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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________ TO __________.
COMMISSION FILE NUMBER 000-25113
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MARKETWATCH.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 94-3315360
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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825 BATTERY STREET, SAN FRANCISCO, CALIFORNIA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 733-0500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), Yes [X] No [ ]
and (2) has been subject to such filing requirements for the past 90 days. Yes
[ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 19, 1999, the aggregate market value of voting stock held by
non-affiliates of the Registrant was $209,120,313.
The number of shares of the Registrant's Common Stock outstanding as of
March 19, 1999 was 12,162,500.
Documents incorporated by reference: portions of the registrant's proxy
statements for its 1999 annual meeting of stockholders are incorporated by
reference.
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MARKETWATCH.COM, INC.
1998 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PART 1
ITEM 1: Business.................................................... 1
ITEM 2: Properties.................................................. 18
ITEM 3: Legal Proceedings........................................... 18
ITEM 4: Submission of Matters to a Vote of Security Holders......... 18
ITEM 4A: Executive Officers.......................................... 18
PART II
ITEM 5: Market for the Registrant's Common Equity and Related
Stockholder Matters....................................... 19
ITEM 6: Selected Financial Data..................................... 20
ITEM 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
ITEM 8: Financial Statements and Supplementary Data................. 29
ITEM 9: Changes In and Disagreements with Accountants and Accounting
and Financial Disclosure.................................. 47
PART III
ITEM 10: Directors and Executive Officers of the Registrant.......... 47
ITEM 11: Executive Compensation...................................... 47
ITEM 12: Security Ownership of Certain Beneficial Owners and
Management................................................ 47
ITEM 13: Certain Relationships and Related Transactions.............. 47
PART IV
ITEM 14: Exhibits, Financial Statement Schedules and Reports of Form
8-K....................................................... 47
Signatures............................................................ 48
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PART I
ITEM 1. BUSINESS
EXCEPT FOR HISTORICAL INFORMATION, THE FOLLOWING DESCRIPTION OF THE
COMPANY'S BUSINESS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE OUTCOME OF THE EVENTS DESCRIBED IN THESE FORWARD-LOOKING
STATEMENTS IS SUBJECT TO RISKS AND ACTUAL RESULTS COULD DIFFER MATERIALLY. THE
SECTIONS ENTITLED "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THIS ANNUAL REPORT CONTAIN A DISCUSSION OF SOME OF THE
FACTORS THAT COULD CONTRIBUTE TO THESE DIFFERENCES. OWNERSHIP OF OUR SECURITIES
BY CBS OR DBC SHOULD NOT BE VIEWED AS A RECOMMENDATION BY EITHER COMPANY TO
ACQUIRE OR HOLD THE COMMON STOCK.
We are a leading Web-based provider of comprehensive, real-time business
news, financial programming and analytic tools. Our CBS.MarketWatch.com Web site
also offers several tiers of paid subscription products, personal finance
commentary and data, community features and other services designed to provide a
"one-stop-shop" for our audience's financial information needs. We carefully
design and regularly update our Web site to provide well-organized, relevant and
clear content. Our staff of approximately 50 professional journalists, including
freelance journalists, creates in-depth, up-to-the-minute business and financial
commentary and analysis throughout the trading day and our correspondents
regularly appear on CBS Television and CBS Radio News. We have important
strategic relationships with our principal stockholders Data Broadcasting
Corporation, or DBC, and CBS Broadcasting Inc., or CBS. Our goal is to create
the preeminent brand for real-time business news and financial information on
the Web. We believe our consistent focus on original and authoritative content
and our access to a national media audience through our CBS relationship will
help us achieve this goal. In the fourth quarter of 1998, our Web site attracted
an average of 2.3 million unique visitors per month, who generated approximately
160 million page views, as compared with approximately 1.7 million unique
visitors per month, who generated approximately 124 million page views in the
third quarter of 1998. Our visitor information was based on information provided
to us by DoubleClick, Inc., the company which delivers ads on our Web site and
measures and tracks our users.
THE CBS.MARKETWATCH.COM SITE
The CBS.MarketWatch.com Web site is a comprehensive business and financial
Web site providing up-to-the-minute business news, financial programming and
analytic tools. Our staff of approximately 50 professional journalists,
including freelance journalists, offers real-time coverage of business and
financial news and in-depth commentary on market moving trends and events. We
also offer a wide range of other financial information and subscription services
as well as community features to provide a "one-stop-shop" for our audience.
Recent additions to the CBS.MarketWatch.com Web site include columns by
well-known commentators, enhanced personal portfolio tracking features, hosted
chat rooms, bulletin boards and messaging. We believe that offering
comprehensive business news, financial programming and analytic tools is
critical to its success as it enables us to increase audience loyalty and sense
of community, average usage time and repeat visits.
News and Editorial Content
The CBS.MarketWatch.com front page is carefully designed and regularly
updated throughout the trading day by our journalists and editors to inform our
audience of the important stories of the moment. Unlike many of our Web-based
competitors, we do not rely exclusively on automatic editing and display
systems; instead we leverage our journalistic expertise to add a strong
editorial framework to our content. From the CBS.MarketWatch.com Web site's
"front page," users can access news stories, columns and headlines written by
its reporters and third parties, such as Reuters, Associated Press, and PR
Newswire, as well as stock quotes and other business and financial data and
analytic tools. The CBS.MarketWatch.com
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Web site also offers limited audio and video clips of news reports that were
recently broadcast on the CBS Television Network and CBS Radio by our
correspondents. Users can also search a historical database of news stories by
company name and ticker symbol.
We create and publish on the CBS.MarketWatch.com Web site real-time
commentary and analysis of business and financial news and a number of regular
columns by our experienced editorial staff. News features include real-time
headlines, stock market news and updates and coverage of technology stocks, bond
markets, initial public offerings and other areas of interest to our audience.
These features include:
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UPDATED THROUGHOUT UPDATED SEVERAL UPDATED WEEKLY
EACH TRADING DAY UPDATED DAILY TIMES PER WEEK OR BI-WEEKLY
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Analysts' Changes Daily Calendar The Big Cap Bazdarich on Bonds
Bond Report Analysts' Ratings Clueless Investor Beyond Stocks
Earnings Headlines Earnings Calendar Capitol Reports Cappiello's Take
Earnings Surprises eGgads! Erdman's World Cedd Moses
Futures Movers IPO Daily Report Getting Personal CyberPitch
Hardware Stocks Mutual Fund Center I.P.Onder Deep Pockets
Headlines Press Briefing Irwin Kellner Elaine Garzarelli
Internet Daily Stock Buybacks London Calling Kellner's Forecast
Market Snapshot Stock Splits Mortgages Legal Options
Media Report Thom Calandra's Moscow Report Marder on Markets
Movers & Shakers Stock Watch Options Watch NouveauGeek
Mutual Understanding Weekly Calendar Screamers Roy Blumberg
Net Stocks SoapBox SportsBiz
NewsWatch Telecom Report Stupid Stock Tricks
Silicon Stocks Taxing Times
Software Report Wall Street
Stocks to Watch Eavesdropper
Tech Report Zapman
The Net Economy
Washington Schedule
World Markets
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To broaden its audience appeal, the CBS.MarketWatch.com Web site has other
specialized content areas targeting novice as well as sophisticated investors.
These additional areas include:
Mutual Fund Center. A mutual fund expert provides "Superstar Fund" listings
and edits the CBS.MarketWatch.com Web site's mutual fund section. The Mutual
Fund Center section offers Lipper Mutual Fund Profiles and provides links to
other mutual fund listings, news headlines, quotes and charts. The
CBS.MarketWatch.com Web site also offers a "Fund University" section, which
provides various mutual fund educational information and links to other mutual
fund investing sites.
Personal Finance. The CBS.MarketWatch.com Web site has a Getting Personal
section which features regularly updated columns that provide its audience with
information on a range of investment alternatives and other personal
finance-related topics and creates educational programming on topics such as
finance terminology and investing options.
Tax Guide. The CBS.MarketWatch.com Web site has a seasonal online Tax Guide
giving its audience a resource tool for planning tax strategies and estimating
tax bills. This area provides timely special features that highlight the latest
changes in tax laws and reviews and compares various tax preparation software
packages.
Third-Party Products. We also distribute products and services from some of
the leading names in research and news, such as Baseline, Hoover's, Inc.,
INVESTools, Inc., Investor Communications Business Inc. and Zacks Inc. We
receive a portion of any revenue generated from the sale of these products or
services,
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however, to date, we have not received material revenue from these sources. Our
reporters and editors also use information provided by these services in our
daily news coverage.
Data and Analytic Tools
We offer a variety of data and analytic tools which, together with its
other real time news and programming, are designed to provide a "one-stop-shop"
for the financial and business needs of its audience. These include the
following:
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DATA TOOLS
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US Equities Historical Charts
International Equities Technical Charts
US Options Portfolio Management
Mutual Funds Volume Alerts
Futures/Commodities Price Alerts
Foreign Exchange Stock Screener
Fixed Income
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Securities Price Quotes. Utilizing data gathered and packaged for online
use by DBC customers, the CBS.Marketwatch.com Web site provides stock quotes
from all major U.S. stock markets. These quotes are offered on a minimum delay
of 15 minutes in the United States in accordance with exchange rules, and of
varying periods from foreign markets. Users can also subscribe to real-time
quote services, MarketWatch RT and MarketWatch Live, through the Web site.
Through these stock quote pages, our audience can link to other valuable
information about a particular company, including related MarketWatch.com news
stories, stories from other news services, summaries of SEC filings and annual
reports, summaries of analysts' information and a variety of fundamental and
technical information about its stock. The CBS.MarketWatch.com Web site also
provides information as to various market and industry indices, commodity
contracts and currency exchange rates.
Portfolios. In an effort to offer the most complete and functional
portfolio tracking system on the Web, the CBS.MarketWatch.com Web site has a
sophisticated portfolio tracking service which offers a variety of features,
including the ability to:
- track up to 200 ticker symbols in multiple portfolios;
- access portfolios from any computer with Web access;
- track options, mutual funds and stocks on all major U.S. and
international exchanges;
- monitor portfolios over a secure connection;
- automatically update portfolio price views every five minutes; monitor
short and long positions;
- view transaction history and capital gains reports; and
- download portfolio reports for use in spreadsheets, thus providing a
wider set of choices for record-keeping.
We are also developing additional features, such as an email alert when one
of a user's portfolio securities trades out of its normal range and
end-of-the-day emails summarizing the portfolio's activity that day. This
service is offered free of charge and users can enroll by completing a simple
online registration form.
Data. The CBS.MarketWatch.com Web site offers a wide variety of data
including trading volume and dollar volume information, corporate share
repurchases, industry and customized local CBS affiliate indices, stock split
information and other data related to global and currency markets.
Analytics. We have developed real-time news products utilizing proprietary
analytical tools. These services typically generate thousands of daily,
real-time headlines based on individual stock activity. If, for
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example, a stock exhibits unusual volume or price activity, the software
generates a real-time headline that alerts investors to that activity. The
CBS.MarketWatch.com Web site also provides information relating to fixed-income
securities and commodities.
Community Features
We believe that providing a place for our audience, financial journalists
and experts in the financial world to meet and share ideas about investing will
help increase brand awareness, motivate users to return to the
CBS.MarketWatch.com Web site frequently and encourage our audience to spend more
time on its Web site. Additionally, because we intend to integrate related news,
market data and charts offered throughout our service, community members will be
able to gravitate towards others who share their specific interests, enabling
them to create niche user groups which can be targeted with relevant marketing
campaigns and transaction opportunities. In addition, because we plan to
integrate other content with these community features, community members will be
exposed to other areas of the site, increasing the awareness of the breadth of
our programming and other services. We believe that the personal and interactive
nature of communicating with other people who share similar interests will help
generate an affinity for the community and increased brand loyalty to
MarketWatch.com.
In the first quarter of 1999, we launched an array of communication tools
designed to facilitate the creation of a larger, dynamic community. This suite
of tools provides our audience with the means for communicating either
privately, using Web-based email and instant messaging, or in affinity group
message boards and chat rooms. In order to participate and to assist us in
targeting advertising, users must complete a registration form and provide
demographic information about themselves.
Our community building efforts are centered on strengthening audience
loyalty, increasing page views across all areas of the site, and providing
opportunities for premium sponsorships, such as sponsoring moderated chat
events. Longer term, as we gather more information about the interests of the
community members, we intend to offer targeted advertising in specialized
discussion groups within the community and pursue electronic commerce
relationships with the goal of entering into revenue sharing relationships based
on transactions derived from community members.
EDITORIAL
We maintain news bureaus in New York City, Washington D.C., San Francisco,
Los Angeles and London, England. Our journalists generate between 600 and 800
finance and business-related, real-time headlines on an average trading day. We
have also devoted additional staff to cover special areas of interest, including
initial public offerings, investment conferences, the fixed income markets,
mutual funds, mortgages, microcap stocks, futures and options and technology
stocks. Also, we intend to expand our industry-based and real-time capital
markets coverage. For example, we recently added columns which cover the
telecommunications and the sports industries and introduced a "spot news" desk
to cover the major relevant stories of the day. MarketWatch.com also receives
live media feeds from PR Newswire and Business Wire, and has access to all major
financial wires and broadcast channels. We also work with CBS News' global
operations and presence to expand our coverage of international business and
financial news. In addition to providing news coverage for the
CBS.MarketWatch.com Web site, our journalists provide financial news to CBS
Television News and CBS Radio news programming. We believe that by providing
news reports for CBS and working with CBS News journalists, it will have the
opportunity to enhance our reputation and audience reach.
Our staff of approximately 50 professional journalists, including freelance
journalists who write for us, are experienced editors, bureau chiefs and
reporters with high standards for reporting and editing. We believe our staff
provides us with a significant competitive advantage. For example, Larry Kramer,
our Chief Executive Officer, was Executive Editor of the San Francisco Examiner,
and a financial reporter and Metro Editor of The Washington Post. Our staff also
includes Thom Calandra, our Editor-in-Chief, who has been a financial columnist
for the San Francisco Examiner, the London-based, lead markets editor for
Bloomberg News and Online Money Editor for USA Today Online; Paul Erdman, a
renowned economist and author; and Irwin Kellner, a former Chief Economist for
Manufacturers Hanover Trust Bank; as well as a number of other
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journalists who previously worked for Bloomberg News, Associated Press, UPI, CBS
Radio news, Fox News Internet and Dow Jones Television. We believe that we are
one of the few Web-based companies which offers this level of journalism.
ADVERTISING AND SALES
We are focused on providing our advertisers with a large, demographically
desirable audience. We believe that our Web site attracts users who as a group
are more affluent and better educated than users of many other Web sites and
therefore represents an attractive medium for companies that advertise and
engage in commerce over the Internet. Advertisements are displayed throughout
the Web site, when a user enters the service, reviews a news story or accesses a
quote or portfolio. Advertising revenues represented 56%, and 73% of our net
revenues for the year ended December 31, 1997 and the year ended December 31,
1998, respectively.
We currently derive, and expect to continue to derive, a substantial
majority of our revenue from advertising sales. We offer a variety of
advertising options that may be purchased individually or in packages such as
"run of site," targeted advertising and sponsorships. Currently we offer the
following advertising options on the CBS.MarketWatch.com Web site:
Run of Site. Run of site rotations are banner advertisements that
rotate on a random basis throughout the CBS.MarketWatch.com Web site,
appealing to advertisers seeking to establish general brand recognition
across MarketWatch.com's audience. Run of site rotations are typically sold
in blocks of 1,000 impressions and generally are sold with a minimum of
100,000 guaranteed impressions over the life of the advertising contract.
MarketWatch.com's current rate card CPM ranges from $15 to $25 depending on
length of contract and number of impressions purchased.
Targeted Advertising. Targeted advertisements are banner
advertisements that are displayed when a user browses through specific news
and quote pages, allowing advertisers to target users based on ticker
symbols requested or by specific areas of interest by advertising on
particular columns. Advertisers can also deliver their advertisements by
region or country, time of day, frequency of use, Internet Service
Provider, type of operating system or browser. Like run of site rotations,
targeted advertisements are sold in blocks of 1,000 impressions. Due to the
greater selectivity of the audience and because users typically spend more
time on news pages than on quote pages, MarketWatch.com's current rate card
CPM for targeted advertisements is generally higher than for run of site
rotations, generally ranging from $19 to $34. In order to enhance the
effectiveness of ad targeting, we are building a database of our registered
users through an email newsletter and securities portfolio tracking
service.
Sponsorships. Sponsorships allow advertisers to gain maximum exposure
on the MarketWatch.com site by featuring "buttons" on certain pages. For
example, eight online brokerage services (Ameritrade, Datek, DLJ Direct,
First Trade, Mr. Stock, Multex, ScoTTrade and Trading Direct) have
purchased premium sponsorship placements to gain fixed positions within the
CBS.MarketWatch.com Web site and thereby present a user with the
opportunity to move directly to the advertisers site to establish an
account or place an order. We offer other sponsorship opportunities
throughout our entire site. Sponsorships are typically sold for a fixed
monthly fee over the life of the contract and may include other advertising
components such as general rotation or targeted banner advertisements.
Content Sidebars. MarketWatch.com also offers fixed location bars, or
content sidebars, on selected high traffic pages to provide advertisers
with greater visibility in order to feature an advertiser's content,
information or tools. MarketWatch.com typically charges premium rates for
the placement of these content sidebars. Content sidebars can also be sold
as part of a sponsorship arrangement.
Historically, MarketWatch.com's advertisers have been from the technology
and financial services industry, but we have recently attracted advertisers from
brands outside of these industries, such as American Airlines, Bell South,
DeBeers, Sprint, Toyota and Volvo. MarketWatch.com believes that attracting
additional advertisers from businesses outside of the financial and technology
industries is important to our future success
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and revenue growth. From our inception (October 29, 1997) through December 31,
1998, more than 100 organizations have advertised on our Web site.
As of December 31, 1997, four customers comprised 53% of our gross accounts
receivable. As of December 31, 1998, four customers comprised 21% of our gross
accounts receivable balance. Sales of news to DBC accounted for 33% and 18% of
revenue for the period from inception (October 29, 1997) through December 31,
1997 and the year ended December 31, 1998, respectively.
Prior to January 1998, we used a third-party service to sell advertising on
our Web site. We are building a direct sales force, which, as of December 31,
1998, consisted of 12 members. We depend on our sales force to sell advertising
on our Web site. This involves a number of risks:
- our sales personnel have, in many cases, only worked for us for a short
period of time;
- our need to further increase the size of our sales force;
- our ability to hire, retain, integrate and motivate additional sales and
sales support personnel;
- the length of time it takes new sales personnel to become productive; and
- the competition we face from other companies in hiring and retaining
sales personnel.
Our business will be adversely affected if we do not develop and maintain
an effective sales force.
We believe that having an internal direct sales force allows us to better
understand and meet advertisers' needs, increase our access to potential
advertisers and maintain strong relationships with our existing advertising
clients. Our in-house sales staff includes experienced Internet sales personnel
as well as those from traditional media. The staff develops and implements its
advertising strategies by creating value-added packages for advertisers from the
wide range of news columns, editorial opinions and other tools and information
on the CBS.MarketWatch.com Web site, including identifying strategic accounts
and developing presentations and promotional materials and building
relationships with advertising buyers. DoubleClick provides advertising
management and delivery services for the CBS.MarketWatch.com Web site and
provides advertisers with reports describing the delivery of their
advertisements.
To date, relatively few advertisers from industries other than the
technology and financial services industries have devoted a significant portion
of their advertising budgets to Web advertising. If we do not attract
advertisers from other industries, our business could be adversely affected.
STRATEGIC RELATIONSHIPS
We believe that our strategic relationships with our principal investors,
CBS and DBC, allow us to differentiate the CBS.MarketWatch.com Web site as the
preeminent brand for real-time business news and financial programming on the
Web.
CBS
License. In connection with the formation of the LLC, the LLC entered into
a five-year license agreement under which the Web site was renamed
"CBS.MarketWatch.com" and the LLC was granted the right to use the CBS name and
logo as well as CBS Television Network news content in connection with the
CBS.MarketWatch.com Web site during this period. This agreement, as it was
amended and restated immediately prior to the effectiveness of this offering,
which we call the Amended and Restated License Agreement, will expire on October
29, 2005. Under the terms of the Amended and Restated License Agreement,
MarketWatch.com will pay CBS a percentage of Gross Revenues generated by the
CBS.MarketWatch.com Web site. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Amended and Restated License
Agreement will be subject to termination in the event that competitors of CBS
acquire specified amounts of our Common Stock and in other events. See "Certain
Transactions" for descriptions of events which could cause a termination of this
agreement. Subject to certain limitations, CBS will provide us with an aggregate
rate card amount of $30 million of network television, radio and Internet
advertising and promotion commencing from October 1997 through October
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2002. Internet advertising will be limited to five percent of the total
promotion delivered. CBS could terminate this advertising obligation if the
Amended and Restated License Agreement is terminated.
Reporting. We believe we can increase our brand awareness by providing
financial news reports for CBS News and CBS Radio. Our New York City-based
bureau is located in CBS facilities and frequently works with CBS News staff to
generate stories for distribution over the CBS broadcast networks. We have two
television correspondents who file daily reports on CBS Up-to-the-Minute
overnight programming and CBS Newspath, which supplies CBS News video to CBS
affiliated television stations for use in their news programs. Both
correspondents also file customized daily reports to major CBS affiliates via
satellite links, and contribute to the CBS Morning News. Our Editor-in-Chief,
Thom Calandra, files live weekday morning reports on KPIX-TV, the CBS owned
television station in San Francisco, and files reports with CBS in New York for
CBS News. Our correspondents often file reports on CBS Radio news programming,
covering breaking financial stories for the top-of-the-hour CBS Radio news
report that is broadcast over several hundred radio stations nationwide. In
addition, Frank Barnako, one of our reporters, does a twice-daily version of his
Internet Daily column for use by CBS Radio affiliates. We do not receive any
payments from CBS for this reporting. However, all reports delivered by our
correspondents are identified as our reports. Our correspondents file these
reports or provide services to CBS through an understanding we have with CBS
which we believe helps to strengthen our brand awareness. We have no formal
agreement with CBS with respect to any of our correspondents who provide reports
to CBS or any of its affiliates. Therefore, there can be no assurance that these
services will continue in the future.
Non-Competition Provisions. The Amended and Restated License Agreement will
contain certain limited non-competition provisions. However, these provisions
will have certain exceptions and will not otherwise provide for an exclusive
relationship. As a result, there can be no assurance that CBS will not promote,
establish or otherwise provide content for a Web site or Internet service which
competes with MarketWatch.com.
We would need to change the name of our Web site and devote substantial
resources towards building a new brand name if our agreement with CBS were
terminated or not renewed. This agreement also has a number of risks associated
with it. CBS can require us to remove any content on our Web site which it
determines conflicts with, interferes with or is detrimental to its reputation
or business or for certain other reasons. We are also required to conform to
CBS's guidelines for the use of its trademarks. CBS has the right to approve all
materials, such as marketing materials, that include any CBS trademarks. CBS
also has control over the visual and editorial presentation of its television
news content on our Web site. Because of these restrictions, we may not be able
to perform our desired marketing activities.
Our license agreement with CBS will expire on October 29, 2005, and CBS
will have no obligation to renew it. CBS will also have the right to terminate
this agreement if:
- we breach a material term or condition of the agreement;
- we become insolvent or subject to bankruptcy or similar proceedings;
- a competitor of CBS acquires 15% or more of our voting power;
- we issue voting securities to, or actively participate in the acquisition
of our voting power by, a CBS competitor which results in such competitor
directly or indirectly owning 9% or more of our voting power; or
- we discontinue using the MarketWatch trademark and do not establish a
substitute mark acceptable to CBS.
If our agreement with CBS is terminated prior to the end of its term, our
business could be adversely affected.
CBS has agreed, subject to certain limitations, to provide us an aggregate
rate card amount of $30 million of advertising and on-air promotions during the
period from October 29, 1997 through October 29, 2002. However, the timing and
placement of these advertisements and promotions are subject to CBS's
discretion. CBS could discontinue promoting us in the manner that it currently
does. CBS also makes no guarantees to us
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as to the demographic composition or size of the audience that views these
advertisements or promotions. This advertising and on-air promotion, as well as
our association with the CBS brand, are important elements of our strategy to
increase our brand awareness. This obligation will terminate if our license
agreement terminates.
We may not be able to continue to attract a sufficient amount of user
traffic and advertisers to our Web site without the CBS name and logo or
promotion from CBS.
DBC
Initial Contribution. At our formation, DBC contributed certain assets
related to its DBC Online/News Business which had been operating as departments
within DBC since October 1995. In addition, DBC assigned agreements for
advertising and content, portions of its award-winning Web site, dbc.com, and
its related trademarks, including "MarketWatch" and the MarketWatch.com Internet
domain name.
Data and hosting. DBC currently provides delayed financial data to
MarketWatch.com at no charge. It also provides real-time financial data to
MarketWatch.com for dissemination to subscribers of certain of MarketWatch.com
subscription services in exchange for a percentage of the subscription fee. In
addition, DBC hosts and manages the CBS.MarketWatch.com Web site infrastructure
and provides 24x7 network support.
General Services. DBC will also provide MarketWatch.com with certain
general services, including cash management, accounting services and human
resources services. MarketWatch.com will reimburse DBC for its actual costs of
providing these services.
Payments for News. Under the Amended and Restated Services Agreement, DBC
will also pay us through October 2002 a monthly per-subscriber fee for delivery
of our news to all DBC subscribers, other than certain commercial ones, with a
minimum payment of $100,000 per month.
Non-Competition Provisions. Through October 29, 2005, DBC will not be able
to:
- sell advertising on a Web site that primarily delivers financial news and
comprehensive stock quotes; or
- use the Internet to sell, or authorize another to sell, real-time snap
quotes to individual subscribers.
Although the Stockholders' Agreement will contain certain non-competition
provisions, these provisions will have certain exceptions and do not provide for
an exclusive relationship.
If DBC fails to provide these services satisfactorily, we would be required
to perform these services ourselves or obtain these services from another
provider. Replacing these services could cause us to incur additional costs. We
may not be able to replace these services on commercially reasonable terms or if
we choose to perform these services ourselves, we may not be able to perform
them adequately. During any such transition, our services could be disrupted for
an indefinite period of time and, as a result, we could lose a substantial
number of users and advertisers.
CONTROL BY CBS AND DBC
After our initial public offering on January 15, 1999, CBS and DBC each
owned approximately 38% of our outstanding common stock. CBS and DBC have
certain rights to have representatives on our board of directors generally based
upon the percentage of our voting securities which they hold. Currently, they
each have three representatives. If we issue voting securities, or securities
convertible into or exchangeable for voting securities in the future, subject to
certain limitations, CBS and DBC will each have the right to purchase securities
from us so they can maintain their respective percentage ownerships. In
addition, if either CBS or DBC desires to transfer any shares of common stock
held by it, the other party has a right of first refusal to purchase all or a
portion of those shares, subject to certain exceptions. As a result of their
share ownership and other rights, CBS and DBC collectively will be able to
control our management and affairs, elect a majority of our Board of Directors
and approve significant corporate transactions. This concentration of ownership
and other rights could also delay or prevent a change in control.
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If a competitor of CBS directly or indirectly acquires more than 30% of the
voting power of DBC or substantially all of DBC's assets at a time when DBC
beneficially owns at least 10% of our outstanding common stock, CBS may within
45 days either:
- purchase all of our securities held by DBC; or
- require DBC to place these securities in a trust which would then dispose
of the securities with a view to maximizing the sale price while
disposing of such shares as promptly as reasonably practicable.
DBC would forfeit its Board representation in either event. We cannot
predict which option, if any, CBS would elect in such an event.
MARKETING AND DISTRIBUTION
We are seeking to establish the MarketWatch.com brand as the Web's leading
provider of business and financial information. CBS will agree to provide the
CBS.MarketWatch.com Web site with promotion and advertising with an aggregate
rate card amount of $30 million through October 2002. This promotion and
advertising will be carried or disposed on CBS Television Network programming,
programming on CBS owned and operated television and radio stations and/or
banner advertising on CBS Web sites over the period from October 29, 1997,
through October 29, 2002. These advertising placements may take the form of 30,
15 or 10 second commercial units, scrolls of the CBS.MarketWatch.com URL, on-air
mentioning of our Web site, banner advertising and/or in credit rolls or
sign-offs, with CBS having broad discretion as to the type and manner of
placement. As of December 31, 1998, CBS had delivered $7.1 million rate card
amount of promotion and advertising under this commitment.
CBS has displayed our MarketWatch.com logo and domain name on the CBS
Evening News with Dan Rather, CBS This Morning and on the news programming of
the CBS Television Network and many affiliated television stations. The logo is
usually displayed when business or financial news is covered during the
broadcast. When they occur, these promotional activities give the
CBS.MarketWatch.com Web site national promotion to the over 10.2 million people
who, according to recent national Nielsen Ratings for the television season
through March 1999, watch the CBS Evening News as well as the millions of
additional viewers of other CBS News broadcasts. CBS is not obligated to
continue to display our logo or domain name in this particular manner.
We use journalists' appearances on CBS Television and Radio news broadcasts
and on certain affiliate station broadcasts to highlight the CBS.MarketWatch.com
Web site and increase the association of the Web site with CBS. When making
appearances, our journalist is identified with the MarketWatch brand. The
CBS.MarketWatch.com Web site is also linked directly to the Web sites of CBS and
many of its affiliate television stations. Each time a user at these Web sites
clicks on the "Money" section he or she receives a graphic or story from the
CBS.MarketWatch.com Web site or one of its correspondents and a direct link to
the CBS.MarketWatch.com Web site. We also have an agreement with Westwood One,
America's #1 radio network, to build the CBS.MarketWatch.com Radio Network. As
part of this agreement, we will provide financial market updates to Westwood
One's radio stations across the country.
In addition to our CBS-related promotional activities, we advertise on a
number of heavily trafficked Web sites, such as Yahoo!, Lycos, Excite and
AltaVista, and conduct a variety of other marketing and public relations
programs. These programs include paid advertisements in print publications and
radio broadcasts and participation in personal finance, online journalism and
Internet-related conferences. We intend to increase advertising and marketing
expenditures over their historical levels to continue to build awareness with
its audience. To this end, we launched a national brand building campaign and
intend to make substantial expenditures to advertise our brand and the
CBS.MarketWatch.com Web site in traditional and online media.
We have entered into a number of, and are aggressively pursuing additional,
distribution relationships to enhance our brand name recognition and audience
reach. Key distribution relationships include:
Yahoo! Inc. Yahoo! has agreed to index certain of the
CBS.MarketWatch.com news headlines in the Finance section of Yahoo! with
links to the CBS.MarketWatch.com Web site for the full story. In
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addition, we will advertise on Yahoo! over the 12 month period following
the closing of our initial public offering. We also have a content
distribution relationship with Yahoo! under which we will provide at no
charge a version of our Market Snapshot Report on a daily basis to
registered users of the Investment Challenge fantasy investment game on
Yahoo!'s Finance section.
Quicken.com. Intuit has agreed to display certain of our news columns
and features in portions of its Quicken.com Web site. We will receive a
share of any revenues from the sale of advertising on the Quicken.com pages
which display this content.
CompuServe. CompuServe, ranked among the top Internet Service
Providers (ISP's) and among America Online's (AOL's) key lines of business,
selected CBS.MarketWatch.com to serve as the Financial News Center for its
newly launched service, CompuServe 4.0. CBS.MarketWatch.com created a
comprehensive, customized, cobranded version of the MarketWatch site for
the service.
Universal Feature Syndicate. In June 1998, we entered into an
agreement with Universal Feature Syndicate under which Universal Feature
Syndicate will market certain of the CBS.MarketWatch.com editorial features
to newspapers exclusively in North America and non-exclusively throughout
the world for syndication in print and electronic editions.
News Alert. In March 1998, we entered into an agreement with News
Alert, Inc. under which News Alert will provide certain third-party news
feed collection, databasing and display services for the
CBS.MarketWatch.com Web site. In addition, News Alert may also make certain
of the CBS.MarketWatch.com editorial content available as a news feed to
certain of News Alert's other customers.
Brand Label Quotes Pages. We also seek to increase our revenues and
name recognition by hosting co-branded financial information pages, or
Brand Label Quotes Pages, accessible to visitors of other companies' Web
sites who wish to retrieve market quotations and financial news. The
presence of links on the Brand Label Quotes Pages to relevant
MarketWatch.com news stories also helps drive traffic to the
CBS.MarketWatch.com Web site. Web sites with these Brand Label Quotes Pages
include Web sites operated by American Express Financial Direct, Callaway
Golf, Cigar Aficionado, Conde Naste's cnCurrency.com, Hoover's Inc., IPO
Monitor, iSleuth.com, Jack Carl Futures, National Discount Broker, Proctor
& Gamble, Rocky Mountain News, Muriel Siebert & Co., SportsLine USA, Wall
Street Access, Wine Spectator, and United Media, among others. Generally,
we sell advertising on portions of, and receive hosting fees for these
pages. For the year ended December 31, 1998, revenues from these Brand
Label Quotes Pages have constituted less than 10% of our aggregate
revenues.
We believe that distribution relationships of this type are important to
our continued growth and to increase our exposure to our target audience. We
intend to continue to aggressively pursue additional distribution relationships.
See "Factors that may affect our operating results -- Need to Establish and
Maintain Strategic Relationships with Other Web sites."
SUBSCRIPTION SERVICES
While substantially all of the programming available on the
CBS.MarketWatch.com Web site is currently free of charge, the
CBS.MarketWatch.com Web site offers subscription-based third-party financial
data services which are targeted for sophisticated investors. These services are
currently created and provided by DBC on a non-exclusive basis under a revenue
sharing arrangement. See "-- Strategic Relationships." MarketWatch.com is
developing and, in the future, intends to introduce additional subscription
services, such as exclusive news, commentary and analytic tools.
We act or will act as DBC's sales agent with respect to the following DBC
services in exchange for a fee for new subscribers obtained through the
CBS.MarketWatch.com Web site:
MarketWatch RT. MarketWatch RT is a browser-based, real-time financial data
service providing on demand real-time quotes from the American and New York
Stock Exchanges and NASDAQ. The service is available for a $34.95 monthly fee
which includes non-professional exchange fees of $12.50 for those three
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exchanges. Premium research from Baseline is also available through this
service. DBC pays MarketWatch.com a monthly royalty for each subscriber. DBC
provides all customer and MIS support for this service. In August 1998, we began
marketing MarketWatch RT Wireless, a product for use with hand-held computing
devices such as Windows CE devices and Palm Pilots. In the future, we do not
expect to derive a material amount of revenue from this service.
MarketWatch LIVE. MarketWatch LIVE is a Windows-based, real-time financial
data service providing "streaming" real-time quotes over the Internet from all
major US equity and futures exchanges. The base fee for this product is $79 per
month. Premium research from Baseline is also available through this service.
DBC pays MarketWatch.com a monthly royalty on revenues derived from this
service. DBC provides all customer and MIS support for this service. In the
future, we do not expect to derive a material amount of revenue from this
service.
MarketWatch PRO. In addition, it is the Company's intention to introduce a
new subscription service, MarketWatch PRO, during the second quarter of 1999.
Our Web site also offers, for a fee, third party financial data and other
services through the Web site, such as Hoover's, Inc., which provides company
profiles, Zacks Inc., which provides company earnings estimates, and Baseline,
which provides company research reports. We receive a portion of the revenue
from the sale of these products or services through the CBS.MarketWatch.com Web
site. We do not currently and, in the future do not intend to, derive a material
amount of revenue from these services.
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
The CBS.MarketWatch.com Web site is hosted at, and all of its network
operations are controlled from, DBC's facilities in Hayward, California. DBC
provides multiple Web servers which run Microsoft Windows and Microsoft NT
operating systems and use Microsoft Internet Information Server. Internet access
is maintained through multiple DS3 connections with three different tier one
ISPs, UUNET, Digex and MCI. The computer equipment used to operate the
CBS.MarketWatch.com Web site at DBC's facilities is powered by multiple
uninterruptible power supplies. Our operations are dependent upon our ability to
protect systems against damage from fire, earthquakes, power loss,
telecommunications failure, break-ins, computer viruses, hacker attacks and
other events beyond our control. Our insurance policies have low coverage limits
and therefore our insurance may not adequately compensate us for any losses that
may occur due to any failures or interruptions in our systems. DBC is also
developing a redundant network operations center in Salt Lake City, Utah.
However, we do not presently have a formal disaster recovery plan.
