the firm that
authored the report. MultexNET enables research and other information providers
to monitor requests for their research reports and determine who has accessed
and viewed the report. Subscribers whose subscription does not entitle them to
access particular embargoed research and third-party research information may
be able to access these reports through Multex Research-On-Demand on a pay-per-
view basis after the typical 15-day embargo period has ended.
Features of MultexNET include real-time access to high-quality multimedia and
rich text research reports, the ability to utilize advanced searching features
which permit searches by company name, ticker symbol, brokerage firm, analyst,
industry/subject codes and date, the ability to create and modify customized
portfolios and profiles in order to ensure the delivery of updated research
information about those companies in a particular user's portfolio or profile,
and easy-to-use document viewing, printing, faxing and e-mail options. We also
provide access to delayed stock quotes through Quote.com and real-time filings
with the Securities and Exchange Commission filings through EDGAR Online as
part of the MultexNET subscription. In addition, features currently under
development will enable subscribers to arrange for automated fax and/or e-mail
distribution of research reports to the subscriber's end-users.
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Research reports and other financial information available through MultexNET
are stored on our servers and made available through the Internet. MultexNET
requires subscribers to have an Internet connection, or a connection to an
extranet maintained by us, Microsoft Internet Explorer or Netscape Navigator
Web browsers, and the Adobe Acrobat viewer installed on their workstation,
desktop or laptop computer.
The annual subscription fee for MultexNET typically ranges from $1,000 to
$3,540 per subscriber depending upon the number of users at the particular
buyside institution or corporation who have access to the service. As of
December 31, 1998, we had approximately 2,580 paying subscribers to MultexNET,
as compared to approximately 2,040 paying subscribers on December 31, 1997. In
addition, pursuant to our agreement with Reuters, approximately 6,000 Reuters'
customers obtained MultexNET user passwords to use MultexNET as of December 31,
1998, whereas no Reuters' customers had obtained passwords as of December 31,
1997.
MultexEXPRESS
MultexEXPRESS enables investment banks, brokerage firms and other financial
institutions to distribute their own proprietary financial research, as well as
corporate documents, forms, news and other proprietary content, over the
Internet or through intranets and other private networks. Using MultexEXPRESS,
investment banks, brokerage firms and other financial institutions are able to
reduce the cost of printing and distributing research reports and other
internal information and can disseminate more timely information to their
employees and customers. Like MultexNET, MultexEXPRESS offers the contributing
firm the ability to identify which users actually access research through the
usage reporting system incorporated into MultexEXPRESS. MultexEXPRESS can be
implemented as a unique Internet site or seamlessly integrated into a firm's
existing online presence to target information to employees and key clients on
a real-time basis. MultexEXPRESS is built on the same technology platform and
provides users with the same core functionality found in MultexNET.
MultexEXPRESS also offers additional features and integration options targeted
to the internal distribution needs of investment banks, brokerage firms and
other financial institutions.
MultexEXPRESS has been installed at 30 investment banking and brokerage
firms, with more than 530,000 users, approximately 450,000 of which are
generated from one MultexEXPRESS installation, at December 31, 1998. This
compares to 18 MultexEXPRESS installations, with more than 500,000 users,
approximately 450,000 of which are generated from one MultexEXPRESS
installation, at December 31, 1997. MultexEXPRESS is generally contracted for a
one to three year period at a fixed rate dependent upon the scale of the
enterprise-wide solution offered to the customer. Currently, the average price
per installation is approximately $150,000 for each year of the contract.
Multex Research-On-Demand
Multex Research-On-Demand gives corporations, financial institutions and
advisors, institutional investors, other professional service firms and
libraries, the ability to access more than 450,000 research reports and other
information from over 250 MultexNET research providers. Each report can be
purchased on a pay-per-view basis after an embargo period during which the
research providers make the report available on a proprietary basis only to
their own employees and customers. A growing subset of the content in our
database, approximately 50% as of December 31, 1998, is available on Multex
Research-On-Demand. This service is available either on a stand-alone basis,
through strategic distribution channels or as a part of MultexNET,
MultexEXPRESS or Multex Investor Network. While the majority of the reports
available on Multex Research-On-Demand relate to U.S. equities and investment
opportunities, we are adding information relating to foreign equities and
investment opportunities.
Multex Research-On-Demand customers can purchase and download the research
reports to their own computer using advanced searching and filtering technology
that locates documents by symbol, industry, brokerage firm, full-text words and
phrases, or user-defined portfolios and profiles. Users can receive e-mail
alerts throughout the day, which may be keyed to their portfolios or other
user-provided criteria. The financial research reports available to Multex
Research-On-Demand customers include both those relating to a particular
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company and those relating to an industry as a whole. Research from independent
research providers, including Standard & Poor's, Disclosure and Value Line
Mutual Fund Survey, is also available for purchase. An online purchase history
provides a specific list of all of the reports purchased by an individual user.
Prices per document available through Multex Research-On-Demand generally
range from $10.00 to $150.00, based on the length and type of document. We
share the pay-per-view fees generated from the sale of documents with the
investment bank, brokerage firm or third-party research provider that authored
the original research report, and the distributor through which the purchase
was initiated. There is no registration or subscription fee for use of this
service. Some of our users have purchased an annual subscription which enables
them to purchase individual research reports at a discounted price. We are also
adding analysis from leading third-party advisory services.
Multex Investor Network
Multex Investor Network is an Internet service targeting the rapidly growing
individual investor market. Multex Investor Network is an interactive community
for individual investors. Visitors to Multex Investor Network can join as a
"member" at no cost. Members of Multex Investor Network can download, view and
print at no cost a wide range of investment research reports and investment
content from us, sponsoring brokerage firms and investment banks, as well as
member-generated content. Members also have access to over 250,000 premium
"pay-per-view" investment and brokerage research reports from over 250
brokerage firms, investment banks and third-party information providers. We
have established a number of strategic distribution relationships to promote
the Multex Investor Network, including a strategic distribution relationship
with America Online to serve as the anchor tenant for brokerage research on the
AOL Personal Finance channel. In addition, we have established distribution
relationships for the Multex Investor Network with other Internet portals and
financial sites, including The Wall Street Journal Interactive, CNNfn, CBS
MarketWatch, Quote.com, Hoover's and Edgar On-Line.
We generate revenue from our Multex Investor Network through the sale of
sponsorships to investment banks and brokerage firms, the sale of banner
advertisements that allow interested users to link directly to the advertisers'
own Web sites, and pay-per-view sales of investment research and other
financial reports. To date, we have signed sponsorship agreements with Merrill
Lynch, Salomon Smith Barney and Gruntal & Co.
In connection with the Merrill Lynch sponsorship, we recently assisted
Merrill Lynch in the launch of www.askmerrill.com, a four-month trial Web site
that makes Merrill Lynch's award-winning research available to individual
investors with access to the Internet. Specifically, the trial Web site,
developed by us and co-branded in partnership with Merrill Lynch, gives
registered users access to:
. Merrill Lynch Research reports on specific companies, including analyst
reports and earnings estimates;
. an at-a-glance listing of the latest research reports available from
Merrill Lynch analysts; and
. a research tracker feature that automatically displays reports for up to
ten companies specified by the user.
Other Services
Through Multex Data Group, we maintain an earnings estimate database and
generate related, proprietary financial reports, which are resold through
various distributors. These reports, which combine information from our
earnings estimates database with other fundamental data obtained from a variety
of sources, are sold on a pay-per-view basis through Multex Research-On-Demand
and Multex Investor Network, and may be offered in the future on a subscription
basis.
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Research and Information Providers
We have dedicated substantial resources to develop relationships with an
extensive range of domestic and international investment banks, brokerage firms
and third-party research providers, and we have a dedicated sales force which
is continually recruiting research providers. We manage our relationship with
each major research provider through our staff of account representatives.
Set forth below is a representative list of our research and information
providers:
Selected North American Information Providers
<TABLE>
<S> <C>
ABN Amro Chicago ING Barings PaineWebber
Corporation Interstate/Johnson Lane* Piper Jaffray*
BancBoston Robertson J.P. Morgan Securities Ragen McKenzie*
Stephens* J.C. Bradford & Co.* Raymond James &
Bear Stearns & Co. Inc. Janney Montgomery Scott* Associates*
Brown Brothers Harriman* Jefferies & Co. * Robinson-Humphrey*
BT Alex. Brown* Keefe, Bruyette & Woods* Salomon Smith Barney*
Chase Securities* Legg Mason Wood Walker* Sanford Bernstein
CIBC Oppenheimer* Merrill Lynch* Schroder & Co., Inc.
CS First Boston Morgan Keegan & Company* SG Cowen*
Dain Rauscher Wessels* Morgan Stanley Dean Soundview Financial
Goldman Sachs & Co. Witter Group*
Gruntal & Co.* NationsBanc Montgomery Volpe Brown Whelan
Hambrecht & Quist* Securities Warburg Dillon Read*
</TABLE>
Selected International Information Providers
<TABLE>
<S> <C>
ABN Amro Dresdner Kleinwort Benson PaineWebber
Alfred Berg Fox Pitt, Kelton* International*
Auerbach Grayson* Goldman Sachs Paribas*
Bankers Trust Australia International RBC Dominion
Limited HSBC James Capel Securities Inc.
Cazenove & Co. Indosuez WI Carr* Robert Fleming & Co.
Clarion Securities ING Barings Salomon Smith Barney*
Commerzbank AG Jardine Fleming Holdings Santander Investment
Credit Lyonnais Europe* Ltd. Securities*
Credit Suisse First JP Morgan Securities Ltd. SBC Warburg Dillon
Boston Merrill Lynch Read
Daiwa Institute of International* Schroder Securities
Research Ltd.* Morgan Stanley Limited*
Deutsche Morgan Grenfell International SG Securities PTE
Nomura Securities Union Bank of
International Switzerland
</TABLE>
Selected Third-Party Information Providers
Yorktown Securities*
<TABLE>
<S> <C>
Baseline* Instinet Research* The Red Chip Review*
CNBC/Dow Jones* IPO Maven* Value Line Mutual Fund
Disclosure* Renaissance Capital* Survey*
Ford Investor Services* Standard & Poor's* Wall Street
Transcript*
WEFA*
</TABLE>
- --------
* Also provides research and information for Multex Research-On-Demand
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Customers
Multex.com has dedicated substantial resources to developing relationships
with an extensive range of buyside institutions, investment banks, brokerage
firms, libraries, corporations and other professional service firms. As a
result, MultexNET is used at over 4,000 financial institutions and
corporations, MultexEXPRESS is used by 30 of the world's leading brokerage
firms, and thousands of users access Multex Research-On-Demand. Multex Investor
Network, which was launched in November 1998, had more than 180,000 registered
members on March 1, 1999.
Set forth below is a representative list of our institutional customers:
<TABLE>
<S> <C> <C>
AIM Advisors Gabelli Asset Management Morgan Stanley Asset
Alliance Capital Management GE Capital Management
Arthur Andersen & Company Goldman Sachs & Co. Oppenheimer Funds
BancBoston Robertson Stephens Gruntal & Co. PaineWebber
Barclays Global Investors Heidrick & Struggles Piper Jaffray
BT Alex. Brown Hewlett-Packard Putnam Investments
Citibank Global Asset Management Invesco Asset Management T. Rowe Price
Dain Rauscher Wessels J.C. Bradford & Co. Ragen McKenzie
Delaware Management Jefferies & Co. Salomon Smith Barney Asset
Dresdner/RCM Global Investors John Hancock Advisors Management
Ernst & Young Kleinwort Benson Investment SBC Warburg Dillon Read
Fidelity Capital Markets Management SG Cowen
Fleet Investment Advisors-- Legg Mason Wood Walker Soundview Financial Group
Equity Partners McKinsey & Co. UBS Securities
Franklin Research and Development Merrill Lynch Asset Management Vanguard
</TABLE>
Strategic Distribution Relationships
Multex.com has established a number of strategic distribution relationships
to provide marketing and additional distribution for its services, to build
traffic on our Web sites and to increase investor awareness of our services and
the Multex.com brand name. These strategic relationships target both
institutional investors and individual investors.
We have entered into agreements and strategic relationships with ADP,
Bloomberg, Bridge, Disclosure, Dow Jones and Reuters to assist us in marketing
our services to institutional investors, although in the case of Bridge, the
services are not expected to become available until the third quarter of 1999.
In each case, we share in revenues generated from sales to end-users through
the strategic partners' distribution networks. The principal services
distributed by these strategic partners are MultexNET, which is made available
as a service through the partners' distribution network on similar terms to
those available to subscribers to MultexNET over the Internet, and Multex
Research-On-Demand. We recently renegotiated our strategic relationship with
Reuters for the five-year term beginning on January 1, 1999. See "Certain
Transactions."
In order to enhance the distribution of investment research to the individual
investor market, we have entered into an agreement with America Online. This
agreement is for an initial two-year term and is automatically renewable unless
either party gives advance notice of its intention not to renew. Under our
agreement with AOL, we have secured a position as an anchor tenant for
brokerage research on the AOL Personal Finance channel as well as a integrated
links on other screens within the AOL service, with links from those locations
back to Multex Investor Network.
In addition to the strategic relationships described above, we have entered
into agreements with numerous other distributors, including Big Charts, CBS
Marketwatch, CNNfn, Data Broadcasting Corp., EDGAR Online, Hoover's, MediaOne,
Quote.com, Stock Smart and Ziff Davis Interactive Investor, to further attract
traffic to the Multex Investor Network and our other Web sites.
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Sales and Marketing
Multex.com sells its services through a sales and marketing organization,
which consisted of an aggregate of 59 employees at December 31, 1998. Our sales
force is organized into geographic teams focused on sales of subscriptions to
MultexNET, sales of subscriptions to MultexEXPRESS and sales of Multex
Research-On-Demand on a pay-per-view or subscription basis. Furthermore,
sponsorships on the Multex Investor Network are sold directly by our sales
staff. In addition, we sell sponsorship and banner advertising, pursuant to an
agreement with DoubleClick.
Our sales force develops sales presentations, demonstrates our services and
manages the complete sales cycle. We currently have sales personnel in New York
and London, as well as two independent representatives in Hong Kong, who are
responsible for specific geographic territories as well as named accounts and
prospects around the world. We recently opened a sales office in San Francisco
and plan to add additional sales personnel from time to time as necessary.
In addition to our direct sales efforts, our services are also sold over a
growing number of third-party channels, including Bloomberg, Disclosure and
Reuters, which reach individual and institutional investors around the world.
We believe that our presence on these channels also serves as a significant and
continuous source of marketing for our services and the Multex.com brand name.
See "--Strategic Distribution Relationships."
To support our sales efforts, we employ a variety of methods to market and
promote our services and the Multex.com brand name. These methods include
direct mail, print advertisements, Internet advertisements, trade shows and
conferences, and telemarketing. We also utilize our Web sites, which are
continually updated with corporate and industry news, new information about our
services and other financial information, to provide links and other
registration opportunities, all designed to create awareness, generate leads
and sell services.
Research and Development
Our future success will depend upon our ability to maintain and develop
competitive technologies, to continue to enhance our current services and to
develop and introduce new services in a timely and cost-effective manner that
meets changing conditions, including evolving customer needs, new competitive
service offerings, emerging industry standards and rapidly changing technology.
We have a dedicated research and development organization that develops new
features and functionality for our existing services as well as the software
that supports new services. The research and development team has expertise in
network development and maintenance, Internet and intranet protocols, software
development, database maintenance and development and a variety of programming
tools and languages and operating systems. At December 31, 1998, we had 24
employees engaged in research and development. Research and development
expenses were $1.4 million in 1996, $1.6 million in 1997 and $2.2 million in
1998. We expect to continue making substantial expenditures on research and
development in the future.
The market for the electronic distribution of investment research and related
services is characterized by rapidly changing technology, evolving industry
standards in computer hardware, programming tools, programming languages,
operating systems, database technology and information delivery systems,
changes in customer requirements and frequent new product introductions and
enhancements. There can be no assurance that we will be able to develop and
market, on a timely basis, if at all, service enhancements or new services that
respond to changing market conditions or that will be accepted by individual
and institutional investors. Any failure by us to anticipate or to respond
quickly to changing market conditions, or any significant delays in service
development or introduction, could cause users to delay or decide against
purchases of our services and would have a material and adverse effect on our
business, results of operations and financial condition. See "Risk Factors--Our
business would be materially and adversely affected if the emerging market for
online investment research does not continue to grow."
Customer Service and Network Support
Multex.com is committed to providing a high level of service and support to
its customers. Because our services are available to users 24 hours-a-day, 7
days-a-week, our network support services are likewise
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continuously available. Customer service is generally available weekdays from 8
a.m. to 6 p.m. (New York time). Inquiries come in through our Web sites and via
e-mail and telephone. At December 31, 1998, we had 29 employees engaged in
customer service and network support.
System Architecture and Technology
We believe that our system architecture and proprietary technology provide us
with an important competitive advantage. We use only open standard components,
including Microsoft Windows NT, Microsoft Internet Information Server,
Microsoft SQL Server and Fulcrum Server. The infrastructure of our production
site is built to provide continuous availability of service to both
contributors and users over Internet and intranet channels. All the critical
components of the system are redundant, which allows continuous service in case
of unexpected component failure, maintenance and upgrades. Our infrastructure
is scalable, allowing us to quickly adjust to our expanding client and research
information database.
Our operations are dependent on our ability to maintain our computer and
telecommunications systems in effective working order and to protect our
systems against damage from fire, natural disaster, power loss,
telecommunications failure or similar events. Although we are currently in the
planning stages of acquiring and implementing a redundant back-up, off-site
computer system, this measure will not eliminate the significant risk to our
operations from a natural disaster or system failure at our principal site. In
addition, any failure or delay in the timely transmission or receipt of feeds
and computer downloads from our information providers, due to system failure of
the information providers, the public network or other failures, could disrupt
our operations. See "Risk Factors--Because our business is dependent upon one
computer system, we are particularly susceptible to problems caused by system
failures, security breaches or other damage to our system."
Competition
The market for the electronic distribution of investment research and related
services is intensely competitive and this competition is expected to continue
to increase. We believe that our ability to compete will depend upon many
factors both within and beyond our control, including continuing relationships
with leading providers of investment research, the timing and market acceptance
of new services and enhancements to existing services developed by us and our
competitors, ease of use, performance, price, reliability, customer service and
support, and sales and marketing efforts. Our competitors vary in size and in
the scope and breadth of services offered. Further, we encounter direct and
indirect competition from a number of sources, including traditional media,
companies that provide investment research, including investment banks and
brokerage firms, many of whom have their own Web sites, investment newsletters,
personal financial magazines and other Internet providers of either free or
subscription research services. In addition, extensive company-specific
information, as well as general investment research relating to particular
industries, may be obtained, frequently without charge, from public sources,
including annual reports, Standard & Poor's company-specific reports and Value
Line investment research reports, all of which are available from public
libraries and from the companies to which these reports relate, and industry
research appearing in financial periodicals.
We believe that the principal competitive factors in attracting and retaining
information providers include the ability to provide full-text, publication-
quality research reports electronically on a real-time basis, relationships
with institutional investors interested in receiving this research and the
flexibility of open architecture systems which enable any computer user with
access to a browser to receive research reports regardless of which operating
system controls the information provider's computer. We believe that the
principal competitive factors in attracting and retaining subscribers include
price of the service, the depth, breadth and timeliness of content, the full-
text search features available and the ease of use. We believe that the
principal competitive factors in attracting advertisers will include the number
of subscribers, the demographics of these subscribers and the "pre-
qualification" features that can be offered to investment banks and brokerage
firms. There can be no assurance that we will be able to compete favorably with
respect to these or any other competitive factors.
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Our MultexNET and Multex Research-On-Demand services compete with large and
well-established distributors of financial information, including First Call,
Investext and I/B/E/S. Our MultexEXPRESS service competes with services
provided by in-house management information services personnel and independent
systems integrators. Our Multex Investor Network service competes with Web
sites that offer personal finance information, including Microsoft Investor and
Yahoo! Finance, and Web sites hosted by investment banks and brokerage firms,
such as DLJ Direct and Prudential Securities, offer a particular firm's
research reports online either exclusively to their customers or more generally
to the public. Numerous other competitors, including Market Guide, Standard &
Poor's, Moody's and others, offer similar investment research-based services
that compete, or may in the future compete, directly and indirectly with our
services. Many of our existing and prospective competitors have longer
operating histories, greater name recognition, larger customer bases and
significantly greater financial, technical and marketing resources than we do.
As a result, they may be able to respond more quickly to new or emerging
technologies and changes in investor requirements, or devote greater resources
to the development, promotion and sale of their services than we can. These
competitors may be able to undertake more extensive marketing campaigns, adopt
more aggressive pricing policies and make more attractive offers to potential
employees, subscribers, strategic partners and providers of investment research
information. See "Risk Factors--Our business may be adversely affected by
competitive pressures."
Intellectual Property
Our future success will depend, in substantial part, on our intellectual
property, and we rely upon copyright, patent, trade secret and trademark laws
in the United States and other jurisdictions to protect our proprietary rights.
We own copyrights in the computer software and online materials that we have
developed or acquired, and currently hold limited licenses to use and
distribute software in which third parties own copyrights, including software
for electronic document and database management. We have also entered into
limited license agreements with some of the investment banks, brokerage firms
and other third-party research providers that own the copyrights in research
reports that we distribute electronically. We distribute other research reports
without the benefit of written licenses with the providers of those reports,
solely on the basis of implied licenses that we believe these providers have
granted. There can be no assurance that we will be able to maintain our
licenses of research content or of third-party software, that we will be able
to obtain these licenses in the future on commercially reasonable terms, if at
all, that we will be able to continue to distribute those research reports for
which we do not have written licenses or that our competitors will not be able
to independently develop competing software or on-line materials so as to avoid
infringing upon our copyrights. Also, because none of our licenses of third-
party software and research content are exclusive, this software and content is
and will be available to our current and future competitors. Our failure to
protect or secure ownership of, or to maintain licensed rights to use and
distribute software and content of others, or the ability of our competitors to
obtain rights to distribute the same research reports that we distribute, could
have a material and adverse effect on our business, results of operations and
financial condition.
We own three U.S. patents which claim certain aspects of an information
delivery system that provides electronic distribution of research documents
over the Internet. These patents expire on June 4, 2016. We currently have two
pending international patent applications designating certain foreign countries
corresponding to two of the issued patents. We have also filed patent
applications in Canada and the United Kingdom corresponding to the third
patent. There can be no assurance that any of our pending patent applications
will be allowed, that any patents will be issued to us even if the respective
applications have been or will be allowed, or that any patents that are issued
to us will not be successfully challenged by others and invalidated through
agreements with employees, representatives, advisors and others. We also rely
on trade secrets and proprietary know-how for certain unpatented aspects of our
business information and technology. To protect such information, we generally
require all employees, consultants and licensees to enter into confidentiality
agreements limiting the disclosure and use of such information. There can be no
assurance that these agreements provide meaningful protection or that they will
not be breached, that we will have adequate remedies for any such breach, or
that our trade secrets, proprietary know-how, and technological advances will
not otherwise become known to others. In addition, there can be no assurance
that, despite precautions we have
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taken, others have not and will not obtain access to our proprietary
technology. Further, there can be no assurance that third parties will not
independently develop substantially equivalent or better technology or accrue
equivalent business information.
We rely upon and seek to protect the trademarks and service marks that we
currently use, and those that we intend to use in the future, through
registration in the United States and other jurisdictions. We have been granted
United States federal and German registrations for MultexNET, and two MultexNET
logos, as trademarks and service marks, and have applied for registration of
the same marks in Japan, Taiwan, Hong Kong, the United Kingdom and the European
Union. There can be no assurance that any of our pending trademark applications
will be allowed or granted and, if they are allowed or granted, that they, or
any of the registrations that have already been granted to us, will not be
successfully challenged by others and invalidated through administrative
process or litigation. We also use the following trademarks and service marks:
Multex.com, the Multex.com logo, MultexEXPRESS, Multex Research-On-Demand,
Multex Investor Network and The Online Investment Research Network. There can
be no assurance that our use of and interest in these trademarks and service
marks will be subject to any legal protection in any of the jurisdictions in
which we now do business or might do business in the future. As our business is
dependent on brand recognition in the marketplace, any failure to maintain and
protect our trademarks and service marks could have a material and adverse
effect on our business, results of operations and financial condition.
We expect to license some of our proprietary technology to third parties,
including in connection with the establishment of our international business
operations, which may be controlled by these third parties. While we will
attempt to ensure that our proprietary rights will be protected by our business
partners, no assurances can be given that these partners will not take actions
that could materially and adversely affect the value of our proprietary rights
or the reputation of our services and technologies. We currently license some
aspects of our text search functionality and relational database technologies
from third parties. Our failure to maintain these licenses, or to find a
replacement for these technologies in a timely and cost-effective manner, could
have a material adverse effect on our business, results of operations and
financial condition.
Legal standards relating to the validity, enforceability and scope of
protection of proprietary rights in Internet-related businesses are uncertain
and still evolving, and no assurance can be given as to the future viability or
value of any of our proprietary rights or other companies within the industry.
See "Risk Factors--If we fail to adequately protect our intellectual property
or face a claim of infringement, we could lose our proprietary rights and be
liable for significant damages."
Government Regulation
We are subject, both directly and indirectly, to various laws and
governmental regulations relating to our business. There are currently few laws
or regulations directly applicable to commercial online services or the
Internet. However, due to the increasing popularity and use of commercial
online services and the Internet, it is possible that a number of laws and
regulations may be adopted with respect to commercial online services and the
Internet. These laws and regulations may cover issues including, for example,
user privacy, pricing and characteristics and quality of products and services.
Moreover, the applicability to commercial online services and the Internet of
existing laws governing issues including, for example, property ownership,
libel and personal privacy is uncertain and could expose us to substantial
liability. Any new legislation or regulation or the application of existing
laws and regulations to the Internet could have a material and adverse effect
on our business, results of operations and financial condition.
As our services are available over the Internet anywhere in the world,
multiple jurisdictions may claim that we are required to qualify to do business
as a foreign corporation in each of those jurisdictions. Our failure to qualify
as a foreign corporation in a jurisdiction where we are required to do so could
subject us to taxes and penalties for the failure to qualify. It is possible
that state and foreign governments might also attempt to regulate our
transmissions of content on our Web sites or prosecute us for violations of
their laws. There can be no assurance that violations of local laws will not be
alleged or charged by state or foreign governments, that we might not
unintentionally violate these laws or that these laws will not be modified, or
new laws enacted, in the future.
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Employees
At December 31, 1998, we employed 149 persons, of which 59 were in sales and
marketing, 29 were in network operations, 24 were in research and development,
20 were in contributor relations and 17 were in accounting, finance and
administration. In addition, we retain the services of two independent
representatives in Hong Kong to solicit research and information providers. Our
future success will depend in substantial part upon our ability to attract and
retain highly qualified employees. Competition for this personnel, in
particular information technology professionals, is intense, and there can be
no assurance that we will be able to retain our senior management or other key
employees, or that we will be able to attract and retain additional qualified
personnel in the future. Our employees are not represented by any collective
bargaining organization and we consider our relations with our employees to be
good. See "Risk Factors--We are dependent on our key personnel for our future
success."
Facilities
Our corporate headquarters are located in New York, New York. We lease
approximately 20,000 square feet, under a lease which expires in December 2000.
We also lease space for our sales and marketing efforts in San Francisco and
London. We currently are seeking additional facilities and believe that we will
be able to obtain additional space as needed on commercially reasonable terms.
Legal Proceedings
We are not a party to any material legal proceedings.
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MANAGEMENT
Executive Officers, Other Key Employees and Directors
Executive officers, other key employees and directors of Multex.com, and
their ages as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Age Position
Executive Officers: --- --------
<S> <C> <C>
Isaak Karaev(1)......... 52 Chairman, President and Chief Executive Officer
James M. Tousignant..... 38 Executive Vice President
Philip Callaghan........ 46 Chief Financial Officer
Gregg B. Amonette....... 46 Senior Vice President, Sales and Marketing
John J. Mahoney......... 39 Senior Vice President, Product Development
Key Employees:
Mikhail Akselrod........ 43 Vice President, Operations
Malcolm Draper, Jr...... 46 Vice President, Multex Data Group, Inc.
