AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made and
entered into as of April 28, 1999 (the "AGREEMENT DATE") by and among
MarketWatch.com, Inc., a Delaware corporation ("MARKETWATCH"); Big Dog
Acquisition Corp., a Minnesota corporation that is a wholly-owned subsidiary of
MarketWatch ("SUB"); BigCharts Inc., a Minnesota corporation ("CHARTS"); Philip
D. Hotchkiss; Verticality BigCharts Investment, LLC, a Delaware Limited
Liability Company ("VERTICALITY"); Wyncrest Capital, Inc.; David C. Malmberg;
Jamie Thingelstad; Scott Kinney; Ronny Apfel; Sholem Greenbaum and Hadar
Pedhazur.
RECITALS
A. The parties intend that, subject to the terms and conditions of
this Agreement, Sub will be merged with and into Charts in a reverse triangular
merger, with Charts to be the surviving corporation of such merger, all pursuant
to the terms and conditions of this Agreement and applicable law. The parties
also intend for such merger to be treated as a "reorganization" under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"), and to be
treated as a "purchase" transaction for accounting purposes.
B. Upon the effectiveness of such merger, (i) the common stock of
Charts that is outstanding immediately prior to the effectiveness of the merger
will be converted into shares of the common stock of MarketWatch, (ii) the
employee stock options to purchase shares of Charts' common stock granted under
the Charts Option Plan (as defined in Article 1 below) that are outstanding
immediately prior to the effectiveness of the Merger will be assumed by
MarketWatch and converted into options to purchase shares of the common stock of
MarketWatch and (iii) Sub will be merged with and into Charts, all as provided
in this Agreement.
NOW, THEREFORE, in consideration of the above-recited facts and the
mutual promises, covenants and conditions contained herein, the parties hereby
agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms will have the meanings
set forth below:
1.1 "CAPITAL CHANGES" shall have the meaning set forth in Section
2.3.
1.2 "CHARTS ANCILLARY AGREEMENTS" means, collectively, the Escrow
Agreement, the Registration Rights Agreement, each Noncompetition Agreement,
each Employment Agreement, each Voting Agreement, the Articles of Merger, each
certificate to be delivered by Charts or an officer or officers of Charts at the
Closing pursuant to Article 9 of this Agreement, and each other agreement (other
than this Agreement) which Charts is to enter into as a party thereto pursuant
to this Agreement.
1.3 "CHARTS ARTICLES" means the Articles of Incorporation of Charts
in effect immediately prior to the Effective Time.
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1.4 "CHARTS COMMON STOCK" means Charts' Common Stock, par value
$0.01 per share.
1.5 "CHARTS DISSENTING SHARES" means any shares of any capital stock
of Charts that (i) are outstanding immediately prior to the Effective Time and
(ii) with respect to which "dissenters' rights" within the meaning of Section
302A.471 of the MBCA have been duly and properly exercised and perfected in
connection with the Merger in compliance with Section 302A.473 of the MBCA.
1.6 "CHARTS OPTIONS" means options to purchase shares of Charts
Common Stock granted by Charts to Charts employees under Charts' 1995 Stock Plan
(the "CHARTS OPTION PLAN").
1.7 "CHARTS OPTIONS OUTSTANDING" means the total number of shares of
Charts Common Stock that are subject to or potentially issuable (without regard
to vesting) under all Charts Options that are issued and outstanding immediately
prior to the Effective Time.
1.8 "CHARTS OTHER SECURITIES" means, collectively: (a) any warrant,
option, right or other security (in each case other than any Charts Option or
Charts Warrant) that entitles the holder thereof to purchase or otherwise
acquire from Charts any shares of the capital stock of Charts (collectively,
"CHARTS STOCK RIGHTS"); (b) any note, evidence of indebtedness, stock or other
security issued by Charts that is convertible into or exchangeable for any
shares of the capital stock of Charts or any Charts Stock Rights ("CHARTS
CONVERTIBLE SECURITY"); and (c) any warrant, option, right, note, evidence of
indebtedness, stock or other security that entitles the holder thereof to
purchase or otherwise acquire from Charts any Charts Stock Rights or any Charts
Convertible Security. The term "Charts Other Securities" does not include any
Charts Options, Charts Warrants, or any securities issued or granted by any
person or entity other than Charts.
1.9 "CHARTS SHAREHOLDERS" means, collectively, those persons (each
being individually referred to herein as a "CHARTS SHAREHOLDER") who,
immediately prior to the Effective Time, hold the shares of Charts Common Stock
that are outstanding immediately prior to the Effective Time; provided, however,
that for purposes of Sections 2.4 and 7.2.1 and Article 11 of this Agreement,
the term "Charts Shareholders" means only those Charts Shareholders (as defined
above in this Section) who are issued shares of MarketWatch Common Stock in the
Merger pursuant to Section 2.1.2 of this Agreement and excludes holders of
Charts Dissenting Shares who are not issued shares of MarketWatch Common Stock
in the Merger pursuant to Section 2.1.2 of this Agreement.
1.10 "CHARTS SHAREHOLDERS' VOTE" means the meeting of Charts
shareholders to be called and held by Charts in order to seek the Charts
shareholders' approval of the Merger, this Agreement and the transactions
contemplated by this Agreement.
1.11 "CHARTS WEBSITE" means all websites or other sites accessed via
the Internet or any other electronic network (including without limitation any
cable-based network or private network), that are, in whole or in part, owned or
operated by Charts, either as of the Agreement Date, the Closing Date or anytime
in the past, including without limitation that certain website currently
accessible at the URL address "http://www.bigcharts.com" (the "HOME CHARTS
WEBSITE"); provided, however, that with respect to any such website or site that
is not owned by Charts but on which Charts content is displayed, the term
"Charts Website" shall mean and refer
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only to that portion of such website or site that contains the content directly
or indirectly provided by Charts.
1.12 The "CODE" means the Internal Revenue Code of 1986, as amended.
1.13 The "COMMON STOCK AMOUNT PER SHARE" is the amount of (a) six
million dollars ($6,000,000) less (i) any amount paid in respect of Charts
Dissenting Shares and less (ii) any amount payable to any financial advisor set
forth in Schedule 3.18 in the Charts Disclosure Letter (defined below), divided
by (b) the Common Stock Equivalents Outstanding.
1.14 The "COMMON STOCK CONVERSION NUMBER" is the number obtained by
dividing (a) the MarketWatch Merger Shares by (b) the Common Stock Equivalents
Outstanding.
1.15 "COMMON STOCK EQUIVALENTS OUTSTANDING" means that number of
shares of Charts Common Stock that is equal to the sum of (a) the total number
of shares of Charts Common Stock that are issued and outstanding immediately
prior to the Effective Time less any Charts Dissenting Shares; plus (b) the
Charts Options Outstanding (as defined above); plus (c) the total number of
shares of Charts Common Stock ultimately issuable upon the conversion or
exchange of all Charts Warrants and Charts Other Securities that are issued and
outstanding immediately prior to the Effective Time.
1.16 "DGCL" means the Delaware General Corporation Law.
1.17 "EFFECTIVE TIME" means the date and time on which the Merger
first becomes legally effective under the laws of the State of Minnesota as a
result of the filing with the Minnesota Secretary of State of Articles of Merger
between Sub and Charts in substantially the form of Exhibit A (the "ARTICLES OF
MERGER") and any required officers' certificates.
1.18 "EMPLOYMENT AGREEMENT" shall mean each of those certain
Employment Agreements dated of even date herewith by and among MarketWatch,
Charts and each of Philip D. Hotchkiss, Scott Kinney and Jamie J. Thingelstad
attached hereto as Exhibits B 1-3.
1.19 "ESCROW AGREEMENT" shall have the meaning set forth in Section
2.4.
1.20 "INITIAL UNLOCKED SHARES" means the shares of MarketWatch Common
Stock received in the Merger by a Principal Shareholder (or subject to
MarketWatch Options received in the Merger by a Principal Shareholder), which
are deemed to be Unlocked Shares immediately at the Effective Time pursuant to
Section 2.6, as adjusted for any Capital Changes or any dividends or other
payments made with respect to such Initial Unlocked Shares.
1.21 "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act, as amended.
1.22 "KNOWLEDGE," when used with reference to a party, means the
collective knowledge, of those officers, directors and employees of such party.
1.23 "MARKETWATCH ANCILLARY AGREEMENTS" means, collectively, the
Registration Rights Agreement, the Escrow Agreement, each Employment Agreement,
each Noncompetition
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Agreement, each certificate to be delivered by MarketWatch or an officer or
officers of MarketWatch at the Closing pursuant to Article 8 of this Agreement
and each agreement (other than this Agreement) which MarketWatch is to enter
into as a party thereto pursuant to this Agreement.
1.24 "MARKETWATCH COMMON STOCK" means MarketWatch's Common Stock,
$0.01 par value per share.
1.25 "MARKETWATCH CLOSING PRICE PER SHARE" means the average of the
closing sale prices of MarketWatch Common Stock as quoted on the Nasdaq National
Market on each of the five trading days ending on the Closing Date, as reported
in the Wall Street Journal.
1.26 "MARKETWATCH SUBSEQUENT PRICE PER SHARE" means the average of
the closing sale prices of MarketWatch Common Stock as quoted on the Nasdaq
National Market on each of the five trading days ending on the date of a payment
for Damages pursuant to Section 11, as reported in the Wall Street Journal.
1.27 "MARKETWATCH MERGER SHARES" means 2,175,000 shares of
MarketWatch Common Stock.
1.28 "MATERIAL ADVERSE CHANGE" when used with reference to any entity
or group of entities, means a material adverse change to such entity or group of
entities which would have a Material Adverse Effect other than: (a) a change
arising or resulting, directly or indirectly, from general industry, economic or
stock market conditions; or (b) a change that is proximately caused by the
public announcement of, and the response or reaction of customers, vendors,
licensors, investors or employees of such entity or group of entities to, this
Agreement, the Merger or any of the transactions contemplated by this Agreement;
or (c) a change arising from an act or omission of another party to this
Agreement (or an affiliate of such party) and not from an act or omission of
such entity or group of entities; provided, however, that with respect to
MarketWatch, a reduction in the market price of MarketWatch Common Stock shall
not, in and of itself, constitute a Material Adverse Change with respect to
MarketWatch.
1.29 "MATERIAL ADVERSE EFFECT" when used with reference to any entity
or group of related entities, means any event, change or effect that is
materially adverse to the condition (financial or otherwise), properties,
assets, liabilities, business, operations or results of operations of such
entity and its subsidiaries, taken as a whole.
1.30 "MBCA" means the Minnesota Business Corporation Act.
1.31 "MERGER" means the statutory merger of Sub with and into Charts
to be effected pursuant to this Agreement.
1.32 "NONCOMPETITION AGREEMENT" shall mean each of those certain
Noncompetition Agreements dated of even date herewith by and among MarketWatch,
Charts and each of Philip D. Hotchkiss, Scott Kinney and Jamie J. Thingelstad
attached hereto as Exhibits C 1-3.
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1.33 "PRINCIPAL SHAREHOLDERS" means, collectively, Philip D.
Hotchkiss, Wyncrest Capital, Inc., David C. Malmberg, Jamie Thingelstad, Scott
Kinney, Ronny Apfel, Sholem Greenbaum and Hadar Pedhazur.
1.34 "SUB ANCILLARY AGREEMENTS" means, collectively, the Articles of
Merger, each certificate to be delivered by Sub or an officer or officers of Sub
at the Closing pursuant to Article 8 of this Agreement and each agreement (other
than this Agreement) which Sub is to enter into as a party thereto pursuant to
this Agreement.
Other capitalized terms defined elsewhere in this Agreement and not
defined in this Article 1 will have the meanings assigned to such terms in this
Agreement.