We are expanding our internal development group to create new, and enhance
existing, services, tools and features. For example, this group recently
developed a database portfolio application that, among other features, allows
users to track up to 200 ticker symbols each in multiple portfolios and view the
portfolio information through a secure connection. We are also developing an
advanced charting application which is designed to provide intraday ticker and
interval charts. We also utilize third-party technology for certain of its
services and tools. For example, we licensed news database technology to allow
users to search for news stories from multiple third-party sources by ticker
symbol, keyword and news source. We have also entered into an agreement with a
software development firm that will provide a new community application system,
with functionality such as message boards, chat and instant messaging. As of
December 31, 1998, we had 12 personnel dedicated to product and content
development, and for the year ended December 31, 1998, our product development
expenditures were $1.5 million.
In the past, our Web site has experienced significant increases in traffic
when there are significant business or financial news stories. In addition, the
number of our users has continued to increase over time and we are seeking to
further increase our user base. Therefore, our Web site must accommodate a high
volume of traffic and deliver frequently updated information. Our Web site has
in the past and may in the future experience slower response times or other
problems for a variety of reasons.
We also depend on information providers, including DBC, to provide
information and data feeds on a timely basis. Our Web site could experience
disruptions or interruptions in service due to the failure or delay in
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the transmission or receipt of this information. In addition, our users depend
on Internet service providers, online service providers and other Web site
operators for access to our Web site. Each of them has experienced significant
outages in the past, and could experience outages, delays and other difficulties
due to system failures unrelated to our systems. These types of occurrences
could cause users to perceive our Web site as not functioning properly and
therefore cause them to use other methods to obtain their business and financial
news and other information.
Our market is characterized by rapidly changing technology, evolving
industry standards and frequent new product announcements. These are exacerbated
by the recent growth of the Web and the intense competition in our industry. To
be successful, we must adapt to our rapidly changing market by continually
improving the performance, features and reliability of our services. We could
also incur substantial costs if we need to modify our services or infrastructure
in order to adapt to these changes. Our business could be adversely affected if
we incurred significant costs without adequate results or cannot adapt to these
changes.
COMPETITION
The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. The number of Web sites on the Internet
competing for consumers' attention and spending has proliferated and we expect
that competition will continue to intensify. We compete, directly and
indirectly, for advertisers, viewers, members and content providers with the
following categories of companies:
- publishers and distributors of traditional off-line media, such as
television, radio and print, including those targeted to business,
finance and investing needs, many of which have established or may
establish Web sites, such as The Wall Street Journal, CNN and CNBC;
- general purpose consumer online services such as America Online and
Microsoft Network, each of which provides access to financial and
business-related content and services;
- online services or Web sites targeted to business, finance and investing
needs, such as TheStreet.com and Motley Fool; and
- Web search and retrieval and other online services, such as Excite, Inc.,
Infoseek Corporation, Lycos, Inc., Yahoo! Inc., and other high-traffic
Web sites, such as those operated by Netscape Communications Corporation,
which offer quotes, financial news and other programming and links to
other business and finance related Web sites.
We anticipate that the number of direct and indirect competitors will
increase in the future. This could result in price reductions for its
advertising, reduced margins, greater operating losses or loss of market share,
any of which would materially adversely affect our business, results of
operations and financial condition.
Although the Amended and Restated License Agreement and Stockholders'
Agreement will contain non-competition provisions, these provisions will have
certain exceptions. As a result, there can be no assurance that CBS or DBC will
not promote, establish or otherwise provide content for a competitive Web site
or Internet service.
We believe our programming and content compete favorably with our
competitors, as many of them do not primarily provide real-time coverage by
experienced journalists. However, many of our existing competitors, as well as a
number of potential new competitors, have longer operating histories in the Web
market, greater name recognition, larger customer bases and higher amounts of
user traffic and significantly greater financial, technical and marketing
resources. Such competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies, make more attractive offers
to potential employees, distribution partners, advertisers and content providers
and may be able to respond more quickly to new or emerging technologies and
changes in Web user requirements. Further, there can be no assurance that they
will not develop services that are equal or superior to ours or that achieve
greater market acceptance than our offerings. Increased competition could also
result in price reductions, reduced margins or loss of market share, any of
which could materially adversely affect our business, results of operations and
financial condition.
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The Web, and MarketWatch.com specifically, also must compete with
traditional advertising media, such as print, radio and television, for a share
of advertisers' total advertising budgets. Web companies and MarketWatch.com
would lose revenue if the Web is not perceived as an effective advertising
medium. As a result, there can be no assurance that we will be able to compete
successfully against its current or future competitors or that competition will
not have a material adverse effect on our business, results of operations and
financial condition.
POTENTIAL COMPETITION FROM CBS AND DBC
Although our agreements with CBS and DBC contain certain limited
non-competition provisions, these provisions have certain exceptions and are not
exclusive relationships. For example:
- CBS could license its name and logo to other Web sites or Internet
services that deliver general news, sports or entertainment. These sites
or services could also offer financial news, so long as delivering
comprehensive stock quotes and financial news to consumers in the English
language is not their primary function and their principal theme and
format;
- DBC may provide hosting services to other Web sites;
- DBC could also establish an advertising-supported Web site that does not
have as its primary function and its principal theme and format the
delivery of financial news and stock quotes;
- CBS or DBC could license its content to other Web sites or Internet
services; or
- CBS or DBC could make certain investments in other Web sites or Internet
services.
Any of these could adversely affect us. For example, these sites or
services could compete with us or CBS and DBC might promote these other sites or
services more actively than they promote our Web site.
INTELLECTUAL PROPERTY
We rely primarily on a combination of copyrights, trademarks, trade secret
laws, our user policy and restrictions on disclosure to protect our intellectual
property, such as our content, trademarks, trade names and trade secrets. We
also enter into confidentiality agreements with our employees and consultants,
and seek to control access to and distribution of our other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use the content on our Web site or our other
intellectual property without authorization. There can be no assurance that
these precautions will prevent misappropriation or infringement of our
intellectual property. A failure to protect our intellectual property in a
meaningful manner could have a material adverse effect on our business,
operating results and financial condition. In addition, we may need to engage in
litigation in order to enforce our intellectual property rights in the future or
to determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of management and
other resources, either of which could have a material adverse effect on our
business, operating results and financial condition.
We license the CBS logo, name and certain news content from CBS pursuant to
the Amended and Restated License Agreement. This agreement could terminate in
certain circumstances and also involves a number of other risks.
We also use certain licensed third-party technology, such as software from
DoubleClick, and data and content from third parties. In these license
agreements, the licensors have generally agreed to defend, indemnify and hold us
harmless with respect to any claim by a third party that the licensed software
or content infringes any person's proprietary rights. There can be no assurance
that the outcome of any litigation between such licensors and a third party or
between us and a third party will not lead to royalty obligations for which we
are not indemnified or for which such indemnification is insufficient, or that
we will be able to obtain any additional license on commercially reasonable
terms if at all. In the future, we may seek to license additional technology or
content in order to enhance our current features or to introduce new services,
such as certain of the community features we may introduce. There can be no
assurance that any such licenses will be available on commercially reasonable
terms, if at all. The loss of or inability to obtain or maintain any of these
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technology licenses could result in delays in introduction of new services until
equivalent technology, if available, is identified, licensed and integrated,
which could have a material adverse effect on our business, results of
operations and financial condition.
Because we license some data and content from third parties, our exposure
to copyright infringement actions may increase because we must rely upon such
third parties for information as to the origin and ownership of such licensed
content. We generally obtain representations as to the origins and ownership of
such licensed content and generally obtain indemnification to cover any breach
of any such representations. However, there can be no assurance that such
representations will be accurate or that such indemnification will be sufficient
to provide adequate compensation for any breach of such representations.
There can be no assurance that infringement or other claims will not be
asserted or prosecuted against us in the future whether resulting from our
internally developed intellectual property or licenses or content from third
parties. Any future assertions or prosecutions could materially adversely affect
our business, results of operations and financial condition. Any such claims,
with or without merit, could be time-consuming, result in costly litigation and
diversion of technical and management personnel or require us to introduce new
content or trademarks, develop non-infringing technology or enter into royalty
or licensing agreements. Such royalty or licensing agreements, if required, may
not be available on acceptable terms, if at all. In the event of a successful
claim of infringement and our failure or inability to introduce new content or
trademarks, develop non-infringing technology or license the infringed or
similar technology on a timely basis, our business, results of operations and
financial condition could be materially adversely affected.
EMPLOYEES
As of December 31, 1998, there were 65 personnel dedicated full time to our
business, 12 of these personnel worked in product and content development, 17 in
sales and marketing, 27 in editorial and 9 in administration. Such personnel are
currently on the payroll of DBC and are provided to us pursuant to the Original
Services Agreement with DBC. Effective as of January 1, 1999, such personnel
became our direct employees. We have never had a work stoppage and no personnel
are represented under collective bargaining agreements. We consider our employee
relations to be good.
We believe that our future success will depend in part on its continued
ability to attract, integrate, retain and motivate highly qualified sales,
technical, and managerial personnel, and upon the continued service of our
senior management and key sales and technical personnel. None of our personnel
is bound by an employment agreement that prevents such person from terminating
his or her relationship at any time for any reason. Competition for qualified
personnel is intense, particularly in the San Francisco Bay Area, where our
headquarters is located. At times we have experienced difficulties in attracting
new personnel. There can be no assurance that we will successfully attract,
integrate, retain and motivate a sufficient number of qualified personnel to
conduct our business in the future.
GOVERNMENT REGULATION
There are currently few laws or regulations that specifically regulate
communications or commerce on the Web. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting certain types of
information and content over the Web. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet Service
Providers and online services providers in a manner similar to long distance
telephone carriers and to impose access fees on these companies. This could
increase the cost of transmitting data over the Internet. Moreover, it may take
years to determine the extent to which existing laws relating to issues such as
property ownership, libel and personal privacy are applicable to the Web. Any
new laws or regulations relating to the Web could adversely affect our business.
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FACTORS THAT MAY AFFECT OUR OPERATING RESULTS
POTENTIAL FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS; UNPREDICTABILITY OF
FUTURE REVENUE; EXPECTED FUTURE LOSSES; SEASONALITY
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside our control.
These factors include:
- the early stage of our development, particularly given that we did not
become a separate legal entity until October 1997;
- the level of Web usage;
- traffic levels on our Web site, which can fluctuate significantly as a
result of business and financial news events;
- the demand for advertising on our Web site as well as on the Web in
general;
- changes in rates paid for Web advertising resulting from competition or
other factors;
- our ability to enter into or renew key agreements such as our recent
agreement with Yahoo!;
- the amount and timing of our costs related to our marketing efforts or
other initiatives;
- fees we may pay for distribution or content agreements or other costs we
incur as we expand our operations;
- new services introduced by us or our competitors;
- competitive factors;
- technical difficulties or system downtime affecting the Web generally or
the operation of our Web site; or
- economic conditions specific to the Web as well as general economic
conditions.
Therefore, our operating results for any particular quarter may not be
indicative of future operating results.
We expect that over time our revenues will come from a mix of advertising,
content licensing, e-commerce relationships and subscription service fees.
However, we expect to be substantially dependent on advertising revenues for the
foreseeable future. Therefore, our quarterly revenues and operating results are
likely to be particularly affected by the level of our advertising revenue in
each quarter. Our operating expenses are based on our expectations of our future
revenues and are relatively fixed in the short term. If we have lower revenues,
particularly advertising revenues, than we expect, we may not be able to quickly
reduce our spending in response. Our cost structure could also change
dramatically as we increasingly operate independently from DBC. If we continue
to rely on DBC for the services described under "-- Strategic
Relationships -- DBC," we will be required to reimburse DBC for its costs in
providing the services. We will have little control over the amount of these
costs, which could be substantial. In addition, we intend to significantly
increase our operating expenses to grow our business. Any shortfall in our
revenues would have a direct impact on our operating results for a particular
quarter and these fluctuations could affect the market price of our Common Stock
in a manner unrelated to our long-term operating performance.
We have incurred operating losses in each fiscal quarter since we were
formed. We expect operating losses and negative cash flows to continue for the
foreseeable future as we intend to significantly increase our operating expenses
to grow our business.
We believe that advertising sales in traditional media, such as television
and radio, generally are lower in the first and third calendar quarters of each
year. If our market makes the transition from an emerging to a more developed
medium, seasonal and cyclical patterns in our industry may develop in the
future. Therefore, if our industry follows the same seasonal patterns as those
in the traditional media, we may experience lower advertising revenues in the
first and third calendar quarters of each year. Furthermore, traffic levels on
our
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Web site typically fluctuate with the occurrence of significant events in the
business and financial news, such as fluctuations in the stock markets, that
could cause changes in our audience size.
NEED TO DEVELOP AND IMPLEMENT OUR OWN INTERNAL SYSTEMS
Although our predecessor business has been operating since October 1995, we
did not become a separate legal entity until October 1997 when we were formed as
a limited liability company and we introduced our CBS.MarketWatch.com Web site.
We have been and continue to be substantially dependent on DBC to host our
Web site and for many of our financial, administrative and operational services
and related support functions. We may not be able to perform these financial,
administrative, operational and support functions effectively as an independent
company. In addition, we believe that we will need further improvements in these
systems, controls and procedures to manage our growth. Our future financial
performance could be adversely affected if we or DBC do not perform these
functions effectively or if we do not implement these systems, controls and
procedures successfully.
NEED TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS WITH OTHER WEB SITES
We depend on establishing and maintaining distribution relationships with
high-traffic Web sites for a significant portion of our traffic. For example,
for the month of December 1998, approximately 12% of our traffic came from
Yahoo!. There is intense competition for placements on these sites, and we may
not be able to enter into such relationships on commercially reasonable terms or
at all. Even if we enter into distribution relationships with these Web sites,
they themselves may not attract significant numbers of users. Therefore, our
site may not receive additional users from these relationships. Moreover, we may
have to pay significant fees to establish these relationships.
Occasionally we enter into agreements with advertisers, content providers
or other high traffic Web sites that require us to exclusively feature these
parties in certain sections of our Web site. Existing and future exclusivity
arrangements may prevent us from entering into other content agreements,
advertising or sponsorship arrangements or other strategic relationships. Many
companies we may pursue for a strategic relationship also offer competing
services. As a result, these competitors may be reluctant to enter into
strategic relationships with us. Our business could be adversely affected if we
do not establish and maintain additional strategic relationships on commercially
reasonable terms or if any of our strategic relationships do not result in
increased use of our Web site.
RISKS RELATING TO OUR ABILITY TO TRACK AND MEASURE THE DELIVERY OF
ADVERTISEMENTS
It is important to our advertisers that we accurately measure the
demographics of our user base and the delivery of advertisements on our Web
site. We depend on third parties to provide these measurement services. If they
are unable to provide these services in the future, we would be required to
perform them ourselves or obtain them from another provider. This could cause us
to incur additional costs or cause interruptions in our business during the time
we are replacing these services. We are implementing additional systems designed
to record demographic data on our users. If we do not develop these systems
successfully, we may not be able to accurately evaluate the demographic
characteristics of our users. Companies may not advertise on our Web site or may
pay less for advertising if they do not perceive our measurements or
measurements made by third parties to be reliable.
NEED TO EXPAND OUR BUSINESS AND RELATED PROBLEMS
We believe that we will need to expand our business and operations both to
operate as an entity independent from DBC and in order to grow our business.
This growth is likely to continue to place a significant strain on our
resources. As we grow, we will also have to implement new operational and
financial systems, procedures and controls. If we are unable to accomplish any
of these, our business could be adversely affected.
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RISKS OF DEVELOPING NEW AND ENHANCED SERVICES AND FEATURES FOR OUR WEB SITE
We believe that our Web site will be more attractive to advertisers if we
develop a larger audience comprised of demographically-favorable users.
Accordingly, we intend to introduce additional or enhanced services in the
future in order to retain our current users and attract new users. If we
introduce a service that is not favorably received our current users may not
continue using our service as frequently. New users could also choose a
competitive service over ours.
We may also experience difficulties that could delay or prevent us from
introducing new services. Furthermore, these services may contain errors that
are discovered after the services are introduced. We may need to significantly
modify the design of these services on our Web site to correct these errors. Our
business could be adversely affected if we experience difficulties in
introducing new services or if these new services are not accepted by users.
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE WEB
Our market is new and rapidly evolving. Our business would be adversely
affected if Web usage does not continue to grow. Web usage may be inhibited for
a number of reasons, such as:
- inadequate network infrastructure;
- security concerns;
- inconsistent quality of service; and
- availability of cost-effective, high-speed service.
If Web usage grows, the Internet infrastructure may not be able to support
the demands placed on it by this growth or its performance and reliability may
decline. In addition, Web sites have experienced interruptions in their service
as a result of outages and other delays occurring throughout the Internet
network infrastructure. If these outages or delays frequently occur in the
future, Web usage, as well as usage of our Web site, could grow more slowly or
decline.
RISKS ASSOCIATED WITH OUR BUSINESS MODEL WHICH DEPENDS ON WEB ADVERTISING
We expect to derive a substantial amount of our revenues from advertising
for the foreseeable future. No standards have been widely accepted to measure
the effectiveness of Web advertising. If such standards do not develop, existing
advertisers may not continue their current levels of Web advertising.
Furthermore, advertisers that have traditionally relied upon other advertising
media may be reluctant to advertise on the Web. Advertisers that already have
invested substantial resources in other advertising methods may be reluctant to
adopt a new strategy. Our business would be adversely affected if the market for
Web advertising fails to develop or develops more slowly than expected.
Different pricing models are used to sell advertising on the Web. It is
difficult to predict which, if any, will emerge as the industry standard. This
makes it difficult to project our future advertising rates and revenues. For
example, advertising rates based on the number of "click throughs," or user
requests for additional information made by clicking on the advertisement,
instead of rates based solely on the number of impressions, or times an
advertisement is displayed, could adversely affect our revenues because
impression-based advertising comprises a substantial majority of our current
advertising revenues. Our advertising revenues could be adversely affected if we
are unable to adapt to new forms of Web advertising. Moreover, "filter" software
programs that limit or prevent advertising from being delivered to a Web user's
computer are available. Widespread adoption of this software could adversely
affect the commercial viability of Web advertising.
WEB SECURITY CONCERNS COULD HINDER INTERNET COMMERCE
The need to securely transmit confidential information over the Internet
has been a significant barrier to electronic commerce and communications over
the Web. Any well-publicized compromise of security could
17
<PAGE> 20
deter more people from using the Web or from using it to conduct transactions
that involve transmitting confidential information, such as stock trades or
purchases of goods or services. Because many of our advertisers seek to
advertise on our Web site to encourage people to use the Web to purchase goods
or services, our business could be adversely affected.
We may also incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by such breaches.
ITEM 2. PROPERTIES
Our principal administrative, sales, marketing and research development
facilities are located in approximately 11,000 square feet of office space in
San Francisco, California leased from CBS. This lease expires in March 2003. See
"Certain Transactions." We believe that our current facilities will be adequate
to meet our needs for the foreseeable future. All of our communications and
network infrastructure is hosted at DBC's facilities in the San Francisco Bay
Area, with a redundant site being implemented in Salt Lake City, Utah. Any
system failure at these locations could lead to interruptions, delays or
cessations in service to users of the CBS.MarketWatch.com Web site, which could
have a material adverse effect on our business, results of operations and
financial condition.
ITEM 3. LEGAL PROCEEDINGS
The Company was not a party to any significant legal proceedings at
December 31, 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended 1998
ITEM 4A. EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of MarketWatch.com:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Larry S. Kramer.................. 48 President, Chief Executive Officer and
Director
J. Peter Bardwick................ 40 Chief Financial Officer and Secretary
Thom Calandra.................... 42 Editor-in-Chief and Vice President of
News
William Bishop................... 30 Vice President of Business Development
Scot McLernon.................... 41 Vice President of Advertising Sales
Michele Chaboudy................. 52 Vice President of Marketing
</TABLE>
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.
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<PAGE> 21
Mr. Bardwick has served as Chief Financial Officer of MarketWatch.com since
June 1998. From June 1996 until June 1998, Mr. Bardwick was Managing Director of
Star Media Capital, a Dallas, Texas-based, boutique investment bank serving the
media and broadcasting industries. From April 1993 until December 1995, Mr.
Bardwick served first as Chief Financial Officer and Executive Vice President,
and then as a consultant to The Beasley Broadcasting Group, a national radio
broadcasting company. Mr. Bardwick previously was also Vice President, Finance,
for Westwood One, Inc., a producer of nationally syndicated radio news and
entertainment programming. (Westwood One is currently affiliated with CBS, but
was not during Mr. Bardwick's employment). He was a Vice President in Corporate
Finance with Salomon Brothers Inc and was with Citicorp Investment Bank prior to
that time. Mr. Bardwick holds a B.A. degree in Political Science from the
University of Michigan and an M.B.A. degree from the University of Michigan,
Graduate School of Business.
Mr. Calandra has served as Editor-in-Chief and Vice President of News of
MarketWatch.com since October 1997. He was Director of News with DBC from April
1996 until October 1997 and was a consultant to DBC from February 1996 until
April 1996. From October 1995 until January 1996, he served as Financial Editor
with USA Today Online, the USA Today newspaper's Web site. Mr. Calandra was
employed by Bloomberg LP, a financial news service, from January 1994 until
September 1995, serving in its London office and holding positions as the lead
markets editor and European financial columnist. From August 1988 until December
1993, he served as financial columnist and business reporter with the San
Francisco Examiner. Mr. Calandra holds a B.A. degree in Arts from City
University of New York and an M.A. degree in English from the University of
Arizona.
Mr. Bishop has served as Vice President of Business Development of
MarketWatch.com since the Company's formation in October 1997. From August 1995
until October 1997, Mr. Bishop was employed by DBC, most recently as Director of
DBC Online. From August 1993 until May 1995, Mr. Bishop attended the Johns
Hopkins University School of Advanced International Studies. Mr. Bishop holds a
B.A. degree in East Asian Studies from Middlebury College and an M.A. degree in
International Economics from John Hopkins University.
Mr. McLernon has served as Vice President of Advertising Sales of
MarketWatch.com since January 1998. From March 1997 until December 1997, he
served as National Director of Advertising Sales with Quote.com, Inc., a
financial news Web site operator. Mr. McLernon was also the National Director of
Internet Strategy with Softbank Interactive Marketing, a subsidiary of Softbank
Corp., a distributor and wholesaler of software and peripheral equipment for
PCs, from March 1996 until March 1997. From June 1994 until March 1996, he
served as Account Manager with Interactive Marketing. From May 1993 until June
1994 he was a sales consultant with Pacific Bell Interactive Services.
Ms. Chaboudy has served as Vice President of Marketing of MarketWatch.com
since May 1998. From January to May 1998, she was a consultant to
MarketWatch.com. From November 1997 until January 1998, she was an independent
marketing consultant. From March 1997 until November 1997, Ms. Chaboudy served
as a Director, responsible for marketing and business development, at the Wired
News division of Wired Digital Inc., a magazine publisher. From September 1996
until March 1997, she was a marketing consultant. From January 1996 until
September 1996, she served as the Senior Vice President for Marketing and Sales
for World Pages Inc., an Internet directory provider. From April 1995 until
December 1995, she was a Director of Urban & Associates, a consulting firm
serving the newspaper industry. Ms. Chaboudy served as Vice President of
Marketing for the Houston Post from May 1993 until April 1995. Ms. Chaboudy
holds a B.A. degree in History from DePauw University, an M.B.A. degree from
Pepperdine University and a Master's degree in Library & Information Sciences
from Indiana University.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Since January 15, 1999, our common stock, par value $.01, has been traded on The
Nasdaq Stock Market under the symbol MKTW. the principal market for trading of
our common stock is NASDAQ under the
19
<PAGE> 22
symbol MKTW. The approximate number of record holders of our common stock as of
March 19, 1999 was 148 (although we believe there was a greater number of
beneficial owners). We do not intend to pay dividends for the foreseeable
future.
The trading price of the Company's Common Stock has been and may continue to be
subject to wide fluctuations in response to a number of events and factors, such
as quarterly variations in operating results, announcements of technological
innovations or new products and media properties by the Company or its
competitors, changes in financial estimates and recommendations by securities
analysts, the operating and stock price performance of other companies that
investors may deem comparable to the Company, and news reports relating to
trends in the Company's markets. In addition, the stock market in general, and
the market prices for Internet-related companies in particular, have experienced
extreme volatility that often has been unrelated to the operating performance of
such companies. These broad market and industry fluctuations may adversely
affect the trading price of the Company's Common Stock, regardless of the
Company's operating performance.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
MARKETWATCH.COM DBC ONLINE/NEWS(1)
--------------------------- --------------------------------------------------
INCEPTION
(OCTOBER 29, INCEPTION
1997) JANUARY 1, 1997 (OCTOBER 1, 1995)
YEAR ENDED THROUGH THROUGH YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, OCTOBER 28, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996 1995
------------ ------------ --------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (IN
THOUSANDS):
Net revenues...................... $ 7,027 $ 630 $1,172 $ 607 $ --
Gross profit...................... 4,190 482 512 156 --
Operating expenses................ 16,444 563 1,895 2,023 236
Net loss.......................... $(12,413) $ (81) $ (943) $(1,172) $(147)
Basic and diluted net loss per
share(2)........................ $ (1.38) $(0.01)
Shares used to compute basic and
diluted net loss per
Share(2)(3)..................... 9,000 9,000
</TABLE>
<TABLE>
<CAPTION>
MARKETWATCH.COM DBC ONLINE/NEWS
------------------------------------- -------------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (IN
THOUSANDS):
Cash........................... $ 140 $ -- $ -- $ --
Working capital (deficit)...... (5,889) 139 (1,502) (68)
Total assets................... 4,487 237 409 99
Advances from DBC(4)........... 3,946 -- 1,644 178
Total stockholders' equity
(deficit).................... (3,130) 152 (1,320) (147)
</TABLE>
- ---------------
(1) Represents the results of operations of the Predecessor Business for the
period indicated.
(2) Reflects the conversion of MarketWatch.com LLC into a corporation as if such
transaction had occurred as of the beginning of the period indicated.
(3) See Note 2 to Notes of MarketWatch.com Financial Statements for information
concerning the number of shares used in computing net loss per share.
(4) Advances from DBC by DBC Online/News at October 28, 1997 was neither paid by
the Predecessor Business nor assumed by MarketWatch.com.
20
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and the Notes thereto of MarketWatch.com and the Predecessor Business
which appear elsewhere in this document. The following discussion contains
forward-looking statements that reflect MarketWatch.com's plans, estimates and
beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and elsewhere
in this document, particularly in "Factors That May Affect Our Future Operating
Results."
OVERVIEW
MarketWatch.com is a leading Web-based provider of comprehensive, real-time
business news, financial programming and analytic tools. In addition to
real-time coverage of business and financial news and in-depth commentary on
market moving trends and events, we offer stock quotes, portfolios, charts and
fundamental data. The Company completed its initial public offering on January
15, 1999. Prior to the offering, MarketWatch.com was a joint venture owned 50%
each by DBC and CBS, and was formed as a limited liability company (the "LLC")
in October 1997. It was formed as the successor to DBC's Online/News Business,
which commenced operations in October 1995. When this joint venture was formed,
CBS and DBC agreed that their contributions would be treated as having equal
value. Immediately prior to the closing of our initial public offering on
January 15, 1999, we were re-organized from a limited liability company into a
corporation.
The DBC Online/News Business developed the dbc.com Web site to deliver
financial quotes and news to users free of charge. While operating as DBC
Online/News, DBC sold advertising banners and sponsorships and subscriptions to
MarketWatch RT. With the formation of the LLC, the dbc.com site was changed to
the CBS.MarketWatch.com site. Since the formation of the LLC, MarketWatch.com
has operated as a provider of business news, financial programming and analytic
tools, with services including new articles, feature columns and analytic tools,
such as stock quotes and charting. These services are available free of charge.
MarketWatch.com has continued selling advertising banners and sponsorships and
subscriptions to MarketWatch RT. We have also begun selling news to DBC and
subscriptions to MarketWatch Live.
DBC's principal products are Signal, StockEdge, BMI, InSite, BondEdge and
QuoTrek, which provide real-time streaming quotes and financial market data to
subscribers using the Internet, cable television, FM radio, satellite and direct
telephone lines. DBC developed DBC Online/News with the original intent of
enhancing its existing services to its subscribers. Subsequently DBC began to
sell advertising on the dbc.com Web site. While MarketWatch.com's principal
source of revenue is advertising, DBC's principal source of revenue is
subscriptions. Although MarketWatch.com sells MarketWatch RT and MarketWatch
Live on a non-exclusive basis, DBC may provide these services itself or through
other third parties. However, DBC is not permitted to sell advertising on a Web
site that has as its primary function and principal theme and format the
delivery of comprehensive stock quotes and financial news in the English
language to consumers. However, DBC could compete with us in the future.
We have yet to achieve significant revenue and our ability to generate
significant revenue is uncertain. Further, in view of the rapidly evolving
nature of our business and our very limited operating history, we have little
experience forecasting our revenues. Therefore, we believe that period-to-period
comparisons of our financial results are not necessarily meaningful and you
should not rely upon them as an indication of our future performance. To date,
we have incurred substantial costs to create, introduce and enhance our
services, to develop content, to build brand awareness and to grow our business.
As a result, we have incurred operating losses in each fiscal quarter since we
were formed. We expect operating losses and negative cash flows to continue for
the foreseeable future as we intend to significantly increase our operating
expenses to grow our business. We may also incur additional costs and expenses
related to content creation, technology, marketing or acquisitions of businesses
and technologies to respond to changes in our rapidly changing industry. These
costs could have an adverse effect on our future financial condition or
operating results.
21
<PAGE> 24
AGREEMENTS WITH CBS AND DBC
Upon formation of the LLC, DBC agreed to contribute $2.0 million in cash
and the intellectual property of the DBC Online/News Business for its 50%
ownership interest. DBC simultaneously entered into a five-year services
agreement to provide us with our Web site infrastructure and certain operational
and administrative services at DBC's cost. Under this original Services
Agreement, DBC also agreed to pay us between $2.50 and $5.00 per month for each
DBC subscriber who receives real-time streaming quotes, subject to a minimum of
$100,000 per month. We refer to these payments as the Subscriber Payments. CBS
agreed to contribute $50 million in rate card advertising and promotion over
five years for its 50% ownership interest. CBS simultaneously entered into a
five-year License Agreement to license its CBS "Eye" design and certain CBS news
content, in exchange for royalties approximating 30% of our advertising banner
revenue.
Immediately prior to the closing of our initial public offering, the
agreements were amended so that:
- CBS will contribute $30 million in rate card advertising through October
2002 instead of $50 million,
- the CBS license was extended for three years to October 29, 2005,
- the royalties were modified from 30% of advertising revenue to
approximately 8% of all revenue other than revenue attributable to DBC
and certain other revenue, and
- DBC's service obligation was extended three years to October 29, 2005.
However, the Subscriber Payments obligation will expire in October 2002.
In addition, we will not receive any Subscriber Payments with respect to
certain commercial subscribers.
RESULTS OF OPERATIONS
Due to the creation of the MarketWatch.com business on October 29, 1997,
the Company's December 31, 1997 statement of operations data includes
information reflecting the ten month period of the predecessor business ending
October 28, 1997 (the "Ten Month Period") and the two month period of the
MarketWatch.com business ended December 31, 1997 (the "Two Month Period"). In
order to provide a meaningful basis for comparing the years ended December 31,
1998 and December 31, 1997, the Ten Month Period has been combined with the Two
Month Period for purposes of the following discussion and analysis.
<TABLE>
<CAPTION>
MARKETWATCH.COM/
MARKETWATCH.COM DBC ONLINE/NEWS DBC ONLINE/NEWS
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues:
Advertising..................... $ 5,115 $ 1,010 $ 303
News to DBC..................... 1,285 210 --
Subscription.................... 627 582 304
-------- ------- -------
Total net revenues...... 7,027 1,802 607
Cost of revenues:
Advertising and news............ 2,398 483 280
Subscription.................... 439 325 171
-------- ------- -------
Total cost of
revenues.............. 2,837 808 451
-------- ------- -------
Gross profit...................... 4,190 994 156
-------- ------- -------
Operating expenses:
Product development............. 1,468 1,071 1,159
General and administrative...... 3,429 1,191 732
Sales and marketing............. 11,547 196 132
-------- ------- -------
Total operating
expenses.............. 16,444 2,458 2,023
-------- ------- -------
Operating loss.................... (12,254) (1,464) (1,867)
Interest expense.................. (159) (181) (90)
-------- ------- -------
Loss before income tax benefit.... (12,413) (1,645) (1,957)
Income tax benefit................ -- 621 785
-------- ------- -------
Net loss.......................... $(12,413) $(1,024) $(1,172)
======== ======= =======
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
MARKETWATCH.COM/
MARKETWATCH.COM DBC ONLINE/NEWS DBC ONLINE/NEWS
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
(AS A PERCENTAGE OF NET REVENUES)
<S> <C> <C> <C>
Net revenues:
Advertising................................. 73% 56% 50%
News to DBC................................. 18 12 --
Subscription................................ 9 32 50
---- --- ----
Total net revenues.................. 100 100 100
Cost of revenues:
Advertising and news........................ 34 27 46
Subscription................................ 6 18 28
---- --- ----
Total cost of revenues.............. 40 45 74
---- --- ----
Gross profit.................................. 60 55 26
---- --- ----
Operating expenses:
Product development......................... 21 59 191
General and administrative.................. 49 66 120
Sales and marketing......................... 164 11 22
---- --- ----
Total operating expenses............ 234 136 333
---- --- ----
Operating loss................................ (174) (81) (307)
Interest expense.............................. (2) (10) (15)
---- --- ----
Loss before income tax benefit................ (177) (91) (322)
Income tax benefit............................ -- 34 129
---- --- ----
Net loss...................................... (177)% (57)% (193)%
==== === ====
</TABLE>
We have compared below the results of operations of MarketWatch.com/DBC
Online/News for the years ended December 31, 1998 and 1997. We have also
compared the results of operations for MarketWatch.com/DBC Online/News for the
years ended December 31, 1997 and 1996.
The results of operations for DBC Online/News reflect the carve-out
historical results of operations of the online and news businesses of DBC prior
to the formation of MarketWatch.com. These results of operations include all
revenue and costs directly attributable to the DBC Online/News Business,
including costs for facilities, functions and services used by the business at
shared sites and allocations of costs for certain administrative functions and
services performed by centralized departments within DBC. Costs have been
allocated based on DBC management's estimate of the costs that would have been
incurred if the DBC Online/News Business had been a separate entity.
The following are descriptions of the components of revenue and expenses:
- - Advertising revenues consist primarily of sales of advertising banners and
sponsorships.
- - News to DBC revenues are the Subscriber Payments from DBC which represent fees
from the sale to DBC by MarketWatch.com of its news for between $2.50 and
$5.00 per month for each DBC subscriber who receives real-time streaming
quotes, subject to a minimum of $100,000 per month. Prior to the formation of
the LLC, DBC Online/News did not charge DBC for this news. After our initial
public offering, we only receive Subscriber Payments from DBC subscribers
other than certain commercial subscribers.
- - Subscription revenues are from the sale of subscriptions to DBC's MarketWatch
RT and MarketWatch Live products and not from the sale of any proprietary
services of MarketWatch.
- - Cost of revenues for advertising and news includes compensation and benefits
for news reporters and editors, royalties payable to CBS and content
providers, Web site infrastructure costs allocated from DBC, exchange fees and
beginning in 1998, and the cost of serving ads by DoubleClick. Web
infrastructure costs include communications lines, computer equipment, and DBC
network operations personnel costs. All such
23
<PAGE> 26
cost incurred are necessary to support both news and advertising revenue
streams. Allocation of costs between each revenue stream has not been made
since all costs would continue to be incurred if we did not have either DBC
news or advertising revenue.
- - Cost of revenues for subscriptions includes exchange fees, communication lines
and royalties paid to DBC.
- - Product development expenses are primarily compensation and benefits for
software developers and expenses for contract programmers and developers.
- - General and administrative expenses consist primarily of compensation and
benefits for finance and administrative personnel, allocations from DBC for
administrative services, occupancy costs, professional fees, depreciation and
charges for bad debts.
- - Sales and marketing costs consist primarily of promotion and advertising
provided by CBS beginning in 1998, Internet banner ads, advertising
commissions, promotional materials and compensation, benefits and sales
commissions to our direct sales force. Sales and marketing expenses prior to
formation of MarketWatch.com were not significant.
See Note 2 to the Financial Statements for a description of how we
recognize our net revenues.
RESULTS OF OPERATIONS -- 1998 COMPARED TO 1997
NET REVENUES
Net revenues for the year ended December 31, 1998 increased compared to the
year ended December 31, 1997 due to increases in the number of banner and
sponsorship ads placed on our web sites. The increases were caused by several
interrelated factors, including the following:
- increased number of advertisers;
- increased audience acceptance of our Web sites and resultant page views;
- increased size of our direct sales force; and
- increased flexibility and sophistication of advertising packages offered
to advertisers.