William Ferguson........ 50 Managing Director, International Operations
Eduard Kitain........... 32 Vice President, Software Engineering
Philip Scheps........... 52 Vice President, Finance and Controller
Directors:
I. Robert Greene(1)(2).. 38 Director
Peter G. LaBonte........ 39 Director
Lennert J. Leader....... 43 Director
Milton J.
Pappas(1)(2)(3)........ 70 Director
Herbert L. Skeete....... 46 Director
</TABLE>
- --------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
Isaak Karaev co-founded Multex.com in April 1993 and has served as President
and Chief Executive Officer and a director of Multex.com since that time. In
addition, Mr. Karaev served as Chairman of the board of directors from
Multex.com's inception to October 1996 and has served as Chairman of the board
of directors since April 1998. Before founding Multex.com, Mr. Karaev was the
Senior Vice President for Advanced Systems Development in the Brokerage
Services Information Group of ADP, a provider of front-office market data
services and back-office processing to the financial services industry, from
1989 to April 1993. Mr. Karaev was named to the board of directors pursuant to
an agreement which will terminate upon the completion of the offering. However,
he intends to continue to serve on the board of directors following the
completion of the offering.
James M. Tousignant co-founded Multex.com in April 1993 and has served as
Multex.com's Executive Vice President since December 1998. Mr. Tousignant
served as Multex.com's Senior Vice President from April 1993 to December 1998.
Before founding Multex.com, Mr. Tousignant was Senior Director of Sales in the
Brokerage Services Information Group of ADP from 1989 to April 1993.
Philip Callaghan has served as Multex.com's Chief Financial Officer since
December 1996. From 1992 to November 1996, Mr. Callaghan was Executive Vice
President and Chief Financial Officer of Graff Pay-Per-View, Inc., a
distributor of programming to the cable and direct satellite industries in the
United States and Europe. He served as the Managing Director of Media Computer
Systems Limited, a software developer for the radio and television industries,
from 1989 to 1992. From 1987 to 1989, Mr. Callaghan was Financial Director of
MTV Europe.
Gregg B. Amonette has served as Multex.com's Senior Vice President, Sales and
Marketing since December 1998, and also served as Multex.com's Vice President,
Sales and Marketing from August 1996 to December 1998. From January 1995 to
July 1996, Mr. Amonette was Vice President and General Manager of Micrognosis,
Inc., a division of CSK Software, Inc. and a provider of bank and brokerage
trading-room software and technology. From 1984 to December 1994, Mr. Amonette
served in various capacities in the Brokerage Services Information Group of
ADP, including most recently as Vice President of Retail Sales.
47
<PAGE>
John J. Mahoney has served as Multex.com's Senior Vice President, Product
Development since December 1998, and also served as Multex.com's Vice
President, Product Development from August 1994 to December 1998. Prior to
joining Multex.com, Mr. Mahoney was Vice President of Workstation Products in
the Brokerage Services Information Group of ADP from 1987 to March 1993.
Mikhail Akselrod joined Multex.com in April 1993 and has served as
Multex.com's Vice President, Operations since April 1997. Prior to joining
Multex.com, Mr. Akselrod was an independent software consultant from 1991 to
March 1993 and previously was Chief Engineer at R.H. Lytle Co., an independent
systems integration consulting firm, from 1989 to 1991.
Malcolm Draper, Jr. has served as Multex.com's Vice President, Multex Data
Group, Inc. since April 1998, and served as Multex.com's Vice President,
International Operations from April 1997 to April 1998 and as its Vice
President, Operations from May 1995 to April 1997. From March 1994 to April
1995, Mr. Draper was Chief Financial and Administrative Officer of Paresco,
Inc., an asset management company. From 1991 to February 1994, he was Manager
of Software Development at Quies Corp., a software company.
William Ferguson has served as Multex.com's Managing Director, International
Operations since February 1998. From September 1997 to January 1998, Mr.
Ferguson was an independent consultant. From 1989 to September 1997, Mr.
Ferguson served as President of Thomson Technical Data Corporation, a division
of Thomson Financial Services, Inc. delivering real time fundamental and
technical analysis to bond, foreign exchange and derivative professionals.
Eduard Kitain has served as Multex.com's Vice President, Software Engineering
since January 1997 and has held various positions with Multex.com since
November 1993. From 1992 to October 1993, Mr. Kitain was a programmer analyst
for Cashflow Software, Inc., a software development company.
Philip Scheps has served as Multex.com's Vice President, Finance and
Controller since December 1993. From 1990 to November 1993, Mr. Scheps served
as Controller of Harve Benard Ltd., a wholesale and retail apparel company.
I. Robert Greene has served as a director of Multex.com since July 1996.
Since January 1999, Mr. Greene has been a General Partner of Chase Capital
Partners, a global private equity organization. From August 1994 to December
1998, he was a Principal with Chase Capital Partners. From 1988 to July 1994,
Mr. Greene was an Associate, a Director and a Principal of Prudential Equity
Investors. Chase Capital Partners is a significant stockholder of Multex.com.
Mr. Greene was named to the board of directors pursuant to an agreement which
will terminate upon the completion of this offering.
Peter G. LaBonte has served as a director of Multex.com since April 1998. Mr.
LaBonte is Vice President, International Marketing of Reuters Limited, a
position he has held since January 1997. From April 1996 to February 1997, he
was a Managing Director, Emerging Markets Services of Moody's Investors
Services. From March 1995 to April 1996, Mr. LaBonte served as Vice President,
Fidelity Brokerage Group of Fidelity Investments. From 1988 to March 1995, he
was Vice President, Capital International of Morgan Stanley & Co. Reuters
America Inc., which is an affiliate of Reuters Limited, is a significant
stockholder of Multex.com. Mr. LaBonte was named to the board of directors
pursuant to an agreement which will terminate upon the completion of this
offering.
Lennert J. Leader has served as a director of Multex.com since December 1998.
Mr. Leader is President of America Online, Inc. Investments. Mr. Leader served
as Senior Vice President, Chief Financial Officer and Treasurer of America
Online, Inc. from September 1989 until July 1998 and was Chief Accounting
Officer from October 1993 until July 1998. Prior to joining America Online, Mr.
Leader was Vice President, Finance, of LEGENT Corporation, a computer software
and services company, from March 1989 to September 1989. He also served as
Chief Financial Officer of Morino, Inc., a computer software and services
company, from 1986 to March 1989 and as its Director of Finance from 1984 to
1986. Prior to joining Morino, Inc. in 1984, he was an audit manager at Price
Waterhouse. America Online, Inc., which is an affiliate of America Online, Inc.
Investments, is a significant stockholder of Multex.com. Mr. Leader was named
to the board of directors pursuant to an agreement which will terminate upon
the completion of this offering.
48
<PAGE>
Milton J. Pappas served as a director of Multex.com from November 1993 to
March 1994, and has served as a director since July 1996. In addition, Mr.
Pappas served as Chairman of the board of directors from October 1996 to April
1998. Since 1983, Mr. Pappas has served as Chairman of Euclid Partners
Corporation, a management company providing services to various venture capital
investment funds, including Euclid Partners III, L.P. and Euclid Partners IV,
L.P. Mr. Pappas serves as a director of Netegrity, Inc., a provider of Web
security products. Euclid Partners III and Euclid Partners IV are significant
stockholders of Multex.com. Mr. Pappas was named to the board of directors
pursuant to an agreement which will terminate upon the completion of this
offering.
Herbert L. Skeete became a director of Multex.com in March 1999. Since 1978,
Mr. Skeete has held various positions with Reuters Limited. Since January 1999,
Mr. Skeete has served as Director, Product Management--Real Time Information,
in the Equities Business Unit of Reuters Limited. From April 1998 to December
1998, Mr. Skeete was Director, Real-Time Information of Reuters Limited. From
November 1996 to April 1998, Mr. Skeete was Head of the Information Management
Group of Reuters Limited. Reuters America Inc., which is an affiliate of
Reuters Limited, is a significant stockholder of Multex.com. Mr. Skeete was
appointed to the board of directors pursuant to an agreement which will
terminate upon the completion of this offering.
Composition of the Board of Directors
Upon the completion of this offering, we intend to file a revised certificate
of incorporation pursuant to which our board of directors will be divided into
three classes, each of whose members will serve for a staggered three-year
term. Upon the expiration of the term of a class of directors, directors in
that class will be elected for three-year terms at the annual meeting of
stockholders in the year in which their term expires. Our board of directors
has resolved that Messrs. Pappas and Greene will be Class I Directors whose
terms expire at the 2000 annual meeting of stockholders. Messrs. Leader and
Skeete will be Class II Directors whose terms expire at the 2001 annual meeting
of stockholders. Messrs. Karaev and LaBonte will be Class III Directors whose
terms expire at the 2002 annual meeting of stockholders. With respect to each
class, a director's term will be subject to the election and qualification of
their successors, or their earlier death, resignation or removal.
Mr. Skeete was appointed by the board of directors to fill a vacancy created
by Davis Gaynes in March 1999, when Mr. Gaynes resigned from the board of
directors.
Board Committees
The audit committee of the board of directors reviews, acts on and reports to
the board of directors with respect to various auditing and accounting matters,
including the selection of our independent auditors, the scope of the annual
audits, fees to be paid to the auditors, the performance of our independent
auditors and our accounting practices. Mr. Pappas serves as a member of the
audit committee. Until his resignation in March 1999, Mr. Gaynes served as a
member of the audit committee. After the completion of this offering, the board
of directors intends to appoint a non-employee director to fill the vacancy
created by Mr. Gaynes.
The compensation committee of the board of directors determines the salaries
and incentive compensation of our officers and provides recommendations for the
salaries and incentive compensation of our other employees. The compensation
committee also administers our various incentive compensation, stock and
benefit plans. The members of the compensation committee are Messrs. Greene and
Pappas.
The executive committee of the board of directors meets periodically with
management to advise upon and approve the details of the execution of strategy
decided at board meetings, and to consider strategic developments that may
arise between the regularly scheduled board meetings. The members of the
executive committee are Messrs. Greene, Karaev and Pappas.
Director Compensation
We do not currently compensate directors for attending meetings of the board
of directors or committee meetings of the board of directors, but we do
reimburse directors for their reasonable travel expenses incurred in connection
with attending these meetings.
49
<PAGE>
Under the Automatic Option Grant Program of the 1999 Stock Option Plan, which
is described below under "--1999 Stock Option Plan", and subject to the last
sentence of this paragraph, each individual who is serving as a non-employee
member of the board of directors on the date the underwriting agreement is
executed and who has not previously been in our employ will receive at that
time an option to purchase 12,000 shares of common stock with an exercise price
equal to the public offering price set forth on the cover page of this
prospectus. Each individual who first joins the board of directors after the
completion of this offering as a non-employee member of the board of directors
will also receive an option grant for 12,000 shares of common stock at the time
of his or her commencement of service on the board of directors, provided such
individual has not otherwise been in our prior employ. In addition, at each
annual meeting of stockholders, beginning with the 2000 annual meeting, each
individual who is to continue to serve as a non-employee member of the board of
directors will receive an option to purchase 3,750 shares of common stock,
whether or not such individual has been in our prior employ. However, any non-
employee member of the board of directors who, directly or indirectly, is a 5%
or greater stockholder or is affiliated with or a representative of a 5% or
greater stockholder, will not be eligible to receive any options under the
Automatic Option Grant Program.
Executive Compensation
The following table sets forth all compensation earned during the fiscal year
ended December 31, 1998 by our Chief Executive Officer and our other four most
highly compensated executive officers of whose salaries and bonuses exceeded
$100,000 in 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation(1) Awards
---------------- ------------
Securities
Underlying
Name and Principal Position Salary Bonus Options
- --------------------------- -------- ------- ------------
<S> <C> <C> <C>
Isaak Karaev..................................... $200,000 -- 250,000
President and Chief Executive Officer
James M. Tousignant.............................. 129,942 $90,000 92,500
Executive Vice President
Philip Callaghan................................. 130,769 90,000 25,000
Chief Financial Officer
Gregg B. Amonette................................ 130,000 90,000 67,500
Senior Vice President, Sales and Marketing
John J. Mahoney.................................. 126,730 75,000 17,500
Senior Vice President, Product Development
</TABLE>
- --------
(1) The column for "Other Annual Compensation" has been omitted because there
is no compensation required to be reported in that column. The aggregate
amount of perquisites and other personal benefits provided to each
executive officer above is less than 10% of the total annual salary and
bonus of that officer.
50
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information regarding options granted to our
executive officers during the fiscal year ended December 31, 1998. We have
never granted any stock appreciation rights.
<TABLE>
<CAPTION>
Individual Grants(1)
-------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates
Number of Percent of Total Of Stock Price
Securities Options Exercise Appreciation
Underlying Granted to Price For Option Term(3)
Options Employees Per Expiration ---------------------
Name Granted In 1998(2) Share($) Date 5% 10%
- ---- ---------- ---------------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Isaak Karaev............ 250,000(4) 25.3% $5.00 11/29/08 $ 786,118 $ 1,992,178
James M. Tousignant..... 17,500 1.8 7.50 4/23/08 82,542 209,179
75,000(4) 7.6 5.00 11/29/08 235,835 597,653
Philip Callaghan........ 17,500 1.8 7.50 4/23/08 82,542 209,179
7,500 0.8 5.00 12/15/08 23,584 59,765
Gregg B. Amonette....... 17,500 1.8 7.50 4/23/08 82,542 209,179
50,000(4) 5.1 5.00 12/15/08 157,224 398,436
John J. Mahoney......... 17,500 1.8 7.50 4/23/08 82,542 209,179
</TABLE>
- --------
(1) Each option represents the right to purchase one share of common stock.
The options shown in this column were all granted pursuant to our 1993
Stock Incentive Plan. The options shown in this table, except as otherwise
indicated below, become exercisable at a rate of 25% annually over four
years from the date of grant. The options with an exercise price of $7.50
per share were granted on April 24, 1998. The options with an exercise
price of $5.00 were granted to Messrs. Karaev and Tousignant on November
30, 1998, and to Messrs. Callaghan and Amonette on December 16, 1998. In
addition, the options will vest in the event we are acquired by merger or
asset sale or if any person, other than Mr. Karaev, becomes the owner of
more than 50% of our common stock.
(2) In the year ended December 31, 1998, we granted options to employees to
purchase an aggregate of 989,000 shares of common stock.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent an estimate or projection of our future common stock prices.
These amounts represent certain assumed rates of appreciation in the value
of our common stock from the fair market value on the date of grant.
Actual gains, if any, on stock option exercises are dependent on the
future performance of the common stock and overall stock market
conditions. The amounts reflected in the table may not necessarily be
achieved.
(4) These options vest on the date which is six years following the date of
their grant, but may vest earlier if we achieve certain milestones.
Specifically, the options will vest earlier with respect to 50% of the
shares when total gross revenues in any 12-month period exceed $25.0
million and, the other 50% of the shares when total gross revenues in any
12-month period exceed $40.0 million and we achieve positive earnings
before interest, taxes, depreciation and amortization.
51
<PAGE>
Aggregated Option Exercises In The Year Ended December 31, 1998 And Fiscal
Year-End Option Values
The following table sets forth information concerning options to purchase
common stock exercised by our executive officers during the year ended December
31, 1998 and the number and value of unexercised options held by each of the
executive officers at December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options
Acquired December 31, 1998 at December 31, 1998(1)
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Isaak Karaev............ 100,000 $492,000 375,000 250,000 $1,668,750 --
James M. Tousignant..... 18,750 9,000 6,250 117,500 28,125 $115,500
Philip Callaghan........ 43,750 241,125 -- 81,250 -- 253,125
Gregg B. Amonette....... 37,500 193,875 -- 130,000 -- 281,250
John J. Mahoney......... 75,000 36,000 34,375 45,625 166,688 126,563
</TABLE>
- --------
(1) There was no public market for the common stock on December 31, 1998. The
fair market value on December 31, 1998 was determined by the board of
directors to be $5.00 per share.
Employment and Non-Competition Agreements
None of our executive officers has an employment agreement, although all of
our executive officers have entered into agreements that contain non-
competition, non-disclosure and non-solicitation restrictions and covenants,
including a provision prohibiting these officers from competing with Multex.com
during their employment with us and for a period of nine months after
termination of their employment with us.
1999 Stock Option Plan
Multex.com's 1999 Stock Option Plan is intended to serve as the successor
equity incentive program to Multex.com's existing 1993 Stock Incentive Plan and
became effective in January 1999. We have reserved for issuance 3,411,375
shares of common stock under the 1999 Stock Option Plan. This initial share
reserve is comprised of the shares issuable upon exercise of outstanding stock
options granted under the 1993 Stock Incentive Plan plus the remaining share
reserve available for option grants under that plan. In addition, the share
reserve will automatically be increased on the first trading day of January
each calendar year, beginning in January 2000, by a number of shares equal to
three percent (3%) of the total number of shares of common stock outstanding on
the last trading day of the immediately preceding calendar year, but no such
annual increase shall exceed 750,000 shares. However, in no event may any one
participant in the 1999 Stock Option Plan receive option grants or direct stock
issuances for more than 375,000 shares in the aggregate per calendar year.
Outstanding options under the 1993 Stock Incentive Plan will be incorporated
into the 1999 Stock Option Plan on the date of this prospectus, and no further
option grants will be made under the 1993 Stock Incentive Plan thereafter. The
incorporated options will continue to be governed by their existing terms,
unless the Plan Administrator elects to extend one or more features of the 1999
Stock Option Plan to those options. However, except as otherwise noted below,
the outstanding options under the 1993 Stock Incentive Plan contain
substantially the same terms and conditions summarized below for the
Discretionary Option Grant Program in effect under the 1999 Stock Option Plan.
The 1999 Stock Option Plan is divided into four separate components:
. the Discretionary Option Grant Program under which eligible individuals,
including officers, non-employee members of the board of directors and
consultants, may, at the discretion of the Plan Administrator, be granted
options to purchase shares of common stock at an exercise price
determined by the Plan Administrator;
. the Stock Issuance Program under which eligible individuals may, in the
Plan Administrator's discretion, be issued shares of common stock
directly, through the purchase of shares at a price determined by the
Plan Administrator or as a bonus tied to the performance of services;
52
<PAGE>
. the Salary Investment Option Grant Program under which executive officers
and other highly compensated employees may elect to apply a portion of
their base salary to the acquisition of special below-market stock option
grants; and
. the Automatic Option Grant Program under which option grants will
automatically be made at periodic intervals to eligible non-employee
board members to purchase shares of common stock at an exercise price
equal to 100% of the fair market value of those shares on the grant date.
The Discretionary Option Grant Program and the Stock Issuance Program will be
administered by the compensation committee of the board of directors. The
compensation committee, as Plan Administrator, will have complete discretion to
determine which eligible individuals are to receive option grants or stock
issuances, the time or times when option grants or stock issuances are to be
made, the number of shares subject to each grant or issuance, the status of any
granted option as either an incentive stock option or a non-statutory stock
option under the federal tax laws, the vesting schedule to be in effect for the
option grant or stock issuance and the maximum term for which any granted
option is to remain outstanding. The compensation committee will also have the
authority to select the executive officers and other highly compensated
employees who may participate in the Salary Investment Option Grant Program in
the event that program is activated for one or more calendar years, but neither
the compensation committee nor the board of directors will exercise any
administrative discretion with respect to option grants made under the Salary
Investment Option Grant Program or under the Automatic Option Grant Program for
the non-employee members of the board of directors. All grants under those two
latter programs will be made in compliance with the express provisions of these
programs.
The exercise price for the shares of common stock subject to option grants
made under the 1999 Stock Option Plan may be paid in cash or in shares of
common stock valued at fair market value on the exercise date. The option may
also be exercised through a same-day sale program without any cash outlay by
the optionee. In addition, the Plan Administrator may provide financial
assistance to one or more participants in the 1999 Stock Option Plan in
connection with their acquisition of shares, by allowing individuals to deliver
a full-recourse, interest-bearing promissory note in payment of the option
exercise price and or direct issue price any associated withholding taxes
incurred in connection with that acquisition.
In the event of an acquisition of Multex.com, whether by merger or asset sale
or a sale by the stockholders of more than 50% of the total combined voting
power of Multex.com recommended by the board of directors, each outstanding
option under the Discretionary Option Grant Program which is not to be assumed
by the successor corporation or otherwise continued will automatically
accelerate in full, and all unvested shares under the Discretionary Option
Grant and Stock Issuance Programs will immediately vest, except to the extent
our repurchase rights with respect to those shares are to be assigned to the
successor corporation or otherwise continued in effect. The Plan Administrator
will have the authority under the Discretionary Option Grant Program to provide
that the shares subject to options granted under that program will
automatically vest as follows:
. upon an acquisition of Multex.com, whether or not those options are
assumed or continued;
. upon a hostile change in control of Multex.com effected through a
successful tender offer for more than 50% of the outstanding voting stock
or by proxy contest for the election of members of the board of
directors; or
. in the event the individual's service is terminated, whether
involuntarily or through a resignation for good reason, within a
designated period, not to exceed eighteen (18) months, following an
acquisition in which those options are assumed or otherwise continued in
effect or a hostile change in control. The vesting of outstanding shares
under the Stock Issuance Program may be accelerated upon similar terms
and conditions. Options currently outstanding under the 1993 Stock
Incentive Plan will vest in the event of an acquisition of Multex.com
whether by merger or asset sale or, if any person other than Mr. Karaev
becomes the owner of more than 50% of the common stock of Multex.com.
53
<PAGE>
Stock appreciation rights are authorized for issuance under the Discretionary
Option Grant Program which provide the holders with the election to surrender
their outstanding options for an appreciation distribution from
us equal to the excess of the fair market value of the vested shares of common
stock subject to the surrendered option over the aggregate exercise price
payable for those shares. This appreciation distribution may be made in cash or
in shares of common stock. There are currently no outstanding stock
appreciation rights under the Predecessor Plan.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program, including
options incorporated from the 1993 Stock Incentive Plan, in return for the
grant of new options for the same or different number of option shares with an
exercise price per share based upon the fair market value of the common stock
on the new grant date.
In the event the compensation committee elects to activate the Salary
Investment Option Grant Program for one or more calendar years, each of our
executive officers and other highly compensated employees selected for
participation may elect, prior to the start of the calendar year, to reduce his
or her base salary for that calendar year by a specified dollar amount not less
than $10,000 nor more than $50,000. In return, the individual will
automatically be granted, on the first trading day in the calendar year for
which the salary reduction is to be in effect, a non-statutory option to
purchase that number of shares of common stock determined by dividing the
salary reduction amount by two-thirds of the fair market value per share of
common stock on the grant date. The option will be exercisable at a price per
share equal to one-third of the fair market value of the option shares on the
grant date. As a result, the total spread on the option shares at the time of
grant will be equal to the salary reduction amount. The option will become
exercisable in a series of twelve (12) equal monthly installments over the
calendar year for which the salary reduction is to be in effect and will be
subject to full and immediate vesting upon specified changes in the ownership
or control of Multex.com.
Under the Automatic Option Grant Program, and subject to the last sentence of
this paragraph, each individual who is serving as a non-employee member of the
board of directors on the date the underwriting agreement is executed and who
has not previously been in our employ will receive at that time an option grant
for 12,000 shares of common stock with an exercise price equal to the public
offering price set forth on the cover page of this prospectus. Each individual
who first joins the board of directors after the completion of this offering as
a non-employee member of the board of directors will also receive an option
grant for 12,000 shares of common stock at the time of his or her commencement
of service on the board of directors, provided that the individual has not
otherwise been in our prior employ. In addition, at each annual meeting of
stockholders, beginning with the 2000 annual meeting, each individual who is to
continue to serve as a non-employee member on the board of directors will
receive an option grant to purchase 3,750 shares of common stock, whether or
not that individual has been in our prior employ. However, any non-employee
member of the board of directors who, directly or indirectly, is a 5% or
greater stockholder or is affiliated with or a representative of a 5% or
greater stockholder, will not be eligible to receive any option grants under
the Automatic Option Grant Program.
Each automatic grant will have an exercise price equal to the fair market
value per share of common stock on the grant date and will have a maximum term
of ten years, subject to earlier termination following the optionee's cessation
of service on the board of directors. Each automatic option will be immediately
exercisable; however, any shares purchased upon exercise of the option will be
subject to repurchase, at the option exercise price paid per share, should the
optionee's service as a non-employee member of the board of directors cease
prior to vesting in the shares. The 12,000-share grant will vest in four equal
and successive annual installments over the optionee's period of service on the
board of directors. Each additional 3,750-share grant will vest upon the
optionee's completion of one year of service on the board of directors measured
from the grant date. However, each outstanding option will immediately vest
upon specified changes in the ownership or control of Multex.com or, the death
or disability of the optionee while serving as a member of the board of
directors.
Limited stock appreciation rights will automatically be included as part of
each grant made under the Automatic Option Grant and Salary Investment Option
Grant Programs and may be granted to one or more of
54
<PAGE>
our officers as part of their option grants under the Discretionary Option
Grant Program. Options with this limited stock appreciation right may be
surrendered to us upon the successful completion of a hostile tender offer for
more than 50% of our outstanding voting stock. In return for the surrendered
option, the optionee will be entitled to a cash distribution from us in an
amount per surrendered option share equal to the excess of the highest price
per share of common stock paid in connection with the tender offer over the
exercise price payable for that share.
Our board of directors may amend or modify the 1999 Stock Option Plan at any
time, subject to any required stockholder approval. The 1999 Stock Option Plan
will terminate on the earliest of ten years after the date that the board of
directors adopts the 1999 Stock Option Plan, the date on which all shares
available for issuance under the 1999 Stock Option Plan have been issued as
fully-vested shares, or the termination of all outstanding options in
connection with specified changes in control or ownership of Multex.com.
1999 Employee Stock Purchase Plan
Multex.com has reserved for issuance 750,000 shares of common stock under
Multex.com's 1999 Employee Stock Purchase Plan, which became effective in
January 1999. The Employee Stock Purchase Plan is designed to allow eligible
employees of Multex.com and participating subsidiaries to purchase shares of
common stock, at semi-annual intervals, through their periodic payroll
deductions under the Employee Stock Purchase Plan.
The Employee Stock Purchase Plan will be implemented in a series of
successive offering periods, each with a maximum duration of 24 months.
However, the initial offering period will begin on the date of this prospectus
and will end on or about the last business day in April 2001. The next offering
period will commence on the first business day in May 2001, and subsequent
offering periods will commence as designated by the Plan Administrator.
Individuals who are eligible employees on the start date of any offering
period may enter the Employee Stock Purchase Plan on that start date or on any
subsequent semi-annual entry date, May 1 or November 1 each year. Individuals
who become eligible employees after the start date of the offering period may
join the Employee Stock Purchase Plan on any subsequent semi-annual entry date
within that period.
Payroll deductions may not exceed 10% of the participant's total cash
compensation for each semi-annual period of participation, and the accumulated
payroll deductions will be applied to the purchase of shares on the
participant's behalf on each semi-annual purchase date, which is the last
business day in April and October each year, at a purchase price per share not
less than eighty-five percent (85%) of the lower of the fair market value of
the common stock on the participant's entry date into the offering period or,
the fair market value on the semi-annual purchase date. In no event, however,
may any participant purchase more than 1,500 shares, nor may all participants
in the aggregate purchase more than 187,500 shares on any one semi-annual
purchase date. Should the fair market value of the common stock on any semi-
annual purchase date be less than the fair market value of the common stock on
the first day of the offering period, then the current offering period will
automatically end and a new offering period will begin, based on the lower fair
market value.
