-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Og3cYlfrt6J7nZmjiclMLDxTwL5YEH6kNCndBT6F42MCEKGl427ITCWNvBJOn4Cs KR7iYjeuhaX1q1zKL2KcXw== 0000950130-00-002037.txt : 20000413 0000950130-00-002037.hdr.sgml : 20000413 ACCESSION NUMBER: 0000950130-00-002037 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MULTEX COM INC CENTRAL INDEX KEY: 0001061310 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 333-75121 FILM NUMBER: 599043 BUSINESS ADDRESS: STREET 1: 100 WILLIAM ST STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 BUSINESS PHONE: 2128599800 MAIL ADDRESS: STREET 1: 33 MAIDEN LANE 5TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 FORMER COMPANY: FORMER CONFORMED NAME: MULTEX SYSTEMS INC DATE OF NAME CHANGE: 19980508 10-K/A 1 FORM 10K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 COMMISSION FILE NUMBER 0-24559 MULTEX.COM, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 22-3253344 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER) 100 WILLIAM STREET, 7th FLOOR NEW YORK, NEW YORK 10038 (212) 607-2400 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Yes [] No The aggregate market value of voting stock held by non-affiliates of the registrant as of March 6, 2000 was $603,273,823 (based on the last reported sale price on the NASDAQ National Market on that date). The number of shares outstanding of the registrant's common stock as of March 6, 2000 was 28,729,181. DOCUMENTS INCORPORATED BY REFERENCE The following documents (or parts thereof) are incorporated by reference into the following parts of the Form 10-K: Certain information required in Part III of this Form 10-K is incorporated from the registrant's Proxy Statement for its 2000 Annual Meeting of the Stockholders. The registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as filed with the Securities and Exchange Commission on March 30, 2000, is hereby amended and restated in its entirety.
MULTEX.COM, INC. 1999 FORM 10-K/A ANNUAL REPORT TABLE OF CONTENTS Page PART I ....................................................................................................3 ITEM 1. BUSINESS............................................................................................3 ITEM 2. PROPERTIES.........................................................................................21 ITEM 3. LEGAL PROCEEDINGS..................................................................................22 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................22 PART II ...................................................................................................22 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK..............................................................................................22 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA...............................................................23 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............24 Item 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........................................36 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...........................................50 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...............50 PART III ...................................................................................................50 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................................50 ITEM 11. EXECUTIVE COMPENSATION.............................................................................54 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....................................61 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................63 PART IV ...................................................................................................66 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K....................................66
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT MULTEX.COM AND OUR INDUSTRY. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. MULTEX.COM'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, AS MORE FULLY DESCRIBED IN THIS SECTION AND ELSEWHERE IN THIS REPORT. MULTEX.COM UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE. PART I ITEM 1. BUSINESS Multex.com, Inc. (www.multex.com) is the Internet's leading financial e- marketplace connecting buyers and sellers of financial services and information. Multex.com is a global company that provides information and commerce enabling technology and infrastructure, application services, Web hosting and online community services to the major financial marketplace participants: brokerage firms, investment banks, corporations, and individual and institutional investors. Our services enable timely online access to over 2 million research reports and other investment information on over 26,000 companies. These reports are published by approximately 700 investment banks, brokerage firms and third-party research providers worldwide. In the United States, we offer research reports from 20 out of the 20 leading investment banks and brokerage firms, according to the Institutional Investor rankings, including Merrill Lynch, Morgan Stanley Dean Witter, Goldman Sachs and Salomon Smith Barney. In Europe, we offer research reports from 20 out of the 20 leading investment banks and brokerage firms, as ranked by the Reuters Tempest survey, and in Asia, we offer research reports from 20 out of the 20 leading investment banks and brokerage firms, as ranked by Asia Money. Through various arrangements, more than 3,000,000 individual investors, institutional investors and financial professionals, including mutual funds managers, portfolio managers, brokers and their clients, are able to use our services. In addition to making our services available through our own Web sites, we have established a number of strategic distribution relationships to reach both the institutional market and the individual investor market. For the individual investor market, Multex Investor is an Internet service targeting the rapidly growing individual investor market. Multex Investor is an interactive community for individual investors. Visitors to Multex Investor can join as a "member" at no cost. Members of Multex Investor have free access to a range of member services, investment research reports and other financial information from Multex.com, sponsoring brokerage firms and investment banks, as well as member generated content. As of December 31, 1999, we had over 1 million members of Multex Investor. We have established a number of strategic distribution relationships to promote Multex Investor, including a strategic distribution relationship with America Online to serve as the anchor tenant for brokerage research on the AOL Personal Finance channel. America Online is also a recent investor in Multex.com. In addition, we have established 3 distribution relationships for Multex Investor with other Internet portals and financial sites, including The Wall Street Journal Interactive, CNNfn, CBS MarketWatch, Yahoo!, Intuit, and Quote.com. On September 23, 1999, Multex.com acquired Market Guide Inc. Market Guide compiles, integrates and distributes accurate, timely and objective corporate and financial information on over 13,000 publicly traded corporations for dissemination over the Internet and other distribution channels. Under the terms of the acquisition, one share of Multex.com's common stock was exchanged for each outstanding share of Market Guide stock. Multex.com issued approximately 4.9 million shares of its common stock and assumed options to purchase approximately 680,000 shares. Industry Overview In recent years, there has been substantial growth in the ownership of equity and fixed income securities worldwide. The Investment Company Institute reports that the percentage of US households owning stock directly, or through mutual funds, rose from 19% in 1983 to 48% in 1999, a 153% increase. Growth in financial assets has resulted from a number of factors, including an increase in the number of mutual funds and increased cash flows into those mutual funds, households allocating more of their assets to equity investments, sustained high returns in the equity markets over a number of years, and lower trading costs as a result of regulatory changes and improved technologies. The proliferation in equity ownership and associated trading activity has created a need for more investment research and market information on the part of investors who seek higher returns on their portfolios. Individuals are showing strong preferences for transacting various types of business, including trading securities, via the Internet, rather than in person or over the telephone. These transactions are being streamlined and can now be performed directly virtually anywhere at any time. Individual investors have accepted and even welcomed self-directed online transactions because these transactions can be faster, less expensive and more convenient than transactions conducted through a human intermediary. We believe that these trends evidence a fundamental change in the way many individual investors manage their financial assets. As individual investors seek to independently manage their financial assets, these investors are increasingly looking for investment research and other financial reports online. Investment research is one of the primary tools individual and institutional investors use to assist them in deciding whether to invest in a company or industry and when to buy and sell a particular security. Investment banks and brokerage firms, as the primary providers of investment research, have invested billions of dollars developing their research capabilities, which they use to build their brand name recognition, enhance customer loyalty and generate investment banking and trading revenues. Many of these firms are expanding the breadth and scope of their research by hiring additional analysts and increasing the number of companies and industries covered by their research and providing research on international markets. The ability to offer investment research to investors who traditionally have not had timely access to investment research is increasingly becoming a competitive advantage and a key distinguishing feature for brokerage firms. As the industry becomes more competitive, investment banks and brokerage firms want to distribute their research in the fastest and most efficient manner possible 4 in order to meet increasing investor demand for better access to investment research and market information. Individual and institutional investors are increasingly demanding access to investment research and other market information--including detailed company information, Securities and Exchange Commission filings, business and financial news, stock quotes, stock price graphs and annual reports--on a "real-time" or near "real-time" basis. Investment research traditionally has been mailed to investors, which results in a delay in the receipt of the research and significant printing, duplicating and mailing costs. In order to distribute research reports on a more timely basis, some reports are sent by facsimile transmission to investors. However, these conventional distribution methods do not allow investment banks or brokerage firms to control which investors access and view their research. Moreover, large institutional investors often receive hundreds of paper reports, totaling thousands of pages, each week. These paper- based reports must be manually sorted, distributed, stored, reviewed and prioritized, which can be time consuming and expensive. Likewise, large users of investment research and other financial information also include investment banks and brokerage firms, which utilize their proprietary research and other corporate documents, as well as research purchased from other sources, to support their own banking, sales, trading and marketing functions. These firms seek to quickly and efficiently distribute research and other documents to their investment bankers, brokers and traders in geographically dispersed locations. In response to the shortcomings of the traditional research distribution methods, investment banks and brokerage firms have tried new distribution methods, including e-mail and distribution through their Web sites, with varying degrees of success. Distribution by e-mail is inefficient because it not only requires the recipient to open and view the e-mail messages, but it also lacks a way for the recipient to differentiate one message from another. Also, e-mail messages cannot be easily retrieved by others. Web-site distribution by investment banks and brokerage firms requires the investor to visit and search numerous Web sites that provide research, which is time-consuming and inefficient. Investment banks and brokerage firms need a solution to their internal and client investment research distribution needs. Institutional investors need a real-time, commingled source for their investment research needs. Individual investors need access to research from investment banks, brokerage firms and other third-party providers. The Multex.com Solution Our investment research and financial information services provide users with online access to a wide range of research and other investment information from corporations, leading investment banks, brokerage firms and third-party research providers worldwide. Our Internet-based technology solution ensures timely receipt of information for critical investment decisions and enables research providers to target their research more efficiently. At the same time, recipients of the information can use our proprietary search tools to locate and retrieve the desired information, saving the time and expense of manually searching through printed reports. Online availability also eliminates costs otherwise incurred in printing, mailing, sorting and filing printed reports. Finally, we enable research and information providers to market more efficiently, not only by reaching their target customers more effectively, but also by providing feedback regarding their access and usage patterns. Our services provide the following key benefits: 5 Extensive Database of Research and Financial Information. We provide investors with access to extensive online databases of research reports, fundamental financial data and other investment information on over 26,000 companies. We typically add reports to our database at the rate of more than 20,000 new reports each week. Research reports in our database include all text, charts, graphs, tables, color and document formatting contained in the original report. We continually update and maintain our database of detailed financial and corporate data on almost every publicly-traded US corporation. For some of our customers, we also provide access to delayed stock quotes and real-time Securities and Exchange Commission filings as part of their subscription. Efficient, Cost-Effective Research Distribution. We enable investment banks, brokerage firms and third-party research providers to electronically distribute their research reports to their brokers, bankers and traders and their customers via the Internet or intranets on a real-time basis. Our services permit research to be distributed to multiple locations simultaneously. By using these services, research providers can target investors worldwide, monitor investor requests for research reports and determine who has accessed their reports. Because our services are distributed over the Internet or intranets, research providers save printing and mailing costs and can more easily target their research to their customers. Our services are password- protected and research included in our database can be accessed only by authorized users. Comprehensive Search Capabilities. We have incorporated extensive search capabilities into our services, thereby enabling users to rapidly and easily locate relevant commingled research from hundreds of sources and to reduce the costs of indexing, organizing and distributing research reports. Users can search for a particular research report by a number of criteria, including company name, industry, ticker symbol or analyst. Additionally, users can search on a full text basis for words or phrases. We also enable users to create searchable, customized research profiles and portfolios, to further facilitate finding and retrieving the document. Ease and Efficiency of Use. Our services are designed to facilitate the electronic contribution and online distribution of investment research, as well the efficient dissemination of financial and corporate data over the Internet. Our proprietary software allows sell-side research departments and third-party information providers to easily contribute research reports, financial models, graphic presentations and other documents in real-time directly to our database. Research providers can use existing word processing and desktop publishing software, including Microsoft Word, Excel, PowerPoint, WordPerfect, HTML and multimedia creation software, and are not required to modify their method of document creation. For users accessing research, our proprietary technology incorporates a graphical user interface and provides access through leading browser technologies to simplify finding, retrieving, viewing and printing research reports. Strategy Our objective is to be the leading provider of online investment research, financial information and related technology services for the individual and institutional investment community. We use leading Internet technologies to provide a unique, integrated platform for 6 the efficient distribution of investment research and financial information