Substantially all of our advertising customers purchase advertising under
short-term contracts. Customers can cease advertising on short notice without
penalty. Advertising revenues would be adversely affected if we were unable to
secure new advertising contracts from existing customers or obtain new
customers. We expect to continue to derive a substantial majority of net
revenues from selling advertisements. The market for Web advertising is
intensely competitive, advertising rates could be subject to pricing pressure in
the future. If we are forced to reduce our advertising rates or we experience
lower CPMs across our Web site or click-through advertising rates as a result of
such competition or otherwise, future revenues could be adversely affected.
COST OF REVENUES
Cost of revenues for the year ended December 31, 1998 increased compared to
the year ended December 31, 1997 due to the addition of news reporters and
editors, additional network communications lines to accommodate increased
traffic on our sites, and fees payable to DoubleClick to serve ads. Costs
charged by DBC were $441,000 and $221,000 for the years ended December 31, 1998
and 1997, respectively. Royalties to CBS were $307,000 and $0 for the years
ended December 31, 1998 and 1997, respectively. As a percent of net revenues,
cost of revenues decreased by 5% because certain news content and Web
infrastructure expenses are relatively fixed.
OPERATING EXPENSES
Since inception, operating expenses have increased significantly to reflect
the costs associated with the growth and development of MarketWatch.com and our
Web site. We continue to be substantially dependent on DBC for many of our
financial, administrative and operational services and related support
functions. We
24
<PAGE> 27
plan to implement independent financial, operational and management controls,
and reporting systems and procedures to support the continued expansion of our
operations. As a consequence, we intend to continue to increase expenditures in
all operating areas to support our planned growth and the development of its
infrastructure.
Product Development. Product development expenses for the year ended
December 31, 1998 increased compared to the year ended December 31, 1997 due to
increased headcount and expenses related to development of software by third
parties. As a percentage of net revenues, product development expenses declined
due to the much greater increase in revenues and the relatively small amount of
such expenses. We intend to increase the absolute dollar level of product
development expenditures in future periods in order to further enhance the
programming on the web site and these expenses may fluctuate as a percentage of
revenue over time depending on the projects undertaken by us from time-to-time.
We include in product development expenses the amortization of deferred
compensation related to options granted below fair market value. Amortization of
deferred compensation was $58,000 and $0 for the years ended December 31, 1998
and December 31, 1997, respectively.
General and Administrative. General and administrative expenses for the
year ended December 31, 1998 increased compared to the year ended December 31,
1997 due to increased headcount, occupancy and bad debts. Costs charged by DBC
were $261,000 and $161,000 for the years ended December 31, 1998 and 1997,
respectively. We anticipate hiring additional personnel and incurring additional
costs related to being a public company, including directors and officers
liability insurance, investor relation programs and professional service fees.
Accordingly, we intend to increase the absolute dollar level of general and
administrative expenses in future periods.
We include in general and administrative expenses the amortization of
deferred compensation related to options granted below fair market value.
Amortization of deferred compensation was $189,000 and $0 for the years ended
December 31, 1998 and December 31, 1997, respectively.
Sales and Marketing. Sales and marketing expenses for the year ended
December 31, 1998 increased compared to the year ended December 31, 1997 due to
a number of factors including:
- promotions and advertising contributed by CBS in 1998;
- development of our direct sales force in 1998, and increased sales
commissions from higher advertising sales;
- increased Web banner ads to promote our products and services; and
- purchase of traditional print and broadcast ads in 1998 to promote our
products and services.
We expect to increase our sales staff and significantly increase the
absolute dollar level of sales and marketing expenses in future periods.
CBS has agreed to provide advertising and promotions over a five-year
period ending October 29, 2002. The Company will record an expense at the time
the advertising and promotion is provided based on the rate card value. The
Company has recorded advertising expense of $7.1 million at the rate card value
for the year ended December 31, 1998 related to services provided by CBS.
INTEREST EXPENSE
Interest expense for the year ended December 31, 1998 compared to December
31, 1997 decreased to a comparatively lower advance balance due to DBC over the
year ended December 31, 1998.
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<PAGE> 28
RESULTS OF OPERATIONS -- 1997 COMPARED TO 1996
NET REVENUES
Net revenues were $1.8 million and $607,000 for years ended December 31,
1997 and December 31, 1996, respectively. The year ended December 31, 1996 was
the first period in which DBC made its Web site and the MarketWatch RT online
service publicly available. The increase in revenue for the year ended December
31, 1997 is primarily attributable to an increase in the number of customers
advertising on the Web site.
COST OF REVENUES
Cost of revenues were $808,000 and $451,000 for the years ended December
31, 1997 and December 31, 1996, respectively. Cost of revenues, as a percentage
of net revenues, for the years ended December 31, 1997 and December 31, 1996,
respectively, were 45% and 74%. The decrease in cost of revenues, as a
percentage of net revenues for the year ended December 31, 1997 is primarily
attributable to advertising revenues increasing while a portion of the costs
associated with providing the advertising remained relatively constant. Included
in cost of revenues are costs allocated from DBC. Allocated expenses were
$221,000 and $160,000 for the years ended December 31, 1997 and December 31,
1996, respectively.
OPERATING EXPENSES
Product Development. Product development expenses were $1.1 million and
$1.2 million for the years ended December 31, 1997 and December 31, 1996,
respectively. Product development, as a percentage of net revenues, were 59% and
191% for the years ended December 31, 1997 and December 31, 1996, respectively.
The decrease in product development expenses in absolute dollars in the year
ended December 31, 1997 is primarily due to high product development costs
incurred during the period from January 1996 through April 1996 in the
development of the Web site and the MarketWatch RT online service.
General and Administrative. General and administrative expenses were $1.2
million and $732,000 for the years ended December 31, 1997 and December 31,
1996, respectively. General and administrative expenses, as a percentage of net
revenues, were 66% and 120% for the years ended December 31, 1997 and December
31, 1996, respectively. General and administrative expenses as a percentage of
net revenues, decreased from the year ended December 31, 1996 due to costs
associated with the implementation of billing systems related to MarketWatch RT
incurred during 1996. Included in general and administrative expenses are costs
allocated from DBC. Allocated expenses were $161,000 and $135,000 for the years
ended December 31, 1997 and December 31, 1996, respectively.
Sales and Marketing. Sales and marketing expenses were $196,000 and
$132,000 for the years ended December 31, 1997 and December 31, 1996,
respectively. Sales and marketing, as a percentage of net revenues were 11% and
22% for years ended December 31, 1997 and December 31, 1996, respectively. Sales
and marketing expenses as a percentage of revenues decreased due to an increase
in net revenue in 1997 and a reduction in advertising costs associated with the
initial promotion of the Web site in 1996. During 1997, substantially all sales
and marketing efforts were outsourced to a third-party firm in order to reduce
costs associated with maintaining an internal staff.
INTEREST EXPENSE
DBC funded the working capital requirements of the DBC Online/News Business
division based upon a centralized cash management system. Interest expense was
$181,000 and $90,000 for the years ended December 31, 1997 and December 31,
1996, respectively. Interest on amounts due to DBC is charged at The Chase
Manhattan National Bank's prime plus 2% (10.50% at December 31, 1997).
INCOME TAX
No benefit for federal and state income taxes is reported in the financial
statements as MarketWatch.com has elected to be taxed as a partnership prior to
the merger of the limited liability company into a corporation.
26
<PAGE> 29
Therefore, for the periods presented, the federal and state tax effects of our
tax losses were recorded by the members of the LLC in their respective income
tax returns. Subsequent to the Reorganization, we will account for income taxes
in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"). Had we applied the provisions of
SFAS No. 109 for the period from inception (October 29, 1997) through December
31, 1997, the deferred tax asset generated, primarily from net operating loss
carryforwards, would have been offset by a full valuation allowance.
The DBC Online/News Business has accounted for income taxes in accordance
with SFAS No. 109. The operating losses of the DBC Online/News Business were
included in the consolidated tax returns of DBC and were used to offset taxable
income. Therefore, the DBC Online/News Business has reflected a current tax
benefit related to these tax losses.
LIQUIDITY AND CAPITAL RESOURCES
Since inception on October 29, 1997, we have funded our operations
primarily from cash contributed and advanced by DBC and from revenues from
advertising sales. DBC contributed capital of $218,000 and $1,782,000 to us
during the period from inception (October 29, 1997) through December 31, 1997
and the year ended December 31, 1998, respectively. As of December 31, 1998, we
had a working capital deficit of $5.9 million. In January 1999, we completed our
initial public offering of 3,162,500 shares of common stock which resulted in
net proceeds to the Company of approximately $48.2 million after deducting
underwriting discounts and offering expenses.
Cash used in operating activities was $4.5 million for the year ended
December 31, 1998 compared to $205,000 for the period from inception (October
29, 1997) through December 31, 1997. Significant uses of cash in operations for
the year ended December 31, 1998 include costs associated with increased sales
and marketing activities to establish and to promote our products and services
and increased accounts receivable and deferred offering costs, offset by
accounts payable and accrued expenses for the costs of our initial public
offering.
Cash used in investing activities was $1.1 million for the year ended
December 31, 1998 compared to $13,000 for the period from inception (October 29,
1997) through December 31, 1997 and primarily reflects capital expenditures.
Cash from financing activities were $5.7 million for the year ended December 31,
1998 compared to $218,000 for the period from inception (October 29, 1997)
through December 31, 1997 and primarily reflects contributions and advances from
DBC.
Capital expenditures were $1.1 million for the year ended December 31, 1998
and $13,000 for the period from inception (October 29, 1997) through December
31, 1997. The company does not have any commitments for capital expenditures at
December 31, 1998. However, as of December 31, 1998, we had commitments under
noncancellable operating leases of $1.5 million through March 31, 2003. In
addition, under the terms of our agreements with Yahoo!, we are committed to
make payments for advertising and slotting of $870,000 through 1999. Upon
completion of our initial public offering, the minimum commitment increased from
$870,000 over a twelve month period to $1.6 million over a twelve month period,
beginning upon the closing of the initial public offering. In addition, we are
obligated to pay Yahoo! a fee based on the amount of traffic directed to our Web
site.
To date, we continue to be substantially dependent on DBC for much of our
financial, administrative and operational services and related support functions
including cash management. We believe the implementation of an independent
accounting system, financial, operational and management controls, and reporting
systems and procedures will be necessary to support the continued expansion of
our operations. As a consequence, we intend to expend working capital to support
the development of the infrastructure.
Under the terms of the Limited Liability Company Agreement of the LLC
between CBS and DBC and, subsequently, the Credit Agreement between
MarketWatch.com and DBC, DBC agreed to advance us up to an aggregate of $5.0
million on a revolving basis through October 29, 2000. Borrowings bear interest
at a variable rate per annum equal to The Chase Manhattan Bank's prime rate plus
2% and are due on October 29, 2000. As of December 31, 1998, advances from DBC
under this Credit Agreement were $3.9 million. We used
27
<PAGE> 30
a portion of the net proceeds from the initial public offering to repay all
outstanding advances from DBC. See Note 7 to our financial statements.
At October 28, 1997 the DBC Online/News Business owed DBC $2.7 million for
working capital advances which we have not assumed. Subsequent to October 28,
1997, the amounts due to DBC by the DBC Online/News Business have been reduced
by the collection of accounts receivable existing prior to our formation. Any
remaining obligation has remained unpaid.
We expect to incur significantly higher costs, particularly content
creation costs, and sales and marketing costs, in the future to grow our
business. We believe that the net proceeds from our initial public offering,
together with our current cash and cash equivalents, will be sufficient to meet
our anticipated cash needs for working capital and capital expenditures for at
least the next 12 months. We may need to raise funds sooner if we acquire any
businesses, products or technologies. If additional funds are raised through the
issuance of equity securities, the percentage ownership of our then-current
stockholders would be reduced. However, if CBS or DBC elects to maintain their
percentage interest pursuant to the exercise of the purchase right they have
under the stockholders' agreement between them and us, then CBS or DBC would not
necessarily suffer a reduction in their ownership. Furthermore, such equity
securities might have rights, preferences, or privileges senior to those of the
Common Stock.
YEAR 2000 READINESS DISCLOSURE
We rely on DBC's computer and communications networks for the operation of
its Web site, and on DBC's information systems for customer billing, accounting
and administration. DBC has advised us that it has substantially completed a
comprehensive review of its products, information systems and critical suppliers
for year 2000 compliance, and has reported that its computer and communications
networks are year 2000 compliant. DBC is currently installing new billing,
accounting and administrative systems which are scheduled to be fully
operational during 1999 and which have been represented will be fully year 2000
compliant when fully operational. DBC and MarketWatch.com utilize software and
computer equipment from third party suppliers. DBC and MarketWatch.com also rely
on information, provided electronically by a number of outside suppliers. Based
on representations received from suppliers and compliance testing completed and
ongoing, DBC has advised us that its critical suppliers are or will be year 2000
compliant in all material respects before the year 2000. Based on
representations from our other software and equipment suppliers, we believe that
our software and other computer hardware is year 2000 compliant. We also rely on
solutions provided by DoubleClick for the delivery of its advertising and user
measurement. We have been informed by them that their solutions are, or will be,
year 2000 compliant in all material respects.
We have made no investigation of any of our embedded systems, such as
electrical, heating or telephones. However, if any year 2000 issues arose with
respect to these systems, we do not expect that they would have any materially
adverse effect on our business in the long term.
Failure of third-party equipment or software to operate properly with
regard to the year 2000 and thereafter could require us to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
our business, results of operations and financial condition. Furthermore, the
purchasing patterns of advertisers may be affected by year 2000 issues as
companies expend significant resources to correct their current systems for year
2000 compliance. These expenditures may result in reduced funds available for
Web advertising, which could have a material adverse effect on our business,
results of operations and financial condition.
We do not presently have a contingency plan for handling year 2000 problems
that are not detected and corrected prior to their occurrence. DBC has advised
us that it has developed certain contingency options in the event of a failure
due to year 2000 issues. Any failure to address any Year 2000 issue could
adversely affect our business, financial condition and results of operations. If
we are unable to utilize DoubleClick as a result of year 2000 issues, we believe
we could either seek to obtain another vendor or deliver advertising using our
own systems as we had in the past. However, we may not be able to replace
DoubleClick with another vendor on reasonable terms, or if we delivered
advertising ourselves, we would not be able to track or measure the advertising
to the same extent as DoubleClick.
28
<PAGE> 31
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Accountants........................ 35
Balance Sheets as of December 31, 1998 and 1997........... 37
Statements of Operations for the three-year periods ended
December 31, 1998...................................... 38
Statements of Stockholders' Equity for each of the years
in the two-year period ended December 31, 1998......... 39
Statements of Cash Flows for the three-year periods ended
December 31, 1998...................................... 40
Notes to Financial Statements............................. 41
</TABLE>
29
<PAGE> 32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of MarketWatch.com, Inc.
In our opinion, the accompanying financial statements present fairly, in
all material respects, the financial position of MarketWatch.com, Inc. at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the year ended December 31, 1998 and for the period from inception (October
29, 1997) through December 31, 1997 in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
February 12, 1999
30
<PAGE> 33
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Data Broadcasting Corporation
In our opinion, the accompanying statements of operations and of cash flows
present fairly, in all material respects, the financial position of the DBC
Online/News Business, a division of Data Broadcasting Corporation, and the
results of its operations and its cash flows for the period from January 1, 1997
through October 28, 1997 and for the year ended December 31, 1996 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Business' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
June 15, 1998
31
<PAGE> 34
MARKETWATCH.COM, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash...................................................... $ 140,000 $ --
Accounts receivable, net of allowances for doubtful
accounts of $226,000, and $10,000, respectively........ 1,586,000 224,000
Prepaid expenses.......................................... 2,000 --
------------ ------------
Total current assets.............................. 1,728,000 224,000
Other assets................................................ 11,000 --
Property and equipment, net................................. 932,000 13,000
Deferred offering costs..................................... 1,816,000 --
------------ ------------
Total assets...................................... $ 4,487,000 $ 237,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 1,969,000 $ --
Accrued expenses.......................................... 1,688,000 75,000
Deferred revenue.......................................... 14,000 10,000
Advances from DBC......................................... 3,946,000 --
------------ ------------
Total current liabilities......................... 7,617,000 85,000
------------ ------------
Commitments (Note 6)
Stockholders' equity (deficit):
Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common stock, $.01 par value; 30,000,000 shares
authorized; 9,000,000 shares issued and outstanding.... 90,000 90,000
Additional paid-in capital................................ 53,366,000 51,925,000
Deferred compensation..................................... (1,144,000) --
Contribution receivable................................... (42,948,000) (51,782,000)
Accumulated deficit....................................... (12,494,000) (81,000)
------------ ------------
Total stockholders' equity (deficit).............. (3,130,000) 152,000
------------ ------------
Total liabilities and stockholders' equity........ $ 4,487,000 $ 237,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 35
MARKETWATCH.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MARKETWATCH.COM, INC. (NOTE 1) DBC ONLINE/NEWS (NOTE 1)
---------------------------------- ---------------------------
INCEPTION JANUARY 1,
(OCTOBER 29, 1997) 1997
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 28, DECEMBER 31,
1998 1997 1997 1996
------------ ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Net revenues:
Advertising (including $233,000
from DBC for the year ended
December 31, 1998).......... $ 5,115,000 $ 320,000 $ 690,000 $ 303,000
News to DBC.................... 1,285,000 210,000 -- --
Subscription................... 627,000 100,000 482,000 304,000
------------ ---------- ----------- -----------
Total net revenues..... 7,027,000 630,000 1,172,000 607,000
Cost of revenues:
Advertising and news........... 2,398,000 92,000 391,000 280,000
Subscription................... 439,000 56,000 269,000 171,000
------------ ---------- ----------- -----------
Total cost of
revenues............. 2,837,000 148,000 660,000 451,000
------------ ---------- ----------- -----------
Gross profit..................... 4,190,000 482,000 512,000 156,000
------------ ---------- ----------- -----------
Operating expenses:
Product development............ 1,468,000 186,000 885,000 1,159,000
General and administrative..... 3,429,000 248,000 943,000 732,000
Sales and marketing............ 11,547,000 129,000 67,000 132,000
------------ ---------- ----------- -----------
Total operating
expenses............. 16,444,000 563,000 1,895,000 2,023,000
------------ ---------- ----------- -----------
Operating loss................... (12,254,000) (81,000) (1,383,000) (1,867,000)
Interest expense................. (159,000) -- (181,000) (90,000)
------------ ---------- ----------- -----------
Loss before income tax benefit... (12,413,000) (81,000) (1,564,000) (1,957,000)
Income tax benefit............... -- -- 621,000 785,000
------------ ---------- ----------- -----------
Net loss......................... $(12,413,000) $ (81,000) $ (943,000) $(1,172,000)
============ ========== =========== ===========
Basic and diluted net loss per
share.......................... $ (1.38) $ (0.01)
============ ==========
Shares used in the calculation of
basic and diluted net loss per
share.......................... 9,000,000 9,000,000
============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 36
MARKETWATCH.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL
PAR VALUE PAID-IN DEFERRED CONTRIBUTION ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION RECEIVABLE DEFICIT TOTAL
--------- --------- ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital contribution
receivable from DBC upon
formation (Note 1).......... -- $ -- $ 2,000,000 $ -- $ (2,000,000) $ -- $ --
Capital contribution
receivable from CBS upon
formation (Note 1).......... -- -- 50,000,000 -- (50,000,000) -- --
Issuance of shares to DBC and
CBS at formation (Note 1)... 9,000,000 90,000 (90,000) -- -- -- --
Cash contribution received
from DBC.................... -- -- -- -- 218,000 -- 218,000
Fair value of services
provided by DBC to the
Company..................... -- -- 15,000 -- -- -- 15,000
Net loss...................... -- -- -- -- -- (81,000) (81,000)
--------- ------- ----------- ----------- ------------ ------------ -----------
Balance at December 31,
1997........................ 9,000,000 90,000 51,925,000 -- (51,782,000) (81,000) 152,000
Cash contribution received
from DBC.................... -- -- -- -- 1,782,000 -- 1,782,000
Issuance of compensatory stock
options to employees........ -- -- 1,391,000 (1,391,000) -- -- --
Amortization of deferred
compensation................ -- -- -- 247,000 -- -- 247,000
Fair value of services
provided by DBC to the
Company..................... -- -- 50,000 -- -- -- 50,000
Advertising received from
CBS......................... -- -- -- -- 7,052,000 -- 7,052,000
Net loss...................... -- -- -- -- -- (12,413,000) (12,413,000)
--------- ------- ----------- ----------- ------------ ------------ -----------
Balance at December 31,
1998........................ 9,000,000 $90,000 $53,366,000 $(1,144,000) $(42,948,000) $(12,494,000) $(3,130,000)
========= ======= =========== =========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE> 37
MARKETWATCH.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
MARKETWATCH.COM, INC. (NOTE 1) DBC ONLINE/NEWS (NOTE 1)
------------------------------ ---------------------------
INCEPTION
(OCTOBER 29, JANUARY 1,
1997) 1997
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 28, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Cash flows used in operating
activities:
Net loss.......................... $(12,413,000) $ (81,000) $ (943,000) $(1,172,000)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Provision for bad debt
expense...................... 216,000 10,000 -- --
Depreciation and
amortization................. 470,000 -- 86,000 63,000
Deferred income taxes.......... -- -- (73,000) (29,000)
Noncash charges from
stockholders................. 7,102,000 15,000 -- --
Changes in operating assets and
liabilities:
Accounts receivable.......... (1,578,000) (234,000) 4,000 (178,000)
Prepaid expenses and other
current assets............ (13,000) -- (64,000) (16,000)
Deferred offering costs...... (1,816,000) -- -- --
Accounts payable and accrued
expenses.................. 3,583,000 75,000 14,000 3,000
Deferred revenue............. 4,000 10,000 2,000 14,000
------------ --------- ---------- -----------
Net cash used in operating
activities.............. (4,445,000) (205,000) (974,000) (1,315,000)
------------ --------- ---------- -----------
Cash flows used in investing
activities:
Purchase of property and
equipment...................... (1,143,000) (13,000) (90,000) (158,000)
------------ --------- ---------- -----------
Cash flows provided by financing
activities:
Contributions from DBC............ 1,782,000 218,000 -- --
Advances from DBC (Note 7)........ 3,946,000 -- 1,064,000 1,473,000
------------ --------- ---------- -----------
Net cash provided by
financing Activities.... 5,728,000 218,000 1,064,000 1,473,000
------------ --------- ---------- -----------
Net change in cash.................. 140,000 -- -- --
Cash at beginning of period......... -- -- -- --
------------ --------- ---------- -----------
Cash at end of period............... $ 140,000 $ -- $ -- $ --
============ ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE> 38
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND NATURE OF BUSINESS:
THE COMPANY
MarketWatch.com, Inc. (the "Company"), a leading Web-based provider of
comprehensive, real-time, business news, financial programming and analytic
tools, was formed on October 29, 1997 in the state of Delaware as a limited
liability company and is jointly owned by Data Broadcasting Corporation ("DBC")
and CBS Broadcasting Inc. ("CBS") (collectively, the "Members"), with each
Member owning 50% of the Company. The operations of the Company are governed by
a limited liability company agreement dated October 29, 1997 (the "LLC
Agreement"). The Company's Web site, CBS.MarketWatch.com, delivers a wide range
of financial news and information, including real-time and delayed market prices
of stocks, bonds, options and mutual funds and original news and commentary from
financial and market analysts, economists and reporters, all of which is
available to viewers. However, certain proprietary information and real-time
market prices are available only through subscriptions to MarketWatch RT and
MarketWatch Live products. The Company operates in one segment. In September
1998, the Company's Board of Directors authorized the reorganization of the
limited liability company into a corporation effective immediately prior to the
IPO. Upon the consummation of the reorganization, the corporation was authorized
to issue 30,000,000 shares of $.01 par value Common Stock of which 9,000,000
shares were issued to the founding Members. The Company was also authorized to
issue 5,000,000 shares of $.01 par value Preferred Stock. All share and per
share data have been retroactively adjusted to reflect the reorganization. (See
Note 8).
In connection with the formation of the limited liability company, the
Company, CBS and DBC entered into a contribution agreement on October 29, 1997
(the "Contribution Agreement"), under which DBC was required to contribute to
the Company $1.0 million in cash upon consummation of the Contribution
Agreement, $1.0 million in cash on October 29, 1998 and DBC's existing
"Online/News" business which primarily consists of customer contracts and
intellectual property in return for its ownership position. CBS will provide $50
million of rate card amount advertising and promotions over a period of five
years in return for its ownership position. Under the terms of the Stockholders
Agreement, the $50 million rate card amount has been revised to $30 million upon
completion of the IPO (See Note 8).
In addition, CBS and the Company have entered into a license agreement
dated October 29, 1997 (the "License Agreement") where CBS, in exchange for 30%
of net advertising revenue, as defined, has granted to the Company the
non-exclusive right and license to use certain CBS news content and registered
trademarks, including the CBS "Eye" design, for five years ending October 29,
2002, subject to termination on the occurrence of certain events. In addition to
the agreements above, the Company entered into a services agreement with DBC
(the "Services Agreement"). Under the terms of the Services Agreement, DBC
charges the Company for certain general services, the Company receives payment
from DBC for supplying news and the Company receives a fee for licensing
MarketWatch RT and MarketWatch Live, respectively (See Notes 7 and 8).
Immediately prior to the closing of its IPO, the Company entered into a
Stockholders' Agreement, Amended and Restated Services and License Agreements, a
Registration Rights Agreement and a Revolving Credit Agreement. (See Note 8).
The accompanying financial statements and related notes also reflect the
carve-out historical results of operations and cash flows of the online and news
business ("DBC Online/News" or "Business") of Data Broadcasting Corporation
("DBC"). The Statement of Operations includes all revenues and costs directly
attributable to DBC Online/News, including costs for facilities, functions and
services used by the Business at shared sites and allocations of costs for
certain administrative functions and services performed by centralized
departments within DBC. Cost have been allocated to the Business based on DBC
management's estimate of costs attributable to the operation of the online and
new business. Such costs are not necessarily indicative of the costs that would
have been incurred if DBC Online/News had been a separate entity.
36
<PAGE> 39
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ACCOUNTING FOR THE INITIAL CAPITALIZATION OF THE COMPANY
The Company has recorded DBC's equity contributions under the Contribution
Agreement at the value of the cash contributed. DBC's contribution of the
intellectual property of the Online/News business has been recorded at its
historical carrying amount, which is zero. DBC contributed none of the tangible
assets or liabilities of the Online/News business; only intellectual property.
The Company has recorded the contribution of the Online/News business at its
historical carrying amount since the fair value of the business is not
objectively determinable by a corresponding contribution of monetary assets by
CBS.
As described above, CBS has committed to provide advertising and promotions
over a five-year period in return for its ownership position. The Company has
recorded the $50 million commitment by CBS as a contribution receivable and will
reduce the receivable and record an expense based on the rate card amount of the
advertising and promotion during the period provided. (See Note 7). Under the
terms of the Stockholders Agreement, the Company recorded a $20 million
reduction to the contribution receivable and additional paid-in capital upon
completion of the IPO (See Note 8).
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue recognition
The Company generates its revenues from three primary sources: the sale of
advertising on the Company's Web site, subscriptions to premium services
available through the Web site and the sale of news to DBC.
Advertising revenue, derived from the sale of banner advertisements and
sponsorships on the Company's Web site, is recognized ratably in the period the
advertising is displayed, provided that no significant Company obligations
remain and collection of the resulting receivable is probable. Company
obligations typically include guarantees of a minimum number of "impressions,"
or times that an advertisement is viewed by users of the Company's Web site.
Additionally, certain sponsorship agreements provide links to third-party Web
sites and generate either fixed transaction fees for monthly access or variable
fees which are dependent upon the number of transactions consummated at the
third-party Web site by linked customers. Such amounts are recognized as revenue
in the month earned.
Subscription revenue relates to customer subscriptions to the DBC premium
online services, MarketWatch RT and MarketWatch Live, which provide subscribers
access to real time exchange data and premium analytical products and are sold
through the Company's Web site. Subscriptions are charged to customers' credit
cards and are billed in advance on a monthly basis. Revenue from subscriptions
is recognized ratably over the subscription period. Deferred revenues relate to
subscription fees for which amounts have been collected but for which revenue
has not been recognized.
Revenue related to the sale of news to DBC is recognized in the month the
services are provided.
Revenues from barter transactions are recognized in accordance with the
provisions of Accounting Principles Board Opinion No. 29 ("APB 29") during the
period in which the advertisements are displayed on the Company's Web site.
Under the provisions of APB 29, barter transactions are recorded at the fair
value of the goods or services received. To date, barter transactions have been
insignificant.
Property and equipment
Property and equipment is recorded at cost and depreciated using the
straight-line method over its estimated useful life, ranging from three to five
years. Leasehold improvements are depreciated using the straight-line method
over the shorter of their useful lives or the remaining lease term.
37
<PAGE> 40
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Basic and diluted net loss per share
The Company computes net loss per share in accordance with the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the
provisions of SFAS 128 and SAB 98, basic and diluted net loss per share is
computed by dividing the net loss available to common stockholders for the
period by the weighted average number of common shares outstanding for the
period. The calculation of diluted net loss per share excludes all shares of
common stock issuable upon exercise of employee stock options as the effect of
the exercise would be antidilutive.
Product development costs
Product development costs primarily consist of costs attributable to the
development of new products and are expensed as incurred.
The Company develops software which enables users to access information on
its Web site and subscription services. Development costs incurred prior to
technological feasibility are expensed as incurred. The Company defines
establishment of technological feasibility as the completion of a working model.
Software development costs incurred subsequent to the establishment of
technological feasibility through the period of market availability of products
are capitalized. Costs eligible for capitalization have been immaterial for all
periods presented.
Promotion and advertising
Advertising costs are expensed as incurred. Promotion and advertising
provided by CBS under the Contribution Agreement, will be recognized as an
expense and capital contribution during the period in which the services are
provided based on the rate card value of such services (See Note 7). For the
period from inception (October 29, 1997) through December 31, 1997 promotion and
advertising services provided by CBS were not material. For the year ended
December 31, 1998, $7,052,000 was expensed for promotion and advertising
services provided by CBS.
Use of estimates in the financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements. Actual
results could differ from those estimates.
Concentrations of credit risk
Financial instruments that potentially subject the Company to a significant
concentration of credit risk consist primarily of cash and accounts receivable.
Management deposits all its cash with a single financial institution. Management
periodically performs credit evaluations of its customers' financial condition
and generally does not require collateral on accounts receivable. Most of the
Company's accounts receivable are from Internet-related businesses. As of
December 31, 1997, four customers comprised 53% of gross accounts receivable. As
of December 31, 1998, four customers comprised 21% of the gross accounts
receivable balance. The fair value of accounts receivable approximates cost due
to their short-term nature. Sales of news to DBC accounted for 33% and 18% of
revenue for the period from inception (October 29, 1997) through December 31,
1997 and the year ended December 31, 1998, respectively.
Stock-based compensation
The Company accounts for its stock-based employee compensation agreements
in accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and
38
<PAGE> 41
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
complies with the disclosure provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation."
NOTE 3 -- BALANCE SHEET COMPONENTS:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
---------- -------
<S> <C> <C>
Computers and equipment....................... $ 628,000 $ 9,000
Leasehold improvements........................ 300,000 4,000
Furniture and fixtures........................ 228,000 --
---------- -------
1,156,000 13,000
Less accumulated depreciation and
amortization................................ (224,000) --
---------- -------
Total property and equipment, net... $ 932,000 $13,000
========== =======
</TABLE>
Allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
INCEPTION
(OCTOBER 29,
1997)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Balance at beginning of period............. $ 10,000 $ --
Charged to expenses........................ 216,000 10,000
Write-offs net of recoveries............... -- --
-------- -------
Balance at end of period................... $226,000 $10,000
======== =======
</TABLE>
NOTE 4 -- INCOME TAXES:
The taxable loss of DBC Online/News for the year ended December 31, 1996
and period ended from January 1, 1997 through October 28, 1997 was included in
the DBC consolidated tax returns. Separate income tax returns were not prepared
or filed for DBC Online/News. For all periods presented, deferred income taxes
and related tax expenses have been recorded by applying the asset and liability
approach to each component of DBC Online/New as if it were a separate taxpayer.
Under this approach, deferred tax assets and liabilities represent the expected
future tax consequences of carryforwards and temporary differences between the
carrying amounts and the tax bases of assets and liabilities.
The current tax benefit has been determined as if DBC Online/News was a
separate taxpayer and is deemed to be receivable from DBC in the period it
arose.
The operating results of DBC Online/News were included in the consolidated
tax returns of DBC. The methodology for allocating tax expense to DBC
Online/News is set forth in Note 2. For all periods presented, tax losses
generated by DBC Online/News were used to reduce DBC's taxable income, and
therefore, have been reflected as a current tax benefit.
39
<PAGE> 42
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The benefit for income taxes consists of the following:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1997
THROUGH YEAR ENDED
OCTOBER 28, DECEMBER 31,
1997 1996
--------------- ------------
<S> <C> <C>
Current benefit:
Federal................................ $426,000 $564,000
State.................................. 122,000 184,000
-------- --------
548,000 748,000
Deferred benefit:
Federal................................ 57,000 28,000
State.................................. 16,000 9,000
-------- --------
73,000 37,000
-------- --------
$621,000 $785,000
======== ========
</TABLE>
No benefit for federal and state income taxes is reported in the financial
statements as the Company has elected to be taxed as a partnership prior to the
reorganization of the limited liability company into a Corporation, which took
effect immediately prior to the closing of the IPO (Note 8). Therefore, the
federal and state tax effects of the Company's results of operations are
recorded by the Members in their respective income tax returns.
Subsequently, the Company will account for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). Had the Company applied the provision of SFAS No. 109
for the period from inception (October 1997) through December 31, 1998, the
Company would have recorded a deferred tax asset, primarily from net operating
loss carryforwards, and a full valuation allowance. Net operating loss
carryforwards generated during the period would have been approximately
$5,135,000.
NOTE 5 -- OPTIONS:
The Members and the management committee of the LLC authorized options to
purchase membership interests in the Company may be granted to officers and
employees of the Company. For the year ended December 31, 1998, the Company
recorded $1,391,000 of deferred compensation expense representing the difference
between the deemed fair value by the Company's Board of Directors of the common
stock on the date of grant and the option exercise price on the date of grant.
Deferred compensation will be amortized over the three year vesting period of
the options. During the year ended December 31, 1998, $247,000 of deferred
compensation was recognized as expense. The fair market value of the membership
interest is determined by the Board of Directors on the date of grant. In
determining the fair market value of the membership interest on each grant date,
the Board of Directors considered, among other things, the value of assets
contributed to the Company from DBC, the Company's absolute and relative level
of revenues and other operating results, the state of the Company's Website
development, the absence of a public trading market for the Company's
securities, the intensely competitive nature of the Company's market and the
appreciation of stock values of a number of generally comparable Internet
companies. Each option converted into an option to purchase the equivalent
percentage of Common Stock upon the reorganization of the limited liability
company into a
40
<PAGE> 43
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
corporation, as discussed in Note 8. The following table reflects the option
activity restated to reflect the reorganization.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
OPTIONS EXERCISE AVERAGE
OUTSTANDING PRICE FAIR VALUE
----------- -------- ----------
<S> <C> <C> <C>
Options granted at fair value for the periods from
Inception (October 29, 1997) through December 31,
1997............................................. 446,250 $ 4.09 $ 4.09
Options granted at fair value for the year ended
December 31, 1998................................ 231,500 $10.64 $10.64
Options granted below fair during the year ended
December 31, 1998................................ 198,000 $ 5.87 $12.89
Options cancelled for the year ended December 31,
1998............................................. (12,250) $ 4.41 $ 4.41
-------
Options outstanding at December 31, 1998........... 863,500 $ 6.25 $ 7.86
=======
</TABLE>
At December 31, 1998, 636,500 options were available for future grant and
144,690 options were vested. The weighted average exercise price and weighted
average remaining contractual life of the vested options are $4.00 and 8.43
years, respectively.
The following table summarizes information about options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE
NUMBER CONTRACTUAL EXERCISE
EXERCISE PRICE OUTSTANDING LIFE PRICE
-------------- ----------- ----------- --------
<S> <C> <C> <C>
$ 4.00............................................. 563,500 8.93 $ 4.00
$ 6.00 - $ 8.50.................................... 121,750 9.00 $ 7.92
$ 9.50 - $13.00.................................... 132,500 9.32 $11.29
$14.00 - $16.00.................................... 45,750 9.58 $15.01
-------
863,500 9.04 $ 6.25
=======
</TABLE>
1998 Equity Incentive and Directors' Stock Option Plan
In September 1998, the Board of Directors adopted, subject to stockholder
approval, the 1998 Equity Incentive Plan (the "1998 Plan") and the 1998
Directors' Stock Option Plan (the "1998 Directors' Plan"). The 1998 Plan and
1998 Directors' Plan became effective upon the completion of the Company's IPO.
An aggregate of 636,500 shares have been reserved for issuance under both plans.