ARTICLE 2
PLAN OF REORGANIZATION
2.1 The Merger. Subject to the terms and conditions of this
Agreement, Sub will be merged with and into Charts pursuant to this Agreement in
accordance with applicable provisions of the laws of the State of Minnesota as
follows:
2.1.1 Conversion of Sub Stock. At the Effective Time, each
share of the Common Stock of Sub that is issued and outstanding immediately
prior to the Effective Time will, by virtue of the Merger and without the need
for any further action on the part of the holder thereof, be converted into and
become one (1) share of Charts Common Stock that is issued and outstanding
immediately after the Effective Time, and the shares of Charts Common Stock into
which the shares of Sub Common Stock are so converted in the Merger will be the
only shares of capital stock of Charts that are issued and outstanding
immediately after the Effective Time.
2.1.2 Conversion of Charts Stock. At the Effective Time
(subject to the provisions of Section 2.1.4 regarding the payment of cash in
lieu of fractional shares of MarketWatch Common Stock and regarding the rounding
of fractional cents) each share of Charts Common Stock that is issued and
outstanding immediately prior to the Effective Time (other than any Charts
Dissenting Shares as provided in Section 2.1.3) will, by virtue of the Merger,
and without the need for any further action on the part of the holder thereof,
be converted into (i) a number of shares of MarketWatch Common Stock that is
equal to the Common Stock Conversion Number and (ii) the right to receive an
amount equal to the Common Stock Amount Per Share;
2.1.3 Charts Dissenting Shares. Subject to the provisions of
Sections 9.8 and 9.9, Holders of Charts Dissenting Shares (if any) will be
entitled to their appraisal rights under 302A.471 of the MBCA with respect to
such Charts Dissenting Shares, and such Charts Dissenting Shares will not be
converted into shares of MarketWatch Common Stock in the Merger; provided,
however, that shares of the capital stock of Charts that are outstanding
immediately prior to the Effective Time of the Merger and with respect to which
dissenting shareholders' rights of appraisal under the MBCA have not been
properly perfected will, when such dissenting shareholders' rights can no longer
be legally exercised under the MBCA, be converted into MarketWatch Common Stock
and cash as provided in Section 2.1.2.
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2.1.4 Fractional Shares. No fractional shares of MarketWatch
Common Stock will be issued in connection with the Merger. In lieu thereof, each
holder of Charts Common Stock who would otherwise be entitled to receive a
fraction of a share of MarketWatch Common Stock pursuant to Section 2.1.2,
computed after aggregating all shares of MarketWatch Common Stock to be received
by such holder pursuant to Section 2.1.2, will instead receive from MarketWatch,
within ten (10) business days after the Effective Time, an amount of cash
(rounded to the nearest whole cent) equal to the product obtained by multiplying
(i) the MarketWatch Closing Price Per Share (as adjusted to reflect any Capital
Change (as defined in Section 2.3 below) of MarketWatch) by (ii) the fraction of
a share of MarketWatch Common Stock that such holder would otherwise be entitled
to receive.
The total number of shares of MarketWatch Common Stock to be issued in
the Merger shall not exceed 2,175,000 shares (adjusted for Capital Changes) and
the aggregate Common Stock Amount Per Share payable to Charts stockholders shall
not exceed six million dollars ($6,000,000).
2.2 Assumption of Charts Options and Charts Warrants; Charts Other
Securities.
2.2.1 Charts Options. Each Charts Option that is outstanding
immediately prior to the Effective Time will, by virtue of the Merger and at the
Effective Time and without the need for any further action on the part of any
holder thereof, be assumed by MarketWatch and converted into an option (a
"MARKETWATCH OPTION") to purchase that number of shares of MarketWatch Common
Stock determined by multiplying the number of shares of Charts Common Stock that
are subject to such Charts Option immediately prior to the Effective Time by the
Common Stock Conversion Number, at an exercise price per share of MarketWatch
Common Stock equal to the exercise price per share of Charts Common Stock that
was in effect for such Charts Option immediately prior to the Effective Time
divided by the Common Stock Conversion Number, with the resulting exercise price
being rounded up to the nearest whole cent; provided, however, that if the
foregoing calculation would result in an assumed and converted Charts Option
being converted into an MarketWatch Option that, after aggregating all the
shares of MarketWatch Common Stock issuable upon the exercise of such
MarketWatch Option, would be exercisable for a fraction of a share of
MarketWatch Common Stock, then the number of shares of MarketWatch Common Stock
subject to such MarketWatch Option will be rounded to the nearest whole number
of shares of MarketWatch Common Stock. The terms, exercisability, vesting
schedule, status as an "incentive stock option" under Section 422 of the Code
(if applicable) or as a nonqualified stock option, and all other terms and
conditions of each Charts Option (including without limitation the provisions of
the Charts Option Plan that contains part of the terms and conditions of such
Charts Option) that is converted into an MarketWatch Option in the Merger will
(except as otherwise expressly provided in the terms of such Charts Options), to
the extent permitted by law and otherwise reasonably practicable, be unchanged
and continue in effect after the Effective Time of the Merger. To the extent
that the terms of a Charts Option provide that the pre-Merger employment service
of the holder of such Charts Option with Charts is credited to such holder for
purposes of applying any vesting schedule contained in such Charts Option, such
holder's pre-Merger employment service with Charts will also be credited to such
holder for purposes of applying any vesting schedule contained in the
MarketWatch Option issued to such holder upon the conversion of such Charts
Option in the Merger in order to determine the number of shares of MarketWatch
Common Stock that are exercisable under such MarketWatch Option at any point in
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time. This Section 2.2.1 is intended to meet the requirements of Section 424(a)
of the Code and shall be interpreted consistent with such intent.
A Charts Option which is converted into a MarketWatch Option pursuant to
the provisions of this Section 2.2.1 shall become immediately exercisable,
subject to the provisions of Section 2.6.3, in the event that the employment of
such holder by MarketWatch or Charts is terminated for other than "Cause" or if
such holder terminates his or her employment for "Good Reason" or upon a "Change
of Control." For purposes of this Agreement: CAUSE means:
(a) Willful and repeated failure by such employee to carry
out the lawful instructions of the Board of Directors
after being notified of such failure, other than a
failure resulting from his complete or partial
incapacity due to physical or mental illness or
impairment;
(b) Indictment or a violation of a federal or state law or
regulation which indictment or violation is for a crime
which is a felony under federal or state law, or any
violation of state or federal securities laws involving
securities of MarketWatch which would result in a civil
penalty being imposed by the U.S. Securities and
Exchange Commission or similar state securities law
authority; or
(c) An act of personal dishonesty that would result in
employee's personal enrichment at the expense of
MarketWatch or Charts;
GOOD REASON means (i) any reduction in such employee's base salary from
the base salary then in effect as of March 31, 1999 or (ii) a relocation of such
employee's principal place of employment more than 50 miles from Minneapolis,
Minnesota without such holder's consent; and
CHANGE OF CONTROL means:
(x) the sale, lease, conveyance, liquidation or other
disposition of all or substantially all of Charts' or
MarketWatch's assets as an entirety or substantially as
an entirety to any person, entity or group of persons
acting in concert other than (i) to any affiliates of
Charts or MarketWatch, including, without limitation,
Data Broadcasting Corporation ("DBC"), CBS, Inc. ("CBS")
or any of their affiliates, (ii) in the ordinary course
of business; or
(y) any transaction or series of related transactions (as a
result of a tender offer, merger, consolidation or
otherwise) that results in any Person (as defined in
Section 13(h)(8)(E) under the Securities Exchange Act of
1934) other than MarketWatch or Sub becoming the
beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or
indirectly, of more than 50% of the aggregate voting
power of all classes of common equity securities of
Charts or MarketWatch, except if such Person is (A) a
subsidiary of Charts or MarketWatch, (B) an employee
stock ownership plan for employees of Charts or
MarketWatch, (C) a company formed to
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hold Charts' or MarketWatch's common equity securities
and whose shareholders constituted, at the time such
company became such holding company, substantially all
the equity owners or shareholders of Charts or
MarketWatch, or (D) DBC, CBS and/or any of their
affiliates.
2.2.2 Charts Warrants. Each warrant to purchase shares of
Charts capital stock (a "CHARTS WARRANT") that is outstanding immediately prior
to the Effective Time will, by virtue of the Merger and at the Effective Time
and without the need for any further action on the part of any holder thereof,
be assumed by MarketWatch and converted into a warrant (a "MARKETWATCH WARRANT")
to purchase that number of shares of MarketWatch Common Stock determined by
multiplying the number of shares of Charts Common Stock that are subject to such
Charts Warrant immediately prior to the Effective Time by the Common Stock
Conversion Number, at an exercise price per share of MarketWatch Common Stock
equal to the exercise price per share of Charts Common Stock that was in effect
for such Charts Warrant immediately prior to the Effective Time divided by the
Common Stock Conversion Number. If the foregoing calculation results in a
MarketWatch Warrant being exercisable for a fraction of a share of MarketWatch
Common Stock, then the number of shares of MarketWatch Common Stock subject to
such MarketWatch Warrant shall be rounded down to the nearest whole number with
no cash being payable for such fractional share. If a MarketWatch Warrant is
exercisable for a per share exercise price that includes a fraction of a cent,
the exercise price shall be rounded down to the nearest whole cent. All terms
and conditions of each Charts Warrant that is converted into a MarketWatch
Warrant in the Merger will, to the extent permitted by law and otherwise
reasonably practicable, be unchanged and continue in effect after the Effective
Time of the Merger.
2.2.3 Charts Other Securities. Prior to the Merger, Charts
will cause all outstanding Charts Other Securities, if any, to have been validly
terminated or exercised in full and thereby converted into shares of Charts
Common Stock in accordance with their current terms and conditions, so that no
Charts Other Securities will be outstanding immediately prior to the Effective
Time.
2.3 Adjustments for Capital Changes. Notwithstanding the provisions
of Section 2.1 or Section 2.2, if at any time after the Agreement Date and prior
to the Effective Time, MarketWatch recapitalizes, either through a subdivision
(or stock split) of any of its outstanding shares of MarketWatch Common Stock
into a greater number of such shares, or a combination (or reverse stock split)
of any of its outstanding shares of MarketWatch Common Stock into a lesser
number of such shares, or reorganizes, reclassifies or otherwise changes its
outstanding shares of MarketWatch Common Stock into the same or a different
number of shares of other classes or series of MarketWatch stock (other than
through a subdivision or combination of shares provided for in the preceding
clause), or declares a dividend on its outstanding shares that is payable in
shares of MarketWatch Common Stock or in shares or securities convertible into,
or exercisable or exchangeable for, shares of MarketWatch Common Stock without
the payment of any consideration therefor (each, a "CAPITAL CHANGE"), then the
number of shares of MarketWatch Common Stock into which each outstanding share
of Charts Common Stock is converted in the Merger, the number of shares of
MarketWatch Common Stock issuable under, and the exercise price per share of
MarketWatch Common Stock of each MarketWatch Option and MarketWatch Warrant
issued in the Merger under Section 2.2, will each be proportionally and
equitably adjusted to reflect such Capital Change.
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2.4 Escrow.