worldwide. The following are the key elements of our strategy: Provide Extensive Investment Research and Financial Information. We intend to continue to leverage our success as an investment research and financial information source for institutional and individual investors. We continuously target leading investment banks and brokerage firms in an effort to add their research to our research database. Through our acquisition of Market Guide we now have the ability to provide accurate, timely and objective financial, descriptive and other information on publicly-traded corporations. Through our Multex Data Group subsidiary, we also now are able to provide proprietary earnings estimates. By establishing relationships with other third-party providers of investment and financial information, including Morningstar, Standard & Poor's, ValueLine, Quote.com and others, we can offer extensive third-party investment research and information. We believe that by continually incorporating additional sources of investment and financial information into our database, we will be well positioned to become the premier source of high- value investment information. Expand Distribution Channels. We employ a broad array of distribution channels for our services and are continuously identifying and developing new channels. For distribution of investment research into the institutional investor market, we have entered into agreements with leading third-party distributors, including Bloomberg, Disclosure, Dow Jones and Reuters. In order to enhance the distribution of investment research to individual investors, we have entered into an agreement with America Online to be an anchor tenant on the investment research area within the AOL Personal Finance channel, and have also entered into agreements to distribute our services with a number of leading Internet-based financial Web sites and distributors, including Yahoo!, CNNfn, Data Broadcasting Corporation, which includes CBS MarketWatch, Disclosure, and TheStreet.com. Through our acquisition of Market Guide, we distribute detailed corporate and financial information to over 135 Web sites and information service vendors, including, Yahoo!, America Online, Ameritrade, Charles Schwab, E*Trade, the Motley Fool, Reuters, Business Wire and FactSet. Increase Awareness of the Multex.com Family of Brands. We believe that increasing the brand name awareness of Multex.com and our services in the financial community will contribute to our future success. We have successfully built a brand name among institutional investors, research providers and the consumers of financial information and are targeting our marketing efforts to expand the recognition of our brand names through advertising, direct mail, trade shows, seminars and conferences as well as joint marketing initiatives with information providers and distributors. We seek to incorporate our branded logo on each Web site that utilizes our information or technology to increase the brand name awareness of the Multex.com family of brands. Target Individual Investor Market. Through Multex Investor, we are targeting the expanding individual investor market. We intend to expand our related sales and marketing efforts in order to increase traffic on Multex Investor and expand our member base. In addition, to address the individual investor market, we intend to capitalize on our arrangements with America Online, The Wall Street Journal Interactive, CNNfn, CBS MarketWatch, Yahoo!, Intuit, Quote.com, Hoover's and EDGAR Online, and to develop links to Multex Investor from other 7 leading Internet portals and personal finance Web sites. We are also seeking to expand the amount of research available to individual investors on Multex Investor from leading investment banks and brokerage firms. We believe that Multex Investor will significantly increase individual investors' access to institutional quality research and enhance our position as a leading online provider of this research. Extend Global Presence. To provide U.S. and foreign investors with access to financial information and investment research obtained from corporations or prepared by leading investment banks and brokerage firms throughout the world, we target international corporations, contributors and subscribers from our headquarters in New York, and from offices in London and Hong Kong. We intend to open offices in other leading financial centers. We believe that institutional investors in Europe, the Pacific Rim and numerous emerging markets require access to high quality online investment research and information. Since many investors are investing in markets throughout the world, they also require research and information from corporations, investment banks and brokerage firms in local markets. In addition, many investment banks and brokerage firms in U.S. and foreign markets are seeking to distribute their research worldwide. Maintain Technology Leadership. We intend to continuously develop and incorporate new technologies to enhance our services. We intend to maintain our leadership position by continuing to improve our technology through investment in research and development activities, use of new Internet, intranet and extranet technologies and integration of each of our services. In particular, we are extending the available document formats to support spreadsheets, presentation applications, HTML-based pages, URL references, XML forms and audio and video files. We are currently developing intelligent categorization, which provides context and "learning" from the publishing habits of over 35,000 analysts. Using our technological capabilities and expertise, we focus on enhancing our scalable and open architecture. Our architecture is based on industry leading software, hardware and communications components, together with in-house built applications, protocols, systems and tools. Focus on Multiple Revenue Opportunities. We continue to pursue multiple revenue opportunities for future growth with a particular focus on establishing a recurring revenue stream from licensing fees, subscriptions and development, maintenance and hosting fees. We believe that subscriptions, license fees, pay- per-view transactions, advertising and development and other professional service fees represent key opportunities. By expanding the number of research providers and the scope of financial and corporate information available, we believe that we can generate additional revenue from new and enhanced services. In addition, we believe that by targeting individual investors and corporations, we may be able to increase the pay-per-view revenues from Multex Research-On- Demand and Multex Investor. We expect to continue to increase advertising, sponsorship and other revenue from Multex Investor, marketguide.com and our other Web sites. We also expect continued revenue growth from our MultexEXPRESS Web site development and hosting products. Services The following table sets forth information concerning our principal service offerings: 8 Multex.com Service Offerings
Name of Service Description Target Market --------------- ----------- ------------- MultexNET Access to real-time, commingled Buyside institutions and corporations research MultexEXPRESS Development, hosting and real-time Sellside investment banks and distribution of research and other brokerage firms, buyside information on customized Web sites institutions, and other financial for institutional clients services companies Multex Access to commingled, pay-per-view Corporations, financial institutions Research-On-Demand research on a delayed basis and advisors, institutional investors, other professional service firms and libraries Multex Investor Financial destination Web site with Individual investors access to free and pay-per-view research on a delayed basis, as well as other financial data Market Guide Financial and corporate information Financial institutions, institutional database and reports on over 13,000 publicly investors, corporations, Web sites, traded companies individual investors and other consumers of financial information
MultexNET MultexNET enables subscribers to access, on a real-time basis over the Internet, commingled full-text investment research reports supplied by leading investment banks, brokerage firms and third-party research providers. Over 11,000 mutual fund managers, portfolio managers and other institutional investors, as well as research analysts and other financial services professionals, are able to use MultexNET, which offers timely online access to over 2,000,000 research reports and other investment information from approximately 700 information providers. Subscribers to MultexNET are offered advanced searching and filtering capabilities, and the ability to retrieve investment research reports over the Internet. Our proprietary software enables us to distribute a particular research or other financial report only to those users who have been authorized or entitled to access the report by the firm that authored the report. MultexNET enables research and other information providers to monitor requests for their research reports and determine who has accessed and viewed the report. Subscribers whose subscription does not entitle them to access particular embargoed research and third-party research information may be able to access these reports through Multex Research-On-Demand on a pay-per- view basis after the typical 15-day embargo period has ended. Features of MultexNET include real-time access to high-quality multimedia and rich text research reports, the ability to utilize advanced searching features which permit searches by 9 company name, ticker symbol, brokerage firm, analyst, industry/subject codes and date, the ability to create and modify customized portfolios and profiles in order to ensure the delivery of updated research information about those companies in a particular user's portfolio or profile, and easy-to-use document viewing, printing, faxing and e-mail options. We also provide access to delayed stock quotes and real-time filings with the Securities and Exchange Commission filings as part of the MultexNET subscription. In addition, subscribers may arrange for automated fax and/or e- mail distribution of research reports to the subscriber's end-users. Research reports and other financial information available through MultexNET are stored on our servers and made available through the Internet. MultexNET requires subscribers to have an Internet connection, or a connection to an extranet maintained by us, Microsoft Internet Explorer or Netscape Navigator Web browsers, and the Adobe Acrobat viewer installed on their workstation, desktop or laptop computer. The annual subscription fee for MultexNET typically ranges from $1,000 to $3,540 per subscriber depending upon the number of users at the particular buyside institution or corporation who have access to the service. MultexEXPRESS MultexEXPRESS is our applications service provider business ("ASP") that enables investment banks, brokerage firms and other financial institutions to distribute their own proprietary financial research, as well as corporate documents, forms, news and other proprietary content, over the Internet or through intranets and other private networks. Using MultexEXPRESS, investment banks, brokerage firms and other financial institutions are able to reduce the cost of printing and distributing research reports and other internal information and can disseminate more timely information to their employees and customers. Like MultexNET, MultexEXPRESS offers the contributing firm the ability to identify which users actually access research through the usage reporting system incorporated into MultexEXPRESS. MultexEXPRESS can be implemented as a unique Internet site or seamlessly integrated into a firm's existing online presence to target information to employees and key clients on a real-time basis. MultexEXPRESS is built on the same technology platform and provides users with the same core functionality found in MultexNET. MultexEXPRESS also offers additional features and integration options targeted to the internal distribution needs of investment banks, brokerage firms and other financial institutions. MultexEXPRESS has been installed at 70 investment banking and brokerage firms, with more than 1,500,000 users at December 31, 1999. This compares to 18 MultexEXPRESS installations, with more than 500,000 users at December 31, 1997. MultexEXPRESS is generally contracted for a one- to three-year period at a fixed rate dependent upon the scale of the enterprise-wide solution offered to the customer. Multex Research-On-Demand Multex Research-On-Demand gives corporations, financial institutions and advisors, institutional investors, other professional service firms and libraries, the ability to access more than 750,000 research reports and other information from over 400 MultexNET research 10 providers. Each report can be purchased on a pay-per-view basis after an embargo period during which the research providers make the report available on a proprietary basis only to their own employees and customers. This service is available either on a stand- alone basis, through strategic distribution channels or as a part of MultexNET, MultexEXPRESS or Multex Investor. While the majority of the reports available on Multex Research-On-Demand relate to U.S. equities and investment opportunities, we are adding information relating to foreign equities and investment opportunities. Multex Research-On-Demand customers can purchase and download the research reports to their own computer using advanced searching and filtering technology that locates documents by symbol, industry, brokerage firm, full-text words and phrases, or user-defined portfolios and profiles. Users can receive e-mail alerts throughout the day, which may be keyed to their portfolios or other user- provided criteria. The financial research reports available to Multex Research- On-Demand customers include both those relating to a particular company and those relating to an industry as a whole. Research from independent research providers, including Standard & Poor's, Disclosure and Value Line Mutual Fund Survey, is also available for purchase, as well reports from the Market Guide database. An online purchase history provides a specific list of all of the reports purchased by an individual user. Prices per document available through Multex Research-On-Demand generally range from $10.00 to $300.00, based on the length and type of document. We share the pay-per-view fees generated from the sale of documents with the investment bank, brokerage firm or third-party research provider that authored the original research report, and the distributor through which the purchase was initiated. There is no registration or subscription fee for use of this service. Some of our users have purchased an annual subscription that enables them to purchase individual research reports at a discounted price. We are also adding analysis from leading third-party advisory services. Multex Investor Multex Investor is an Internet service targeting the rapidly growing individual investor market. Multex Investor is an interactive community for individual investors. Visitors to Multex Investor can join as a "member" at no cost. Members of Multex Investor can download, view and print at no cost a wide range of investment research reports and investment content from us, sponsoring brokerage firms and investment banks, as well as member-generated content. Members also have access to over 500,000 premium "pay-per-view" investment and brokerage research reports from over 300 brokerage firms, investment banks and third-party information providers. We have established a number of strategic distribution relationships to promote Multex Investor, including a strategic distribution relationship with America Online to serve as the anchor tenant for brokerage research on the AOL Personal Finance channel. In addition, we have established distribution relationships for Multex Investor with other Internet portals and financial sites, including The Wall Street Journal Interactive, CNNfn, CBS MarketWatch, Intuit and Quote.com. We generate revenue from Multex Investor through the sale of sponsorships to investment banks and brokerage firms, the sale of banner advertisements that allow interested users to link directly to the advertisers' own Web sites, and pay-per-view sales of investment research and 11 other financial reports. To date, we have signed sponsorship agreements with Merrill Lynch, Salomon Smith Barney, Prudential, Morgan Stanley Dean Witter, Robertson Stephens, J.P. Morgan and Gruntal & Co. Market Guide database Market Guide acquires, integrates, condenses and publishes accurate, timely and objective financial, descriptive and other information on publicly-traded corporations. Market Guide markets this information along with proprietary software to the professional and individual investment communities, through the Internet (www.marketguide.com) and other distribution channels in a cost- ------------------- effective manner. Market Guide maintains one of the largest U.S. public company databases with over 13,000 companies traded on the major U.S. markets. Market Guide has also created widely used and well-regarded proprietary industry and sector groupings and assigns companies to these industries and sectors. Market Guide then adds value by computing ratios, peer group comparisons, growth rates and other statistics, which are presented as fielded information in various time tested report formats that follow a recommended analytic process and are supported by extensive educational content. Market Guide also has a historical database of daily pricing and other information going back to 1983 and a new product providing business description, officer and director information and business and geographical segment information. Market Guide adds value and distinguishes itself from competition by its: . flexible database design which presents financial statements in the same detail as issued by each corporation. This gives users important insights no available in competitive databases, thereby enabling them to make better informed investment decisions; . mapping the financials into standardized formats to allow consistent calculations and cross company comparisons; . inclusion of auxiliary information such as earnings estimates, price performance, relative price performance, summary insider and institutional ownership statistics, bond ratings, corporate profile information and short interest statistics, giving users a complete perspective on each company; . calculation of over 500 popular financial ratios, growth rates and averages computed for the users' convenience; and . carefully planned, market tested display formats, including company to industry and sector comparisons, that allow users to quickly and efficiently make considered investment decisions. The targeted markets for Market Guide's data and related products include investment managers, investment research departments, financial planners, investment counselors, investment bankers, banks, stockbrokers and brokerage firms, individual investors, financial Web sites and other Internet sites. 12 Other Services Through Multex Data Group, we maintain an earnings estimate database and generate related, proprietary financial reports, which are resold through various distributors. These reports, which combine information from our earnings estimates database with other fundamental data obtained from a variety of sources, are sold on a pay-per-view basis through Multex Research-On-Demand and Multex Investor, and may be offered in the future on a subscription basis. Research and Information Providers We have dedicated substantial resources to develop relationships with an extensive range of domestic and international investment banks, brokerage firms and third-party research providers, and we have a dedicated sales force which is continually recruiting research providers. We manage our relationship with each major research provider through our staff of account representatives. Set forth below is a representative list of our research and information providers: Selected North American Information Providers