Our board of directors may amend or modify the Employee Stock Purchase Plan
following any semi-annual purchase date. The Employee Stock Purchase Plan will
terminate on the last business day in April 2009, unless sooner terminated by
the board of directors.
Compensation Committee Interlocks and Insider Participation
The compensation committee of the board of directors consists of Messrs.
Greene and Pappas, none of whom has been an officer or employee of Multex.com
at any time since our inception. No executive officer of Multex.com serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of
directors or compensation committee. Prior to the formation of the compensation
committee, the board of directors as a whole made decisions relating to the
compensation of our executive officers.
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CERTAIN TRANSACTIONS
Reuters Agreements
Reuters Limited entered into a strategic distribution relationship with
Multex.com in June 1995. An affiliate of Reuters, Reuters America Inc., is one
of our significant stockholders. Under the terms of a Software and Reciprocal
Data License Agreement, dated June 1, 1995, as amended on September 1, 1996,
November 14, 1996 and December 18, 1997, we granted to Reuters a limited, non-
exclusive license to use and distribute some of our technology for production
and delivery of research reports to Reuters' customers, to market and
distribute MultexNET research reports to up to 15,000 Reuters' customers, and
to market Multex Research-on-Demand service to Reuters' customers. In 1998,
Reuters made aggregate payments to us of approximately $1.2 million, which
consisted of a $500,000 license fee and payments for consulting and maintenance
services.
On July 15, 1998, we and Reuters entered into a revised agreement, pursuant
to which we renegotiated the terms of our relationship described above. The new
agreement, which took effect on January 1, 1999, is for a five-year term and is
automatically renewable for one-year periods thereafter, unless terminated by
either party. Under the terms of this agreement, Multex.com supplies
subscribers of the Reuters 3000 product with the ability to access the Multex
database via the Reuters Web, an intranet controlled by Reuters that uses
Internet technology to retrieve and display data. MultexNET and Multex
Research-On-Demand are available to Reuters 3000 subscribers on both a
subscription and pay-per-view basis. Revenues generated from the use of
Multex.com products via the Reuters Web are shared in accordance with the terms
of this agreement. Specifically, Reuters is required to pay us 50% of all
revenues generated from the first 20,000 Reuters' customers who subscribe to
MultexNET, and 40% of all revenues generated from subscribers in excess of
20,000. In addition, Reuters is required to pay us a royalty payment of 75% of
all purchases by Reuters' customers of research reports and information from
Multex Research-on-Demand. Over the five year term, Reuters may terminate the
agreement if certain subscriber minimums are not met. Beginning on January 1,
2000, Reuters may terminate the agreement if the number of subscribers does not
exceed 1000. Over the remaining four year period, this minimum number of
subscribers increases from 2,500 to 5000 by December 31, 2003.
We believe that the terms of the initial agreement with Reuters were no less
favorable than the terms we would have otherwise negotiated with an
unaffiliated third party as we entered into this agreement before Reuters
America Inc. became a stockholder of Multex.com in June 1996. In addition, we
believe that the terms of the revised agreement with Reuters, which became
effective on January 1, 1999, are no less favorable than the terms we would
have otherwise negotiated with an unaffiliated third party.
Mr. LaBonte, who became a director of Multex.com in April 1998, and Mr.
Skeete, who became a director in March 1999, are both officers of Reuters.
America Online Agreements
In March 1998, Multex.com entered into an agreement, which was amended in
February 1999, with America Online, Inc., one of our significant stockholders.
Pursuant to the terms of the initial agreement, we secured a position as an
anchor tenant for brokerage research on the America Online Personal Finance
channel as well as a programming presence on other screens within the America
Online service, with links from those locations back to Multex Investor
Network. Under the revised agreement, our anchor tenancy for brokerage research
on the America Online Personal Finance channel became "exclusive" so that we
receive continuous and permanent placement on the channel. America Online has
the right to cancel this "exclusive" tenancy if we do not remain one of the top
three providers of commingled investment and brokerage research, or if it
determines that our content is not commensurate with that of a top three
provider. The revised agreement also provides for additional tenancies,
including placements on international and other screens within the America
Online service and on CompuServe's personal finance channel. The initial and
revised agreements expire in February 2001 and are automatically renewable
unless either party gives advance notice of its intention not to renew. In
consideration of the anchor tenant position, we paid America Online a carriage
fee of $100,000 in 1998 and under the revised agreement, we are obliged to pay
an aggregate carriage fee of $1.8 million in eight
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equal installments, which began in February 1999 and end in November 2000. In
addition, America Online receives 10% to 25% of both advertising and
merchandising revenues from advertisements and sales generated from the Multex
Investor Network, with links back to the America Online network. This revenue
share is based on an advertising minimum of $30.00 for each thousand times an
advertisement is delivered to a user.
We believe that the terms of the agreement with America Online are no less
favorable than the terms we would have otherwise negotiated with an
unaffiliated third party as the parties entered into the agreement before
America Online became one of our stockholders in December 1998. In addition, we
believe that the terms of the revised agreement with America Online, which
became effective on February 25, 1999, are no less favorable than the terms we
would have otherwise negotiated with an unaffiliated third party.
Mr. Leader, who is one of our directors, is the President of America Online,
Inc. Investments, an affiliate of America Online.
Preferred Stock Financings
In November 1993 and March 1994, Multex.com sold 25,000 shares of Series A
convertible preferred stock to Euclid Partners III, L.P., Isaak Karaev and
other investors for an aggregate offering amount of $2,500,000. In November
1994, we sold 36,666 shares of Series B convertible preferred stock to Euclid
Partners III, L.P., 77 Capital Partners, L.P., Venture Fund I, L.P. and other
investors for an aggregate offering amount of $5,500,000. In 1996, we sold
100,000 shares of Series C convertible preferred stock in various tranches to
Chase Venture Capital Associates, L.P., Euclid Partners III and IV, L.P.,
Reuters America Inc., Softbank Ventures, Inc., 77 Capital Partners, L.P.,
Venture Fund I, L.P. and other investors for an aggregate offering amount of
$15,000,000. In July and August 1997, we sold 55,556 shares of Series D
convertible preferred stock to Chase Venture Capital Associates, L.P., Euclid
Partners IV, L.P., FGIC Services, Inc., The Fl@tiron Fund, LLC and Reuters
America Inc. for an aggregate offering amount of $10,000,000. In December 1998,
we sold 80,000 shares of Series E convertible preferred stock to Chase Venture
Capital Associates, L.P., Flatiron Associates LLC, The Flatiron Fund 1998/99
LLC, Rader Reinfrank Investors, L.P., America Online, Inc., Prospect Street NYC
Discovery Fund, L.P. and Mellon Ventures, L.P. for an aggregate offering amount
of $20,000,000. Mr. Karaev is a limited partner of Flatiron Associates LLC.
Upon the completion of this offering, all of these outstanding shares of
preferred stock will be automatically converted into an aggregate of
approximately 14,861,112 shares of common stock.
Stock Options Granted to Executive Officers
For additional information regarding the grant of stock options to executive
officers and directors, see "Management--Director Compensation," "--Executive
Compensation," "--1999 Stock Option Plan" and "Principal Stockholders."
Agreements with Underwriters
BancBoston Robertson Stephens Inc., CIBC Oppenheimer Corp. and Dain Rauscher
Wessels have entered into service agreements with Multex.com. The terms of
these agreements were negotiated by the parties in arms-length transactions and
the agreements were entered into prior to our selection of the underwriters of
this offering. Pursuant to their service agreements with us, BancBoston
Robertson Stephens and Dain Rauscher Wessels pay us fees for access to our
services and software. During a trial period from March 1998 to May 1998,
BancBoston Robertson Stephens was entitled to receive up to $50,000 free usage
of Multex Research-on-Demand. In accordance with these separate research
control agreements, we pay BancBoston Robertson Stephens and Dain Rauscher
Wessels royalties based on a percentage of net revenues from resales of their
respective investment research reports.
In February 1998, we entered into a three year distribution agreement with
CIBC Oppenheimer Corp. pursuant to which we pay CIBC Oppenheimer Corp.
royalties and 33% of all net fees we receive from sales of
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CIBC Oppenheimer's research. Under the agreement, CIBC Oppenheimer is entitled
to receive minimum royalties of $50,000 for the first year of the contract,
$100,000 for the second year and $150,000 for the third year. If these minimum
royalties are not met, Multex.com may terminate the agreement or pay the
difference between the actual royalty amount and the minimum royalty amount. In
addition, CIBC Oppenheimer is entitled to receive a 50% discount on its usage
of Multex Research-On-Demand of up to $250,000 annually during the term of the
agreement. Finally, CIBC Oppenheimer is entitled to receive free usage of
MultexExpress for up to 1,000 users, a savings of up to $200,000 annually.
Other underwriters of this offering may enter into similar agreements with us
after the date of this prospectus, or may enter into similar agreements with us
from time to time in the future.
Employment of Michael Gavronsky
In February 1999, Michael Gavronsky became an employee of Multex.com, and
serves as Multex.com's Vice President, Application Development. Mr. Gavronsky
is the son-in-law of Isaak Karaev, Multex.com's President and Chief Executive
Officer. Pursuant to an offer letter dated February 1999, Multex.com granted
Mr. Gavronsky a stock option to purchase 30,000 shares of common stock at an
exercise price of $9.00 per share. In addition, six months after the
commencement of his employment, Mr. Gavronsky may receive an option to purchase
an additional 20,000 shares of common stock, subject to satisfactory work
performance.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the common stock as of December 31, 1998, after giving effect to
the conversion of convertible preferred stock, and as adjusted to reflect the
sale of the shares of common stock offered in this offering, by each
stockholder whom we know to beneficially own 5% or more of the outstanding
shares of common stock, each of our directors and executive officers and all
of our directors and executive officers as a group. Unless otherwise
indicated, the address of each beneficial owner listed below is c/o
Multex.com, Inc., 33 Maiden Lane, 5th Floor, New York, New York 10038.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated by the footnotes below,
we believe, based on information furnished to us, that the persons and
entities named in the table below have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 18,112,237 shares of common
stock outstanding as of December 31, 1998, and 21,112,237 shares of common
stock outstanding after the completion of this offering. In computing the
number of shares of common stock subject to options held by that person that
are exercisable within 60 days of December 31, 1998, these shares are deemed
outstanding for the purpose of determining the percentage ownership of the
optionee. These shares, however, are not deemed outstanding for the purpose of
computing the percentage ownership of any other stockholder.
<TABLE>
<CAPTION>
Assuming the Over-Allotment
Percent Option Is Exercised by the
Beneficially Owned Underwriters (2)
-------------------- ---------------------------------
Shares to be Percent
Number Offered by the Beneficially
of Before After Over-Allotment Owned After
Name of Beneficial Owner Shares Offering Offering(1) Selling Stockholders Offering
- ------------------------ ---------- -------- ----------- -------------------- ------------
<S> <C> <C> <C> <C> <C>
Executive Officers and
Directors:
Isaak Karaev (3)....... 1,357,668 7.3% 6.3% 70,000 5.9%
James M. Tousignant
(4)................... 228,250 1.3 1.1 20,000 1.0
Philip Callaghan....... 43,750 * * -- *
Gregg B. Amonette (5).. 43,750 * * -- *
John J. Mahoney (6).... 193,750 1.1 0.9 7,500 *
I. Robert Greene (7)... 3,042,118 16.8 14.4 -- 14.1
Peter G. LaBonte (8)... 1,944,444 10.7 9.2 -- 9.0
Lennert J. Leader (9).. 400,000 2.2 1.9 -- 1.9
Milton J. Pappas (10).. 1,840,278 10.2 8.7 -- 8.5
Herbert L. Skeete
(11).................. 1,944,444 10.7 9.2 -- 9.0
All directors and
executive officers as
a group
(10 persons) (12)..... 11,038,452 59.5 51.2 97,500 49.7
Other 5% Stockholders:
Chase Venture Capital
Associates, L.P.
(13).................. 3,042,118 16.8 14.4 -- 14.1
Euclid Partners
Corporation (14)...... 1,840,278 10.2 8.7 -- 8.5
Multex Voting Trust
(15).................. 3,051,125 16.8 14.5 -- 14.2
Rader Reinfrank
Investors, L.P. (16).. 1,000,000 5.5 4.7 -- 4.6
Reuters America Inc.
(17).................. 1,944,444 10.7 9.2 -- 9.0
77 Capital Partners,
L.P. (18)............. 1,000,000 5.5 4.7 -- 4.6
Softbank Ventures, Inc.
(19).................. 1,083,333 6.0 5.1 -- 5.0
Venture Fund I, L.P.
(20).................. 916,650 5.1 4.3 -- 4.3
Other Over-Allotment
Selling Stockholders:
George C. Baird, III... 200,625 1.1 1.0 18,000 *
Thomas V. D'Ambrosio... 50,000 * * 3,000 *
Jane Gavronsky (21).... 260,667 1.4 1.2 25,000 1.1
Gregory Ginsburg....... 50,000 * * 5,000 *
Yefim Karayev (22)..... 55,333 * * 5,000 *
Mikhail Kolfman........ 105,000 * * 10,000 *
Olympia Romero......... 21,250 * * 1,000 *
Philip Scheps.......... 49,375 * * 2,000 *
</TABLE>
- -------
*Less than one percent.
(1) Assumes that the underwriters' over-allotment option to purchase up to an
additional 450,000 shares from Multex.com and the over-allotment selling
stockholders is not exercised.
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(2) Multex.com will sell 283,500 additional shares and the over-allotment
selling stockholders will sell an aggregate of 166,500 shares.
(3) Includes 375,000 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of December 31, 1998.
Does not include the shares of common stock held by others through the
Multex Voting Trust, of which Mr. Karaev is the trustee and 8,000 shares
of common stock held by Flatiron Associates LLC, of which Mr. Karaev is a
limited partner. See Note 15 below.
(4) Includes 12,500 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of December 31, 1998
and 1,500 shares of common stock held by Mr. Tousignant's spouse. Mr.
Tousignant disclaims beneficial ownership of the shares held by his
spouse.
(5) Includes 6,250 shares of common stock issuable upon exercise of stock
options which are exercisable within 60 days of December 31, 1998.
(6) Includes 43,750 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of December 31, 1998.
(7) Consists of 3,042,118 shares of common stock held by Chase Venture
Capital Associates, L.P., of which Chase Capital Partners is a General
Partner. Mr. Greene is a General Partner of Chase Capital Partners. In
this capacity, Mr. Greene may be deemed to be the beneficial owner of
these shares, although he disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest, if any.
(8) Consists of 1,944,444 shares of common stock held by Reuters America
Inc., Mr. LaBonte serves as a Vice President of Reuters Limited, an
affiliate of Reuters America Inc. In this capacity, Mr. LaBonte may be
deemed to be the beneficial owner of these shares, although he disclaims
beneficial ownership of these shares except to the extent of his
pecuniary interest, if any.
(9) Consists of 400,000 shares of common stock held by America Online, Inc.
Mr. Leader serves as the President of an affiliate of America Online,
Inc., America Online, Inc. Investments. In this capacity, Mr. Leader may
be deemed to be a beneficial owner of these shares, although he disclaims
beneficial ownership of these shares to the extent of his pecuniary
interest, if any.
(10) Consists of 1,000,000 shares of common stock held by Euclid Partners III,
L.P., of which Mr. Pappas is a General Partner, and 840,278 shares of
common stock held by Euclid Partners IV, L.P., of which Mr. Pappas is a
General Partner. In these capacities, Mr. Pappas may be deemed to be the
beneficial owner of these shares, although he disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest,
if any.
(11) Consists of 1,944,444 shares of common stock held by Reuters America Inc.
Mr. Skeete serves as Director, Product Management--Real Time Information
of Reuters Limited, an affiliate of Reuters America Inc. In this
capacity, Mr. Skeete may be deemed to be the beneficial owner of these
shares, although he disclaims beneficial ownership of these shares except
to the extent of his pecuniary interest, if any.
(12) Includes 437,500 shares of common stock issuable upon exercise of stock
options which are exercisable within 60 days of December 31, 1998. See
Notes 3 through 6.
(13) Consists of 3,042,118 shares of common stock held by Chase Venture
Capital Associates, L.P., of which Chase Capital Partners is the General
Partner. Mr. Greene is a General Partner of Chase Capital Partners. In
this capacity, Mr. Greene may be deemed to be the beneficial owner of
these shares, although he disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest, if any. The address for
Chase Venture Capital Associates, L.P. is 380 Madison Avenue, 12th Floor,
New York, New York 10017.
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(14) Consists of 1,000,000 shares of common stock held by Euclid Partners III,
L.P. and 840,278 shares of common stock held by Euclid Partners IV, L.P.
Mr. Pappas is a General Partner of each of Euclid Partners III, L.P. and
Euclid Partners IV, L.P. In these capacities, Mr. Pappas may be deemed to
be the beneficial owner of these shares, although he disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest,
if any. The address of Euclid Partners Corporation is 45 Rockefeller
Plaza, Suite 907, New York, New York 10111.
(15) The Multex Voting Trust, of which Mr. Karaev is the trustee, was created
pursuant to a Shareholders' Agreement and Voting Trust, dated as of
October 31, 1993, and amended as of May 1, 1996, by and among Multex.com,
Mr. Karaev and each of the common stockholders of Multex.com, except for
125,000 shares of common stock held by Research Data Group, Inc. and
75,000 shares held by a principal of Research Data Group. The agreement
will terminate upon the completion of this offering and the shares of
common stock held in trust will be distributed to Mr. Karaev and those
stockholders in accordance with their respective ownership of those
shares. Mr. Karaev disclaims beneficial ownership of these shares except
to the extent of his pecuniary interest, if any.
(16) Consists of 1,000,000 shares of common stock held by Rader Reinfrank
Investors, L.P., of which Rader Reinfrank & Co., LLC is a General
Partner. Stephen P. Rader is a Managing Member of Rader Reinfrank & Co.,
LLC. In this capacity, Mr. Rader may be deemed to be the beneficial owner
of these shares, although he disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest, if any. The
address of Rader Reinfrank & Co. LLC is 9465 Wilshire Boulevard, Suite
950, Beverly Hills, California 90212.
(17) Consists of 1,944,444 shares of common stock held by Reuters America Inc.
Mr. LaBonte serves as a Vice President of Reuters Limited, an affiliate
of Reuters America Inc. Mr. Skeete serves as Director, Product
Management--Real Time Information of Reuters Limited, an affiliate of
Reuters America Inc. In their respective capacities, Messrs. LaBonte and
Skeete may be deemed to be the beneficial owner of these shares, although
each disclaims beneficial ownership of these shares except to the extent
of his pecuniary interest, if any. The address for Reuters America Inc.
is 1700 Broadway, 40th Floor, New York, New York 10019.
(18) Consists of 1,000,000 shares of common stock held by 77 Capital Partners,
L.P., of which 77 Capital Corporation is a General Partner. Russell B.
Pyne is President of 77 Capital Corporation. In such capacity, Mr. Pyne
may be deemed to be the beneficial owner of such shares, although he
disclaims beneficial ownership except to the extent of his pecuniary
interest, if any. The address for 77 Capital Partners, L.P. is c/o Atrium
Capital Corporation, 3000 Sand Hill Road, Building 2, Suite 240, Menlo
Park, California 94025.
(19) Consists of 1,083,334 shares of common stock held by Softbank Ventures,
Inc., of which Mr. Yoshitaka Kitao is the President and Chief Executive
Officer. In this capacity, Mr. Kitao may be deemed to be the beneficial
owner of these shares, although he disclaims beneficial ownership of
these shares except to the extent of his pecuniary interest, if any. The
address for Softbank Ventures, Inc. is 10 Langley Road, Newton Centre,
Massachusetts 02159.
(20) Consists of 916,650 shares of common stock held by Venture Fund I, L.P.,
of which Venture Management I, G.P. is a General Partner. R. Bradford
Burnham is a General Partner of Venture Management I, G.P. In this
capacity, Mr. Burnham may be deemed to be the beneficial owner of these
shares, although he disclaims beneficial ownership of these shares except
to the extent of his pecuniary interest, if any. The address for Venture
Fund I, L.P. is 295 North Maple Avenue, Room 3361 C1, Basking Ridge,
New Jersey 07920.
(21) Includes 5,333 shares of common stock held jointly by Ms. Gavronsky and
her spouse, 2,667 shares held by Ms. Gavronsky's daughter, and 2,667
shares held by Ms. Gavronsky's son. Ms. Gavronsky disclaims beneficial
ownership of the shares held by her children.
(22) Includes 5,333 shares of common stock held jointly by Mr. Karayev and his
spouse.
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DESCRIPTION OF CAPITAL STOCK
The following description of our securities and various provisions of our
revised certificate of incorporation and our revised bylaws are summaries.
Statements contained in this prospectus relating to such provisions are not
necessarily complete, and reference is made to the revised certificate of
incorporation and the revised bylaws that will be in effect upon the completion
of this offering, copies of which have been filed with the Securities and
Exchange Commission as exhibits to our registration statement of which this
prospectus constitutes a part. The revised certificate of incorporation and the
revised bylaws will become effective at the time of completion of this
offering.
Our authorized capital stock will consist of 50,000,000 shares of common
stock, par value $.01 per share, and 5,000,000 shares of preferred stock, par
value $.01 per share, at the time of completion of this offering.
Common Stock
As of December 31, 1998, there were 3,251,125 shares of common stock
outstanding and held of record by 89 stockholders, without giving effect to the
conversion of our preferred stock. Based upon the number of shares outstanding
as of that date and giving effect to the issuance of the 3,000,000 shares of
common stock in this offering and the conversion of our outstanding shares of
preferred stock upon the completion of this offering, there will be 21,112,237
shares of common stock outstanding upon the closing of this offering.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
dividends, if any, as may be declared by the board of directors out of funds
legally available for dividends, subject to any preferential dividend rights of
any outstanding preferred stock. Upon the liquidation, dissolution or winding
up of Multex.com, the holders of common stock are entitled to receive ratably
our net assets available after the payment of all debts and other liabilities
and subject to the prior rights of any outstanding shares of preferred stock.
Holders of common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock are fully paid and
nonassessable, and the shares offered by us in this offering will be fully paid
and nonassessable upon receipt of payment. The rights, preferences and
privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock which we may designate and issue in the future. After completion of this
offering, there will be no shares of preferred stock outstanding.
Preferred Stock
As of December 31, 1998, there were 297,222 shares of convertible preferred
stock outstanding. We will effect a one-for-two reverse stock split of all of
our outstanding shares of common stock before the completion of this offering.
The 297,222 shares of convertible preferred stock will convert into an
aggregate of 14,861,112 shares of common stock after giving effect to the
reverse stock split. These shares of convertible preferred stock will no longer
be authorized, issued or outstanding after completion of this offering.
Upon the completion of this offering, the board of directors will be
authorized, without further stockholder approval, to issue from time to time up
to an aggregate of 5,000,000 shares of preferred stock in one or more series
and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each series,
including the dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption which may include sinking fund provisions,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of that series. We have no present
plans to issue any shares of preferred stock. See "--Anti-Takeover Effects of
Various Provisions of Delaware Law and Multex.com's Revised Certificate of
Incorporation and Revised Bylaws."
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Options
As of December 31, 1998, options to purchase a total of 2,410,625 shares of
common stock were outstanding, approximately 2,395,500 of which are subject to
lock-up agreements entered into with the underwriters. A total of 3,411,375
shares of common stock have been reserved for issuance under the 1999 Stock
Option Plan. See "Management--1999 Stock Option Plan" and "Shares Eligible for
Future Sale."
Warrant
As of December 31, 1998, a warrant to purchase 318,050 shares of common stock
at an exercise price of $4.80 per share was outstanding. The warrant contains
anti-dilution provisions providing for adjustments of the exercise price and
the number of shares of common stock underlying the warrant upon the occurrence
of specified events, including any recapitalization, reclassification, stock
dividend, stock split, stock combination or similar transaction. The common
stock issuable upon exercise of the warrant have registration rights, which are
described below. See "Shares Eligible for Future Sale."
Registration Rights
Pursuant to the terms of a registration rights agreement entered into between
us and some of our stockholders, after the completion of this offering, the
holders of 16,111,112 shares of common stock will be entitled to demand
registration rights concerning the registration of these shares under the
Securities Act. The holders of 33% or more of these shares are entitled to
demand that we register their shares under the Securities Act, subject to
various limitations. We are not required to effect more than two registrations
pursuant to these demand registration rights. In addition, pursuant to the
terms of the stockholders agreement, after the completion of this offering, the
holders of 16,111,112 shares of common stock will be entitled to piggyback
registration rights concerning the registration of shares of common stock under
the Securities Act. In the event that we propose to register any shares of
common stock under the Securities Act, either for our own account or for the
account of other security holders. The stockholders having piggyback rights are
entitled to receive notice of that registration and are entitled to include
their shares in the registration, subject to various limitations described
below. In addition, at any time after we become eligible to file a registration
statement on Form S-3, the stockholders may require us to file one or more
registration statements under the Securities Act on Form S-3 concerning their
shares of common stock. The above registration rights are subject to customary
conditions and limitations, including the right of the underwriters of an
offering to limit the number of shares of common stock held by security holders
with registration rights to be included in that registration. We are generally
required to bear all of the expenses of all these registrations, except
underwriting discounts and commissions. The registration of any of the shares
of common stock held by stockholders with registration rights would result in
these shares becoming freely tradable without restriction under the Securities
Act immediately upon effectiveness of that registration statement.
The holders of the registration rights described above have waived their
rights to register any shares in this registration statement of which this
prospectus constitutes a part.
Anti-Takeover Effects of Various Provisions of Delaware Law and Multex. com's
Revised Certificate of Incorporation and Revised Bylaws
Following the completion of this offering, we will be subject to the
provisions of Section 203 of the Delaware General Corporation Law. Subject to
various exceptions, Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the interested stockholder attained
that status with the approval of the board of directors or unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to various exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within
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<PAGE>
three years did own, fifteen percent (15%) or more of the corporation's voting
stock. This statute could prohibit or delay the accomplishment of mergers or
other takeover or change in control attempts affecting us and, accordingly, may
discourage attempts to acquire us.
In addition, various provisions of our revised certificate of incorporation
and revised bylaws, which provisions will be in effect upon the completion of
this offering and are summarized in the following paragraphs, may be deemed to
have an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
Classified Board of Directors. Following the completion of this offering, our
board of directors will be divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board
of directors will be elected each year. These provisions, when coupled with the
provision of the revised certificate of incorporation authorizing the board of
directors to fill vacant directorships or increase the size of the board of
directors, may deter a stockholder from voting to remove incumbent directors
and simultaneously gaining control of the board of directors by filling the
vacancies created by that removal with its own nominees.
Stockholder Action; Special Meeting of Stockholders. The revised certificate
of incorporation provides that stockholders may not take action by written
consent, but only at duly called annual or special meetings of stockholders.
The revised certificate of incorporation further provides that special meetings
of stockholders may be called only by the Chairman of the board of directors or
a majority of the board of directors.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The revised bylaws provide that stockholders who wish to bring
business before an annual meeting of stockholders, or to nominate candidates
for election as directors at an annual meeting of stockholders, must provide
timely notice in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at our principal executive offices, not
less than 120 days nor more than 150 days prior to the first anniversary of the
date of our notice of annual meeting for the previous year's annual meeting of
stockholders. However, if no annual meeting of stockholders was held in the
previous year or the date of the annual meeting of stockholders has been
changed to be more than 30 calendar days earlier than or 60 calendar days after
the anniversary, notice by the stockholder, to be timely, must be received by
us not more than 90 days after the later of 60 days before the annual meeting
of stockholders, or the close of business on the 10th day following the date on
which notice of the date of the meeting is given to stockholders or made
public, whichever occurs first. The revised bylaws also specify various
requirements as to the form and content of a stockholder's notice. These
provisions may preclude stockholders from bringing matters for a vote before an
annual meeting of stockholders or from making nominations for directors at an
annual meeting of stockholders.
