<PAGE> 1
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MARKETWATCH.COM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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Notes:
<PAGE> 2
MarketWatch Logo
MARKETWATCH.COM, INC.
825 BATTERY STREET
SAN FRANCISCO, CALIFORNIA 94111
May 3, 1999
To Our Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of MarketWatch.com, Inc. to be held at the Park Hyatt Hotel, located at 333
Battery Street, San Francisco, California on Friday, May 21, 1999 at 10:00 a.m.,
Pacific Daylight time.
The matters expected to be acted upon at the meeting are described in
detail in the following Notice of the 1999 Annual Meeting of Stockholders and
Proxy Statement.
It is important that you use this opportunity to take part in the affairs
of MarketWatch.com, Inc. by voting on the business to come before this meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. Returning the Proxy does not
deprive you of your right to attend the meeting and to vote your shares in
person.
We look forward to seeing you at our 1999 Annual Meeting of Stockholders.
Sincerely,
/s/ Lawrence S. Kramer
Lawrence S. Kramer
President and Chief Executive Officer
<PAGE> 3
MarketWatch Logo
MARKETWATCH.COM, INC.
825 BATTERY STREET
SAN FRANCISCO, CALIFORNIA 94111
------------------------
NOTICE OF THE 1999 ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of
MarketWatch.com, Inc. will be held at the Park Hyatt Hotel, located at 333
Battery Street, San Francisco, California on Friday, May 21, 1999 at 10:00 a.m.,
Pacific Daylight time. The 1999 Annual Meeting of Stockholders is being held for
the following purposes:
1. To elect directors of MarketWatch.com, Inc., each to serve until his
successor has been elected and qualified or until his earlier
resignation or removal.
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors for MarketWatch.com, Inc. for the year ending December 31,
1999.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 12, 1999 are
entitled to notice of and to vote at the 1999 Annual Meeting of Stockholders or
any adjournment or postponement thereof.
By Order of the Board of Directors,
/s/ J. Peter Bardwick
J. Peter Bardwick
Chief Financial Officer and Secretary
San Francisco, California
May 3, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Proxy Statement for the 1999 Annual Meeting of Stockholders:
Proposal No. 1 -- Election of Directors................... 2
Proposal No. 2 -- Ratification of Selection of Independent
Auditors............................................... 6
Security Ownership of Certain Beneficial Owners and
Management............................................. 6
Executive Compensation.................................... 7
Summary Compensation Table................................ 8
Option Grants in Fiscal 1998.............................. 8
Fiscal Year-End Option Values............................. 9
Compensation Arrangements with Executive Officers......... 11
Report of the Compensation Committee...................... 12
Stock Price Performance Graph............................. 13
Certain Relationships and Related Transactions............ 13
Stockholder Proposals for the 2000 Annual Meeting of
Stockholders........................................... 19
Section 16(a) Beneficial Ownership Reporting Compliance... 19
Other Business............................................ 19
Communicating with MarketWatch.com.......................... 20
</TABLE>
<PAGE> 5
MarketWatch Logo
MARKETWATCH.COM, INC.
825 BATTERY STREET
SAN FRANCISCO, CALIFORNIA 94111
------------------------
PROXY STATEMENT
FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
------------------------
May 3, 1999
The accompanying proxy is solicited on behalf of the Board of Directors of
MarketWatch.com, Inc., a Delaware corporation, for use at the 1999 Annual
Meeting of Stockholders (the "Meeting") to be held at the Park Hyatt Hotel
located at 333 Battery Street, San Francisco, California on Friday, May 21, 1999
at 10:00 a.m., Pacific Daylight time. Only holders of record of our common stock
at the close of business on April 12, 1999, which is the record date, will be
entitled to vote at the Meeting. At the close of business on the record date, we
had 12,162,500 shares of common stock outstanding and entitled to vote. All
proxies will be voted in accordance with the instructions contained therein and,
if no choice is specified, the proxies will be voted in favor of the nominees
and the proposals set forth in the accompanying Notice of the Meeting and this
proxy statement. This proxy statement and the accompanying form of proxy were
first mailed to stockholders on or about May 3, 1999. An annual report for the
year ended December 31, 1998 is enclosed with this proxy statement.
VOTING RIGHTS
Holders of MarketWatch.com's common stock are entitled to one vote for each
share held as of the record date, except that in the election of directors each
stockholder has cumulative voting rights and is entitled to a number of votes
equal to the number of shares held by such stockholder multiplied by the number
of directors to be elected for which such stockholder is eligible to vote. The
stockholder may cast these votes all for a single candidate or distribute the
votes among any or all of the candidates. However, no stockholder will be
entitled to cumulate votes for a candidate, however, unless that candidate's
name has been placed in nomination prior to the voting and the stockholder, or
any other stockholder, has given notice at the Meeting prior to the voting of an
intention to cumulate votes. In such an event, the proxy holder may allocate
among the Board of Directors' nominees the votes represented by proxies in the
proxy holder's sole discretion.
VOTE REQUIRED TO APPROVE THE PROPOSALS
With respect to Proposal No. 1, nine (9) directors will be elected by a
plurality of the votes of the shares of common stock present in person or
represented by proxy at the Meeting and voting on the election of directors.
Proposal No. 2 requires for approval the affirmative vote of a majority of the
shares of common stock present in person or represented by proxy at the Meeting.
None of the Proposals are conditional upon the approval of any of the other
Proposals by the stockholders.
VOTES NEEDED FOR A QUORUM, EFFECT OF ABSTENTIONS
A majority of the shares of common stock outstanding on the record date
will constitute a quorum for the transaction of business. Abstentions will be
included in determining the number of shares present and voting at the Meeting
and will have the same effect as votes against Proposal No. 2.
<PAGE> 6
ADJOURNMENT OF MEETING
In the event that sufficient votes in favor of the Proposals are not
received by the date of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies. Any such adjournment would require the affirmative vote of the majority
of the outstanding shares present in person or represented by proxy at the
Meeting.
EXPENSES OF SOLICITING PROXIES
MarketWatch.com will pay the expenses of soliciting proxies to be voted at
the Meeting. Following the original mailing of the proxies and other soliciting
materials, we and/or our agents may also solicit proxies by mail, telephone,
telegraph or in person. Following the original mailing of the proxies and other
soliciting materials, we will request that brokers, custodians, nominees and
other record holders of our shares forward copies of the proxy and other
soliciting materials to persons for whom they hold shares and request authority
for the exercise of proxies. In such cases, we will reimburse the record holders
for their reasonable expenses if they ask us to do so.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this proxy statement
has the power to revoke it prior to the Meeting or at the Meeting prior to the
vote pursuant to the proxy. A proxy may be revoked by any of the following
methods:
- a written instrument delivered to MarketWatch.com stating that the proxy
is revoked;
- a subsequent proxy that is signed by the person who signed the earlier
proxy and is presented at the Meeting; or
- attendance at the Meeting and voting in person.
Please note, however, that if a stockholder's shares are held of record by a
broker, bank or other nominee and that stockholder wishes to vote at the
Meeting, the stockholder must bring to the Meeting a letter from the broker,
bank or other nominee confirming that stockholder's beneficial ownership of the
shares.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
MarketWatch.com's Bylaws currently authorize no fewer than one director and
provide for seven initial directors. Thereafter, the number shall be fixed from
time to time by resolution of the Board of Directors. The Board of Directors has
resolved that MarketWatch.com have nine directors. MarketWatch.com's Board of
Directors, or the Board, is currently comprised of nine directors. Directors are
elected by the stockholders at each annual meeting of stockholders or until
their successors are duly elected and qualified.
Shares represented by the accompanying proxy will be voted "for" the
election of the nine nominees recommended by the Board unless the proxy is
marked in such a manner as to withhold authority so to vote. In the event that
any nominee for any reason is unable to serve or for good cause will not serve,
the proxies may be voted for such substitute nominee as the proxy holder may
determine. The Company is not aware of any nominee who will be unable to or for
good cause will not serve as a director.