ABN AMRO Chicago Corporation J.P. Morgan Securities Raymond James & Associates* A.G. Edwards & Sons* Janney Montgomery Scott* Robinson-Humphrey* Robertson Stephens* Jefferies & Co.* Salomon Smith Barney* Bear Stearns & Co. Inc.* Legg Mason Wood Walker* Sanford Bernstein Brown Brothers Harriman* Merrill Lynch* Schroder & Co., Inc. BT Alex. Brown* Morgan Keegan & Company* SG Cowen* CIBC World Markets* Morgan Stanley Dean Witter* U.S. Bancorp Piper Jaffray* CS First Boston NationsBanc Montgomery Securities Warburg Dillon Read* Dain Rauscher Wessels* PaineWebber Wedbush Morgan Securities, Inc.* Goldman Sachs & Co. Prudential Securities* William Blair & Company* Gruntal & Co.* Ragen McKenzie* WIT Soundview* Hambrecht & Quist* ING Barings J.C. Bradford & Co.* Associates* Selected International Information Providers ABN AMRO Commerzbank AG Dresdner Kleinwort Benson Alfred Berg Credit Lyonnais Europe* Fox Pitt, Kelton* Auerbach Grayson* Credit Suisse First Boston Goldman Sachs International Bankers Trust Australia Limited Daiwa Institute of Research Ltd.* HSBC James Capel Cazenove & Co. Deutsche Morgan Grenfell Indosuez WI Carr* Clarion Securities
13
ING Barings PaineWebber International* Salomon Smith Barney Jardine Fleming Holdings Ltd. Paribas Santander Investment Securities* JP Morgan Securities Ltd. Prudential-Bache International Limited* SBC Warburg Dillon Read Merrill Lynch International* RBC Dominion Securities Inc. Schroder Securities Limited* Morgan Stanley International Robert Fleming & Co. SG Securities PTE Union Bank of Switzerland Yorktown Securities* Selected Third-Party Information Providers Baseline* Instinet Research* The Red Chip Review* CNBC/Dow Jones* IPO Maven* Value Line* Duff & Phelps Credit Rating* Renaissance Capital* Wall Street Transcript* Gartner Group* SNL Securities* ZONA Research* Standard & Poor's*
- ---------------------- * Also provides research and information for Multex Research-On-Demand Customers Multex.com has dedicated substantial resources to developing relationships with an extensive range of buyside institutions, investment banks, brokerage firms, libraries, corporations and other professional service firms. As a result, MultexNET is used at over 9,000 financial institutions and corporations, MultexEXPRESS is used by 45 of the world's leading brokerage firms, and thousands of users access Multex Research-On-Demand. Multex Investor, which was launched in November 1998, had more than one million registered members as of December 31, 1999. Set forth below is a representative list of our institutional customers:
AIM Advisors Dresdner/RCM Global Investors Heidrick & Struggles Alliance Capital Management Ernst & Young Hewlett-Packard Arthur Andersen & Company Fidelity Capital Markets Management Invesco Asset Management AXA Fleet Investment Advisors--Equity Partners J.C. Bradford & Co. Robertson Stephens Franklin Research and Development J.P. Morgan Asset Management Barclays Global Investors Gabelli Asset Management Jefferies & Co. BT Alex. Brown GE Capital John Hancock Advisors Carson Group Goldman Sachs & Co. Kleinwort Benson Investment Citibank Global Asset Management Gruntal & Co. Legg Mason Wood Walker Dain Rauscher Wessels McKinsey & Co. Delaware Management Merrill Lynch Asset Management
14
Morgan Stanley Asset Management Ragen McKenzie Schroeders Investment Management Oppenheimer Funds Salomon Smith Barney Asset Management T. Rowe Price PaineWebber SBC Warburg Dillon Read UBS Securities Piper Jaffray SG Cowen Vanguard Putnam Investments WIT Soundview
Strategic Distribution Relationships Multex.com has established a number of strategic distribution relationships to provide marketing and additional distribution for its services, to build traffic on our Web sites and to increase investor awareness of our services and the Multex.com brand name. These strategic relationships target both institutional investors and individual investors. We have entered into agreements and strategic relationships with Bloomberg, Bridge, Disclosure, Dow Jones, FactSet and Reuters to assist us in marketing our services to institutional investors. In each case, we share in revenues generated from sales to end-users through the strategic partners' distribution networks. The principal services distributed by these strategic partners are MultexNET, which is made available as a service through the partners' distribution network on similar terms to those available to subscribers to MultexNET over the Internet, and Multex Research-On-Demand. On January 1, 1999 we renewed our strategic relationship with Reuters for a five-year term. See "Certain Relationships and Related Transactions." In order to enhance the distribution of investment research to the individual investor market, we have entered into an agreement with America Online. This agreement is for an initial two-year term and is automatically renewable unless either party gives advance notice of its intention not to renew. Under our agreement with AOL, we have secured a position as an anchor tenant for brokerage research on the AOL Personal Finance channel as well as integrated links on other screens within the AOL service, with links from those locations back to Multex Investor. In addition to the strategic relationships described above, we have entered into agreements with numerous other distributors, including Yahoo!, Big Charts, CBS Marketwatch, CNNfn, Hoover's, Intuit, Quote.com, Bloomberg, SmartMoney.com and Ziff Davis Interactive Investor, as well as 300 affiliates, to further attract traffic to the Multex Investor and our other Web sites. Sales and Marketing Multex.com's sales organization grew from 19 professionals at the end of 1998 to 54 by year-end 1999. Our sales force is organized into geographic teams focused on sales of all Multex.com product lines. There are eight teams in North and South America, four teams in UK/Europe and one in Asia. For each of our business units, a senior sales executive is responsible for insuring that every geographic team contains the professional sales personnel capable of developing sales presentations, demonstrating our products and services, and executing a complete successful sales cycle. 15 Currently, our sales personnel are located in our offices in New York and London, and recently our new Hong Kong office. Our plans include expanding sales personnel into our San Francisco office, and into Tokyo. In addition to our direct sales efforts, Multex.com's services continue to be sold over a growing number of third-party channels, including Reuters, Bloomberg, Factset, and Disclosure, collectively reaching individual and institutional investors around the world. We believe that our presence on these channels also serves as a significant and continuous source of marketing for our services and the Multex.com brand name. Supporting our sales force is our marketing organization of five Multex.com professionals who leverage their significant skills by working with a total of six outside creative, public relations, investor relations and advertising firms representing 32 account team members at those firms. Our marketing in 1999 included virtually every kind of campaign in every media type both in the U.S and the UK. We launched a full calendar of Internet, television, radio, direct mail, outdoor, and print advertisements. We also hosted and participated in trade shows and conferences, and our executives frequently appeared on financial television shows as well as a wide variety of panel discussions. Our concentration on editorial placement paid off with hundreds of articles and mentions in magazines and other press around the world. We continued to utilize our Web sites to create awareness, generate leads and sell services. The Multex.com Web sites (www.multex.com, www.multexinvestor.com, -------------- ---------------------- www.marketguide.com ) as well as our co-branded affiliate Web sites are - ------------------- continually updated with new information about our products and services, and provide links and other registration opportunities for our prospects as well as our clients' prospects. And finally, our ASP business continues to gain global branding benefits from the "Powered by Multex.com" logo which is displayed on the MultexEXPRESS Web sites which we host for our clients and is seen by hundreds of thousands of their end users. Research and Development Our future success will depend upon our ability to maintain and develop competitive technologies, to continue to enhance our current services and to develop and introduce new services in a timely and cost-effective manner that meets changing conditions, including evolving customer needs, new competitive service offerings, emerging industry standards and rapidly changing technology. We have a dedicated research and development organization that develops new features and functionality for our existing services as well as the software that supports new services. The research and development team has expertise in network development and maintenance, Internet and intranet protocols, software development, database maintenance and development and a variety of programming tools and languages and operating systems. At December 31, 1999, we had 66 employees engaged in research and development. Research and development expenses were $6.3 million in 1999, $3.2 million in 1998 and $2.9 million in 1997. We expect to continue making substantial expenditures on research and development in the future. The market for the electronic distribution of investment research and related services is characterized by rapidly changing technology, evolving industry standards in computer hardware, programming tools, programming languages, operating systems, database technology and information delivery systems, changes in customer requirements and frequent new product 16 introductions and enhancements. There can be no assurance that we will be able to develop and market, on a timely basis, if at all, service enhancements or new services that respond to changing market conditions or that will be accepted by individual and institutional investors. Any failure by us to anticipate or to respond quickly to changing market conditions, or any significant delays in service development or introduction, could cause users to delay or decide against purchases of our services and would have a material and adverse effect on our business, results of operations and financial condition. See "Risk Factors-- Multex.com's business would be materially and adversely affected if the emerging market for online investment research does not continue to grow." Customer Service and Network Support Multex.com is committed to providing a high level of service and support to its customers. Because our services are available to users 24 hours-a-day, 7 days-a-week, our network support services are likewise continuously available. Our New York Customer Service Center is generally available 24 hours-a-day Sunday evening through Friday evening. We also have a Customer Service Center in London which is generally available from 7 a.m. until 6 p.m. Monday through Friday. Inquiries come in through our Web sites and via e-mail and telephone. At December 31, 1999, we had 27 employees engaged in customer service and network support. System Architecture and Technology We believe that our system architecture and proprietary technology provide us with an important competitive advantage. We use only open standard components, including Microsoft Windows NT, Microsoft Internet Information Server, Microsoft SQL Server and Fulcrum Server. The infrastructure of our production site is built to provide continuous availability of service to both contributors and users over Internet and Intranet channels. All the critical components of the system are redundant, which allows continuous service in case of unexpected component failure, maintenance and upgrades. Our infrastructure is scalable, allowing us to quickly adjust to our expanding client and research information database. Our operations are dependent on our ability to maintain our computer and telecommunications systems in effective working order and to protect our systems against damage from fire, natural disaster, power loss, telecommunications failure or similar events. We operate two data centers in downtown Manhattan, one at 33 Maiden Lane and the other at 100 William Street. In addition, Multex is building a new, state-of-the-art data center, to replace the one at Maiden Lane. This new data center will be five times larger than the one it is replacing. This measure will not eliminate the significant risk to our operations from a natural disaster. In addition, any failure or delay in the timely transmission or receipt of feeds and computer downloads from our information providers, due to system failure of the information providers, the public network or other failures, could disrupt our operations. Competition The market for the electronic distribution of investment research and related services is intensely competitive and this competition is expected to continue to increase. We believe that our ability to compete will depend upon many factors both within and beyond our control, 17 including continuing relationships with leading providers of investment research, the timing and market acceptance of new services and enhancements to existing services developed by us and our competitors, ease of use, performance, price, reliability, customer service and support, and sales and marketing efforts. Our competitors vary in size and in the scope and breadth of services offered. Further, we encounter direct and indirect competition from a number of sources, including traditional media, companies that provide investment research, including investment banks and brokerage firms, many of whom have their own Web sites, investment newsletters, personal financial magazines and other Internet providers of either free or subscription research services. In addition, extensive company-specific information, as well as general investment research relating to particular industries, may be obtained, frequently without charge, from public sources, including annual reports, Standard & Poor's company- specific reports, Value Line investment research reports, Media General Financial Services and Disclosure, all of which are available from public libraries, on the Internet and from the companies to which these reports relate, and industry research appearing in financial periodicals. We believe that the principal competitive factors in attracting and retaining information providers include the ability to provide full-text, publication- quality research reports electronically on a real-time basis, relationships with institutional investors interested in receiving this research and the flexibility of open architecture systems which enable any computer user with access to a browser to receive research reports regardless of which operating system controls the information provider's computer. We believe that the principal competitive factors in attracting and retaining subscribers include price of the service, the depth, breadth and timeliness of content, the full- text search features available and the ease of use. We believe that the principal competitive factors in attracting advertisers will include the number of subscribers, the demographics of these subscribers and the "pre- qualification" features that can be offered to investment banks and brokerage firms. There can be no assurance that we will be able to compete favorably with respect to these or any other competitive factors. Our MultexNET and Multex Research-On-Demand services compete with large and well-established distributors of financial information, including First Call, Investext and I/B/E/S. Our MultexEXPRESS service competes with services provided by in-house management information services personnel and independent systems integrators. Our Multex Investor service competes with Web sites that offer personal finance information, including Microsoft Investor and Yahoo! Finance, and Web sites hosted by investment banks and brokerage firms, such as DLJ Direct and Prudential Securities, offer a particular firm's research reports online either exclusively to their customers or more generally to the public. Numerous other competitors, including Standard & Poor's, Moody's and others, offer similar investment research-based services that compete, or may in the future compete, directly and indirectly with our services. Many of our existing and prospective competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. As a result, they may be able to respond more quickly to new or emerging technologies and changes in investor requirements, or devote greater resources to the development, promotion and sale of their services than we can. These competitors may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to potential employees, subscribers, strategic partners and providers of investment research information. See "Risk Factors-- Multex.com's business could be materially and adversely affected by increased competition." 