2.4.1 Escrow of Shares for Indemnification; Escrow Agreement.
At the Closing of the Merger, MarketWatch will withhold from the shares of
MarketWatch Common Stock to be issued to Charts Shareholders in the Merger
pursuant to Section 2.1.2, a number of such shares of MarketWatch Common Stock
that is equal to ten percent (10%) of the MarketWatch Merger Shares, and the
number of such shares withheld from each Charts Shareholder shall be rounded
down to the nearest whole number of such shares (such withheld shares of
MarketWatch Common Stock being hereinafter referred to as the "ESCROW SHARES")
and will deliver certificates representing such Escrow Shares to State Street
Bank and Trust Company, N.A. or a similar institution reasonably acceptable to
Charts, as escrow agent (the "ESCROW AGENT"), and the Charts Shareholders will
deliver to the Escrow Agent related stock transfer powers executed by the
applicable Charts Shareholders (with medallion signature guarantees if requested
by the Escrow Agent), to be held by the Escrow Agent as security for the Charts
Shareholders' indemnification obligations under Article 11 and pursuant to the
provisions of an escrow agreement in substantially the form of Exhibit D (the
"ESCROW AGREEMENT") to be entered into at the Closing by MarketWatch, the Escrow
Agent, and the Escrow Representative (as defined below). The Escrow Shares will
be withheld from each Charts Shareholder pro rata in the same proportion as the
total number of shares of MarketWatch Common Stock issuable to such Charts
Shareholder under Section 2.1.2 bears to the total number of shares of
MarketWatch Common Stock issued to all Charts Shareholders under Section 2.1.2.
The Escrow Shares will be represented by stock certificates issued in the names
of each of the Charts Shareholders in proportion to their respective interests
in the Escrow Shares and will be held by the Escrow Agent during that time
period commencing on the Effective Time and ending on the first (1st)
anniversary of the Effective Time or on such later date as may be provided in
the Escrow Agreement (such time period being hereafter called the "ESCROW
PERIOD").
2.4.2 Effect of Charts Shareholder Approval Regarding Escrow
Shares; Escrow Representative. By their approval of the Merger, the Charts
Shareholders will be conclusively deemed to have consented to, approved and
agreed to be bound by: (i) the indemnification provisions of Article 11; (ii)
the Escrow Agreement; (iii) the appointment of Philip D. Hotchkiss as the
representative of Charts Shareholders (the "ESCROW REPRESENTATIVE") under the
Escrow Agreement and as the attorney-in-fact and agent for and on behalf of each
Charts Shareholder as provided in the Escrow Agreement; and (iv) the taking by
the Escrow Representative of any and all actions and the making of any decisions
required or permitted to be taken by the Escrow Representative under this
Agreement and/or the Escrow Agreement, including, without limitation, the
exercise of the power to: (a) authorize delivery to MarketWatch of Escrow Shares
in satisfaction of indemnity claims by MarketWatch or any other Indemnified
Person (as defined herein) pursuant to Article 11 and/or the Escrow Agreement;
(b) agree to, negotiate, enter into settlements and compromises of, demand
arbitration of, and comply with orders of courts and awards of arbitrators with
respect to, such claims; (c) arbitrate, resolve, settle or compromise any claim
for indemnity made pursuant to Article 11; and (d) take all actions necessary in
the judgment of the Escrow Representative for the accomplishment of the
foregoing. The Escrow Representative will have authority and power to act on
behalf of each Charts Shareholder with respect to the Escrow Agreement and the
disposition, settlement or other handling of all claims under Article 11 hereof
or governed by the Escrow Agreement, and all rights or obligations arising
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under the Escrow Agreement so long as all Charts Shareholders are treated in the
same manner. The Charts Shareholders will be bound by all actions taken and
documents executed by the Escrow Representative in connection with the Escrow
Agreement, and MarketWatch will be entitled to rely on any action or decision of
the Escrow Representative. In performing the functions specified in this
Agreement and the Escrow Agreement, the Escrow Representative will not be liable
to any Charts Shareholder in the absence of gross negligence or willful
misconduct on the part of the Escrow Representative. Any out-of-pocket costs and
expenses reasonably incurred by the Escrow Representative in connection with
actions taken by the Escrow Representative pursuant to the terms of the Escrow
Agreement (including without limitation the hiring of legal counsel and the
incurring of legal fees and costs) will be paid by the Charts Shareholders to
the Escrow Representative pro rata in proportion to their respective percentage
interests in the Escrow Shares.
2.5 Effects of the Merger. At and upon the Effective Time of the
Merger:
(a) the separate existence of Sub will cease and Sub will be
merged with and into Charts, and Charts will be the surviving corporation of the
Merger (sometimes hereinafter referred to as the "SURVIVING CORPORATION")
pursuant to the terms of this Agreement, the Agreement of Merger and the
Articles of Merger;
(b) the Articles of Incorporation of Charts will be the
Articles of Incorporation of the Surviving Corporation immediately after the
Effective Time;
(c) the Bylaws of Charts will be the Bylaws of the Surviving
Corporation immediately after the Effective Time;
(d) each share of Charts Common Stock that is issued and
outstanding immediately prior to the Effective Time will be converted into
MarketWatch Common Stock as provided in Section 2.1.2 and the right to receive
the Common Stock Amount Per Share, and each Charts Option that is outstanding
immediately prior to the Effective Time, will be converted into a MarketWatch
Option, in each case, as provided in this Article 2;
(e) each share of Sub Common Stock that is outstanding
immediately prior to the Effective Time will be converted into one (1) share of
Charts Common Stock as provided in Section 2.1.1;
(f) the officers of the Surviving Corporation immediately
after the Effective Time will be the individuals who are officers of Sub
immediately prior to the Effective Time.
(g) the members of the Board of Directors of the Surviving
Corporation immediately after the Effective Time will be the individuals who are
the members of the Board of Directors of Sub immediately prior to the Effective
Time; and
(h) the Merger will, from and after the Effective Time, have
all of the effects provided by applicable law.
2.6 Private Placement of MarketWatch Common Stock.
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2.6.1 Securities Laws Issues. MarketWatch shall issue the
shares of MarketWatch Common Stock to be issued to the Charts Shareholders in
the Merger pursuant to Section 2.1.2 pursuant to an exemption or exemptions from
registration under Section 4(2) of the 1933 Act and/or Regulation D promulgated
under the 1933 Act, the exemption from the "blue sky" laws qualification under
Minnesota Statutes Section 80A.15, subd. 2(h) and exemptions from the
qualification or registration requirements of all other applicable state "blue
sky" securities laws. Charts and MarketWatch shall jointly prepare an
information statement or proxy statement (which must be acceptable to
MarketWatch) to be provided to Charts' shareholders in connection with the
consideration of the approval of the Merger by Charts' shareholders and the
offering and issuance of shares of MarketWatch Common Stock to Charts'
shareholders in the Merger (the "INFORMATION STATEMENT"). MarketWatch and Charts
shall comply with all applicable provisions of, and rules under, the 1933 Act in
connection with offering and issuance of shares of MarketWatch common stock in
the Merger. As a condition precedent to receiving any share certificates for
shares of MarketWatch Common Stock issued in the Merger as contemplated by
Article 7 and Article 9, each Charts Shareholder shall execute and deliver to
MarketWatch an Investment Representation Letter in the form and substance of
Exhibit E attached hereto (the "INVESTMENT REPRESENTATION LETTER") as well as a
Purchaser Questionnaire in the form and substance of Exhibit F attached hereto
(the "PURCHASER QUESTIONNAIRE").
2.6.2 Registration Rights. At the Closing, MarketWatch and
each Charts Shareholder who receives shares of MarketWatch Common Stock in the
Merger pursuant to Section 2.1.2 will also enter into a Registration Rights
Agreement with MarketWatch in substantially the form of Exhibit G attached
hereto (the "REGISTRATION RIGHTS AGREEMENT"), under which each Charts
Shareholder who executes and delivers such Registration Rights Agreement will be
granted certain registration rights under the 1933 Act, solely with respect to
shares of MarketWatch Common Stock issued under Section 2.1.2 of this Agreement,
on the terms, and subject to the conditions and limitations, of such
Registration Rights Agreement.
2.6.3 Lockup of Merger Shares; Market Standoff.
(a) Each Principal Shareholder hereby agrees that it
shall not pledge, sell, assign or otherwise transfer, including by operation of
law or otherwise, or dispose of any Locked Shares. Shares of MarketWatch Common
Stock received in the Merger that are locked pursuant to the schedule set forth
herein are "LOCKED SHARES." Shares of MarketWatch Common Stock received in the
Merger that are unlocked pursuant to the schedule set forth herein are "UNLOCKED
SHARES." At the Effective Time, all shares of MarketWatch Common Stock received
by a Charts Shareholder will be Locked Shares.
(i) with respect to each Charts Employee
Shareholder who is not a Principal Shareholder, ten percent (10%) of the
shares of MarketWatch Common Stock received in the Merger (based upon
such Charts Shareholder's stock and stock option or warrant ownership
set forth in Schedules 3.4.1 and 3.4.2, and as adjusted for Capital
Changes) by such Charts Employee Shareholder will be Unlocked Shares
immediately at the Effective Time, one-half (1/2) of the remaining
shares of MarketWatch Common Stock received in the Merger (based upon
such Charts Shareholder's stock and stock option or warrant ownership
set forth in Schedules 3.4.1 and 3.4.2, and as adjusted for Capital
Changes) by such Charts Employee Shareholder will become Unlocked Shares
on the first
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(1st) year anniversary of the Closing Date, and all shares of
MarketWatch Common Stock received in the Merger by such Charts Employee
Shareholder will become Unlocked Shares on the second (2nd) year
anniversary of the Closing Date.
(ii) with respect to each Charts Employee
Shareholder who is a Principal Shareholder, ten percent (10%) of the
shares of MarketWatch Common Stock received in the Merger (based upon
such Charts Shareholder's stock and stock option or warrant ownership
set forth in Schedules 3.4.1 and 3.4.2, and as adjusted for Capital
Changes) by such Charts Employee Shareholder who is Principal
Shareholder will be Unlocked Shares immediately at the Effective Time,
and on each one year anniversary of the Closing Date, one-third (1/3rd)
of the remaining shares of MarketWatch Common Stock received in the
Merger (based upon such Charts Shareholder's stock and stock option or
warrant ownership set forth in Schedules 3.4.1 and 3.4.2, and as
adjusted for Capital Changes) by such Charts Employee Shareholder who is
a Principal Shareholder will become Unlocked Shares.
(iii) with respect to each Charts Non-Employee
Shareholder, ten percent (10%) of the shares of MarketWatch Common Stock
received in the Merger (based upon such Charts Shareholder's stock and
stock option or warrant ownership set forth in Schedules 3.4.1 and
3.4.2, and as adjusted for Capital Changes) by such Charts Non-Employee
Shareholder will be Unlocked Shares immediately at the Effective Time,
one-third (1/3rd) of the remaining shares of MarketWatch Common Stock
received in the Merger (based upon such Charts Shareholder's stock and
stock option or warrant ownership set forth in Schedules 3.4.1 and
3.4.2, and as adjusted for Capital Changes) by such Charts Non-Employee
Shareholder will become Unlocked Shares on each of the 180-day, 270-day
and one year anniversary of the Closing Date. If the application of the
foregoing percentages causes a fractional share, such share shall be
rounded up to the nearest whole share. As used herein, a "CHARTS
EMPLOYEE SHAREHOLDER" means a Charts Shareholder that is an employee of
Charts on the Closing Date, it being understood that a Charts
Shareholder who is only a director of BigCharts and not otherwise
employed by BigCharts shall not be a Charts Employee Shareholder, and a
"CHARTS NON-EMPLOYEE SHAREHOLDER") means a Charts Shareholder that is
not an employee of Charts on the Closing Date.
(b) Shares subject to a MarketWatch Option or a
MarketWatch Warrant shall be subject to the provisions of this Section 2.6 and
such shares shall be included in the number of shares of MarketWatch Common
Stock received in the Merger for the purposes of calculating Locked Shares and
Unlocked Shares.