Directors will be elected by a plurality of the votes of the shares present
in person or represented by proxy at the Meeting and entitled to vote in the
election of directors. The nine nominees for election of directors who receive
the greatest number of votes cast for the election of directors at the meeting,
a quorum being present, will become directors at the conclusion of the
tabulation of votes.
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<PAGE> 7
Six of the initial current directors were appointed pursuant to the
provisions of the Stockholders' Agreement described in "Certain Relationships
and Related Transactions." Each of Data Broadcasting Corporation, or DBC, and
CBS Broadcasting Inc., or CBS, has the right to designate for election to the
Board:
- three candidates, so long as it holds at least 30% of our outstanding
voting securities;
- two candidates, so long as it holds at least 20% but less than 30% of our
outstanding voting securities; or
- one candidate, so long as it holds at least 1% but less than 20% of our
outstanding voting securities.
So long as the Amended and Restated License Agreement described in "Certain
Relationships and Related Transactions" remains in effect, CBS will also have
the right to nominate at least one candidate to our Board of Directors,
regardless of the number of our voting securities held by it. If the size of the
Board is increased, CBS and DBC will each have the right to nominate a number of
candidates to the Board based upon the percentage of our outstanding voting
securities then held by them, rounded up to the nearest whole number. In
addition, each of CBS and DBC will be obligated to vote the voting securities
held by it for the other party's designated candidates.
DIRECTORS/NOMINEES
The names of the nominees for election to the Board of Directors at the
Meeting, and certain information about them, are included below.
<TABLE>
<S> <C> <C>
Larry S. Kramer.............. 48 President, Chief Executive Officer and Director
James A. DePalma(2).......... 48 Director
Alan J. Hirschfield(1)....... 63 Director
Allan R. Tessler............. 62 Director
Mark F. Imperiale(2)......... 48 Director
Andrew Heyward(1)............ 48 Director
Michael H. Jordan............ 62 Director
Robert H. Lessin............. 44 Director
Daniel Mason................. 47 Director
</TABLE>
- ---------------
Notes: (1) Member of the Compensation Committee
(2) Member of the Audit Committee
Mr. Kramer has served as President, Chief Executive Officer and a member of
the Board of Directors of MarketWatch.com since October 1997. From February 1994
until October 1997, Mr. Kramer served as Vice President for News and Sports of
DBC. In January 1991, Mr. Kramer co-founded DataSport Inc. ("DataSport"), a
developer of hand-held sports information monitors, and he served as DataSport's
President from its founding until February 1994, when DataSport was acquired by
DBC. Prior to founding DataSport, Mr. Kramer spent more than twenty years in
journalism, including serving as a financial reporter, Metro Editor and
Assistant Managing Editor of the Washington Post, and most recently serving as
Executive Editor of the San Francisco Examiner. He has been a recipient of
National Press Club, Gerald E. Leob and Associated Press Awards. During Mr.
Kramer's tenures at the Washington Post and the San Francisco Examiner, his
staffs at each paper won a Pulitzer Prize. Mr. Kramer serves as a member of the
Board of Directors of American Information Company, which conducts an auto
buying service under the name "Consumers Car Club" through its carclub.com Web
site. Mr. Kramer holds a B.S. degree in Journalism from Syracuse University and
an M.B.A. degree from the Harvard Business School.
Mr. DePalma has served as a member of the Board of Directors of
MarketWatch.com since December 1998. Mr. DePalma has served as Vice President
and General Manager of CBS New Media since March 1999 and Vice President,
Finance CBS Television Network since February 1998. From January 1995 until
February 1998, he was Vice President, Finance of CBS Corporation. Mr. DePalma
spent the prior 10 years as a partner with Coopers & Lybrand specializing in the
communications and broadcasting industries. Mr. DePalma holds a B.A. degree in
Accounting from Bentley College.
3
<PAGE> 8
Mr. Hirschfield has served as a member of the Board of Directors of
MarketWatch.com since March 1998 and as Co-Chief Executive Officer and
Co-Chairman of the Board of Directors of DBC since June 1992. Prior to joining
DBC, Mr. Hirschfield served as Managing Director of Schroder Wertheim & Co., an
investment banking firm, and as a consultant to the entertainment and media
industry. He formerly served as Chief Executive Officer of Twentieth Century Fox
Film Corp. and Columbia Pictures Inc. from 1980 to 1985 and 1973 to 1978,
respectively. Mr. Hirschfield currently serves on the Boards of Directors of
Cantel Industries, Inc. and Chyron Corporation. Mr. Hirschfield holds a B.A.
degree in Finance from the University of Oklahoma and an M.B.A. degree from the
Harvard Business School.
Mr. Tessler has served as a member of the Board of Directors of
MarketWatch.com since August 1998 and as Co-Chief Executive Officer and
Co-Chairman of the Board of DBC since June 1992. Mr. Tessler also serves as the
Chief Executive Officer and Chairman of International Financial Group, Inc., a
private merchant bank, Chairman of Enhance Financial Services Group, Inc., a
reinsurance and credit enhancement insurance firm and Jackpot Enterprises, Inc.,
a company that operates gaming machines in major chain stores in Nevada, and as
a member of the Boards of Directors of The Limited, Inc., Allis-Chalmers
Corporation, and Rhone Capital, LLC, and he is a Trustee of Cornell University.
Mr. Tessler holds a B.A. degree and a J.D. degree from Cornell University.
Mr. Imperiale has served as a member of the Board of Directors of
MarketWatch.com since October 1997. Mr. Imperiale was named President, Chief
Operating Officer and Chief Financial Officer of DBC in September 1996, having
served with that company as Executive Vice President and Chief Financial Officer
since July 1994. Mr. Imperiale was formerly Executive Vice President and Chief
Financial Officer of Ameriscribe Corporation ("Ameriscribe"), a facilities
management company from May 1992 through October 1993, when Ameriscribe was
acquired by Pitney Bowes Inc., and where he continued as a consultant through
December 1993. Mr. Imperiale spent the prior 10 years in the securities
industry, with Prudential Securities, Merrill Lynch, and First Boston
Corporation. Mr. Imperiale, a certified public accountant, worked with Arthur
Young & Company from 1973 to 1983 in the public accounting field. Mr. Imperiale
holds a B.A. degree and an M.B.A. degree from Rutgers University.
Mr. Heyward has served as a member of the Board of Directors of
MarketWatch.com since March 1998. Mr. Heyward has served as President of CBS
News since January 1996. From October 1994 until January 1996, he was Executive
Producer of "CBS Evening News with Dan Rather" and Vice President of CBS News.
From February 1993 until October 1994, Mr. Heyward served as Executive Producer
of the CBS News magazine "Eye to Eye With Connie Chung." Prior to that time, he
was responsible for developing CBS's "48 Hours" series. Mr. Heyward holds a B.A.
in History and Literature from Harvard University.
Mr. Jordan has served as a member of the Board of Directors of
MarketWatch.com since June 1998. Mr. Jordan served as the Chairman and Chief
Executive Officer of CBS Corporation from June 1993 through January 1999. Mr.
Jordan currently serves on the Boards of Directors of Aetna Inc. and Dell
Computer Corporation. Mr. Jordan holds a B.S. degree from Yale University and an
M.S. degree from Princeton University. Mr. Jordan retired from CBS Corporation
effective January 1, 1999.
Mr. Lessin has served as a member of the Board of Directors of
MarketWatch.com since February 1999. Mr. Lessin has served as Chairman and
Co-CEO of Wit Capital Corporation since April 1998. Mr. Lessin served as Vice
Chairman of Salomon Smith Barney from June 1993 to March 1998, where he was head
of its Investment Banking Division from June 1993 to January 1997. Prior to
joining Smith Barney, Mr. Lessin spent 16 years with Morgan Stanley in a number
of positions, including Managing Director, Vice Chairman of Morgan Stanley's
Investment Banking Operating Committee, and Chairman of their Strategic Planning
Committee. Mr. Lessin holds a B.A. degree in Applied Physics and Economics from
Harvard College and an M.B.A. degree from Harvard University.