18 Intellectual Property Our future success will depend, in significant part, on our intellectual property, and we rely upon copyright, patent, trade secret and trademark laws in the United States and other jurisdictions to protect our proprietary rights. We own copyrights in the computer software and online materials that we have developed or acquired, and currently hold limited licenses to use and distribute software in which third parties own copyrights, including software for electronic document and database management. We have also entered into limited license agreements with the majority of the investment banks, brokerage firms and other third-party research providers that own the copyrights in research reports that we distribute electronically. We distribute other research reports without the benefit of written licenses with the providers of those reports, solely on the basis of implied licenses that we believe these providers have granted. There can be no assurance that we will be able to maintain our licenses for research content or of third-party software, that we will be able to obtain these licenses in the future on commercially reasonable terms, if at all, that we will be able to continue to distribute those research reports for which we do not have written licenses or that our competitors will not be able to independently develop competing software or on-line materials that avoid infringing our copyrights. Also, because none of our licenses of third-party software and research content are exclusive, this software and content is and will be available to our current and future competitors. Failure on our part to protect or secure ownership of, or to maintain licensed rights to use and distribute software and content of others, and the ability of our competitors to obtain rights to distribute the same research reports that we distribute, could have a material and adverse effect on our business, results of operations and financial condition. We have been issued U.S. patents which claim certain aspects of an information delivery and authentication system that provides entitlement and electronic distribution of research documents over the Internet. These patents expire in 2016 and 2017. We have filed applications for four additional U.S. patents covering various aspects of our core technology. We have also filed patent applications under the international Patent Cooperation Treaty and in Canada and the United Kingdom corresponding to our US patents and patent applications. There can be no assurance that any of our pending patent applications will be allowed, that any patents will be issued to us even if the respective applications have been or will be allowed, or that any patents that are issued to us will not be successfully challenged by others or invalidated through agreements with employees, representatives, advisors and others. We also rely on trade secrets and proprietary know-how for certain unpatented aspects of our business information and technology. To protect such information, we generally require all employees, consultants and licensees to enter into confidentiality agreements limiting the disclosure and use of such information. There can be no assurance that these agreements provide meaningful protection or that they will not be breached, that we will have adequate remedies for any such breach, or that our trade secrets, proprietary know-how, and technological advances will not otherwise become known to others. In addition, there can be no assurance that, despite precautions we have taken, others have not obtained or will not obtain access to our proprietary technology. Further, there can be no assurance that third parties will not independently develop substantially equivalent or better technology or acquire equivalent business information. We rely upon and seek to protect the trademarks and service marks that we currently use, and those that we intend to use in the future, through registration in the United States and other 19 jurisdictions. We have been granted United States federal and German registrations for MultexNET, and two MultexNET logos, as trademarks and service marks, and have applied for registration of the same marks in Japan, Taiwan, Hong Kong, the United Kingdom and the European Union. We also use the following trademarks and service marks: Multex, Multex.com, the Multex.com logo, MultexEXPRESS, Multex Research-On-Demand, Multex Investor and The Online Investment Research Network. United States registrations have been granted for Multex.com, and United States applications are pending for the other marks. Applications for Multex and Multex Investor have also been made in the European community, Japan, Hong Kong, Taiwan, the United Kingdom, Canada and Australia. There can be no assurance that our use of and interest in these trademarks and service marks will be subject to any legal protection in any of the jurisdictions in which we now do business or might do business in the future, nor that they, or any of the registrations that have already been granted to us, will not be successfully challenged by others and invalidated through administrative process or litigation. As our business is dependent on brand recognition in the marketplace, any failure to maintain and protect our trademarks and service marks could have a material and adverse effect on our business, results of operations and financial condition. We have licensed and expect to license some of our proprietary technology to third parties, including joint ventures with third parties, in connection with the establishment of our international business operations, which may be controlled by these third parties. While we will attempt to ensure that our proprietary rights will be protected by our business partners, no assurances can be given that these partners will not take actions that could materially and adversely affect the value of our proprietary rights or the reputation of our services and technologies. We currently license some aspects of our text search functionality and relational database technologies from third parties. Our failure to maintain these licenses, or to find a replacement for these technologies in a timely and cost-effective manner, could have a material adverse effect on our business, results of operations and financial condition. Legal standards relating to the validity, enforceability and scope of protection of proprietary rights in Internet-related businesses are uncertain and still evolving, and no assurance can be given as to the future viability or value of any of our proprietary rights or other companies within the industry. See "Risk Factors--If Multex.com fails to adequately protect its intellectual property rights or faces a claim of intellectual property infringement by a third party, it could lose its intellectual property rights or be liable for significant damages." Government Regulation We are subject, both directly and indirectly, to various laws and governmental regulations relating to our business. There are currently few laws or regulations directly applicable to commercial online services or the Internet. However, due to the increasing popularity and use of commercial online services and the Internet, it is possible that a number of laws and regulations may be adopted with respect to commercial online services and the Internet. These laws and regulations may cover issues including, for example, user privacy, pricing and characteristics and quality of products and services. Moreover, the applicability to commercial online services and the Internet of existing laws governing issues including, for example, property ownership, libel and personal privacy is uncertain and could expose us to substantial liability. Any new 20 legislation or regulation or the application of existing laws and regulations to the Internet could have a material and adverse effect on our business, results of operations and financial condition. As our services are available over the Internet anywhere in the world, and as we intend to offer services specifically aimed at jurisdictions outside the United States, multiple jurisdictions may claim that we are required to qualify to do business as a foreign corporation in each of those jurisdictions. Failure by us to qualify as a foreign corporation in a jurisdiction where we are required to do so could subject us to taxes and penalties for the failure to qualify. It is possible that state and foreign governments might also attempt to regulate our transmissions of content on our Web sites or prosecute us for violations of their laws. There can be no assurance that violations of local laws will not be alleged or charged by state or foreign governments, that we might not unintentionally violate these laws or that these laws will not be modified, or new laws enacted, in the future. Employees At December 31, 1999, we employed 336 persons, compared to 246 persons at December 31, 1998. Our future success will depend in substantial part upon our ability to attract and retain highly qualified employees. Competition for personnel, in particular information technology professionals, is intense, and there can be no assurance that we will be able to retain our senior management or other key employees, or that we will be able to attract and retain additional qualified personnel in the future. Our employees are not represented by any collective bargaining organization and we consider our relations with our employees to be good. See "Risk Factors That May Affect Future Results--The loss of any of Multex.com's key personnel could have a material and adverse effect." ITEM 2. PROPERTIES Our corporate headquarters are located in New York, New York. We occupy approximately 40,000 square feet, under a lease that expires in 2010. This space includes our corporate headquarters and one of our data centers. We also lease 15,000 square feet of space in New York City where we are currently constructing a data center. This lease expires in 2012. This data center is expected to be completed and operational by fourth quarter 2000. We currently have approximately 20,000 square feet leased in a third location that must be vacated by December 2000. This space also includes a data center. We also have approximately 19,000 square feet of space located on Long Island, New York under a lease that expires in 2005. In San Francisco, California we currently lease approximately 6,000 square feet of office space under a lease that expires in 2004. In London we will be vacating our current space (approximately 2,000 square feet) and moving into approximately 8,500 square feet of office space. This new lease expires in 2010 with an option to terminate the lease in 2005. This move will be completed in the second quarter 2000. In Hong Kong we currently lease approximately 500 square feet. This lease renews every six months. We are currently seeking additional facilities and believe that we will be able to obtain additional space as needed on commercially reasonable terms. 21 ITEM 3. LEGAL PROCEEDINGS We are not a party to any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At our special meeting held on September 22, 1999 in connection with our acquisition of Market Guide Inc., we submitted the following matters to a vote of our stockholders through a proxy solicitation: . To consider and vote upon a proposal to approve the issuance of our shares of common stock pursuant to a merger agreement by and among Multex.com, MarketGuide and Merengue Acquisition Corp. . To authorize an amendment to Multex.com's certificate of incorporation to increase the size of Multex.com's board of directors from a maximum of seven (7) directors to a maximum of eleven (11) directors. . To authorize an amendment to the Multex.com 1999 Stock Option Plan to increase the number of shares of Multex.com common stock reserved for issuance under such plan by an additional 2,500,000 shares. . To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof. The results of the voting at the special meeting were as follows:
Affirmative Votes Proposal Votes Against Abstentions Broker Non-Votes - -------- ----- ------- ----------- ---------------- Share Issuance 16,098,221 51 100 24,416 Certificate Amendment 16,121,477 1,021 290 0 Option Plan Amendment 16,110,121 352 12,315 0
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK Multex.com's common stock has traded on the Nasdaq National Market under the symbol "MLTX" since March 17, 1999. The following table sets forth the range of high and low sales prices reported on the Nasdaq National Market for Multex.com common stock of the periods indicated. 22
Calendar Year 1999: High Low ------------------------- ---------------------- First Quarter $66.375 $25.625 (Commencing March 17, 1999) Second Quarter 71.50 22.125 Third Quarter 28.625 12.75 Fourth Quarter 39.44 12.56
On March 6, 2000 the last reported sale price of our common stock on the NASDAQ National Market was $27.19. HOLDERS As of March 6, 2000, there were approximately 6,500 holders of record of our common stock. UNREGISTERED STOCK SALES There were no unregistered stock sales in 1999. Unregistered stock has been issued during the first quarter of 2000 in connection with the purchase of Sage Online, Inc., a transaction with Merrill Lynch & Co., Inc., and as a result of exercise of warrants previously issued to FleetBoston Financial Corporation in connection with a credit facility. USE OF PROCEEDS On March 17, 1999, the Securities and Exchange Commission declared effective our Registration Statement on Form S-1 (File No. 333-70693). Pursuant to this Registration Statement, and the Abbreviated Registration Statement filed on March 17, 1999 pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, we completed our initial public offering of 3,283,500 shares of our common stock at an initial public offering price of $14 per share. Our initial public offering was managed by BancBoston Robertson Stephens, CIBC Oppenheimer and Dain Rauscher Wessels. Proceeds to us from our initial public offering, after calculation of the underwriters discount and commission of approximately $2.9 million and offering costs of $1.5 million, totaled approximately $41.6 million. None of the expenses incurred in our initial public offering were direct or indirect payments to our directors, officers, general partners or their associates, to persons owning ten percent or more of any class of our equity securities or to our affiliates. As of December 31, 1999, we have used approximately $4.7 million of the proceeds from our initial public offering toward general corporate purposes, including working capital, and toward the expansion of our international operations and sales and marketing capabilities. None of these expenses were direct or indirect payments to our directors, officers, general partners or their associates, to persons owning ten percent or more of any class of our equity securities or to our affiliates. DIVIDEND POLICY We have not declared or paid any cash dividends on our capital stock since inception. We intend to retain any future earnings to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Consequently, stockholders will need to sell shares of common stock in order to realize a return on their investment, if any. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated historical financial data is qualified by reference to, and should be read in conjunction with, the historical financial statements of Multex.com and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein. On September 23, 1999, Multex.com acquired Market Guide Inc. in a transaction accounted for as a pooling of interests. All selected consolidated financial data below reflect the results of Multex.com and Market Guide as if they had always been combined.