(c) Notwithstanding anything to the contrary in
subsection (a) above, each Charts Shareholder hereby agrees that it shall not
sell or otherwise transfer or dispose of any shares of MarketWatch Common Stock
received in the Merger or other shares of stock of MarketWatch then owned by
such Charts Shareholder (other than to donees or partners of the such Charts
Shareholder who agree to be similarly bound) for up to ninety (90) days
following the effective date of any registration statement of MarketWatch filed
under the 1933 Act with respect to an underwritten public offering of its
securities excluding shares included in such registration.
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(d) In order to enforce the foregoing covenant,
MarketWatch shall place restrictive legends on the certificates representing the
Merger Shares and have the right to impose stop transfer instructions with
respect to the Merger Shares and such other shares of stock of each Charts
Shareholder (and the shares or securities of every other person subject to the
foregoing restriction).
2.7 Tax-Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a) of the Code. However, neither
Charts nor MarketWatch makes any representation or warranty to the other or to
any holder of Charts securities regarding the tax treatment of the Merger or
whether the Merger will qualify as a tax-free plan of reorganization under the
Code. Charts and MarketWatch each acknowledges that it is relying on its own tax
advisors in connection with the Merger and the other transactions contemplated
by this Agreement. MarketWatch and Charts each agree not to knowingly take any
action on or prior to the Effective Time with the intent of causing the Merger
not to qualify as a reorganization under Section 368(a) of the Code.
2.8 Further Assurances. If, at any time before or after the
Effective Time, MarketWatch believes or is advised that any further instruments,
deeds, assignments or assurances are reasonably necessary or desirable to
consummate the Merger or to carry out the purposes and intent of this Agreement
at or after the Effective Time, then MarketWatch, the Surviving Corporation and
their respective officers and directors may execute and deliver all such proper
deeds, assignments, instruments and assurances and do all other things necessary
or desirable to consummate the Merger and to carry out the purposes and intent
of this Agreement, in the name of Charts or otherwise.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CHARTS
Each of Charts and the Principal Shareholders represents and warrants to
MarketWatch that, except as set forth in the letter addressed to MarketWatch
from Charts and dated as of the Agreement Date (including all schedules thereto)
which has been delivered by Charts to MarketWatch concurrently with the parties'
execution of this Agreement (the "CHARTS DISCLOSURE LETTER"), each of the
following representations, warranties and statements in this Article 3 is true
and correct as of the Agreement Date (and for all purposes of this Agreement
(including without limitation Articles 9 and 11), the statements contained in
the Charts Disclosure Letter and its schedules shall also be deemed to be
representations and warranties made and given by Charts and the Principal
Shareholders under Article 3 of this Agreement):
3.1 Organization and Good Standing. Charts is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. Charts has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted and as
proposed to be conducted, and is qualified to transact business, and is in good
standing, in each jurisdiction in which its failure to be so qualified would
have a Material Adverse Effect on Charts. Charts has delivered to MarketWatch
true and correct copies of the currently effective Articles of Incorporation and
Bylaws or other charter documents, as applicable, of
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Charts, each as amended to date. Charts is not in violation of its Articles of
Incorporation, Bylaws or other charter documents.
3.2 Subsidiaries. Except as expressly disclosed in Schedule 3.2 of
the Charts Disclosure Letter, Charts does not have any subsidiary or any equity
or ownership interest, whether direct or indirect, in any corporation,
partnership, limited liability company, joint venture or other business entity.
3.3 Power, Authorization and Validity.
3.3.1 Power and Authority. Each of Charts, each Principal
Shareholder who is not an individual and Verticality, has all requisite
corporate or other power and authority to enter into, execute, deliver, and
perform its obligations under, this Agreement and all Charts Ancillary
Agreements, and (subject to the approval of this Agreement and the Merger by
Charts' shareholders) to consummate the Merger. The execution, delivery and
performance by Charts and the Charts Shareholders who are not individuals of
this Agreement and each of the Charts Ancillary Agreements have been duly and
validly approved and authorized by all necessary corporate or other action on
the part of Charts' and the Charts Shareholders' Board of Directors or similar
governing body in compliance with applicable law (including without limitation
the MBCA) and Charts' Articles of Incorporation and Bylaws, each as amended.
3.3.2 No Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency, commission or other governmental authority (each, a
"GOVERNMENTAL AUTHORITY"), or any other person or entity, governmental or
otherwise, is necessary or required to be made or obtained by Charts, the
Principal Shareholders or Verticality to enable Charts, the Principal
Shareholders or Verticality, as the case may be, to lawfully execute and
deliver, enter into, and to perform its obligations under, this Agreement and
each of the Charts Ancillary Agreements or to consummate the Merger, except for:
(a) the approval of this Agreement and the Merger by the shareholders of Charts
in compliance with the requirements of applicable law (including without
limitation the MBCA) and Charts' Articles of Incorporation and Bylaws, each as
amended; and (b) the filing of the Articles of Merger with the Minnesota
Secretary of State and any such further documents as may be required under the
MBCA to effect the Merger.
3.3.3 Enforceability. This Agreement and each of the Charts
Ancillary Agreements are, or when executed by Charts, the Principal Shareholders
or Verticality, as the case may be, will be, valid and binding obligations of
Charts, the Principal Shareholders or Verticality, as the case may be,
enforceable against Charts, the Principal Shareholders and Verticality, the
other Charts Shareholders and holders of Charts Options and Charts Warrants in
accordance with their respective terms, subject only to the effect of (a)
applicable bankruptcy and other similar laws affecting the rights of creditors
generally and (b) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies.
3.4 Capitalization of Charts.
3.4.1 Stock. The authorized capital stock of Charts consists
entirely of: (i) 10,000,000 shares of Common Stock, no par value, of which a
total of 4,146,878 shares are
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issued and outstanding and (ii) 3,000,000 shares of Preferred Stock, no par
value, all of which are undesignated and unissued; and except as expressly
described above in this Section 3.4.1, no other shares of any capital stock of
Charts are authorized, issued or outstanding. No fractional shares of Charts
Common Stock are issued or outstanding and Charts holds no treasury shares.
As of the Closing Date, there will have been no change in the
authorized and outstanding capital stock of Charts as represented in the
foregoing sentences of this Section 3.4.1, other than the following changes if
made in compliance with this Agreement: the issuance of shares of Charts Common
Stock pursuant to the exercise of Charts Options represented as being
outstanding on the Agreement Date in Section 3.4.2 or pursuant to the exercise
or conversion of any Charts Other Securities represented as being outstanding on
the Agreement Date in Section 3.4.2.
All issued and outstanding shares of Charts' capital stock have
been duly authorized and validly issued, are fully paid and nonassessable, are
not subject to any claim, lien, preemptive right, right of first refusal,
co-sale right, right of first offer or right of rescission, and have been
offered, issued, sold and delivered by Charts in compliance with all
registration or qualification requirements (or applicable exemptions therefrom)
of all applicable federal and state securities laws. A list of all of the record
holders of Charts' outstanding capital stock, and the total number of shares of
Charts Common Stock owned by each such holder is set forth in Schedule 3.4.1 to
the Charts Disclosure Letter. No shareholder of Charts owes Charts any money or
other consideration representing any part of the purchase price of any
outstanding shares of Charts' capital stock, including without limitation any
money due under a promissory note payable to Charts. Charts has no liability to
any shareholder for any dividends that have been declared or accrued.
All shares of Charts Common Stock held by the Charts Shareholders are
owned of record by the Charts Shareholders, each Principal Shareholder and
Verticality, and to the knowledge of Charts each Charts Shareholder which is not
a Principal Shareholder or Verticality, has good and marketable title to shares
of Charts Common Stock owned by such Principal Shareholder, Verticality or
Charts Shareholder, as the case may be, and Charts has not received any notice
that any Charts Shareholder which is not a Principal Shareholder or Verticality
does not hold the Charts Common Stock reflected as being held by him, her or it
on Schedule 3.4.1 to the Charts Disclosure Letter, free and clear of all liens,
claims and encumbrances, agreements, voting trusts, proxies and other
arrangements or restrictions of any kind whatsoever.
3.4.2 Options, Warrants or Rights. Except for (a) Charts
Options to purchase an aggregate total of 1,547,986 shares of Charts Common
Stock that are outstanding on the Agreement Date (all of which Charts Options
were granted under the Charts Option Plan) and (b) Charts Other Securities
disclosed in Schedule 3.4.2, there are no options, warrants, convertible
securities or other securities, calls, commitments, conversion privileges,
preemptive rights, rights of first refusal, rights of first offer or other
rights or agreements outstanding to purchase or otherwise acquire (whether
directly or indirectly) from Charts any shares of Charts' authorized but
unissued capital stock or any securities convertible into or exchangeable for
any shares of Charts' capital stock or obligating Charts to grant, issue,
extend, or enter into any such option, warrant, convertible security or other
security, call, commitment, conversion privilege, preemptive right, right of
first refusal, right of first offer or other right or agreement. No person or
entity holds, or
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has any option, warrant or other right to acquire, any issued and outstanding
shares of the capital stock of Charts from any Principal Shareholder, or to the
knowledge of Charts, any holder of shares of the capital stock of Charts.
A total of 1,500,000 shares of Charts Common Stock are reserved
for issuance under the Charts Option Plan. As of the Agreement Date, a total of
1,547,986 shares of Charts Common Stock are potentially issuable upon the
exercise of all options granted under the Charts Option Plan that are
outstanding on the Agreement Date. Attached as Schedule 3.4.2 to the Charts
Disclosure Letter is (i) a true and complete list of all holders of all Charts
Options that are outstanding on the Agreement Date, the number of Charts Options
held by each such holder, the exercise price and vesting schedule of each Charts
Option held by each such person, and the name of the Charts option plan under
which each such option was granted, and (ii) a true and complete list of all
holders of all Charts Other Securities (other than holders of Charts Options),
if any, that are outstanding on the Agreement Date, the number, class and series
of the shares subject to each such Charts Other Security held by each such
holder, the exercise or conversion price and (if applicable) vesting schedule of
each Charts Other Security. The Charts Option Plan and any change in (a) the
number of shares reserved under the Charts Option Plan or (b) the eligible
participants under the Charts Option Plan have each been duly and validly
approved by Charts' Board of Directors and by Charts' shareholders, and with
respect to the Charts Option Plan (or any such change) such shareholder approval
was obtained within one (1) year of the date on which the Charts Option Plan (or
such change) was approved by Charts' Board of Directors.
3.4.3 No Voting Arrangements or Registration Rights. There are
no voting agreements, voting trusts, proxies, preemptive rights, rights of first
refusal, rights of first offer or other restrictions (other than normal
restrictions on transfer under applicable federal and state securities laws)
applicable to any of Charts' outstanding stock or other securities or to the
conversion of any shares of Charts' capital stock in the Merger pursuant to any
agreement or obligation to which Charts, Verticality or a Principal Shareholder
is a party or is bound except for the Voting Agreements (and related Irrevocable
Proxies referred to in Section 3.22). Charts is not aware of any other similar
agreement or obligation binding on or affecting Charts Shareholders who are not
Principal Shareholders or Verticality. Charts is not under any obligation to
register under the 1933 Act any of its presently outstanding shares of stock or
other securities or any stock or other securities that may be subsequently
issued.