Mr. Mason has served as a member of the Board of Directors of
MarketWatch.com since February 1999. Mr. Mason has served as President of CBS
Radio (renamed Infinity Radio Group) since November 1995 and is responsible for
the operation of the group's 160 stations. Prior to this, Mr. Mason served as
President of Group W Radio, a division of Westinghouse Broadcasting Company, for
three years. In 1985, Mr. Mason became Executive Vice President of First Media
and in 1988, became President of Cook Inlet Radio Partners,
4
<PAGE> 9
formerly First Media. Mr. Mason holds a B.S. Degree in Broadcasting from Eastern
Kentucky University and was named outstanding alumnus in 1995.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board met six times, including telephone conference meetings, and took
no actions by written consent during 1998. No director attended fewer than 75%
of the aggregate of the total number of meetings of the Board held during the
period for which such director was a director and the total number of meetings
held by all committees of the Board on which such director served during the
period that such director served.
The Audit Committee has the responsibility to review audited financial
statements and accounting practices of MarketWatch.com, and to consider and
recommend the employment of, and approve the fee arrangements with, independent
accountants for both audit functions and for advisory and other consulting
services. The Audit Committee is currently comprised of Messrs. Imperiale and
DePalma. The Compensation Committee reviews and approves the compensation and
benefits for our key executive officers, administers our employee benefit plans
and makes recommendations to the Board regarding such matters. The Compensation
Committee is currently comprised of Messrs. Heyward and Hirschfield.
DIRECTOR COMPENSATION
Directors do not receive any cash fees for their service on the Board or
any Board Committees, but are entitled to reimbursement of all reasonable
out-of-pocket expenses incurred in connection with their attendance at Board and
Board committee meetings. In October 1997, MarketWatch.com granted to Mr. Kramer
a non-plan option to purchase a membership interest in Marketwatch.Com LLC,
MarketWatch.com's predecessor, which represented an option to purchase 200,000
shares of Common Stock, with an exercise price per share of $4.00 upon the
reorganization of the Company in conjunction with the Company's Initial Public
Offering (the "IPO"). See "Certain Relationships and Related Transactions --
Reorganization Transactions".
In September 1998, the Board adopted, and the stockholders subsequently
approved, the 1998 Directors Stock Option Plan (the "Directors Plan") and
reserved a total of 50,000 shares of Common Stock for issuance thereunder.
Members of the Board who are not our employees or of any affiliated company are
eligible to participate in the Directors Plan. Option grants under the Directors
Plan are automatic and nondiscretionary. The exercise price of such options is
the fair market value of the Common Stock on the date of grant.
Each eligible director who first became a member of the Board on or after
the effective date of the Registration Statement was granted an option to
purchase 10,000 shares. At each annual meeting of stockholders, each eligible
director will automatically be granted an additional option to purchase 2,000
shares if he or she has served continuously as a member of the Board since the
date of such director's initial grant. The options have 10 year terms. They will
terminate seven months following the date the director ceases to be a director
or a consultant of MarketWatch.com, 12 months if the termination is due to death
or disability. All options granted under the Directors Plan will vest as to
33 1/3% of the shares on each anniversary of the option grant date.
Additionally, immediately prior to the dissolution, liquidation of
MarketWatch.com or a "change in control" transaction, the vesting of the options
will accelerate and the options will be exercisable for a period of up to seven
months following the transaction. After that time any unexercised options will
expire.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the IPO, our Board did not have a compensation committee and all
compensation decisions were made by the full Board. Mr. Kramer did not
participate in Board deliberations with respect to his compensation. Currently,
the Compensation Committee makes all compensation decisions. No interlocking
relationship exists between the Board or Compensation Committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS.
5
<PAGE> 10
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board has the responsibility to recommend to the
Board annually, and at other appropriate times, the selection, retention or
termination of the Company's independent auditors. The Audit Review Committee
has nominated PricewaterhouseCoopers LLP to audit and express an opinion on the
Company's financial statements for 1999, and this firm has advised the Company
that it is willing to serve. The Board has approved this nomination, and the
stockholders are being asked to ratify this selection. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Meeting, will have
the opportunity to make a statement at the Meeting if they desire to do so and
are expected to be available to respond to appropriate questions.
The affirmative vote of a majority of the shares of common stock present in
person or represented by proxy at the Meeting will be required to approve the
ratification of PricewaterhouseCoopers LLP as MarketWatch.com's independent
auditors.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of MarketWatch.com's common stock as of March 31, 1999 by:
- each person who is known by MarketWatch.com to own beneficially more than
5% of MarketWatch.com's common stock;
- each director of MarketWatch.com;
- each of the Named Executive Officers; and
- all directors and executive officers of MarketWatch.com as a group.
6
<PAGE> 11
The percentage ownership is based on 12,162,500 shares of common stock
outstanding at March 31, 1999. Shares of common stock that are subject to
options currently exercisable or exercisable within 60 days of March 31, 1999,
are deemed outstanding for the purpose of computing the percentage ownership of
the person holding such options but are not deemed outstanding for computing the
percentage ownership of any other person. Unless otherwise indicated in the
footnotes following the table, the persons and entities named in the table have
sole voting and sole investment power with respect to all shares beneficially
owned, subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
--------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ --------- -------
<S> <C> <C>
CBS Broadcasting, Inc. .................................. 4,500,000 37.0%
Data Broadcasting Corporation............................ 4,500,000 37.0%
Larry S. Kramer(1)....................................... 66,686 *
James A. DePalma......................................... -- *
Alan J. Hirschfield...................................... -- *
Allan R. Tessler......................................... -- *
Mark F. Imperiale........................................ -- *
Andrew Heyward........................................... -- *
Michael H. Jordan........................................ 5,000 *
Robert H. Lessin......................................... -- *
Daniel Mason............................................. -- *
J. Peter Bardwick........................................ -- *
Thom Calandra(2)......................................... 25,000 *
Scot McLernon(3)......................................... 25,000 *
All directors and executive officers as a group (15
persons)(4)............................................ 163,352 1.3
</TABLE>
- ---------------
* Less than 1% of MarketWatch.com's common stock
(1) Represents 66,666 shares subject to options held by Mr. Kramer that are
exercisable within 60 days of March 31, 1999 and 20 shares purchased on
January 20, 1999 by Mr. Kramer on behalf of his children.
(2) Represents 25,000 shares subject to options held by Mr. Calandra that are
exercisable within 60 days of March 31, 1999.
(3) Represents 25,000 shares subject to options held by Mr. McLernon that are
exercisable within 60 days of March 31, 1999.
(4) Includes the shares described in footnotes (1)-(3) and 50,000 shares subject
to options that are exercisable within 60 days of March 31, 1999 and are
held by two additional executive officers.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation actually paid for services rendered to the predecessor business of
MarketWatch.com and MarketWatch.com in all capacities during 1997 and 1998, by
our Chief Executive Officer and our three most highly compensated executive
officers, other than our Chief Executive Officer, who were serving as executive
officers at the end of 1998 (collectively, the "Named Executive Officers").