Year ended December 31, -------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- (in thousands, except share and per share data) Statement of Operations Data: Revenues................................. $ 40,850 $ 22,021 $ 12,616 $ 7,423 $ 5,005 Costs of revenues........................ 10,569 5,083 2,720 2,659 2,318 ---------- --------- --------- --------- --------- Gross profit............................. 30,281 16,938 9,896 4,764 2,687
23
Operating expenses: Sales and marketing..................... 26,379 8,667 4,568 2,444 1,980 Research and development................ 6,301 3,167 2,873 2,560 2,039 General and administrative.............. 18,414 12,550 10,426 6,752 3,964 ---------- --------- --------- --------- --------- Total operating expenses............... 51,094 24,384 17,867 11,756 7,983 Loss from operations..................... (20,813) (7,446) (7,971) (6,992) (5,296) Net interest income (expense)............ 2,245 (186) 60 16 (10) Other income (expense)................... (5,712) (716) -- -- -- ---------- --------- --------- --------- --------- Loss from continuing operations before (24,280) (8,348) (7,911) (6,976) (5,306) income taxes............................ Income taxes............................. 1,030 276 7 (2) 1 ---------- --------- --------- --------- --------- Loss from continuing operations.......... (25,310) (8,624) (7,918) (6,974) (5,307) Discontinued operations.................. 331 (214) (1,087) (115) -- ---------- --------- --------- --------- --------- Net loss................................. $ (24,979) $ (8,838) $ (9,005) $ (7,089) $ (5,307) ========== ========= ========= ========= ========= Basic and diluted net loss per share..... $(1.15) $(1.51) $(1.62) $(1.35) $(0.97) ========== ========= ========= ========= ========= Shares used in calculating net loss per share--basic and diluted................ 22,688,050 7,609,524 6,891,764 6,272,043 6,126,598 ========== ========= ========= ========= =========
Year ended December 31, -------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- (in thousands) Balance Sheet Data: Cash and cash equivalents, and $39,117 $ 24,171 $ 11,007 $ 9,961 $ 936 marketable securities................... Working capital (deficit)................ 37,519 21,958 8,882 8,697 (513) Total assets............................. 65,600 33,183 18,542 15,885 5,236 Deferred revenues........................ 5,691 3,376 2,003 1,334 449 Long-term debt........................... -- 236 393 1,948 1,008 Convertible preferred stock.............. -- 59,860 37,234 25,066 8,798 Total stockholders' (deficit) equity..... 47,201 (34,123) (25,111) (14,033) (7,178)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MULTEX SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE HEREIN. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. MULTEX.COM'S ACTUAL RESULTS AND TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE HEREIN. Overview Multex.com is a leading provider of online investment research and information services designed to meet the needs of individual and institutional investors, including investment banks, brokerage firms and corporations. We offer five main services as follows: 24 . MultexNET, which was launched in June 1996; . MultexEXPRESS, which was launched in January 1997; . Multex Research-On-Demand, which was launched in April 1997; . Multex Investor, which was launched in November 1998; and . Market Guide database, which was acquired in September 1999. MultexNET, typically offered as a one- to three-year subscription, allows entitled institutional investors to access full-text investment research reports on a real-time basis from investment banks, brokerage firms and other third- party research providers over the Internet or through other distribution channels. MultexEXPRESS, also provided pursuant to one- to three-year subscriptions, enables financial institutions to distribute their proprietary financial research, as well as other corporate documents, over the Internet, through intranets and other private networks. Multex Research-On-Demand gives corporations, financial institutions and advisors, and institutional investors the ability to access research reports on a pay-per-view basis from a majority of the contributors to MultexNET, over the Internet or through other distribution channels. Multex Investor gives individual investors who register as members access to a range of financial reports and services, including research reports on a pay-per-view basis, over the Internet from a majority of the contributors to MultexNET. Multex Investor also includes banner advertising and sponsorship advertising throughout the site. Sponsors to Multex Investor include full-service brokerage firms and other financial institutions interested in attracting individual investors to their products, services and brands. Revenues from subscriptions to MultexNET and MultexEXPRESS are recognized in equal installments over the term of the subscription. Revenues from Multex Research-On-Demand and pay-per-view transactions on Multex Investor are recognized upon sale. Revenues from sponsorships to Multex Investor are recognized in equal installments over the term of the sponsorship. Some of the users of Multex Research-On-Demand pay a flat annual fee for the service, which entitles them to receive research and other reports at a discounted rate. Revenues from these users are recognized in equal installments over the term of the subscription. All costs associated with revenues from MultexNET, MultexEXPRESS, Multex Research-On-Demand and Multex Investor are expensed as and when incurred. We pay distribution fees to our distributors and, with respect to Multex Research-On-Demand and pay-per-view transactions on Multex Investor, royalties to the investment banks, brokerage firms or third-party research providers that authored the research. On March 17, 1999, we completed our initial public offering of 3,450,000 shares of common stock, of which 3,283,500 shares were issued and sold by Multex.com, at a price of $14.00 per share. Net proceeds of approximately $41.6 million from the sale of common stock in our initial public offering were added to our working capital. We continue to expand our operations and have grown from 246 employees at December 31, 1998 to 336 employees at December 31, 1999. We expect to add additional personnel both 25 in the United States and abroad as our operations expand. We currently expect to significantly increase our operating expenses both on an absolute basis and as a percentage of revenues in order to expand our sales and marketing operations, to continue to expand internationally and to continuously upgrade and enhance our services and technologies. As a result of these and other factors, there can be no assurance that we will not incur significant losses on a quarterly and annual basis for the foreseeable future. We have incurred significant losses since our inception, and as of December 31, 1999 had an accumulated deficit of $60.1 million. In addition, we have recorded cumulative deferred compensation of $2.4 million, which represents the difference between the exercise price of stock options for shares of common stock granted to some of our employees and the fair market value of our common stock at the date of grant. Of the total deferred compensation amount, $465,000 was amortized prior to December 31,1998 and $646,000 was amortized during the year ended December 31, 1999. The remaining deferred compensation amount will be amortized over the remaining vesting periods of the related options. We believe that period-to-period comparisons of our operating results are not necessarily meaningful and that the results for any period should not be relied upon as an indication of future performance. Historically, a few of our subscribers and distributors have accounted for a substantial portion of our revenues. For the year ended December 31, 1999, Merrill Lynch accounted for 10.2% of our consolidated revenues. For the years ended December 31, 1998 and 1997, Reuters Group PLC accounted for 11.3% and 18.1%, respectively, of our consolidated revenues. For the year ended December 31, 1997, Bloomberg L.P. accounted for 10.1% of our consolidated revenues. The loss of Merrill Lynch, or any of our other subscribers or distributors, could have a material and adverse effect on our business, results of operations and financial condition. Recent Developments Market Guide Acquisition The acquisition of Market Guide, which was consummated September 23, 1999, is further discussed in Part I, Item 1. Merrill Lynch Transaction On December 21, 1999, Multex.com announced a multi-year partnership with Merrill Lynch to co-develop global research and information Web sites for clients of Merrill Lynch's institutional e-commerce portal. The companies will jointly develop the next-generation platform for real-time delivery of Merrill Lynch investment strategy and securities research for its institutional clients. Sage Transaction On March 20, 2000, Multex.com acquired Sage Online, Inc. Sage Online is a leading provider of live events and interactive community for personal finance, including mutual fund and equity content, chat rooms, forums and message boards. Sage Online was a privately held company and is now a wholly-owned subsidiary of Multex.com. 26 General In September 1999, Multex.com acquired Market Guide Inc. in a transaction accounted for as a pooling of interests. The consolidated statement of operations for the year ended December 31, 1999 includes the calendar results of operations for Multex.com and Market Guide for the year ended December 31, 1999. The consolidated statement of operations for the year ended December 31, 1998 includes the calendar results of operations for Multex.com and the fiscal year end results of operations for Market Guide for the year ended February 28, 1999. The consolidated statement of operations for the year ended December 31, 1997, includes the calendar results of operations for Multex.com and the fiscal year end results of operations for Market Guide for the year ended February 28, 1998. Results of Operations The following table shows the percentage of total revenues represented by the items in our consolidated statements of operations.
YEAR ENDED DECEMBER 31, 1999 1998 1997 -------------------------------------- Revenues 100% 100% 100% Cost of Revenues -25.9% -23.1% -21.6% ------ ------ ------ Gross profit 74.1% 76.9% 78.4% Operating expenses: Sales and marketing 64.6% 39.4% 36.2% Research and development 15.4% 14.4% 22.8% General and administrative 45.1% 56.9% 82.6% ------ ------ ------ Total operating expenses 125.1% 110.7% 141.6% Loss from operations -51.0% -33.8% -63.2% Other income (expense): Gain on sale of equipment 0.0% 0.5% 0.0% Offering expenses 0.0% -3.8% 0.0% Other income 0.1% 0.0% 0.0% Acquisition expenses -14.0% 0.0% 0.0% Interest expense -0.2% -2.6% -3.1% Interest and Investment income 5.8% 1.8% 3.6% ------ ------ ------ Loss from continuing operations before income tax expense -59.4% -37.9% -62.7% Income Taxes 2.5% 1.3% 0.1% loss from continuing operations -61.9% -39.2% -62.8% Income (Loss) from discontinued operations 0.2% -1.9% -8.6% Gain on sale of discontinued operations 0.6% 1.0% 0.0% Net loss -61.1% -40.1% -71.4% Redeemable preferred stock dividends -2.9% -12.2% -17.3% Net loss attributable to common shareholders -64.0% -52.3% -88.7%
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 Revenues Multex.com's revenues consist of subscription fees for MultexNET, subscription, development and hosting fees for MultexEXPRESS, sales of investment research on a pay-per-view basis through Multex Research-On-Demand, license and redistribution fees for the Market Guide database, and sales of sponsorships, advertising and investment research through the Multex Investor and Market Guide Web sites. We also provide professional services to select MultexEXPRESS clients, including software development, customization and integration services. On occasion, as a service to our clients, we have acquired equipment for resale. Revenues increased 85.5% to $40.8 million for the year ended December 31, 1999 from $22.0 million for the year ended December 31, 1998. The increase in revenues was attributable to a number of factors: a significant increase in the number of institutions and individuals using our pay-per-view service, greater acceptance of Multex Research-On-Demand, an increase in the number of installations utilizing MultexEXPRESS to distribute their proprietary research to their employees and customers, an increase in the number of vendors distributing the Market Guide database, and increased advertising and sponsorship revenues from the Multex Investor and Market Guide Web sites. Cost of Revenues Cost of revenues consists primarily of fees payable to distributors of MultexNet and Multex Research-On-Demand, royalties payable to the authors of investment research and content offered through Multex Research-On-Demand, Multex Investor and marketguide.com, external development costs incurred for MultexEXPRESS customers, research department costs related to the collection and processing of financial data and earnings estimates, purchases of equipment for resale and data communications costs. Cost of revenues increased 107.9% to $10.6 million in the year ended December 31, 1999 from $5.1 million for the year ended December 31, 1998. As a percentage of revenues, cost of revenues increased to 25.9% for the year ended December 31, 1999 from 23.1% for the year ended December 31, 1998. The increase in cost of revenues in dollar terms was primarily due to royalty and distribution fee payments as a result of increased sales of Multex Research-On- Demand, the increased cost of equipment purchased for resale, increased data collection costs related to the maintenance and enhancement of the Market Guide database, growth in web site traffic resulting in increased royalty payments to content providers, increased Web site development costs resulting from the increased number of MultexEXPRESS installations, and additional data communications charges resulting from increased sales of subscriptions for MultexNET and installations of MultexEXPRESS. Operating Expenses 27 Sales and Marketing. Sales and marketing expenses consist primarily of salaries, commissions, advertising, public relations, tradeshow expenses and costs of marketing materials. Sales and marketing expenses increased 204.3% to $26.4 million for the year ended December 31, 1999 from $8.7 million for the year ended December 31, 1998. As a percentage of revenues, sales and marketing expenses increased to 64.6% for the year ended December 31, 1999 from 39.4% for the year ended December 31, 1998. The increase in sales and marketing expenses was due to an expansion of our sales force both domestically and internationally, increased marketing activities, additional costs resulting from expanding our international marketing efforts, and a significant advertising campaign undertaken in 1999 to increase awareness and visibility of Multex Investor and prominence of the Multex.com family of brands. Research and Development. Research and development expenses consist primarily of salaries and benefits. Research and development expenses increased 99.0% to $6.3 million for the year ended December 31, 1999 from $3.2 million for the year ended December 31, 1998. As a percentage of revenues, research and development expenses increased to 15.4% for the year ended December 31, 1999 from 14.4% for the year ended December 31, 1998. The increase in research and development expenses in dollar terms was primarily due to an increase in the number of developers employed by us, salary increases and costs related to creating and developing new products and enhancements to the Market Guide database. We believe that continued investment in product development is critical to attaining our strategic objectives and, as a result, expect research and development expenses to increase in dollar terms in future periods. General and Administrative. General and administrative expenses consist primarily of salaries and benefits, fees for professional services and facility expenses, including depreciation of assets. General and administrative expenses increased 46.7% to $18.4 million for the year ended December 31, 1999 from $12.5 million for the year ended December 31, 1998. As a percentage of revenues, general and administrative expenses decreased to 45.1% for the year ended December 31, 1999 from 57.0% for the year ended December 31, 1998. The increase in general and administrative expenses in dollar terms in each period was primarily due to increased personnel, professional service fees and facility expenses necessary to support our domestic and international growth, including costs associated with our London and Multex Data Group offices. We expect that general and administrative expenses will increase in dollar terms in future periods as we hire additional personnel and incur additional costs related to the growth of our business and our operations as a public company. Loss from Operations We have invested heavily in establishing a brand name for our services, expanding internationally, continuing to develop enhanced services, maintaining our technological advantage and increasing the number of our employees and offices as we seek to increase our market share. For the foregoing reasons, loss from operations increased 179.5% to $20.8 million for the year ended December 31, 1999 from $7.4 million for the year ended December 31, 1998. 28 As a percentage of revenues, loss from operations was 50.9% for the year ended December 31, 1999 compared to 33.8% for the year ended December 31, 1998. Interest Income (Expense) and Other Income Net interest income was $2.2 million for the year ended December 31, 1999 as compared to net interest expense of $186,000 for the year ended December 31, 1998. The changes in net interest income/expense are attributable to the changes in cash available for investing and fluctuations in borrowings. In particular, 1999 interest income reflects interest earned on proceeds from the March 1999 initial public offering. For the year ended December 31, 1998, Multex.com recognized a gain of $125,000 from the sale of leased equipment. There was no comparable transaction during the year ended December 31, 1999. For the year ended December 31, 1999, Multex.com recorded $5.7 million in expenses related to the September 1999 acquisition of Market Guide Inc. The majority of these expenses related to fees for investment bankers, outside counsel, accountants, proxy solicitors, document preparation and other costs related to consummating the acquisition. Income Taxes At December 31, 1999, Multex.com had net operating loss carryforwards of approximately $50.0 million and research and development credits of approximately $1.0 million for income tax purposes that expire in 2009 through 2019. The utilization of approximately $15.6 million and $400,000 of these loss carryforwards and credits, respectively, are subject to annual limitations of approximately $1.9 million, pursuant to Section 382 of the Internal Revenue Code of 1986. The majority of income tax expense recognized for the years ended December 31, 1999 and 1998 relates to Market Guide's operations prior to the September 1999 acquisition. Such operations cannot be included in Multex.com's consolidated tax returns, and accordingly cannot be offset by Multex.com's net operating loss. Loss from continuing operations Loss from continuing operations increased 193.5% to $25.3 million for the year ended December 31, 1999 from $8.6 million for the year ended December 31, 1998. The increase in loss from continuing operations was due to Multex.com's large investment in establishing a brand name for its services, expanding internationally, continuing to develop new services, 29 increasing the number of employees, and $5.7 million in expenses related to the Market Guide acquisition. Discontinued operations Income from discontinued operations totaled $106,000 for the year ended December 31, 1999 compared to a loss from discontinued operations of $440,000 for the year ended December 31, 1998. Multex.com recognized a gain of $226,000, net of $163,000 in income taxes, related to the receipt of $1.2 million upon completion of the sale of CreditRisk Monitor to New Generation Foods in January 1999. Net loss Net loss increased 127.2% to $26.2 million for the year ended December 31, 1999 from $11.5 million for the year ended December 31, 1998. The net loss includes redeemable preferred stock dividends of $1.2 million for the year ended December 31, 1999 and $2.7 million for the year ended December 31, 1998. All preferred stock was converted into common stock upon the completion of the March 1999 initial public offering. Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 Revenues Multex.com's revenues consist of subscription fees for MultexNET, subscription, development and hosting fees for MultexEXPRESS, sales of investment research on a pay-per-view basis through Multex Research-On-Demand, license and redistribution fees for the Market Guide database, and sales of sponsorships, advertising and investment research through the Multex Investor and Market Guide Web sites. We also provide professional services to select MultexEXPRESS clients, including software development, customization and integration services. On occasion, as a service to our clients, we have acquired equipment for resale. Total revenues increased 74.5% to $22.0 million for the year ended December 31, 1998 from $12.6 million for the year ended December 31, 1997. The increase in revenues for 1998 was primarily due to several factors: a significant increase in the number of institutions and individuals using our pay-per-view service, Multex Research-On-Demand, and the availability of that service for all of 1998, as compared to 1997, when the availability commenced in April; an increase in the number of installations utilizing MultexEXPRESS to distribute their proprietary research to their employees and customers, combined with the fact that 18 of these installations were revenue-producing for all of 1998, as compared to only four that were revenue-producing for all of 1997; an increase in the number of MultexNET users, primarily as a result of the addition of Reuters as a distribution channel; the launch of Multex Investor in November 1998; the addition of 35 new vendors related to Internet redistribution and co- branded relationships for the Market Guide database; and a full year of year of Internet advertising revenue on the marketguide.com Internet site. 30 Cost of Revenues Cost of revenues consists primarily of fees payable to distributors of MultexNet and Multex Research-On-Demand, royalties payable to the authors of investment research and content offered through Multex Research-On-Demand and marketguide.com, external development costs incurred for MultexEXPRESS customers, research department costs related to the collection and processing of financial data and earnings estimates, purchases of equipment for resale and data communications costs. Cost of revenues increased 86.8% to $5.1 million for the year ended December 31, 1998 from $2.7 million for the year ended December 31, 1997. As a percentage of revenues, cost of revenues increased to 23.1% for the year ended December 31, 1998 from 21.6% for the year ended December 31, 1997. The increase in cost of revenues in dollar terms in each period was primarily due to royalty and distribution fee payments as a result of increased sales of Multex Research- On-Demand, the increased cost of equipment purchased for resale, increased data collection costs related to the maintenance and enhancement of the Market Guide database, growth in web site traffic resulting in increased royalty payments to content providers, increased Web site development costs resulting from the increased number of MultexEXPRESS installations, and additional data communications charges resulting from increased sales of subscriptions for MultexNET and installations of MultexEXPRESS. Operating Expenses Sales and Marketing. Sales and marketing expenses consist primarily of salaries, commissions, advertising, public relations, tradeshow expenses and costs of marketing materials. Sales and marketing expenses increased 89.7% to $8.7 million for the year ended December 31, 1998 from $4.6 million for the year ended December 31, 1997. As a percentage of revenues, sales and marketing expenses increased to 39.4% for the year ended December 31, 1998 from 36.2% for the year ended December 31, 1997. The increase in sales and marketing expenses was due to an expansion of our sales force both domestically and internationally, increased marketing activities, and additional costs resulting from expanding our international marketing efforts. Research and Development. Research and development expenses consist primarily of salaries and benefits. Research and development expenses increased 10.3% to $3.2 million for the year ended December 31, 1998 from $2.9 million for the year ended December 31, 1997. As a percentage of revenues, research and development expenses decreased to 14.4% for the year ended December 31, 1998 from 22.8% for the year ended December 31, 1997. The increase in research and development expenses in dollar terms was primarily due to an increase in the number of developers employed by us, salary increases and costs related to creating and developing new products and enhancements to the Market Guide database. We believe that continued investment in product development is critical to attaining our strategic objectives and, as a result, expect research and development expenses to increase in dollar terms in future periods. 31 General and Administrative. General and administrative expenses consist primarily of salaries and benefits, fees for professional services and facility expenses, including depreciation of assets. General and administrative expenses increased 20.4% to $12.5 million for the year ended December 31, 1998 from $10.4 million for the year ended December 31, 1997. As a percentage of revenues, general and administrative expenses decreased to 57.0% for the year ended December 31, 1998 from 82.6% for the year ended December 31, 1997. The increase in general and administrative expenses in dollar terms in each period was primarily due to increased personnel, professional service fees and facility expenses necessary to support our domestic and international growth, including costs associated with our London and Multex Data Group offices. We expect that general and administrative expenses will increase in dollar terms in future periods as we hire additional personnel and incur additional costs related to the growth of our business and our operations as a public company. Loss from Operations We have invested heavily in establishing a brand name for our services, expanding internationally, continuing to develop enhanced services and maintaining our technological advantage, and increasing the number of our employees and offices as we seek to increase our market share, all of which have contributed to our losses. Loss from operations decreased 6.6% to $7.4 million for the year ended December 31, 1998 from $8.0 million for the year ended December 31, 1997. As a percentage of revenues, loss from operations was 33.8% for the year ended December 31, 1998 and 63.2% for the year ended December 31, 1997. Interest Income (Expense) and Other Income Net interest expense was $186,000 for the year ended December 31, 1998 compared to net interest income of $61,000 for the year ended December 31, 1997. The changes in net interest income/expense are attributable to the changes in cash available for investing and fluctuations in borrowings. In the fiscal year ended December 31, 1998, Multex.com recognized a gain of $125,000 from the sale of leased equipment. There was no comparable transaction during the year ended December 31, 1997. Income Taxes The majority of income tax expense recognized in the years ended December 31, 1998 and 1997 was related to Market Guide's operations prior to the September 1999 acquisition. Loss from continuing operations 32 Loss from continuing operations increased 8.9% to $8.6 million for the year ended December 31, 1998 from $7.9 million for the year ended December 31, 1997. The increase in loss from continuing operations was due to Multex.com's large investment in establishing a brand name for its services, expanding internationally, continuing to develop new services, increasing the number of employees and $841,000 of expenses related to its proposed, but not completed, 1998 initial public offering. Discontinued operations Loss from discontinued operations decreased 59.5% to $440,000 for the year ended December 31, 1998 from $1.1 million for the year ended December 31, 1997. The decline in losses from 1997 to 1998 reflects a growing number of customers for the CreditRisk Monitor service and a cost containment program instituted in the middle of fiscal year 1998. Multex.com also recognized a gain of $226,000, net of $163,000 in income taxes, related to the receipt of $1.2 million upon completion of the sale of CreditRisk Monitor to New Generation Foods in January 1999. Net loss Net loss increased 3.0% to $11.5 million for the year ended December 31, 1998 from $11.2 million for December 31, 1997. The net loss includes redeemable preferred stock dividends of $2.7 million and $2.2 million for the years ended December 31, 1998 and 1997, respectively. Selected Unaudited Quarterly Results of Operations The following table sets forth unaudited quarterly statement of operations data for each of the eight quarters ended December 31, 1999. In the opinion of management, the unaudited financial results include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of our consolidated results of operations for those periods. The consolidated quarterly data should be read in conjunction with the audited Consolidated Financial Statements and the Notes thereto appearing elsewhere in this report. The results of operations for any quarter are not necessarily indicative of the results of operations for any future period. In the following table, the quarters ended March 31, June 30, September 30 and December 31, 1998 include the calendar quarter results for Multex.com and the results for Market Guide's fiscal quarters ended May 31, August 31 and November 30, 1998 and February 28, 1999, respectively. The quarters ended March 31, June 30, September 30 and December 31, 1999 include the calendar quarter results for Multex.com and the estimated results for Market Guide on a calendar quarter basis. 33
Three Months Ended --------------------------------------------------------------------------- Mar. 31, 1998 June 30, 1998 Sept. 30, 1998 Dec. 31, 1998 Mar. 31, 1999 ------------- ------------- -------------- ------------- ------------- (in thousands) Revenues........................... $ 4,934 $ 5,175 $ 5,569 $ 6,343 $ 7,606 Cost of revenues................... 1,273 1,236 1,221 1,353 2,006 ------ ------ ------ ------ ------ Gross profit....................... 3,661 3,939 4,348 4,990 5,600 Operating expenses: Sales and marketing............... 1,452 1,609 2,083 3,523 4,031 Research and development.......... 702 704 728 1,033 1,065 General and administrative........ 2,793 3,076 3,115 3,566 3,737 ------ ------ ------ ------ ------ Total operating expenses......... 4,947 5,389 5,926 8,122 8,833 ------ ------ ------ ------ ------ Loss from operations............... (1,286) (1,450) (1,578) (3,132) (3,233) Net interest income (expense)...... (213) 36 37 (46) 263 Other income (expenses)............ (716) -- -- -- -- Loss from continuing operations before taxes...... (2,215) (1,414) (1,541) (3,178) (2,970) Income taxes....................... 8 4 7 257 446 ------ ------ ------ ------ ------ Loss from cont. operations......... (2,223) (1,418) (1,548) (3,434) (3,416) Discontinued operations............ (234) (269) (255) 543 331 ------ ------ ------ ------ ------ Net loss........................... $(2,457) $(1,687) $(1,803) $(2,891) $(3,085) ====== ====== ====== ====== ====== Three Months Ended ------------------------------------------- June 30, 1999 Sept. 30, 1999 Dec. 31, 1999 ------------- -------------- ------------- Revenues........................... $ 8,841 $ 10,929 $13,474 Cost of revenues................... 2,293 2,671 3,599 ------ ------- ------ Gross profit....................... 6,548 8,258 9,875 Operating expenses: Sales and marketing............... 4,912 6,619 10,817 Research and development.......... 1,122 2,039 2,075 General and administrative........ 4,087 4,776 5,814 ------ ------- ------ Total operating expenses......... 10,121 13,434 18,706 ------ ------- ------ Loss from operations............... (3,573) (5,176) (8,831) Net interest income (expense)...... 711 685 586 Other income (expenses)............ -- (5,606) (106) Loss from continuing operations before taxes...... (2,862) (10,097) (8,351) Income taxes....................... 226 234 124 ------ ------- ------ Loss from cont. operations......... (3,088) (10,331) (8,475) Discontinued operations............ -- -- -- ------ ------- ------ Net loss........................... $(3,088) $(10,331) $(8,475) ====== ======= ======
Percentage of Total Revenues -------------------------------------------------------------------- Revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of revenues.................... 25.8 23.9 21.9 21.3 26.4 25.9 24.4 26.7 ----- ----- ----- ----- ----- ----- ----- ----- Gross profit........................ 74.2 76.1 78.1 78.7 73.6 74.1 75.6 73.3 Operating expenses: Sales and marketing................ 29.5 31.1 37.4 55.6 53.0 55.6 60.6 80.2 Research and development........... 14.2 13.6 13.1 16.3 14.0 12.7 18.7 15.4 General and administrative......... 56.6 59.4 55.9 56.2 49.1 46.2 43.7 43.2 ----- ----- ----- ----- ----- ----- ----- ----- Total operating expenses.......... 100.3 104.1 106.4 128.1 116.1 114.5 123.0 138.8 ----- ----- ----- ----- ----- ----- ----- ----- Loss from operations................ (26.1) (28.0) (28.3) (49.4) (42.5) (40.4) (47.4) (65.5) Net interest income (expense)....... (4.3) 0.7 0.6 (0.7) 3.5 8.0 6.0 4.1 Other income (expenses)............. (14.5) -- -- -- -- -- (51.1) (0.6) ----- ----- ----- ----- ----- ----- ----- ----- Loss from continuing operations before taxes...... (44.9) (27.3) (27.7) (50.1) (39.0) (32.4) (92.5) (62.0) Income taxes........................ (0.1) (0.1) (0.1) (4.0) (5.9) (2.5) (2.0) (0.9) Loss from cont. operations.......... (45.1) (27.4) (27.8) (54.1) (44.9) (34.9) (94.5) (62.9) Discontinued operations............. (4.7) (5.2) (4.6) 8.6 4.4 -- -- -- ----- ----- ----- ----- ----- ----- ----- ----- Net loss............................ (49.8)% (32.6)% (32.4)% (45.5)% (40.5)% (34.9)% (94.5)% (62.9)% ===== ===== ===== ===== ===== ===== ===== =====
Our revenues have increased in all quarters presented as a result of increased acceptance of MultexNET, which was launched in June 1996, MultexEXPRESS, which was launched in January 1997, Multex Investor, which was launched in November 1998, increased purchases of the Multex Research-On-Demand service, which was launched in April 1997, and the continued growth in the number of companies licensing the Market Guide database. Our gross margins fluctuate due to several factors. Increased prices and improved operating efficiencies lead to an increase in gross margin, which is also enhanced when significant volumes of professional services are supplied. In other quarters, when we have significant amounts of equipment resale transactions, including, for example, in the three months ended March 31, 1998, gross margin tends to decrease. Operating expenses have increased in dollar terms during the quarters presented. Sales and marketing expenses have increased in dollar terms as a result of increased personnel and increased marketing, advertising and promotional activity. Research and development expenses increased in dollar terms as a result of expanded technological development efforts to support the launch of new services and to enhance the features and functionality of its services. Our quarterly revenues, margins and results of operations have fluctuated significantly in the past and are expected to continue to fluctuate significantly in the future. Causes of these 34 fluctuations have included and may include, among other factors, demand for our services, the size and timing of both new and renewal subscriptions, the number, timing and significance of new services introduced by us and our competitors, our ability to develop, market and introduce new and enhanced services on a timely basis, the level of service and price competition, changes in operating expenses, changes in the mix of services offered, changes in our sales incentive strategy, sharp declines in the volume or price levels of securities transactions and general economic factors. Any one or more of these factors could have a material and adverse effect on our business, results of operation and financial condition, and makes the prediction of results of operations on a quarterly basis unreliable. See "Risk Factors-- Fluctuations in Multex.com's operating results may negatively impact our stock price". Liquidity and Capital Resources We have financed our operations primarily through the sale of equity securities as we have not generated cash flow from operations since our inception. Through December 31, 1999, we have received an aggregate of $94.3 million in net proceeds from the sale of common stock and convertible preferred stock. At December 31, 1999, we had $6.1 million of cash and cash equivalents. Our principal commitments consist of obligations under operating leases. Net cash used in operating activities from continuing operations was $22.3 million in the year ended December 31, 1999, and $4.7 million in the equivalent period in 1998. The principal use of cash for all periods was to fund our losses from operations. Net cash used in investing activities was $21.7 million in the year ended December 31, 1999, and $13.2 million in the equivalent period in 1998. Cash used in investing activities was primarily related to purchases of marketable securities and the acquisition of property and equipment. Net cash provided by financing activities was $45.6 million in the year ended December, 1999, and $19.0 million for the equivalent period in 1998. Net cash provided by financing activities primarily consisted of net proceeds from the sale of equity securities in the March 1999 initial public offering. Net cash provided by discontinued activities was $331,000 in the year ended December, 1999, compared to net cash used in discontinued operations of $261,000 for the equivalent period in 1998. Net cash provided by discontinued operating activities reflects proceeds from the gain on sale of Market Guide's Creditrisk Monitor division in January 1999. Although we have no material commitments for capital expenditures, we anticipate that we will experience a substantial increase in our capital expenditures and lease commitments consistent with our anticipated growth in operations, infrastructure and personnel, including the implementation of an off-site backup computer system and various capital expenditures associated with expanding our facilities. We currently anticipate that we will continue to experience significant growth in our operating expenses for the foreseeable future and that our operating expenses will be a material use of our cash resources. We believe that our existing cash, cash equivalents and marketable securities, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures at least for the next twelve months. 