3.5 No Conflict. Neither the negotiation, execution and delivery of
this Agreement or any of the Charts Ancillary Agreements by Charts, Verticality
or the Principal Shareholders, nor the consummation of the Merger or the
performance by Charts, Verticality or the Principal Shareholders of its or their
obligations under this Agreement or any Charts Ancillary Agreement, has or will
(with or without notice or lapse of time, or both) result in a termination,
breach, impairment or violation of (i) any provision of the Articles of
Incorporation or Bylaws or other charter documents (including, without
limitation, any limited liability company agreement) of Charts, Verticality or
the Principal Shareholders, as currently in effect; or (ii) any federal, state,
local or foreign judgment, writ, decree, order, statute, rule or regulation
applicable to Charts, Verticality or the Principal Shareholders or any of their
respective assets or properties. Neither the negotiation, execution and delivery
of this Agreement or any of the Charts Ancillary Agreements by Charts,
Verticality or the Principal Shareholders, nor the consummation of the Merger or
the performance by Charts, Verticality or the Principal Shareholders of its or
their obligations under
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this Agreement or any Charts Ancillary Agreement, has or will (with or without
notice or lapse of time, or both) result in a termination, breach, impairment or
violation of any instrument, agreement, contract, undertaking, understanding,
letter of intent, memorandum of understanding or commitment (whether verbal or
in writing) or confidentiality agreement to which Charts, Verticality or the
Principal Shareholders is a party or by which Charts, Verticality or the
Principal Shareholders or any of their respective assets or properties are
bound, which termination, breach, impairment or violation: (i) would have a
Material Adverse Effect on Charts; or (ii) prevent the consummation of the
transactions contemplated by this Agreement. Neither Charts', Verticality's or
the Principal Shareholders' entering into this Agreement nor the consummation of
the Merger will give rise to, or trigger the application of, any rights of any
third party related to Charts' or the Principal Shareholders' actions or arising
under an agreement to which Charts or any Principal Shareholder is a party or is
bound that would come into effect upon the effectiveness of the Merger and would
(i) be adverse to the financial condition or business interests of Charts or
(ii) impair the value of any of Charts' assets or properties in any material
respect. The consummation of the Merger by Charts or the Principal Shareholders
will not require the consent, release, waiver or approval of any third party
(other than any consent, release, waiver or approval that is set forth in
clauses (a) through (d) of Section 3.3.2).
3.6 Litigation. There is no action, claim, suit, arbitration,
mediation, proceeding, claim or investigation pending against Charts or against
any officer, director, or to the best of Charts' knowledge, any employee of
Charts in their capacity as such or relating to their employment, services or
relationship with Charts, before any court, administrative agency or arbitrator,
nor, to the best of Charts' knowledge, has any such action, suit, proceeding,
arbitration, mediation, claim or investigation been threatened. There is no
judgment, decree, injunction, rule or order of any governmental entity or
agency, court or arbitrator outstanding against Charts. Charts is not aware of
any facts that would form a basis of a claim against Charts or MarketWatch based
upon: (a) Charts', Verticality's or the Principal Shareholders' negotiating or
entering into this Agreement or any Charts Ancillary Agreement or consummating
the Merger or any of the transactions contemplated by this Agreement or any
Charts Ancillary Agreement; (b) any confidentiality or similar agreement entered
into by Charts; (c) any claim that Charts has agreed to sell or dispose all or
any substantial portion of its assets or business to any party other than
MarketWatch, whether by way of merger, consolidation, sale of assets or
otherwise; (d) any wrongful failure by Charts to issue any of its stock or other
securities to any party; (e) ownership or rights to ownership of any shares of
Charts Common Stock, Charts Options or Charts Other Securities; (f) any rights
as a shareholder of Charts, including any option or preemptive rights or rights
to notice or to vote; or (g) any rights under any agreement among Charts and its
shareholders.
3.7 Taxes.
3.7.1 Charts has timely filed all federal, state, local and
foreign tax returns required to be filed, has timely paid all taxes required to
be paid in respect of all periods for which returns have been filed, has
established an adequate accrual or reserve for the payment of all taxes payable
in respect of the periods subsequent to the periods covered by its most recent
applicable tax returns (which accrual or reserve as of the Balance Sheet Date
(as defined in Section 3.8 below) is fully reflected on the Balance Sheet (as
defined in Section 3.8 below) and in any more recent balance sheet of Charts
provided by Charts to MarketWatch on or before the Agreement Date), has made all
necessary estimated tax payments, and has no material liability for taxes in
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excess of the amount so paid or accruals or reserves so established. Charts is
not delinquent in the payment of any tax or in the filing of any tax returns,
and no deficiencies for any tax have been threatened, claimed, proposed or
assessed against Charts, or any of the officers, employees or agents of Charts
in their capacity as such. Charts has not received any notification that any
material issues have been raised by (or are currently pending) before the
Internal Revenue Service or any other taxing authority (including but not
limited to any sales or use tax authority) regarding Charts and no tax return of
Charts has ever been audited by the Internal Revenue Service or any state or
local taxing agency or authority. No tax liens have been filed against any
assets of Charts. Charts has not filed any election under Section 341(f) of the
Code. Charts has withheld with respect to each of its employees and, to Charts'
knowledge, independent contractors, all taxes, including but not limited to
federal and state income taxes, FICA, Medicare, FUTA and other taxes, required
to be withheld, and paid such withheld amounts to the appropriate tax authority
within the time prescribed by law.
3.7.2 For the purposes of this Section, the terms "TAX" and
"TAXES" include all federal, state, local and foreign income, alternative or
add-on minimum income, gains, franchise, excise, property, property transfer,
sales, use, employment, license, payroll (including without limitation any
income taxes or other taxes or required withholdings on income or receipts of
employees or others that are required to be withheld and paid by Charts), ad
valorem, documentary, stamp, withholding, occupation, recording, value added or
transfer taxes, governmental charges, fees, customs duties, levies or
assessments (whether payable directly or by withholding), and, with respect to
any such taxes, any estimated tax, interest, fines and penalties or additions to
tax and interest on such fines, penalties and additions to tax.
3.8 Charts Financial Statements.
(a) Schedule 3.8 to the Charts Disclosure Letter includes
(i) Charts' audited balance sheet as of December 31, 1998, and Charts' audited
statement of operations, statement of cash flows and statement of changes in
shareholders' equity for the year ended December 31, 1998, and (ii) Charts'
unaudited balance sheet as of March 31, 1999 (the "BALANCE SHEET", and such
date, the "BALANCE SHEET DATE"), and Charts' unaudited statements of operations
for the three (3) month period ended March 31, 1999 (all such financial
statements of Charts and the notes thereto are hereinafter collectively referred
to as the "CHARTS FINANCIAL STATEMENTS"). The Charts Financial Statements (a)
are derived from and in accordance with the books and records of Charts, (b)
fairly present the financial condition of Charts at the dates therein indicated
and the results of operations for the periods therein specified and (c) have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods except (solely with respect to
any unaudited financial statements included in the Charts Financial Statements)
for the absence of notes to such unaudited financial statements and except that
Charts' unaudited financial statements are subject to normal and recurring
year-end audit adjustments. Charts has no material debt, liability or obligation
of any nature, whether accrued, absolute, contingent or otherwise, and whether
due or to become due, except for (i) those shown on the Balance Sheet, and (ii)
those that have been incurred after the Balance Sheet Date in the ordinary
course of Charts' business, and (iii) those that have been incurred after the
Balance Sheet Date that are not material in amount, either individually or
collectively. To Charts' knowledge, all reserves
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established by Charts and set forth in or reflected in the Balance Sheet
(including, but not limited to, reserves for any material loss contingencies (as
such term is used in Statement of Financial Accounting Standards No. 5 issued by
the Financial Accounting Standards Board in March 1975)) were reasonably
adequate as of the Balance Sheet Date. On the Closing Date, Charts current
assets shall exceed its current liabilities.
(b) Charts is not engaged in manufacturing (within the
meaning of the HSR Act) and Charts' Total Assets (as defined below) (i) were
less than Ten Million Dollars ($10,000,000) on the Balance Sheet and on the date
of the last regularly prepared balance sheet of Charts prepared on or prior to
the Agreement Date (the "LAST DATE") and (ii) will not equal or exceed Ten
Million Dollars ($10,000,000) at any time during the time period commencing on
the Last Date and ending on the earlier to occur of (a) the Effective Time or
(b) the date on which this Agreement is terminated in accordance with the
provisions of Article 10. As used herein, the term "CHARTS' TOTAL ASSETS" means
Charts' total assets as determined in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods.
3.9 Title to Properties. Charts has good and marketable title to all
of its assets and properties (including but not limited to those shown on the
Balance Sheet), free and clear of all mortgages, deeds of trust, security
interests, pledges, liens, title retention devices, collateral assignments,
claims, charges, restrictions or other encumbrances of any kind other than (i)
liens for current taxes that are not yet due and payable, (ii) statutory
mechanics', materialmens' and similar liens imposed by operation of law for
obligations incurred by Charts in the ordinary course of its business that are
not material in amount and are not currently due and payable. The machinery,
vehicles, equipment (including without limitation computers and web servers) and
other tangible personal property owned or leased by Charts or used in its
business, considered collectively, are in reasonably good condition and repair,
normal wear and tear excepted. Any real or personal property held by Charts is
held by Charts under a currently effective written lease and Charts is not in
breach of such lease and it has no knowledge that the lessor is in breach of
such lease. Such leases afford peaceful and undisturbed leasehold possession of
the real or personal property that is the subject of the lease. Charts is not in
violation of any zoning, building, safety or environmental ordinance, regulation
or requirement or other law or regulation applicable to the operation of its
owned or leased properties, which violation would have a Material Adverse Effect
on Charts nor has Charts received any written notice from any Governmental
Authority of any violation of law with which it has not complied which violation
would have a Material Adverse Effect on Charts. Charts owns no real property.
3.10 Absence of Certain Changes. Since the Balance Sheet Date, there
has not been with respect to Charts any:
(a) Material Adverse Change in Charts;
(b) amendment to, or change in, the Articles of
Incorporation or Bylaws of Charts;
(c) incurrence, creation or assumption by Charts of (i) any
mortgage, deed of trust, security interest, pledge, title retention device or
collateral assignment, (ii) any claim, lien, charge, restriction or other
encumbrance of any kind on any of the assets or properties of Charts
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any obligation or liability other than customer licenses and other obligations
or liabilities incurred in the ordinary course of Charts' business, or (iii) any
indebtedness for borrowed money in excess of $10,000;
(d) offer, issuance or sale of any debt or equity securities
of Charts, or any options, warrants or other rights to acquire from Charts,
directly or indirectly, any debt or equity securities of Charts (other than the
grant of Charts Options under the Charts Option Plan in the ordinary course of
Charts' business, generally consistent with its past practices, where such
Charts Options have an exercise price equal to the fair market value of Charts
Common Stock, as determined in good faith by Charts' Board of Directors as of
the date such Charts Option is granted, and the right to exercise such Charts
Options vests on a vesting schedule consistent with Charts' past vesting
practices, except that, with respect to such Charts Options granted after the
Agreement Date, the vesting of such Charts Options shall not accelerate at any
time by reason of the Merger or this Agreement);
(e) payment or discharge by Charts of any security interest,
lien, claim, or encumbrance of any kind on any asset or property of Charts, or
the payment or discharge of any liability that was not either shown on the
Balance Sheet or incurred in the ordinary course of Charts' business after the
Balance Sheet Date in an amount not in excess of $25,000 for any single
liability to a particular creditor;
(f) purchase, license, sale, assignment or other disposition
or transfer (or any agreement or other arrangement for the purchase, license,
sale, assignment or other disposition or transfer) of any of the assets,
properties or goodwill of Charts other than customer licenses incurred in the
ordinary course of its business;
(g) damage, destruction or loss of any property or asset,
whether or not covered by insurance, having (or likely with the passage of time
to have) a Material Adverse Effect on Charts;
(h) declaration, setting aside or payment of any dividend
on, or the making of any other distribution in respect of, the capital stock of
Charts, any split, combination or recapitalization of the capital stock of
Charts or any direct or indirect redemption, purchase or other acquisition of
any capital stock of Charts or any change in any rights, preferences, privileges
or restrictions of any outstanding security of Charts;
(i) change or increase in the compensation payable or to
become payable to any of the officers, directors, or employees of Charts, or any
bonus or pension, insurance or other benefit payment or arrangement (including
without limitation stock awards, stock option grants, stock appreciation rights
or stock option grants) made to or with any of such officers, employees or
agents except in connection with normal employee salary or performance reviews
or otherwise in the ordinary course of Charts' business;
(j) obligation or liability incurred by Charts to any of its
officers, directors or shareholders except for normal and customary compensation
and expense allowances payable to directors, officers and employee-shareholders
of Charts in accordance with written contractual
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commitments in existence on the Agreement Date or payable in the ordinary course
of Charts' business;
(k) making by Charts of any loan, advance or capital
contribution to, or any investment in, any officer, director or shareholder of
Charts or any firm or business enterprise in which any such person had a direct
or indirect material interest at the time of such loan, advance, capital
contribution or investment;
(l) entering into, amendment of, relinquishment, termination
or non-renewal by Charts of any material contract, lease, transaction,
commitment or other material right or obligation other than in the ordinary
course of its business;
(m) assertion by any advertiser(s), subscriber(s) and/or
customer(s) of Charts of any complaint regarding Charts' services or products
which, if substantiated, would be likely to have a Material Adverse Effect on
Charts' business;
(n) material change in the policies under which Charts
extends discounts, credits or warranties to customers or otherwise deals with
its customers;
(o) entering into by Charts of any transaction, contract or
agreement that by its terms requires or contemplates a current and/or future
financial commitment, expense (inclusive of overhead expense) or obligation on
the part of Charts involving in excess of $25,000 or that is not entered into in
the ordinary course of Charts' business, or the conduct of any business or
operations other than in the ordinary course of Charts' business;
(p) any license, transfer or grant of a right under any
Charts IP Rights (as defined in Section 3.13 below), other than those licensed,
transferred or granted in the ordinary course of Charts' business;
(q) any grant of exclusive promotion or sponsorship with
respect to any portion of the Charts Website; or
(r) any agreement made by Charts to provide exclusive
services to any person or entity or not to engage in any business activity.