Bonuses accrued in 1998 but paid in 1999 are not
7
<PAGE> 12
included in the table below. No other executive officer of MarketWatch.com met
the definition of "most highly compensated officer" for 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ------------
OTHER SECURITIES
FISCAL ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) OPTIONS(3)
- --------------------------- ------ --------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Larry S. Kramer............. 1998 $192,500 $25,000 $7,814 --
President and Chief 1997 167,000 50,000 7,879 200,000
Executive Officer
J. Peter Bardwick........... 1998 100,000(4) -- 1,042 100,000
Chief Financial Officer 1997 -- -- -- --
Thom Calandra............... 1998 94,587 7,500 7,295 --
Editor-in-Chief and Vice 1997 82,503 5,000 7,346 75,000
President of News
Scot McLernon............... 1998 200,806 -- 5,967 75,000
Vice President of 1997 -- -- -- --
Advertising Sales
</TABLE>
- ---------------
(1) Michele Chaboudy, who joined MarketWatch.com in May 1998 as Vice President
of Marketing, is compensated at an annual salary of $100,000.
(2) Represents health insurance premiums and contributions to the Data
Broadcasting Corporation 401(k) Profit Sharing Plan.
(3) All option grants were initially grants of options to purchase membership
interests in the LLC. The number in this column gives effect to the
conversion of the LLC into a corporation, which occurred immediately prior
to the closing of our IPO, as if such transaction had occurred prior to
January 1, 1997.
(4) Mr. Bardwick is currently compensated at an annual salary of $200,000. See
"Certain Transactions."
OPTION GRANTS IN FISCAL 1998
The following table sets forth certain information regarding stock options
granted during 1998 to the Named Executive Officers. All option grants were
initially grants of options to purchase membership interests in the LLC. The
numbers in this table give effect to the Reorganization which occurred
immediately prior to the closing of our IPO as if such transaction had occurred
prior to January 1, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES IN PRICE FOR OPTION TERMS(2)
OPTIONS FISCAL PER EXPIRATION ----------------------------------
NAME GRANTED(#) YEAR(%)(3) SHARE(4) DATE 0% 5% 10%
---- ---------- ------------- -------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry S. Kramer...... -- -- -- -- -- -- --
J. Peter Bardwick.... 100,000 23.3 4.00 7/8/2008 $1,000,000 1,880,452 3,231,239
Thom Calandra........ -- -- -- -- -- -- --
Scot McLernon........ 75,000 17.5 8.00 1/7/2008 -- 377,336 956,245
</TABLE>
- ---------------
(1) Options granted in 1998 were granted outside of any plan. These options
become exercisable with respect to 33 1/3% of the shares subject to such
option on each anniversary of the grant date. These options have a term of
ten years. See "-- Employee Benefit Plans" for a description of the material
terms of these options.
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<PAGE> 13
(2) Potential realizable value is based on the assumption that the Common Stock
of MarketWatch.com appreciates at the annual rate shown, compounded
annually, from the date of grant until the expiration of the ten-year term.
These numbers are calculated based on Securities and Exchange Commission
requirements and do not reflect our projection or estimate of future stock
price growth. Potential realizable values are computed by
- multiplying the number of shares of Common Stock subject to a given
option by the exercise price, or in the case of the 0% column for Mr.
Bardwick, by $14.00, the fair market value on the date of his grant, as
determined by the Board of Directors;
- assuming that the aggregate stock value derived from that calculation
compounds at the annual 0%, 5% or 10% rate shown in the table for the
entire ten-year term of the option; and
- subtracting from that result the aggregate option exercise price.
(3) MarketWatch.com granted options to purchase an aggregate of 429,500 shares
of Common Stock to all employees during 1998.
(4) Options were generally granted at an exercise price equal to the fair market
value of our Common Stock, as determined by the management committee of the
LLC. In determining the fair market value of the Common Stock on each grant
date, the management committee considered, among other things, the value of
assets contributed to MarketWatch.com from DBC, MarketWatch.com's absolute
and relative levels of revenues and other operating results, the state of
MarketWatch.com's Web site development, increases in operating expenses, the
absence of a public trading market for MarketWatch.com's securities, the
intensely competitive nature of MarketWatch.com's market and the
appreciation of stock values of a number of generally comparable Internet
companies. See "-- Director Compensation," "-- Compensation Arrangements
with Executive Officers" and "-- Employee Benefit Plans" for a description
of the material terms of these options.
FISCAL YEAR-END OPTION VALUES
The following table sets forth for the Named Executive Officers, the number
and year-end value of exercisable and unexercisable options for the year ended
December 31, 1998. All option grants were initially grants of options to
purchase membership interests in Marketwatch.Com LLC. The numbers in this table
give effect to the Reorganization which occurred immediately prior to the
closing of our IPO as if such transaction had occurred during 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT
AT DECEMBER 31, 1998(1) DECEMBER 31, 1998(2)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Larry S. Kramer............................ 66,666 133,334 $866,658 $1,733,342
J. Peter Bardwick.......................... -- 100,000 -- 1,300,000
Thom Calandra.............................. 25,000 50,000 325,000 650,000
Scot McLernon.............................. -- 75,000 -- 675,000
</TABLE>
- ---------------
(1) Options shown are subject to vesting as described in footnote (1) to the
option grant table above. See "-- Employee Benefit Plans" for a description
of the material terms of these options.
(2) Based on an assumed fair market value of the Company's Common Stock as of
December 31, 1998 of $17.00 per share less the exercise price.
No options were exercised during 1998 by the Named Executive Officers of
MarketWatch.com. No compensation intended to serve as incentive for performance
to occur over a period longer than one year was paid pursuant to a long-term
incentive plan during 1998 to the Named Executive Officers of MarketWatch.com.
MarketWatch.com does not have any defined benefit or actuarial plan under which
benefits are determined primarily by final compensation and years of service
with the Named Executive Officers of MarketWatch.com.
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<PAGE> 14
EMPLOYEE BENEFIT PLANS
Since October 1997, MarketWatch.com had issued options to purchase
membership interests in the LLC. In connection with the Reorganization,
outstanding options were assumed by MarketWatch.com and represented the right to
purchase shares of Common Stock rather than membership interests of the LLC.
Each such option was converted into an option to purchase Common Stock based
upon a ratio of 1,000 shares of Common Stock for each 0.01% membership interest.
The options to purchase LLC membership interests outstanding on December 31,
1998 were converted into options to purchase 863,500 shares of Common Stock and
they would have a weighted average exercise price of $6.25 per share (assuming
the Reorganization occurred as of such date). These options will be subject to
terms substantially similar to those described below with respect to options to
be granted under the 1998 Equity Incentive Plan described below. Shares covered
by any outstanding option that expires unexercised become available again for
grant under the 1998 Equity Incentive Plan described below.
1998 Equity Incentive Plan. In September 1998, the Board adopted, subject
to stockholder approval, the 1998 Equity Incentive Plan. The total number of
shares of Common Stock reserved for issuance thereunder is 1,450,000 less the
number of shares of Common Stock subject to non-plan options outstanding on the
date of our IPO, for a total number of shares reserved of 586,500 immediately
after the IPO. All of the non-plan options to purchase LLC membership interests
outstanding on December 31, 1998 were converted into options to purchase 863,500
shares of Common Stock. The plan became effective on the date of our IPO. Shares
will again be available for issuance under the plan that:
- are subject to issuance upon exercise of an option granted prior to
adoption of the plan or under the plan that cease to be subject to such
option for any reason other than exercise of such option;
- have been issued pursuant to the exercise of an option granted under the
plan with respect to which our right of repurchase has not lapsed and are
subsequently repurchased by us;
- are subject to an award granted under the plan that are forfeited or are
repurchased by us; or
- are subject to stock bonuses granted under the plan that otherwise
terminate without shares being issued.
This plan will terminate in September 2008, unless sooner terminated in
accordance with the terms of the plan.
The plan authorizes the award of options, restricted stock awards and stock
bonuses. No person can receive more than 400,000 shares in any calendar year
pursuant to awards under the plan. However, new employees can receive up to
500,000 shares in the calendar year in which such employee commences employment.
The plan is administered by the Compensation Committee . The committee has the
authority to interpret the plan and any agreement made thereunder, grant awards
and make all other determinations to administer the plan.