FAIR VALUE DISCLOSURES
The Company applies APB No. 25 and related Interpretations in accounting
for its stock option plan. Had the Company's stock based compensation cost been
determined based on the minimum value at the grant
41
<PAGE> 44
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
date for awards under the method prescribed by SFAS No. 123, the Company's net
loss would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
INCEPTION
(OCTOBER 29, 1997)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
------------------ ------------------
<S> <C> <C>
Net loss:
As reported..................................... $(12,413,000) $ (81,000)
============ =========
Pro forma....................................... $(13,289,000) $(118,000)
============ =========
Net loss per share:
As reported..................................... $ (1.38) $ (0.01)
============ =========
Pro forma....................................... $ (1.48) $ (0.01)
============ =========
</TABLE>
The Company calculated the value of each option grant using the minimum
value method with the following assumptions: no dividend yield, weighted average
expected option term of 10 years: risk free interest rates of 5.8% to 5.7%, and
5.5% to 4.6% for the period from inception (October 29, 1997) through December
31, 1997 and for the year ended December 31, 1998, respectively and an expected
volatility factor of 72%.
NOTE 6 -- COMMITMENTS:
Beginning in April 1998, the Company subleases office space for its
corporate headquarters in San Francisco, California from CBS. Rent expense under
the sublease was $137,000 for the year December 31, 1998. Future annual minimum
lease payments under the leases were as follows:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1999..................................................... 322,000
2000..................................................... 335,000
2001..................................................... 348,000
2002..................................................... 362,000
2003..................................................... 90,000
----------
$1,457,000
==========
</TABLE>
The Company has entered into employment agreements with two of its officers
which expire in June 2001. Such agreements provide for minimum annual salary
levels ranging from $200,000 to $240,000, as well as annual bonuses of up to 50%
of the base salary.
During August 1998, the Company entered into a license agreement with
Yahoo! Inc. whereby the Company is required to provide news headlines, make
payments for advertising and slotting of $870,000 through 1999 and remit
referral fees monthly based on the number of click-throughs to the Company's
web-site. Payments under the agreement for advertising are expensed in the
period in which the advertising is provided. Payments for slotting fees are
recognized ratably over the term of the agreement. Payments for referral fees
are expensed in the month incurred. Expenses for the year ended December 31,
1998 under this agreement totaled $670,000. Upon completion of the Company's
IPO, the minimum commitment increased from $870,000 over a twelve month period
to $1.6 million over a twelve month period beginning on the first day of the
month following the closing of the IPO.
In September 1998, the Company amended its Web Site Linking and Data
Services Agreement with News Alert, Inc. Under the amended agreement, beginning
in September 1998, the Company is required to
42
<PAGE> 45
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
pay a minimum of $20,000 per month over a twelve month period to News Alert,
Inc. for co-branding and hosting charges.
The Company maintains agreements with independent content providers for
certain news, stock quotes and other information. The terms of these agreements
are generally one year, with optional extension periods ranging from one to
three years. At December 31, 1998 minimum payments under these agreements are
$615,000.
NOTE 7 -- RELATED PARTY TRANSACTIONS:
The accompanying DBC Online/News financial statements include costs for
cash management, accounting, legal and network operations, that were provided to
the Business by DBC, in addition to allocated costs for facility charges at
shares sites, including rent and equipment usage. Costs for cash management
accounting, legal and network operations have been allocated to the Business
based on DBC management's estimated percentage of the time spent by DBC
employees on the Business to total department time. The costs for facility
charges are based on the percentage of usage by DBC Online/News to the overall
costs. Such allocations are not necessarily indicative of the costs that would
have been incurred if DBC Online/News had been a separate entity. However,
management believes the differences between the allocated costs and cost to
obtain such services from an outside third party would be insignificant.
Charges allocated to DBC Online/News were $295,000 and $306,000 for the
year ended December 31, 1996 and for the period from January 1, 1997 through
October 28, 1997, respectively. For the year ended December 31, 1996, allocated
charges of $160,000 and $135,000 were included in cost of revenues and general
and administrative expenses, respectively. For the period from January 1, 1997
through October 28, 1997, allocated charges of $191,000 and $115,000 were
included in cost of revenues and general and administrative expenses,
respectively. Other expenses charged by DBC included in the Statement of
Operations represent actual costs incurred by DBC which were directly
attributable to the Business primarily include payroll and related costs,
consulting, commissions, depreciation and access fees for information from
various exchange markets.
DBC funded the working capital requirements of the Business based upon a
centralized cash management system. Interest on amounts due to DBC was charged
at prime plus 2% (10.5% at October 28, 1997). Amounts due under the obligation
to DBC were not assumed by MarketWatch upon formation. Subsequent to October 28,
1997, the amounts due to DBC would be reduced by cash collected by DBC on
existing accounts receivable. Any remaining obligation has remained outstanding.
Prior to the formation of the Company and contribution of the intellectual
property (See Note 1), the Online/News business owed DBC $2.7 million. The
amounts due under this intercompany obligation were not assumed by the Company.
An analysis of DBC's owners net deficit for the Online/News business is as
follows:
<TABLE>
<CAPTION>
JANUARY 1, 1997
THROUGH YEAR ENDED
OCTOBER 28, 1997 DECEMBER 31, 1996
---------------- -----------------
<S> <C> <C>
Owners net deficit beginning balance................. $(1,319,000) $ (147,000)
Net loss............................................. (943,000) (1,172,000)
----------- -----------
Owners net deficit ending balance.................... $(2,262,000) $(1,319,000)
=========== ===========
</TABLE>
Under the LLC Agreement, DBC will advance the Company up to an aggregate of
$5,000,000 through October 29, 2000. Borrowings bear interest at a variable rate
per annum equal to The Chase Manhattan Bank's prime rate plus 2% (9.75% at
December 31, 1998) and are repayable at such time as the Company has sufficient
cash, as determined by the Members.
43
<PAGE> 46
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
An analysis of the advances from DBC to the Company are as follows:
<TABLE>
<CAPTION>
INCEPTION
(OCTOBER 29, 1997)
YEAR ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ------------------
<S> <C> <C>
Balance as of the beginning of the Period.......... $ -- $ --
Expenses paid by DBC on behalf of the Company...... 9,483,000 538,000
Expenses allocated by DBC to the Company........... 755,000 70,000
Royalty fees to DBC................................ 158,000 16,000
News revenue from DBC.............................. (1,285,000) (210,000)
Web advertising revenue from DBC................... (340,000) --
Receivables collected by DBC on behalf of the
Company.......................................... (995,000) (196,000)
Interest payable on advances from DBC.............. 164,000 --
Cash advances (payments) From DBC, net............. (2,212,000) --
Cash contributions................................. (1,782,000) (218,000)
----------- ---------
Balance as of the end of the period................ $ 3,946,000 $ --
=========== =========
</TABLE>
The majority of expenditures and liabilities of the Company were incurred
by DBC and directly charged to the Company. These direct charges totaled
$538,000 for the period from inception (October 29, 1997) through December 31,
1997 and $9,483,000 for the year ended December 31, 1998. Direct charges
primarily consist of payroll and related costs, consulting, commissions and
access fees for information from various exchange markets. Additionally, under
the terms of a Services Agreement dated October 29, 1997, DBC will provide the
Company with certain general services which include cash management, accounting,
network operations and hosting of the Company's Web pages and data feeds.
Charges for these services and equipment usage are allocated based upon DBC
management's estimate of costs attributable to the operations of
MarketWatch.com. Such fees totaled $70,000 for the period from inception
(October 29, 1997) through December 31, 1997 and $755,000 for the year ended
December 31, 1998.
The Company is required by the Services Agreement to share net revenue from
its current subscription services with DBC. The Services Agreement requires DBC
to pay the Company 25% and 75% of the Net Revenues of MarketWatch RT and
MarketWatch Live, respectively. The Services Agreement defines "Net Revenues" as
gross subscription fees collected, less various direct costs. These direct
charges included in cost of revenue and totaled $16,000 for the period from
inception (October 29, 1997) through December 31, 1997 and $200,000 for the year
ended December 31, 1998.
The Services Agreement also provides for the Company to sell its
proprietary news and commentary to DBC in exchange for a fee based on the number
of DBC subscribers. These fees amounted to $210,000 for the period from
inception (October 29, 1997) through December 31, 1997 and $1,285,000 for the
year ended December 31, 1998. For the five years ending October 29, 2002, these
fees are subject to a monthly minimum of $100,000.
DBC provided office space at various facilities to the Company through June
30, 1998. The Company has recorded rent expense of $15,000 for the period from
inception (October 29, 1997) through December 31, 1997 and $50,000 for the year
ended December 31, 1998 related to the rent provided by DBC based upon an
allocation methodology using its occupancy percentage and the rental amount paid
by DBC. Management believes the allocation methodology to be reasonable. Such
amounts have been recorded as capital contributions.
Under the Amended License Agreement, the Company is required to pay to CBS
8% on certain net advertising revenues, as defined, in excess of the first
$1,000,000 as compensation for licensing CBS' news content and trademarks. No
amounts have been accrued under the agreement for the period from inception
(October 29,
44
<PAGE> 47
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1997) through December 31, 1997. $307,000 has been accrued at December 31, 1998
under the License Agreement.
Under the terms of the Contribution Agreement, CBS will provide advertising
and promotions over a five year period. The Company will record an expense at
the time the advertising and promotion is provided based on the rate card value.
The Company has recorded advertising expense of $7,052,000 at rate card value
for the year ended December 31, 1998 related to advertising and promotion
provided by CBS. As of December 31, 1998, CBS is committed to provide
$22,948,000 rate card amount of advertising and promotions, upon execution of
the Stockholders' Agreement prior to closing the IPO (See Note 8).
An executive of the Company is also a member of the Board of Directors of a
customer. For the period from inception (October 29, 1997) through December 31,
1997, $40,000 of advertising revenues were attributable to this customer. For
the year ended December 31, 1998, $80,000 of advertising revenues were
attributable to this customer.
CBS provides office space at its facility in New York and association with
the CBS name to the Company in exchange for access to certain news content and
news personnel. The Company has not recorded any revenue or expense for this
barter transaction for the periods presented because such amounts are
insignificant.
Under the terms of an insertion order, DBC has committed 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. At December
31, 1998, DBC had purchased $233,000 of advertising under the insertion order.
This commitment may be terminated by DBC on 30 days' notice.
NOTE 8 -- SUBSEQUENT EVENTS:
Initial Public Offering
In January 1999, the Company completed an initial public offering of
3,162,500 shares of common stock at $17 per share. The following table sets
forth the Company advances from DBC and stockholders equity (deficit) as of
December 31, 1998 (i) on an actual basis, and (ii) as adjusted to give effect to
the sale of the 3,162,500 shares of Common Stock at $17 per share less the
underwriters discount and deferred offering costs and the reduction of the
advertising commitment from CBS.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Advances from DBC........................................... $ 3,946 $ --
-------- --------
Stockholders' equity (deficit):
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding actual and
as adjusted............................................ -- --
Common stock, $0.01 par value; 30,000,000 shares
authorized; 9,000,000 shares issued and outstanding
actual; 12,162,500 shares issued and outstanding as
adjusted............................................... 90 122
Additional paid-in capital................................ 53,366 81,518
Deferred compensation..................................... (1,144) (1,144)
Contribution receivable................................... (42,948) (22,948)
Accumulated deficit....................................... (12,494) (12,494)
-------- --------
Total stockholders' equity (deficit).............. $ (3,130) $ 45,054
======== ========
</TABLE>
Stockholders' Agreement
In January 1999, the Company entered into a Stockholders' Agreement
("Stockholders' Agreement"). Under the terms of the Stockholders' Agreement, CBS
reduced the advertising commitment from the Contribution Agreement to an
aggregate rate card amount $30 million in return for a change in the percentage
royalty under the
45
<PAGE> 48
MARKETWATCH.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
License Agreement, extension of the License Agreement to 2005 and modification
to certain non competition provisions. Additionally, both CBS and DBC will have
a right of first refusal in the event either party desires to sell any
securities of the Company to a third party or if the Company issues new
securities.
CBS License Agreement Amendment
In January 1999, the Company and CBS entered into an Amended and Restated
License Agreement (the "Amended and Restated License") which superseded and
replaced the License Agreement. The Amended and Restated License became
effective immediately prior to the IPO and was not retroactively applied. Under
the Amended and Restated License, in return for the right to use the CBS name
and logo as well as the CBS Television Network news content, the Company will be
obligated to pay a royalty to CBS of: (i) during 1998, (A) 8% of Gross Revenues
in excess of $1.0 million and up to and including $51.0 million and (B) 6% of
Gross Revenues in excess of $51.0 million, (ii) during 1999, (A) 8% of Gross
Revenues in excess of $500,000 and up to and including $50.5 million and (B) 6%
of Gross Revenues in excess of $50.5 million, and (iii) in subsequent years
through the termination of the License Agreement on October 29, 2005, (A) 8% of
Gross Revenues up to and including $50.0 million and (B) 6% of Gross Revenues in
excess of $50.0 million. CBS will have the right to terminate the agreement in
certain circumstances, including breach of a material term or condition of the
agreement, insolvency, bankruptcy or other similar proceeding, discontinuance of
use of the MarketWatch logo without providing an acceptable substitute, or
acquisition or issuance of certain percentages of the Company's Common Stock or
voting power by or to a CBS competitor. In addition, CBS will retain significant
editorial control over the use and presentation of the CBS news content and the
CBS logo and has the ability to prevent the Company from displaying certain
types of content which are unacceptable to CBS. The Amended and Restated License
will expire on October 29, 2005.
The terms of the Amended and Restated License will not prohibit CBS from
licensing its name and logo to certain other Web sites or Internet services. CBS
is also not prohibited from licensing its news content to, or investing in,
another Web site or Internet service.
DBC Services Agreement Amendment
In January 1999, the Company and DBC entered into an Amended and Restated
Services Agreement (the "Amended Services Agreement) which supersedes and
replaces the Services Agreement. Under the Amended Services Agreement, DBC will
provide the Company with hosting services, software programming assistance, data
feeds, communications lines, office space and related facilities, network
operations and Web site management services as well as certain administrative
and engineering services if requested by the Company. The Amended Services
Agreement provides for DBC to grant the Company certain nonexclusive licenses to
its data and information feeds and provide for certain network Website hosting
performance standards. DBC will also pay the Company a monthly per subscriber
fee ranging from $2.50 to $5.00, subject to a monthly minimum of $100,000
through October 2002, for delivery of the Company's news to all DBC subscribers,
as defined. The term of the Amended Services Agreement will expire on October
29, 2005.
Revolving Credit Agreement
In January 1999, the Company and DBC entered into a Revolving Credit
Agreement (the "Credit Agreement") whereby DBC will be obligated to loan the
Company up to $5.0 million through October 2000. Borrowings under the Credit
Agreement will be unsecured and bear interest at a variable rate per annum equal
to The Chase Manhattan Bank's prime rate plus 2%. All previous advances under
the LLC Agreement from DBC, will be included against the borrowings under the
Credit Agreement. This Credit Agreement will supercede DBC's loan obligation
under the LLC Agreement described in Note 7.
Registration Rights Agreement
In January 1999, the Company, CBS and DBC entered into a Registration
Rights Agreement ("Registration Agreement"). CBS and DBC, and their affiliates
and permitted transferees will have certain registration rights for the
securities of the Company held by them under the Registration Agreement.
46
<PAGE> 49
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS IN ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
PART III
Certain information required by Part III is omitted from this Report in
that we will have filed our definitive proxy statement pursuant to Regulation
14A no later than 120 days after the end of the fiscal year covered by this
report, and certain information is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to our directors is set forth under the caption
"Proposal No. 1 -- Election of Directors" in our definitive Proxy Statement (the
"Proxy Statement") in connection with the Annual Meeting of Stockholders to be
held in May 1999. Such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is set forth under the
caption "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners and
management is set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement. Such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related transactions is
set forth under the caption "Executive Compensation -- Certain Transactions" in
the Proxy Statement. Such information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
[See index on Item 8]
2. Financial Statement Schedule.
All financial statement schedules have been omitted since the required
information is not present in amounts sufficient to require submission of the
schedules, or because the information required is included in the financial
statements or notes thereto.
3. List of Exhibits.
The exhibits filed as part of this Form 10-K are listed in the Index to
Exhibits immediately preceding such exhibits, which Index to Exhibits is
incorporated herein by reference.
(b) Reports on Form 8-K.
None.
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(2) above.
47
<PAGE> 50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused the report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 31st day of
March, 1999.
MarketWatch.com, Inc.
By: /s/ LARRY S. KRAMER
------------------------------------
Larry S. Kramer
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LARRY S. KRAMER President, Chief Executive March 31, 1999
- ----------------------------------------------------- Officer and Director (Principal
Larry S. Kramer Executive Officer)
/s/ J. PETER BARDWICK Chief Financial Officer and March 31, 1999
- ----------------------------------------------------- Secretary (Principal Financial
J. Peter Bardwick Officer)
/s/ JOE BRICHLER Controller (Principal March 31, 1999
- ----------------------------------------------------- Accounting Officer)
Joe Brichler
/s/ JAMES A. DEPALMA Director March 31, 1999
- -----------------------------------------------------
James A. DePalma
/s/ ALAN J. HIRSCHFIELD Director March 31, 1999
- -----------------------------------------------------
Alan J. Hirschfield
/s/ ALLAN R. TESSLER Director March 31, 1999
- -----------------------------------------------------
Allan R. Tessler
/s/ MARK F. IMPERIALE Director March 31, 1999
- -----------------------------------------------------
Mark F. Imperiale
/s/ MICHAEL H. JORDAN Director March 31, 1999
- -----------------------------------------------------
Michael H. Jordan
/s/ ANDREW HEYWARD Director March 31, 1999
- -----------------------------------------------------
Andrew Heyward
/s/ ROBERT LESSIN Director March 31, 1999
- -----------------------------------------------------
Robert Lessin
/s/ DANIEL MASON Director March 31, 1999
- -----------------------------------------------------
Daniel Mason
</TABLE>
48
<PAGE> 51
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<S> <C>
2.01 Merger Agreement dated January 13, 1999, entered into by
MarketWatch.com, LLC (the "LLC") and the Registrant
3.01 Registrant's Amended and Restated Certificate of
Incorporation
3.02 Registrant's Bylaws, which are incorporated herein by
reference to the Registrant's Registration Statement on Form
S-1 (File No. 333-65569) filed with the Securities and
Exchange Commission (the "SEC") on October 13, 1998 (the
"Registration Statement.").
4.01 Form of Specimen Stock Certificate for Registrant's Common
Stock, which is incorporated herein by reference to the
Registration Statement
4.02 Registration Rights Agreement dated January 13, 1999,
entered into among the Registrant, CBS Broadcasting Inc.
(formerly known as CBS Inc.) ("CBS") and Data Broadcasting
Corporation ("DBC").
4.03 Stockholders' Agreement dated January 13, 1999, entered into
among the Registrant, the LLC, CBS and DBC.
10.01 Form of Indemnity Agreement entered into by Registrant with
each of its directors, which is incorporated herein by
reference to the Registrant's Amendment No. 3 to the
Registration Statement, filed with the SEC on January 13,
1999.
10.02 Limited Liability Company Agreement of the LLC, dated
October 29, 1997, between CBS and DBC, which is incorporated
by reference to the Registration Statement.
10.03 Contribution Agreement dated October 29, 1997 among the LLC,
CBS and DBC, which is incorporated by reference to the
Registration Statement.
10.04 License Agreement dated October 29, 1997 between the LLC and
CBS, which is incorporated by reference to the Registration
Statement.
10.05 Services Agreement dated October 29, 1997 between the LLC
and DBC, which is incorporated by reference to the
Registration Statement.
10.06 Lease dated as of August 27, 1998 between the Registrant and
CBS Corporation, which is incorporated by reference to the
Registration Statement.
10.07 Amended and Restated License Agreement dated January 13,
1999, entered into by and between the Registrant and CBS.
10.08 Amended and Restated Services Agreement dated January 13,
1999, entered into by and between the Registrant and DBC.
10.09 Revolving Credit Agreement dated January 13, 1999, entered
into by and between the Registrant and DBC, together with
Revolving Promissory Note dated January 13, 1999, made by
the Registrant in favor of DBC.
10.10* Form of Non-Plan Option, which is incorporated herein by
reference to the Registration Statement.
10.11* Registrant's 1998 Directors Stock Option Plan, which is
incorporated herein by reference to the Registration
Statement.
10.12* Registrant's 1998 Equity Incentive Plan, which is
incorporated herein by reference to Amendment No. 2 to the
Registration Statement, filed December 16, 1998.
10.13* Employment Agreement dated as of July 1, 1998 between the
Registrant and Lawrence Kramer, which is incorporated herein
by reference to the Registration Statement.
10.14* Employment Agreement dated as of July 1, 1998 between the
Registrant and J. Peter Bardwick, which is incorporated
herein by reference to the Registration Statement.
10.15 Insertion Order dated as of August 25, 1998 between DBC and
the LLC, which is incorporated herein by reference to the
Registration Statement.
27.01 Financial Data Schedule (EDGAR Version Only).
</TABLE>
- ---------------
* Indicates a management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 2.01
MERGER AGREEMENT
OF
MARKETWATCH.COM, LLC
WITH AND INTO
MARKETWATCH.COM, INC.
This Merger Agreement (this "AGREEMENT") is dated as of January 13,
1999 by and between Marketwatch.Com, LLC, a Delaware limited liability company
("TARGET"), and MarketWatch.com, Inc., a Delaware corporation ("ACQUIRER").
1. Merger; Effective Time. Upon the terms and subject to the conditions
hereof, in accordance with the Delaware General Corporation Law (the "DGCL") and
the Delaware Limited Liability Company Act (the "DLLCA"), Target will be merged
with and into Acquirer (the "MERGER"). Acquirer will be the surviving
corporation (hereinafter referred to sometimes as the "SURVIVING CORPORATION")
of the Merger, and the separate existence of Target shall cease. The Merger will
be effective as of the date and at such time as this Agreement and any other
documents necessary to effect the Merger in accordance with the DGCL and DLLCA
are duly filed with the Secretary of State of the State of Delaware (the time
the Merger becomes effective being referred to herein as the "EFFECTIVE TIME").
2. Exchange of Securities.
(a) Conversion of Limited Liability Company Interests. At the
Effective Time, the limited liability company interests (the "INTEREST") in
Target of each member ("MEMBER") thereof immediately prior to the Effective Time
will, by virtue of the Merger and without further action on the part of any
Member, be converted into 4,500,000 shares of fully paid and nonassessable
Common Stock, par value $0.01 per share, of Acquirer ("ACQUIRER STOCK"). At the
Effective Time, the Interests held by the two Members, shall constitute 100% of
the outstanding Interests in Target.
(b) No Securities of Acquirer Outstanding. Immediately prior
to the Effective Time, there are no outstanding securities of Acquirer.
(c) Issuance of Stock Certificates. The Interests are not
represented by certificates. Promptly following the Effective Time, Acquirer
shall issue stock certificates representing the Acquirer Stock to the holders of
the Interests that were converted by virtue of the Merger.
(d) Target Options. At the Effective Time, each holder of an
outstanding option (collectively, the "Target Options") to purchase an Interest
shall be entitled, in accordance with the terms of such option, to purchase
after the Effective Time that number of shares of Acquirer's Common Stock,
determined by multiplying the Percentage Interest (as defined in the agreement
relating to such Target Option) subject to such Target Option on the Effective
Date by 100,000, and the exercise price per share for each such Target Option
will equal the aggregate
<PAGE> 2
exercise price of the Target Option immediately prior to the Effective Time
divided by the number of shares of Acquirer's Common Stock as determined above.
If the foregoing calculation results in an assumed option being exercisable for
a fraction of a share, then the number of shares of Acquirer's Common Stock
subject to such option will be rounded down to the nearest whole number with no
cash being payable for such fractional share. The term, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422A of the United
States Internal Revenue Code, if applicable, and all other terms of the Target
Options will otherwise be unchanged. Continuous employment with the Target will
be credited to an optionee for purposes of determining the number of shares
subject to exercise after the Effective Time.
3. Governing Documents. At the Effective Time, the Certificate of
Incorporation of Acquirer in effect immediately prior to the Effective Time
shall become the Certificate of Incorporation of the Surviving Corporation and
the Bylaws of Acquirer in effect immediately prior to the Effective Time shall
become the Bylaws of the Surviving Corporation.
4. Principal Office. The location of the principal office of Acquirer
is 825 Battery Street, San Francisco, California 94111. The location of the
principal office of Acquirer in the State of Delaware is c/o The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19805. The name of its
registered agent in Delaware is The Corporation Trust Company.
5. Directors and Officers. At the Effective Time, the directors and
officers of Acquirer immediately prior to the Effective Time shall be and become
the directors and officers (holding the same titles and positions) of the
Surviving Corporation, and after the Effective Time shall serve in accordance
with the Certificate of Incorporation and Bylaws of the Surviving Corporation.
6. Employee Benefit Plans. At the Effective Time, the obligations of
Target under or with respect to every plan, trust, program and benefit then in
effect or administered by Target for the benefit of the directors, officers and
employees of Target, shall become the lawful obligations of Acquirer and shall
be implemented and administered in the same manner and without interruption
until the same are amended or otherwise lawfully altered or terminated.
Effective at the Effective Time, Acquirer hereby expressly adopts and assumes
all obligations of Target under such employee benefit plans.
7. Further Assurances. After the Effective Time, Acquirer and its
officers and directors may execute and deliver such deeds, assignments,
assurances and other documents and do all other things necessary or desirable to
vest, perfect or confirm title to Target's property or rights in Acquirer and
otherwise to carry out the purposes of the Merger in the name of Target or
otherwise.
8. Approval of Merger. The Merger has been approved by the holders of
100% of the outstanding Interests in Target.
9. Assignment. Neither party hereto may assign any of its rights or
obligations hereunder without the prior written consent of the other party
hereto. This Agreement will be
2
<PAGE> 3
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
10. Abandonment. At any time before the Effective Time, this Agreement
may be terminated and the Merger abandoned by the Management Committee of Target
or the Board of Directors of Acquirer, notwithstanding approval of this
Agreement by the holders of the outstanding Interests in Target and such
Management Committee and such Board of Directors.
11. Amendment. At any time before the Effective Time, this Agreement
may be amended, modified or supplemented by the Management Committee of Target
and the Board of Directors of Acquirer, notwithstanding approval of this
Agreement by the holders of the outstanding Interests in Target; provided,
however, that no such amendment, modification or supplement not approved by the
holders of the outstanding Interests in Target may materially adversely affect
the benefits intended under this Agreement for the holders of the outstanding
Interests in Target.
12. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
entered into and to be performed wholly within the State of Delaware without
regard to principles of conflict of laws.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
MARKETWATCH.COM, INC. MARKETWATCH.COM, LLC
By: /s/ Lawrence Kramer By: /s/ Lawrence Kramer
------------------------------ ------------------------------
Lawrence Kramer, President and Lawrence Kramer, President and
Chief Executive Officer Chief Executive Officer
Attest Attest
By: /s/ J. Peter Bardwick By: /s/ J. Peter Bardwick
------------------------------- ------------------------------
J. Peter Bardwick, Chief Financial J. Peter Bardwick, Chief
Officer and Secretary Financial Officer and Secretary
[SIGNATURE PAGE TO MERGER AGREEMENT]
4
<PAGE> 1
EXHIBIT 3.01
Exhibit A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MARKETWATCH.COM, INC.
ARTICLE I
The name of the corporation is MarketWatch.com, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The
name of its registered agent at that address is The Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the corporation
has authority to issue is Thirty-five Million (35,000,000) shares, consisting of
two classes: Thirty Million (30,000,000) shares of Common Stock, $0.01 par value
per share, and Five Million (5,000,000) shares of Preferred Stock, $0.01 par
value per share.
The Board of Directors is authorized, subject to any limitations prescribed
by the law of the State of Delaware, to provide for the issuance of the shares
of Preferred Stock in one or more series, and, by filing a certificate of
designation pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof,
and to increase or decrease the number of shares of any such series (but not
below the number of shares of such series then outstanding). The number of
authorized shares of Preferred Stock may also be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the stock of the corporation entitled to vote,
unless a vote of any other holders is required pursuant to a certificate or
certificates establishing a series of Preferred Stock.
Except as otherwise expressly provided in any certificate of designation
designating any series of Preferred Stock pursuant to the foregoing provisions
of this Article IV, any new series
<PAGE> 2
of Preferred Stock may be designated, fixed and determined as provided herein by
the Board of Directors without approval of the holders of Common Stock or the
holders of Preferred Stock, or any series thereof, and any such new series may
have powers, preferences and rights, including, without limitation, voting
rights, dividend rights, liquidation rights, redemption rights and conversion
rights, senior to, junior to or pari passu with the rights of the Common Stock,
the Preferred Stock, or any future class or series of Preferred Stock or Common
Stock.
ARTICLE V
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal Bylaws of the corporation.
ARTICLE VI
A. Election of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide.
B. Special meetings of stockholders of the corporation may be called only
by the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist any vacancies
in previously authorized directorships at the time any such resolution is
presented to the Board for adoption), the Chairman of the Board, the Chief
Executive Officer or any holder of twenty-five percent (25%) of the outstanding
Common Stock of the corporation.
ARTICLE VII
Subject to the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation or other cause may be filled (a) by the
stockholders at any meeting, (b) by a majority of the directors, although less
than a quorum, or (c) by a sole remaining director, and directors so chosen
shall hold office for a term expiring at the next annual meeting of stockholders
at which the term of office of the class to which they have been elected
expires, and until their respective successors are elected, except in the case
of the death, resignation, or removal of any director. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
ARTICLE VIII
A. To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
2
<PAGE> 3
B. To the extent permitted by applicable law, this corporation is also
authorized to provide indemnification of (and advancement of expenses to) agents
(and any other persons to which Delaware law permits this corporation to provide
indemnification) through bylaw provisions, agreements with such agents or other
persons, vote of stockholders or disinterested directors or otherwise, in excess
of the indemnification and advancement otherwise permitted by Section 145 of the
Delaware General Corporation Law, subject only to limits created by applicable
Delaware law (statutory or non-statutory), with respect to actions for breach of
duty to the corporation, its stockholders, and others.
C. Neither any amendment nor repeal of any of the foregoing provisions of
this Article VIII, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article VIII, shall eliminate, reduce or
otherwise adversely affect any limitation on the personal liability of a
director of the corporation existing at the time of such amendment, repeal or
adoption of such an inconsistent provision.
3
<PAGE> 1
EXHIBIT 4.02
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of January 13, 1999 (the "EFFECTIVE DATE") by and between
MarketWatch.com, Inc., a Delaware corporation (the "COMPANY"), and the entities
listed on Exhibit A hereto (collectively, the "STOCKHOLDERS" and each
individually a "STOCKHOLDER").
R E C I T A L S
WHEREAS, the Company and the Stockholders have entered into that
certain Merger Agreement (the "MERGER AGREEMENT") dated as of the date hereof,
which provides, among other things, that Marketwatch.Com, LLC (the "LLC") shall
merge with and into the Company (the "MERGER") with the Company being the entity
surviving the Merger;
WHEREAS, immediately prior to the Merger, the Stockholders were the
sole members of the LLC;
WHEREAS, the Stockholders each received 4,500,000 shares of the Common
Stock of the Company, par value $0.01 per share (the "MERGER SHARES"), in
exchange for their membership interests in the LLC;
WHEREAS, as a condition to the Stockholders agreeing to enter into the
Merger Agreement, the Company has agreed to grant the Stockholders certain
registration rights with respect to the Merger Shares and other securities of
the Company which they may hold in the future;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Stockholders
hereby, intending to be legally bound by the terms hereof, agree as follows:
1. REGISTRATION RIGHTS.
1.1 Definitions. For purposes of this Agreement:
(a) Form S-3. The term "FORM S-3" means such form
under the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
(b) Holder. The term "HOLDER" means any person owning
of record Registrable Securities that have not been sold to the public or
pursuant to Rule 144 ("RULE 144") promulgated under the Securities Act of 1933,
as amended (the "1933 ACT") or any assignee of
<PAGE> 2
record of such Registrable Securities to whom rights under this Agreement have
been duly assigned in accordance with this Agreement.
(c) Prospectus. The term "PROSPECTUS" shall mean
the prospectus included in any registration statement filed pursuant to the
provisions hereof (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the 1933
Act), as amended or supplemented by any prospectus supplement (including,
without limitation, any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
registration statement), and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
(d) Registrable Securities. The term "REGISTRABLE
SECURITIES" means: (1) all of the Merger Shares, (2) any securities of the
Company subsequently acquired by a Stockholder or any entity which controls, is
controlled by, or is under common control with a Stockholder, and (3) any
securities of the Company issued as a dividend or other distribution with
respect to, or in exchange for or in replacement thereof excluding in all cases,
however, (i) any Registrable Securities sold by a person in a transaction in
which rights under this Section 1 are not assigned in accordance with this
Agreement, or (ii) any Registrable Securities sold in a public offering pursuant
to a registration statement filed with the SEC or sold pursuant to Rule 144
except to the extent reacquired by a Stockholder or an entity which controls, is
controlled by or is under common control with a Stockholder as provided in
clause (2) above.
(e) Registrable Securities Then Outstanding. The
number of shares of "REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the
number of Registrable Securities that are common stock of the Company and are
issued and outstanding at such time plus with respect to any Registrable
Securities issued and outstanding at such time that are not common stock of the
Company, the number of shares of common stock of the Company into which such
Registrable Securities are then or will be convertible or otherwise exchangeable
or exerciseable.
(f) Registration. The terms "REGISTER,"
"REGISTERED," and "REGISTRATION" refer to a registration effected by preparing
and filing a registration statement in compliance with the 1933 Act, and the
declaration or ordering of effectiveness of such registration statement.
(g) SEC. The term "SEC" or "COMMISSION" means the
U.S. Securities and Exchange Commission.
1.2 Demand Registration.
(a) Request by Stockholder. If the Company shall
receive at any time after 180 days following the effective date of the
registration statement for the Company's initial public offering, a written
request from either Stockholder (the "INITIATING HOLDER") that the Company file
a registration statement under the 1933 Act covering the registration of
Registrable
-2-
<PAGE> 3
Securities with a reasonably anticipated aggregate price to the public of at
least three million dollars ($3,000,000) pursuant to this Section 1.2, then the
Company shall effect, as soon as practicable, and in any event use its best
efforts to effect within 60 days of such request, the registration under the
1933 Act of all Registrable Securities which the Initiating Holder requests to
be registered and included in such registration, subject only to the limitations
of this Section 1.2.
(b) Underwriting. If the Initiating Holder intends
to distribute the Registrable Securities covered by its request by means of an
underwriting, then it shall so advise the Company as a part of its request made
pursuant to this Section 1.2. The Initiating Holder shall (a) select the
managing underwriter to administer such offering after consultation with the
Company and subject to the approval of the Company, which approval shall not be
unreasonably withheld, and (b) enter into an underwriting agreement in customary
form with such managing underwriter. Notwithstanding any other provision of this
Section 1.2, if the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of Registrable Securities
which would otherwise be registered and underwritten pursuant hereto the Company
will so advise the Initiating Holder, and the number of securities that may be
included in the underwriting shall be reduced as required by the underwriter(s)
and allocated first, to the Initiating Holder, second, to the Company, third,
among all other holders of Registrable Securities and fourth, among all other
holders of securities of the Company.
(c) Maximum Number of Demand Registrations. The
Company is obligated to effect only two (2) such registrations for each
Stockholder pursuant to this Section 1.2. Only registrations in which a
Stockholder is the Initiating Holder shall count against such limit with respect
to such Stockholder. The Company shall not be deemed to have effected a
registration pursuant to this Section 1.2 unless a registration statement in
respect thereof shall have been declared effective by the SEC and remains
effective for 120 days or such earlier time until all Registrable Securities
registered under such Registration Statement have been sold (or withdrawn from
such registration at the request of the Initiating Holder).
(d) Deferral; Jurisdictional Requirements.
Notwithstanding the foregoing, if the Company shall furnish to the Initiating
Holder a certificate signed by the President or Chief Executive Officer of the
Company stating that it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for a period of not more than 120 days
after receipt of the request of the Initiating Holder or such earlier time as
such a certificate could no longer be given in good faith; provided, however,
that the Company may not utilize this right more than once in any twelve (12)
month period.