Authorized But Unissued Shares. The authorized but unissued shares of common
stock and preferred stock are available for future issuance without further
stockholder approval. These additional shares may be used for a variety of
corporate purposes, including future public or private offerings to raise
additional capital, corporate acquisitions and employee benefit plans. The
existence of authorized but unissued and unreserved common stock and preferred
stock could make more difficult or discourage an attempt to obtain control of
us by means of a proxy contest, tender offer, merger or otherwise.
The Delaware General Corporation Law generally provides that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or bylaws, unless a
corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage, or unless the bylaw provision being amended was
originally adopted by the board of directors, in which case the amendment
requires only the affirmative vote of a majority of the members of the board of
directors.
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<PAGE>
Limitation of Liability and Indemnification Matters
Our revised certificate of incorporation provides that, except to the extent
prohibited by Delaware General Corporation Law, our directors shall not be
personally liable to us or our stockholders for monetary damages for any breach
of fiduciary duty as directors of Multex.com. Under the Delaware General
Corporation Law, the directors have a fiduciary duty to us which is not
eliminated by this provision of the revised certificate of incorporation and,
in appropriate circumstances, equitable remedies including injunctive or other
forms of nonmonetary relief will remain available. In addition, each director
will continue to be subject to liability under the Delaware General Corporation
Law for breach of the director's duty of loyalty, for acts or omissions which
are found by a court of competent jurisdiction to be not in good faith or which
involve intentional misconduct, or knowing violations of law, for actions
leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are prohibited
by Delaware General Corporation Law. This provision does not affect the
directors' responsibilities under any other laws, including the federal
securities laws or state or federal environmental laws.
Section 145 of the Delaware General Corporation Law empowers a corporation to
indemnify its directors and officers and to purchase insurance for liability
arising out of their capacity or status as directors and officers, provided
that this provision shall not eliminate or limit the liability of a director as
follows:
. for any breach of the director's duty of loyalty to the corporation or
its stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. arising under Section 174 of the Delaware General Corporation Law; or
. for any transaction from which the director derived an improper personal
benefit.
The Delaware General Corporation Law also states that the indemnification it
provides for shall not be deemed exclusive of any other rights to which the
directors and officers may be entitled under the corporation's bylaws, any
agreement, a vote of stockholders or otherwise. Our revised certificate of
incorporation eliminates the personal liability of directors to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law
and provides that we will fully indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding--whether civil, criminal, administrative or
investigative--by reason of the fact that the person is or was a director or
officer, or is or was serving at our request as a director or officer of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against expenses, including attorney's fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by that
person in connection with that action, suit or proceeding.
We have obtained liability insurance for our officers and directors. At
present, there is no pending litigation or proceeding involving any director,
officer, employee or agent as to which indemnification will be required or
permitted under the certificate of incorporation. We are not aware of any
threatened litigation or proceeding that may result in a claim for
indemnification.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock
Transfer and Trust Company, New York, New York.
65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for Multex.com's
common stock, and no prediction can be made as to the effect, if any, that
sales of shares of common stock or the availability of shares of common stock
for sale will have on the market price of the common stock prevailing from time
to time. Nevertheless, sales of substantial amounts of common stock in the
public market, or the perception that such sales could occur, could adversely
affect the market price of our common stock and could impair our future ability
to raise capital through the sale of our equity securities.
Upon the completion of this offering, we will have an aggregate of 21,112,237
shares of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of options or a warrant outstanding at
December 31, 1998. Of the outstanding shares, the 3,000,000 shares sold in this
offering will be freely tradeable, except that any shares held by our
"affiliates" as defined in Rule 144 promulgated under the Securities Act may be
sold only in compliance with the limitations described below. The remaining
18,112,237 shares of common stock will be deemed "restricted securities" as
defined under Rule 144 and may not be sold publicly unless they are registered
under the Securities Act or are sold pursuant to Rule 144 or another exemption
from registration. Our directors, executive officers and substantially all of
our other stockholders, holding 17,176,421 shares in the aggregate, have agreed
that they will not sell, directly or indirectly, any shares of common stock
without the prior written consent of BancBoston Robertson Stephens Inc. for a
period of 180 days from the date of this prospectus. Subject to these lock-up
agreements, the shares of common stock outstanding upon the completion of this
offering will be available for sale in the public market as follows:
<TABLE>
<CAPTION>
Approximate
Number of
Shares Description
----------- -------------------------------------------------------------
<C> <S>
3,466,683 After the date of this prospectus, freely tradeable shares
sold in this offering and shares saleable under Rule 144(k)
that are not subject to the 180-day lock-up
247,083 Upon the filing of a registration statement to register for
resale shares of common stock issued upon the exercise of
stock options, which shares are not subject to the lock-up
142,050 After 90 days the date of this prospectus, shares saleable
under Rule 144 that are not subject to the 180-day lock-up
13,131,421 After 180 days from the date of this prospectus, the 180-day
lockup is released and these shares are saleable under Rule
144 (subject, in some cases, to volume limitations), Rule
144(k), or pursuant to a registration statement to register
for resale shares of common stock issued upon the exercise of
stock options
4,125,000 Over 180 days from the date of this prospectus, restricted
securities that are held for less than one year and are not
yet saleable under Rule 144
</TABLE>
In general, under Rule 144, as currently in effect, a person or persons whose
shares are required to be aggregated, including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of common stock, which is expected to be approximately 210,000 shares
upon the completion of this offering, or the average weekly trading volume of
the common stock during the four calendar weeks preceding the date on which
notice of such sale is filed, subject to certain restrictions. In addition, a
person who is not deemed to have been an affiliate of ours at any time during
the 90 days preceding a sale and who has beneficially owned the shares proposed
to be sold for at
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<PAGE>
least two years would be entitled to sell such shares under Rule 144(k) without
regard to the requirements described above. To the extent that shares were
acquired from an affiliate, such person's holding period for the purpose of
effecting a sale under Rule 144 commences on the date of transfer from the
affiliate.
As of December 31, 1998, options to purchase a total of 2,410,625 shares of
common stock, of which 811,596 were then exercisable, and a warrant to purchase
318,050 shares of common stock were outstanding. Upon the completion of this
offering, we intend to file a registration statement to register for resale the
3,411,375 shares of common stock reserved for issuance under our 1999 Stock
Option Plan. That registration statement will become effective immediately upon
filing. Accordingly, shares covered by that registration statement will become
eligible for sale in the public markets, subject to vesting restrictions or the
lock-up agreements with BancBoston Robertson Stephens Inc. Holders of options
to purchase 2,395,500 shares of common stock and the holder of a warrant to
purchase 318,050 shares of common stock have entered into lock-up agreements.
We have agreed not to sell or otherwise dispose of any shares of common stock
during the 180-day period following the date of the prospectus, except we may
issue and grant options to purchase shares of common stock under the 1999 Stock
Option Plan. In addition, we may issue shares of common stock in connection
with an acquisition of another company if the terms of such issuance provide
that the common stock so issued shall not be resold prior to the expiration of
the 180-day lock-up period. See "Risk Factors--The future sale of shares of our
common stock may negatively affect our stock price."
Following this offering, under specified circumstances and subject to
customary conditions, holders of 16,111,112 shares of common stock will have
demand registration rights with respect to their shares of common stock,
subject to the 180-day lock-up arrangement described above, to require us to
register their shares of common stock under the Securities Act, and they will
have rights to participate in any future registration of securities by us. We
are not required to effect more than an aggregate of three demand registrations
on behalf of these holders. These holders of registration rights are subject to
lock-up periods of not more than 180 days following the date of this prospectus
or any subsequent prospectus. See "Description of Capital Stock--Registration
Rights."
67
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., CIBC Oppenheimer Corp. and Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated, have severally agreed with
us, subject to the terms and conditions of the underwriting agreement, to
purchase from us the number of shares of common stock set forth below opposite
their respective names. The underwriters are committed to purchase and pay for
all shares if any are purchased.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc.................................
CIBC Oppenheimer Corp.............................................
Dain Rauscher Wessels.............................................
---------
Total...........................................................
=========
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to certain dealers at that price less
a concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After this offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
such reduction shall change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus. The common stock is offered by the
underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 283,500 additional shares of common stock and the over-allotment
selling stockholders listed in the "Principal Stockholders" table have granted
to the underwriters an option, on similar terms, to purchase up to 166,500
additional shares of common stock, to cover over-allotments, if any, at the
public offering price less the underwriting discount set forth on the cover
page of this prospectus. If the underwriters exercise their over-allotment
option to purchase any of the additional 450,000 shares of common stock, the
underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof as the number of shares to be
purchased by each of them bears to the total number of shares of common stock
offered in this offering. If purchased, these additional shares will be sold by
the underwriters on the same terms as those on which the shares offered hereby
are being sold. We and the over-allotment selling stockholders will be
obligated, pursuant to the over-allotment option, to sell shares to the
underwriters to the extent the over-allotment option is exercised. The
underwriters may exercise the over-allotment option only to cover over-
allotments made in connection with the sale of the shares of common stock
offered in this offering.
The following table summarizes the compensation to be paid to the
underwriters by Multex.com and the over-allotment selling stockholders who have
granted the underwriters this option:
<TABLE>
<CAPTION>
Total
-------------------
Without With
Per Over- Over-
Share allotment allotment
----- --------- ---------
<S> <C> <C> <C>
Underwriting Discounts and Commissions
payable by Multex.com.............................. $ $ $
Underwriting Discounts and Commissions
payable by the over-allotment selling stockhold-
ers................................................ $ $ $
</TABLE>
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<PAGE>
Multex.com estimates expenses payable by us in connection with this offering,
other than the underwriting discounts and commissions referred to above, will
be approximately $900,000.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters, us and the over-allotment selling stockholders against
certain civil liabilities, including liabilities under the Securities Act, and
liabilities arising from breaches of representations and warranties contained
in the underwriting agreement.
Lock-Up Agreements. Each executive officer and director of Multex.com and
substantially all of our other stockholders have agreed, during the period of
180 days after the effective date of this prospectus, subject to specified
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of common stock
or any options or warrants to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock owned as
of the date of this prospectus or thereafter acquired directly by those holders
or with respect to which they have the power of disposition, without the prior
written consent of BancBoston Robertson Stephens Inc. However, BancBoston
Robertson Stephens Inc. may, in its sole discretion and at any time or from
time to time, without notice, release all or any portion of the securities
subject to lock-up agreements. There are no existing agreements between the
Representatives and any of our stockholders who have executed a lock-up
agreement providing consent to the sale of shares prior to the expiration of
the lock-up period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of BancBoston Robertson Stephens Inc.,
subject to certain exceptions, consent to the disposition of any shares held by
stockholders subject to lock-up agreements prior to the expiration of the lock-
up period, or issue, sell, contract to sell, or otherwise dispose of, any
shares of common stock, any options or warrants to purchase any shares of
common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of our common stock upon the exercise of outstanding
options or warrants, and the issuance of options under existing stock option
and incentive plans provided that those options do not vest prior to the
expiration of the lock-up period. See "Shares Eligible for Future Sale."
The underwriters have advised us that they do not intend to confirm sales to
any accounts over which they exercise discretionary authority.
Prior to this offering, there has been no public market for the common stock.
Consequently, the public offering price for the common stock offered by this
prospectus will be determined through negotiations among the representatives
and us. Among the factors to be considered in such negotiations are prevailing
market conditions, certain of our financial information, market valuations of
other companies that we and the representatives believe to be comparable to us,
estimates of our business potential, the present state of our development and
other factors deemed relevant.
Listing. The common stock has been approved for quotation on the Nasdaq
National Market under the symbol "MLTX."
Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Securities Act of 1933, some persons participating in
the offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the shares of common
stock at a level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of shares of common stock on
behalf of the underwriters for the purpose of fixing or maintaining the price
of the common stock. A "syndicate covering transaction" is the bid for or
purchase of common stock on behalf of the underwriters to reduce a short
position incurred by the underwriters in connection with the offering. A
"penalty bid" is an arrangement permitting the representatives to reclaim the
selling concession otherwise accruing to an underwriter or syndicate member in
connection with the offering if the common stock originally sold by such
69
<PAGE>
underwriter or syndicate member purchased by the representatives in a syndicate
covering transaction and has therefore not been effectively placed by such
underwriter or syndicate member. The representatives have advised us that such
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.
Directed Share Program. The underwriters have reserved up to five percent
(5%) of the common stock to be issued by us and offered for sale in this
offering, at the initial public offering price, to directors, officers,
employees, business associates and persons otherwise connected to Multex.com.
The number of shares of common stock available for sale to the general public
will be reduced to the extent these individuals purchase reserved shares. Any
reserved shares which are not purchased will be offered by the underwriters to
the general public on the same basis as the other shares offered in this
offering.
Other Agreements. Some of the underwriters are subscribers of our services.
See "Certain Transactions--Agreements with Underwriters."
LEGAL MATTERS
The validity of the common stock offered will be passed upon for us by
Brobeck, Phleger & Harrison LLP, New York, New York. Various legal matters in
connection with the offering will be passed upon for the underwriters by Hale
and Dorr LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Multex.com as of December 31, 1997
and 1998 and for each of the years in the three-year period ended December 31,
1998 appearing in this prospectus and registration statement of which this
prospectus constitutes a part, and the related consolidated financial statement
schedule included elsewhere in this registration statement, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their reports
thereon appearing elsewhere herein, are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
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<PAGE>
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits, schedules and amendments filed with
this registration statement, under the Securities Act with respect to the
shares of common stock to be sold in this offering. This prospectus does not
contain all the information included in this registration statement. For
further information about Multex.com and the shares of our common stock to be
sold in this offering, please refer to this registration statement. Complete
exhibits have been filed with our registration statement on Form S-1.
You may read and copy any contract, agreement or other document referred to
in this prospectus and any portion of our registration statement or any other
information from our filings at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by
writing to the Securities and Exchange Commission. Please call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information about the
public reference rooms. Our Securities and Exchange Commission filings,
including our registration statement, are also available to you on the
Securities and Exchange Commission's Web site (http://www.sec.gov). As a result
of this offering, we will become subject to the information and reporting
requirements of the Securities Exchange Act of 1934, and will file periodic
reports, proxy statements and other information with the Securities and
Exchange Commission.
We intend to furnish our stockholders with annual reports containing audited
financial statements, and make available to our stockholders quarterly reports
for the first three quarters of each year containing unaudited interim
financial information.
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<PAGE>
MULTEX.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998.............. F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1997 and 1998...................................................... F-4
Consolidated Statements of Stockholders' Deficit for the years ended
December 31, 1996, 1997 and 1998......................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Multex.com, Inc.
We have audited the accompanying consolidated balance sheets of Multex.com,
Inc. (the "Company") as of December 31, 1997 and 1998, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Multex.com, Inc. as of December 31, 1997 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
January 29, 1999, except for
Note 14, as to which the
date is March 9, 1999
F-2
<PAGE>
MULTEX.COM, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
December 31, December 31,
-------------------------- ------------
1997 1998 1998
------------ ------------ ------------
(Unaudited)
(Note 14)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 2,532,983 $ 2,317,675 $ 2,317,675
Marketable securities............... 7,663,585 20,014,680 20,014,680
Accounts receivable, less allowance
of $240,000 and $138,000
in 1997 and 1998, respectively..... 1,813,570 2,447,299 2,447,299
Other current assets................ 259,606 221,184 221,184
------------ ------------ ------------
Total current assets................ 12,269,744 25,000,838 25,000,838
Property and equipment, net.......... 2,161,315 2,843,477 2,843,477
Other................................ 302,341 124,078 124,078
------------ ------------ ------------
Total assets........................ $ 14,733,400 $ 27,968,393 $ 27,968,393
============ ============ ============
LIABILITIES AND STOCKHOLDERS'
(DEFICIT) EQUITY
Current liabilities:
Accounts payable.................... $ 344,901 $ 981,905 $ 981,905
Accrued expenses.................... 1,091,324 1,599,609 1,599,609
Deferred revenues................... 1,446,699 2,682,939 2,682,939
Current portion of long-term debt... 1,053,188 -- --
Other current liabilities........... 312,783 -- --
------------ ------------ ------------
Total current liabilities........... 4,248,895 5,264,453 5,264,453
Other................................ -- 58,619 58,619
Commitments (Note 11)
Redeemable preferred stock authorized
2,000,000 shares:
Series A redeemable preferred
stock; $.01 par value,
$2,500,000 aggregate liquidation
preference:
Issued and outstanding--25,000
shares at December 31, 1997 and
1998.............................. 3,251,303 3,459,696 --
Series B redeemable preferred
stock; $.01 par value,
$5,500,000 aggregate liquidation
preference:
Issued and outstanding--36,666
shares at December 31, 1997 and
1998.............................. 6,850,679 7,294,411 --
Series C redeemable preferred
stock; $.01 par value,
$15,000,000 aggregate liquidation
preference:
Issued and outstanding--100,000
shares at December 31, 1997 and
1998.............................. 16,840,299 18,064,794 --
Series D redeemable preferred
stock; $.01 par value,
$10,000,000 aggregate liquidation
preference:
Issued and outstanding--55,556
shares at December 31, 1997 and
1998.............................. 10,291,743 11,101,685 --
Series E redeemable preferred
stock; $.01 par value,
$20,000,000 aggregate liquidation
reference:
Issued and outstanding--80,000
shares at December 31, 1998....... -- 19,939,452 --
Stockholders' (deficit) equity:
Preferred stock--$.01 par value:
Authorized--5,000,000 shares; none
issued and outstanding
at December 31, 1997 and 1998..... -- -- --
Common stock--$.01 par value:
Authorized--50,000,000 shares;
issued and outstanding--
2,445,000 shares and 3,251,125
shares at December 31, 1997 and
1998, respectively, and
18,112,237 shares on a pro forma
basis............................. 24,450 32,511 181,122
Additional paid-in capital.......... (3,313,260) (3,634,083) 56,077,344
Accumulated deficit................. (22,394,473) (32,137,197) (32,137,197)
Deferred compensation............... (1,052,112) (1,460,000) (1,460,000)
Translation adjustment.............. (14,124) (15,948) (15,948)
------------ ------------ ------------
Total stockholders' (deficit)
equity........................... (26,749,519) (37,214,717) 22,645,321
------------ ------------ ------------
Total liabilities and
stockholders' (deficit) equity... $ 14,733,400 $ 27,968,393 $ 27,968,393
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
MULTEX.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Revenues............................. $ 2,646,527 $ 6,013,766 $ 13,181,589
Cost of revenues..................... 809,380 1,231,692 2,894,563
------------ ------------ ------------
Gross profit......................... 1,837,147 4,782,074 10,287,026
Operating expenses:
Sales and marketing................ 2,339,110 3,506,935 7,622,348
Research and development........... 1,414,908 1,600,893 2,180,244
General and administrative......... 4,552,936 7,836,639 9,385,418
------------ ------------ ------------
Total operating expenses............. 8,306,954 12,944,467 19,188,010
------------ ------------ ------------
Loss from operations................. (6,469,807) (8,162,393) (8,900,984)
Other income (expense):
Gain on sale of equipment.......... -- -- 124,796
Offering expenses (Note 1)......... -- -- (840,781)
Interest expense................... (250,175) (309,769) (481,997)
Interest and investment income..... 310,177 434,986 356,242
------------ ------------ ------------
Net loss............................. (6,409,805) (8,037,176) (9,742,724)
Redeemable preferred stock
dividends........................... 1,402,788 2,181,472 2,679,445
------------ ------------ ------------
Net loss available to common
stockholders'....................... $( 7,812,593) $(10,218,648) $(12,422,169)
------------ ------------ ------------
Basic and diluted loss per common
share............................... $ (3.86) $ (4.69) $ (4.36)
============ ============ ============
Number of shares used in computing
basic and diluted loss per share.... 2,021,919 2,179,261 2,846,963
============ ============ ============
Pro forma basic and diluted loss per
share............................... -- -- $ (0.55)
============
Number of shares used in computing
pro forma
basic and diluted loss per share.... -- -- 17,708,075
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
MULTEX.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
----------------- Paid-in Accumulated Deferred Comprehensive
Shares Amount Capital Deficit Compensation Loss Total
--------- ------- ----------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... 1,963,750 $19,638 $ (863,094) $ (7,947,492) -- -- $ (8,790,948)
Net loss............... -- -- -- (6,409,805) -- -- (6,409,805)
Redeemable preferred
stock dividend........ -- -- (1,402,788) -- -- -- (1,402,788)
Exercise of options.... 105,625 1,056 1,132 -- -- -- 2,188
--------- ------- ----------- ------------ ----------- -------- ------------
Balance at December 31,
1996................... 2,069,375 20,694 (2,264,750) (14,357,297) -- -- (16,601,353)
------------
Net loss............... -- -- -- (8,037,176) -- -- (8,037,176)
Translation
adjustment............ -- -- -- -- -- (14,124) (14,124)
------------
Comprehensive loss..... -- -- -- -- -- -- (8,051,300)
------------
Redeemable preferred
stock dividend........ -- -- (2,181,472) -- -- -- (2,181,472)
Stock issued for
services.............. 35,000 350 10,150 -- -- -- 10,500
Exercise of options.... 340,625 3,406 45,593 -- -- -- 48,999
Amortization of
deferred compensation
relating to stock
options............... -- -- -- -- 25,107 -- 25,107
Deferred compensation
related to stock
options............... -- -- 1,077,219 -- (1,077,219) -- --
--------- ------- ----------- ------------ ----------- -------- ------------
Balance at December 31,
1997................... 2,445,000 24,450 (3,313,260) (22,394,473) (1,052,112) (14,124) (26,749,519)
------------
Net loss............... -- -- -- (9,742,724) -- -- (9,742,724)
Translation
adjustment............ -- -- -- -- -- (1,824) (1,824)
------------
Comprehensive loss..... -- -- -- -- -- -- (9,744,548)
------------
Redeemable preferred
stock dividend........ -- -- (2,679,445) -- -- -- (2,679,445)
Exercise of options.... 606,125 6,061 143,062 -- -- -- 149,123
Amortization of
deferred compensation
relating to stock
options............... -- -- -- -- 439,672 -- 439,672
Cancellation of stock
options............... -- -- (24,898) -- 24,898 -- --
Deferred compensation
related to stock
options............... -- -- 872,458 -- (872,458) -- --
Sale of stock and
issuance of options in
connection with the
acquisition of certain
assets of Multex Data
Group................. 75,000 750 644,250 -- -- -- 645,000
Issuance of stock in
connection with the
acquisition of Multex
Data Group............ 125,000 1,250 623,750 -- -- -- 625,000
Issuance of warrant in
connection with long-
term debt............. -- -- 100,000 -- -- -- 100,000
--------- ------- ----------- ------------ ----------- -------- ------------
Balance at December 31,
1998 .................. 3,251,125 $32,511 $(3,634,083) $(32,137,197) $(1,460,000) $(15,948) $(37,214,717)
========= ======= =========== ============ =========== ======== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
MULTEX.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------- ---
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating activities
Net loss........................... $(6,409,805) $(8,037,176) $(9,742,724)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization of deferred
compensation.................... -- 25,107 439,672
Gain on sale of equipment........ -- -- (124,796)
Depreciation and amortization.... 1,096,754 1,368,318 1,433,191
Amortization of issuance and
financing costs................. 29,384 40,988 146,569
Bad debt expense................. 130,000 168,130 138,000
Stock issued for services........ -- 10,500 --
Changes in operating assets and
liabilities:
Accounts receivable............ (798,099) (1,058,303) (771,729)
Other current assets........... (64,225) (94,082) 38,422
Other assets................... (56,254) 54,063 178,263
Accounts payable............... (843,560) (136,797) 509,304
Accrued expenses............... 608,251 194,297 508,285
Deferred revenue............... 798,812 361,637 1,236,240
Other liabilities.............. -- -- 58,619
----------- ----------- -----------
Net cash used in operating
activities........................ (5,508,742) (7,103,318) (5,952,684)
Investing activities
Purchase of marketable securities.. (12,044,939) (7,663,585) (21,283,209)
Proceeds from sale of marketable
securities........................ 4,215,304 7,829,635 8,932,114
Proceeds from sale of equipment.... -- -- 200,953
Purchase of property and
equipment......................... (1,372,224) (1,111,196) (1,093,810)
----------- ----------- -----------
Net cash used in investing
activities........................ (9,201,859) (945,146) (13,243,952)
Financing activities
Proceeds from issuances of stock... 15,002,188 10,048,999 20,449,123
Preferred stock issuance costs..... (164,245) (54,095) (100,000)
Proceeds from long-term debt....... 1,231,525 474,667 1,850,000
Repayment of long-term debt........ (564,299) (805,822) (2,903,188)
Repayment of short-term debt....... (327,000) -- --
Other liabilities.................. 177,837 31,224 (312,783)
----------- ----------- -----------
Net cash provided by financing
activities........................ 15,356,006 9,694,973 18,983,152
Effect of exchange rate changes on
cash.............................. -- (14,124) (1,824)
----------- ----------- -----------
Increase (decrease) in cash and
cash equivalents.................. 645,405 1,632,385 (215,308)
Cash and cash equivalents,
beginning of year................. 255,193 900,598 2,532,983
----------- ----------- -----------
Cash and cash equivalents, end of
year.............................. $ 900,598 $ 2,532,983 $ 2,317,675
=========== =========== ===========
Supplemental disclosures of cash
flow information
Noncash investing and financing
activity:
Accrued purchases of fixed
assets.......................... $ 210,046 $ 46,336 $ 127,700
=========== =========== ===========
Fair market value of stock and
options given in connection with
the acquisition of certain
assets of Multex Data Group..... $ -- $ -- $ 345,000
=========== =========== ===========
Fair market value of stock issued
in connection with the
acquisition
of Multex Data Group............ $ -- $ -- $ 625,000
=========== =========== ===========
Stock issued for services........ $ -- $ 10,500 $ --
=========== =========== ===========
Interest paid...................... $ 158,277 $ 159,705 $ 325,181
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1996, 1997 and 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Multex.com, Inc. (the "Company") is a leading provider of online investment
research and information services designed to meet the needs of individual and
institutional investors, including investment banks, brokerage firms and
corporations.
The Company was founded in 1993 as the result of the merger of Multex
Systems, Inc., a New York corporation, with and into Multex Publisher, Inc., a
Delaware corporation, which subsequently changed its name to Multex Systems,
Inc. In January 1999, the Company changed its name to Multex.com, Inc.
During December 1996, the Company commenced the operations of Multex Systems
International Inc., a wholly owned subsidiary of the Company, and opened an
office in London.
Acquisition
On February 27, 1998, the Company established a new wholly owned subsidiary,
RDG-Multex, Inc. In September 1998, the subsidiary's name was changed to Multex
Data Group, Inc. ("Multex Data Group"). Multex Data Group acquired assets
(earnings estimate database and related software) of Research Data Group, Inc.
in exchange for 49 shares of the common stock (49%) of Multex Data Group on
March 27, 1998.
In connection with the transaction above, the Company issued to a principal
of Research Data Group, Inc., 75,000 shares of the Company's common stock at a
purchase price of $4.00 per share ($300,000) and a one year option ("One Year
Option") to acquire 125,000 shares of the Company's common stock at an exercise
price of $5.00 per share. The Company has estimated the fair market value of
the 75,000 shares to be approximately $450,000 and has valued the option at
approximately $195,000 as of the date of grant using the Black-Scholes option
pricing model. The purchase price of the assets acquired was $345,000, the
estimated fair market value of the consideration given to a principal of
Research Data Group, Inc. (see calculation of fair market value below)
<TABLE>
<S> <C>
Fair market value of 75,000 shares sold..................... $ 450,000
Fair market value of One Year Option........................ 195,000
Less cash consideration received by the Company............. (300,000)
---------
Fair market value of consideration given (49 shares of
Multex Data Group) for assets acquired..................... $ 345,000
=========
</TABLE>
On December 15, 1998, the Company acquired the remaining 49% of Multex Data
Group in exchange for 125,000 shares of the Company's common stock, which was
valued at approximately $625,000. Such value was based on the estimated fair
market value of the Company's common stock of $5.00 per share. The purchase
price was fully allocated to the earnings estimate database.