The plan provides for the grant of both incentive stock options, or ISOs,
that qualify under Section 422 of the Internal Revenue Code, and nonqualified
stock options or NQSOs. ISOs may be granted only to our employees or employees
of a parent or subsidiary. NQSOs and all other awards other than ISOs may be
granted to our employees, directors and other third parties who render services
to us or any parent or subsidiary that are not in connection with the offer and
sale of securities in a capital-raising transaction. The exercise price of ISOs
must be at least equal to the fair market value of the Common Stock on the date
of grant. The exercise price of NQSOs must be at least equal to 85% of the fair
market value of the Common Stock on the date of grant. Options granted under the
plan have a maximum term of 10 years. Awards granted under the plan may not be
transferred other than by will or by the laws of descent and distribution. They
generally must also be exercised during the lifetime of the optionee only by the
optionee.
Options granted under the plan generally expire three months after the
termination of the optionee's service, except in the case of death or
disability, in which case the options generally may be exercised up to 12 months
following the date of death or termination of service. Options will generally
terminate immediately upon termination for cause. If MarketWatch.com is
dissolved or liquidated or has a "change in control"
10
<PAGE> 15
transaction, outstanding awards may be assumed or substituted by the successor
corporation, if any. If a successor corporation does not assume or substitute
the awards, the Compensation Committee may accelerate the vesting of the awards
prior to the effectiveness of the transaction.
COMPENSATION ARRANGEMENTS WITH EXECUTIVE OFFICERS
In October 1997, we granted Mr. Kramer an option to purchase 200,000 shares
of Common Stock at an exercise price of $4.00 per share. This option vests as to
one-third of the shares subject to the option on each anniversary of its date of
grant. We also entered into an employment agreement with Mr. Kramer effective
July 1, 1998. Mr. Kramer's employment agreement provides for a base salary of
$210,000 from the effective date through June 30, 1999, $225,000 through June
30, 2000, and $240,000 through June 30, 2001. Mr. Kramer is also eligible to
receive an annual bonus of up to 50% of his annual base salary. The employment
agreement has a term of three years.
In July 1998, Mr. Bardwick was granted an option to purchase 100,000 shares
of Common Stock at an exercise price of $4.00 per share. This option vests as to
one-third of the shares subject to the option on each anniversary of Mr.
Bardwick's employment start date. We also entered into an employment agreement
with Mr. Bardwick effective July 1, 1998. Mr. Bardwick's employment agreement
provides for a base salary of $200,000 from the effective date through June 30,
1999, $210,000 through June 30, 2000, and $225,000 through June 30, 2001. Mr.
Bardwick is also eligible to receive an annual bonus of up to 50% of his annual
base salary. The employment agreement has a term of three years.
If Mr. Kramer or Mr. Bardwick's employment is terminated or if he resigns
because of a constructive termination, he will be entitled to receive:
- an amount equal to his then current base salary, payable in twelve
monthly installments; and
- his stock options will vest as to an additional one-third of the shares
subject to the option.
A constructive termination means:
- a material change of position causing it to be of materially less stature
or responsibility;
- a salary reduction of more than 10%; or
- relocating his place of employment outside the San Francisco Bay Area.
If his employment is terminated without cause or if he resigns because of a
constructive termination within six months of a change of control, he will be
entitled to receive:
- a lump sum payment in the amount of his current base salary plus his
target bonus for the current year; and
- his options will vest as to an additional one-third of the shares subject
to the option.
A change of control means:
- the sale of substantially all of our assets to an entity other than
CBS or DBC; or
- any transaction or series of transactions that results in any person
other than CBS, DBC or other affiliated entities with us, owning
more than 50% of our voting power.
This lump sum would equal $315,000 based on Mr. Kramer's current base
salary and $300,000 based on Mr. Bardwick's current base salary.
Ms. Chaboudy's employment offer letter of April 23, 1998 provides for an
initial annual base salary of $100,000. Ms. Chaboudy was also granted an option
to purchase 50,000 shares of Common Stock at an exercise price of $11.00 per
share. This option vests as to one-third of the shares subject to the option on
each anniversary of Ms. Chaboudy's employment start date.
11
<PAGE> 16
Mr. McLernon's employment offer letter dated December 30, 1997 provided for
an initial base salary of $95,000. In addition, Mr. McLernon is entitled to
receive a commission in 1998 and 1999 in the amount of 3% of our advertising and
sponsorship sales and the Company has agreed to reimburse Mr. McLernon's
expenses, up to $15,000 per year, for working in San Francisco, California. We
agreed to renegotiate his compensation terms at the end of 1999 based on market
conditions and our operating projections. Mr. McLernon was also granted an
option to purchase 75,000 shares of Common Stock at a purchase price of $8.00.
This option vests as to one-third of the shares subject to the option on each
anniversary of Mr. McLernon's employment start date.
Mr. Calandra, our Vice President of News, receives an annual base salary of
$100,000 and in October 1997, received a grant of an option to purchase 75,000
shares of Common Stock at a purchase price of $4.00 per share. This option vests
as to one-third of the shares subject to the option on each anniversary of its
date of grant.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors administers
MarketWatch.com's executive compensation program. The current members of the
Compensation Committee are Alan J. Hirschfield and Andrew Heyward. Each of these
persons is a non-employee director within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, and an "outside director" within
the meaning of Section 162(m) of the Code. Neither of Mr. Hirschfield nor Mr.
Heyward has any interlocking relationships as defined by the SEC.
General Compensation Philosophy
The role of the Compensation Committee is to set the salaries and other
compensation of the executive officers and certain other key employees of
MarketWatch.com, and to make grants under, and to administer, the stock option
and other employee equity and bonus plans. MarketWatch.com's compensation
philosophy for executive officers is to relate compensation to corporate
performance and increases in stockholder value, while providing a total
compensation package that is competitive and enables MarketWatch.com to attract,
motivate, reward and retain key executives and employees. Accordingly, each
executive officer's compensation package may, in one or more years, be comprised
of the following three elements:
- base salary that is designed primarily to be competitive with base salary
levels in effect at high technology companies in the San Francisco Bay
Area that are of comparable size to MarketWatch.com and with which
MarketWatch.com competes for executive personnel;
- annual variable performance awards, such as bonuses, payable in cash and
tied to the achievement of performance goals, financial or otherwise,
established by the Compensation Committee; and
- long-term stock-based incentive awards which strengthen the mutuality of
interests between the executive officers and MarketWatch.com's
stockholders.
Executive Compensation
BASE SALARY. Salaries for executive officers for 1998 were generally
determined on an individual basis by evaluating each executive's scope of
responsibility, performance, prior experience and salary history, as well as the
salaries for similar positions at comparable companies.
ANNUAL INCENTIVE AWARDS. MarketWatch.com has established a management
incentive plan. Certain employees, including executive officers, are eligible to
participate in this plan. Target bonuses are established based on a percentage
of base salary and become payable upon the achievement of specified total
company financial goals and personal and team objectives. The Compensation
Committee administers this plan with regard to Mr. Kramer and Mr. Bardwick. Mr.
Kramer and Mr. Bardwick administer the plan with regard to the other executive
officers.
12
<PAGE> 17
LONG-TERM INCENTIVE AWARDS. The Compensation Committee believes that
equity-based compensation in the form of stock options links the interests of
executive officers with the long-term interests of MarketWatch.com's
stockholders and encourages executive officers to remain in MarketWatch.com's
employ. Stock options generally have value for executive officers only if the
price of MarketWatch.com's stock increases above the fair market value on the
grant date and the officer remains in MarketWatch.com's employ for the period
required for the shares to vest.
MarketWatch.com grants stock options in accordance with the 1998 Equity
Incentive Plan. In 1998, stock options were granted to certain executive
officers as incentives for them to become employees or to aid in the retention
of executive officers and to align their interests with those of the
stockholders. Stock options typically have been granted to executive officers
when the executive first joins MarketWatch.com. The Compensation Committee may,
however, grant additional stock options to executive officers for other reasons.