(e) Withdrawn Request. The Initiating Holder may
withdraw a request for registration under this Section 1.2 at any time prior to
the effective date of the Registration Statement related to such registration,
provided that if such Stockholder elects to remain liable for all expenses
incurred in conjunction therewith then such withdrawn registration statement
shall not count toward the maximum number of registrations provided for in
section
-3-
<PAGE> 4
1.2(c). Notwithstanding the foregoing provisions of this Section 1.2(e),
if such withdrawal is the result of a material adverse change in the business,
assets, properties, condition (financial or otherwise), results of operations or
prospects of the Company that was unknown to such Stockholder at the time the
request for registration was made and the withdrawal of such request is made
with reasonable promptness upon learning of such material adverse change, then
such request for registration that is so withdrawn shall not count toward the
maximum number of registrations provided for in Section 1.2(c) and such Holder
shall not be liable for the expenses incurred in connection with such withdrawn
registration statement.
1.3 Piggyback Registrations.
(a) The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to filing any
registration statement under the 1933 Act for purposes of effecting a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements on Form S-8 or S-4 or relating
solely to any employee benefit plan or an acquisition of any entity or business)
and will afford Holders, subject to the terms and conditions set forth herein,
an opportunity to include in such registration statement all or any part of the
Registrable Securities then held by Holders. Holders shall, within twenty (20)
days after receipt of the above-described notice from the Company, so notify the
Company in writing, and in such notice shall inform the Company of the number of
Registrable Securities a Holder wishes to include in such registration
statement. If a Holder decides not to include all of its Registrable Securities
in any registration statement filed by the Company, the Holder shall
nevertheless continue to have the right to include any Registrable Securities
not included in such registration statement in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(b) Underwriting. If a registration statement with
respect to which the Company gives notice under this Section 1.3 pertains to an
underwritten offering, then the Company shall so advise Holders. In such event,
the right of Holders to have the Registrable Securities included in a
registration pursuant to this Section 1.3 shall be conditioned upon Holders'
participation in such underwriting and the inclusion of the Registrable
Securities in the underwriting to the extent provided herein. Each Holder
proposing to sell Registrable Securities in such offering shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting. Notwithstanding any other provision
of this Agreement, if the managing underwriter or underwriters determine(s) in
good faith that marketing factors require a limitation of the number of
securities to be underwritten, then the managing underwriter(s) may exclude
securities (including Registrable Securities) from the registration and the
underwriting, and the number of securities that may be included in the
registration and the underwriting shall be allocated, first, to the Company,
second, between the Holders, on a pro-rata basis based on the number of
Registrable Securities held by each such Holder and third to any other holders
of the Company's securities, provided that if the registration is a registration
pursuant to Section 1.2, the "cut-back" provisions described in the last
sentence of Section 1.2(b) shall apply. If a Holder disapproves of the terms of
any such
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<PAGE> 5
underwriting, a Holder may elect to withdraw therefrom by written notice to the
Company and the managing underwriter(s), delivered at least ten (10) business
days prior to the effective date of the registration statement or if notified of
the terms thereafter, promptly after such notification. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration.
1.4 Form S-3 Registration. In case the Company shall receive from
either Stockholder a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Stockholder
or its affiliates, then the Company will:
(a) Registration. As soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Stockholder's or its affiliates' Registrable Securities as are
specified in such request, provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 1.4:
(1) if Form S-3 is not available for such
offering by the Stockholder;
(2) if the Stockholder, together with the
holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than one million dollars
($1,000,000); or
(3) if the Company shall furnish to the
Stockholder a certificate signed by the President or Chief Executive Officer of
the Company stating that it would be seriously detrimental to the Company and
its stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement no more than once during any twelve month period for a
period of not more than one hundred twenty (120) days after receipt of the
request of the Stockholder under this Section 1.4 or such earlier time as such a
certificate could no longer be given in good faith.
(b) Not Demand Registration.Form S-3 registrations
shall not be deemed to be demand registrations as described in Section 1.2
above.
(c) Notwithstanding anything to the contrary herein,
the Company is obligated to effect only two (2) registrations on Form S-3 per
year and each Stockholder may request only one (1) such registration per year
pursuant to this Section 1.4.
(d) Withdrawn Request. The Stockholder requesting a
registration pursuant to this Section 1.4 may withdraw a request for
registration under this Section 1.4 at any time prior to the effective date of
the Registration Statement related to such registration, provided that if such
Holder elects to remain liable for all expenses incurred in conjunction
therewith then such withdrawn registration statement shall not count toward the
maximum number of
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<PAGE> 6
registrations provided for in Section 1.4(c). Notwithstanding the foregoing
provisions of this Section 1.4(d), if such withdrawal is the result of a
material adverse change in the business, assets, properties, condition
(financial or otherwise), results of operations or prospects of the Company that
was unknown to such Holder at the time the request for registration was made and
the withdrawal of such request is made with reasonable promptness upon learning
of such material adverse change, then such a request for registration that is so
withdrawn shall not count toward the maximum number of registrations provided
for in Section 1.4(c) and such Holder shall not be liable for the expenses
incurred in connection with such withdrawn registration statement.
1.5 Obligations of the Company. Whenever required to effect
the registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities, use its best efforts to
cause such registration statement to become effective as soon as practicable and
with respect to registrations effected pursuant to Sections 1.2, 1.3 and 1.4
keep such registrations effective for up to one hundred twenty (120) days,
excluding any lock-up period, or such shorter period of time as is agreed to in
writing by the Company and each applicable Holder.
(b) For such period of time as shall be required in
connection with the transactions contemplated thereby and permitted by
applicable rules, regulations and administrative practice of the SEC (but not
for more than 120 days from the effective date thereof), file such
post-effective amendments and supplements to such registration statement as
shall be necessary so that neither such registration statement nor any related
prospectus shall contain any material misstatement or omission relative to the
Company or any of its assets or liabilities or its businesses of affairs and
will otherwise comply with all applicable federal, state and foreign securities
laws.
(c) Furnish to the Holder such number of copies of a
Prospectus, including a preliminary Prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as it may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by it that are included in such registration.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions unless already subject
thereto.
(e) If requested by the underwriters for any
underwritten offering by a Holder pursuant to any registration requested under
Section 1.2 or 1.4, the Company shall enter into an underwriting agreement with
such underwriters for such offering, such agreement to be satisfactory in form
and substance to such Stockholder and to contain such representations and
warranties by the Company and such other terms and provisions (including,
without limitation,
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<PAGE> 7
provisions for indemnification of such underwriters by the Company) as are
customarily contained in such underwriting agreements. The Stockholder shall be
a party to such underwriting agreement and may, at its option, require that any
or all of the representations and warranties by, and the agreements on the part
of, the Company to and for the benefit of such underwriters be made to and for
the benefit of such Stockholder and that any or all of the conditions precedent
to the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such Stockholder.
(f) Notify the Holders promptly, (i) of the time such
registration statement becomes effective or when any amendment or supplement or
prospectus forming a part of such registration statement has been filed or
becomes effective, (ii) of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of a registration
statement for amendments or supplements to such registration statement or
related prospectus or for additional information, (iii) of the issuance by the
SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of a registration statement or the initiation or
threatening of any proceedings for that purpose (and the Company will use its
best efforts to prevent the issuance of any such stop order or to obtain its
withdrawal promptly if such stop order should be issued), (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of any event which makes any
statement made in a registration statement or related prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or which requires the making of any changes in the registration
statement or prospectus so that, in the case of a registration statement, it
will not contain any untrue statement of a material fact required to be stated
therein or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any 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, at the reasonable request of a Holder, the
Company shall also promptly prepare and file with the Securities and Exchange
Commission and make available to such Holder any supplement or amendment
reasonably necessary so that neither such registration statement nor any related
prospectus shall contain any material misstatement or omission as a result of
such event (provided that the 120 day period referred to in Section 1.2, 1.3 or
1.4 shall be extended by the period from which the Company gives the notice
specified in this clause until such supplement or amendment is made available to
such Holder), and (vi) of the Company's reasonable determination that a
post-effective amendment to a registration statement would be appropriate;
except that notice of an event or determination referred to in (v) or (vi) above
need be made only if a registration statement relating to Registrable Securities
is then in effect.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the effective date of the
Registration Statement, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering and
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<PAGE> 8
reasonably satisfactory to the Holder requesting registration, and (ii) a
"comfort" letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to the Holder requesting
registration.
(h) Provide for the listing of the Registrable
Securities on the stock exchange or authorization for trading on automated
quotation system on which the Registrable Securities' class of securities are
then listed or quoted; provided however, nothing contained herein shall obligate
the Company to have listed any Registrable Securities which are of a class of
securities of the Company not then listed on a stock exchange or authorized for
trading on automated quotation system.
(i) Make available for inspection by the Holder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other professional retained by the
Holder or such underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such Inspector in connection with such registration statement.
1.6 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Sections 1.2, 1.3
or 1.4 with respect to any particular Holder that such Holder shall furnish to
the Company such information regarding such Holder, the Registrable Securities
held by it, and the intended method of disposition of such securities as shall
be required to timely effect the registration of its Registrable Securities.
1.7 Expenses. All expenses incurred in connection with a
registration pursuant to Sections 1.2, 1.3 and 1.4, including without limitation
all registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders to be selected by the
selling Stockholder(s) (but excluding underwriters' discounts and commissions),
shall be borne by the Company. Each Holder participating in a registration
pursuant to Section 1 shall bear such Holder's proportionate share (based on the
total number of shares sold in such registration other than for the account of
the Company) of all discounts, commissions or other amounts payable to
underwriters or brokers in connection with such offering.
1.8 Indemnification. In the event any registration statement
is filed by the Company:
(a) By the Company. To the extent permitted by law,
the Company will indemnify and hold harmless each Holder, each officer and
director of a Holder, any agent or underwriter (as defined in the 1933 Act) for
the Holders and each person (as defined in Section 2(2) of the 1933 Act), if
any, who controls such Holder or such underwriter within the meaning of Section
15 of the 1933 Act or the Section 20 of the Securities Exchange Act of 1934,
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<PAGE> 9
as amended (the "1934 ACT") or any similar federal statute then in effect,
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the 1933 Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "VIOLATION"):
(i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or in any amendments or supplements thereto;
(ii) the omission or alleged omission to state in
such registration statement, including any preliminary
prospectus or final prospectus contained therein or in any
amendments or supplements thereto, a material fact required to
be stated therein, or necessary to make the statements therein
not misleading (in the case of any preliminary prospectus or
final prospectus, in the light of the circumstances under
which they are made); or
(iii) any violation or alleged violation by the
Company of the 1933 Act, the 1934 Act, any federal or state
securities law or any rule or regulation promulgated under the
1933 Act, the 1934 Act or any federal or state securities law
in connection with the offering covered by such registration
statement;
and the Company will reimburse each Holder, each officer or director of a
Holder, and each such agent, underwriter or controlling person for any legal or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this subsection
1.8(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage or liability
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, or by such officer,
director, agent, underwriter or controlling person of such Holder; provided,
further, however, the indemnification rights provided for in this Section 1.8(a)
with respect to a registration statement shall not apply to any Holder who is
not a Stockholder, unless such Holder has included any of its Registrable
Securities in such registration statement.
(b) By Selling Holders. To the extent permitted by
law, each selling Holder, if any, will severally and not jointly indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the registration statement, each person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act, as applicable, and any agent
or underwriter, against any losses, claims, damages or liabilities (joint or
several)
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<PAGE> 10
to which the Company or any such director, officer, controlling person, agent or
underwriter may become subject under the 1933 Act, the 1934 Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information concerning such Holder furnished
by such Holder expressly for use in connection with such registration; and each
such Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, controlling person, underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action to the extent that (and only to the extent that) such
Violation occurs in reliance upon and in conformity with written information
concerning such Holder furnished by such Holder for use in connection therewith;
provided, however, that the indemnity agreement contained in this subsection
1.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Stockholders, which consent shall not be unreasonably withheld; and
provided further, that the total amounts payable in indemnity by a Holder under
this Section 1.8(b) in respect of any Violation shall not exceed the net
proceeds received by such Holder in the registered offering out of which such
Violation arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section 1.8 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim for
indemnification in respect thereof is to be made against any indemnifying party
under this Section 1.8, deliver to the indemnifying party a written notice of
the commencement of such an action and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential conflict of
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
indemnified party under this Section 1.8 except to the extent that the
indemnifying party is actually prejudiced by the failure to give such notice. In
addition, the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.8. The indemnification provided in this
Section 1.8 shall remain in full force and effect, regardless of any
investigation made by or on behalf of any indemnified party, and shall survive
the transfer of any Registrable Securities being registered pursuant to Section
1.2, 1.3 or 1.4.
(d) Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and Holders are subject to the
limitation that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time the registration statement in question becomes
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<PAGE> 11
effective or in the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "FINAL PROSPECTUS"), such indemnity agreements shall not inure to
the benefit of a selling Holder (or any officer or director of a selling Holder
or any such agent, underwriter or controlling Person of a Holder) if a copy of
the Final Prospectus was timely furnished to the indemnified party, and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the 1933 Act; provided, however,
that this subparagraph (d) shall not apply with respect to any underwritten
offering.
(e) Contribution. In order to provide for just and
equitable contribution to joint liability under the 1933 Act in any case in
which either (i) any Holder exercising rights under this Agreement (and/or any
officer, director, agent, underwriter or controlling person who may be
indemnified under Section 1.8(a)) makes a claim for indemnification pursuant to
this Section 1.8 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 1.8 provides for indemnification in such case, or (ii) contribution
under the 1933 Act may be required on the part of any such selling Holder
(and/or any officer, director, underwriter or controlling person who may be
indemnified under Section 1.8(b)) in circumstances for which indemnification is
provided under this Section 1.8; then, and in each such case, the Company and
such Holder (and/or such other person) will contribute to the aggregate losses,
claims, damages and expenses or liabilities to which they may be subject (after
contribution from others) in proportion to their relative fault. The relative
fault of the Company and a Holder shall be determined by reference to, among
other things, whether the untrue or alleged omission of a material fact relates
to information supplied by the Company or by such Holder and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Holders agree that it
would not be just and equitable if contribution pursuant to this Section 1.8(e)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
two immediately preceding sentences; provided however, that in no event, except
in instances of fraud by a Holder in which there is no limitation, (i) shall
such Holder be responsible for more than the portion represented by the
percentage that the public offering price of the Registrable Securities of such
Holder offered by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such registration
statement and (ii) shall such Holder be required to contribute any amount in
excess of the public offering price of all such securities offered and sold by
such Holder pursuant to such registration statement; and in any event, no person
or entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and
Holders under this Section 1.8 shall survive the completion of any offering of
Registrable Securities in a registration statement or otherwise.
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<PAGE> 12
1.9 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, for so long as Holders own any Registrable Securities, the Company
agrees to:
(a) Make and keep adequate, current public
information available, as required by and defined in Rule 144, at all times;
(b) Use its best efforts to file with the Commission
in a timely manner all reports and other documents required of the Company under
the 1934 Act;
(c) So long as a Holder owns any Registrable
Security, furnish to the Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of said Rule
144, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company as a Holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
a stockholder of the Company to sell any such securities without registration;
and
(d) Take such further action as a Holder may
reasonably request.
1.10 Termination of the Company's Obligations. The Company
shall have no obligations to register Registrable Securities (i) if all
Registrable Securities have been registered and sold pursuant to registrations
effected pursuant to this Agreement, or (ii) at such time as all outstanding
Registrable Securities may be sold within a three month period under Rule 144,
as it may be amended from time to time, including but not limited to amendments
that reduce that period of time that securities must be held before such
securities may be sold pursuant to such rule.
1.11 "Market Stand-Off" Agreement. Each Holder hereby agrees
that it shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities then owned by such Holder (other than to donees or
affiliates of the Holder who agree to be similarly bound) for up to (1) one
hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act with respect to the
initial public offering of securities of the Company (the "IPO"), and (2) ninety
(90) days following the first underwritten public offering of securities of the
Company following the IPO; provided, however, that all executive officers and
directors of the Company then holding securities of the Company enter into
similar agreements. In order to enforce the foregoing covenant, the Company
shall have the right to place restrictive legends on the certificates
representing the shares subject to this Section and to impose stop transfer
instructions with respect to the Registrable Securities and such other shares of
stock of each Holder (and the shares or securities of every other person subject
to the foregoing restriction) until the end of such period.
1.12. Review. Each Stockholder shall have the right to require
the insertion in any registration statement filed by the Company of language, in
form and substance satisfactory
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<PAGE> 13
to the Stockholder, to the effect that the holding by the Stockholder of any
Registrable Securities is not to be construed as a recommendation by the
Stockholder of the investment quality of the securities of the Company and that
such holding does not imply that the Stockholder will assist in meeting any
future financial requirements of the Company. The Company covenants that it will
not file any registration statement under the Securities Act unless it shall
first have given notice thereof to the Stockholders. The Company further
covenants that the Stockholders shall have the right prior to filing with the
SEC, to receive copies of such registration statement and any amendment thereof
or supplement thereto and any prospectus forming a part thereof in a timely
fashion to enable them to participate in the preparation of such registration
statement, amendment, supplement or prospectus and to request the insertion
therein of material furnished in timely fashion (not to exceed ten business days
from the date of receipt of such material) in writing to the Company, which in a
Stockholder's judgment should be included therein. Notwithstanding the foregoing
provisions of this Section 1.12, the rights of a Stockholder under this Section
1.12 shall not apply if the Registrable Securities held by such Stockholder and
its affiliates are equal to or less than five percent (5%) of the total Common
Stock of the Company then outstanding.
2. ASSIGNMENT.
2.1 Assignment. Notwithstanding anything herein to the
contrary, the registration rights of a Holder under Section 1 hereof may be
assigned only to (a) an affiliate of a Holder, (b) a party who acquires from a
Holder at least fifteen percent (15%) of the shares of Common Stock that
constituted the original number of Registrable Securities (as such number may be
adjusted to reflect subdivisions, combinations and stock dividends of the
Company's Common Stock and similar events) or (c) any party who acquires
ownership or control of a Holder through a merger, consolidation, sale of assets
or similar business combination (such party is referred to as a "ASSIGNEE");
provided, however that (w) no party may be assigned any of the foregoing rights
(other than pursuant to clause (c)) until the Company is given written notice by
the assigning party at the time of such assignment stating the name and address
of the assignee and identifying the securities of the Company as to which the
rights in question are being assigned; (x) any such Assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement,
including without limitation the provisions of this Section 2, and (y) upon an
assignment or assignments pursuant to clause (b) hereof, the rights held by each
Holder under this Agreement other than the Stockholders or their permitted
assignees under clauses (a) or (c) above, may only be exercised by persons or
entities holding a majority of the Registrable Securities not held by the
Stockholders or their permitted assignees under clauses (a) or (c) above.
3. GENERAL PROVISIONS.
3.1 Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the U.S. mail by
registered or certified mail, return receipt requested, postage prepaid, as
follows:
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<PAGE> 14
(a) if to the Company, at:
MarketWatch.com, Inc.
825 Battery Street
San Francisco, CA 94111
Attention: J. Peter Bardwick
Facsimile: 415/392-1972
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Mark C. Stevens
Facsimile: 650/494-1417
(b) If to a Stockholder, at such Stockholder's respective
address as set forth on Exhibit A hereto.
(c) If to any other Holder, at such Holder's respective
address as set forth in the Company's share register.
Any party hereto (and such party's permitted assigns) may by notice so given
provide and change its address for future notices hereunder. Notice shall
conclusively be deemed to have been given when personally delivered or five days
after when deposited in the mail in the manner set forth above.
3.2 Entire Agreement. This Agreement constitutes and contains
the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties respecting the subject matter hereof.
3.3 Amendment of Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company, and any Stockholder (and /or any of their
permitted successors or assigns pursuant to clauses (a) or (c) of Section 2.1)
affected by such amendment or waiver. In the event the rights of a Holder who
becomes a Holder pursuant to the provisions of clause (b) under Section 2.1
hereunder are sought to be waived, then the Holders of a majority of the
Registrable Securities owned by such Holders may waive such rights on behalf of
all of such other Holders.
3.4 Governing Law. This Agreement shall be governed by and
construed exclusively in accordance with the laws of the State of Delaware,
excluding that body of law relating to conflict of laws.
3.5 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, then such provision(s) shall
be excluded from this
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<PAGE> 15
Agreement and the balance of this Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
3.6 Third Parties. Except as expressly provided in Section
1.8, nothing in this Agreement, express or implied, is intended to confer upon
any person, other than the parties hereto and their successors and assigns, any
rights or remedies under or by reason of this Agreement.
3.7 Successors And Assigns. Subject to the provisions of
Section 2.1, the provisions of this Agreement shall inure to the benefit of, and
shall be binding upon, the successors and permitted assigns of the parties
hereto.
3.8 Captions. The captions to sections of this Agreement have
been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.
3.9 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
MARKETWATCH.COM, INC. HOLDERS
CBS BROADCASTING INC.
By: /s/ J. PETER BARDWICK By: /s/ LOUIS J. BRISKMAN
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Name: J. Peter Bardwick Name: Louis J. Briskman
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Title: Chief Financial Officer Title: Executive Vice President
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and Secretary and General Counsel
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DATA BROADCASTING CORPORATION
By: /s/ MARK F. IMPERIALE
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Name: Mark F. Imperiale
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Title: President
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[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
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EXHIBIT A
STOCKHOLDERS
CBS BROADCASTING INC.
51 WEST 52ND STREET
NEW YORK, NY 10019
ATTENTION: FREDRIC REYNOLDS
LOUIS J. BRISKMAN
FACSIMILE: 212/975-9191
212/597-4031
DATA BROADCASTING CORPORATION
3955 POINT EDEN WAY
HAYWARD, CA 94545
ATTENTION: MARK IMPERIALE
FACSIMILE: 510/266-6018
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EXHIBIT 4.03
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (the "AGREEMENT") is made and entered into
as of January 13, 1999, by and among CBS Broadcasting Inc., a New York
corporation ("CBS"), and Data Broadcasting Corporation, a Delaware corporation
("DBC") (hereinafter referred to collectively as the "STOCKHOLDERS" and each
singly as "STOCKHOLDER"), MarketWatch.com, Inc., a Delaware corporation (the
"COMPANY"), and Marketwatch.Com LLC, a Delaware limited liability company (the
"LLC").
RECITALS
WHEREAS, the parties hereto are parties to a Merger Agreement, dated as
of the date hereof, pursuant to which the LLC will be merged with and into the
Company for the purpose of operating the business of the LLC in a corporate form
(the "MERGER");
WHEREAS, as a result of the Merger, the LLC will cease to exist,
however, the parties hereto desire to enter into this Stockholders' Agreement;
WHEREAS, the parties hereto also desire to amend certain provisions of
the Contribution Agreement (the "CONTRIBUTION AGREEMENT") dated as of October
29, 1997, between the Stockholders and the LLC;
NOW THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby, intending to be legally bound by the terms
hereof, agree as follows:
1. CERTAIN DEFINITIONS.
1.1 BUSINESS. The term "BUSINESS" means, collectively the Internet-based
business and financial news and information service offered by the Company,
which includes, without limitation, the businesses conducted with the assets
contributed to the Company by DBC pursuant to the Contribution Agreement as such
businesses may be expanded or otherwise changed from time to time by the
Company.
1.2 BUSINESS DAY. The term "BUSINESS DAY" means a day that is not a
Saturday, Sunday or other day on which banking institutions in the State of New
York are authorized or required by law, regulation or executive order to be
closed.
1.3 COMMON STOCK. The term "COMMON STOCK" means the Common Stock, $0.01
par value per share of the Company.
1.4 CONVERTIBLE SECURITIES. The term "CONVERTIBLE SECURITIES" mean any
securities convertible into or exchangeable for Voting Securities or any
options, warrants or other rights exercisable to acquire Voting Securities.
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1.5 INITIAL PERCENTAGE. The term "INITIAL PERCENTAGE" means the
percentage of then Total Voting Power of the Company represented by the Voting
Securities held by a Stockholder at the time of the consummation of the
Company's initial public offering.
1.6 OFFERED SECURITIES. The term "OFFERED SECURITIES" means all
Securities proposed to be Transferred by a Stockholder or, if applicable, an
affiliate of a Stockholder.
1.7 PERSON. The term "PERSON" means any natural person, legal entity, or
other organized group of persons or entities. (All pronouns, whether personal or
impersonal, which refer to Person include natural persons and other Persons).
1.8 SECURITIES. The term "SECURITIES" shall mean Voting Securities and
Convertible Securities.
1.9 TOTAL VOTING POWER. The term "TOTAL VOTING POWER" means, at any
time, the total number of votes that may be cast in the election of directors of
the Company at any meeting of the holders of Voting Securities held at such time
for such purpose.
1.10 TRANSFER and TRANSFERRED. The terms "TRANSFER" and "TRANSFERRED"
mean and include any sale, assignment, encumbrance, hypothecation, pledge,
conveyance in trust, gift, transfer by bequest, devise or descent, or other
transfer or disposition of any kind, including but not limited to, transfers to
receivers, levying creditors, trustees or receivers in bankruptcy proceedings or
general assignments for the benefit of creditors, whether voluntary or by
operation of law, directly or indirectly, except for:
(a) any transfer of Securities by CBS or DBC to any entity
controlling, controlled by or under common control with CBS or DBC, or to any
entity that acquires CBS or DBC by purchase of stock or by merger or otherwise;
(b) any transfer of Securities by a Stockholder made: (i)
pursuant to a statutory merger or statutory consolidation of the Company with or
into another corporation or corporations; or (ii) pursuant to the winding up and
dissolution of the Company; or
(c) any transfer of Securities by a Stockholder pursuant to a
Stockholder's exercise of such Stockholder's right of first refusal hereunder.
1.11 VOTING POWER. The term "VOTING POWER" means, as to any Voting
Security at any time, the number of votes such Voting Security is entitled to
cast for directors of the Company at any meeting of the holders of Voting
Securities held at such time for such purpose.
1.12 VOTING SECURITIES. The term "VOTING SECURITIES" means the Common
Stock and any other securities issued by the Company having the power to vote in
the election of directors of the Company, including without limitation any
securities having such power only upon the occurrence of a default or any other
extraordinary contingency.
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2. MANDATORY TRANSFERS.
2.1 DBC CHANGE OF CONTROL. Notwithstanding anything herein to the
contrary, and absent agreement of the Stockholders to do otherwise, CBS shall
have the right (but not the obligation) in its sole discretion to purchase DBC's
Securities or require that such Securities be transferred to an independent
trustee, as provided in Section 2.2 within 60 days after a competitor of CBS has
directly or indirectly acquired beneficial ownership of more than 30% of the
outstanding shares of the common stock, or securities representing, in the
aggregate, more than 30% of the voting power, of DBC (or any person controlling
DBC), or all or substantially all of DBC's assets (a "DBC CHANGE OF CONTROL"),
at a time when DBC and its affiliates shall then own in the aggregate a number
of shares of Common Stock equal to at least ten percent (10%) of the outstanding
shares of Common Stock on the IPO Closing Date (defined below) (appropriately
adjusted to reflect any stock splits, reverse stock splits, stock dividends,
recapitalizations and other similar transactions occurring subsequent to the IPO
Closing Date), without the prior written consent of CBS (a "TRIGGERING EVENT").
The parties hereby agree that DBC may give CBS confidential written notice of
its intent to enter into an agreement which would cause a DBC Change of Control,
together with a description of the party with whom DBC intends to effect such a
transaction. CBS shall have twenty (20) days from receipt of such notice to
respond to DBC in writing as to whether it would elect to trigger the provisions
of this Section 2 with respect to such potential DBC Change of Control. If, and
only if, CBS notifies DBC in writing that it would not make such election, CBS
shall be deemed to have waived its right to trigger such mandatory transfer
provisions with respect to such potential DBC Change of Control.
2.2 TRANSFER OF SHARES. Upon the occurrence of a DBC Change of Control,
CBS may elect one of the following within 45 days after written notice from DBC
that a DBC Change of Control has occurred:
(a) (i) CBS may offer to purchase the Securities then held by
DBC and its affiliates, and DBC and its affiliates shall be required to sell to
CBS, such sale to occur no later than 10 days after DBC's receipt of CBS'
written offer to purchase such Securities, at a purchase price for the
Securities held by DBC and its affiliates equal to the Fair Market Value of the
Securities on the date of the Triggering Event.
(ii) Notwithstanding the foregoing provisions of Section
2.2(a)(i), if (y) any legal or regulatory requirements, including, without
limitation, those imposed by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended must be first satisfied prior to making such sale or (z) the
Fair Market Value must be determined according to the terms of subsection (b) of
the definition of Fair Market Value, then such sale shall be made within two
days of the satisfaction of such legal requirements or of the determination of
the Fair Market Value of the Securities, as applicable.
(iii) Upon the date that payment is made for the
Securities, DBC and its affiliates will have no further rights as a holder of
such Securities and DBC and its affiliates will forthwith cause all
certificate(s) evidencing such Securities to be surrendered to the Company or
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its transfer agent for cancellation and new certificates evidencing such
Securities will be promptly delivered to CBS.
(b) CBS may require DBC to transfer all Securities then held by
DBC and its affiliates to an independent trustee reasonably satisfactory to CBS,
which trustee shall then dispose of such Securities formerly held by DBC and its
affiliates to purchaser(s) that is/are not competitor(s) of CBS, subject to the
foregoing, in such a manner as such trustee shall determine with a view to
maximizing the sale price of the shares formerly held by DBC and its affiliates,
while disposing of such shares as promptly as reasonably practicable. Upon such
transfer, such trustee shall have sole voting and dispositive control over such
Securities, DBC shall no longer be entitled to appoint any DBC Designees and all
current DBC Designees shall resign from their positions as members of the
Company's Board of Directors. Unless otherwise agreed in writing by CBS, any
trustee appointed pursuant to this Section 2.2(b) shall be a bank or trust
company incorporated or otherwise organized under the laws of the United States
or a state thereof and having a combined capital and surplus of at least
$100,000,000. The provisions of Article 8 of this Agreement shall not be
applicable to such trustee. Any such trustee shall perform its duties upon
customary terms pursuant to documentation reasonably satisfactory to CBS, it
being understood and agreed that, without the prior written consent of CBS, no
such trustee shall vote any Securities held by it at any meeting of the
stockholders of the Company or otherwise.
"FAIR MARKET VALUE" of the Securities shall mean (a), for any
Security that is listed on a national securities exchange or authorized for
trading on the National Association of Securities Dealers Nasdaq Stock Market or
other automated quotation system, the average of the closing prices for the five
day period ending on the date of the Triggering Event; and (b), for any other
Security, such price as is determined by an appraiser chosen by the members of
the Company's Board of Directors who are neither employees of the Company, CBS
Designees (defined below) or DBC Designees (defined below) or otherwise
affiliated with or employed by either of CBS, DBC or one of their respective
affiliates (other than as serving as an independent member of the Company's
Board of Directors) (the "INDEPENDENT DIRECTORS"). If there are no Independent
Directors, then Fair Market Value for purposes of this Subsection (b) only,
shall be determined by a panel of appraisers, one (1) chosen by CBS, one (1)
chosen by DBC and the third to be chosen by the first two (2) appraisers. If the
appraisers cannot reach agreement within thirty (30) days of the date of the
Triggering Event, then each appraiser shall deliver its appraisal within 40 days
of the Triggering Event and the appraisal which is neither the highest nor the
lowest shall constitute the Fair Market Value. In the event either Stockholder
fails to choose an appraiser within thirty (30) days of the date of the
Triggering Event, then the appraisal of the sole appraiser shall constitute the
Fair Market Value. Each party shall bear the cost of the appraiser selected by
such Stockholder and the cost of the third appraiser shall be borne one-half by
each Stockholder. In the event either party fails to choose an appraiser, the
cost of the sole appraiser shall be borne one-half by each Stockholder.
2.3 TERMINATION PAYMENT. Upon the termination of the Amended and
Restated License dated as of the date hereof between CBS and the Company (the
"AMENDED AND RESTATED LICENSE") in accordance with its terms, CBS may elect to
terminate its advertising obligation under Section 1.04 of the Contribution
Agreement. In the event CBS elects to exercise this
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termination right, CBS shall pay to the Company a cash payment in the amount of
$500,000 times the number of full calendar months from the date of such
termination remaining until October 2002.
3. AGREEMENT NOT TO COMPETE.
3.1 AGREEMENT OF DBC NOT TO COMPETE. DBC understands that the Company
shall be entitled to protect and preserve the going concern value of the
Business to the extent permitted by law and, therefore, until October 29, 2005,
DBC shall not, and DBC shall not authorize or permit another Person to, without
the prior written consent of the Company:
(a) (i) sell advertising on an Internet Web site that has as its
primary function and as 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 (ii) use the Internet to sell real-time
snap-quotes to individual subscribers or customers who pay a fee for such
information ("COMPETITIVE ACTIVITIES");
(b) solicit, recruit or hire any employees of the Business or
person who has worked for the Business;
(c) solicit or encourage any employee of the Business to leave
the employment of the Business; and
(d) disclose or furnish to anyone any confidential information
relating to the Business or otherwise using such confidential information for
its own benefit or the benefit of any other person.
The Company acknowledges that the maintenance and
continued operation of the dbc.com Web site by DBC shall not be considered to be
a violation of this Section 3.1 provided that dbc.com does not engage in any
Competitive Activities. In addition, this Section 3.1 shall not be deemed
breached as a result of the maintenance, operation, sale or transmission over
the Internet of DBC's existing products, including, but not limited to, Bond Vu,
BondEdge, InSite, Signal Online, and StockEdge Online.
3.2 NON-COMPETING ACTIVITIES. The Company acknowledges and agrees that
the following are either not within the express terms of the prohibitions
contained in Section 3.1 or, if so, shall nevertheless be excluded from said
prohibitions:
(a) the ownership by DBC of less than an aggregate of 5% of any
class of stock of a Person engaged, directly or indirectly, in Competitive
Activities;
(b) the ownership by DBC of less than 10% in value of any
instrument of indebtedness of a Person engaged, directly or indirectly, in
Competitive Activities;
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(c) an Internet service or Web site that delivers general news
or sports or entertainment content with a financial news segment or portion
included, will not be considered to have as its primary function or as 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;
(d) an Internet service or Web site will not be considered to
have as its primary function or as 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 solely on the basis of its providing a
stock price ticker crawl line;
(e) any activity conducted by DBC and/or its Affiliates as of
January 13, 1999, the execution date of this Agreement; or
(f) any Internet services in which DBC has an interest as of
January 13, 1999, the execution date of this Agreement.
3.3 AGREEMENT OF THE COMPANY NOT TO COMPETE. The Company agrees that
subsequent to the date hereof through October 29, 2005 or, at such earlier time
(i) as the Amended and Restated Services Agreement has terminated, (ii) upon the
occurrence of a DBC Change of Control, or (iii) at such time as DBC shall hold
less than 10% of the then-outstanding Voting Securities, it will not, except
through DBC, sell any product or service that offers streaming real-time stock
price quotes.
3.4 ENFORCEMENT. Notwithstanding any other provision of this Agreement,
it is understood and agreed that the remedies at law would be inadequate in the
case of any breach of the covenant contained in Sections 3.1 or 3.3. Therefore,
the Company or DBC, as the case may be, shall be entitled to equitable relief,
including the remedy of specific performance, with respect to any breach or
attempted breach of such covenant.
3.5 TERMINATION. The Stockholders and the Company acknowledge that the
provisions of this Section 3 shall terminate and cease to apply in the event
that the Company is dissolved or liquidated.
4. DBC CONTRIBUTION. DBC acknowledges that as of each of October 29, 1997
and October 29, 1998, it had contributed $1,000,000 to the LLC.
5. ASSIGNMENT OF CONTRIBUTION AGREEMENT.
5.1 ASSIGNMENT AND ASSUMPTION. Effective immediately upon the date of
this Agreement, the LLC hereby assigns, transfers, and sets over to the Company
all of LLC's right, title, and interest in and to the Contribution Agreement and
its rights and obligations thereunder
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and the Company does hereby agree to assume and does hereby assume all of the
obligations and liabilities of LLC related to the Contribution Agreement.
5.2 CONSENT OF CBS AND DBC. Each of CBS and DBC consent to the
assignment and assumption provided for in Section 5.1 hereof.
6. AMENDMENTS TO CONTRIBUTION ARRANGEMENT.
6.1 AMENDMENTS
(a) Section 1.04 of the Contribution Agreement is hereby amended
to delete the reference to "$50 million" in the fifth line thereof and insert
"$30 million" therefor and by adding the CBS termination rights described in
Section 2.3 hereof.
(b) Exhibit B to the Contribution Agreement is deleted and
replaced in its entirety with the Amended and Restated License Agreement
attached hereto as Exhibit 5.1(b).