The acquisition has been accounted for by the purchase method of accounting
and accordingly, the Company is consolidating the results of operations of
Multex Data Group effective March 27, 1998.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Multex.com, Inc. and its wholly owned and majority-owned subsidiaries. All
intercompany account balances and transactions have been eliminated.
F-7
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of 90
days or less when purchased to be cash equivalents.
Concentration of Credit Risk
At December 31, 1997 and December 31, 1998, substantially all cash and cash
equivalents were held in one bank.
The Company's customers are concentrated among institutional investors and
financial professionals, including mutual fund managers, portfolio managers,
brokers and their clients. Except for the customers noted at Note 12, no
customers accounted for revenues in excess of 1.5%, 2.7% and 3.6% of total
revenues for the years ended December 31, 1996, 1997 and 1998, respectively.The
Company performs ongoing credit evaluations, generally does not require
collateral and establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of customers, historical trends and other
information; to date, such losses have been within management's expectations.
Marketable Securities
Marketable securities are classified as available-for-sale. Marketable
securities consisted of United States treasury bills with maturities of 360
days or less when purchased and an investment in a money market mutual fund
which invests in federal agency notes and government agreements. Marketable
securities are carried at fair value, which approximates cost.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed using
the straight-line method over the estimated useful life of the asset which
ranges from two to five years.
Advertising
The Company expenses the costs of advertising as incurred. Advertising
expense for the years ended December 31, 1996, 1997 and 1998 was approximately
$422,000, $732,000 and $2.3 million, respectively.
Revenue Recognition
Revenues from subscriptions are recognized in equal installments over the
term of the subscriptions. Non-subscription revenues from the Multex Research-
On-Demand service are recognized upon sale. Revenues from sponsorships are
recognized in equal installments over the term of the contract. Revenues from
professional services are recognized when the services are accepted by the
client. Such services are primarily customization software services which allow
the Company's services to interface and function with the customers' existing
software platforms.
F-8
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred Revenue
Deferred revenue represents the unamortized portion of annual subscriptions
received in advance, and fees received from customers in advance of performance
of services.
Offering Expenses
Offering expenses represent costs incurred in connection with a proposed
financing in 1998. On October 19, 1998, the Company withdrew the registration
statement relating to such proposed financing, and accordingly, the offering
costs incurred prior to that date were expensed.
Earnings (Loss) Per Share
In 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 128, Earnings per Share, which replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants and convertible securities.
Accounting for Stock-Based Compensation
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No.
123 prescribes accounting and reporting standards for all stock-based
compensation plans, including employee stock options, restricted stock,
employee stock purchase plans and stock appreciation rights. SFAS No. 123
requires compensation expense to be recorded (i) using the new fair value
method or (ii) using existing accounting rules prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") and related interpretations with pro forma disclosure of what net
income and earnings per share would have been had the Company adopted the new
fair value method. The Company accounts for its stock-based compensation plans
in accordance with the provisions of APB 25.
Comprehensive Income
As of January 1, 1998, the Company adopted FASB Statement No. 130, Reporting
Comprehensive Income. Statement No. 130 establishes new rules for the reporting
and display of comprehensive income and its components; however, the adoption
of this statement had no impact on the Company's net loss or stockholders'
deficit. Statement No. 130 requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments,
which prior to adoption were reported separately in stockholders' deficit, to
be included in other comprehensive loss.
Segment Information
Effective January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information (Statement
131). Statement 131 superseded FASB Statement No. 14, Financial Reporting for
Segments of a
F-9
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Business Enterprise. Statement 131 establishes standards for reporting of
financial information about operating segments in annual financial statements
and requires reporting selected information about operating segments in interim
financial reports. The adoption of Statement 131 did not affect the Company's
results of operations or financial position. The disclosure of segment
information was not required as the Company operates in only one business
segment.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. STOCKHOLDERS' EQUITY
Common Stock (see Note 14)
During 1997, the Company increased the number of authorized shares of its
common stock from 14,000,000 shares to 19,000,000 shares. In December 1998, the
Company increased the number of authorized shares of its common stock to
50,000,000 shares.
Common Stock Reserved for Issuance
At December 31, 1997 and 1998, the Company has reserved approximately
13,278,000 shares and 18,397,000 shares, respectively of its common stock for
issuance in connection with shares issuable under the Company's stock option
plan and the conversion of its redeemable preferred stock.
3. REDEEMABLE PREFERRED STOCK
The Company has recorded issuance costs of redeemable preferred stock as
discounts at issuance and is accreting the discount over the life of the
redeemable preferred stock. The Company accrues all cumulative dividends on
redeemable preferred stock.
During 1997, the Company authorized 83,334 shares of $.01 par value Series D
convertible preferred stock ("Series D Stock") and issued 55,556 shares of the
Series D Stock for $10,000,000. In connection with the issuance of the Series D
Stock, the Company incurred issuance costs of approximately $54,000.
During 1998, the Company authorized 80,000 shares of $.01 par value Series E
convertible preferred stock ("Series E Stock") and issued 80,000 shares of the
Series E Stock for $20,000,000. In connection with the issuance of the Series E
Stock, the Company incurred issuance costs of approximately $100,000.
The holders of Series C, Series D and Series E Stock are entitled to a
liquidation preference over the Series A and Series B Stock. The Series C,
Series D and Series E Stock share ratably on a pari passu basis in the event of
a liquidation and the Series A and Series B Stock share ratably on a pari passu
basis in the event of a liquidation.
The holders of redeemable preferred stock are entitled to vote upon any
matter as to which the holders of common stock are entitled to vote.
F-10
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
3. REDEEMABLE PREFERRED STOCK (continued)
The holders of shares of redeemable preferred stock have the right to convert
such shares into the number of shares of common stock (adjusted for stock
splits) as is obtained by multiplying the number of redeemable preferred shares
to be converted by the liquidation preference ($100 for Series A, $150 for
Series B and C, $180 for Series D and $250 for Series E) and dividing the
result by $1.00 for Series A, $1.50 for Series B and C, $1.80 for Series D,
$250 for Series E or by the conversion price, as defined, as last adjusted and
in effect.
In the event the Company completes an underwritten public offering of its
common stock (a) at a per share price to the public of not less than $8.00 and
(b) in which the gross proceeds paid by the public are at least $15,000,000,
then all outstanding redeemable preferred shares shall automatically be
converted into shares of common stock in the manner described in the preceding
paragraph.
In the event the offering is not consummated, the Company will be required to
redeem all outstanding shares of redeemable preferred stock on December 31,
2003. In the event of the consolidation or merger of the Company (other than a
merger in which the Company is the surviving corporation and which will not
result in more than 50% of the capital stock of the Company outstanding
immediately after the effective date of such merger being owned of record or
beneficially by persons other than the holders of such capital stock
immediately prior to such merger), and in the case of a sale of all or
substantially all of the properties and assets of the Company as an entirety to
any other person, any holder can elect to have any or all of their shares of
redeemable preferred stock redeemed. The redemption price for each share of
redeemable preferred stock shall be the sum of the liquidation preference plus
cumulative unpaid dividends at the rate of 8% per annum on the liquidation
preference. No redeemable preferred stock dividends have been declared or paid
as of December 31, 1998. At December 31, 1997 and 1998 the total cumulative
dividends in arrears is approximately $4,467,000 and $7,146,000, respectively.
The Company is not authorized to pay or declare any dividends on outstanding
common shares unless dividends on all outstanding shares of convertible
preferred stock for all past dividend periods have been paid.
F-11
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Numerator:
Net loss............................ $(6,409,805) $ (8,037,176) $ (9,742,724)
Redeemable preferred stock dividends.. 1,402,788 2,181,472 2,679,445
----------- ------------ ------------
Numerator for basic and diluted loss
per share--net loss available for
common stockholders.................. $(7,812,593) $(10,218,648) $(12,422,169)
=========== ============ ============
Denominator:
Denominator for basic and dilutive
loss per share--weighted average
shares............................. 2,021,919 2,179,261 2,846,963
=========== ============ ============
Basic and diluted loss per share...... $ (3.86) $ (4.69) $ (4.36)
=========== ============ ============
</TABLE>
The following securities have been excluded from the dilutive per share
computation as they are antidilutive:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Redeemable preferred stock--Series A.............. 25,000 25,000 25,000
Redeemable preferred stock--Series B.............. 36,666 36,666 36,666
Redeemable preferred stock--Series C.............. 100,000 100,000 100,000
Redeemable preferred stock--Series D.............. -- 55,556 55,556
Redeemable preferred stock--Series E.............. -- -- 80,000
Stock options..................................... 1,276,875 2,054,000 2,410,625
</TABLE>
The following table sets forth the computation of pro forma basic and diluted
loss per share, assuming conversion of the redeemable preferred shares to
shares of common stock on January 1, 1998:
<TABLE>
<CAPTION>
<S> <C>
Numerator:
Net loss available to common stockholders...................... $(12,422,169)
Redeemable preferred stock dividends........................... 2,679,445
------------
Numerator for pro forma loss available to common stockholders.. $ (9,742,724)
============
Denominator:
Weighted average number of common shares....................... 2,846,963
Assumed conversion of preferred shares to common shares (if
converted method)............................................. 14,861,112
------------
Denominator for pro forma basic and diluted loss per share..... 17,708,075
============
Pro forma basic and diluted loss per share....................... $ (0.55)
============
</TABLE>
F-12
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998
---------- ----------
<S> <C> <C>
Computer and telecommunications equipment and
related software................................... $4,932,499 $6,671,162
Furniture and fixtures.............................. 266,852 302,839
Leasehold improvements.............................. 237,393 237,393
---------- ----------
5,436,744 7,211,394
Less accumulated depreciation and amortization...... 3,275,429 4,367,917
---------- ----------
$2,161,315 $2,843,477
========== ==========
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998
---------- ----------
<S> <C> <C>
Payroll and related costs............................. $ 170,976 $ 298,455
Accrued vacation...................................... 125,000 125,000
Accrued bonuses....................................... 130,000 132,000
Royalties............................................. 424,971 597,444
Other................................................. 240,377 446,710
---------- ----------
$1,091,324 $1,599,609
========== ==========
</TABLE>
7. SHORT-TERM DEBT
Short-term debt was payable to three stockholders. The notes bore interest at
8% per annum and were fully repaid during 1996.
8. LONG-TERM DEBT
The Company had available lines of credit provided by two lenders totaling
$3,900,000. At December 31, 1997, total notes of approximately $2,699,000 were
issued under the lines of credit. The notes were payable in monthly
installments of principal and interest of approximately $75,000 and bore
interest ranging from 10% to 12% per annum. The balance of the notes,
approximately $1,053,000, was fully repaid in 1998.
The Company was obligated to pay additional financing costs equal to a
minimum of 10% of original amounts advanced under the lines of credit. At
December 31, 1997, the Company recorded approximately $313,000 in other
liabilities related to such obligation, which was fully paid in 1998.
In January 1998, the Company entered into agreements with respect to a
$1,250,000 term loan and a $1,000,000 revolving line of credit with a bank,
whereby it could borrow up to 75% of eligible accounts receivable, as defined
therein. Substantially all of the assets of the Company were pledged as
collateral for the above obligations. The term loan and the revolving line of
credit bore interest at the prime rate plus 2%, as
F-13
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
8. LONG-TERM DEBT (continued)
defined therein, and the prime rate plus 1%, as defined therein, respectively.
The term loan was payable in twenty four monthly installments of approximately
$52,000 and was fully repaid in June 1998, and the revolving line of credit was
cancelled.
In October 1998, the Company entered into agreements with respect to a
$2,000,000 equipment line and a $4,000,000 revolving credit facility with a
bank. The Company may borrow up to 80% of eligible accounts receivable, as
defined, in the revolving credit facility, and advances under the equipment
line cannot exceed 75% of the net book value of equipment purchased within the
last twelve months. Substantially all of the assets of the Company are pledged
as collateral for the above obligations. The equipment line and revolving
credit facility bear interest at the prime rate plus 1%, as defined.
The above obligations also provide for, among other things, the maintenance
of certain covenants, including a liquidity ratio, leverage ratio and a minimum
tangible capital base, as defined. Borrowings under this agreement were repaid
in December 1998.
In connection with the above obligations, the Company granted to the bank a
warrant to purchase 318,050 shares of the Company's common stock at $4.80 per
share, which was valued at $100,000 based upon the Company's incremental
borrowing rate. The warrant expires on December 28, 2003.
9. INCOME TAXES
Under FASB Statement No. 109, "Accounting for Income Taxes," the liability
method is used in accounting for income taxes. Under this method, deferred
income tax assets and liabilities result from temporary differences between the
income tax basis of assets and liabilities and their reported amounts in the
financial statements that will result in taxable income and deductions in
future years.
At December 31, 1998, the Company had net operating loss carryforwards of
approximately $26,200,000 and research and development credits of approximately
$700,000 for income tax purposes that expire in 2009 through 2013. The
utilization of approximately $15,600,000 and $400,000 of such net operating
loss carryforwards and research and development credits, respectively, are
subject to an annual limitations of approximately $1,900,000, pursuant to
Section 382 of the Internal Revenue Code. The utilization of net operating loss
carryforwards and research and development credits may be subject to further
limitations upon the completion of an initial public offering.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998
----------- ------------
<S> <C> <C>
Net operating loss
carryforward.............. $ 7,423,000 $ 10,483,000
Research and development
credits................... 494,000 711,000
Depreciation and
amortization.............. 565,000 686,000
Deferred revenue........... 579,000 1,073,000
Other...................... 96,000 55,000
----------- ------------
9,157,000 13,008,000
Valuation allowance........ (9,157,000) (13,008,000)
----------- ------------
$ -- $ --
=========== ============
</TABLE>
F-14
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
9. INCOME TAXES (continued)
Due to the uncertainty of the realization of the tax assets, a valuation
allowance has been provided. The valuation allowance was increased by
approximately $3,232,000 and $3,851,000 for the years ended December 31, 1997
and 1998, respectively.
The effective income tax rate differs from the statutory rate as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Statutory rate..................... (34)% (34)% (34)%
Loss for which no tax benefit was
provided.......................... 33 33 33
Other.............................. 1 1 1
--- --- ---
Effective tax rate................. 0 % 0 % 0 %
=== === ===
</TABLE>
10. STOCK OPTIONS
1993 Stock Incentive Plan
The Company had reserved 2,900,000 shares of the Company's common stock to be
issued under its 1993 Stock Incentive Plan (the "Plan"). In 1998, the number of
shares reserved for issuance under the Plan was increased to 4,500,000.
During the years ended December 31, 1997 and 1998, the difference between the
estimated fair market value of the Company's common stock and the options'
exercise price on the date of grant was determined to be approximately
$1,077,000 and $872,000, respectively. This deferred compensation is being
amortized for financial reporting purposes over the vesting period of the
options and the amount recognized as expense during the years ended December
31, 1997 and 1998 amounted to approximately $25,000 and $440,000, respectively.
Pro forma information regarding net loss and net loss per share is required
by SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value of the options was estimated at date of grant using a Black-Scholes
option pricing model with the following assumptions:
<TABLE>
<CAPTION>
Assumptions 1996 1997 1998
----------- ------- ------- -------
<S> <C> <C> <C>
Volatility factor of the expected market price
of the Company's common stock................. 0.558 0.558 0.823
Average risk-free interest rate................ 6.5% 6.1% 5.19%
Dividend yield................................. 0.0% 0.0% 0.0%
Average life................................... 4 years 3 years 4 years
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.
F-15
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
10. STOCK OPTIONS (continued)
The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Pro forma net loss available to
common stockholders............. $(7,816,122) $(10,231,110) $(12,413,223)
Pro forma basic and diluted loss
per share....................... $ (3.87) $ (4.69) $ (4.36)
</TABLE>
The following transactions occurred with respect to the Plan:
<TABLE>
<CAPTION>
Weighted-
Average
1993 Stock Exercise
Incentive Plan Price
-------------- ---------
<S> <C> <C>
Outstanding December 31, 1995....................... 931,000 0.02
Granted during the year............................. 519,000 0.86
Cancelled during the year........................... (67,500) (0.04)
Exercised during the year........................... (105,625) (0.02)
---------
Outstanding December 31, 1996....................... 1,276,875 0.36
Granted during the year............................. 1,396,000 0.50
Cancelled during the year........................... (278,250) (0.50)
Exercised during the year........................... (340,625) (0.14)
---------
Outstanding December 31, 1997....................... 2,054,000 0.38
Granted during the year............................. 989,000 5.00
Cancelled during the year........................... (26,250) (1.10)
Exercised during the year........................... (606,125) (0.25)
---------
Outstanding December 31, 1998....................... 2,410,625 2.30
=========
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged from
$.02 to $7.50 per share. In April 1997, the Board of Directors authorized a
$0.50 reduction in the exercise price per share for all outstanding options
issued with an exercise price of $1.00, with all other terms remaining
unchanged. The weighted average fair value of options granted during 1996, 1997
and 1998 was $0.10, $.85, and $4.03, respectively. The weighted average
remaining contractual life of those options outstanding as of December 31, 1998
is 7.8 years.
The number of shares of common stock issuable upon exercise of outstanding
stock options that were fully exercisable as of December 31, 1996, 1997 and
1998 were 350,407; 581,313 and 811,596, respectively. The weighted average
exercise price of exercisable options as of December 31, 1996, 1997 and 1998 is
$0.02, $0.26 and $0.44, respectively.
The options outstanding under the Plan generally vest in four equal annual
installments commencing on the day after the first anniversary of the grant and
expire ten years after the date of grant.
F-16
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
10. STOCK OPTIONS (continued)
Other Stock Options
During June and December 1996, the Company granted to one of its major
customers two options to purchase 833,334 and 833,334 shares, respectively, of
the Company's common stock at $3.00 and $4.00 per share, respectively. Such
options were valued at $0 on the date of grant using the Black-Scholes option
pricing model. The options expired unexercised in December 1996 and June 1997.
11. COMMITMENTS
Operating Leases
The Company is obligated to make payments under noncancellable operating
leases for office space expiring in 2002. The approximate future minimum annual
rental payments under these operating leases are as follows:
<TABLE>
<S> <C>
1999................................................................ $390,000
2000................................................................ 390,000
2001................................................................ 60,000
2002................................................................ 30,000
--------
$870,000
========
</TABLE>
Total rental expense for the years ended December 31, 1996, 1997 and 1998 was
approximately $306,000, $425,000 and $455,000, respectively.
12. RELATED PARTY TRANSACTIONS, MAJOR CUSTOMERS AND GEOGRAPHICAL CONCENTRATION
In March 1998, the Company entered into an agreement with an independent
third party (the "Third Party") to secure a position as an anchor tenant on the
Third Party's Internet site. The agreement is for two years and is
automatically renewable unless either party elects not to renew. In 1998 the
Company made aggregate royalty payments of approximately $100,000. In December
1998, the Third Party became a Series E stockholder.
One customer accounted for approximately 31% and 21% of revenues for the
years ended December 31, 1996 and 1997, respectively. The same customer
accounted for approximately 36% and 31% of accounts receivable at December 31,
1996 and 1997, respectively.
Another customer accounted for approximately 14%, 16% and 10% of revenues for
the years ended December 31, 1996, 1997 and 1998, respectively. The same
customer accounted for approximately 15% of accounts receivable at December 31,
1996 and16% at December 31, 1998.
A third customer accounted for approximately 16% and 11% of revenues for the
years ended December 31, 1996 and 1997, respectively.
F-17
<PAGE>
MULTEX.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
Years ended December 31, 1996, 1997 and 1998
12. RELATED PARTY TRANSACTIONS, MAJOR CUSTOMERS AND GEOGRAPHICAL CONCENTRATION
(continued)
A holder of preferred stock entered into a strategic distribution
relationship with the Company. As a result the Company granted the preferred
stockholder a limited non-exclusive license to use and distribute the Company's
technology and products. The preferred stockholder made license payments and
payments for consulting and maintenance services which amounted to
approximately 14% and 20% of revenues for the years ended December 31, 1996 and
1997, respectively. This preferred stockholder accounted for approximately 26%
and 19% of accounts receivable at December 31, 1996 and 1997, respectively.
The Company derives substantially all of its revenues from customers located
within the United States.
13. PENSION PLAN
The Company established a defined contribution plan (the "Plan") under
Section 401(k) of the Internal Revenue Code. All employees of the Company are
eligible to participate in the Plan upon hire. Participants may contribute up
to 20% of their eligible earnings, as defined. The Company may decide to make
an additional contribution to the Plan on behalf of the Plan participants. No
additional contributions have been made by the Company for the years ended
December 31, 1996, 1997 and 1998.
14. SUBSEQUENT EVENTS AND PRO FORMA ADJUSTMENTS
Stock Split
In March 1999, the Company effected a 1-for-2 reverse stock split. All common
share information included in the accompanying financial statements has been
adjusted to reflect the one-for-two reverse stock split.
Preferred Stock
In March 1999, the Company authorized the issuance of 5,000,000 shares of
preferred stock, par value $0.01 per share.
Pro Forma Financial Information
Upon the completion of an initial public offering at a per share price to the
public of not less than $8.00 and in which the gross proceeds paid by the
public are at least $15,000,000, all outstanding redeemable preferred shares
will automatically be converted into shares of common stock in the manner
described in Note 3. The pro forma balance sheet at December 31, 1998 gives
effect to such conversion as if it occurred on that date. The pro forma loss
for the year ended December 31, 1998 gives effect to the conversion of such
shares as if it occurred on January 1, 1998.
F-18
<PAGE>
[LOGO] MULTEX.COM
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The expenses, other than underwriting commissions, expected to be incurred by
Multex.com in connection with the issuance and distribution of the securities
being registered under this Registration Statement are estimated to be as
follows:
<TABLE>
<S> <C>
SEC registration fee............................................. $ 11,510
NASD filing fee.................................................. 4,640
Nasdaq National Market listing fee............................... 95,000
Printing and engraving........................................... 175,000
Legal fees and expenses.......................................... 350,000
Accounting fees and expenses..................................... 175,000
Blue sky fees and expenses (including legal fees)................ 12,500
Transfer agent fees.............................................. 15,000
Miscellaneous.................................................... 61,350
--------
Total........................................................ $900,000
========
</TABLE>
Item 14. Indemnification of Directors and Officers
The Second Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") provides that, except to the extent prohibited
by the Delaware General Corporation Law (the "DGCL"), the Registrant's
directors shall not be personally liable to the Registrant or its stockholders
for monetary damages for any breach of fiduciary duty as directors of the
Registrant. Under the DGCL, the directors have a fiduciary duty to the
Registrant which is not eliminated by this provision of the Certificate of
Incorporation and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available. In
addition, each director will continue to be subject to liability under the DGCL
for breach of the director's duty of loyalty to the Registrant, for acts or
omissions which are found by a court of competent jurisdiction to be not in
good faith or involving intentional misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
prohibited by DGCL. This provision also does not affect the directors'
responsibilities under any other laws, such as the Federal securities laws or
state or Federal environmental laws. The Registrant has obtained liability
insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors and
officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this
provision shall not eliminate or limit the liability of a director: (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) arising under
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit. The DGCL provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's bylaws, any agreement, a vote of stockholders or otherwise. The
Certificate of Incorporation eliminates the personal liability of directors to
the fullest extent permitted by Section 102(b)(7) of the DGCL and provides that
the Registrant shall fully indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative)
by reason of the fact that such person is or was a director or officer of the
Registrant, or is or was serving at the request of the Registrant as a director
or officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise,
II-1
<PAGE>
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Certificate of Incorporation. The Registrant is
not aware of any threatened litigation or proceeding that may result in a claim
for such indemnification.
Item 15. Recent Sales of Unregistered Securities
Common Stock. In February 1998, the Registrant established a subsidiary under
the name, RDG-Multex, Inc. In September 1998, RDG-Multex changed its name to
Multex Data Group, Inc. When the Registrant established RDG-Multex, it issued
to a principal of Research Data Group (i) 75,000 shares of the Registrant's
common stock in April 1998 at a price per share of $4.00 and (ii) a one-year
option to acquire 125,000 shares of the Registrant's common stock at an
exercise price of $5.00 per share.
Until December 1998, the Registrant held 51% of the common stock of Multex
Data Group, and Research Data Group held the remaining 49%. On December 15,
1998, the Registrant exercised an option to acquire all of the shares of Multex
Data Group's common stock held by Research Data Group in exchange for the
issuance of 125,000 shares of the Registrant's common stock.
Preferred Stock and Warrants. In November 1993 and March 1994, respectively,
the Registrant sold 25,000 shares of Series A convertible preferred stock to
Euclid Partners III, L.P., Isaak Karaev, 77 Capital Partners, L.P. and other
investors for an aggregate offering amount of $2,500,000. Upon the closing of
this offering, all of the outstanding shares of Series A convertible preferred
stock will convert into an aggregate of 1,250,000 shares of common stock.
In November 1994, the Registrant sold 36,666 shares of Series B convertible
preferred stock to Euclid Partners III, L.P., 77 Capital Partners, L.P.,
Venture Fund I, L.P. and ADP Financial Information Services, Inc. for an
aggregate offering amount of approximately $5,500,000. Upon the closing of this
offering, all of the outstanding shares of Series B convertible preferred stock
will convert into an aggregate of 1,833,300 shares of common stock.
In connection with a bridge financing completed by the Registrant in December
1995, January 1996 and February 1996, the Registrant issued to Euclid Partners
III, L.P., 77 Capital Partners, L.P. and Venture Fund I, L.P. (collectively,
the "Bridge Participants") promissory notes in an aggregate principal amount of
$1.1 million and warrants to purchase an aggregate of 131,250 shares of common
stock at an exercise price of $0.50 per share. The bridge notes and warrants
were subsequently cancelled in connection with the issuance of Series C
convertible preferred stock in February 1996.
In February, April and June 1996, the Registrant sold an aggregate of 100,000
shares of Series C convertible preferred stock to Chase Venture Capital
Associates, L.P., Euclid Partners III and IV, L.P., Reuters America Inc.,
Softbank Ventures, Inc., 77 Capital Partners, L.P., Venture Fund, I, L.P. and
other investors for an aggregate offering amount of $15,000,000. In February
and April 1996, the Registrant issued to the Bridge Participants, Massachusetts
Mutual Life Insurance Company and Alce Partners, L.P., warrants to purchase an
aggregate of 2,464,617 shares of common stock at an exercise price of $0.50 per
share. In connection with the issuance of Series C convertible preferred stock
in June 1996, the common stock purchase warrants were subsequently cancelled
pursuant to an automatic termination provision contained in such warrants,
which provided for cancellation upon the receipt by the Registrant of an
aggregate of $5,000,000 in gross proceeds. Upon the closing of this offering,
all of the outstanding shares of Series C convertible preferred stock will
convert into an aggregate of 5,000,034 shares of common stock.
In July and August 1997, the Registrant sold 55,556 shares of Series D
convertible preferred stock to Chase Venture Capital Associates, L.P., Euclid
Partners IV, L.P., FGIC Services, Inc., The Fl@tiron Fund, LLC and Reuters
America Inc. for an aggregate offering amount of $10,000,000. Upon the closing
of this offering, all of the outstanding shares of Series D convertible
preferred stock will convert into an aggregate of 2,777,778 shares of common
stock.
II-2
<PAGE>
In October 1998, the Registrant entered into a loan agreement with Fleet
National Bank relating to a $2,000,000 equipment line and a $4,000,000
revolving credit facility. In connection with this loan, the Registrant issued
to Fleet National Bank a warrant to purchase 6,361 shares of Series D
convertible preferred stock at an exercise price of $240 per share. Upon the
closing of this offering, all of the shares of Series D convertible preferred
stock subject to the warrant will convert into an aggregate of 318,050 shares
of common stock at an exercise price of $4.80 per share.