The number of shares subject to each stock option granted is within the
discretion of the Compensation Committee and is based on anticipated future
contribution and ability to impact MarketWatch.com's results, past performance
or consistency within the officer's peer group. In 1998, the Compensation
Committee considered these factors. At the discretion of the Compensation
Committee, executive officers may also be granted stock options to provide
greater incentives to continue their employment with MarketWatch.com and to
strive to increase the value of MarketWatch.com's common stock, although to date
no such subsequent option grants have been made. The stock options generally
become exercisable over a three-year period and are granted at a price that is
equal to the fair market value of MarketWatch.com's common stock on the date of
grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Kramer's base salary, target bonus, bonus paid and long-term incentive
awards for 1998 were determined by the Compensation Committee in a manner
consistent with the factors described above for all executive officers.
INTERNAL REVENUE CODE SECTION 162(M) LIMITATION
Section 162(m) of the Internal Revenue Code limits the tax deduction to
$1.0 million for compensation paid to certain executives of public companies.
Having considered the requirements of Section 162(m), the Compensation Committee
believes that non-plan options grants made by the LLC and grants made pursuant
to the Equity Incentive Plan meet the requirements that such grants be
"performance based" and are, therefore, exempt from the limitations on
deductibility. Historically, the combined salary and bonus of each executive
officer has been below the $1.0 million limit. The Compensation Committee's
present intention is to comply with Section 162(m) unless the Compensation
Committee feels that required changes would not be in the best interest of
MarketWatch.com or its stockholders.
Compensation Committee
Alan J. Hirschfield
Andrew Heyward
STOCK PRICE PERFORMANCE GRAPH
We have not included a stock price performance graph in this document as
there was no public market for the Company's common stock as of December 31,
1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1998, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which MarketWatch.com was
or is to be a party in which the amount involved
13
<PAGE> 18
exceeded or will exceed $60,000 and in which any director, executive officer or
holder of more than 5% of the common stock of MarketWatch.com or any member of
the immediate family of the foregoing persons had or will have a direct or
indirect material interest other than (1) the compensation agreements, which are
described where required in "Executive Compensation," and (2) the transactions
described below.
DBC CONTRIBUTION
In October 1998, DBC contributed $1 million to the LLC pursuant to the
Limited Liability Company Agreement of Marketwatch.Com, LLC, entered into by the
LLC, CBS and DBC in October 1997 (the "LLC Agreement").
REORGANIZATION TRANSACTIONS
CONVERSION OF LLC
On January 13, 1999, MarketWatch.com converted its business form to a
corporation in order to have a business organization form that is more typical
of other publicly-traded entities in our market. The Reorganization was effected
by merging Marketwatch.Com LLC (the "LLC") into MarketWatch.com. In connection
with the Reorganization, the LLC Agreement terminated, except for certain
covenants that, by their terms, require performance after the termination of
such agreement, and each of DBC and CBS received 4,500,000 shares of Common
Stock in exchange for their membership interests in the LLC. Additionally, all
outstanding options to purchase membership interests in the LLC were converted
into options to purchase MarketWatch.com Common Stock.
AMENDED AND RESTATED LICENSE AGREEMENT
We entered into an Amended and Restated License Agreement with CBS which
supersedes and replaces the original license agreement with CBS.
Original License Agreement. Under the original license agreement, CBS
granted to the LLC a non-exclusive license to utilize the CBS marks "CBS(R)" and
the CBS "eye" design for use in connection with the operation of the
MarketWatch.com site. CBS also granted MarketWatch.com a license to use current
CBS Television News content related to business and financial news on the
MarketWatch.com site, excluding sponsorships. The LLC paid CBS a royalty based
on amounts received for advertising on the CBS.MarketWatch.com site.
MarketWatch.com accrued $307,000 in royalties payable under the original license
agreement for the fiscal year ended December 31, 1998.
Reasons for Amending and Restating the License. MarketWatch.com, CBS and
DBC agreed to amend the terms of the Original License Agreement because the
parties believed its terms would be appropriate only if the LLC remained as a
private limited liability company owned equally by CBS and DBC, with no outside
investors. As part of the conversion of the LLC to a corporation, the terms of
the Original License Agreement were amended to help make the business attractive
to outside investors. For example, MarketWatch.com believed that the royalty
equal to 30% of advertising revenues requested under the original license
agreement could adversely affect gross margins, particularly if MarketWatch.com
received a substantial portion of its revenues from non-sponsorship advertising.
As part of the agreement to modify the royalty rate, other terms of the
relationship with CBS were amended, including extending the term of the license,
modifying the amount of the CBS advertising commitment, and the non-competition
provisions.
Term. The term of the Amended Restated License Agreement will expire on
October 29, 2005.
Royalties. Under the Amended and Restated License Agreement, we will pay
CBS:
During 1998:
- 8% of Gross Revenues in excess of $1.0 million and up to and including
$51.0 million; and
- 6% of Gross Revenues in excess of $51.0 million.
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<PAGE> 19
During 1999:
- 8% of Gross Revenues in excess of $500,000 and up to and including $50.5
million; and
- 6% of Gross Revenues in excess of $50.5 million.
In subsequent years through October 29, 2005:
- 8% of Gross Revenues up to and including $50.0 million; and
- 6% of Gross Revenues in excess of $50.0 million.
Gross Revenues means gross operating revenues that are derived from an
Internet service or Web site that:
- provides information or services of a financial nature; or
- uses the CBS trademarks licensed to MarketWatch.com.
Gross Revenue excludes revenues from DBC, an amount equal to certain
commissions paid to sales representatives and an amount equal to certain
revenues attributable to an acquired company's results of operations for the 12
months prior to the acquisition.
Control of Content by CBS. Under the Amended and Restated License
Agreement, CBS retained significant editorial control over the use and
presentation of CBS television news content and the CBS logo. For example:
- we must conform to CBS's guidelines for the use of its trademarks;
- CBS has the right to approve all materials, such as marketing materials,
which include any CBS trademarks; and
- CBS has control over the visual and editorial presentation of its
television news content on the CBS.MarketWatch.com Web site.
As a result of these provisions, CBS will have the ability to prevent us
from displaying certain types of content on the CBS.MarketWatch.com Web site and
from producing materials, such as marketing materials, which it does not
approve. This control by CBS could prevent us from engaging in desired marketing
activities or from being perceived as an independent news organization, either
of which could adversely affect our brand awareness and brand name.
Termination if CBS Competitors Acquire Our Securities. CBS will be able to
terminate our right to use the CBS name, logo and news content in the event
that:
- a competitor of CBS directly or indirectly beneficially owns 15% or more
of our outstanding Common Stock or voting power of MarketWatch.com; or
- if we issue to a CBS competitor or actively participate in the
acquisition by a CBS competitor a number of voting securities, such that
after the issuance(s), such CBS competitor beneficially owns 9% or more
of our voting securities.
Notwithstanding the foregoing, the mere acquisition by a CBS competitor of
an interest in DBC that causes a DBC Change of Control shall not be deemed to
constitute the acquisition of an ownership interest in MarketWatch.com in the
absence of other facts demonstrating ownership of an interest in
MarketWatch.com.
Other Grounds for Termination. The Amended and Restated License Agreement
will also be subject to termination if we:
- breach a material term or condition of the Amended and Restated License
Agreement;
- become insolvent or subject to bankruptcy or similar proceedings; or
- discontinue using the MarketWatch mark and do not establish a substitute
mark acceptable to CBS in its sole discretion.