3.11 Contracts and Commitments/Licenses and Permits. Schedule 3.11 to
the Charts Disclosure Letter sets forth a list, arranged by the subsections
below, of each of the following (i) written or oral contracts, agreements,
commitments or other instruments to which Charts is a party or to which Charts
or any of its assets or properties is bound and (ii) licenses and permits held
by Charts:
(a) any website hosting, website linking, content or data
sharing, data feed, information exchange, advertising, distribution, fee
sharing, lead or customer referral, commerce, co-branding, framing, service,
order or transaction processing or similar agreement relating to any aspect or
element of the Charts Website;
(b) any distributor, OEM (Original Equipment Manufacturer),
VAR (Value Added Reseller), sales representative or similar agreement under
which any third party is
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authorized to sell, sublicense, lease, distribute, market or take orders for,
any product, services or technology of Charts;
(c) any continuing contract for the future purchase, sale,
license, provision or manufacture of products, material, supplies, equipment or
services requiring payment to or from Charts in an amount in excess of $25,000
per annum;
(d) any contract or commitment in which Charts has granted
or received most favored customer pricing provisions or exclusive marketing or
on-line distribution rights relating to any product or service, group of
products or services, market or geographic territory;
(e) any contract providing for the development of software,
website content or other technology or intellectual property for Charts, or the
license of any software, website content or other technology or intellectual
property to Charts, which software, website content or other technology or
intellectual property is used or incorporated (or is contemplated by Charts to
be used or incorporated) (i) in connection with any aspect or element of the
Charts Website; (ii) in any product currently sold, licensed, leased,
distributed or marketed by Charts or (iii) to provide any service currently
provided or marketed by Charts (other than off-the-shelf software generally
available to the public at retail);
(f) any joint venture or partnership contract or agreement
or other agreement which has involved or is reasonably expected to involve a
sharing of profits, expenses or losses with any other party;
(g) any contract or commitment for or relating to the
employment of any officer, employee or consultant of Charts or any other type of
contract or understanding with any officer, employee or consultant of Charts
that is not immediately terminable by Charts without cost or other liability;
(h) any indenture, mortgage, trust deed, promissory note,
loan agreement, security agreement, guarantee or other agreement or commitment
for the borrowing of money, for a line of credit or for a leasing transaction of
a type required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board;
(i) any lease or other agreement under which Charts is
lessee of or holds or operates any items of tangible personal property or real
property owned by any third party and under which payments to such third party
exceed $25,000 per annum;
(j) any agreement or arrangement for the sale, licensing or
leasing of any assets, properties, products, services or rights having a value
in excess of $25,000;
(k) any agreement that restricts Charts from engaging in any
aspect of its business, from participating or competing in any line of business
or market or that restricts Charts from engaging in any business in any market
or geographic area;
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<PAGE> 23
(l) any instrument, contract, license or other agreement
governing any Charts IP Right (as defined in Section 3.13) to which Charts is a
party (collectively, the "CHARTS IP RIGHTS AGREEMENTS");
(m) any agreement relating to the sale, issuance, grant,
exercise, award, purchase, repurchase or redemption of any shares of capital
stock or other securities of Charts or any options, warrants or other rights to
purchase or otherwise acquire any such shares of stock, other securities or
options, warrants or other rights therefor (or, in the case of any Charts
Option, the Charts Option Plan, as such may be amended, and the forms of Charts
Option agreements used by Charts thereunder);
(n) consulting or similar agreement under which Charts
provides any advice or services to a third party for an annual compensation to
Charts of $25,000 per year or more;
(o) any contract with or commitment to any labor union;
(p) any contract or arrangement under which Charts has made
any commitment to develop any website content, software or new technology, to
deliver any software currently under development or to enhance or customize any
software;
(q) any consulting, development or similar agreement under
which Charts currently provides or will provide any custom software development,
training, documentation, personnel placements, advice, consulting service or
other products or services to a customer of Charts;
(r) any contract for the current or future sale, provision
or manufacture of products (including computer software), material or supplies
from Charts or in which Charts has granted or received distribution rights, most
favored customer pricing provisions or exclusive marketing rights relating to
any product or services, group of products or services or territory;
(s) any other agreement, contract, commitment or instrument
that is material to the business of Charts or that involves a future commitment
by Charts in excess of $25,000; and
(t) any Governmental Permit (as defined in Section 3.14.4).
A true and complete copy of each agreement or document required
by subsections (a) through (s) of this Section to be listed on Schedule 3.11 to
the Charts Disclosure Letter (such agreements and documents being hereinafter
collectively referred to as the "CHARTS MATERIAL AGREEMENTS") and a copy of each
Governmental Permit required by subsection (t) of this Section to be listed on
Schedule 3.11 to the Charts Disclosure Letter, has been delivered to
MarketWatch's counsel.
3.12 No Breach or Default; No Consent Required; No Restrictions.
Charts is not in material breach or violation of, or in default under: (a) any
Charts Material Agreement; or (b) any other contract or agreement (whether
written or oral) binding on Charts or to which Charts is a party, the breach,
violation or default of which by Charts could reasonably be expected to result
in any liability that would have a Material Adverse Effect on Charts (a
"SIGNIFICANT AGREEMENT"). Charts does not have any material liability for
renegotiation of government contracts or
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<PAGE> 24
subcontracts, if any. Except as set forth in Schedule 3.12 to the Charts
Disclosure Letter, no consent or approval of any third party is required to
ensure that, following the Effective Time, any Charts Material Agreement will
continue to be in full force and effect without any breach or violation thereof
caused by virtue of the Merger or by any other transaction called for by this
Agreement or any Charts Ancillary Agreement. Charts is not a party to, and no
asset or property of Charts is bound or affected by, any judgment, injunction,
order, decree, contract, covenant or agreement (non-competition or otherwise)
that restricts or prohibits (or purports to restrict or prohibit) Charts from
freely engaging in any business now conducted by it or from competing anywhere
in the world (including without limitation any contracts, covenants or
agreements restricting the geographic area in which Charts may sell, license,
market, distribute or support any products or technology or provide services, or
restricting the markets, customers or industries that Charts may address in
operating its businesses), or includes any grants by Charts of exclusive
licenses. No event has occurred, and no circumstance or condition exists,
including, without limitation, the consummation of the Merger, that (with or
without notice or lapse of time) would (a) result in a violation or breach of
any of the provisions of any Charts Material Agreement, (b) give any third party
(i) the right to declare a default or exercise any remedy under any Charts
Material Agreement, (ii) the right to a rebate, chargeback, penalty or change in
delivery schedule under any Charts Material Agreement, (iii) the right to
accelerate the maturity or performance of any obligation of Charts under any
Charts Material Agreement, or (iv) the right to cancel, terminate or modify any
Charts Material Agreement, except in each such case for such defaults,
acceleration rights, termination rights and other rights that have not had and
would not have a Material Adverse Effect on Charts. Charts has not received any
written notice or other communication, nor, to Charts' knowledge, any other
notice or communication, regarding any asserted violation or breach by Charts or
the other party thereto of, or default by Charts or the other party thereto
under, any Charts Material Agreement or any Significant Agreement.
3.13 Intellectual Property.
3.13.1 Charts owns or has the valid right or license to make,
use, possess, sell, reproduce, distribute, prepare derivative works of, publicly
display or license, all Intellectual Property (as defined below) necessary or
required for the conduct of the business of Charts as presently conducted,
including without limitation, the operation of the Charts Website (such
Intellectual Property being hereinafter collectively referred to as the "CHARTS
IP RIGHTS"), and such rights to use, possess, sell or license are sufficient for
such conduct of such business. As used herein, the term "INTELLECTUAL PROPERTY"
means, collectively, all U.S. industrial and intellectual property rights,
including, without limitation, patents, patent applications, patent rights,
trademarks, trademark registrations and applications therefor, trade dress
rights, trade names, service marks, service mark registrations and applications
therefor, Internet domain names, Internet and World Wide Web URLs or addresses,
copyrights, copyright registrations and applications therefor, mask work rights,
mask work registrations and applications therefor, franchises, licenses,
inventions, trade secrets, know-how, customer lists, supplier lists, proprietary
processes and formulae, software source code and object code, algorithms, net
lists, architectures, structures, screen displays, layouts, inventions,
development tools, designs, blueprints, specifications, technical drawings (or
similar information in electronic format) and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, programmers' notes, memoranda and records.
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3.13.2 Neither the execution, delivery and performance of this
Agreement, the Delaware Certificate of Merger, the Minnesota Certificate of
Merger or the consummation of the Merger and the other transactions contemplated
hereby and/or by Charts Ancillary Agreements will materially impair the right of
Charts or the Surviving Corporation to use, possess, sell or license any Charts
IP Right or portion thereof. There are no royalties, honoraria, fees or other
payments payable by Charts to any third person by reason of the ownership, use,
possession, license, sale, marketing, advertising or disposition of any Charts
IP Rights by Charts.
3.13.3 Neither the manufacture, marketing, license, sale,
furnishing or intended use of any product or service (including without
limitation any service offered to users of the Charts Website) currently
licensed, utilized, sold, provided or furnished by Charts violates any license
or agreement between Charts and any third party or infringes or misappropriates
any Intellectual Property Right of any other party; and there is no pending or,
to the knowledge of Charts, threatened claim or litigation contesting the
validity, ownership or right of Charts to use, possess, sell, market, advertise,
license or dispose of any Charts IP Right nor, to the knowledge of Charts, is
there any valid basis for any such claim, nor has Charts received any notice
asserting that any Charts IP Right or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party, nor, to the knowledge of Charts, is there any valid basis for any such
assertion.