In December 1998, the Registrant sold an aggregate of 80,000 shares of Series
E convertible preferred stock to Chase Venture Capital Associates, L.P.,
Flatiron Associates LLC, The Flatiron Fund 1998/99 LLC, Rader Reinfrank
Investors, L.P., America Online, Inc., Prospect Street NYC Discovery Fund, L.P.
and Mellon Ventures, L.P. for an aggregate offering amount of $20,000,000. Upon
the closing of this offering, all of the outstanding shares of Series E
convertible preferred stock will convert into an aggregate of 4,000,000 shares
of common stock.
Options. The Registrant from time to time has granted stock options to
employees. The following table sets forth information regarding such grants
during the past three fiscal years:
<TABLE>
<CAPTION>
Number of Exercise
Options Prices
--------- ----------
<S> <C> <C>
January 1, 1996 to December 31, 1996................... 519,000 0.50
January 1, 1997 to December 31, 1997................... 1,396,000 0.50
January 1, 1998 to December 31, 1998................... 989,000 0.50-7.50
</TABLE>
The above securities were offered and sold by the Registrant in reliance upon
exemptions from registration pursuant to either (i) Section 4(2) of the
Securities Act of 1933, as transactions not involving any public offering, or
(ii) Rule 701 under the Securities Act of 1933. No underwriters were involved
in connection with the sales of securities referred to in this Item 15.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation.
3.2+ Form of Second Amended and Restated Certificate of Incorporation to be
in effect upon the consummation of this offering.
3.3+ Bylaws.
3.4+ Form of Amended and Restated Bylaws to be in effect upon the
consummation of this offering.
3.5+ Form of Certificate of Amendment of Amended and Restated Certificate of
Incorporation to be in effect immediately prior to the effectiveness of
this registration statement.
3.6+ Certificate of Amendment of Amended and Restated Certificate of
Incorporation authorizing change of name to Multex.com, Inc.
4.1+ Specimen common stock certificate.
4.2 See Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 for provisions of the
Certificate of Incorporation and Bylaws of the Registrant defining the
rights of holders of Common Stock of the Registrant.
5.1+ Opinion of Brobeck, Phleger & Harrison LLP.
10.1+ Sublease, dated August 23, 1995, between International Business
Machines Corporation and the Registrant.
10.2++ Interactive Services Agreement, dated as of March 20, 1998, by and
between America Online, Inc. and the Registrant.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.3++ Distribution and Joint Sourcing Agreement, dated as of June 4, 1996,
by and between Bloomberg, L.P. and the Registrant.
10.4++ Specialist Data Agreement, dated as of July 15, 1998, by and between
Reuters Limited and the Registrant.
10.5+ 1999 Stock Option Plan.
10.6+ Employee Stock Purchase Plan.
10.7+ Fourth Amended and Restated Registration Rights Agreement, dated as of
December 15, 1998.
10.8++ Agreement for Internal Electronic Distribution Services, dated as of
April 10, 1997, by and between Robertson, Stephens & Company LLC and
the Registrant.
10.9++ Amendment No.1, dated as of March 9, 1998, to the Agreement for
Internal Electronic Distribution Services, dated as of April 10, 1997,
by and between Robertson, Stephens & Company LLC and the Registrant.
10.10+ Amendment No. 2, dated as of July 29, 1998, to the Agreement for
Internal Electronic Distribution Services, dated as of April 10, 1997,
by and between Robertson, Stephens & Company LLC and the Registrant.
10.11++ Amendment No. 3, dated as of September 10, 1998, to the Agreement for
Internal Electronic Distribution Services, dated as of April 10, 1997,
by and between Robertson, Stephens & Company LLC and the Registrant.
10.12+ Agreement for Electronic Distribution Services, dated as of June 30,
1998, by and between CIBC Wood Gundy Securities, Inc. and the
Registrant.
10.13++ Master Services Agreement, dated as of November 23, 1998, by and
between Dain Rauscher Incorporated and the Registrant.
10.14+ Agreement for Internal Distribution Services, dated as of February 17,
1998, by and between CIBC Oppenheimer Corp. and the Registrant.
10.15+ Letter Agreement, dated February 5, 1999, by and between CIBC
Oppenheimer Corp. and the Registrant.
10.16 Amendment to Interactive Services Agreement, dated as of February 25,
1999, by and between America Online, Inc. and the Registrant.
11.1+ Statement re: Computation of Per Share Earnings.
21.1+ Subsidiaries of the Registrant.
23.1+ Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1+ Powers of Attorney.
27.1+ Financial Data Schedule for the year ended December 31, 1997.
27.2+ Financial Data Schedule for the year ended December 31, 1998.
</TABLE>
- --------
+ Previously filed.
+ Confidential treatment to be requested for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act. Confidential
portions of this Exhibit have been filed separately with the Securities and
Exchange Commission.
(b) Financial Statement Schedules.
Report of Independent Public Accountants on Schedule
Schedule II: Valuation and Qualifying Accounts
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the Underwriter at
the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
II-4
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation of the Registrant, the Underwriting Agreement, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424 (b) (1) or (4), or 497 (h) under the Securities Act of 1933 shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused Amendment No. 3 to this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in The City of New
York, State of New York, on this 15th day of March, 1999.
Multex.com, Inc.
/s/ Isaak Karaev
By____________________________________
Name: Isaak Karaev
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to this Registration Statement has been signed by the
following persons in the capacities indicated on March 15, 1999:
Signature Title(s)
/s/ Isaak Karaev President, Chief Executive Officer
- ------------------------------------ and Chairman of the Board of
Isaak Karaev Directors (Principal Executive
Officer)
/s/ Philip Callaghan Chief Financial Officer (Principal
- ------------------------------------ Financial Officer)
Philip Callaghan
/s/ Philip Scheps Vice President, Finance and
- ------------------------------------ Controller (Principal Accounting
Philip Scheps Officer)
* Director
- ------------------------------------
I. Robert Greene
* Director
- ------------------------------------
Peter LaBonte
* Director
- ------------------------------------
Lennert J. Leader
* Director
- ------------------------------------
Milton J. Pappas
* Director
- ------------------------------------
Herbert E. Skeete
/s/ Isaak Karaev
*By: _______________________________
Isaak Karaev
Attorney-in-Fact
II-6
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders of
Multex.com, Inc.
We have audited the consolidated financial statements of Multex.com, Inc. as
of December 31, 1998 and 1997, and for each of the three years in the period
ended December 31, 1998, and have issued our report thereon dated January 29,
1999 except for Note 14 as to which the date is March 9, 1999 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedule listed in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
New York, New York
January 29, 1999
S-1
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
MULTEX.COM, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------
Additions
Balance at ---------------------------------
Beginning of Charged to Costs Charged to Other Balance at
Description Period and Expenses Accounts Deductions End of Period
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Deducted from asset
account
Allowance for doubtful
accounts............... $240,000 $138,000 $ -- $240,000 $138,000
Year Ended December 31,
1997:
Deducted from asset
account
Allowance for doubtful
accounts............... $130,000 $168,130 $ -- $ 58,130 $240,000
Year Ended December 31,
1996:
Deducted from asset
account
Allowance for doubtful
accounts............... $ -- $130,000 $ -- $ -- $130,000
</TABLE>
S-2
<PAGE>
EXHIBIT 1.1
3,000,000 SHARES/1/
MULTEX.COM, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
March __, 1999
BANCBOSTON ROBERTSON STEPHENS INC.
CIBC OPPENHEIMER CORP.
DAIN RAUSCHER WESSELS
As Representatives of the several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
Multex.com, Inc., a Delaware corporation (the "Company"), and certain
stockholders of the Company named in Schedule B hereto (hereafter called the
"Selling Stockholders") address you as the Representatives of each of the
persons, firms and corporations listed in Schedule A hereto (herein collectively
called the "Underwriters") and hereby confirm their respective agreements with
the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
---------------------
3,000,000 shares of its authorized and unissued Common Stock, $.01 par value per
share, to the several Underwriters, hereinafter called the "Firm Shares." The
Company and the Selling Stockholders also propose to grant, severally and not
jointly, to the Underwriters an option to purchase up to 450,000 additional
shares of the Company's Common Stock, $.01 par value per share, (the "Option
Shares"), as provided in Section 7 hereof, of which 283,500 shares are to be
issued and sold by the Company (the "Company Option Shares") and an aggregate of
166,500 shares are to be sold by the Selling Stockholders (the "Selling
Stockholder Shares" and, together with the Company Option Shares, the "Option
Shares") in the respective amounts set forth opposite each such Selling
Stockholder's name in Schedule B hereto. As used in this Agreement, the term
"Shares" shall include the Firm Shares and the Option Shares. All shares of
Common Stock, $.01 par value per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby, including the Shares, are
hereinafter referred to as "Common Stock."
2. Representations, Warranties and Agreements of the Company and the
-----------------------------------------------------------------
Selling Stockholders.
- --------------------
1. The Company represents and warrants to and agrees with each
Underwriter that:
(a) A registration statement on Form S-1 (File No. 333-70693)
with respect to the Shares, including a prospectus subject to completion, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the applicable
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under
____________________________
/1/ Plus an option to purchase up to 450,000 additional shares from the Company
and certain stockholders of the Company to cover over-allotments.
<PAGE>
the Securities Act and has been filed with the Commission; such amendments to
such registration statement, such amended prospectuses subject to completion and
such abbreviated registration statements pursuant to Rule 462(b) of the Rules
and Regulations as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Company will file such
additional amendments to such registration statement, such amended prospectuses
subject to completion and such abbreviated registration statements as may
hereafter be required. Copies of such registration statement and amendments, of
each related prospectus subject to completion (the "Preliminary Prospectuses")
and of any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Securities Act by the Commission, the Company will prepare
and promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) or, if BancBoston Robertson
Stephens Inc., on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information required
to be included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations pursuant to subparagraph (1), (4) or
(7) of Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to the registration statement (including a final form of prospectus).
If the registration statement relating to the Shares has not been declared
effective under the Securities Act by the Commission, the Company will prepare
and promptly file an amendment to the registration statement, including a final
form of prospectus, or, if BancBoston Robertson Stephens Inc., on behalf of the
several Underwriters, shall agree to the utilization of Rule 434 of the Rules
and Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations.
The term "Registration Statement" as used in this Agreement shall mean such
registration statement, including financial statements, schedules and exhibits,
in the form in which it became or becomes, as the case may be, effective
(including, if the Company omitted information from the registration statement
pursuant to Rule 430A(a) or files a term sheet pursuant to Rule 434 of the Rules
and Regulations, the information deemed to be a part of the registration
statement at the time it became effective pursuant to Rule 430A(b) or Rule
434(d) of the Rules and Regulations) and, in the event of any amendment thereto
or the filing of any abbreviated registration statement pursuant to Rule 462(b)
of the Rules and Regulations relating thereto after the effective date of such
registration statement, shall also mean (from and after the effectiveness of
such amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company omitted
information from the Registration Statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the Rules
and Regulations); provided, however, that if in reliance on Rule 434 of the
-------- -------
Rules and Regulations and with the consent of BancBoston Robertson Stephens
Inc., on behalf of the several Underwriters, the Company shall have provided to
the Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable,
prior to the time that a confirmation is sent or given for purposes of Section
2(10)(a) of the Securities Act, the term "Prospectus" shall mean the "prospectus
subject to completion" (as defined in Rule 434(g) of the Rules and Regulations)
last provided to the Underwriters by the Company and circulated by the
Underwriters to all prospective purchasers of the Shares (including the
information deemed to be a part of the Registration Statement at the time it
became effective pursuant to Rule 434(d) of the Rules and Regulations).
Notwithstanding the foregoing, if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of the
Shares that differs from the prospectus referred to in the immediately preceding
sentence (whether or not such revised prospectus is required to be filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriters for such use. If in reliance on Rule 434
of the Rules and Regulations and with the consent of BancBoston Robertson
Stephens Inc., on behalf of the several Underwriters, the Company shall have
provided to the Underwriters a term sheet pursuant to Rule 434(b) or (c), as
applicable, prior to the time that a confirmation is sent or given for purposes
of Section 2(10)(a) of the Securities Act, the Prospectus and the term sheet,
together, will not be materially different from the prospectus in the
Registration Statement.
-2-
<PAGE>
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose. Each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Securities Act and the Rules and Regulations
and, as of its date, has not included any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
at the time the Registration Statement became or becomes, as the case may be,
effective and at all times subsequent thereto up to and on the Closing Date (as
hereinafter defined) and on any later date on which Option Shares are to be
purchased, (i) the Registration Statement and the Prospectus, and any amendments
or supplements thereto, contained and will contain all material information
required to be included therein by the Securities Act and the Rules and
Regulations and will in all material respects conform to the requirements of the
Securities Act and the Rules and Regulations, (ii) the Registration Statement,
and any amendments or supplements thereto, did not and will not include any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and (iii) the
Prospectus, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that none of the
-------- -------
representations and warranties contained in this subparagraph (b) shall apply to
information contained in or omitted from the Registration Statement or the
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation thereof.
(c) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation with full power and authority
(corporate and other) to own, lease and operate its properties and conduct its
business as described in the Prospectus; the Company owns all of the outstanding
capital stock of its subsidiaries free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; each of the Company and its
subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
properties, results of operations, or business of the Company and its
subsidiaries considered as one enterprise (a "Material Adverse Effect"); to the
knowledge of the Company, no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; each of the Company and its
subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal and other regulatory authorities which are material to the conduct of
its business, all of which are valid and in full force and effect; neither the
Company nor any of its subsidiaries is in violation of its respective charter or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
debenture, note or other evidence of indebtedness, or in any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of its subsidiaries or their respective properties
may be bound; and neither the Company nor any of its subsidiaries is in material
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or over
their respective properties. The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than Multex
Systems International, Inc. and Multex Data Group, Inc.
(d) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and is
a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles; the
-3-
<PAGE>
performance of this Agreement and the consummation of the transactions herein
contemplated will not result in a material breach or violation of any of the
terms and provisions of, or constitute a default under, (i) any bond, debenture,
note or other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of its subsidiaries or their respective properties may be bound,
(ii) the charter or bylaws of the Company or any of its subsidiaries, or (iii)
any law, order, rule, regulation, writ, injunction, judgment or decree of any
court, government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or over their
respective properties. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties is required for the execution
and delivery of this Agreement and the consummation by the Company of the
transactions herein contemplated, except such as may be required under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act") or under state or other securities or Blue Sky laws, all of which
requirements have been satisfied.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened, any action, suit, claim or proceeding against the
Company, any of its subsidiaries or any of their respective officers or any of
their respective properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or over their respective officers or
properties or otherwise which (i) might result in any Material Adverse Effect,
(ii) might prevent consummation of the transactions contemplated hereby or (iii)
is required to be disclosed in the Registration Statement or the Prospectus and
is not so disclosed; and there are no agreements, contracts, leases or documents
of the Company or any of its subsidiaries of a character required to be
described or referred to in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement by the Securities Act or
the Rules and Regulations which have not been accurately described in all
material respects in the Registration Statement or the Prospectus or filed as
exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company (including
the Selling Stockholder Shares) have been duly authorized and validly issued and
are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase securities,
and the authorized and outstanding capital stock of the Company is as set forth
in the Prospectus under the caption "Capitalization" and conforms in all
material respects to the statements relating thereto contained in the
Registration Statement and the Prospectus (and such statements correctly state
the substance of the instruments defining the capitalization of the Company);
the Firm Shares and the Company Option Shares have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive right, co-
sale right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Firm Shares or Company Option
Shares or the issuance and sale thereof other than those that have been
expressly waived prior to the date hereof and those that will automatically
expire upon and will not apply to the consummation of the transactions
contemplated hereunder on the Closing Date. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale or transfer of the Shares except as
may be required under the Securities Act or under state or other securities or
Blue Sky laws. All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable, and were not issued in violation of or subject to
any preemptive right, or other rights to subscribe for or purchase shares and
are owned by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest. Except as disclosed in the Prospectus
and the financial statements of the Company, and the related notes thereto,
included in the Prospectus, neither the Company nor any subsidiary has
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or
-4-
<PAGE>
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and fairly presents
in all material respects the information required to be shown with respect to
such plans, arrangements, options and rights.
(g) Ernst & Young LLP, which has examined the consolidated financial
statements of the Company, together with the related schedules and notes, as of
December 31, 1998 and 1997 and for each of the years in the three (3) years
ended December 31, 1998, filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent accountants
within the meaning of the Securities Act and the Rules and Regulations; the
audited consolidated financial statements of the Company, together with the
related schedules and notes, and the unaudited consolidated financial
information, forming part of the Registration Statement and the Prospectus,
accurately and fairly present the financial position and the results of
operations of the Company and its subsidiaries at the respective dates and for
the respective periods to which they apply; and all audited consolidated
financial statements of the Company, together with the related schedules and
notes, and the unaudited consolidated financial information, filed with the
Commission as part of the Registration Statement, have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved except as may be otherwise stated therein. The
selected and summary financial and statistical data included in the Registration
Statement present accurately and fairly the information shown therein and have
been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to
be included in the Registration Statement pursuant to the Securities Act and the
Rules and Regulations.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been (i)
any material adverse change in the condition (financial or otherwise), earnings,
properties, results of operations, or business of the Company, (ii) any
transaction that is material to the Company, except transactions entered into in
the ordinary course of business, (iii) any obligation, direct or contingent,
that is material to the Company, incurred by the Company or its subsidiaries,
except obligations incurred in the ordinary course of business, (iv) any change
in the capital stock or outstanding indebtedness of the Company or any of its
subsidiaries that is material to the Company, (v) any dividend or distribution
of any kind declared, paid or made on the capital stock of the Company or any of
its subsidiaries, or (vi) any loss or damage (whether or not insured) to the
property of the Company or any of its subsidiaries which has been sustained or
will have been sustained which has resulted in a Material Adverse Effect.
(i) Except as set forth in the Registration Statement and the
Prospectus, (i) each of the Company and its subsidiaries has good and marketable
title to all properties and assets described in the Registration Statement and
the Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would not
have a Material Adverse Effect (ii) the agreements to which the Company or any
of its subsidiaries is a party described in the Registration Statement and the
Prospectus are valid agreements, enforceable by the Company and its subsidiaries
(as applicable), except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles and, to the best of the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements, and (iii) each of the Company and its subsidiaries has
valid and enforceable leases for all properties described in the Registration
Statement and the Prospectus as leased by it, except as the enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. Except as set forth in the Registration Statement
and the Prospectus, the Company owns or leases all such properties as are
necessary to its operations as now conducted and as proposed to be conducted.
(j) The Company and its subsidiaries have timely filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown thereon as due, and there is no tax deficiency that has been or, to
the best of the Company's knowledge, might be asserted against the Company or
any
-5-
<PAGE>
of its subsidiaries that might have a Material Adverse Effect; and all tax
liabilities are adequately provided for on the books of the Company and its
subsidiaries.
(k) The Company and its subsidiaries maintain insurance with insurers
of recognized financial responsibility of the types and in the amounts generally
deemed adequate for their respective businesses and consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, insurance covering real and personal property owned or leased by
the Company or its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for; and
neither the Company nor any such subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a comparable cost.
(l) To the best of the Company's knowledge, no labor disturbance by
the employees of the Company or any of its subsidiaries exists or is imminent;
and the Company is not aware of any existing or imminent labor disturbance by
the employees of any of its principal suppliers that might be expected to result
in a Material Adverse Effect. No collective bargaining agreement exists with
any of the Company's employees and, to the best of the Company's knowledge, no
such agreement is imminent.
(m) Each of the Company and its subsidiaries own or possess
enforceable rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration Statement
and the Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not have a Material
Adverse Effect; the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with asserted rights of the Company by
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights; and the Company
has not received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a Material Adverse Effect.
(n) The Common Stock has been approved for quotation on The Nasdaq
National Market, subject to official notice of issuance.
-6-
<PAGE>
(o) There are no issues related to the Company's, or any of its
subsidiaries', preparedness for the Year 2000 that (i) are of a character
required to be described or referred to in the Registration Statement or the
Prospectus by the Securities Act or the Rules and Regulations which have not
been accurately described in the Registration Statement or the Prospectus or
(ii) might reasonably be expected to result in any Material Adverse Effect or
that might materially affect their properties, assets or rights. All internal
computer systems and each Constituent Component (as hereinafter defined) of
those systems and all computer-related products and each Constituent Component
of those products of the Company and each of its subsidiaries fully comply with
the Year 2000 Qualification Requirements. "Year 2000 Qualification
Requirements" means that the internal computer systems and each Constituent
Component of those systems and all computer-related products and each
Constituent Component of those products of the Company and each of its
subsidiaries (i) have been reviewed to confirm that they store, process
(including sorting and performing mathematical operations, calculations and
computations), input and output data containing date and information correctly
regardless of whether the data contains dates and times before, on or after
January 1, 2000, (ii) have been designated to ensure date and time entry
recognition, calculations that accommodate same century and multi-century
formulas and date values, leap year recognition and calculations, and date data
interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (iv) accurately process any date rollover and (v) accept and respond to
two-digit year date input in a manner that resolves any ambiguities as to the
century. "Constituent Component" means all software (including operating
systems, programs, packages and utilities), firmware, hardware, networking
components, and peripherals provided as part of the configuration.
(p) The Company has filed a registration statement pursuant to Section
12(g) of the Exchange Act, to register the Common Stock under the Exchange Act.
(q) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
and has in the past conducted, and intends in the future to conduct, its affairs
in such a manner as to ensure that it will not become an "investment company" or
a company "controlled" by an "investment company" within the meaning of the 1940
Act and such rules and regulations.
(r) The Company and, to its knowledge, and the officers, directors and
employees of the Company, have not distributed and will not distribute prior to
the later of (i) the Closing Date, or any date on which Option Shares are to be
purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any Preliminary Prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Securities Act.
(s) Neither the Company nor any of its subsidiaries has at any time
during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(t) The Company and, to its knowledge, its officers and directors,
have not taken and will not take, directly or indirectly, any action designed to
or that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.
(u) Each officer and director of the Company, each Selling Stockholder
and except for those stockholders listed on Schedule C hereto, each beneficial
owner of 1% or more of the outstanding shares of Common Stock has agreed in
writing that such person will not, for a period of 180 days from the date that
the Registration Statement is declared effective by the Commission (the "Lock-up
Period"), offer to sell, contract to sell, or otherwise sell, dispose of, loan,
pledge or grant any rights with respect to (collectively, a "Disposition") any
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<PAGE>
shares of Common Stock, any options or warrants to purchase any shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock (collectively, "Securities") now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter acquires the
power of disposition, otherwise than (i) as a bona fide gift or gifts, provided
the donee or donees thereof agree in writing to be bound by this restriction,
(ii) as a distribution to partners or stockholders of such person, provided that
the distributees thereof agree in writing to be bound by the terms of this
restriction, or (iii) with the prior written consent of BancBoston Robertson
Stephens Inc. The foregoing restriction has been expressly agreed to preclude
the holder of the Securities from engaging in any hedging or other transaction
which is designed to or reasonably expected to lead to or result in a
Disposition of Securities during the Lock-up Period, even if such Securities
would be disposed of by someone other than such holder. Such prohibited hedging
or other transactions would include, without limitation, any short sale (whether
or not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person has also agreed and consented to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by such person except in compliance with this
restriction. The Company has provided to counsel for the Underwriters a
complete and accurate list of all securityholders of the Company and the number
and type of securities held by each securityholder. The Company has provided to
counsel for the Underwriters true, accurate and complete copies of all of the
agreements pursuant to which each officer, director, Selling Stockholder and
except for those stockholders listed on Schedule C hereto, each beneficial owner
of 1% or more of the outstanding shares of Common Stock has agreed to such or
similar restrictions (the "Lock-up Agreements") presently in effect or effected
hereby. The Company hereby represents and warrants that it will not release any
of its officers, directors or other stockholders from any Lock-up Agreements
currently existing or hereafter effected without the prior written consent of
BancBoston Robertson Stephens Inc.
(v) Except as set forth in the Registration Statement and the
Prospectus, (i) the Company is in compliance, in all material respects, with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, properties and assets, (ii) the
Company has received no notice from any governmental authority or third party of
an asserted claim under Environmental Laws, which claim is required to be
disclosed in the Registration Statement and the Prospectus, (iii) to the
Company's knowledge, the Company will not be required to make material capital
expenditures to comply with Environmental Laws and (iv) to the Company's
knowledge, no property which is or was owned, leased or occupied by the Company
has been designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S) 9601, et
--
seq.), or otherwise designated as a contaminated site under applicable state or
- ----
local law.
(w) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(x) Each of the Company and its subsidiaries has fulfilled its
respective obligations, if any, under the minimum funding standards of Section
302 of the U.S. Employee Retirement Income Security Act of 1974 ("ERISA") and
the regulations and published interpretations thereunder with respect to each
"plan" as defined in Section 3(3) of ERISA and such regulations and published
interpretations in which its employees are eligible to participate and each such
plan is in compliance in all material respects with the presently applicable
provisions of ERISA and such regulations and published interpretations. Neither
the Company nor any subsidiary has incurred any unpaid liability to the Pension
Benefit Guaranty Corporation (other than for the payment of premiums in the
ordinary course) or to any such plan under Title IV of ERISA.
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<PAGE>
(y) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
II. Each Selling Stockholder, severally and not jointly, represents
and warrants to and agrees with each Underwriter and the Company that:
(a) Such Selling Stockholder now has, and on the Closing Date, and on
any later date on which Option Shares are purchased will have, valid title to
the Shares to be sold by such Selling Stockholder, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
pursuant to this Agreement; and upon delivery of such Shares hereunder and
payment of the purchase price as herein contemplated, each of the Underwriters
will obtain valid title to the Shares purchased by it from such Selling
Stockholder, free and clear of any pledge, lien, security interest pertaining to
such Selling Stockholder or such Selling Stockholder's property, encumbrance,
claim or equitable interest, including any liability for estate or inheritance
taxes, or any liability to or claims of any creditor, devisee, legatee or
beneficiary of such Selling Stockholder.
(b) Such Selling Stockholder has duly authorized (if applicable),
executed and delivered, in the form heretofore furnished to the Representatives,
an irrevocable Power of Attorney (the "Power of Attorney") appointing Isaak
Karaev and Philip Callaghan as attorneys-in-fact (collectively, the "Attorneys"
and individually, an "Attorney") and a Letter of Transmittal and Custody
Agreement (the "Custody Agreement") with the Company, as custodian (the
"Custodian"); each of the Power of Attorney and the Custody Agreement
constitutes a valid and binding agreement on the part of such Selling
Stockholder, enforceable in accordance with its terms, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles; and each of such Selling
Stockholder's Attorneys, acting alone, is authorized to execute and deliver this
Agreement and the certificate referred to in Section 6(h) hereof on behalf of
such Selling Stockholder, to determine the purchase price to be paid by the
several Underwriters to such Selling Stockholder as provided in Section 3
hereof, to authorize the delivery of the Selling Stockholder Shares under this
Agreement and to duly endorse (in blank or otherwise) the certificate or
certificates representing such Shares or a stock power or powers with respect
thereto, to accept payment therefor, and otherwise to act on behalf of such
Selling Stockholder in connection with this Agreement.
(c) All consents, approvals, authorizations and orders required for
the execution and delivery by such Selling Stockholder of the Power of Attorney
and the Custody Agreement, the execution and delivery by or on behalf of such
Selling Stockholder of this Agreement and the sale and delivery of the Selling
Stockholder Shares under this Agreement (other than, at the time of the
execution hereof (if the Registration Statement has not yet been declared
effective by the Commission), the issuance of the order of the Commission
declaring the Registration Statement effective and such consents, approvals,
authorizations or orders as may be necessary under state or other securities or
Blue Sky laws have been obtained and are in full force and effect; and such
Selling Stockholder has full legal right, power and authority to enter into and
perform his or her obligations under this Agreement and such Power of Attorney
and Custody Agreement, and to sell, assign, transfer and deliver the Shares to
be sold by such Selling Stockholder under this Agreement.