15
<PAGE> 20
Non-Competition Provisions. Under the terms of the Amended and Restated
License Agreement, CBS is not permitted to license or authorize another to
license the use of the CBS logo or name to others in connection with promoting
any other Internet Service or Web site in the U.S. that has as its primary
function and its principal theme and format the delivering of comprehensive
real-time or delayed stock market quotations and financial news in the English
language to consumers, which we refer to as a "Business Site." The following
activities would not be prohibited:
- licensing its logo or name to a Web site or Internet service that
delivers general news, sports or entertainment, with a financial news
segment or portion included;
- licensing its name or logo to a Web site or Internet service outside the
U.S.;
- licensing its name or logo to Web sites that provide stock price ticker
displays on the site;
- any activity conducted by CBS and/or its affiliates prior to CBS's
signing the Amended and Restated License Agreement;
- any activities of non-CBS owned television and radio station affiliates;
- any Internet services in which CBS has an interest prior to signing the
Amended and Restated License Agreement;
- any activity of Westwood One, Inc. if such activity does not produce a
substantial portion of its revenues from a Business Site; or
- any transmissions of any signal of any type by and if through CBS's cable
television operations.
As a result, if CBS were to license its name and logo to another Web site
or Internet service that delivers general news, sports or entertainment and that
also delivers financial news, such other Web site or service could be
competitive with our Web site.
Also, CBS is not prohibited from licensing its news content to, or
investing in, another Web site or Internet service, regardless of the theme of
that Web site or Internet service.
AMENDED AND RESTATED SERVICES AGREEMENT
DBC and MarketWatch.com entered into an Amended and Restated Services
Agreement which superseded and replaced the original services agreement between
DBC and MarketWatch.com.
Original Services Agreement. Under the original services agreement, DBC
provided MarketWatch.com with a variety of support and hosting services. Charges
by DBC to the Company for these services were $755,000 in 1998. DBC also agreed
to pay MarketWatch.com a per subscriber fee for users of DBC's PC-based and
Quotrek subscribers of real-time quotes (the "Subscriber Payment"). Subscriber
Payments to us by DBC under the original services agreement were $1,285,000 in
1998. From January 1998 through June 1998, DBC also provided us with office
space for our executive offices for a total charge of $50,000. DBC also pays us
a fee based upon net revenues from subscriptions to MarketWatch RT and
MarketWatch LIVE (the "Real-Time Fees"). Real-Time Fees from DBC amounted to
$200,000 in 1998.
Reasons for Amending the Services Agreement. MarketWatch.com, CBS and DBC
agreed to amend the terms of the original Services Agreement to extend the term,
provide for agreed upon network performance standards, grant non-exclusive
licenses to use DBC's trademark and data feeds and to document other changes in
our relationship with DBC which were not previously memorialized so that
MarketWatch.com could operate the Web site when it became an independent entity.
There were no material changes to the economic terms of the original Services
Agreement.
Services Provided. Under the Amended and Restated Services Agreement, DBC
will, upon request:
- provide us with any employees needed to operate our business;
- handle billing and collections for our subscription products;
- provide computer programming and engineering services;
16
<PAGE> 21
- provide delayed commodities and stock data feeds as well as certain other
data feeds free of charge; and
- provide communications Web site hosting services pursuant to certain
performance standards.
These services will be provided at DBC's out-of-pocket cost. DBC will also
continue to pay MarketWatch.com the Subscriber Payments except with respect to
certain of DBC's commercial subscribers. The term of the Amended and Restated
Services Agreement will expire on October 29, 2005. However, DBC's Subscriber
Payments obligation will expire in October 2002.
Currently, DBC does not provide similar services to any other third party.
Non-Competition Provisions. The Amended and Restated Services Agreement
does not contain any exclusivity provisions or non-competition provisions. For
example, DBC could:
- provide Web sites hosting services to other Web sites;
- provide content or data to other Web sites including MarketWatch RT and
MarketWatch Live; or
- sell its services through other Web sites.
CREDIT AGREEMENT
MarketWatch.com and DBC entered into a Revolving Credit Agreement (the
"Credit Agreement") in order to evidence DBC's loan obligation under the LLC
Agreement. Under the Credit Agreement, DBC will be obligated to loan
MarketWatch.com up to $5.0 million through October 2000. Borrowings under the
Credit Agreement will be unsecured and bear interest at a rate equal to The
Chase Manhattan National Bank's prime rate plus two percent per annum and mature
on October 29, 2000. MarketWatch.com's previous borrowings from DBC will be
included as indebtedness outstanding under the Credit Agreement. As of December
31, 1998, MarketWatch.com had outstanding indebtedness to DBC of $3,946,000.
MarketWatch.com repaid this balance in full in January 1999 using proceeds from
its IPO.
STOCKHOLDERS' AGREEMENT
DBC, CBS and MarketWatch.com entered into a Stockholders' Agreement (the
"Stockholders' Agreement").
CBS Advertising Commitment. The parties agreed to reduce the Advertising
Commitment provided for in a contribution agreement entered into by
Marketwatch.com LLC, DBC and CBS in October 1997 from a $50 million aggregate
rate card amount of advertising and promotion to an aggregate rate card amount
of $30 million during the period from October 29, 1997 through October 29, 2002
in return for a reduction in the percentage royalty to be paid to CBS under the
Amended and Restated License Agreement. Advertising and promotion can be over
CBS owned and operated television and radio stations or on CBS Internet sites,
provided that no more than 5% of the total advertising can be on CBS Internet
sites. As of December 31, 1998, CBS had delivered $7.1 million rate card amount
of advertising and promotion to us. This Advertising Commitment is subject to
termination upon termination of the Amended and Restated License Agreement, in
which event, CBS shall make a termination payment in the amount of $500,000 per
month for each full calendar month remaining from the termination through
October 2002.
Board Members. The Stockholders' Agreement also provides that each of CBS
and DBC will be entitled to nominate up to three members to our Board of
Directors, so long as it holds at 30%, two, so long as it holds at least 20% but
less than 30%, or one, so long as it holds at least 1%, but less than 20% of our
outstanding voting securities. So long as the Amended and Restated License
Agreement is in effect, CBS shall have the right to appoint at least one member
to our Board of Directors, regardless of its percentage ownership of our Common
Stock. If the size of the Board of Directors is increased, CBS and DBC will each
have the right to nominate a number of candidates to the Board of Directors
based upon the percentage of our outstanding voting securities then held by
them, rounded up to the nearest whole number.
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<PAGE> 22
Right of First Refusal. Pursuant to the Stockholders' Agreement, each of
CBS and DBC will have a right of first refusal in the event that either party
desires to sell any securities of the Company held by it to a third party. In
addition, each of CBS and DBC will have the right to purchase from us additional
shares of our Common Stock, other of our voting securities or securities
convertible into or exchangeable for such securities, which we call New
Securities, if we propose to issue New Securities. In such a case, they would be
able to purchase an amount, subject to certain limitations, necessary to
maintain its then current percentage ownership, not to exceed the party's
percentage ownership interest immediately after the closing of this offering.
Non Competition Provisions for DBC. DBC agreed, inter alia, that until
October 29, 2005 and subject to certain exceptions:
- it will not, nor will it authorize or permit another to, sell advertising
on any other Web site that has as its primary function and its principal
theme and format the delivering of comprehensive real-time or delayed
stock quotations and financial news in the English language to consumers;
or
- it will not use the Internet to sell real-time stock-quotes in "snapshot"
form.
Therefore, DBC would be permitted to:
- sell advertising on a general news, sports or entertainment Web site with
a financial news segment;
- provide data or content to any other Web site, regardless of its theme so
long as it was not selling data and content that was real-time
snap-quotes;
- host any other Web site; or
- invest in any other Web site so long as it held less than 5% of any stock
or less than 10% of the indebtedness of that company.
Our Non Competition Obligations. In addition, we will agree not, except
through DBC, to sell any product or service that offers streaming real-time
stock price quotes. This obligation expires on October 29, 2005 or, at such
earlier time:
- as the Amended and Restated Services Agreement has terminated;
- upon the occurrence of a DBC Change of Control; or
- at such time as DBC shall hold less than 10% of our then-outstanding
voting securities.