(c) Exhibit C to the Contribution Agreement is deleted and
replaced in its entirety with the Amended and Restated Services Agreement
attached hereto as Exhibit 5.1(c).
(d) Exhibit D to the Contribution Agreement is amended by
deleting the last sentence of paragraph 2 thereto.
6.2 FULL FORCE. Except as expressly amended hereby, the Contribution
Agreement shall remain in full force and effect, except to reflect the change of
the LLC's organization from a limited liability company to a corporation as a
result of the Merger.
7. DIRECTOR NOMINATION RIGHTS.
7.1 BOARD SIZE. The Company shall maintain a Board of Directors of at
least seven (7) members and shall use its best efforts to maintain a Board of
Directors of nine (9) members immediately after the IPO Closing Date (defined
below).
7.2 DESIGNEE. For so long as CBS continues to own a number of Voting
Securities equal to at least one percent (1%) of the Company's outstanding
Voting Securities, the Company shall provide CBS, and for so long as DBC
continues to own a number of Voting Securities equal to at least one percent
(1%) of the outstanding Voting Securities, the Company shall provide DBC, thirty
(30) days prior written notice of any Stockholder solicitation or action
relating to the election of directors. After receipt of such notice by DBC, DBC
may, and after receipt of such notice by CBS, CBS may, by written notice sent to
the Company within ten (10) days of receipt of such notice, request that the
Company nominate, and the Company shall nominate, for election to the Company's
Board of Directors (the "BOARD OF DIRECTORS"), in connection with such
Stockholder solicitation or action:
(a) one, if CBS holds a number of Voting Securities greater than
or equal to one percent (1%) but less than twenty percent (20%) of the Company's
outstanding Voting
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Securities, two, if CBS holds a number of Voting Securities greater than or
equal to twenty percent (20%) but less than thirty percent (30%) of the
Company's outstanding Voting Securities, and three, if CBS holds a number of
Voting Securities greater than or equal to thirty percent (30%) of the
outstanding Voting Securities, candidates designated in the CBS notice, who
shall be reasonably acceptable to the Company (collectively, the "CBS
DESIGNEES"); and
(b) one, if DBC holds a number of Voting Securities greater than
or equal to one percent (1%) but less than twenty percent (20%) of the Company's
outstanding Voting Securities, two, if DBC holds a number of Voting Securities
greater than or equal to twenty percent (20%) but less than thirty percent (30%)
of the outstanding Voting Securities, and three, if DBC holds a number of
Company's outstanding Voting Securities greater than or equal to thirty percent
(30%) of the Company's outstanding Voting Securities, candidates designated in
the DBC notice, who shall be reasonably acceptable to the Company (collectively,
the "DBC DESIGNEES").
In the event that CBS or DBC shall desire to appoint CBS Designees or
DBC Designees, as applicable, otherwise than in connection with a Stockholder
solicitation or action relating to the election of directors, then as soon as
practicable upon written notice from CBS or DBC, as applicable, the Company
shall appoint the CBS Designees or DBC Designees, as applicable, to the Board of
Directors.
In the event that the size of the Company's Board of Directors is
increased to a number greater than nine (9), the number of CBS and DBC Designees
shall be a number equal to the product of (A) the percentage of outstanding
Voting Securities held by such Stockholder times (B) the number of authorized
members of the Company's Board of Directors, rounded up to the nearest whole
number.
Notwithstanding the foregoing, for so long as the Amended and Restated
License remains in effect, CBS shall be entitled to select at least one CBS
Designee, regardless of the number of Voting Securities held by it.
7.3 AFFILIATES. For purposes of this Agreement, all shares held by an
affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933,
as amended (the "SECURITIES ACT")) (each, an "AFFILIATE") of CBS or DBC, will be
deemed to be owned by CBS or DBC, as applicable.
7.4 VOTING OF SHARES.
(a) The Company shall use its best efforts (i) to cause to be
voted the shares of Voting Securities for which the Company's management or the
Board of Directors holds proxies or is otherwise entitled to vote in favor of
the election of the CBS Designees and DBC Designees nominated pursuant to
Section 7.2 to this Agreement; and (ii) to cause the Board of Directors to
unanimously recommend to its stockholders to vote in favor of the CBS Designees
and the DBC Designees.
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(b) Each of CBS and DBC shall vote the shares of Voting
Securities held by it for the CBS Designees and the DBC Designees.
7.5 VACANCIES. In the event that any CBS or DBC Designee shall cease to
serve as a director of the Company for any reason, the vacancy resulting
therefrom shall be filled by another CBS Designee or DBC Designee, as
applicable.
7.6 EQUAL TREATMENT. The Company shall offer the same compensation and
shall provide rights and benefits of indemnity to each CBS Designee or DBC
Designee as are provided to other non-employee directors, provided however, that
none of the CBS Designees or DBC Designees shall be entitled to participate in
the Company's proposed 1998 Directors Stock Option Plan or any other equity
based plan.
8. RIGHT OF FIRST REFUSAL.
8.1 NOTICE. Before any Stockholder or affiliate of any Stockholder may
effect any Transfer of any Securities, such Stockholder or affiliate (the
"SELLING STOCKHOLDER") must give at the same time to the Company and the other
Stockholder a written notice signed by the Selling Stockholder (the "SELLING
STOCKHOLDER'S NOTICE") stating (a) the Selling Stockholder's bona fide intention
to transfer such Offered Securities; (b) the number of Offered Securities
proposed to be transferred to each proposed purchaser or other transferee
("PROPOSED TRANSFEREE"); (c) the name, address and relationship, if any, to the
Selling Stockholder of each Proposed Transferee; and (d) the bona fide cash
price or, in reasonable detail, other consideration, per share for which the
Selling Stockholder proposes to transfer such Offered Securities to each
Proposed Transferee (the "OFFERED PRICE") and the proposed time of payment and
other relevant terms of the proposed sale. If such Selling Stockholder desires
to effect sales into the open market pursuant to Rule 144 promulgated under the
Securities Act ("OPEN MARKET SALE"), the Selling Stockholder's Notice shall also
contain the closing price of the Securities on the date prior to the date of
such notice which price shall constitute the Offered Price. Upon the request of
the Company or the other Stockholder, the Selling Stockholder will promptly
furnish to the Company and to the other Stockholder such other information as
may be reasonably requested to establish that the offer and Proposed
Transferee(s) are bona fide. In the event that the notice provisions of this
Section 8 make it impractical or impossible to comply with the notice provisions
of Section 1 of the Registration Rights Agreement, the parties hereto agree that
the notice provisions of the Registration Rights Agreement shall be modified or
waived to the extent necessary so as to permit the operation of this Section 8
in conjunction with the provisions of Section 1 of the Registration Rights
Agreement.
8.2 STOCKHOLDERS' RIGHT OF FIRST REFUSAL. The non-Selling Stockholder
will have a right of first refusal (the "RIGHT OF FIRST REFUSAL") to purchase
any portion of the Offered Securities made available for purchase in the manner
provided in this Section 8.2 unless (a) the Offered Securities are to be sold in
a private sale to one purchaser, in which case the non-Selling Stockholder will
only be permitted to exercise its Right of First Refusal if it purchases all of
the Offered Securities, or (b) the Selling Stockholder is selling the Offered
Securities through a registered offering and the quantity of Offered Securities
that the non-Selling Stockholder
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proposes to purchase would, in the good faith opinion of the managing
underwriter, jeopardize the success of the offering. In such a circumstance, the
non-Selling Stockholder will only be permitted to purchase either all of the
Offered Securities or such Offered Securities, if any, that would not, in the
good faith opinion of the managing underwriter, jeopardize the success of such
offering. If the non-Selling Stockholder desires to purchase any or all, as
applicable, of the Offered Securities made available for purchase such
Stockholder must give written notice within the fifteen (15) day period
commencing on the date of the Selling Stockholder's Notice (the "REFUSAL
PERIOD"), to the Selling Stockholder (the "PURCHASE NOTICE") and to the Company
of such Stockholder's election to purchase the Offered Securities, and the
number of shares and type of Offered Securities that such Stockholder desires to
purchase, provided however, that in the case of a proposed Open Market Sale, the
non-Selling Stockholder must give the Purchase Notice prior to 5:00 pm. Pacific
time on the second Business Day after the non-Selling Stockholder receives the
Purchase Notice.
8.3 PURCHASE PRICE. The purchase price for the Offered Securities to be
purchased by the non-Selling Stockholder exercising its Right of First Refusal
under this Agreement will be the Offered Price, and will be payable as set forth
in Section 8.4 hereof. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration will be the Fair
Market Value of such noncash consideration.
8.4 PAYMENT. Payment of the purchase price for Offered Securities
purchased by a Stockholder exercising its Right of First Refusal will be made in
cash within ten (10) days after the date of the Purchase Notice, or if any legal
or regulatory requirements, including, without limitation, those imposed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, must be first satisfied
prior to making such payment, within two (2) days after the satisfaction of such
legal requirements.
8.5 RIGHTS OF STOCKHOLDER. Upon the date that payment is made for the
Offered Securities purchased by the non-Selling Stockholder pursuant to the
Right of First Refusal hereunder, the Selling Stockholder will have no further
rights as a holder of such Offered Securities and the Selling Stockholder will
forthwith cause all certificate(s) evidencing such Offered Securities to be
surrendered to the Company or its transfer agent for cancellation and new
certificates evidencing such Offered Securities will be promptly delivered to
the purchasing Stockholder.
8.6 SELLING STOCKHOLDER'S RIGHT TO TRANSFER. If the non-Selling
Stockholder has not elected pursuant to its Right of First Refusal to purchase
all or a portion, as applicable, of the Offered Securities, the Selling
Stockholder may Transfer the Offered Securities to any person named as a
Proposed Transferee in the Selling Stockholder's Notice, at the Offered Price or
at a higher price, provided that such transfer (a) is consummated within one
hundred twenty (120) days after the date of the Selling Stockholder's Notice and
(b) is in accordance with the terms and conditions of this Agreement; provided
however, that in the case of a proposed Open Market Sale, such transfers must
take place within the six (6) week period following the date of the Selling
Stockholder's Notice. If the Offered Stock is transferred in accordance with the
terms and conditions of this Agreement to a non-affiliate, then the
transferee(s) of the Offered Stock
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will thereafter hold such Offered Securities free of the Right of First Refusal
and all other restrictions imposed by this Agreement. If the Offered Securities
are not so transferred during such one hundred twenty (120) day period or such
six (6) week period, as the case may be, then the Selling Stockholder will not
transfer any of such Offered Stock without complying again in full with the
provisions of this Agreement.
8.7 CERTAIN TRANSFERS.
Notwithstanding the foregoing:
(i) If the Offered Securities will be sold by means of a
registered underwritten offering, then the Selling Stockholder's Notice need not
name any Proposed Transferee if such notice (x) states that the Offered
Securities will be sold by means of a broadly distributed offering and (y)
contains the proposed underwriter's good faith estimate of the public offering
price (the "PROPOSED PUBLIC OFFERING PRICE") based on then-current market
conditions. If the non-Selling Stockholder does not elect, pursuant to its Right
of First Refusal, to purchase all or a portion, as applicable, of the Offered
Securities at the proposed Public Offering Price, the Selling Stockholder may
transfer such Offered Securities as the non-Selling Stockholder has not elected
to so purchase at prices that are based on the prevailing market price for the
Offered Securities at the time of the sale of such Offered Securities even if
such market price is lower than the Proposed Public Offering Price.
(ii) If the Offered Securities will be sold pursuant to block
trades or other brokerage transactions, then the Selling Stockholder's Notice
need not name any Proposed Transferee nor any Offered Price. If the non-Selling
Stockholder does not elect, pursuant to its Right of First Refusal, to purchase
all of the Offered Securities on the date of the Selling Stockholder's Notice at
the closing market price for the Offered Securities on the date of the Selling
Stockholder's Notice, the Selling Stockholder may transfer such Offered
Securities at prices that are based on the prevailing market price in effect for
the Offered Securities at the time of the sale of such Offered Securities
through block trades or other brokerage transaction, even if such market price
is lower than the closing market price for such Offered Securities on the date
of the Selling Stockholder's Notice.
8.8 LEGEND. Each Stockholder understands and agrees that the Company
will cause the legend set forth below, or a legend substantially equivalent
thereto, to be placed upon any certificate(s) or other documents or instruments
evidencing ownership of Securities by the Stockholder:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RIGHTS OF FIRST REFUSAL AS SET FORTH IN A
STOCKHOLDERS' AGREEMENT DATED AS OF JANUARY __, 1999
ENTERED INTO BY THE HOLDER OF THESE SHARES, THE COMPANY
AND CERTAIN STOCKHOLDERS OF THE COMPANY. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
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<PAGE> 12
THE COMPANY. SUCH RIGHT OF FIRST REFUSAL IS BINDING ON
CERTAIN TRANSFEREES OF THESE SHARES.
The Company will cause such legend to be removed upon the termination of this
Agreement.
8.9 STOCK TRANSFER INSTRUCTIONS. Each Stockholder agrees, to ensure
compliance with the restrictions referred to herein, that the Company may issue
appropriate "stop transfer" certificates or instructions and that, if the
Company transfers its own securities, it may make appropriate notations to the
same effect in its records.
9. PARTICIPATION RIGHTS.
9.1 NEW SECURITIES. If from time to time the percentage of the Total
Voting Power represented by the Voting Power of all Voting Securities then
owned, directly or indirectly, by a Stockholder (the "APPLICABLE PERCENTAGE")
would be reduced as a result of any issuance of Voting Securities by the Company
or could be reduced as a result of any issuance of Convertible Securities by the
Company (in either case, whether for cash, property or otherwise and, such
securities are referred to herein as "NEW SECURITIES"), the Company shall so
notify the Stockholder in writing not less than ten (10) Business Days prior to
the proposed date of any such issuance and shall offer to sell to the
Stockholder, and, if such offer is accepted in writing by (x) if such issuance
is made pursuant to an underwriting or private placement purchase agreement, the
second Business Day prior to the date of execution of any such agreement (it
being understood that the Company will give the Stockholder at least four (4)
Business Day's prior notice of such date of execution) or (y) if such issuance
is not made pursuant to such an agreement, the fifth (5th) Business Day prior to
the proposed date of such issuance, the Company shall sell to the Stockholder
that portion of the Voting Securities or Convertible Securities to be issued
which would result in such Stockholder's Applicable Percentage immediately prior
to such issuance equaling the Stockholder's Applicable Percentage in effect
immediately prior to such issuance (assuming, in the case of Convertible
Securities, the conversion, exchange or exercise at such time of all Convertible
Securities), or any lesser portion of the Voting Securities or Convertible
Securities to be issued in such issuance as may be designated by the
Stockholder, in either case at a price per share or other trading unit of such
Voting Securities or Convertible Securities, as the case may be, equal to the
price per share or other trading unit of such Voting Securities or Convertible
Securities, as the case may be, to be received by the Company in such issuance,
less any underwriting discounts and commissions (the "PURCHASE PRICE"), and
otherwise on the same terms as may be applicable to such issuance; provided,
however, that a Stockholder shall not be entitled to purchase such Voting
Securities or Convertible Securities from the Company pursuant to this Section
9.1 to the extent that such purchase would cause such Stockholder to own,
directly or indirectly, Voting Securities representing an aggregate Voting Power
in excess of a percentage of the Total Voting Power of the Company equal to the
Initial Percentage after giving effect to the proposed issuance; provided,
further, however, that the preceding provisions shall not apply to issuances of:
(a) up to an aggregate of 1,500,000 shares of the Company's
Common Stock (and/or options or warrants therefor) issued to employees,
officers, directors, contractors,
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advisors or consultants of the Company pursuant to incentive agreements or plans
approved by the Board of Directors of the Company, such number of shares being
subject to proportional adjustment to reflect subdivisions, combinations and
stock dividends affecting the number of outstanding shares of such stock; or
(b) securities offered by the Company in its initial public
offering pursuant to a registration statement filed under the Securities Act; or
(c) up to an aggregate of 500,000 shares of the Company's Common
Stock (and/or options or warrants therefor) issued or issuable to parties as
approved by the Board of Directors for any corporate purpose, including, without
limitation, for providing the Company with equipment leases, real property
leases, loans, credit lines, guaranties of indebtedness, cash price reductions
or similar financing, such number of shares being subject to proportional
adjustment to reflect subdivisions, combinations and stock dividends affecting
the number of outstanding shares of such stock.
Notwithstanding the foregoing provisions, in the event the
Company proposes to issue Voting Securities or Convertible Securities for
consideration other than cash, then, in lieu of purchasing a portion of the
Voting Securities or Convertible Securities to be issued, the Stockholder shall
be entitled to require the Company to issue to such Stockholder at a per share
price equal to the Fair Market Value of the additional Voting Securities or
Convertible Securities such that immediately after such issuance, such
Stockholder's Applicable Percentage equals such Stockholder's Applicable
Percentage in effect immediately prior to such issuance (assuming, in the case
of Convertible Securities, the conversion, exchange or exercise at such time of
all Convertible Securities to be issued in such issuance). For purposes of
calculating the Fair Market Value of such additional Voting Securities or
Convertible Securities, the term "Triggering Event" shall mean the date of the
issuance of such Voting Securities or Convertible Securities for consideration
other than cash.
9.2 ADDITIONAL LIMITATIONS ON PARTICIPATION RIGHTS.
(a) Notwithstanding the provisions of Section 9.1, (i) if the
Company proposes to issue Voting Securities or Convertible Securities pursuant
to the first underwritten public offering of the Company subsequent to its
initial public offering (the "FIRST FOLLOW-ON OFFERING") and a Stockholder would
otherwise be entitled to purchase a portion of such Voting Securities pursuant
to the provisions of Section 9.1, and (ii) if, in the opinion of the
underwriters of such First Follow-On Offering, the public trading market for the
Company's Common Stock would be significantly adversely affected if the
Stockholders exercised their participation rights contained in Section 9.1 with
respect to an amount of Voting Securities or Convertible Securities such that
after exercise of such participation right, the Applicable Percentage of such
Stockholder would be in excess of 25% (assuming, in the case of Convertible
Securities, the conversion, exchange or exercise at such time of all Convertible
Securities), then the Stockholders shall be permitted to exercise their
participation rights specified in Section 9.1 in connection with the First
Follow-On Offering only to the extent that such Stockholder's Applicable
Percentage would not exceed 25% after giving effect to the First Follow-On
Offering, or such higher
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<PAGE> 14
percentage that would not, in the opinion of the underwriters of such First
Follow-On Offering, significantly adversely affect such offering.
(b) In the event that a Stockholder was unable to exercise the
participation rights set forth in Section 9.1 to the extent it would have
otherwise been able to exercise as a result of the provisions of Section 9.2(a),
then in the event the Company proposes to issue Voting Securities or Convertible
Securities subsequent to the First Follow-On Offering, such Stockholder shall be
entitled to purchase up to that portion of the Voting Securities or Convertible
Securities to be issued or to purchase from the Company up to a number of
additional Voting Securities or Convertible Securities pursuant to Section 9.1
such that the Applicable Percentage of such Stockholder immediately after such
purchase equals no more than such Stockholder's Applicable Percentage (not to
exceed such Stockholder's Initial Percentage) immediately prior to the First
Follow-On Offering (assuming, in the case of Convertible Securities, the
conversion, exchange or exercise at such time of all Convertible Securities).
9.3 FAILURE TO EXERCISE. In the event that a Stockholder fails to
exercise the participation right within such ten (10) day period, then the
Company shall have 120 days thereafter to sell the New Securities with respect
to which the Stockholder's participation rights hereunder were not exercised, at
a price and upon general terms not materially more favorable to the purchasers
thereof than specified in the Company's notice to the Stockholders. In the event
that the Company has not issued and sold the New Securities within such 120 day
period, then the Company shall not thereafter issue or sell any New Securities
without again first offering such New Securities to the Stockholders pursuant to
this Section 9.
10. SECTION 5.08 OF THE LLC AGREEMENT. Section 5.08 of the LLC's limited
liability company agreement, dated as of October 29, 1997 (the "LLC AGREEMENT"),
establishes the manner in which the Stockholders, as members of the LLC, will
treat contributions to the LLC for U.S. Federal income tax purposes. In order to
induce the Stockholders to enter into this Agreement and to consummate the
transactions identified herein, the Company agrees that it will not take any
action that contradicts or is inconsistent with such agreed treatment of
contributions to the LLC for U.S. Federal income tax purposes unless a final
determination (which shall include the execution of a Form 870-AD or successor
form) requires a different treatment.
11. TERM. This Agreement shall terminate on October 29, 2005.
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<PAGE> 15
12. GENERAL PROVISIONS.
12.1 NOTICES. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if deposited in the U.S. mail by registered or
certified mail, return receipt requested, postage prepaid, as follows:
(a) if to the Company, at:
MarketWatch.com, Inc.
825 Battery Street
San Francisco, CA 94111
Attention: J. Peter Bardwick
Facsimile: 415/392-1972
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Mark C. Stevens
Facsimile: 650/494-1417
(b) If to CBS:
51 West 52nd Street
New York, NY 10019
Attention: Fredric G. Reynolds
Louis J. Briskman
Facsimile: 212/975-9191
212/597-4031
(c) If to DBC:
Data Broadcasting Corporation
3955 Point Eden Way
Hayward, CA 94545
Attention: Mark F. Imperiale
Facsimile: 510/266-6018
Any party hereto (and such party's permitted assigns) may by notice so given
provide and change its address for future notices hereunder. Notice shall
conclusively be deemed to have been given when personally delivered or five (5)
days after being deposited in the mail in the manner set forth above.
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<PAGE> 16
12.2 ENTIRE AGREEMENT. This Agreement constitutes and contains the
entire agreement and understanding of the parties with respect to the subject
matter hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting
the subject matter hereof.
12.3 AMENDMENT OF RIGHTS. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the parties hereto (and/or any of their permitted successors or
assigns).
12.4 GOVERNING LAW. This Agreement shall be governed by and construed
exclusively in accordance with the laws of the State of Delaware, excluding that
body of law relating to conflict of laws.
12.5 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, then such provision(s) shall be
excluded form this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
12.6 THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.
12.7 SUCCESSOR AND ASSIGNS. The provisions of this Agreement shall inure
to the benefit of, and shall be binding upon, the successors and permitted
assigns of the parties hereto.
12.8 CAPTIONS. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
12.9 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
12.10 NO ASSIGNMENT. No party hereto may assign any of its rights or
obligations hereunder without the prior written consent of the other parties
hereto and any attempt to do so will be void.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
DATA BROADCASTING CORPORATION CBS BROADCASTING INC.
By: /s/ MARK F. IMPERIALE By: /s/ LOUIS J. BRISKMAN
---------------------------------- -----------------------------------
Name: Mark F. Imperiale Name: Louis J. Briskman
-------------------------------- ----------------------------------
Title: President Title: Executive Vice President and
------------------------------- General Counsel
---------------------------------
MARKETWATCH.COM, INC. MARKETWATCH.COM, LLC
By: /s/ J. PETER BARDWICK By: /s/ J. PETER BARDWICK
---------------------------------- -----------------------------------
Name: J. Peter Bardwick Name: J. Peter Bardwick
-------------------------------- ----------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
and Secretary and Secretary
------------------------------- ---------------------------------
[SIGNATURE PAGE TO STOCKHOLDERS' AGREEMENT]
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<PAGE> 1
EXHIBIT 10.07
AMENDED AND RESTATED LICENSE AGREEMENT
This AGREEMENT made on January 13, 1999, and effective as of the 29th
day of October, 1997, by and between CBS Broadcasting, Inc. (formerly known as
CBS Inc.), 51 West 52nd Street, New York, New York 10019 (herein called "CBS"),
and Marketwatch.Com, LLC, 825 Battery St., San Francisco, CA 94111 (herein
called "MarketWatch") hereby amends and restates the License Agreement entered
into between the parties as of October 29, 1997 (that was attached to and formed
a part of the CONTRIBUTION AGREEMENT, dated as of October 29, 1997, between CBS,
INC., DATA BROADCASTING CORPORATION ("DBC") and MARKETWATCH.COM,LLC).
1. DEFINITIONS
1.1 "Acquired Business" means a corporation, partnership, limited
liability company, other business entity or division of any of the foregoing or
assets of the foregoing constituting a business or line of business acquired by
the Company or any of its subsidiaries.
1.2 "CBS Content Pages" means pages of the MarketWatch Site that include
any CBS News Content.
1.3 "CBS License Guidelines and Restrictions" or "CBS License
Guidelines" means the clearance, form, format and use restrictions and
procedures set forth in Exhibit 2 attached hereto which MarketWatch shall adhere
to in its use of CBS News Content, CBS Marks, MarketWatch Site Content on the
MarketWatch Site.
1.4 "CBS Marks" means the following CBS registered trademarks, as shown
in Exhibit 1 attached hereto: CBS(R) and the CBS "Eye" design.
1.5 "CBS News Content" means any current news Television Content
(excluding, for avoidance of doubt, any archival Content or television/radio
program outtakes and the content to be supplied by MarketWatch to CBS in
connection with the Broadcast Personnel Agreement to be entered into between the
parties herewith) related to business and financial issues and contained in CBS
News' regularly scheduled hard news broadcasts, scheduled special events
coverage and unscheduled live breaking news coverage which CBS has the right to
license for use on the Internet. (Nothing herein shall be construed to grant
MarketWatch any rights to CBS Radio Content or any Content of CBS Cable [i.e.,
Content contained in coverage or broadcasts of the CBS Radio division of CBS
and/or CBS Cable]).
1.6 "Content" means text, graphics, photographs, video, audio and/or
other data or information, including, without limitation, Television Content,
relating to any subject.
1.7 "Core Business" means an Internet service or Web site that (i)
provides information or services of a financial nature, including without
limitation the delivery of financial news or real-time or delayed stock market
quotations to consumers, or (ii) uses the CBS Marks.
1.8 "Date and Time Network Guidelines" means the guidelines issued by
CBS which restrict any advertisement from disclosing the date and time of the
program or event advertised.
<PAGE> 2
1.9 "Intellectual Property Rights" means all inventions, discoveries,
trademarks, patents, trade names, copyrights, moral rights, jingles, know-how,
intellectual property, software, shop rights, licenses, developments, research
data, designs, technology, trade secrets, test procedures, processes, route
lists, computer programs, computer discs, computer tapes, literature, reports
and other confidential information, intellectual and similar intangible property
rights, whether or not patentable or copyrightable (or otherwise subject to
legally enforceable restrictions or protections against unauthorized third party
usage), and any and all applications for, registrations of and extensions,
divisions, renewals and reissuance of, any of the foregoing, and rights therein,
including without limitation (a) rights under any royalty or licensing
agreements, and (b) programming and programming rights, whether on film, tape or
any other medium.
1.10 "Internet" means global network of interconnected computer
networks, each using the Transmission Control Protocol/Internet Protocol and/or
such other standard network interconnection protocols as may be adopted from
time to time, which is used to transmit Content that is directly or indirectly
delivered to a computer or other digital electronic device for display to an
end-user, whether such Content is delivered through on-line browsers, off-line
browsers, or through "push" technology, electronic mail, broadband distribution,
satellite, wireless or otherwise, and any subset of such global network, such as
"intranets."
1.11 "Internet Site" means any site or service delivering Content on or
through the Internet, including, without limitation, any on-line service such as
America Online, Compuserve, Prodigy and the Microsoft Network.
1.12 "MarketWatch Content" means any Content owned or controlled by
MarketWatch other than CBS Property (as defined in subparagraph 7.1(a)).
1.13 "MarketWatch Site" means the Internet Web sites owned or controlled
by MarketWatch as of the effective date of this Agreement that provide stock
quotes, personal finance information and business, stock stories and that are
accessed via (i) the top-level domains Marketwatch.com and Stockchat.com, (ii)
the URLs http://cbs.marketwatch.newsalert.com,
http://www.marketwatch.newsalert.com and http://www.marketwatchrt.newsalert.com
(or any successor URLs), (iii) the URL http://www.dbc.com (so long as
www.dbc.com serves only as an entry point to the foregoing URLs); and (iv) any
Mirror Site.
1.14 "Mirror Site" means an Internet Site which contains the exact form
and content as the MarketWatch Site which (a) is located at a geographic
location distinct from the MarketWatch Site and (b) is created for the purpose
of improving the performance of and accessibility to the MarketWatch Site. For
purposes of clarification, a mirror site may be used only in accordance with the
preceding purposes.
1.15 "Person" means any natural person, legal entity, or other organized
group of persons or entities. (All pronouns whether personal or impersonal,
which refer to Person include natural persons and other Persons.)
1.16 "Television Content" consists of Content broadcast on television.
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<PAGE> 3
2. LICENSE
2.1 CBS grants to MarketWatch, during the term of this Agreement and
subject to the terms and conditions contained herein, the non-exclusive right
and license:
(a) to use, copy, publicly display, edit, revise, perform,
distribute or otherwise make available on or through the MarketWatch Site, the
CBS News Content, to the extent CBS has the right to so license such Content.
CBS agrees that users of the MarketWatch Site may view, access, retrieve, copy
and print only for noncommercial private use any CBS News Content distributed
hereunder on the MarketWatch Site.
(b) to use the CBS Marks, together with the MARKETWATCH mark, in
connection with MarketWatch's advertising, promotion and operation of the
MarketWatch Site.
(c) to use the CBS Marks in connection with identifying,
marketing and promoting MarketWatch Content to third-parties, provided that such
MarketWatch Content is also branded with the MARKETWATCH mark.
Nothing in this Agreement grants MarketWatch ownership or other rights in or to
the CBS News Content or the CBS Marks, except in accordance and to the extent of
this license.
2.2 MarketWatch's exercise of the rights granted herein shall conform to
the restrictions or requirements set forth in the CBS License Guidelines
(attached hereto as Exhibit 2), as such License Guidelines may be amended or
revised from time to time by CBS, in its reasonable discretion, to reflect any
changes in the business, practice, procedures or policies of CBS.
2.3 (a) MarketWatch shall have access to all CBS News Content, and,
subject to the conditions stated in the next sentence, CBS shall deliver, at
times reasonably requested by MarketWatch, all CBS News Content in a mutually
agreed form and format (including, for avoidance of doubt, video and text, to
the extent reasonably possible). CBS shall have the right to refuse to deliver
to MarketWatch any CBS News Content if, in CBS's sole discretion, the CBS News
Content or the use contemplated, conflicts with, interferes with or is
detrimental to CBS's interests, reputation or business or might subject CBS to
unfavorable regulatory action, violate any law, infringe the rights of any
person, or subject CBS to liability for any reason.
(b) MarketWatch shall be responsible for and shall reimburse CBS
for all actual costs and expenses, above and beyond those expenses normally
incurred by CBS in the ordinary course of business, which are incurred by CBS in
preparing and/or delivering the CBS News Content in the desired form and format,
and which are agreed to in advance by MarketWatch. Any amounts to be paid under
this paragraph 2.3(b) shall be due and payable within 30 days of receipt of an
invoice relating to such amounts. Those amounts will also be recoupable from all
monies becoming payable to MarketWatch under this or any other Agreement or
otherwise to the extent to which they have not actually been paid or reimbursed
as provided for in the preceding sentence.
2.4 All Content which MarketWatch intends to use on the MarketWatch Site
shall consist of business or financial-related content and other content deemed
appropriate by CBS. During the term of this Agreement, any Content displayed on
the MarketWatch Site shall be
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<PAGE> 4
subject to any restrictions or requirements set forth in the CBS License
Guidelines. CBS shall have the right to demand the withdrawal from the
MarketWatch Site of any Content which in CBS's sole opinion conflicts with,
interferes with or is detrimental to CBS's interests, reputation or business or
which might subject CBS to unfavorable regulatory action, violate any law,
infringe the rights of any Person, or subject CBS to liability for any reason.
Upon notice from CBS to withdraw the Content concerned, MarketWatch shall cease
using any such Content on the MarketWatch Site as soon as commercially and
technically feasible, but in any event within three (3) days after the date of
CBS's notice. If MarketWatch cannot cease using such Content within twenty-four
(24) hours, MarketWatch will so notify CBS detailing why the cessation cannot be
effected within twenty-four (24) hours and when the cessation will be effected,
subject to the terms of the preceding sentence.
2.5 (a) During the term of this Agreement, MarketWatch shall consult
with CBS regarding the general (visual and editorial) presentation of the CBS
News Content on the MarketWatch Site; provided, however, that in the event the
parties cannot agree in any instance, then CBS's decision will be conclusive. In
no event shall MarketWatch distort or misrepresent any material contained in the
CBS News Content. No CBS News Content shall be used/displayed out of context;
MarketWatch shall have the right (subject to CBS License Guidelines) to edit and
revise the CBS News Content to meet spatial requirements provided that any such
edits or revisions shall not distort or misrepresent any events, opinions or
statements contained in the CBS News Content received by MarketWatch.
(b) MarketWatch shall be solely responsible for the engineering,
production, maintenance and monitoring of all CBS News Content which MarketWatch
makes available on the MarketWatch Site.
(c) Subject to any restrictions or requirements in the CBS
License Guidelines, MarketWatch shall have the right, but not the obligation, to
correct any errors, omissions and/or inaccuracies in the transmission or
transcription of the CBS News Content identified by MarketWatch or reported to
MarketWatch by MarketWatch Site users.
(d) Notwithstanding anything to the contrary contained herein,
upon notice from CBS, MarketWatch shall immediately cease using any CBS News
Content which (i) in CBS's sole opinion, conflicts, interferes with or is
detrimental to CBS's reputation or business or (ii) becomes subject to any third
party restriction or claim which would prohibit, limit or restrict the use
thereof on the Internet.
2.6 In the event that MarketWatch desires to use any music contained in
any CBS News Content on the MarketWatch Site, prior to such use, MarketWatch
shall (i) report to the applicable music rights society on behalf of CBS, all
titles and publishers of all such music and, (ii) secure, at its sole cost and
expense, and pay for all performing, duplication and/or recording rights
licenses, if any, necessary for the use of such music on the Internet. CBS shall
endeavor to deliver to MarketWatch accurate music cue sheets for all such music.
2.7 Upon expiration or termination of this Agreement, MarketWatch shall
cease all use of the CBS Marks as provided in Section 4.4 below, and, except as
otherwise provided in this paragraph, any CBS News Content or Content derived
therefrom in connection with the operation of the MarketWatch Site or otherwise.
In connection with the above, MarketWatch
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<PAGE> 5
shall immediately remove or erase the CBS News Content (and any Content derived
therefrom) and CBS Marks from the MarketWatch Site, and from any advertising and
promotional materials, as soon as commercially and technically practicable,
given customary Internet business practices, but in no event shall any such
material remain on the MarketWatch Site more than five (5) days after expiration
or CBS's notice of termination, as applicable, and at CBS's request, MarketWatch
shall furnish CBS with certified evidence of such removal or erasure
satisfactory to CBS.
3. TERM
3.1 The term of this Agreement shall begin on October 29, 1997 and shall
continue in full force and effect for a period of eight (8) consecutive years,
through and including October 29, 2005, unless it is terminated earlier in
accordance with the terms and conditions contained herein.
4. TRADEMARKS
4.1 (a) CBS shall deliver to MarketWatch a copy of each CBS Mark in the
form in which such Mark may be used by MarketWatch hereunder. Both parties
acknowledge that the CBS Marks are trademarks exclusively owned or controlled by
CBS Broadcasting Inc. and that all uses by MarketWatch of such CBS Marks shall
inure to CBS's benefit. MarketWatch shall maintain CBS quality standards with
respect to its use of the CBS Marks, and otherwise use the CBS Marks subject to
any reasonable restrictions or requirements disclosed by CBS (including any
requirements/restrictions delineated in the CBS License Guidelines).
(b) In the event that during the term of this Agreement
MarketWatch shall create any proprietary right in any CBS Marks, as a result of
the exercise by MarketWatch of any right granted to it hereunder, such
proprietary right shall immediately vest in CBS and MarketWatch shall be
authorized to use such new proprietary right as though same had specifically
been included in this Agreement.
4.2 (a) MarketWatch shall not file any application in any country to
register a trademark which contains "CBS," the CBS "eye" or any other trademark
which is the same as, similar to, or misleading with respect to the CBS Marks or
any other CBS trademark. If any application for registration is filed in any
country by MarketWatch in contravention of this paragraph 4.2, CBS shall have
the right to take appropriate action against MarketWatch, including seeking
injunctive relief, to prohibit or otherwise restrain MarketWatch's use of the
infringement party's use of the infringing mark.
(b) MarketWatch shall furnish CBS proofs of all materials
bearing any CBS Marks (including, without limitation, advertising and publicity
materials). MarketWatch will not authorize full scale production of any such
material until after obtaining CBS's written approval in each instance. Any
changes in such material shall also be subject to CBS's prior written approval.