3.13.4 To Charts' knowledge, no employee, consultant or
independent contractor of Charts or any subsidiary of Charts: (a) is in
violation of any term or covenant of any employment contract, patent disclosure
agreement, invention assignment agreement, non-disclosure agreement,
noncompetition agreement or any other contract or agreement with any other party
by virtue of such employee's, consultant's, or independent contractor's being
employed by, or performing services for, Charts or such subsidiary or using
trade secrets or proprietary information of others, or that would have a
Material Adverse Effect on Charts; or (b) has developed any technology, software
or other copyrightable, patentable, or otherwise proprietary work for Charts
that is subject to any agreement under which such employee, consultant or
independent contractor has assigned or otherwise granted to any third party any
rights (including without limitation Intellectual Property) in or to such
technology, software or other copyrightable, patentable or otherwise proprietary
work or any Intellectual Property related thereto. To Charts' knowledge, the
employment of any employee of Charts or any subsidiary of Charts or the use by
Charts or any subsidiary of Charts of the services of any consultant or
independent contractor does not subject Charts or any such subsidiary to any
liability to any third party.
3.13.5 Charts has taken reasonably necessary and appropriate
steps to protect, preserve and maintain the secrecy and confidentiality of the
Charts IP Rights and all Charts' ownership interests and proprietary rights
therein. All officers, employees and consultants of Charts having access to
confidential information of Charts, its customers or business partners, have
executed and delivered to Charts an agreement regarding the protection of such
proprietary information; and copies of the form of all such agreements have been
delivered to MarketWatch's counsel. To the best of Charts' knowledge, no current
or former employee, officer, director, consultant or independent contractor of
Charts or of any subsidiary of Charts has any right, license or property or
ownership interest whatsoever in or with respect to any Charts IP Rights.
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3.13.6 Schedule 3.13.6 to the Charts Disclosure Letter contains
a complete list of (i) all registrations of any patents, copyrights, mask works,
trademarks, service marks, Internet domain names or Internet or World Wide Web
URLs or addresses with any governmental or quasi-governmental authority or other
body; (ii) all applications, registrations, filings and other formal actions
made or taken pursuant to federal, state and foreign laws by Charts to secure,
perfect or protect its interest in Charts IP Rights, including, without
limitation, all patent applications, copyright applications, and applications
for registration of trademarks and service marks, (iii) all unregistered
copyrights, trademarks and service marks. All trademarks, service marks,
Internet domain names, Internet or World Wide Web URLs or addresses and
copyrights held by Charts are valid, enforceable and subsisting.
3.13.7 Schedule 3.13.7 to the Charts Disclosure Letter contains
a complete list of (i) all licenses, sublicenses and other agreements as to
which Charts is a party and pursuant to which any person or entity is authorized
to use any Charts IP Rights, and (ii) all licenses, sublicenses and other
agreements as to which Charts is a party and pursuant to which Charts is
authorized to use any third party patents, trademarks, Internet domain names,
Internet or World Wide Web URLs or addresses, or copyrights and which are
material to the business of Charts taken as a whole, including but not limited
to software ("THIRD PARTY IP RIGHTS") which would be infringed by, or are
incorporated in, or form a part of, any product or service sold, licensed,
distributed, provided or marketed by Charts.
3.13.8 Neither Charts, nor any other party acting on its
behalf, has disclosed or delivered to any party, or permitted the disclosure or
delivery to any escrow agent or other party, of any Charts Source Code (as
defined below). No event has occurred, and no circumstance or condition exists,
that will, or would reasonably be expected to, result in the disclosure or
delivery to any party of any Charts Source Code (as defined below). Schedule
3.13.8 of the Charts Disclosure Letter identifies each contract, agreement and
instrument (whether written or oral) pursuant to which Charts has deposited, or
is or may be required to deposit, with an escrowholder or any other party, any
Charts Source Code and further describes whether the execution of this Agreement
or the consummation of the Merger or any of the other transactions contemplated
hereby, in and of itself, would reasonably be expected to result in the release
from escrow of any Charts Source Code. As used in this Section 3.13.8, "CHARTS
SOURCE CODE" means, collectively, any software source code, or any material
portion or aspect of the software source code, or any material proprietary
information or algorithm contained in or relating to any software source code,
of any Charts IP Rights or any other product marketed by Charts.
3.13.9 To Charts' knowledge, there is no material unauthorized
use, disclosure, infringement or misappropriation of any Charts IP Rights or any
Intellectual Property Right of Charts by any third party, including any employee
or former employee of Charts. Charts has not agreed to indemnify any person for
any infringement of any Intellectual Property of any third party by any product
or service that has been sold, licensed, leased, supplied, marketed,
distributed, or provided by Charts, except as provided in customer licenses
entered into in the ordinary course of Charts' business.
3.13.10 To Charts' knowledge, all software developed by Charts
and licensed by Charts to customers and all other products manufactured, sold,
licensed, leased or delivered by Charts to customers and all services provided
by Charts to customers on or prior to the Closing
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Date conform in all material respects to applicable contractual commitments,
express and implied warranties, product specifications and product documentation
and to any representations provided to customers and Charts has no material
liability (and, Charts is not aware of any facts that would form a basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against Charts giving rise to any liability that
could have a Material Adverse Effect on Charts) for replacement or repair
thereof or other damages in connection therewith in excess of any reserves
therefor reflected on the Balance Sheet. During the six (6) month period ended
on March 31, 1999, Charts has not received notice from customers of any service
claims with respect to its customer licenses that were materially greater than
the amount of the same type of claims experienced for the six (6) month period
ended September 30, 1998. Since the Balance Sheet Date, Charts has not had any
of its customer licenses terminated prior to their initial term except for
terminations consistent with its past history and that would not result in a
reversal of any material amount of revenue recognized by Charts on any of its
financial statements.
3.13.11 All of the software developed, licensed and/or marketed
or distributed by Charts or owned or developed by Charts and utilized in
connection with the Charts Website or Charts' business is Year 2000 Compliant
(as defined below), except for (a) minor display errors that do not materially
affect the performance of the Charts Website or any services provided to its
customers, and (b) commercially available software used for administrative
functions and not in connection with the Charts Website or customer
implementations and data provided by third parties under content provider
agreements and with respect to such commercially available software and data
content providers Charts has no knowledge that such software or data sources are
not Year 2000 Compliant. "YEAR 2000 COMPLIANT" means, as applied to software,
that: (i) such software will operate and correctly store, represent and process
(including sort) all dates (including single and multi-century formulas and leap
year calculations), such that errors will not occur when the date being used is
in the Year 2000, or in a year preceding or following the Year 2000; (ii) such
software has been written and tested to support numeric and date transitions
from the twentieth century to the twenty-first century, and back (including
without limitation all calculations, aging, reporting, printing, displays,
reversals, disaster and vital records recoveries) without error, corruption or
impact to current and/or future operations; and (iii) such software will
function without error or interruption related to any date information,
specifically including errors or interruptions from functions which may involve
date information from more than one century.
3.14 Compliance with Laws.
3.14.1 Charts has complied, and is in compliance with all
applicable federal, state, local or foreign laws, ordinances, regulations, and
rules, and all orders, writs, injunctions, awards, judgments, and decrees
applicable to it or to its assets, properties, and business (and any regulations
promulgated thereunder) (collectively, "APPLICABLE LAW") except for such
noncompliance as would not have a Material Adverse Effect.
3.14.2 The Charts Website has at all times made all consumer
disclosures required by Applicable Law and none of the disclosures made to
consumers in the Charts Website have been inaccurate, misleading or deceptive in
any material respect.
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3.14.3 Charts has at all times been in compliance with
Applicable Laws relating to the privacy of users of the Charts Website in all
material respects.
3.14.4 Charts holds all permits, licenses and approvals from,
and has made all filings with, government (and quasi-governmental) agencies and
authorities, that are necessary for Charts to hold in order to own and operate
the Charts Website and to conduct its present business without any violation of
Applicable Law that would adversely affect Charts' ability to own and operate
the Charts Website and to conduct its present business in any material respect
("GOVERNMENTAL PERMITS") and all such Governmental Permits are in full force and
effect. Charts has not received any notice or other communication from any
Governmental Authority (or quasi-governmental authority) regarding (a) any
actual or possible violation of law or any Governmental Permit or any failure to
comply with any term or requirement of any Governmental Permit, or (b) any
actual or possible revocation, withdrawal, suspension, cancellation, termination
or modification of any Governmental Permit.
3.15 Certain Transactions and Agreements. None of the officers,
directors, employees Principal Shareholders or any Charts Shareholder holding in
excess of 5% of the outstanding capital stock of Charts which is not a Principal
Shareholder, nor any member of their immediate families, has any direct or
indirect ownership interest in any firm or corporation that competes with, or
does business with, or has any contractual arrangement with, Charts (except with
respect to any interest in less than one percent (1%) of the stock of any
corporation whose stock is publicly traded). To Charts' knowledge, none of said
officers, directors, employees or shareholders or any member of their immediate
families, is a party to, or otherwise directly or indirectly interested in, any
contract or informal arrangement with Charts, except for normal compensation for
services as an officer, director or employee thereof that have been disclosed to
MarketWatch and except for agreements related to the purchase of the stock of
Charts by, or the grant of Charts Options to, such persons. To Charts'
knowledge, none of said officers, directors, employees, shareholders or family
members has any interest in any property, real or personal, tangible or
intangible (including but not limited to any Charts IP Rights or any other
Intellectual Property) that is used in, or that pertains to, the business of
Charts, except for the normal rights of a shareholder.
3.16 Employees, ERISA and Other Compliance.
3.16.1 Charts is in compliance in all respects with all
applicable laws, agreements and contracts relating to employment, employment
practices, immigration, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters except for such
noncompliance as would not have a Material Adverse Effect on Charts. A list of
all employees, officers and consultants of Charts and their current title and/or
job description and compensation is set forth on Schedule 3.16.1 to the Charts
Disclosure Letter. Charts does not have any employment contracts or consulting
agreements or contracts with a professional employer organization or other
entity which provides employee benefits to individuals that provide services to
Charts currently in effect that are not terminable at will (other than
agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions).
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3.16.2 Charts (i) is not, nor has ever been, subject to a union
organizing effort, (ii) is not subject to any collective bargaining agreement
with respect to any of its employees, (iii) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization or (iv) has no current labor disputes. Charts has good
labor relations, and has no knowledge of any facts indicating that the
consummation of the Merger or any of the other transactions contemplated hereby
will have a material adverse effect on such labor relations, and has no
knowledge that any of its key employees intends to leave their employ. To the
best of Charts' knowledge, all of the employees of Charts are legally permitted
to be employed by Charts in the United States of America in their current job
capacities.
3.16.3 Charts has no pension plan which constitutes, or has
since the enactment of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") constituted, a "multiemployer plan" as defined in Section
3(37) of ERISA. No pension plan of Charts is subject to Title IV of ERISA.
3.16.4 (a) Schedule 3.16.4 to the Charts Disclosure Letter
lists each employment, severance or other similar contract, arrangement or
policy, each "employee benefit plan" as defined in Section 3(3) of ERISA and
each plan or arrangement providing for insurance coverage (including any
self-insured arrangements), workers' benefits, vacation benefits, severance
benefits, disability benefits, death benefits, hospitalization benefits,
retirement benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
for employees, consultants or directors which is entered into, maintained or
contributed to by Charts (or are provided to individuals who provide services to
Charts pursuant to a contract with a professional employer organization or other
similar organization) and covers any current or former service provider or any
current or former employees of Charts. Such contracts, plans and arrangements as
are described in this Section 3.16.4 are hereinafter collectively referred to as
"CHARTS BENEFIT ARRANGEMENTS." Schedule 3.16.4 indicates, with respect to each
particular Charts Benefit Arrangement, whether such Charts Benefit Arrangement
is provided pursuant to a contract with a professional employer organization or
other similar arrangement. No person who has participated or is participating in
any Charts Benefit Arrangement will be required to recognize income for U.S.
federal tax purposes due to the fact that: (i) such Charts Benefit Arrangement
was or is provided pursuant to a contract with a professional employer
organization or other similar arrangement; or (ii) such Charts Benefit
Arrangement was or is provided by Charts; or (iii) that such person is receiving
such benefit by virtue of being an employee of any business, firm or entity
other than Charts.