(d) Such Selling Stockholder will not, during the Lock-up Period,
effect the Disposition of any Securities now owned or hereafter acquired
directly by such Selling Stockholder or with respect to which such Selling
Stockholder has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to partners or
stockholders of such Selling Stockholder, provided that the distributees thereof
agree in writing to be bound by the terms of this restriction, or (iii) with the
prior written consent of BancBoston Robertson Stephens Inc. The foregoing
restriction is expressly agreed to preclude the stockholder of the Securities
from
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<PAGE>
engaging in any hedging or other transaction which is designed to or reasonably
expected to lead to or result in a Disposition of Securities during the Lock-up
Period, even if such Securities would be disposed of by someone other than the
Selling Stockholder. Such prohibited hedging or other transactions include,
without limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Such Selling
Stockholder also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent against the transfer of the securities held by
such Selling Stockholder except in compliance with this restriction.
(e) Certificates in negotiable form for all Shares to be sold by such
Selling Stockholder under this Agreement, together with a stock power or powers
duly endorsed in blank by such Selling Stockholder, have been placed in custody
with the Custodian for the purpose of effecting delivery hereunder.
(f) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles; and the
performance of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the terms and
provisions of or constitute a default under any bond, debenture, note or other
evidence of indebtedness, or under any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or instrument to
which such Selling Stockholder is a party or by which such Selling Stockholder,
or any Selling Stockholder Shares to be sold by such Selling Stockholder
hereunder, may be bound or, to the best of such Selling Stockholders' knowledge,
result in any violation of any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over such Selling Stockholder or over
the properties of such Selling Stockholder.
(g) Such Selling Stockholder has not taken and will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(h) Such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(i) All information furnished by or on behalf of such Selling
Stockholder relating to such Selling Stockholder and the Selling Stockholder
Shares that is contained in the representations and warranties of such Selling
Stockholder in such Selling Stockholder's Power of Attorney or set forth in the
Registration Statement or the Prospectus is, and at the time the Registration
Statement became or becomes, as the case may be, effective and at all times
subsequent thereto up to and on the Closing Date, and on any later date on which
Option Shares are to be purchased, was or will be, true, correct and complete,
and does not, and at the time the Registration Statement became or becomes, as
the case may be, effective and at all times subsequent thereto up to and on the
Closing Date (hereinafter defined), and on any later date on which Option Shares
are to be purchased, will not, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(j) Such Selling Stockholder will review the Prospectus and will
comply with all agreements and satisfy all conditions on its part to be complied
with or satisfied pursuant to this Agreement on or prior to the Closing Date, or
any later date on which Option Shares are to be purchased, as the case may be,
and will advise one of its Attorneys and BancBoston Robertson Stephens Inc.
prior to the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, if any statement to be made on behalf of the
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<PAGE>
Company in the certificate contemplated by Section 6(h) would be inaccurate if
made as of the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be.
(k) Such Selling Stockholder does not have, or has waived prior
to the date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to purchase any of the Shares that are to be sold
by the Company or any of the other Selling Stockholders to the Underwriters
pursuant to this Agreement; such Selling Stockholder does not have, or has
waived prior to the date hereof, any registration right or other similar right
to participate in the offering made by the Prospectus, other than such rights of
participation as have been satisfied by the participation of such Selling
Stockholder in the transactions to which this Agreement relates in accordance
with the terms of this Agreement; and such Selling Stockholder does not own any
warrants, options or similar rights to acquire, and does not have any right or
arrangement to acquire, any capital stock, rights, warrants, options or other
securities from the Company, other than those described in the Registration
Statement and the Prospectus.
(l) Each of the Selling Stockholders listed on Schedule D hereto
is not aware that any of the representations and warranties of the Company set
forth in Section 2.I. above is untrue or inaccurate in any material respect.
3. Purchase, Sale and Delivery of Shares. On the basis of the
-------------------------------------
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective number of Firm Shares as hereinafter set forth. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of Firm Shares which is set forth opposite the name of such Underwriter
in Schedule A hereto (subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made against
payment of the purchase price therefor by the several Underwriters by wire
transfer of same-day funds to an account specified by the Company, at the
offices of Brobeck, Phleger & Harrison LLP, 1633 Broadway, 47th Floor, New York,
New York 10019 (or at such other place as may be agreed upon among the
Representatives and the Company), at 7:00 A.M., San Francisco time (a) on the
third (3rd) full business day following the first day that Shares are traded,
(b) if this Agreement is executed and delivered after 1:30 P.M., San Francisco
time, the fourth (4th) full business day following the day that this Agreement
is executed and delivered or (c) at such other time and date not later than
seven (7) full business days following the first day that Shares are traded as
the Representatives and the Company may determine (or at such time and date to
which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date;" provided, however, that if the Company has not made available to
-------- -------
the Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following delivery
of copies of the Prospectus to the Representatives. The certificates for the
Firm Shares to be so delivered will be made available to you at such office or
such other location including, without limitation, in New York City, as you may
reasonably request for checking at least one (1) full business day prior to the
Closing Date and will be in such names and denominations as you may request,
such request to be made at least two (2) full business days prior to the Closing
Date. If the Representatives so elect, delivery of the Firm Shares may be made
by credit through full fast transfer to the accounts at The Depository Trust
Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
-11-
<PAGE>
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $_____ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last sentence of the last paragraph
on the front cover page, and under the caption "Underwriting" in any Preliminary
Prospectus and in the Prospectus constitutes the only information furnished by
the Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement, and you, on behalf of the respective
Underwriters, represent and warrant to the Company that the statements made
therein do not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
4. Further Agreements of the Company. The Company agrees with the
---------------------------------
several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereto, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; the Company will use its best efforts to
cause any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations as may be required subsequent to the date the Registration
Statement is declared effective to become effective as promptly as possible; the
Company will notify you, promptly after it shall receive notice thereof, of the
time when the Registration Statement, any subsequent amendment to the
Registration Statement or any abbreviated registration statement has become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment to
such Registration Statement as originally declared effective which is declared
effective by the Commission; if the Company files a term sheet pursuant to Rule
434 of the Rules and Regulations, the Company will provide evidence satisfactory
to you that the Prospectus and term sheet meeting the requirements of Rule
434(b) or (c), as applicable, of the Rules and Regulations, have been filed,
within the time period prescribed, with the Commission pursuant to subparagraph
(7) of Rule 424(b) of the Rules and Regulations; if for any reason the filing of
the final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the time
period prescribed; it will notify you promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; promptly upon your request, it will
prepare and file with the Commission any amendments or supplements to the
Registration Statement or the Prospectus which, in the opinion of counsel for
the several Underwriters ("Underwriters' Counsel"), may be necessary or
advisable in connection with the distribution of the Shares by the Underwriters;
it will promptly prepare and file with the Commission, and promptly notify you
of the filing of, any amendments or supplements to the Registration Statement or
the Prospectus which may be necessary to correct any statements or omissions,
if, at any time when a prospectus relating to the Shares is required to be
delivered under the Securities Act, any event shall have occurred as a result of
which the Prospectus or any other prospectus relating to the Shares as then in
effect would include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; in case any
Underwriter is required to deliver a prospectus nine (9) months or more after
the effective date of the Registration Statement in connection with the sale of
the Shares, it will prepare promptly upon request, but at the expense of such
Underwriter, such amendment or amendments to the Registration Statement and such
prospectus or prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Securities Act; and it will file no
amendment or supplement to the Registration Statement or the Prospectus which
shall not previously have been submitted to you a reasonable time prior to the
proposed filing thereof or to which you shall reasonably object in writing,
subject, however, to compliance with the Securities Act and the Rules and
Regulations and the provisions of this
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<PAGE>
Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or of the initiation
or threat of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its withdrawal at
the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet under
Rule 434, in no event later than the first (1st) full business day following the
first day that Shares are traded, copies of the Registration Statement (three of
which will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Securities Act, all in such quantities as you may from time to time
reasonably request. Notwithstanding the foregoing, if BancBoston Robertson
Stephens Inc., on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the Company shall provide
to you copies of a Preliminary Prospectus updated in all respects through the
date specified by you in such quantities as you may from time to time reasonably
request.
(e) The Company will make generally available to its stockholders as
soon as practicable, but in any event not later than the forty-fifth (45th) day
following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Securities Act and covering a twelve
(12) month period beginning after the effective date of the Registration
Statement.
(f) During a period of five (5) years after the date hereof, provided
that the Company is subject to the reporting requirements of the Exchange Act,
the Company will furnish to its stockholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and will make available to
its stockholders unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will furnish to you and the other several
Underwriters hereunder, upon request (i) concurrently with furnishing such
reports to its stockholders, statements of operations of the Company for each of
the first three (3) quarters in the form furnished to the Company's
stockholders, (ii) concurrently with furnishing to its stockholders, a balance
sheet of the Company as of the end of such fiscal year, together with statements
of operations, of stockholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon of
independent certified public accountants, (iii) as soon as they are available,
copies of all reports (financial or other) mailed to stockholders, (iv) as soon
as they are available, copies of all reports and financial statements furnished
to or filed with the Commission, any securities exchange or the NASD, (v) every
material press release and every material news item or article in respect of the
Company or its affairs which was generally released to stockholders or prepared
by the Company or any of its subsidiaries, and (vi) any additional information
of a public nature concerning the Company or its subsidiaries, or its business
which you may reasonably request. During such five (5) year period, if the
Company shall have active subsidiaries the foregoing financial statements shall
be on a consolidated basis to the extent that the accounts of the Company and
its subsidiaries are consolidated, and shall be accompanied by similar
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<PAGE>
financial statements for any significant subsidiary which is not so
consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for its Common Stock.
(i) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company or any
Selling Stockholder to perform any agreement on their respective parts to be
performed hereunder or to fulfill any condition of the Underwriters' obligations
hereunder, or if the Company shall terminate this Agreement pursuant to Section
11(a) hereof, or if the Underwriters shall terminate this Agreement pursuant to
Section 11(b)(i), the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including fees and disbursements of Underwriters'
Counsel) incurred by the Underwriters in investigating or preparing to market or
marketing the Shares.
(j) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
adversely affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the timing and substance
of and disseminate a press release or other public statement, reasonably
satisfactory to the Company and you, responding to or commenting on such rumor,
publication or event.
(k) During the Lock-up Period, the Company will not, without the
prior written consent of BancBoston Robertson Stephens Inc., effect the
Disposition of, directly or indirectly, any Securities other than the sale of
the Firm Shares and the Option Shares to be sold by the Company hereunder and
the Company's issuance of options or Common Stock under the Company's presently
authorized 1999 Stock Option Plan (the "Option Plan") and 1999 Employee Stock
Purchase Plan (the "ESPP").
5. Expenses.
--------
(a) The Company and the Selling Stockholders agree with each
Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky
Survey and any Supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to any of
the foregoing; the issuance and delivery of the Shares hereunder to the
several Underwriters, including transfer taxes, if any; the cost of all
certificates representing the Shares and transfer agents' and registrars'
fees; the fees and disbursements of counsel for the Company; all fees and
other charges of the Company's independent certified public accountants;
the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary
Prospectus and the Prospectus, and any amendments or supplements to any of
the foregoing; NASD filing fees and the cost of qualifying the Shares under
the laws of such jurisdictions as you may designate (including filing fees
and fees and disbursements of Underwriters' Counsel in connection with such
NASD filings and Blue Sky qualifications); and all other expenses directly
incurred by the Company and the Selling Stockholders in connection with the
performance of their obligations hereunder. Any additional expenses
incurred as a result of the sale of the Shares by the Selling Stockholders
will be borne collectively by the Company and the Selling Stockholders. The
provisions of
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<PAGE>
this Section 5(a)(i) are intended to relieve the Underwriters from the
payment of the expenses and costs which the Selling Stockholders and the
Company hereby agree to pay, but shall not affect any agreement which the
Selling Stockholders and the Company may make, or may have made, for the
sharing of any of such expenses and costs. Such agreements shall not impair
the obligations of the Company and the Selling Stockholders hereunder to
the several Underwriters.
(ii) In addition to its other obligations under Section
8(a) hereof, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(a) hereof, it will reimburse the Underwriters on a
monthly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of
a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriters for such expenses and
the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the
Underwriters shall promptly return such payment to the Company together
with interest, compounded daily, determined on the basis of the prime rate
(or other commercial lending rate for borrowers of the highest credit
standing) listed from time to time in The Wall Street Journal (eastern
edition) which represents the base rate on corporate loans posted by a
substantial majority of the nation's thirty (30) largest banks (the "Prime
Rate"). Any such interim reimbursement payments which are not made to the
Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(iii) In addition to their other obligations under Section
8(b) hereof, each Selling Stockholder agrees that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(b) hereof relating to such Selling
Stockholder, it will reimburse the Underwriters on a monthly basis for all
reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of such Selling
Stockholder's obligation to reimburse the Underwriters for such expenses
and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the
Underwriters shall promptly return such payment to the Selling
Stockholders, together with interest, compounded daily, determined on the
basis of the Prime Rate. Any such interim reimbursement payments which are
not made to the Underwriters within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
(b) In addition to their other obligations under Section 8(c) hereof,
the Underwriters severally and not jointly agree that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(c) hereof, they will reimburse the Company and
each Selling Stockholder on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company and each such Selling
Stockholder for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company and each such Selling Stockholder shall promptly return
such payment to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company and each such Selling Stockholder
within thirty (30) days of a request for reimbursement shall bear interest at
the Prime Rate from the date of such request.
(c) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 5(a)(ii), 5(a)(iii)
and 5(b) hereof, including the amounts of any requested reimbursement payments,
the method of determining such amounts and the basis on which such amounts
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shall be apportioned among the reimbursing parties, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of the
Board of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 5(a)(ii), 5(a)(iii)
and 5(b) hereof and will not resolve the ultimate propriety or enforceability of
the obligation to indemnify for expenses which is created by the provisions of
Sections 8(a), 8(b) and 8(c) hereof or the obligation to contribute to expenses
which is created by the provisions of Section 8(e) hereof.
6. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and the Selling Stockholders
herein, to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later date as shall be consented to in writing by you; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company, the Selling Stockholders listed on Schedule D or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of Underwriters'
Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares, shall
have been reasonably satisfactory to Underwriters' Counsel, and such counsel
shall have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters referred to in
this Section 6.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
the Prospectus, which, in your sole judgment, is material and adverse and that
makes it, in your sole judgment, impracticable or inadvisable to proceed with
the public offering of the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of counsel for the Company and the Selling Stockholders, dated the
Closing Date or such later date on which Option Shares are to be purchased
addressed to the Underwriters and with reproduced copies or signed counterparts
thereof for each of the Underwriters, to the effect that:
(i) The Company and each of its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation;
(ii) The Company and each of its subsidiaries has the corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus;
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(iii) The Company and each of its subsidiaries is duly qualified
to transact business and is in good standing in each jurisdiction, if
any, where the nature of its properties or the conduct of its business
requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material adverse
effect on the condition (financial or otherwise), earnings,
properties, results of operations or business of the Company. To such
counsel's knowledge, the Company does not own or control, directly or
indirectly, any corporation, association or other entity other than
Multex Systems International, Inc. and Multex Data Group, Inc.;
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption
"Capitalization";
(v) All of the shares of capital stock of the Company
(including the Selling Stockholder Shares) outstanding prior to the
issuance of the shares have been duly authorized and validly issued,
and are fully paid and nonassessable; and to such counsel's knowledge,
will not have been issued in violation of or subject to any preemptive
right, co-sale, registration right, right of first refusal or other
similar right;
(vi) The Firm Shares or the Option Shares, as the case may be,
to be issued by the Company pursuant to the terms of this Agreement
have been duly authorized and, upon issuance and delivery against
payment therefor in accordance with the terms hereof, will be duly and
validly issued and fully paid and nonassessable and free of (A) any
preemptive rights arising under the Company's charter or the Delaware
General Corporation Law or (B) to such counsel's knowledge, similar
rights that entitle or will entitle any person to acquire any shares
of capital stock of the Company upon the issuance and sale of the
Shares by the Company;
(vii) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Shares to the
Underwriters as provided hereunder;
(viii) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming the due authorization,
execution and delivery by you, is a valid and binding agreement of the
Company, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights and remedies
generally, and subject, as to enforceability, to general equitable
principles (whether relief is sought in a proceeding at law or in
equity) and except as rights to indemnification and contribution
thereunder may be limited by applicable law or public policy relating
thereto;
(ix) The Registration Statement has become effective under the
Securities Act and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose are pending before or
contemplated by the Commission;
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (except for the consolidated financial
statements and the notes thereto and the schedules and other financial
and statistical data included therein, as to which such counsel does
not express any opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the
requirements of the Securities Act and the applicable Rules and
Regulations;
(xi) The statements set forth under the caption "Description of
Capital Stock" in the Prospectus, insofar as such statements purport
to summarize certain provisions of the capital
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stock of the Company, provide a fair summary of such provisions;
(xii) The form of certificate for the Shares complies in all
material respects to the requirements of the Delaware General
Corporation Law;
(xiii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes
fairly presents the information required to be presented by the
Securities Act and the applicable Rules and Regulations thereunder;
(xiv) To such counsel's knowledge, there are no agreements,
contracts, leases or other instruments that are required to be
described in the Registration Statement or the Prospectus or to be
filed as an exhibit to the Registration Statement that are not so
described or filed, as the case may be;
(xv) Neither the performance of this Agreement nor the
consummation of the transactions herein contemplated (other than
performance of the Company's indemnification obligations hereunder,
concerning which no opinion need be expressed) (a) violates the
Company's charter or bylaws, or (b) to such counsel's knowledge,
constitutes a breach of, or a default under any agreement, indenture,
lease, or other instrument to which the Company is a party or by which
the Company or any of its properties is bound that is an exhibit to
the Registration Statement, which breach or default would reasonably
be expected to have a material adverse effect on the condition
(financial or otherwise), business, properties or results of operation
of the Company or (c) will result in any violation of any existing law
or regulation (other than applicable state securities and Blue Sky
laws, as to which such counsel does not express an opinion), or any
ruling, judgment, injunction, order or decree known by such counsel
and applicable to the Company or any of its properties;
(xvi) No consent, approval, authorization or order of, or
registration or filing with any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on
the part of the Company (except (a) as have been obtained under the
Securities Act and the Exchange Act or (b) such as may be required
under state securities or Blue Sky laws governing the purchase and
distribution of the Shares, as to which such counsel does not express
an opinion) for the valid issuance and sale of the Shares to the
Underwriters as contemplated by this Agreement;
(xvii) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or
any of its subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus by the Securities Act or the
Rules and Regulations, other than those described therein;
(xviii) To such counsel's knowledge, neither the Company nor any
of its subsidiaries is presently (a) in violation of its respective
charter or bylaws, or (b) in breach of any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries, or
over any of their properties or operations;
(xvix) To such counsel's knowledge, except as set forth in the
Registration Statement and the Prospectus, no holders of any
securities of the Company or any other person has the right,
contractual or otherwise, to cause the Company to sell or otherwise
issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Stock or other securities of
the Company included in the Registration Statement or the right, as a
result of the filing of the Registration Statement, to require the
Company to register under the Securities Act
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any shares of Common Stock or other securities of the Company, and any
registration rights in connection with the offering contemplated
hereby have been effectively waived;
(xx) Each Selling Stockholder has duly executed and delivered
the Power of Attorney and Custody Agreement; and the Power of Attorney
and Custody Agreement of each Selling Stockholder constitutes a valid
and binding agreement of such Selling Stockholder; enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights and remedies generally, and subject,
as to enforceability, to general equitable principles (whether relief
is sought in a proceeding at law or in equity) and except as rights to
indemnification and contribution thereunder may be limited by
applicable law or public policy relating thereto;
(xxi) Each of the Selling Stockholders has the right, power and
authority to enter into and to perform its obligations under this
Agreement and to sell, transfer, assign and deliver the Shares to be
sold by such Selling Stockholder hereunder;
(xxii) Upon the delivery of and payment for the Shares as
contemplated in this Agreement, each of the Underwriters will receive
valid marketable title to the Shares purchased by it from such Selling
Stockholder, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest. In rendering such opinion,
such counsel may assume that the Underwriters purchase such Shares for
value, in good faith and without notice of any adverse claim, as such
terms are defined in the Uniform Commercial Code in effect in the
State of New York;
In addition, such counsel shall state that although it does not assume
any responsibility for the accuracy, completeness or fairness of the statements
in the Registration Statement, such counsel has participated in the preparation
of the Registration Statement and the Prospectus, including review and
discussion of the contents thereof with representatives of the Underwriters and
their counsel, officers and representatives of the Company, and representatives
of the independent certified public accountants of the Company, and nothing has
come to the attention of such counsel that has caused them to believe that the
Registration Statement (other than the consolidated financial statements,
including the notes and schedules thereto, and the other financial and
statistical data included in the Registration Statement, as to which such
counsel need express no comment), at the time the Registration Statement became
effective, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus (other than with
respect to the consolidated financial statements, including the notes and
schedules thereto, and the other financial and statistical data included in the
Prospectus, as to which such counsel need express no comment), on the date
hereof, contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the State of New York and
Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, the Selling
Stockholders, and of government officials, in which case their opinion is to
state that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to Underwriters'
Counsel.
(e) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of patent counsel for the Company, dated the Closing Date or such later
date on which Option Shares are to be purchased addressed to the Underwriters
and with reproduced copies or signed counterparts thereof for each of the
Underwriters, to the effect that:
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(i) Such counsel has represented the Company on certain
specific matters, primarily in the limited capacity of preparing and
prosecuting patent applications for subject matter identified by the
Company to such counsel. Such counsel is familiar with the technology
used by the Company in its business and the manner of its use thereof
or proposed for use by the Company only to the extent described to
such counsel by employees of the Company for the purpose of preparing
patent applications;
(ii) Such counsel is not aware of any legal or governmental
proceedings pending relating to patent rights of the Company. However,
such counsel has never performed nor been asked to perform any study
or investigation as to whether or not any such proceedings exists. Of
course, there are on going patent prosecution activities on behalf of
the Company in the United States Patent and Trademark Office;
(iii) Such counsel is not aware of any acts of patent
infringement by the Company. However, such counsel has never performed
or been asked to perform a patent clearance search of the technology
used by the Company in its business. Other than one specific review in
June of 1996, such counsel has never studied or been asked to study
any patent owned by a third party; and
(iv) Such counsel has no knowledge as to whether or not the
Company owns or possesses sufficient licenses or other rights to use
all patents necessary to conduct the business now being or proposed to
be conducted by the Company as described in the Prospectus;
(f) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, an opinion of
Hale and Dorr LLP, in form and substance satisfactory to you, with respect to
the sufficiency of all such corporate proceedings and other legal matters
relating to this Agreement and the transactions contemplated hereby as you may
reasonably require, and the Company shall have furnished to such counsel such
documents as they may have reasonably requested for the purpose of enabling them
to pass upon such matters.
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(g) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a letter from
Ernst & Young LLP addressed to the Underwriters, dated the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be,
confirming that they are independent certified public accountants with respect
to the Company within the meaning of the Securities Act and the applicable
published Rules and Regulations and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
five (5) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in the
Original Letter which are necessary to reflect any changes in the facts
described in the Original Letter since the date of such letter, or to reflect
the availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or otherwise),
earnings, properties, results of operations or business of the Company from that
set forth in the Registration Statement or the Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. The Original Letter from Ernst & Young LLP
shall be addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Securities Act and the applicable published
Rules and Regulations, (ii) set forth their opinion with respect to their
examination of the consolidated balance sheet of the Company as of December 31,
1998 and related consolidated statements of operations, stockholders' equity,
and cash flows for the twelve (12) months ended December 31, 1998 and (iii)
address other matters agreed upon by Ernst & Young LLP and you. In addition,
you shall have received from Ernst & Young LLP a letter addressed to the Company
and made available to you for the use of the Underwriters stating that their
review of the Company's system of internal accounting controls, to the extent
they deemed necessary in establishing the scope of their examination of the
Company's consolidated financial statements as of December 31, 1998, did not
disclose any weaknesses in internal controls that they considered to be material
weaknesses.
(h) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a certificate of
the Company, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, signed by the Chief Executive Officer
and Chief Financial Officer of the Company, to the effect that, and you shall be
reasonably satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or any later date on which Option Shares are to be purchased, as
the case may be, and the Company has complied in all material respects
with all the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to the Closing Date or any
later date on which Option Shares are to be purchased, as the case may
be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Securities Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate,
the Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act and the Rules and Regulations
and in all material respects conformed to the requirements of the
Securities Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does
not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
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were made, not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, and, since the effective date of the
Registration Statement, there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been so
set forth; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has
not been (a) any material adverse change in the condition (financial
or otherwise), earnings, properties, results of operations or business
of the Company, (b) any transaction that is material to the Company,
except transactions entered into in the ordinary course of business,
(c) any obligation, direct or contingent, that is material to the
Company, incurred by the Company or its subsidiaries, except
obligations incurred in the ordinary course of business, (d) any
change in the capital stock or outstanding indebtedness of the Company
or any of its subsidiaries that is material to the Company, (e) any
dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or any of its subsidiaries, or (f) any
loss or damage (whether or not insured) to the property of the Company
or any of its subsidiaries which has been sustained or will have been
sustained which has a Material Adverse Effect.
(i) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Attorneys for each Selling
Stockholder to the effect that, as of the Closing Date, or any later date on
which Option Shares are to be purchased, as the case may be, they have not been
informed that:
(i) The representations and warranties made by such Selling
Stockholder herein are not true or correct in any material respect on
the Closing Date or on any later date on which Option Shares are to be
purchased, as the case may be; or
(ii) Such Selling Stockholder has not complied with any
obligation or satisfied any condition which is required to be
performed or satisfied on the part of such Selling Stockholder at or
prior to the Closing Date or any later date on which Option Shares are
to be purchased, as the case may be.
(j) The Company shall have obtained and delivered to you an agreement
from each officer and director of the Company, each Selling Stockholder and
except for those stockholders listed on Schedule C hereto, each beneficial owner
of 1% or more of the outstanding shares of Common Stock, the "Lock-Up
Agreements."
(k) The Company and the Selling Stockholders shall have furnished to
you such further certificates and documents as you shall reasonably request
(including certificates of officers of the Company and the Selling Stockholders
as to the accuracy of the representations and warranties of the Company and the
Selling Stockholders herein, as to the performance by the Company and the
Selling Stockholders of their respective obligations hereunder and as to the
other conditions concurrent and precedent to the obligations of the Underwriters
hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company and the Selling Stockholders will furnish
you with such number of conformed copies of such opinions, certificates, letters
and documents as you shall reasonably request.
7. Option Shares.
-------------
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(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company and the Selling Stockholders hereby severally grant to the several
Underwriters, for the purpose of covering over-allotments in connection with the
distribution and sale of the Firm Shares only, a nontransferable option to
purchase up to an aggregate of 450,000 Option Shares at the purchase price per
share for the Firm Shares set forth in Section 3 hereof, of which 283,500 shares
are to be issued and sold by the Company and an aggregate of 166,500 shares are
to be sold by the Selling Stockholders in the respective amounts set forth
opposite each such Selling Stockholder's name in Schedule B hereto. Such option
may be exercised by the Representatives on behalf of the several Underwriters on
one (1) or more occasions in whole or in part during the period of thirty (30)
days after the date on which the Firm Shares are initially offered to the
public, by giving written notice to the Company and the Selling Stockholders.