Approval by CBS shall not relieve MarketWatch of any of its warranties or
obligations under this Agreement and all materials that bear any CBS Marks shall
strictly conform with the samples and proofs approved by CBS. Samples and
materials to be approved by CBS shall be submitted to the Associate General
Counsel, Contracts, Rights and Development, CBS Law Department and/or such other
person that may be designated in writing by CBS. The materials
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<PAGE> 6
bearing the CBS Marks which are identified in Exhibit 3 attached hereto are
hereby deemed approved by CBS.
4.3 In the event that MarketWatch learns of any infringement, threatened
infringement, or passing off of the CBS's trademarks or logos licensed for use
under this Agreement, or that any Person claims or alleges that the such
trademarks or logos are liable to cause deception or confusion to the public,
then MarketWatch shall notify CBS of the particulars thereof.
4.4 Upon the expiration or termination of this Agreement, MarketWatch
shall cease all use of the CBS Marks, as soon as commercially and technically
practicable, but in any event, no later than five (5) days after expiration or
termination of this Agreement.
5. COMPENSATION
5.1 In consideration of the rights herein granted, MarketWatch shall pay
CBS a royalty computed at the applicable percentage, indicated below, of the
Gross Revenues recognized by MarketWatch during the year concerned, as follows:
(a) (i) During the 1998 calendar year:
(A) With respect to the first Fifty Million
Dollars ($50,000,000) of Gross Revenues recognized over and
above the first One Million Dollars ($1,000,000) of Gross
Revenues recognized during such year: 8%.
(B) With respect to Gross Revenues recognized in
excess of Fifty-One Million Dollars ($51,000,000): 6%.
(ii) During the 1999 calendar year:
(A) With respect to the first Fifty Million
Dollars ($50,000,000) of Gross Revenues over and above the first
Five Hundred Thousand Dollars ($500,000) of Gross Revenues
recognized during such year: 8%.
(B) With respect to Gross Revenues recognized in
excess of Fifty Million Five Hundred Thousand Dollars
($50,500,000): 6%.
(iii) During each calendar year (or portion thereof, if
applicable) subsequent to the 1999 calendar year:
(A) With respect to the first Fifty Million
Dollars ($50,000,000) of Gross Revenues recognized during such
calendar year (or portion thereof, if applicable): 8%.
(B) With respect to Gross Revenues recognized in
excess of Fifty Million Dollars ($50,000,000): 6%.
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(b) (i) For avoidance of doubt, for purposes of this paragraph
5.1, calculation of Gross Revenues shall be made on a calendar yearly
basis, rather than a cumulative basis.
(ii) (A) "Gross Revenues" as used in this paragraph 5.1
shall mean gross operating revenues (excluding the revenues
described in the last sentence of this paragraph 5.1(b)(ii)(A)
and in 5.1(b)(ii)(B)) of MarketWatch, its subsidiaries and, to
the extent of any dividends or other distributions paid to
MarketWatch or its subsidiaries, any Person in which MarketWatch
or any of its subsidiaries has an interest, derived from the
Core Business presented in accordance with generally accepted
accounting principles and, if applicable, based on revenues as
reported in the periodic quarterly and annual statements
required by the Securities and Exchange Commission, provided
that Gross Revenues shall not be reduced for royalties,
commissions (except as otherwise set forth in clause
5.1(b)(ii)(B) below) fees or other expenses incurred in
generating such operating revenue. If an income statement of
MarketWatch presents operating revenue net of any reductions not
allowed under this Section 5, then for purposes of this
paragraph 5.1, operating revenue as presented shall be increased
by the amount of reductions. Sources of operating revenue
include, but are not limited to, advertising, sponsorship,
partnership/commerce, subscriptions, and sales of products and
services and shall include all monetary consideration and the
fair value of all non-monetary considerations. Sources of
operating revenue shall not include: (I) revenue realized by
MarketWatch pursuant to paragraph 1.2 of the DBC Services
Agreement between DBC and MarketWatch dated as of October 27,
1997, as amended and restated on January __, 1999 (the
"Services Agreement") (i.e., the stated dollar portion of
subscriber fees from various DBC-owned subscriber devices
(including portable personal computers) and the stated
percentage of Net Revenues (as defined in the Services
Agreement) derived from the real-time market feeds currently
known as MarketWatch Live and MarketWatch RT); (II) revenue
realized from advertisements purchased by DBC from MarketWatch
which advertise/promote DBC on the MarketWatch Site; (III)
revenue realized from advertisements purchased by any third
party advertising on the MarketWatch Site if and to the extent
CBS determines that revenues from such Person should be excluded
from the calculation of "Gross Revenues" under this Section
5.1; and (IV) an amount equal to the total revenues (calculated
in accordance with U.S. generally accepted accounting
principles) for the 12 months prior to the date of consummation
of the acquisition of such Acquired Business.
(B) Notwithstanding anything to the contrary
contained in clause 5.1(b)(ii)(A) above, Gross Revenues may be
reduced by the amount of any sales representative commission(s)
paid by MarketWatch to any third party sales representative(s)
not affiliated with MarketWatch and in which MarketWatch has no
interest, not to exceed fifteen percent (15%) of the actual ad
price in each instance. Additionally, Gross Revenues for any
particular quarterly period shall not include revenues reported
by MarketWatch as a result of revenues recognized prior to the
effective date of the acquisition of an entity acquired by
MarketWatch and accounted for as a pooling of interest
transaction.
5.2 In the event that the rights granted by CBS to MarketWatch pursuant
to this Agreement cause CBS to recognize income for federal income tax
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purposes in an amount which exceeds the amount prescribed for such rights in
paragraph 5.1 above (the "Excess"), then the entire amount of any deductions
available to MarketWatch solely attributable to such Excess shall be allocated
by MarketWatch to CBS.
6. ACCOUNTINGS
6.1 MarketWatch will compute Gross Revenues as of each March 31, June
30, September 30 and December 31 for the prior three (3) months. Within
ninety-five (95) days after the fourth calendar quarterly period and within
forty-five (45) days after each of the first three (3) calendar quarterly
periods concerned, MarketWatch will send CBS a statement covering Gross Revenues
and will pay CBS CBS's share of Gross Revenues due. Acceptance by CBS of any
statement or payment shall not preclude CBS from challenging the accuracy
thereof.
6.2 MarketWatch will maintain accurate books and records which report
the recognition of Gross Revenues. CBS may, at its own expenses, examine and
copy those books and records, as provided in this paragraph. CBS may make such
an examination for a particular statement within three (3) years after the date
when the other party sends the examining party the statement concerned.
(MarketWatch will be deemed conclusively to have sent CBS the statement
concerned on the date prescribed in paragraph 6.1, unless CBS notifies
MarketWatch otherwise with respect to any statement, within ninety (90) days
after that date). CBS may make those examinations only during MarketWatch's
usual business hours, and at the place where it keeps the books and records.
Such books and records shall be kept at the MarketWatch office in San Francisco,
California, unless otherwise notified. CBS will be required to notify
MarketWatch at least ten (10) days before the date of planned examination. If
CBS's examination has not been completed within two months from the time CBS
begins it, MarketWatch may require CBS to terminate it on seven (7) days notice
to CBS at any time, provided that MarketWatch has cooperated with CBS in the
examination of such books and records.
7. RIGHTS
7.1 (a) As between CBS and MarketWatch: CBS is or shall be the exclusive
owner of and shall retain all right, title and interest to the CBS's News
Content or any Content derived therefrom, and the CBS Marks, including all
Intellectual Property Rights therein (the "CBS Property").
(b) MarketWatch is the exclusive owner of and shall retain all
right, title and interest to the MarketWatch Content or any Content derived
therefrom, the MarketWatch Site, MarketWatch marks, and all Intellectual
Property Rights therein, excluding the CBS Property.
(c) MarketWatch shall place a notice of copyright on each CBS
Content Page in accordance with the CBS License Guidelines. No CBS Content Page
shall contain any other copyright notice whatsoever except as provided in the
CBS License Guidelines. MarketWatch shall cooperate fully with CBS in connection
with CBS's obtaining appropriate copyright protection in the name of CBS for any
CBS Content Page.
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7.2 Each party agrees to take all action and cooperate as is reasonably
necessary, at the other party's request and expense, to protect the other's
respective rights, titles, and interests specified in this Article 7, and
further agrees to execute any documents that might be necessary to perfect each
party's ownership of such rights, titles, and interests.
7.3 (a) During the term of this Agreement, CBS shall not license nor
authorize another to license any Person other than MarketWatch the right to use
the CBS Marks in connection with promoting in the United States any Internet
service or Web site 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.
(b) MarketWatch acknowledges and agrees that the following are
either not within the express terms of the preceding prohibition or, if so,
shall nevertheless be excluded from said prohibition:
(1) any use of the CBS Marks by CBS, its divisions, business
units, affiliates and/or any of the following CBS related entities in connection
with any of the above Person's Internet service(s) or Web site(s) as long as
such Internet service or Web site does not have 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:
(i) the CBS Television Network;
(ii) any CBS owned and operated or affiliated standard
television station;
(iii) CBS Cable;
(iv) any CBS non-standard television network;
(v) any CBS owned or affiliated non-standard television
facilities;
(vi) the CBS Radio Network;
(vii) any CBS owned and affiliated radio station;
(viii) Westwood One, Inc.; and
(ix) any Internet services in which CBS currently has an
interest (such as CBS SportsLine);
(2) an Internet service or Web site that delivers general news,
sports or entertainment, with a financial news segment or portion included, will
not be considered to have as its primary function or as 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;
(3) an Internet service or Web site will not be considered to
have as its primary function or as its principal theme and format the delivering
of comprehensive real-time
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or delayed stock market quotations and financial news in the English language to
consumers solely on the basis of its providing a stock price ticker crawl line;
(4) any activity conducted by CBS and/or its affiliates as of
January 13, 1999, the execution date of this Agreement;
(5) any activity conducted by a CBS Television or Radio Network
Affiliate that is not a CBS owned and operated television or radio station;
(6) any activity of Westwood One, Inc. provided that such
activity does not produce a substantial portion of revenues from an Internet
service or Web site that has as its primary function and principal theme and
format the delivering of comprehensive real-time or delayed stock market
quotations and financial news in the English language to consumers;
(7) any Internet services in which CBS has an interest as of
January 13, 1999, the execution date of this Agreement;
(8) any transmission, retransmission, uplink or satellite
transponder delivery of any signal, of any nature or type, by and through CBS
Cable; and
(9) any occasional use of the CBS Marks by an Internet service
or Web site, as opposed to repeated and regular use.
8. WARRANTIES; REPRESENTATIONS; INDEMNITIES
8.1 (a) CBS represents and warrants that:
(i) it has full power and authority to enter into this
Agreement.
(ii) it has sufficient right and authority to grant to
MarketWatch all licenses and rights granted by CBS hereunder.
(iii) the CBS Marks and the use thereof as permitted
pursuant to this Agreement shall not violate any law or infringe
upon or violate any rights of any Person.
(iv) the CBS Content and the use thereof as permitted
pursuant to this Agreement shall not violate any United States
law or infringe upon or violate any rights of any Person under
any United States law.
(b) MarketWatch represents and warrants that:
(i) it owns or controls all right, title, and interest
in and to the MarketWatch Site, and all Intellectual Property
Rights therein, necessary to carry out its obligations hereunder
and to grant and assign the rights and licenses granted to CBS
herein.
(ii) it is has the full power and authority to enter
into and fully perform this Agreement.
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(iii) the MarketWatch Site, any MarketWatch Site Content
and any Content developed or furnished by MarketWatch hereunder
and the use thereof shall not violate any law or infringe upon
or violate any rights of any Person.
(iv) the MarketWatch Site will be produced, advertised,
distributed, transmitted and licensed in accordance with all
applicable federal, state, local and foreign laws and in a
manner that will not reflect adversely on CBS.
8.2 (a) Each party shall at all times indemnify, hold harmless and
defend the other party in accordance with the indemnification provisions
(applicable to such party) set forth in Article VI of the Contribution Agreement
among CBS, MarketWatch and DBC dated as of October 29, 1997 (the "Contribution
Agreement"); provided, however, that, MarketWatch agrees that neither CBS nor
any agent, subsidiary, or representative of CBS shall have any liability,
contingent or otherwise, for the truthfulness, accuracy or timeliness of the CBS
News Content, or for any decision made or action taken by MarketWatch or its
customers in reliance upon the CBS News Content except to the extent that such
liability arises from CBS's malfeasance or nonfeasance. THERE IS NO WARRANTY OF
MERCHANTABILITY NOR WARRANTY OF FITNESS FOR A PARTICULAR USE, NOR ANY IMPLIED
WARRANTY OF ANY KIND, REGARDING THE CBS NEWS CONTENT. MARKETWATCH RECOGNIZES
THAT THE ACCURACY OF THE CBS NEWS CONTENT SHOULD BE CHECKED BEFORE ITS CUSTOMERS
RELY ON IT.
(b) IN NO EVENT WILL MARKETWATCH OR CBS BE LIABLE TO
MARKETWATCH'S CUSTOMERS, EACH OTHER, OR ANY OTHER PARTY FOR ANY INCIDENTAL,
CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES (INCLUDING BUT NOT LIMITED TO LOST
PROFITS, TRADING LOSSES, OR DAMAGES THAT RESULT FROM INCONVENIENCE, DELAY OR
LOSS OF THE USE OF THE CBS NEWS CONTENT), OR CLAIMS ARISING IN TORT (INCLUDING
NEGLIGENCE), EVEN IF MARKETWATCH OR CBS HAS BEEN ADVISED OF OR IS OTHERWISE
AWARE OF THE POSSIBILITY OF ANY OF THE FOREGOING.
(c) Neither MarketWatch nor CBS shall be liable for any loss
resulting from a cause over which such entities do not have direct control,
including but not limited to the failure of electronic or mechanical equipment
or communication lines, telephone or other interconnect problems, unauthorized
access or theft.
(d) MarketWatch agrees to indemnify and hold CBS harmless from
and against any and all claims, losses, liability, costs and expenses (including
but not limited to attorneys' fees) to the extent arising from or relating to
MarketWatch's modification of the CBS News Content, or the combination of the
CBS News Content with other information or content, and/or MarketWatch's
violation of this Agreement.
9. REMEDIES
9.1 CBS shall have the right to terminate this Agreement upon providing
written notice to MarketWatch if (any of the following occurs):
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(a) MarketWatch breaches any material term or condition of this
Agreement, and has failed to cure such breach within ten (10) days after written
notice of such breach from CBS. The foregoing cure period will not apply where a
specific cure period is provided herein, or to breaches incapable of being
cured.
(b) MarketWatch: (i) becomes insolvent or unable to pay its
debts as they mature or makes an assignment for the benefit of its creditors;
(ii) is the subject of a voluntary petition in bankruptcy or any voluntary
proceeding relating to insolvency, receivership, liquidation, or composition for
the benefit of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing: (iii) becomes the subject of any involuntary petition
in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within sixty (60) days of filing; (iv)
is liquidated or dissolved; or (v) issues to a CBS competitor or actively
participates in the acquisition by a CBS competitor, in any one transaction or
any series of transactions, of a number of voting securities of MarketWatch such
that after such issuance or acquisition or series of issuances or acquisitions,
such CBS competitor beneficially owns, directly or indirectly, nine percent (9%)
or more of the outstanding common stock of MarketWatch or nine percent (9%) or
more of the total voting power of MarketWatch.
(c) any CBS competitor beneficially owns, directly or
indirectly, fifteen percent (15%) or more of the then-outstanding shares of
common stock of MarketWatch or fifteen percent (15%) or more of the total voting
power of MarketWatch.
(d) If MarketWatch discontinues using the "MARKETWATCH" mark
and, within a reasonable time thereafter, MarketWatch does not establish a
substitute mark acceptable to CBS in its sole discretion.
(e) Notwithstanding the foregoing, for purposes of this Section
9.1, the mere acquisition by a CBS competitor of an interest in DBC which
acquisition constitutes or triggers a "DBC Change of Control" (as defined in the
Stockholders' Agreement dated as of the date hereof among CBS, DBC and
MarketWatch) shall not be deemed to constitute the acquisition, directly or
indirectly, of, "beneficial ownership," common stock or "voting power" of
MarketWatch in the absence of other facts demonstrating "beneficial ownership"
thereof.
For purposes of this Section 9.1: (i) the term beneficial
ownership shall have the meaning set forth in Section 13(d) of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder;
(ii) the term total voting power shall mean, at any time, the total number of
votes that may be cast in the election of directors of MarketWatch at any
meeting of the holders of voting securities held at such time for such purpose;
and (iii) the term voting securities shall mean the common stock of MarketWatch
and any other securities issued by MarketWatch having the power to vote in the
election of directors of MarketWatch, including without limitation any
securities having such power only upon the occurrence of a default or any other
extraordinary contingency.
9.2 MarketWatch shall have the right to terminate this Agreement if CBS
breaches any material term or condition of this Agreement, and has failed to
cure such breach within thirty (30) days after receipt of written notice of such
breach.
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9.3 Either Party may exercise its right to terminate pursuant to this
Section 9 by sending the other party appropriate notice. No exercise by CBS of
its rights under this Section 9 will limit CBS's remedies by reason of
MarketWatch's default, CBS's rights to exercise any other rights under this
Section 9, or any of CBS's other rights. No exercise by MarketWatch of its
rights under this Section 9 will limit MarketWatch's remedies by reason of CBS's
default, MarketWatch's rights to exercise any other rights under this Section 9,
or any of Marketwatch's other rights.
10. GENERAL
10.1 Neither party may assign this Agreement, or their respective rights
and obligations hereunder, in whole or in part without the other party's prior
written consent. Any attempt to assign this Agreement without such consent shall
be void and of no effect ab initio. Notwithstanding the foregoing, (i)
MarketWatch may assign this Agreement to its successor, MarketWatch.com, Inc., a
Delaware corporation, provided that MarketWatch.com, Inc. thereafter succeeds to
all of the rights and is subject to all of the obligations of MarketWatch under
this Agreement, and (ii) CBS may assign this Agreement or any of its rights and
obligations hereunder to any entity controlling, controlled by or under common
control with, CBS, or to any entity that acquires CBS by purchase of stock or by
merger or otherwise, or by obtaining substantially all of CBS assets (a "CBS
Assignee"), provided that any such CBS Assignee, or any division thereof,
thereafter succeeds to all of the rights and is subject to all of the
obligations of CBS under this Agreement.
10.2 Each party hereto irrevocably submits to the exclusive jurisdiction
of (a) the Supreme Court of the State of New York, New York County, or (b) the
United States District Court for the Southern District of New York, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby or thereby. Each of CBS and MarketWatch
agrees to commence any such action, suit or proceeding either in the United
States District Court for the Southern District of New York or if such suit,
action or other proceeding may not be brought in such court for jurisdictional
reasons, in the Supreme Court of the State of New York, New York County. Each of
CBS and MarketWatch further agrees that service of any process, summons, notice
or documents by U.S. registered mail to such party's respective address set
forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any maters to which it has submitted to
jurisdiction in this Section 10.2. Each of CBS and MarketWatch irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby and thereby in (i) the Supreme Court of the State of New York, New York
County, or (ii) the United States District Court for the Southern District of
New York, and hereby and thereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
10.3 Each party shall comply in all material respects with all laws and
regulations applicable to its activities under this Agreement.
10.4 If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any Person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity,
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illegality or unenforcability shall not affect any other provision hereof (or
the remaining portion thereof) or the application of such provision to any other
Persons or circumstances.
10.5 All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
(i) if to MarketWatch,
MarketWatch.Com Inc.
825 Battery St.,
San Francisco, CA 94111
Attention of Larry Kramer and Peter Bardwick
(ii) if to CBS,
CBS Broadcasting Inc.
51 West 52nd Street
New York, New York 10019
Attention of Fredric G. Reynolds and
Louis J. Briskman
with copies to:
CBS Broadcasting Inc.
51 West 52nd Street
New York, New York 10019
Attention of General Counsel, and
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention of Peter S. Wilson, Esq., and
Data Broadcasting Corporation
3955 Point Eden Way
Hayward, CA 94549
Attention of Mark F. Imperiale
10.6 The parties to this Agreement are independent contractors. There is
no relationship of partnership, joint venture, employment, franchise, or agency
between the parties. Neither party shall have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent.
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10.7 No failure of either party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
10.8 This Agreement, along with the Exhibits hereto, contains the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. Neither party shall be liable or bound to any
other party in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein.
10.9 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to each of the other parties.
10.10 This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto. By an instrument in
writing, any two parties hereto may waive compliance by the third party with any
term or provision of this Agreement that such third party was or is obligated to
comply with or perform.
10.11 This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York applicable to agreements made
and to be performed entirely within such State, without regard to the conflicts
of law principles of such State.
10.12 Except as provided in Article VI of the Contribution Agreement,
this Agreement is for the sole benefit of the parties hereto and their permitted
assigns (including MarketWatch.com, Inc., the successor to MarketWatch) and
nothing herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto and such assigns, any legal or equitable
rights hereunder.
10.13 The headings contained in this Agreement or in any Exhibit or
Schedule hereto are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Any capitalized terms used in
any Schedule or Exhibit but not otherwise defined therein, shall have the
meaning as defined in this Agreement. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
MARKETWATCH.COM, LLC CBS BROADCASTING INC.
By: /S/ J. PETER BARDWICK By: /s/ LOUIS J. BRISKMAN
------------------------------------ ---------------------------------
Name: J. Peter Bardwick Name: Louis J. Briskman
---------------------------------- -------------------------------
Title: CFO and Secretary Title: Executive Vice President and
--------------------------------- General Counsel
------------------------------
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EXHIBIT 1
(Attached to and forming a part of the Agreement, made January 13, 1999, and
effective as of October 29, 1997 between CBS Broadcasting Inc. and
Marketwatch.Com, LLC)
CBS MARKS
CBS
[EYEBALL LOGO]
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EXHIBIT 2
(Attached to and forming a part of the Agreement, made January 13, 1999, and
effective as of October 29, 1997 between CBS Broadcasting Inc. and
Marketwatch.Com, LLC)
CBS LICENSE GUIDELINES AND RESTRICTIONS
I. GENERAL
The MarketWatch Site shall not include Content that: (i) is sexually
explicit, (ii) contains profanity or (iii) that denigrates a particular
group based on gender, race, creed, religion, sexual preference or
handicap.
II. CBS NEWS CONTENT
1. Each party shall notify the other of all errors, omissions, and/or
inaccuracies in transmission or transcription of the CBS News Content
within forty-eight (48) hours after it becomes aware thereof.
2. If MarketWatch provides such notice, it shall specify to CBS what
action, if any, it has taken to correct the error, omission and/or
inaccuracy.
3. If CBS provides such a notice, or receives such notice, it may
specify the action to be taken by MarketWatch to correct the error,
omission and/or inaccuracy or resubmit such content.
4. All CBS News Content shall be subject to restrictions and
instructions disclosed by CBS at any time.
5. CBS shall have the right to refuse to deliver to MarketWatch any CBS
News Content if, in CBS's sole discretion, the CBS News Content or
the use contemplated, conflicts with, interferes with or is
detrimental to CBS's interests, reputation or business or which might
subject CBS to unfavorable regulatory action, violate any law,
infringe the rights of any person, or subject CBS to liability for
any reason.
6. MarketWatch shall abide by responsible journalistic standards. No CBS
News Content shall be used/displayed out of context. MarketWatch
shall no distort or misrepresent any events, opinions or statements
contained in the CBS News Content received by MarketWatch.
III. TRADEMARKS
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MarketWatch shall place a trademark notice to be furnished by CBS on all
items or materials utilizing CBS Marks. CBS shall provide MarketWatch
with the manner, style and placement of such notice, which shall be
deemed incorporated into this Section.
IV. CROSS-LINKS
1. MarketWatch shall not establish any links from the MarketWatch Site
to any gambling, pornographic or obscenity Content.
2. MarketWatch shall not conduct any cross promotions between the
MarketWatch Site and any Internet Site which uses or exhibits
gambling, pornographic or obscenity Content.
V. OWNERSHIP
1. MarketWatch shall place an appropriate copyright notice to be
furnished by CBS on all CBS Content Pages of the MarketWatch Site.
2. MarketWatch and CBS shall mutually develop the procedures for placing
any third party copyright notice on any CBS Content Page.
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EXHIBIT 3
APPROVED USAGE OF CBS MARKS
The following materials (bearing the CBS marks) are approved:
Munsingware long sleeve t-shirt
grey & black pens
white cocktail napkin
business card, subject to * below
*CBS has a colored photostat of the business card which reflects the
outer circle of the "Eye" fading into the black background. Assuming
that the fading is due to the photostatic process, then the card is
acceptable .
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EXHIBIT 10.08
AMENDED AND RESTATED
SERVICES AGREEMENT
This AGREEMENT made as of the 13th Day of January, 1999, by and
between MARKETWATCH.COM.LLC, 825 Battery Street, San Francisco, CA 94111,
(herein called "MarketWatch") and DATA BROADCASTING CORPORATION, 3955 Point Eden
Way, Hayward, CA 94545 (herein called "DBC") hereby amends and restates this
Agreement entered into between the parties as of October 29, 1997 (that was
attached to and formed a part of the CONTRIBUTION AGREEMENT, dated as of October
29, 1997 between CBS Broadcasting, Inc. (formerly known as CBS, Inc.), DBC and
MarketWatch.
1. DESCRIPTION
1.1 During the term of this Agreement, subject to the terms and
conditions stated herein
(a) at the request of MarketWatch, DBC will perform the
following services for MarketWatch:
(i) (A) subject to MarketWatch's prior approval in each
instance, DBC shall engage or employ personnel assigned to
service MarketWatch (hereinafter referred to as "MarketWatch
Employees") on a full-time or part-time basis as needed,
including the calculation and administration of employee (or
engaged personnel) compensation, benefits and/or related
payments or deductions/withholdings. MarketWatch shall have the
right to require DBC to terminate any employee (or engaged
personnel, as applicable). In connection with the foregoing
services, MarketWatch shall hold DBC harmless from liability
with respect to any personnel action involving a MarketWatch
Employee (acting solely within the scope of his or her
employment for MarketWatch), provided such personnel action is
directed by MarketWatch. (For avoidance of doubt, the preceding
sentence shall not relieve DBC of liability in its capacity as a
principal of MarketWatch.)
(B) For avoidance of any doubt, all material(s)
produced, developed, created or furnished to MarketWatch by
MarketWatch Employees, excluding the MarketWatchRT Software,
will be deemed "work(s) made for hire" for MarketWatch under the
United States Copyright Act; but in the event it is determined
that such materials in whole or in part are not "work(s) made
for hire", they will be deemed transferred to MarketWatch by
this Agreement. All such materials made or furnished to
MarketWatch by MarketWatch Employees, excluding the
MarketWatchRT Software, shall be the sole property of
MarketWatch, free from any claims by any MarketWatch Employee,
DBC or any other person, firm or entity; and MarketWatch shall
have the exclusive right to
<PAGE> 2
copyright such materials in its name as the author and owner of
them and to secure any and all renewals and extensions of such
copyright throughout the world. DBC will cause engaged personnel
to execute and deliver to MarketWatch documents reflecting that
materials developed, produced, created or furnished by such
personnel, excluding the MarketWatchRT Software, are/shall be
deemed a "work made for hire" for MarketWatch; and if any of
such material is determined not to be a "work made for hire" it
will be deemed transferred to MarketWatch.
(ii) handle customer billing and collection for MarketWatch
subscription products and services and other services including
without limitation, real-time data service.
(iii) provide computer software programming assistance,
including, without limitation, assistance with the operation of
the on-line services (including advertising services) offered by
MarketWatch and the creation of MarketWatch web site pages and
navigation systems.
(b) (i) At the request of MarketWatch in each instance, DBC will
license to MarketWatch, free of charge, the delayed commodities and stock data
feeds (the "Data Feed") delivered from the financial exchanges with whom DBC has
existing contracts (including, without limitation, the New York Stock Exchange;
The American Stock Exchange; The Nasdaq Stock Market. Inc.; New York Mercantile
Exchange; Chicago Board Options Exchange; Chicago Board of Trade; MidAmerica
Commodity Exchange; Commodities Exchange Center; Chicago Mercantile Exchange;
and Coffee, Sugar & Cocoa Exchange) (the "Data Providers"). The Data Feed is
currently made available by DBC to users/subscribers of the Internet web site
currently known as dbc.com.
(ii) DBC will provide MarketWatch with communications lines
(including at least two (2) T-3 connections to the Internet,
hardware and software to effect the required capability to
receive/transmit etc. the data feeds described in Section
1.1(b)(i) above. DBC will use its best efforts to ensure third
party provided lines will be in good working order at all times.
(iii) In connection with the data feed described in Section
1.1(b)(i) above, DBC will provide MarketWatch with network
operations and web site management support (including, without
limitation, hosting connectivity, serving content, serving and
reporting ads and reporting content) twenty-four hours a day
seven days a week.
(c) At MarketWatch's request, DBC will provide (from its rented
or owned office space) office space and related facilities, to the extent
available, for MarketWatch Employees. Such right to use such facilities shall in
no way be construed as a sublease or license by DBC of any real property but
shall only be construed as a reimbursement arrangement.
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1.2 During the term of this Agreement, subject to the terms and
conditions stated herein:
(a) DBC will pay MarketWatch:
(i) Two Dollars and Fifty Cents ($2.50) per month per subscriber
for each portable device subscriber who receives real-time
quotes and news, and Five Dollars ($5.00) per month per
subscriber for all other subscriber devices (including all
portable personal computers) who receive real-time quotes and
news, with both types of payments to be made until and through
October 29, 2002. No such payments shall be made with respect to
multi-user "institutional" clients that receive a volume
discount. For the purposes of the preceding sentence, the term
"institutional" means: banks, broker-dealers, money managers,
investment advisors, insurance companies or other similar
organizations. The payment will be a minimum of $100,000 per
month until and through October 29, 2002.
(ii) With respect to subscribers of the real-time market feeds
described below:
(A) twenty-five percent (25%) of the Net Revenues earned
from the real-time market feed currently known as "MarketWatch
Live"; and
(B) seventy-five percent (75%) of the Net Revenues
earned from the real-time market feed currently known as
"MarketWatch RT."
As used in Section 1.2(a)(ii), the term "Net Revenues" shall
mean gross subscription fees collected less exchange fees
actually paid by DBC, credit card fees actually paid by DBC and
any applicable sales taxes billed by DBC and paid by the
subscriber concerned.
2. TERM
2.1 The term of this Agreement shall begin as of the date hereof and
shall continue in full force and effect for a period of eight (8) consecutive
years, from October 29, 1997 through and including October 29, 2005, unless it
is terminated earlier in accordance with the terms and conditions contained
herein.
3. COMPENSATION; OFFSET
3.1 In consideration for all grants herein made or agreed to be made and
all rights, licenses, privileges and property herein conveyed or agreed to be
conveyed, and all warranties, representations and covenants herein made by DBC,
MarketWatch agrees to pay DBC as follows:
(a) DBC's actual costs, subject, however, to the approval of
MarketWatch of the costs to be incurred, other than the costs incurred by DBC in
the ordinary course of business. in connection with:
(i) the services rendered pursuant to Section 1.1 (a) and
Section 1.1(b)(iii); and
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(ii) the provision of communications lines described in Section
1.1(b)(ii) above.
(iii) the provision of office space and related facilities to
MarketWatch personnel, it being understood that such actual cost
shall be DBC's cost per rented square foot of space utilized by
the MarketWatch personnel concerned, subject to the next
sentence. The provision of office space and related facilities
to MarketWatch personnel at DBC's current San Mateo location,
however, shall be free of charge.
3.2 In the event that DBC breaches subparagraph 1.01(b) of the
Contribution Agreement among CBS Inc., DBC and MarketWatch dated as of October
29, 1997 (the "Contribution Agreement"), then, in addition to whatever other
rights and remedies MarketWatch may have under the Contribution Agreement,
MarketWatch may offset any monies due and owing from DBC under the (Section 1.01
(b) of the) Contribution Agreement against monies payable (from MarketWatch) to
DBC hereunder.
3.3 In the event that the services provided by DBC pursuant to this
Agreement cause DBC to recognize income for federal income tax purposes in an
amount which exceeds the amount prescribed for such services in Section 3.1(a)
above (the "Excess"), then the entire amount of any deductions available to
MarketWatch solely attributable to such Excess shall be allocated by MarketWatch
to DBC.
4. CONTENT AND DELIVERABLES
4.1 At no additional charge, DBC will grant MarketWatch a royalty-free,
worldwide, non-exclusive license to use, copy, publicly display, make derivative
works from, perform, distribute or otherwise make available on or through the
MarketWatch Site and in connection with products and services distributed from
the MarketWatch Site the following data feeds:
(a) Those feeds/services set forth in Section 1.1(b)(i) hereof;
and
(b) The following additional data feeds/services, provided that
DBC has in place a license to redistribute such data feeds/services: Fundamental
Data, Historical Data, Intraday Tick Data.
4.2 At no additional charge, DBC hereby irrevocably transfers and
assigns to MarketWatch all right, title and interest in and to all deliverables,
materials, copyrightable works, inventions, improvements, trade secrets,
trademarks, servicemarks, made, conceived or developed by DBC either alone or
with others in connection with this Agreement, and all DBC proprietary software
and technology used in connection with the services and data feeds provided
under this Agreement (collectively, the "DBC Services"), excluding DBC
proprietary software used by DBC in connection with providing MarketWatch the
MarketWatchRT data feed (the "MarketWatchRT Software").
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4.3 At no additional charge, MarketWatch hereby grants to DBC a
non-exclusive, perpetual license to use, copy, modify and make derivative works
from the DBC proprietary software and technology used by DBC in providing the
DBC Services.
4.4 "MarketWatch Site" means the Internet websites owned or controlled
by MarketWatch that provide stock quotes, personal finance information and
business, stock stories and related products and services.
5. PERFORMANCE STANDARDS AND SPECIFICATIONS
5.1 DBC will provide all DBC Services in a professional manner,
consistent with industry standards.
5.2 DBC will use its best efforts to cause all hosting and data services
to meet the Performance Specifications (attached hereto as Schedule A, and
hereby made a part of this Agreement).
5.3 In the event that DBC materially fails to meet the Up-Time
Requirements set forth in the Performance Specifications during any MarketWatch
Business Day, defined below, MarketWatch's payments for the DBC network
operations set forth in Section 1.1(a)(iii) hereof for that month shall be
reduced by a percentage equal to the hours that the DBC Services failed to meet
such Performance Specifications divided by the number of hours in the business
days for that month. A "MarketWatch Business Day" shall be considered to run
from the hours of 4AM to 8PM PST. DBC shall not be responsible for failures
caused by MarketWatch's fault, or by the actions of a non-affiliated third
party, provided that DBC has taken reasonable actions to anticipate and handle
any such failure caused by a third-party, and further provided that DBC shall
credit MarketWatch with any credits or payments received from third parties
related to such failure. DBC shall use its best efforts to ensure that all third
parties conform to the provisions hereof.
5.4 DBC shall provide, at DBC's out-of-pocket cost, a redundant hosting
center capable of providing immediate back up capability and such Internet
connectivity as reasonably requested by MarketWatch.
5.5 DBC will use its reasonable efforts to provide MarketWatch with
additional required hardware, software or communications bandwidth, and will
provide all of the foregoing to MarketWatch at DBC's cost.
6. DBC TRADEMARK
At no additional charge, DBC will grant MarketWatch a worldwide,
non-exclusive license to use the DBC trademark(s) in connection with the
marketing, promotion, and operation of the MarketWatch Site, and the
distribution of content from such Site and related products and
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services. MarketWatch's use of such trademarks shall be in accordance with DBC's
reasonable trademark usage guidelines, as such guidelines are provided to
MarketWatch in writing from time to time.
7. HOSTING SPECIFICATIONS AND TRANSITION SERVICES
7.1 DBC will, upon MarketWatch's request, provide MarketWatch with
reasonably detailed specifications for the DBC technology used in providing the
DBC Services, and for all hardware, software, firmware and system configurations
which MarketWatch will require to properly perform or have performed the
services and procedures performed by DBC. The foregoing shall be subject to any
limitations on disclosure imposed upon DBC by third party suppliers and
licensors.
7.2 Upon any termination or expiration of this Agreement, or of any of
the services provided by DBC hereunder, DBC will provide the following
assistance and deliverables:
(a) assist MarketWatch, or MarketWatch's designee, in the
configuration and installation of any hardware, software, firmware or equipment
procured by MarketWatch in connection with the DBC Services.
(b) DBC will deliver to MarketWatch or its designee, and install
on hardware and equipment designated by MarketWatch, those DBC materials and DBC
proprietary software programs necessary to provide the DBC Services.