OTHER RELATIONSHIPS WITH DBC
Pursuant to an August 1998 Insertion Order Form, DBC has agreed to purchase
approximately $225,000 of advertising from the Company in 1998 and approximately
$500,000 of advertising from the Company in each of 1999 and 2000. This
commitment may be terminated by DBC on 30 days' notice.
OFFICE LEASE
Since April 1, 1998, we occupied space in a CBS facility in San Francisco,
California. We paid CBS a monthly rent of approximately $6,000 for this space
prior to September 1, 1998 for approximately 4,500 square feet. On August 27,
1998, we entered into a lease with CBS with respect to an additional 7,000
square feet of space at the same facility and this lease will expire in March
2003. We are obligated to pay monthly rent of approximately $26,000 in the
aggregate through the expiration date. We are also obligated to pay its
proportionate share of all electricity, heating, ventilation and air
conditioning costs for the leased premises.
We believe that the terms of each of the transactions described above,
taken as a whole, were no less favorable than we could have obtained from
unaffiliated third parties. All future transactions with our officers, directors
and principal stockholders and their affiliates will be approved by a majority
of the Board of Directors, including a majority of the independent and
disinterested outside directors.
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<PAGE> 23
MarketWatch believes that all of the transactions set forth above were made
on terms no less favorable to it than could have been obtained from unaffiliated
third parties. All future transactions between MarketWatch and its officers,
directors and principal shareholders and their affiliates will be approved by a
majority of the Board, including a majority of the independent and disinterested
directors of the Board, and will be on terms no less favorable to MarketWatch
than could be obtained from unaffiliated third parties.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
MarketWatch's bylaws establish an advance notice procedure for stockholder
proposals not included in MarketWatch's proxy statement, to be brought before an
annual meeting of stockholders. In general, nominations for the election of
directors may be made by:
- MarketWatch.com's Board of Directors; or
- any stockholder entitled to vote who has delivered written notice to the
Secretary of MarketWatch.com 60 days or no more than 90 days in advance
of May 21, 2000, which notice must contain specified information
concerning the nominees and concerning the stockholder proposing the
nominations; provided, however, that the foregoing notice requirements
does not apply to (A) any stockholder holding at least twenty-five
percent (25%) of the outstanding Common Stock of MarketWatch.com or (B)
any stockholder that has an agreement with MarketWatch.com for the
nomination of a person or persons for election to the Board of Directors
(either, an "Exempt Stockholder").
The only business that will be conducted at an annual meeting of
MarketWatch.com stockholders is business that is brought before the meeting by
or at the direction of the chairman of the meeting or by any stockholder
entitled to vote who, if applicable, has delivered timely written notice to the
Secretary of MarketWatch.com 60 days or no more than 90 days prior to May 21,
2000; provided, however, that the foregoing notice requirement shall not apply
to an Exempt Stockholder. Any required stockholder's notice must contain
specified information concerning any proposed nominee for election or reelection
as a director, concerning the matters to be brought before the meeting and
concerning the stockholder proposing those matters. If a stockholder who has not
notified MarketWatch.com of his intention to present a proposal at an annual
meeting does not appear or send a qualified representative to present his
proposal at the meeting, MarketWatch.com need not present the proposal for a
vote at the meeting. A copy of the full text of the bylaw provisions discussed
above may be obtained by writing to the Secretary of MarketWatch.com. All
notices of proposals by stockholders, whether or not included in
MarketWatch.com's proxy materials, should be sent to the Secretary of
MarketWatch.com at its principal executive offices.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our directors and officers, and persons who own more
than 10% of our common stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission (the "SEC").
These persons are required by SEC regulations to furnish us with copies of all
Section 16(a) forms that they file.
As we were not a reporting company under the Exchange Act, no forms were
required to be filed pursuant to Section 16 or the rules promulgated thereunder
by any of the foregoing persons.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Meeting, and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the Notice of the Meeting. As to any
business that may properly come before the Meeting, however, it is intended that
proxies, in the form enclosed, will be voted in respect thereof in accordance
with the judgment of the persons voting such proxies.
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<PAGE> 24
Whether or not you expect to attend the meeting, please complete, date,
sign and promptly return the accompanying proxy in the enclosed postage paid
envelope so that your shares may be represented at the meeting.
COMMUNICATING WITH MARKETWATCH.COM
We have from time-to-time received calls from stockholders inquiring about
the available means of communication with MarketWatch.com. We thought that it
would be helpful to describe these arrangements which are available for your
use.
- If you would like to receive information about MarketWatch.com, you may
use one of these convenient methods:
1. To have information such as our latest Quarterly Earnings Release, Form
10-K, Form 10-Q or Annual Report to Stockholders mailed to you, please
call our Investor Relations Department at 415-733-0500.
2. MarketWatch.com's investor relations page on the Internet is located at
www.marketwatch.com.
- If you would like to write to us, please send your correspondence to the
following address:
MarketWatch.com, Inc.
Attention: Investor Relations
825 Battery Street
San Francisco, CA 94111
- If you would like to inquire about stock transfer requirements, lost
certificates and change of stockholder address, please call our transfer
agent, ChaseMellon Shareholder Services at (800) 356-2017. You may also
visit their web site at www.chasemellon.com for step-by-step transfer
instructions.
Of course, as a stockholder, you will continue to automatically receive the
Annual Report to Stockholders and Proxy Statement by mail.
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<PAGE> 25
MarketWatch.com, Inc.
825 Battery Street
San Francisco, California 94111
---------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Larry S. Kramer and J. Peter Bardwick,
as proxies, each with full powers of substitution, and hereby authorizes them to
represent and to vote, as designated below, all shares of Common Stock, $0.01
par value, of MarketWatch.com, Inc. (the "Company") held of record by the
undersigned on April 12, 1999, at the 1999 Annual Meeting of Stockholders of the
Company (the "Meeting") to be held on May 21, 1999, and at any continuations or
adjournments thereof.
This Proxy, when properly executed and returned in a timely manner, will
be voted at the Meeting and any adjournments thereof in the manner described
herein. If no contrary indication is made, the proxy will be voted FOR the Board
of Director nominees and FOR Proposal 2 and in accordance with the judgment of
the persons named as proxies herein on any other matters that may properly come
before the Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE
SEE REVERSE SIDE
<PAGE> 26
[X] Please mark votes
as in this
example.
The Board of Directors unanimously recommends that you vote FOR the Board of
Director nominees and FOR Proposal 2.
1. Election of Directors.
Nominees:
Larry S. Kramer
James A. DePalma
Alan J. Hirschfield
Allan R. Tessler
Mark F. Imperiale
Andrew Heyward
Michael H. Jordan
Robert H. Lessin
Daniel Mason
[ ] FOR all nominees listed below except as marked. [ ] WITHHOLD AUTHORITY to
vote for all nominees.
To withhold authority to vote for any individual nominee, strike a line
through that nominee's name:
2. Proposal to ratify the appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as independent [ ] [ ] [ ]
auditors for the year ending December 31, 1999.
In accordance with their judgement, the proxies are authorized to vote upon
such other matters as may properly come before the Annual Meeting or any
adjournment thereof.
This Proxy must be signed exactly as your name appears hereon. If more than
one name appears, all persons so designated should sign. Attorneys, executors,
administrators, trustees and guardians should indicate their capacities. If the
signer is a corporation, please print full corporate name and indicate capacity
of duly authorized officer executing on behalf of the corporation. If the signer
is a partnership, please print full partnership name and indicate capacity of
duly authorized person executing on behalf of the partnership.
Signature: Date: ,1999
--------------------------------------- ------------
Signature: Date: ,1999
--------------------------------------- ------------
(Reverse Side)
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THIS PROXY CARD AND RETURN IT PRIOR TO THE MEETING IN THE
ENCLOSE ENVELOPE.