(b) Each Charts Benefit Arrangement has been
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Charts Benefit Arrangement.
(c) Charts has delivered to MarketWatch or its
counsel a complete and correct copy and description of each Charts Benefit
Arrangement.
(d) Charts is not obligated by the provisions of
ERISA or the Code to file any annual report (Form 5500) for each Charts Benefit
Arrangement that is an "employee benefit plan" as defined under ERISA.
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(e) Charts has never been a participant in any
"prohibited transaction", within the meaning of Section 406 of ERISA with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) which Charts sponsors as employer or in which Charts participates as an
employer, which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a) of ERISA), or
which could result in an excise tax under the Code.
(f) All contributions due from Charts with respect
to any of Charts Benefit Arrangements have been made or have been accrued on
Charts' financial statements, (including without limitation the Charts Financial
Statements) and no further contributions will be due or will have accrued
thereunder as of the Closing Date.
(g) All individuals who, pursuant to the terms of
any Charts Benefit Arrangement, are entitled to participate in any such Charts
Benefit Arrangement, are currently participating in such Charts Benefit
Arrangement or have been offered an opportunity to do so.
3.16.5 There has been no amendment to, written interpretation
or announcement (whether or not written) by Charts relating to, or change in
employee participation or coverage under, any Charts Benefit Arrangement that
would increase materially the expense of maintaining such Charts Benefit
Arrangement above the level of the expense incurred in respect thereof for
Charts' fiscal year ended December 31, 1997. Each Charts Benefit Arrangement may
be terminated effective immediately, and any benefits distributed thereunder,
without additional liability for premium or other payments (other than benefit
payments in the normal course of administration) and without causing
liquidation, surrender or any other fees or charges to be imposed on the Charts
Benefit Arrangement, Charts, or any participant or beneficiary of the
terminating Charts Benefit Arrangement.
3.16.6 The group health plans (as defined in Section 4980B(g)
of the Code) that benefit employees of Charts are in compliance, in all material
respects, with the continuation coverage requirements of Section 4980B of the
Code as such requirements affect Charts and its employees. As of the Closing
Date, there will be no material outstanding, uncorrected violations under the
Consolidation Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
with respect to any of Charts Benefit Arrangements, covered employees, or
qualified beneficiaries that could result in a Material Adverse Effect on
Charts, or in a Material Adverse Effect on MarketWatch after the Effective Time.
3.16.7 No benefit payable or which may become payable by Charts
pursuant to any Charts Benefit Arrangement or as a result of or arising under
this Agreement or the Agreement of Merger will constitute an "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code) which is subject to the
imposition of an excise Tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code. Charts is not a party to any:
(a) agreement with any officer or other key employee of Charts (i) the benefits
of which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Charts in the nature of the Merger or any
of the other transactions contemplated by this Agreement, the Agreement of
Merger or any Charts Ancillary Agreement, (ii) providing any term of employment
or compensation guarantee, or (iii) providing severance benefits or other
benefits after the termination of employment of such employee regardless of the
reason for such
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termination of employment; or (b) agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of the Merger or any of
the other transactions contemplated by this Agreement, the Certificate of Merger
or any Charts Ancillary Agreement, or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement, the Certificate of Merger or any Charts Ancillary Agreement.
3.16.8 Charts has paid all wages, salaries and other amounts
due to any person from Charts and has complied with all applicable minimum wage
laws.
3.17 Corporate Documents. Charts has made available to MarketWatch
for examination all documents and information listed in the Charts Disclosure
Letter or in any schedule thereto or in any other exhibit or schedule called for
by this Agreement which have been requested by MarketWatch's legal counsel,
including, without limitation, the following: (a) copies of Charts' Articles of
Incorporation and Bylaws as currently in effect; (b) Charts' Minute Book
containing all records of all proceedings, consents, actions, and meetings of
Charts' shareholders, board of directors and any committees thereof; (c) Charts'
stock ledger and journal reflecting all stock issuances and transfers; (d) all
permits, orders, and consents issued by, and filings by Charts with, any
regulatory agency with respect to Charts, and all applications for such permits,
orders, and consents; and (e) all the Charts Material Agreements.
3.18 No Brokers. Charts is not obligated for the payment of any fees
or expenses of any investment banker, broker, finder or similar party in
connection with the origin, negotiation or execution of this Agreement or the
Agreement of Merger or in connection with the Merger or any other transaction
contemplated hereby or thereby.
3.19 Books and Records.
3.19.1 The books, records and accounts of Charts (a) are in all
material respects true and correct, (b) have been maintained in accordance with
reasonable business practices and customary internal controls procedures on a
basis consistent with prior years, and (c) accurately and fairly reflect the
transactions and dispositions of the assets of Charts.
3.19.2 Charts maintains a system of internal accounting
controls sufficient to provide reasonable assurances that: (a) transactions are
executed in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with generally accepted accounting principles or any
other criteria applicable to such statements, and (ii) to maintain
accountability for assets; and (c) the amount recorded for assets on the books
and records of Charts is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.20 Insurance. Charts has maintained, and now maintains, policies of
insurance and bonds of the type and in amounts that are reasonably adequate and
are customarily carried by persons conducting businesses or owning assets
similar in type and size to those of Charts, including without limitation all
legally required workers' compensation insurance and errors and
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omissions, casualty, fire and general liability insurance. There is no material
claim pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been timely
paid and Charts are otherwise in compliance in all material respects with the
terms of such policies and bonds. Charts has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies. All policies of insurance now held by Charts are set forth in Schedule
3.20 to Charts Disclosure Letter, together with the name of the insurer under
each policy, the type of policy, the policy coverage amount and any applicable
deductible.
3.21 Environmental Matters.
3.21.1 Charts is in compliance in all respects with all
applicable Environmental Laws (as defined below), which compliance includes the
possession by Charts of all permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof, except for such noncompliance as would not have a Material
Adverse Effect on Charts. Charts has not received any written notice or
communication or, to the best of its knowledge, other communication, whether
from a governmental body, citizens' group, employee or otherwise, that alleges
that Charts is not in compliance with any Environmental Law, and, to Charts'
knowledge, there are no circumstances that may prevent or interfere with the
compliance by Charts with any current Environmental Law following the Effective
Time. To Charts' knowledge, no current or prior owner of any property leased or
controlled by Charts has received any notice or other communication (in writing
or otherwise), whether from a government body, citizens' group, employee or
otherwise, that alleges that such current or prior owner or Charts is not in
compliance with any Environmental Law. All governmental authorizations currently
held by Charts pursuant to any Environmental Law (if any) are identified in
Schedule 3.21 of the Charts Disclosure Letter.
3.21.2 For purposes of this Section 3.21: (i) "ENVIRONMENTAL
LAW" means any federal, state, local or foreign statute, law regulation or other
legal requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "MATERIAL OF ENVIRONMENTAL CONCERN" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is currently regulated by an
Environmental Law or that is otherwise a danger to health, reproduction or the
environment.
3.22 Voting Agreement; Irrevocable Proxies. The persons and/or
entities set forth on Schedule 3.22 to the Charts Disclosure Letter have agreed
in writing to vote for approval of this Agreement and the Merger (and to vote
against proposals conflicting or inconsistent with this Agreement and the
Merger) pursuant to voting agreements attached hereto as Exhibits H 1-6 ("VOTING
AGREEMENTS") and pursuant to Irrevocable Proxies in the form attached as Exhibit
A thereto ("IRREVOCABLE PROXIES").
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3.23 Vote Required. The affirmative vote of the holders of a majority
of the shares of Charts Common Stock that are issued and outstanding on the
Record Date (as defined below) is the only vote of the holders of any of the
shares of Charts' capital stock necessary to approve this Agreement, the Merger,
the Minnesota Certificate of Merger, the Escrow Agreement, the Charts Ancillary
Agreements and the other transactions contemplated by this Agreement and the
Charts Ancillary Agreements. As used in this Section 3.23, the term "RECORD
DATE" means the record date for determining those shareholders of Charts who are
entitled to vote in the Charts Shareholders' Vote under applicable law and
Charts' Articles of Incorporation and Bylaws.
3.24 Board Approval. The Board of Directors of Charts has unanimously
(i) approved this Agreement, the Certificate of Merger, if any, and the Merger,
(ii) determined that the Merger is in the best interests of the shareholders of
Charts and is on terms that are fair to such shareholders and (iii) voted to
submit this Agreement, the Agreement of Merger, the Merger and the transactions
contemplated by this Agreement to the vote and approval of Charts' shareholders.
3.25 No Existing Discussions. Neither Charts nor any director,
officer, shareholder, employee or agent of Charts is engaged, directly or
indirectly, in any discussions or negotiations with any third party relating to
effecting any Alternative Transaction (as defined in Section 5.10) or in
violation of any agreement to which Charts or its assets are bound relating to
any Alternative Transaction.
3.26 Not a Broker. Charts is not a "broker" (as defined in the
Securities Exchange Act of 1934, as amended (the "1934 ACT")), and is not, and
would not be, required to register as a "broker" as a result of its business as
now conducted or as proposed to be conducted, and is not otherwise subject to
regulation under the 1934 Act as a result of its business as now conducted or as
proposed to be conducted.
3.27 Disclosure.
(a) Neither this Agreement, its exhibits and schedules and
the Charts Disclosure Letter, nor any of the certificates or documents to be
delivered by Charts to MarketWatch under this Agreement, taken together,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein and therein, in
light of the circumstances under which such statements were made, not misleading
and which omission or misstatement is of a material fact, the existence of which
would have a Material Adverse Effect on Charts other than: (a) a change arising
or resulting, directly or indirectly, from general industry, economic or stock
market conditions; (b) a change that is proximately caused by the public
announcement of, and the response or reaction of customers, vendors, licensors,
investors or employees of charts to this Agreement, the Merger or any of the
transactions contemplated by this Agreement; or (c) a change arising from an act
or omission of MarketWatch or Sub.
(b) None of the information supplied or to be supplied by or
on behalf of Charts for inclusion in the Information Statement will, as of the
date such Information Statement is first sent to the shareholders of Charts,
contains any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading; provided, that Charts shall not be responsible for any statement,
information or omission relating to MarketWatch or any
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other information supplied or to be supplied by or on behalf of MarketWatch for
inclusion in the Information Statement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MARKETWATCH AND SUB
MarketWatch and Sub hereby represent and warrant to Charts that, except
as set forth in the letter addressed to Charts from MarketWatch and dated as of
the Agreement Date (including all schedules thereto) which has been delivered by
MarketWatch to Charts concurrently herewith (the "MARKETWATCH DISCLOSURE
LETTER"), each of the following representations, warranties and statements in
this Article 4 is true and correct as of the Agreement Date and will be true and
correct on and as of the Closing Date (and for all purposes of this Agreement
(including without limitation Article 8), the statements contained in the
MarketWatch Disclosure Letter and its schedules shall also be deemed to be
representations and warranties made and given by MarketWatch under Article 4 of
this Agreement):
4.1 Organization and Good Standing. MarketWatch is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted and as
proposed to be conducted. Sub is a corpo