The number of Option Shares to be purchased by each Underwriter upon the
exercise of such option shall be the same proportion of the total number of
Option Shares to be purchased by the several Underwriters pursuant to the
exercise of such option as the number of Firm Shares purchased by such
Underwriter (set forth in Schedule A hereto) bears to the total number of Firm
Shares purchased by the several Underwriters (set forth in Schedule A hereto),
adjusted by the Representatives in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by wire transfer of same-day funds to an
account or accounts specified by the Company with respect to the Shares being
purchased from the Company and to an account or accounts specified by the
Custodian for the respective accounts of the Selling Stockholders with respect
to the Shares being purchased from the Selling Stockholders. Such delivery and
payment shall take place at the offices of Brobeck, Phleger & Harrison LLP, 1633
Broadway, 47th Floor, New York, New York 10019 or at such other place as may be
agreed upon among the Representatives and the Company (i) on the Closing Date,
if written notice of the exercise of such option is received by the Company and
the Selling Stockholders at least two (2) full business days prior to the
Closing Date, or (ii) on a date which shall not be later than the third (3rd)
full business day following the date the Company receives written notice of the
exercise of such option, if such notice is received by the Company and the
Selling Stockholders less than two (2) full business days prior to the Closing
Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a) hereof,
the obligations of the several Underwriters to purchase such Option Shares will
be subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the representations,
warranties and agreements of the Company and the Selling Stockholders herein, to
the accuracy of the statements of the Company, the Selling Stockholders and
officers of the Company made pursuant to the provisions hereof, to the
performance by the Company and the Selling Stockholders of their respective
obligations hereunder, to the conditions set forth in Section 6 hereof, and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may reasonably request in order to evidence the accuracy and completeness of
any of the
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representations, warranties or statements, the performance of any of the
covenants or agreements of the Company and the Selling Stockholders or the
satisfaction of any of the conditions herein contained.
8. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Securities Act,
the Exchange Act or otherwise, specifically including, but not limited to,
losses, claims, damages or liabilities (or actions in respect thereof) arising
out of or based upon (i) any breach of any representation, warranty, agreement
or covenant of the Company herein contained, (ii) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
-------- -------
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof and, provided further, that the indemnity agreement provided in this
-------- -------
Section 8(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Securities Act and the Rules and Regulations, unless such
failure is the result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Securities Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
(b) Each Selling Stockholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject
under the Securities Act, the Exchange Act or otherwise, specifically including,
but not limited to, losses, claims, damages or liabilities (or actions in
respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of such Selling Stockholder
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or (iii) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in the case of
subparagraphs (ii) and (iii) of this Section 8(b) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company or such Underwriter by such Selling
Stockholder, directly or through such Selling Stockholder's representatives,
specifically for use in the preparation thereof, and agrees to reimburse each
Underwriter for any
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<PAGE>
legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement provided in this Section 8(b)
- -------- -------
with respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any losses, claims, damages,
liabilities or actions based upon any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state therein a
material fact purchased Shares, if a copy of the Prospectus in which such untrue
statement or alleged untrue statement or omission or alleged omission was
corrected had not been sent or given to such person within the time required by
the Securities Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Securities Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which such Selling Stockholder may otherwise have.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company and each Selling Stockholder against any losses,
claims, damages or liabilities, joint or several, to which the Company or such
Selling Stockholder may become subject under the Securities Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of such
Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (iii) any untrue statement or alleged untrue statement
of any material fact contained in any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, in the
case of subparagraphs (ii) and (iii) of this Section 8(c) to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such Underwriter, directly or
through you, specifically for use in the preparation thereof, and agrees to
reimburse the Company and each such Selling Stockholder for any legal or other
expenses reasonably incurred by the Company and each such Selling Stockholder in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company, each Selling Stockholder and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Securities Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which each Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 8, notify the indemnifying party in writing of the commencement
thereof but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party otherwise than
under this Section 8. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it shall elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
-------- -------
include both the indemnified party and the indemnifying party and the
indemnified party shall reasonably conclude that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified
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<PAGE>
party of the indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party representing all the
indemnified parties under Section 8(a), 8(b) or 8(c) hereof who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably withheld or
--------
delayed. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnification could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on all claims that are the subject matter of such
proceeding.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 8
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that, except as set forth
in Section 8(f) hereof, the Underwriters severally and not jointly are
responsible pro rata for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price, and the
Company and the Selling Stockholders are responsible for the remaining portion,
provided, however, that (i) no Underwriter shall be required to contribute any
- -------- -------
amount in excess of the amount by which the underwriting discount applicable to
the Shares purchased by such Underwriter exceeds the amount of damages which
such Underwriter has otherwise required to pay and (ii) no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. The contribution agreement in this
Section 8(e) shall extend upon the same terms and conditions to, and shall inure
to the benefit of, each person, if any, who controls any Underwriter, the
Company or any Selling Stockholder within the meaning of the Securities Act or
the Exchange Act and each officer of the Company who signed the Registration
Statement and each director of the Company.
(f) The liability of each Selling Stockholder under the
representations, warranties and agreements contained herein and under the
indemnity agreements contained in the provisions of this Section 8 shall be
limited to an amount equal to the initial public offering price of the Selling
Stockholder Shares sold by such Selling Stockholder to the Underwriters minus
the amount of the underwriting discount paid thereon to the Underwriters by such
Selling Stockholder. The Company and such Selling Stockholders may agree, as
among themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible.
(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and the Prospectus as required by the Securities Act and
the Exchange Act.
9. Representations, Warranties, Covenants and Agreements to Survive
----------------------------------------------------------------
Delivery. All representations, warranties, covenants and agreements of the
- --------
Company, the Selling Stockholders and the
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<PAGE>
Underwriters herein or in certificates delivered pursuant hereto, and the
indemnity and contribution agreements contained in Section 8 hereof shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter or any person controlling any Underwriter within
the meaning of the Securities Act or the Exchange Act, or by or on behalf of the
Company or any Selling Stockholder, or any of their officers, directors or
controlling persons within the meaning of the Securities Act or the Exchange
Act, and shall survive the delivery of the Shares to the several Underwriters
hereunder or termination of this Agreement.
10. Substitution of Underwriters. If any Underwriter or Underwriters
----------------------------
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for twenty-
four (24) hours to allow the several Underwriters the privilege of substituting
within twenty-four (24) hours (including non-business hours) another underwriter
or underwriters (which may include any nondefaulting Underwriter) satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a further twenty-four (24) hours,
if necessary, to allow the Company the privilege of finding another underwriter
or underwriters to purchase the Firm Shares which the defaulting Underwriter or
Underwriters so agreed but failed to purchase. If it shall be arranged for the
remaining Underwriters or substituted underwriter or underwriters to take up the
Firm Shares of the defaulting Underwriter or Underwriters as provided in this
Section 10, (i) the Company shall have the right to postpone the time of
delivery for a period of not more than seven (7) full business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to promptly file any amendments to the Registration Statement,
supplements to the Prospectus or other such documents which may thereby be made
necessary, and (ii) the respective number of Firm Shares to be purchased by the
remaining Underwriters and substituted underwriter or underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Firm Shares so agreed to be
purchased by the defaulting Underwriter or Underwriters or substitute another
underwriter or underwriters as aforesaid and the Company shall not find or shall
not elect to seek another underwriter or underwriters for such Firm Shares as
aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company nor any Selling
Stockholder shall be liable to any Underwriter (except as provided in Sections 5
and 8 hereof) nor shall any Underwriter (other than an Underwriter who shall
have failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Firm Shares agreed by such Underwriter to be purchased
hereunder, which Underwriter shall remain liable to the Company, the Selling
Stockholders and the other Underwriters for damages, if any, resulting from such
default) be liable to the Company or any Selling Stockholder (except to the
extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
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<PAGE>
11. Effective Date of this Agreement and Termination.
------------------------------------------------
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., San Francisco time, on the first full business day following the effective
date of the Registration Statement, or (ii) the time of the initial public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall mean
the time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set forth
in Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(i), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
or any Selling Stockholder shall have failed, refused or been unable to perform
any agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings, properties, results of operations or business prospects of
the Company from that set forth in the Registration Statement or the Prospectus,
which, in your sole judgment, is material and adverse, or (ii) if additional
material governmental restrictions, not in force and effect on the date hereof,
shall have been imposed upon trading in securities generally or minimum or
maximum prices shall have been generally established on the New York Stock
Exchange or on the Nasdaq National Market or in the over the counter market by
the NASD, or trading in securities generally shall have been suspended on either
such exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or (iv)
if there shall have been a material adverse change in the general political or
economic conditions or financial markets as in your sole judgment makes it
inadvisable or impracticable to proceed with the offering, sale and delivery of
the Shares, or (v) if there shall have been an outbreak or escalation of
hostilities or of any other insurrection or armed conflict or the declaration by
the United States of a national emergency which, in the opinion of the
Representatives, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. In the event of
termination pursuant to subparagraph (i) above, the Company shall remain
obligated to pay costs and expenses pursuant to Sections 4(i), 5 and 8 hereof.
Any termination pursuant to any of subparagraphs (ii) through (v) above shall be
without liability of any party to any other party except as provided in Sections
5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. Notices. All notices or communications hereunder, except as herein
-------
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o BancBoston Robertson Stephens Inc., 555
California Street, Suite 2600, San Francisco, California 94104, telecopier
number (415) 781-0278, Attention: General Counsel with a copy to Peter B. Tarr,
Esq., Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109; if sent
to the Company, such notice shall be mailed, delivered, telegraphed (and
confirmed by letter) or telecopied (and confirmed by letter) to Multex.com,
Inc., 33 Maiden Lane, 5th Floor, New York, New York, 10038, telecopier number
(212) 742-9561, Attention: Isaak Karaev, Chief Executive Officer with a copy to
Alexander D. Lynch, Esq., Brobeck Phleger & Harrison LLP, 1633 Broadway, 47th
Floor, New York, New York 10019; and if sent to one or more of the Selling
Stockholders, such notice shall be sent mailed, delivered, telegraphed (and
confirmed by letter) or telecopied (and
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<PAGE>
confirmed by letter) to the Selling Stockholders in care of the Company at 33
Maiden Lane, 5th Floor, New York, New York 10038, telecopier number (212) 742-
9561, Attention: Isaak Karaev, Chief Executive Officer.
13. Parties. This Agreement shall inure to the benefit of and be binding
-------
upon the several Underwriters and the Company and the Selling Stockholders and
their respective executors, administrators, successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or entity, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling persons
within the meaning of the Securities Act or the Exchange Act, officers and
directors referred to in Section 8 hereof, any legal or equitable right, remedy
or claim in respect of this Agreement or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the parties hereto and their
respective executors, administrators, successors and assigns and said
controlling persons and said officers and directors, and for the benefit of no
other person or entity. No purchaser of any of the Shares from any Underwriter
shall be construed a successor or assign by reason merely of such purchase.
In all dealings with the Company and the Selling Stockholders under
this Agreement, you shall act on behalf of each of the several Underwriters, and
the Company and the Selling Stockholders shall be entitled to act and rely upon
any statement, request, notice or agreement made or given by you jointly or by
BancBoston Robertson Stephens Inc. on behalf of you.
14. Applicable Law. This Agreement shall be governed by, and construed in
--------------
accordance with, the internal laws of the State of New York.
15. Counterparts. This Agreement may be signed in several counterparts,
------------
each of which will constitute an original.
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<PAGE>
If the foregoing correctly sets forth the understanding among the Company,
the Selling Stockholders and the several Underwriters, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among the Company, the Selling Stockholders and the several
Underwriters.
Very truly yours,
MULTEX.COM, INC.
By: _____________________________________
Isaak Karaev
President and Chief Executive Officer
SELLING STOCKHOLDERS
By: _____________________________________
Name:
Attorney-in-Fact
Accepted as of the date first above written:
BANCBOSTON ROBERTSON STEPHENS INC.
CIBC OPPENHEIMER CORP.
DAIN RAUSCHER WESSELS
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By: BANCBOSTON ROBERTSON STEPHENS INC.
By: ________________________________________
Authorized Signatory
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<PAGE>
EXHIBIT 10.16
Executable
CONFIDENTIAL
AMENDMENT TO INTERACTIVE SERVICES AGREEMENT
-------------------------------------------
This Amendment to Interactive Services Agreement (this "Amendment"),
effective February 25, 1999 (the "Amendment Effective Date"), is made and
entered into by and between America Online, Inc. ("AOL"), a Delaware corporation
with its principal offices at 22000 AOL Way, Dulles, Virginia 20166, and
Multex.com, Inc., formerly known as Multex Systems, Inc. ("Interactive Content
Provider", "ICP", or "Multex"), a Delaware corporation, with its principal
offices at 33 Maiden Lane, New York, New York 10038 (each a "Party" and
collectively the "Parties"). Defined terms that are used but not defined herein
shall be as defined in the Interactive Services Agreement between AOL and ICP
effective as of March 20, 1998 (the "Agreement").
WHEREAS, the Parties wish to amend the Agreement as described below.
TERMS
-----
It is therefore agreed as follows;
1. Exclusive Anchor Tenancies. From and after the date of this Amendment
--------------------------
during the term of the Agreement, so long as ICP is in material
compliance with this Agreement, ICP shall receive Exclusive Anchor
Tenant Distribution on the Personal Finance Channel of the AOL Service
(the "Exclusive Area"). "Exclusive Anchor Tenant Distribution" shall
mean that, solely with respect to the ICP Competitors, ICP shall be the
only third party to receive continuous permanent placement (as set forth
in Section 1.1 of the Agreement and as amended in Paragraph 2 of this
Amendment) expressly promoting the Exclusive Product on any screen
within the Exclusive Area. To the extent and ICP Competitor does not
solely market the Exclusive Product (i.e., it is also engaged in
activities other than marketing the Exclusive Product), AOL will not be
restricted from promoting such ICP Competitor (including within the
Exclusive Area), so long as such promotions do not expressly promote the
Exclusive Product in a continuous permanent placement (i.e., the
promotions periodically rotate through the area as opposed to being
permanent placements) within the Exclusive Area. The "Exclusive Product"
shall mean the delivery and display of brokerage and investment research
reports in a commingled fashion (i.e., headlines from two or more
brokerage firms or investment banks concurrently within the same
service, interface or display, which link to a research reports),
including the "Brokerage Research Reports" integrated links within the
Investment Research area of the Personal Finance Channel of the AOL
Service. Notwithstanding anything to the contrary in the definition of
ICP Competitor or elsewhere in the Agreement, ICP may not add any third
party to the list of ICP Competitors absent mutual agreement in writing
by the Parties.
Notwithstanding the foregoing, (and without limiting any actions which
may be taken by AOL without violation of ICP's rights hereunder), no
provision of this Agreement shall limit AOL's ability (on or off the
AOL Network) to (i) undertake activities or perform duties pursuant to
existing arrangements with third parties (or pursuant to any agreements
<PAGE>
to which AOL becomes a party subsequent to the Effective Date as a result of
Change of Control, assignment, merger, acquisition or other similar
transaction); (ii) advertise, promote or market, or sell advertising or
promotions to, any third party, including without limitation the ICP
Competitors, or for any products or services, including without limitation,
through rotating banner advertisements, popups or any other non-permanent
placements within the Exclusive Area; (iii) enter into an arrangement with
any third party, including an ICP Competitor, for the primary purpose of
acquiring AOL Members whereby such third party is allowed to promote or
market products or services (including through anchor tenant distribution) to
AOL Members that are acquired as a result of such arrangement; or (iv) create
periodic, non-permanent contextual links to Content or editorial commentary
on any topic, including topics related to the Exclusive Product in any area
including the Exclusive.
Area. In addition, ICP acknowledges that AOL does not control, and nothing
----
in this Section shall in any way restrict, the Content that appears within
third party content areas on the AOL Service or the CompuServe Service
(including such areas within Exclusive Area) or on interactive sites linked
to from the AOL Service or the CompuServe Service. In no event shall AOL be
restricted from offering and/or promoting brokerage or investment research
offered on a non-commingled basis with respect to clause (i) above, it is
further understood and agreed that, as of the Effective Date, there are
existing AOL relationships with third parties which do not specifically
prohibit the distribution of the Exclusive Product through the Exclusive Area
by such parties ("Existing Arrangements"), but to the best of AOL AOL's
knowledge, (a) there is no such Existing Arrangement that explicitly requires
the distribution of a third party's Exclusive Product by AOL and (b) AOL is
not aware of any third party that intends to distribute its Exclusive Product
through the Exclusive Area. Further, with respect to clause (i) above, AOL
shall make commercially reasonable efforts not to encourage those parties
with which AOL has Existing Arrangements to distribute the Exclusive Product
through the Exclusive Area.
AOL may convert ICP's Exclusive Anchor Tenancies as set forth in this Section
1 to nonexclusive Anchor Tenancies on at least thirty (30) days written
notice to ICP if ICP is not in the top three (3) providers of commingled
investment and brokerage research and/or the Content on the ICP Internet Site
is not commensurate with such market position, as determined by evaluating
ICP and/or the Licensed Content, as a whole, using the following criteria:
(a) based on a mutually-approved (which approval shall not be unreasonably
withheld or delayed) cross-section of third-party reviewers who are
recognized authorities in such market and (b) with respect to all material
quality averages or standards in such industry, including each of the
following: (i) scope and quality of Content, (ii) scope, selection and
pricing of products and services, (iii) quality and brands of products and
services, (iv) customer service and fulfillment associated with the marketing
and sale of products and services and (v) user traffic.
2. Additional Anchor Tenancies. In addition to the anchor tenancy set forth in
---------------------------
the Agreement and as extended in Section 1 above, ICP shall receive the
following additional distribution through the AOL Network;
2
<PAGE>
(a) Additional AOL Service Anchor Tenancy. Within a reasonable
-------------------------------------
time after the date on which the "Active Trader" area of the AOL
Personal Finance Channel becomes commercially available through
the AOL Service, AOL shall continuously and prominently place an
Anchor Tenant Button and other mutually agreeable integrated
links on the "Active Trader" main screen, or any successor
thereto, on the AOL Service.
(b) AOL International Anchor Tenancies. Within a reasonable time
----------------------------------
after the Amendment Effective Date, AOL shall continuously and
prominently place an Anchor Tenant Button on each of the
following: (i) the "Investment Main" screen of the AOL Australia
Service, (ii) the "Company Research" screen of the Finance
Channel" of the AOL UK Service, (iii) the "Brokerage Main"
screen of the AOL Germany Service and (iv) other screens within
the AOL International Services at AOL's reasonable
discretion. In addition, ICP shall receive "run of service"
advertising banner rotation through the AOL Germany Service, and
the AOL Canada Web Site Notwithstanding the foregoing, AOL
reserves the right to modify or terminate the access or
provisioning of the ICP Internet Site on any International
Anchor Tenancy within any area or region of the world for which
regulatory laws and requirements restrict or preclude the
provisioning of brokerage and investment research to individual
investors. ICP shall create a Welcome Mat for each area on the
ICP Internet Site linked to from any of the AOL International
services on a continuous basis, which Welcome Mat(s) shall be
subject to AOL approval and ICP shall customize and co-brand the
ICP Internet Site and/or Licensed Content for each of the
foregoing AOL International Services in substantially the same
manner and form as for the AOL Service.
(c) CompuServe Service Placements/Anchor Tenancy. Within a
--------------------------------------------
reasonable time after the Amendment Effective Date, ICP shall
receive (i) community placement in the CompuServe Personal
Finance Channel and (ii) two (2) "scrolling Marquee" insertions
in the "What's New" area of the ICP Internet Site linked to from
the CompuServe Service. ICP shall create a Welcome Mat for each
area on the CompuService Service on a continuous basis, which
Welcome Mat(s) shall be subject to AOL approval and ICP shall
customize and co-brand the ICP Internet Site and/or Licensed
Content for the CompuServe Service in substantially the same
manner and form as for the AOL Service.
(d) Additional Integration. The Parties will use commercially
----------------------
reasonable efforts to integrate the Licensed Content on or
through additional contextually-appropriate areas of the AOL
Service, the AOL International Services, the AOL Canada Web
Site, and the CompuServe Service, subject to AOL's sole
editorial discretion.
3. Site and Content Preparation. ICP shall achieve Site and Content
----------------------------
Preparation within sixty (60) days after the Amendment Effective Date.
"Site and Content Preparation" shall mean that ICP shall have completed
all necessary production work for the ICP Internet Site, any Welcome
Mats, any Anchor Tenant Buttons or logos, and any other related areas or
screens (including programming all Content thereon); customized and
configured and ICP Internet Site in accordance with the Agreement; and
completed all
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other necessary work to prepare the ICP Internet Site, any Welcome Mat,
any Anchor Tenant Buttons or logos and any other related areas or
screens to launch on the AOL Network as contemplated hereunder. In the
event ICP has not achieved Site and Content Preparation within ninety
(90) days after the Amendment Effective Date, then in addition to any
other remedies available, AOL shall have the right to terminate the
applicable portions of this Amendment by giving ICP written notice
thereof. If ICP is delayed in achieving Site and Content Preparation due
to an Excuse as defined in Exhibit C of the Agreement or due to a
failure by AOL to perform its obligations under this Agreement and ICP
notifies AOL in writing of such failure and the resulting delay, then
the sixty (60) day and ninety (90) day periods referenced in this
Section shall each be extended by the amount of time of ICP's delay
solely attributable to such Excuse or to such failure by AOL.
4. Amendment to Section 1.5. Section 1.5 ("Carriage Fee") is hereby
------------------------
deleted in its entirety and replaced with the following;
"In consideration for the exclusive anchor tenancies and
additional anchor tenancies and other distribution through the
AOL Network as set forth herein, ICP shall pay AOL One Million
Eight Hundred Thousand Dollars ($1,800,000) in eight (8) equal
installments with one (1) installment due on each of the
following dates: February 25, 1999; August 1, 1999; November 1,
1999; February 1, 2000; May 1, 2000; August 1, 2000; and
November 1, 2000. The One Hundred Thousand Dollars ($100,000)
already paid by ICP to AOL under the Agreement shall be deducted
from the first installment."
5. Impressions Guarantee. AOL shall provide ICP during the Term with at
---------------------
lease twenty-eight million (28,000,000) Impressions from ICP's presence
on the AOL Network (the "Impressions Guarantee"). For the purposes of
this Agreement, ICP's presence on an AOL or CompuServe screen shall
conform to the specifications set forth on Exhibit D (each, an "ICP
Presence"), provided that only screens that contain a link to the ICP
Internet site or a Welcome Mat will count against the Impressions
Guarantee. In the event that the Impressions Guarantee is not met (or
will not, in AOL's reasonable judgment, be met) during the Term, the
Term shall be extended for up to six (6) months without additional
carriage fees payable by ICP until the Impressions Guarantee is met. In
the event that the Impressions Guarantee remains unmet after such six-
month extension period, AOL shall, from time to time, provide ICP with
the remaining Impressions in the form of advertising space within the
AOL Network of comparable value to the undelivered Impressions (as
reasonably determined by AOL)
6. Amendment to Section 4.2. The last two sentences of Section 4.2
------------------------
("Welcome Mat Advertisement/Revenues") shall be deleted in their
entirety and replaced with the following.
(c) Beginning on the date on which ICP receives Two Million
Dollars ($2,000,000) in Total Revenues, and continuing through
the remainder of the Term, ICP shall pay AOL twenty five percent
(25%) of the Advertising Revenues generated by ICP or its agents
with respect to Welcome Mat Advertisements."
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7. Amendment to Section 4.5. The last sentence of Section 4.5 ("Interactive
------------------------
Commerce/Transaction Revenues") shall be deleted in its entirety and replaced
with the following:
"ICP shall use commercially reasonable efforts to conform the promotion
and sale of products or services through the ICP Internet Site to the
then-existing technologies identified by AOL which are optimized for the
AOL Service, including, without limitation, any "quick checkout" tool
which AOL may implement to facilitate purchase of products and services
by AOL Members through the ICP Internet Site. In addition, any
merchandising and commerce on the ICP Internet Site shall be subject to
(i) the then-current requirements of any CompuServe merchant
certification program, (ii) ICP implementing sufficient procedures to
protect the security of all merchandising on the site (i.e., ICP shall
as of the Effective Date use 40-bit SSL technology and, if requested by
CompuServe, 128-bit SSL), (iii) ICP's proper installation and use of
CompuServe's Virtual Lock software, and (iv) CompuServe's prior written
approval of all proposed merchandising and commerce. ICP shall have six
(6) months from the date of the request from CompuServe to implement and
upgrade to any then-current version SSL technology to the extent
permitted by law. Beginning on the date on which ICP receives Two
Million Dollars ($2,000,000) in Total Revenues, and continuing through
the remainder of the Term, ICP shall pay AOL twenty-five percent (25%)
of the Transaction Revenues generated by ICP or its agents with respect
to Interact Commerce."
8. Amendment to Section 6.1. The first sentence of Section 6.1 ("Term") is
------------------------
hereby deleted in its entirety and replaced with the following:
"Unless earlier terminated as set forth herein, the initial term of this
Agreement shall expire on February 28, 2001 (the "Initial Term")."
9. Definitions:
-----------
AOL Australia Service. The AOL Australian/TM/ branded standard narrow-band
---------------------
localized version of the America Online(R) brand service, specifically
excluding the Service Exclusions.
AOL Canada Web Site. The Canadian version of AOL.COM marketed under the
-------------------
"AOL.CA/TM/" brand, specifically excluding the Service Exclusions.
AOL Germany Service. The AOL Germany/TM/ branded standard narrow-band
-------------------
localized version of the America Online(R) brand service, specifically
excluding the Service Exclusions.
AOL International Services. The AOL Germany Service, the AOL UK Service, and
--------------------------
the AOL Australia Service, collectively.
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AOL Personal Finance Channel. The area on the AOL Service which generally
----------------------------
provides content relating to personal finance and investing, currently
located at AOL keyword: "Personal Finance", or any successor area thereto.
AOL UK Service. The AOL UK(TM) branded standard narrow-band localized
--------------
version of the America Online(R) brand service, specifically excluding the
Service Exclusions.
CompuServe Personal Finance Channel. The area on the CompuServe Service
-----------------------------------
which generally provides content relating to personal finance and
investing, currently located at CompuServe go word: "Personal Finance", or
any successor area thereto.
CompuServe Service. The narrow-band U.S. version of the CompuServe brand
------------------
service, specifically excluding CompuServe.com and the Service Exclusions.
Service Exclusions. (a) Any independent product or service which may be
------------------
offered by, through or with the AOL service at issue, (b) any programming
or content area offered by or through the AOL service at issue over which
AOL does not exercise complete operational control (including, without
limitation, Content areas controlled by other parties and member-created
Content areas), (c) any other international versions of AOL.COM or of the
AOL service at issue, (d) any yellow pages, white pages, classifieds or
other search, directory or review services or Content offered by or through
the service at issue, (d) any property, feature, product or service which
AOL or its affiliates may acquire subsequent to the Effective Rate and (e)
any other version which is materially different from the AOL service at
issue, by virtue of its branding, distribution, functionality, Content and
services, including, without limitation, any co-branded version of the AOL
service at issue and any version distributed through any broadband
distribution platform or through any platform or device other than a
desktop personal computer.
Virtual Lock. The server-based remote authentication software that is used
------------
to identify CompuServe members accessing Internet-based content.
10. Order of Precedence. This Amendment is supplementary to and modifies the
-------------------
Agreement. The terms of this Amendment supersede provisions in the
Agreement only to the extent that the terms of this Amendment and the
Agreement expressly conflict. However, nothing in this Amendment should be
interpreted as invalidating the Agreement, and provisions of the Agreement
will continue to govern relations between the parties insofar as they do
not expressly conflict with this Amendment.
11. Counterparts. This Amendment may be executed in counterparts, each of which
------------
shall be deemed an original and all of which together shall constitute one
and the same document
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IN WITNESS WHEREOF, the Parties hereto have executed this
Amendment as of the date first written above.
AMERICA ONLINE, INC. MULTEX.COM, INC.
By: /s/ David M. Colburn By: /s/ P. Callaghan
------------------------------ ------------------------------
Print Name: David M. Colburn Print Name: P. Callaghan
---------------------- ----------------------
Title: Sr. Vice President Title: CFO
--------------------------- ---------------------------
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Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 29, 1999 except for Note 14, as to which
the date is March 9, 1999, in Amendment No. 3 to the Registration Statement
(Form S-1 No. 333-70693) and related Prospectus of Multex.com, Inc.
Ernst & Young LLP
New York, New York
March 15, 1999