(c) DBC will deliver to MarketWatch, and install on
MarketWatch's hardware and equipment, the current version of any MarketWatch
software then being used by DBC in connection with the DBC Services, excluding
the MarketWatch RT Software.
(d) DBC will provide appropriate training for the MarketWatch
employees or its agents or contractors who will be assuming responsibility for
operation of the DBC technology following such transition. MarketWatch will be
charged time and material, at current rates, for any training provided to
MarketWatch due to termination.
(e) DBC will assist MarketWatch, at MarketWatch's expense, in
MarketWatch's acquisition of any necessary rights to access and use any
third-party data feeds, hardware, software, documentation then being used by DBC
in connection with the DBC Services. Upon MarketWatch's request, DBC will
transfer or assign, or use its best efforts to cause to be transferred or
assigned, to MarketWatch or its designee, on mutually acceptable terms and
conditions, any contracts applicable to such data feeds, hardware, software and
documentation.
(f) MarketWatch shall have the option to buy any hardware and/or
software that DBC is utilizing to provide the DBC Services for an amount to be
negotiated in good faith by the parties.
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(g) upon termination of this Agreement, MarketWatch shall
purchase from DBC any hardware and/or software purchased and paid for by DBC
specifically at MarketWatch's request, at the then-current net book value of
such hardware and/or software, computed using generally accepted accounting
principles.
8. WARRANTIES; REPRESENTATIONS; INDEMNITIES
8.1 (a) DBC represents and warrants that:
(i) it has full power and authority to enter into and fully
perform this Agreement.
(ii) it has sufficient right and authority to grant to
MarketWatch all licenses and rights granted or agreed to be
granted by it hereunder.
(iii) all materials and services furnished to MarketWatch or the
use thereof will not violate any applicable lay, or violate or
infringe upon the rights of any third party.
(iv) at all times. DBC will comply with all applicable federal,
state and local laws.
(b) MarketWatch represents and warrants that it is free to enter
into and fully perform this Agreement.
8.2 (a) DBC will assume all obligations for and indemnify and hold
MarketWatch harmless from (i) malfunctions or other usage problems resulting
from or in connection with the "Year 2000 Problem" (i.e., the year 2000 (and
later years) as distinct from the years 1900 through 1999, (and earlier years)),
and (ii) "bugs", "viruses" or defects in the feeds or other software goods
provided herein, which affect the function or capabilities of such feeds or
software.
(b) Each party shall at all times indemnify, hold harmless and
defend the other party in accordance with the indemnification provisions
(applicable to such party) set forth in Article VI of the Contribution
Agreement; provided, however, that, MarketWatch agrees that neither DBC, nor its
Data Providers, nor any agent, subsidiary, or representative thereof shall have
any liability, contingent or otherwise, for the truthfulness, accuracy or
timeliness of the Data Feed or the truthfulness, accuracy, timeliness,
completeness or correct sequencing of the Data Feed by DBC or the Data
Providers, or for any decision made or action taken by MarketWatch or its
customers in reliance upon the Data Feed, or for interruption or delay of the
Data Feed except to the extent that such liability arises from DBC's malfeasance
or nonfeasance. THERE IS NO WARRANTY OF MERCHANTABILITY NOR WARRANTY OF FITNESS
FOR A PARTICULAR USE, NOR ANY IMPLIED WARRANTY OF ANY KIND, REGARDING THE
INFORMATION OR ANY ASPECT OF THE DATA FEED (INCLUDING BUT NOT LIMITED TO
INFORMATION ACCESS). MARKETWATCH RECOGNIZES THAT THE ACCURACY OF THE INFORMATION
SHOULD BE CHECKED BEFORE ITS
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CUSTOMERS RELY ON IT.
(c) IN NO EVENT WILL MARKETWATCH, DBC OR THE DATA PROVIDERS BE
LIABLE TO MARKETWATCH'S CUSTOMERS, EACH OTHER, OR ANY OTHER PARTY FOR ANY
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES (INCLUDING BUT NOT
LIMITED TO LOST PROFITS, TRADING LOSSES, OR DAMAGES THAT RESULT FROM
INCONVENIENCE, DELAY OR LOSS OF THE USE OF THE DATA FEED), OR CLAIMS ARISING IN
TORT (INCLUDING NEGLIGENCE), EVEN IF MARKETWATCH, DBC OR THE DATA PROVIDERS HAVE
BEEN ADVISED OF OR ARE OTHERWISE AWARE OF THE POSSIBILITY OF ANY OF THE
FOREGOING.
(d) Neither MarketWatch, DBC nor the Data Providers shall be
liable for any loss resulting from a cause over which such entities do not have
direct control, including but not limited to the failure of electronic or
mechanical equipment or communication lines, telephone or other interconnect
problems, unauthorized access or theft.
(e) MarketWatch agrees to indemnify and hold DBC and the Data
Providers harmless from and against any and all claims, losses, liability, costs
and expenses (including but not limited to attorneys' fees) to the extent
arising from or relating to MarketWatch's modification of the information
provided by DBC or the Data Providers or of the Data Feed, or the combination of
such information or Data Feed with other information or content, and/or
MarketWatch's violation of this Agreement.
9. ACCOUNTINGS
9.1 DBC will compute Net Revenues or any other transactions on which
monies are payable to MarketWatch as of each March 31, June 30, September 30 and
December 31, for the prior three (3) months. Within sixty (60) days after the
close of the calendar quarterly period concerned, DBC will send MarketWatch a
statement covering the number of subscribers who pay for the feeds described in
Section 1.2 during such quarterly period and will pay MarketWatch for any Net
Revenues or other monies due (including, without limitation, sums due in
connection with the subscriptions concerned).
9.2 DBC will maintain books and records which report the sales and
maintenance of subscriptions hereunder. Any Member of MarketWatch may make an
examination of a particular statement within three (3) years after the date when
DBC sends the statement concerned. Any Member of MarketWatch may review and copy
the books and records of DBC with respect to such statement, upon reasonable
notice during normal working hours.
10. REMEDIES
10.1 MarketWatch shall have the right to terminate this Agreement if:
(a) DBC breaches any material term or condition of this
Agreement and has failed to cure such breach within ten (10) days after
MarketWatch's notice of default. The
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foregoing cure period will not apply to DBC's obligations regarding the
provision of delayed data feeds or to breaches incapable of being cured;
(b) DBC: (i) becomes insolvent or unable to pay its debts as
they mature or makes an assignment for the benefit of its creditors; (ii) is the
subject of a voluntary petition in bankruptcy or any voluntary proceeding
relating to insolvency, receivership, liquidation, or composition for the
benefit of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing; (iii) becomes the subject of any involuntary petition
in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within sixty (60) days of filing; or
(iv) is liquidated or dissolved; or
(c) MarketWatch is dissolved.
MarketWatch may exercise its rights pursuant to this Section 10.1 by sending DBC
the appropriate notice. No exercise of MarketWatch's rights under this Section
10.1 will limit MarketWatch's remedies by reason of DBC's default, MarketWatch s
rights to exercise any other right under this Section 10.1, or any of
MarketWatch's other rights. The terms and conditions of Sections 4.3 and 7.2
shall survive any termination or expiration of this Agreement.
11. GENERAL
11.1 Neither party may assign this Agreement, or their respective rights
and obligations hereunder, in whole or in part without the other party's prior
written consent. Any attempt to assign this Agreement without such consent shall
be void and of no effect ab initio. Notwithstanding the foregoing, MarketWatch
may have the right to assign this Agreement or any of its rights and obligations
hereunder to any entity controlling, controlled by or under common control with,
MarketWatch, or to any entity that acquires MarketWatch by purchase of stock or
by merger or otherwise, or by obtaining substantially all of MarketWatch's
assets (a "MarketWatch Assignee"), provided that any such MarketWatch Assignee,
or any division thereof, thereafter succeeds to all of the rights and is subject
to all of the obligations of MarketWatch under this Agreement. In the event that
any entity acquires DBC by purchase of stock or by merger or otherwise, or by
obtaining substantially all of DBC's assets (a "DBC Assignee"), such DBC
Assignee shall succeed to all of the rights and be subject to all of the
obligations of DBC under this Agreement and MarketWatch shall be entitled to
injunctive, and other appropriate equitable relief, without the necessity of
posting a bond, to ensure DBC's and the DBC Assignee's compliance with the terms
and conditions of this Agreement.
11.2 This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York; applicable to agreements made
and to be performed entirely within such State, without regard to the conflicts
of law principles of such State.
11.3 Each party hereto irrevocably submits to the exclusive jurisdiction
of (a) the Supreme Court of the State of New York, New York County, and (b) the
United States District Court for the Southern District of New York, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby or thereby.
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Each of DBC and MarketWatch agrees to commence any such action, suit or
proceeding either in the United States District Court for the Southern District
of New York or if such suit, action or other proceeding may not be brought in
such court for jurisdictional reasons, in the Supreme Court of the State of New
York, New York County. Each of DBC and MarketWatch further agrees that service
of any process, summons, notice or document by U.S. registered mail to such
party's respective address set forth above shall be effective service of process
for any action, suit or proceeding in New York, with respect to any matters to
which it has submitted to jurisdiction in this Section 11. Each of DBC and
MarketWatch irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby and thereby in (i) the Supreme Court of the
State of New York, New York County, or (ii) the United States District Court for
the Southern District of New York, and hereby and thereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
11.4 Each party shall comply in all material respects with all laws and
regulations applicable to its activities under this Agreement.
11.5 If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any Person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other Persons or circumstances.
11.6 All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
(i) if to MarketWatch,
825 Battery Street
San Francisco, CA 94111
Attention of Larry Kramer and Peter Bardwick
with copies to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention of Mark C. Stevens, Esq.
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(ii) if to DBC,
Data Broadcasting Corporation
3955 Point Eden Way
Hayward, CA 94545-3720
Attention of Mark F. Imperiale, President
with copies to:
Camhy Karlinsky & Stein LLP
1740 Broadway
Sixteenth Floor
New York, NY 10019
Attention of Alan I. Annex, Esq.
CBS Broadcasting Inc.
51 W 52nd Street
New York, NY 10019
Attention of Fredric G. Reynolds
Louis J. Briskman
11.7 The parties to this Agreement are independent contractors. There is
no relationship of partnership, joint venture, employment, franchise, or agency
between the parties. Neither party shall have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent.
11.8 No failure of either party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
11.9 This Agreement, along with the Exhibits thereto, contains the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. Neither party shall be liable or bound to any
other part, in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein.
11.10 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to each of the other parties.
11.11 This Agreement shall not become effective until executed by all
proposed Parties hereto.
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11.12 This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto. By an instrument in
writing, any two parties hereto may waive compliance by the third partly with
any term or provision of this Agreement that such third party was or is
obligated to comply with or perform.
11.13 Except as provided in Article VI of the Contribution Agreement,
this Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implies shall give or be construed to
give to any person, other than the parties hereto and such assigns, any legal or
equitable rights hereunder.
11.14 The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When a reference is made in this Agreement to a Section such
reference shall be to a Section of this Agreement unless otherwise indicated.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
DATA BROADCASTING CORPORATION MARKETWATCH.COM, LLC
By: /s/ Mark F. Imperiale By: /s/ J. Peter Bardwick
--------------------------------- ---------------------------------
Title: President Title: Chief Financial Officer
------------------------------ ------------------------------
and Secretary
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EXHIBIT 10.09
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement (this "AGREEMENT") is made and entered
into effective as of January 13, 1999 (the "EFFECTIVE DATE") by and between Data
Broadcasting Corporation, a Delaware corporation ("LENDER"), and
MarketWatch.com, Inc., a Delaware corporation ("BORROWER").
RECITALS
WHEREAS, Lender is a party to that certain Limited Liability Company
Agreement dated as of October 29, 1997, between CBS Inc., a New York corporation
("CBS") and Lender, with respect to Marketwatch.Com, LLC, a Delaware limited
liability company (the "LLC"), which provides, among other things, that Lender
shall provide to the LLC, on an unsecured, revolving basis, loans in amounts up
to $5,000,000 (the "REVOLVING LOAN");
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Reorganization dated as of the date hereof, LLC will merge with and into the
Borrower (the "MERGER"), with Borrower to be the entity surviving the Merger;
WHEREAS, Borrower and Lender desire that Lender's obligation to provide
the Revolving Loan shall survive the Merger;
WHEREAS, Lender desires to loan certain sums to Borrower from time to
time, and Borrower wishes to borrow certain sums from Lender, on and subject to
the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Lender and Borrower hereby, intending
to be legally bound by the terms hereof, agree as follows:
1. CERTAIN DEFINITIONS. As used herein:
1.1 BUSINESS DAY. The term "BUSINESS DAY" means any day other
than a Saturday, Sunday, or other day on which commercial banks in San
Francisco, California are authorized or required by law to close.
1.2 CREDIT PERIOD. The term "CREDIT PERIOD" means that period
of time beginning on the Effective Date and ending on October 29, 2000.
1.3 LOAN DOCUMENTS. The term "LOAN DOCUMENTS" means,
collectively, this Agreement, the Note (as defined below) executed and delivered
pursuant hereto, and any other documents executed or delivered by Borrower
pursuant to this Agreement or in connection with any Loan.
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1.4 MATURITY DATE. The term "MATURITY DATE" means that date
which is the earlier to occur of: (a) October 29, 2000; or (b) the date on which
Lender declares the entire unpaid principal amount and all accrued interest on
each outstanding Note immediately due and payable in full under Section 8.2(b).
2. AMOUNT AND TERMS OF CREDIT.
2.1 COMMITMENT TO LEND. Subject to all the terms and
conditions of this Agreement, and in reliance on the representations, warranties
and covenants of Borrower set forth in this Agreement, Lender agrees to make
loans of funds to Borrower during the Credit Period on a revolving basis (such
loans being collectively hereinafter referred to as "LOANS" and each
individually as a "LOAN"), in an aggregate cumulative total principal amount not
to exceed five million Dollars (US $5,000,000). Lender's obligation to make
Loans to Borrower under this Agreement is hereinafter referred to as the
"COMMITMENT." Notwithstanding the foregoing, Lender will not be obligated to
make a Loan to Borrower unless and until Borrower executes and delivers to
Lender a Note (as defined in Section 2.2) for the principal amount of such Loan.
In addition, Lender will not be obligated to advance any Loan to Borrower on or
after the Maturity Date, and Lender's obligation to advance any Loan to Borrower
is subject to satisfaction of all relevant terms and conditions of this
Agreement, including but not limited to the conditions precedent and other
provisions of Sections 5 (with respect to the initial Loan) and 6 (with respect
to each Loan). Notwithstanding the foregoing, Lender will not be obligated to
make a Loan to Borrower unless and until a Borrower first gives Lender written
notice of Borrower's request for a Loan hereunder that sets forth the principal
amount to the borrowed by Borrower under such requested Loan (a "LOAN NOTICE")
and the date on which such Loan is requested to be advanced, which date shall
not be sooner than five (5) Business Days following Lender's receipt of such
Loan Notice.
It is also agreed that amounts previously advanced by Lender
pursuant to Section 12.01 of the Limited Liability Company Agreement dated as of
October 29, 1997 shall be included as part of the Initial Loan.
2.2 NOTE. Borrower's indebtedness to Lender under each Loan
advanced by Lender under this Agreement will be evidenced by a separate
Promissory Note of Borrower in the form attached hereto as Exhibit "A" (the
"NOTE"). The Note will provide that interest on unpaid principal will accrue at
a rate equal to the prime rate as announced by The Chase Manhattan Bank as its
prime rate in effect at its principal office in New York City plus two percent
(2%) per annum (calculated on the basis of a 360-day year) compounded annually
(but in no event higher than the highest lawful rates).
2.3 MATURITY. Unless payment thereof is accelerated or
otherwise becomes due earlier under the terms of this Agreement (including but
not limited to the provisions of Section 8.2) or the terms of a Note the unpaid
principal amount of all Loans and all unpaid interest accrued thereon, together
with any other fees, expenses or costs incurred in connection therewith, will be
immediately due and payable to Lender in full on the Maturity Date.
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2.4 PREPAYMENT. Borrower may at any time and from time to time
on any Business Day prepay any Loan in whole or in part in increments of U.S.
$1,000 on at least one (1) Business Day's prior written notice, or telephonic
notice promptly confirmed in writing, received by Lender no later than 10:00
a.m., Pacific Time. Each prepayment will be applied as follows: (a) first, to
the payment of interest accrued on all Loans outstanding, and (b) second, to the
extent that the amount of such prepayment exceeds the amount of all such accrued
interest, to the payment of principal on such Loan or Loans as Borrower may
designate.
3. CLOSING DATE; DELIVERY.
3.1 CLOSING DATE. The closing of the initial Loan (the
"CLOSING") will be held by mail and/or telecopy on the Effective Date (the
"CLOSING DATE"), or at such other time and place as Borrower and Lender may
mutually agree.
3.2 DELIVERY. At the Closing, Borrower will execute and
deliver to Lender the Note, duly executed by Borrower.
4. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower hereby
represents and warrants to Lender that:
4.1 ORGANIZATION AND STANDING; CHARTER DOCUMENTS. Borrower is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to own, lease and operate its properties and to conduct its business
as such is presently conducted and as proposed to be conducted. Borrower is duly
qualified to do business as a foreign corporation in good standing in any state
or jurisdiction in the United States in which it is required to be qualified to
do intrastate business as the Company's business is currently conducted, except
for jurisdictions in which failure to so qualify could not reasonably be
expected to have a material adverse effect on the business and operations of the
Company taken as a whole. True and accurate copies of the Certificate of
Incorporation (the "CHARTER") and Bylaws of Borrower, each as amended and
currently in effect, have been delivered to Lender and Lender's counsel.
4.2 AUTHORIZATION. All corporate action on the part of
Borrower and its officers, directors and stockholders that is necessary for the
authorization, execution, delivery and performance of each of the Loan Documents
by Borrower has been taken; and each of the Loan Documents, when executed and
delivered by Borrower, will constitute valid and legally binding obligations of
Borrower, enforceable in accordance with their terms.
5. CONDITIONS PRECEDENT TO INITIAL LOAN. The obligation of Lender to
make the initial Loan under the Commitment is subject to the satisfaction (or
written waiver by Lender) of all the following conditions precedent:
5.1 REPRESENTATIONS TRUE. All representations and warranties
of Borrower contained in this Agreement and all other Loan Documents will be
true, correct and complete in all respects with the same effect as though such
representations and warranties had been made on
3
<PAGE> 4
and as of the Closing; and Lender will have received a certificate executed by
the President or Chief Executive Officer of Borrower certifying the foregoing.
5.2 NOTE. Lender will have received the Note representing the
initial Loan, executed by a duly authorized officer of Borrower.
5.3 CORPORATE DOCUMENTS. Lender will have received, in form
and substance satisfactory to Lender and its counsel, a copy of the records of
all actions taken by Borrower, including all corporate resolutions of Borrower
authorizing or relating to the execution, delivery and performance of the Loan
Documents and the consummation of the transactions contemplated thereby, and a
certified copy of the Charter of Borrower.
5.4 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents incident to such transactions will be in form and substance
satisfactory to Lender and Lender's counsel, and Lender will have received all
counterpart originals or certified or other copies of such documents as it may
reasonably request.
6. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of Lender to make
each Loan, including but not limited to the initial Loan, will be subject to the
satisfaction of all the following additional conditions precedent:
6.1 NO EVENT OF DEFAULT. No event will have occurred and be
continuing, and no event would result from the making of such Loan, that would
constitute an Event of Default as defined herein.
6.2 NOTE. Lender will have received the Note representing such
additional Loan, executed by a duly authorized officer of Borrower.
6.3 REPRESENTATIONS TRUE. All representations and warranties
of Borrower contained in this Agreement or in any other Loan Documents will be
true, correct and complete in all respects with the same effect as though such
representations and warranties had been made on and as of the date such Loan is
actually advanced (except to the extent such representations and warranties
specifically relate to an earlier date, in which case they will be true,
accurate and complete in all material respects as of such earlier date).
6.4 ALL AGREEMENTS PERFORMED. All agreements, obligations,
conditions and covenants set forth in this Agreement and all other Loan
Documents to be performed by Borrower through the date such Loan is advanced
will have been duly performed and complied with in all respects.
4
<PAGE> 5
7. OTHER COVENANTS OF BORROWER. Borrower hereby covenants and agrees
with Lender as follows:
7.1 FINANCIAL AND OTHER INFORMATION AND INSPECTION. Except as
provided in Section 7.3, until the Termination Date, Borrower will provide to
Lender all the reports and rights described below in this Section 7.1:
(a) Annual Financial Information. As soon as
practicable after the end of each fiscal year of Borrower, but no later than one
hundred twenty (120) days thereafter, an audited consolidated balance sheet of
Borrower and its subsidiaries as at the end of such fiscal year, and
consolidated statements of income and cash flows of Borrower and its
subsidiaries for such year, prepared in accordance with generally accepted
accounting principles and setting forth in each case in comparative form the
financial statements for the previous fiscal year, all in reasonable detail and
audited and certified by independent public accountants acceptable to Lender.
(b) Quarterly Financial Information. As soon as
practicable after the end of each fiscal quarter of Borrower, and in any event
within forty-five (45) days thereafter, an unaudited consolidated balance sheet
of Borrower and its subsidiaries as at the end of such quarter and consolidated
statements of income and cash flows of Borrower and its subsidiaries for each
such quarter and for the fiscal year to date, prepared in accordance with
generally accepted accounting principles, all in reasonable detail.
(c) Inspection Rights. The right to visit and inspect
any of the properties of Borrower or any of its subsidiaries, and to discuss its
and their affairs and finances with its and their officers, all at such
reasonable times and as often as may reasonably be requested by Lender.
(d) Other Information. With reasonable promptness,
such other information and data, including, without limitation, lists of
property and accounts, budgets, agreements with insurers, forecasts, tax returns
and reports, with respect to Borrower and its subsidiaries as may from time to
time may be reasonably requested by Lender, and all such other information and
communications (including, without limitation, notices of meetings of Borrower's
shareholders) as Borrower will have supplied to its holders of any shares of its
capital stock.
7.2 TERMINATION OF COVENANTS. The covenants set forth in
Sections 7.1 and 7.2 will terminate on the earlier of: (a) the date upon which a
registration statement filed by Borrower under the Securities Act of 1933, as
amended, in connection with a firm commitment underwritten public offering of
its securities first becomes effective and the securities registered thereunder
are sold; (b) the date Borrower first becomes subject to filing reports under
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended; or (c)
the repayment in full of all indebtedness under all Notes, provided that Lender
is under no further obligation to make any additional Loans hereunder.
5
<PAGE> 6
7.3 FURTHER ASSURANCES. In addition to the obligations and
documents which this Agreement expressly requires Borrower to execute, deliver
and perform, Borrower will execute, deliver and perform, and will cause its
subsidiaries to execute, deliver and perform, any and all further acts or
documents which Lender may reasonably require in order to carry out the purposes
of this Agreement or any of the other Loan Documents.
8. EVENTS OF DEFAULT OF BORROWER.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following
events will constitute an "EVENT OF DEFAULT":
(a) Borrower fails to pay any principal or any
accrued interest under any Note or any Loan when the same is due and payable, or
fails to pay any amount of principal or accrued interest due under any Note or
any Loan on the Maturity Date therefor, and such failure to pay is not cured by
Borrower within five (5) calendar days after Lender gives written notice of such
failure to pay to Borrower;
(b) any material representation or warranty made by
or on behalf of Borrower in this Agreement or in any other Loan Document, or any
statement or certificate that Borrower may at any time give in writing pursuant
thereto or in connection therewith is false, misleading or incomplete in any
material respect when made (or deemed to have been made);
(c) Borrower fails or neglects to perform, keep or
observe any covenant set forth in this Agreement or in any of the other Loan
Documents, and the same has not been cured within ten (10) calendar days after
Borrower becomes aware thereof;
(d) Borrower or any of its subsidiaries becomes
insolvent, or admits in writing its inability to pay its debts as they mature,
or makes an assignment for the benefit of creditors, or applies for or consents
to the appointment of a receiver, liquidator, custodian or trustee for it or for
a substantial part of its property or business, or such a receiver, liquidator,
custodian or trustee otherwise is appointed and is not discharged within thirty
(30) calendar days after such appointment; or
(e) bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors are instituted by or against Borrower or
any of its subsidiaries, or any order, judgment or decree is entered against
Borrower or any such subsidiary decreeing its dissolution or liquidation;
provided, however, with respect to an involuntary petition in bankruptcy, such
petition is not have been dismissed within thirty (30) days after the filing of
such petition.
8.2 REMEDIES OF LENDER. Upon and after the occurrence of any
Event of Default, Lender will have no further obligation to make any Loan or
Loans to Borrower, and in addition, at Lender's sole option by written notice to
Borrower, Lender take any one or more of the following actions:
6
<PAGE> 7
(a) Lender may immediately terminate the Commitment
and all liabilities and obligations of Lender under this Agreement, without
affecting Lender's rights under this Agreement and the Note(s);
(b) Lender may declare the entire principal amount of
and all accrued interest on the Note(s) and all Loans to immediately be due and
payable in full, whereupon such amounts will immediately become due and payable
in full, provided that in the case of an Event of Default listed in paragraph
(d) or (e) of Section 8.1, the principal and interest will immediately become
due and payable without the requirement of any notice or other action by Lender;
and
(c) Exercise all rights and remedies granted under
the Loan Documents or otherwise available to Lender at law or in equity.
9. MISCELLANEOUS.
9.1 SURVIVAL. The representations and warranties of Borrower
contained in or made pursuant to this Agreement and all the other Loan Documents
will survive the execution and delivery of the Loan Documents.
9.2 ENTIRE AGREEMENT. This Agreement, the Note, and the
exhibits and schedules attached hereto constitute the entire agreement and
understanding among the parties with respect to the subject matter thereof and
supersede any prior understandings or agreements of the parties with respect to
such subject matter.
9.3 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement will inure to the benefit of and be binding upon the respective
successors and assigns of the parties; provided, however, that neither party may
assign or delegate any of its rights or obligations hereunder or under any other
Loan Document or any interest herein or therein without the other party's prior
written consent.
9.4 NO THIRD PARTY BENEFICIARIES; CONSTRUCTION. Nothing in
this Agreement, express or implied, is intended to confer upon any third party
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. This Agreement and
its exhibits are the result of negotiations between the parties and has been
reviewed by each party hereto; accordingly, this Agreement will be deemed to be
the product of the parties hereto, and no ambiguity will be construed in favor
of or against any party.
9.5 GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the internal laws of the State of California as
applied to agreements entered into solely between residents of, and to be
performed entirely in, such State, without reference to that body of law
relating to conflicts of law or choice of law.
9.6 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which will be deemed in original, but all of which
together will constitute one and the same instrument.
7
<PAGE> 8
9.7 NOTICES. Any notice required or permitted under this
Agreement will be given in writing and will be deemed effectively given upon
personal delivery; upon confirmed transmission by telecopy or telex; or three
(3) days following deposit with the United States Post Office, by certified or
registered mail, postage prepaid, addressed:
To Borrower:
MarketWatch.Com, Inc.
825 Battery Street
San Francisco, CA 94111
Telephone: (415) 733-0500
Telecopier: (415) 392-1972
Attention: J. Peter Bardwick
To Lender:
Data Broadcasting Corporation
3955 Point Eden Way
Hayward, CA 94545
Telephone: (510) 266-6000
Telecopier: (510) 266-6018
Attention: Mark Imperiale
or at such other address as such party may specify by written notice given in
accordance with this Section.
9.8 MODIFICATION; WAIVER. This Agreement may be modified or
amended only by a writing signed by both parties hereto. No waiver or consent
with respect to this Agreement will be binding unless it is set forth in writing
and signed by the party against whom such waiver is asserted. No course of
dealing between Borrower and Lender will operate as a waiver or modification of
any party's rights under this Agreement or any other Loan Document. No delay or
failure on the part of either party in exercising any right or remedy under this
Agreement or any other Loan Document will operate as a waiver of such right or
any other right. A waiver given on one occasion will not be construed as a bar
to, or as a waiver of, any right or remedy on any future occasion.
9.9 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies of
Lender herein provided will be cumulative and not exclusive of any other rights
or remedies provided by law or otherwise.
9.10 SEVERABILITY. Any invalidity, illegality or
unenforceability of any provision of this Agreement in any jurisdiction will not
invalidate or render illegal or unenforceable the remaining provisions hereof in
such jurisdiction and will not invalidate or render illegal or unenforceable
such provision in any other jurisdiction.
8
<PAGE> 9
9.11 ATTORNEYS' FEES. If any party hereto commences or
maintains any action at law or in equity (including counterclaims or
cross-complaints) against the other party hereto by reason of the breach or
claimed breach of any term or provision of this Agreement or any other Loan
Document, then the prevailing party in said action will be entitled to recover
its reasonable attorney's fees and court costs incurred therein.
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the Effective Date.
MARKETWATCH.COM, INC. DATA BROADCASTING CORPORATION
By: /s/ J. PETER BARDWICK By: /s/ MARK F. IMPERIALE
---------------------------- --------------------------------
Title: Chief Financial Officer Title: President
and Secretary
ATTACHMENTS:
Exhibit A - Promissory Note
[SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT]
9
<PAGE> 10
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
REVOLVING
PROMISSORY NOTE
San Francisco, California
$5,000,000.00 January 13, 1999
This Revolving Promissory Note (this "NOTE") is made and delivered
pursuant to that certain Revolving Credit Agreement dated as of January 13, 1999
between Borrower and Lender (as such terms are defined below), as such may be
amended from time to time (the "CREDIT AGREEMENT"). Unless otherwise defined
herein, all capitalized terms used in this Note shall have the same meanings
that are given to such terms in the Credit Agreement, the terms of which are
incorporated into this Note by reference.
1. OBLIGATION. The undersigned, MarketWatch.com, Inc., a Delaware
corporation ("BORROWER") hereby promises to pay to the order of Data
Broadcasting Corporation, a Delaware corporation, ("LENDER" OR "HOLDER") on or
before October 27, 2000, at Lender's principal place of business at
3955 Point Eden Way, Hayward, CA 94545, or at such other place as Holder may
direct, the principal sum of five million Dollars ($5,000,000.00) or so much
thereof as may be advanced and outstanding, together with all interest accrued
on unpaid principal, to be computed on each advance of a Loan from the date of
its disbursement to Borrower, at a rate equal to the prime rate as announced by
The Chase Manhattan Bank as its prime rate in effect at its principal office in
New York City plus two percent (2%) per annum (calculated on the basis of a
360-day year), compounded annually. As used herein, the term "HOLDER" shall
initially mean Lender, and shall subsequently mean each person or entity to whom
this Note is duly assigned.
The outstanding unpaid principal balance of this Note at any time shall
be the total principal amounts advanced hereunder by Holder less the amounts of
payments of principal made hereon by Borrower, which balance may be endorsed
hereon from time to time by Holder
<PAGE> 11
in accordance with Section 2. Payments of interest on this Note shall be payable
on a quarterly basis, on the last business day of each calendar quarter.
2. RECORDING OF LOANS AND PAYMENTS. Holder is authorized to record on
Schedule A hereto, and on any continuation(s) of such Schedule that may be
attached to this Note: (a) the date and principal amount of each Loan advanced
by Lender under the Credit Agreement; and (b) the date and amount of each
payment or prepayment of principal and/or accrued interest of any Loan; which
recordation will constitute prima facie evidence of the accuracy of the
information so endorsed on Schedule A; provided however, that any failure to
record such information on such Schedule or continuation thereof will not in any
manner affect the obligations of Borrower to make payments of principal and
interest in accordance with the terms of this Note. Holder will promptly provide
Borrower with a copy of each recordation made by Holder on Schedule A attached
hereto.
3. PREPAYMENT. Prepayment of unpaid principal and/or interest due under
this Note may be made at any time without penalty as specified in the Credit
Agreement. Unless otherwise agreed in writing by Holder, all payments will be
made in lawful tender of the United States and will be applied (a) first, to the
payment of accrued interest, and (b) second, (to the extent that the amount of
such prepayment exceeds the amount of all such accrued interest), to the payment
of principal.
4. DEFAULT; ACCELERATION OF OBLIGATION. Borrower will be deemed to be
in default under this Note and the outstanding unpaid principal balance of this
Note, together with all interest accrued thereon, will immediately become due
and payable in full, without the need for any further action on the part of
Holder, upon the occurrence of any Event of Default (as defined in the Credit
Agreement).
5. REMEDIES ON DEFAULT; ACCELERATION. Upon any Event of Default, Holder
will have, in addition to its rights and remedies under this Note and the Credit
Agreement, full recourse against any real, personal, tangible or intangible
assets of Borrower, and may pursue any legal or equitable remedies that are
available to Holder, and may declare the entire unpaid principal amount of this
Note and all unpaid accrued interest under this Note to be immediately due and
payable in full.
6. WAIVER AND AMENDMENT. Any provision of this Note may be amended or
modified only by a writing signed by both Borrower and Holder. Except as
provided below with respect to waivers by Borrower, no waiver or consent with
respect to this Note will be binding or effective unless it is set forth in
writing and signed by the party against whom such waiver is asserted. No course
of dealing between Borrower and Holder will operate as a waiver or modification
of any party's rights or obligations under this Note. No delay or failure on the
part of either party in exercising any right or remedy under this Note will
operate as a waiver of such right or any other right. A waiver given on one
occasion will not be construed as a bar to, or as a waiver of, any right or
remedy on any future occasion.
-2-
<PAGE> 12
7. WAIVERS OF BORROWER. Borrower hereby waives presentment, notice of
non-payment, notice of dishonor, protest, demand and diligence. This Note may be
amended only by a writing executed by Borrower and Holder.
8. GOVERNING LAW. This Note will be governed by and construed in
accordance with the internal laws of the State of California as applied to
agreements between residents thereof to be performed entirely within such State,
without reference to that body of law relating to conflict of laws or choice of
law.
9. SEVERABILITY; HEADINGS. The invalidity or unenforceability of any
term or provision of this Note will not affect the validity or enforceability of
any other term or provision hereof. The headings in this Note are for
convenience of reference only and will not alter or otherwise affect the meaning
of this Note.
10. JURISDICTION; VENUE. Borrower, by its execution of this Note,
hereby irrevocably submits to the in personam jurisdiction of the state courts
of the State of California and of the United States District Court for the
Northern District of California that are located in San Francisco, California,
for the purpose of any suit, action or other proceeding arising out of or based
upon this Note.
11. ATTORNEYS' FEES. If suit is brought for collection of this Note,
Borrower agrees to pay all reasonable expenses, including attorneys' fees,
incurred by Holder in connection therewith whether or not such suit is
prosecuted to judgment.
12. ASSIGNMENT. This Note is not assignable by Holder without the
written consent of Borrower. This Note may not be assigned or delegated by
Borrower, whether by voluntary assignment or transfer, operation of law, merger
or otherwise.
13. CREDIT AGREEMENT. This Note incorporates by reference all the
provisions of the Credit Agreement, including but not limited to all provisions
contained therein with respect to Events of Default, waivers, remedies and
covenants, and the description of the benefits, rights and obligations of each
of Borrower and Holder under the Credit Agreement.
IN WITNESS WHEREOF, Borrower has executed this Note as of the date and
year first above written.
BORROWER
MarketWatch.com, Inc. a Delaware corporation
By: /s/ J. PETER BARDWICK
----------------------------------------
Name: J. PETER BARDWICK
---------------------------------------
Title: Chief Financial Officer and Secretary
-------------------------------------
<PAGE> 13
SCHEDULE A
TO
REVOLVING PROMISSORY NOTE
OF
MARKETWATCH.COM, INC.
RECORD OF LOANS AND REPAYMENT OF LOANS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT UNPAID
AMOUNT AMOUNT OF PRINCIPAL
OF OF INTEREST BALANCE NOTATION
DATE LOAN MADE LOAN REPAID PAID OF LOAN MADE BY
- ----------- -------------- ---------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
- ----------- -------------- ---------------- ------------- ------------ -------------
</TABLE>
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 140,000
<SECURITIES> 0
<RECEIVABLES> 1,812,000
<ALLOWANCES> 226,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,728,000
<PP&E> 1,156,000
<DEPRECIATION> 224,000
<TOTAL-ASSETS> 4,487,000
<CURRENT-LIABILITIES> 7,617,000
<BONDS> 0
0
0
<COMMON> 90,000
<OTHER-SE> (3,220,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,487,000
<SALES> 7,027,000
<TOTAL-REVENUES> 7,027,000
<CGS> 2,837,000
<TOTAL-COSTS> 2,837,000
<OTHER-EXPENSES> 16,444,000
<LOSS-PROVISION> 250,000
<INTEREST-EXPENSE> 159,000
<INCOME-PRETAX> (12,413,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,413,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,413,000)
<EPS-PRIMARY> (1.38)
<EPS-DILUTED> (1.38)
</TABLE>