35 Impact of the Year 2000 The Year 2000 issue is the result of computer systems and software products coded to accept or recognize only two digit entries in the date code field. These systems may recognize a date using "00" as the year 1900 rather than the year 2000. Year 2000 issues have not had any material impact on Multex.com. ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK CURRENCY RATE FLUCTUATIONS Our results of operations, financial position, and cash flows are not materially affected by changes in the relative values of non-U.S. currencies to the U.S. dollar. We do not use derivative financial instruments to limit our foreign currency risk exposure. INTEREST RATE FLUCTUATIONS Our results of operations, financial position, and cash flows are not materially affected by changes in market interest rates. We have no long-term debt obligations. We had $39.1 million in cash, cash equivalents and marketable securities as of December 31, 1999. RISK FACTORS THAT MAY AFFECT FUTURE RESULTS Because we have a limited operating history, there is limited information upon which you can evaluate Multex.com's business Although Multex.com commenced operations in April 1993, all of our current services were launched since June 1996. Accordingly, we have a limited operating history upon which you can evaluate our business. In order to be successful, we must increase our revenues from subscription fees for MultexNET, from development, hosting and subscription fees for MultexEXPRESS, generate additional sales of investment research on a pay-per- view basis through Multex Research-On-Demand, attract more users to Multex Investor and increase license fees from the Market Guide database. However, as a company in the new and rapidly evolving market for the distribution of investment research and other information over the Internet, we face numerous risks and uncertainties. Some of these risks relate to our ability to: . anticipate and adapt to the changing Internet market; . attract more subscribers; . continue to collect investment research and other financial information from our research and information providers; . implement our sales and marketing initiatives, both domestically and internationally; 36 . attract, retain and motivate qualified personnel; . respond to actions taken by our competitors; . continue to build an infrastructure to effectively manage our growth and handle any future increased usage; and . integrate acquired businesses, technologies, products and services. If we are unsuccessful in addressing these risks or in executing our business strategy, our business, results of operations and financial condition would be materially and adversely affected. Multex.com has a history of losses Since our incorporation, we have not been profitable on an annual or quarterly basis. We incurred net losses of $25.0 million, $8.8 million and $9.0 million for the years ended December 31, 1999, 1998 and 1997, respectively. We continue to experience operating losses and negative cash flows and will continue to incur significant operating expenses and make capital investments in our business. We may not ever generate sufficient revenues to achieve profitability. If we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis in the future. At December 31, 1999 we had an accumulated deficit of $60.1 million. We have financed our operations to date primarily through the sale of equity securities. Fluctuations in Multex.com's operating results may negatively impact our stock price Our revenues, margins and operating results have fluctuated significantly in the past and are expected to continue to fluctuate significantly in the future due to a variety of factors, many of which are outside of our control. These factors include: . demand for our services; . the size and timing of new and renewal subscriptions and licensing agreements; . the number, timing and significance of new services introduced by both us and our competitors; . our ability to develop, market and introduce new and enhanced services on a timely basis; . the level of service and price competition; . changes in operating expenses; 37 . changes in the mix of services offered; . changes in our sales incentive strategy; . sharp declines in the volume of securities transactions or the prices of securities generally; and . general economic factors. Our cost of revenues consists principally of distribution fees and royalties, which fluctuate depending upon the demand for our services, external development costs and fixed telecommunications costs. In addition, a substantial portion of our operating expenses is related to personnel costs, marketing programs and overhead, which cannot be adjusted quickly and are therefore relatively fixed in the short term. Our operating expense levels are based, in significant part, on our expectations of future revenues on a quarterly basis. If actual revenues on a quarterly basis are below management's expectations, or if our expenses precede increased revenues, both gross margins and results of operations would be materially and adversely affected because a relatively small amount of our costs and expenses varies with our revenues in the short term. The loss of a major research or information provider would harm Multex.com's business We are dependent upon the continued provision of high-quality investment research reports from investment banks, brokerage firms and third-party research providers. Some of these arrangements are not embodied in written contracts and some of these arrangements can be terminated by the provider on short notice. At present, more than half of our approximately 700 information providers permit us to offer the research for sale after a specified embargo period, generally seven to fifteen days. The remaining information providers do not permit these sales. Many of our providers of research reports and other information compete with one another and, to some extent, with us for subscribers. None of these information providers have arrangements to provide research or information exclusively to us. The loss of one or more significant information providers would decrease the research and other information which we can offer our users and would have a material and adverse effect on our business, results of operations and financial condition. Royalty payments and distribution fees to research providers and strategic partners increase Multex.com's costs Royalties and distribution fees payable to our information providers and strategic partners to obtain distribution rights to research reports included in Multex Research-On-Demand constitute a significant portion of our cost of revenues. If we are required to increase the royalties or fees payable to these information providers or strategic partners, these increased payments could have a material and adverse effect on our business, results of operations and financial condition. 38 Because some of Multex.com's competitors are parties to exclusive distribution agreements, we may not be able to get content from important research providers A number of leading investment banks, brokerage firms and third-party research providers are parties to exclusive distribution arrangements with our competitors, including First Call Corporation and The Investext Group, both of which are subsidiaries of Thomson Financial Services, Inc., a leading worldwide provider of financial information services. Consequently, we cannot provide our users with the investment research and other information provided by these investment banks, brokerage firms and third-party research providers, which may put us at a competitive disadvantage. In the event that additional investment banks, brokerage firms and third-party research providers enter into exclusive distribution arrangements or that we are hindered in our ability to offer our own services due to the lack of content from these investment banks, brokerage firms and third-party research providers, our business, results of operations and financial condition would be materially and adversely affected. The inadvertent distribution of research reports could result in a claim for damages against Multex.com or harm our reputation Our proprietary software technology enables us to restrict distribution of a particular research report or other financial information to those users who have been authorized or entitled to access the report by the information provider. We might inadvertently distribute a particular report to a user who is not so authorized or entitled, which could subject us to a claim for damages by the information provider or which could harm our reputation in the marketplace, either of which could have a material and adverse effect on our business, results of operations and financial condition. Multex.com's business would be materially and adversely affected if the emerging market for online investment research does not continue to grow The market for the distribution of investment research and other information over the Internet has only recently begun to develop, is rapidly evolving and is characterized by an increasing number of market entrants who have introduced or developed electronic investment research distribution services by facsimile and over public and private networks, online services and the Internet. As is typical of a rapidly evolving market, demand and market acceptance for new services are subject to a high level of uncertainty. Because the market for our services is new and rapidly evolving, it is difficult to predict with any assurance the growth rate, if any, and the ultimate size of this market. We cannot assure you that the market for our services will develop or that our services will ever achieve market acceptance. If the market fails to develop, develops more slowly than expected, or becomes saturated with competitors, if our services do not achieve market acceptance, or if pricing becomes subject to significant competitive pressures, our business, results of operations and financial condition would be materially and adversely affected. Our future results of operations will depend, in substantial part, on our ability to increase the market acceptance of our services. The future viability of MultexNET will depend upon, among other factors, our ability to expand our direct and indirect sales and marketing channels, 39 to attract and retain high- quality information providers and to deliver our services across multiple delivery platforms. The future viability of MultexEXPRESS will depend upon, among other factors, the continued desire of investment banks, brokerage firms and other information providers to distribute proprietary investment research and corporate documents over the Internet or through private networks to their employees and customers. The future viability of Multex Research-On-Demand will depend upon, among other factors, the acceptance of the Internet as a medium for the distribution and sale of investment research, as well as on our ability to build a direct and indirect sales force to sell our services, to attract and retain high-quality information providers, and to develop and increase our base of users. The future viability of Multex Investor will depend upon, among other factors, the acceptance of the Internet as a medium for the distribution and sale of investment research to individual investors, and our ability to attract and retain advertisers and sponsors, new members and additional distribution partners. In addition, in order to download research reports and other information from Multex Investor, users are required to first download the Adobe Acrobat reader, which may be difficult for some users to accomplish. If we are unable to increase the number of users of MultexNET, MultexEXPRESS, Multex Research-On-Demand and Multex Investor, or to attract and retain information providers, our business, results of operations and financial condition would be materially and adversely affected. Multex.com is dependent on strategic distribution relationships and our business could be materially and adversely affected if we were to lose one of our strategic distributors We have distribution arrangements for our services with a number of third- party distributors, including America Online, Inc., Bloomberg L.P., Dow Jones & Co. Inc., Bridge Information Systems, Inc., FactSet Research Systems and Reuters Limited, all of which are currently generating revenues for us, and with Bridge Information Systems, Inc., which is not currently generating revenues for us. We are dependent on our strategic relationships for the marketing and distribution of investment research reports and other information. Our future results of operations will be affected by the extent to which customers of these third-party distributors choose to subscribe to our various services. We cannot assure you that the customers of these third-party distributors will continue to subscribe to our services or that these third-party distributors will continue to actively market our services. If we are unable to retain and increase the utilization of our services by these customers, our business, results of operations and financial condition would be materially and adversely affected. We cannot assure you that we will be successful in entering into additional strategic relationships, or that any additional relationships, if entered into, will be on terms favorable to us. Our receipt of revenues from our strategic relationships is directly affected by the levels of effort of these distributors. We cannot assure you that our strategic distributors will devote the resources necessary to successfully market our services. Each of these distributors offers services, either of their own or from our competitors, which are in one or more respects competitive with our service offerings. In addition, our strategic distributors have the right to terminate their agreements with us under various specified circumstances, in some circumstances on short notice. Furthermore, we cannot assure you that we will be able to renew these agreements when they expire on acceptable terms, if at all. If we are unable to maintain our existing strategic relationships or to enter into new strategic relationships, our business, results of operations and financial condition would be materially and adversely affected. 40 Multex.com's business would be materially and adversely affected if Multex.com is not successful in establishing brand awareness for Multex Investor The future success of Multex Investor will depend, in part, on our ability to increase its brand awareness. In order to build our brand awareness we must succeed in our marketing efforts, provide high-quality services and increase traffic to the Multex Investor Web site. We intend to increase our marketing budget substantially as part of our brand-building efforts. Our ability to increase advertising and sponsorship revenue from Multex Investor will depend in part on our ability to increase the number of users of our Web sites. If our marketing efforts are unsuccessful or if we cannot increase our brand awareness, our business, financial condition and results of operations would be materially and adversely affected. Multex.com's business could be materially and adversely affected by increased competition The market for the distribution of investment research and other information over the Internet is intensely competitive. We expect competition to continue to increase because our market poses no substantial barriers to entry. Competition also may increase as a result of industry consolidation. Increased competition could result in price reductions, reduced gross margins and loss of market share, any of which would have a material and adverse effect on our business, results of operations and financial condition. Other companies provide and distribute investment research We face direct and indirect competition for both providers of investment research and other reports, and for subscribers, with the following types of companies: . large and well-established distributors of financial information, including Thomson Financial Services, through its subsidiaries First Call and Investext, and Institutional Brokers Estimate System, a subsidiary of Primark Corp.; . companies that provide investment research, including investment banks and brokerage firms, many of whom have their own Web sites; . other providers of either free or subscription research services on the Internet; . services provided by some of our strategic distributors which are competitive in one or more respects with our service offerings; . numerous prospective competitors, including Standard & Poor's, Moody's and Zacks Investment Research, that offer investment research-based services; . various written publications, including traditional media, investment newsletters, personal financial magazines and industry research appearing in financial periodicals; and . services provided by in-house management information services personnel and independent systems integrators. Various public sources provide extensive company information for free 41 We also face competition due to the fact that extensive company-specific information, as well as general investment research relating to particular industries, may be obtained, frequently without charge, from various public sources, including: . annual reports and other filings with the Securities and Exchange Commission; . Standard & Poor's company-specific reports; and . Value Line investment research reports. These reports are all available from public libraries and from the companies about which these reports relate. We believe that our ability to compete successfully will depend upon many factors, many of which are outside of our control. These factors include our ability to sustain our relationships with leading providers of investment research, the timing and market acceptance of new services and enhancements to existing services developed by us and our competitors, ease of use, performance, price, reliability, customer service and support, and sales and marketing efforts. Our competitors vary in size and in the scope and breadth of services offered. Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. This may enable them to respond more quickly to new or emerging technologies and changes in investor requirements, or to devote greater resources to the development, promotion and sale of their services than we can. Our competitors may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to potential employees, subscribers, strategic partners and information providers. Our competitors may develop services that are equal or superior to the services offered by us or that achieve greater market acceptance than our services do. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to improve their ability to address the needs of our existing and prospective customers. As a result, it is possible that new competitors may emerge and rapidly acquire significant market share. Increased competition is likely to result in price reductions, reduced gross margins and loss of market share, which could materially and adversely affect our business, results of operations and financial condition. Multex.com has a high level of customer concentration and our business could be materially and adversely affected if we were to lose a major subscriber or distributor Historically, a few of our subscribers and distributors have accounted for a substantial majority of our revenues. Specifically, 10.2% of our revenues in the year ended December 31, 1999 were generated from Merrill Lynch & Co. The loss of any major subscriber or distributor, or any reduction or delay in subscriptions by any subscriber or distributor, or our failure to successfully market our services to new subscribers or distributors could have a material and adverse effect on our business, results of operations and financial condition. 42 Multex.com's business could be materially and adversely affected by a downturn in the financial services industry We are dependent upon the continued demand for the distribution of investment research and other information over the Internet, making our business susceptible to a downturn in the financial services industry. For example, a decrease in the number of analysts that prepare investment research reports or in the capital dedicated to the dissemination of this research could result in a decrease in the number of research reports and other financial information available for distribution and a concomitant decrease in demand by our subscribers for these reports and other information. In addition, U.S. financial institutions are continuing to consolidate, increasing the leverage of our information providers to negotiate price and decreasing the overall potential market for some of our services. These factors, as well as other changes occurring in the financial services industry, could have a material and adverse effect on our business, results of operations and financial condition. Rapid growth in Multex.com's future operations could strain our managerial, operational and financial resources We have experienced rapid growth in our operations. At December 31, 1999, we had a total of 336 employees, as compared to 246 employees at December 31, 1998. We expect that the number of our employees will continue to increase for the foreseeable future. This rapid growth has placed, and our anticipated future growth will continue to place, a significant strain on our managerial, operational and financial resources. As a result, we will need to continue to improve our operational and financial systems and managerial controls and procedures. In addition, our future success will also depend on our ability to expand, train and manage our workforce, in particular our sales and marketing organization, both domestically and internationally. We will also have to maintain close coordination among our technical, accounting, finance, marketing, sales and editorial personnel. If we are unable to accomplish any of these objectives, our business, results of operations and financial condition could be materially and adversely affected. The loss of any of Multex.com's key personnel could have a material and adverse effect Our future success will depend, in substantial part, on the continued service of our senior management, including Mr. Isaak Karaev, our Chairman and Chief Executive Officer, and key technical and sales personnel, none of whom has entered into an employment agreement with us other than a non-competition/non- disclosure agreement. We maintain a key person life insurance policy in the amount of $2.0 million on the life of Mr. Karaev. The loss of the services of one or more of our key personnel could have a material and adverse effect on our business, results of operations and financial condition. Our future success will also depend on our continuing ability to attract, retain and motivate highly qualified technical, sales and marketing, customer support, financial and accounting, and managerial personnel. Competition for this personnel, in particular information technology professionals, is intense, and we cannot assure you that we will be able to retain our key personnel or that we will be able to attract, assimilate or retain other highly qualified personnel in the future. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. 43 Multex.com's international operations are new and may not be successful. We have only limited business experience outside of the United States We have only recently commenced operations in a number of international markets and a key component of our strategy is to continue to expand our international operations. To date, we have only limited experience in developing and obtaining research and other financial information relating to companies whose securities are traded on foreign markets and in marketing, selling and distributing our services internationally. We cannot assure you that we will be able to successfully market, sell and deliver our services in these markets. In some markets, including Hong Kong, we intend to rely on the sales and marketing efforts of independent representatives. The failure of our independent representatives to successfully solicit information providers or market our services in these markets could have a material and adverse effect on our business, results of operations and financial condition. Doing business internationally subjects us to additional regulatory requirements, tax liabilities and other risks There are risks inherent in doing business in international markets, including unexpected changes in regulatory requirements, potentially adverse tax consequences, export restrictions and controls, tariffs and other trade barriers, difficulties in staffing and managing foreign operations, political instability, fluctuations in currency exchange rates, and seasonal reductions in business activity during the summer months in Europe and various other parts of the world, any of which could have a material and adverse effect on the success of our international operations and, consequently, on our business, results of operations and financial condition. Furthermore, we cannot assure you that governmental regulatory agencies in one or more foreign countries will not determine that the services provided by us constitute the provision of investment advice, which could result in our having to register in these countries as an investment advisor or in our having to cease selling our services in these countries, either of which could have a material and adverse effect on our business, results of operations and financial condition. If Multex.com cannot keep pace with the evolving standards of the industry and demands of customers, we may be unable to enhance our existing services or introduce new services The market in which we operate is characterized by rapidly changing technology, evolving industry standards, frequent new service announcements, introductions and enhancements, and evolving customer demands. These market characteristics are exacerbated by the emerging nature of the Internet and the electronic distribution of investment research. Accordingly, our future success will depend on our ability to adapt to rapidly changing technologies and industry standards, and our ability to continually improve the performance, features and reliability of our services in response to both evolving customer demands and competitive service offerings. Our inability to successfully adapt to these changes in a timely manner could have a material and adverse effect on our business, results of operations and financial condition. Furthermore, we cannot assure you that we will not experience difficulties that could delay or prevent the successful design, development, testing, introduction or marketing of new services, or that any enhancements to existing services will adequately meet the requirements of our current and prospective customers and achieve any degree of significant market acceptance. If we are unable, for technological or other reasons, to develop and introduce 44 new services or enhancements to existing services in a timely manner or in response to changing market conditions or customer requirements, or if our services or enhancements contain defects or do not achieve a significant degree of market acceptance, our business, results of operations and financial condition would be materially and adversely affected. Because Multex.com's business is dependent upon network and computer systems located in one area, we are particularly susceptible to problems caused by natural disasters, power failures, system failures, security breaches or other damage to our system Our electronic distribution of investment research utilizes proprietary technology which resides principally in New York City. The continued and uninterrupted performance of our network and computer systems is critical to our success. Any disaster, power outage or system failure that causes interruptions in our ability to provide our services to our customers, including failures that affect our ability to collect research from our information providers or provide electronic investment research to our users, could reduce customer satisfaction and, if sustained or repeated, would reduce the attractiveness of our services. An increase in the volume of research reports handled by our systems, or in the rate of requests for this research, could strain the capacity of our software or hardware, which could lead to slower response times or system failures. Furthermore, we face the risk of a security breach of our systems that could disrupt the distribution of research and other reports and information. Our business, results of operations and financial condition could be materially and adversely affected if any of these problems occur. Our operations are dependent on our ability to protect our network and computer systems against damage from computer viruses, fire, power loss, data communications failures, vandalism and other malicious acts, and similar unexpected adverse events. In addition, a failure of our communications providers to provide the data communications capacity in the time frame required by us for any reason could cause interruptions in the delivery of our services. Despite precautions we have taken, unanticipated problems affecting our systems have from time to time in the past caused, and in the future could cause, delays and interruptions in the delivery of our services. Although we carry general liability insurance, our insurance may not cover any claims by dissatisfied providers or subscribers or may not be adequate to indemnify us for any liability that may be imposed in the event that a claim were brought against us. Our business, results of operations and financial condition could be materially and adversely affected by any system failure, security breach or other damage that interrupts or delays our operations. If Multex.com fails to adequately protect its intellectual property rights or faces a claim of intellectual property infringement by a third-party, it could lose its intellectual property rights or be liable for significant damages Our future success will depend, in substantial part, on our intellectual property rights. We seek to protect our intellectual property rights, but these actions may be inadequate to protect the rights covered by our patents, patent applications, trademarks or other proprietary rights or to prevent others from claiming violations of their proprietary rights. Our intellectual proprietary rights may not be viable or of value in the future since the validity, enforceability and scope of protection of proprietary rights in Internet- related industries is uncertain and still evolving. 45 Furthermore, we cannot assure you that third parties will not claim that we have infringed their patents or other proprietary rights. From time to time we have been, and we expect to continue to be, subject to claims by third parties in the ordinary course of our business, including claims of alleged infringement of the trademarks and other proprietary rights of third parties. Although there has not been any litigation relating to these claims to date, these claims and any resultant litigation, should they occur, could subject us to significant liability for damages and could result in the invalidation of our proprietary rights. In addition, even if we prevail, this litigation could be time- consuming and expensive to defend, and could result in the diversion of our time and attention, any of which could materially and adversely affect our business, results of operations and financial condition. Any claims or litigation from third parties may also result in limitations on our ability to use the trademarks and other intellectual property subject to these claims or litigation unless we enter into agreements with the third parties responsible for these claims or litigation which may be unavailable on commercially reasonable terms. Generally, we enter into confidentiality agreements with our employees, consultants and strategic partners, and generally control access to and distribution of our proprietary information. Despite our efforts to protect our proprietary information from unauthorized use or disclosure, parties may attempt to disclose, obtain or use our proprietary information which, if successful, could have a material and adverse effect on our business, results of operation and financial condition. The steps we have taken may not prevent misappropriation of our proprietary information. The market price of our shares may experience extreme price and volume fluctuations The stock market has, from time to time, experienced extreme price and volume fluctuations. The market prices of the securities of Internet-related companies have been especially volatile, including fluctuations that are often unrelated to the operating performance of the affected companies. Broad market fluctuations of this type may adversely affect the market price of our common stock. The market price of our common stock could be subject to significant fluctuations due to a variety of factors, including: . public announcements concerning us or our competitors, or the Internet industry; . fluctuations in operating results; . a downturn in the financial services industry generally or the market for securities trading in particular; . introductions of new products or services by us or our competitors; . changes in analysts' earnings estimates; and . announcements of technological innovations. In the past, companies that have experienced volatility in the market price of their stock have been the object of securities class action litigation. If we were the object of securities class action litigation, it could result in substantial costs and a diversion of our management's attention 46 and resources and have a material adverse effect on our business, results of operation and financial condition. Our executive officers, directors and 5% or greater stockholders significantly influence all matters requiring a stockholder vote Our executive officers, directors and existing stockholders who each own greater than 5% of the outstanding common stock and their affiliates, in the aggregate, beneficially own approximately 26.2% of our outstanding common stock. As a result, our executive officers, directors and 5% or greater stockholders will be able to significantly influence the outcome of all matters requiring approval by our stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control. A third party could be prevented from acquiring your shares of stock at a premium to the market price because of our anti-takeover provisions Various provisions of our certificate of incorporation, bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so might be beneficial to you and our other stockholders. The future sale of shares of our common stock may negatively affect our stock price If our stockholders sell substantial amounts of our common stock, including shares issuable upon the exercise of outstanding options and a warrant in the public market, the market price of our common stock could fall. These sales also might make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. Persons who may be deemed to be affiliates of Multex.com include individuals or entities that control, are controlled by, or are under common control of Multex.com and may include some of the officers, directors, or principal shareholders of Multex.com. Affiliates may not sell their shares of Multex.com common stock except pursuant to: . an effective registration statement under the Securities Act covering the resale of those shares; . an exemption under Rule 144 under the Securities Act; or . another applicable exemption under the Securities Act. 47 Risks Related to the Internet Industry If Internet usage does not continue to grow, the our business may not be successful The Internet is relatively new and is rapidly evolving. The Multex.com's business would be materially and adversely affected if Internet usage does not continue to grow. Internet usage may be inhibited for a number of reasons, including: . the Internet infrastructure may not be able to support the demands placed on it or its performance and reliability may decline as usage grows; . security and authentication concerns with respect to transmission over the Internet of confidential information, including credit card numbers, and attempts by unauthorized computer users to penetrate our network security; and . privacy concerns, including those related to the placement by Web sites of information on a user's hard drive without the user's knowledge or consent in order to gather user information. Our markets are characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions, and changing customer demands. To be successful, we must adapt to our rapidly changing markets by continually enhancing our existing services and adding new services to address our customers' changing demands. We could incur substantial costs if we need to modify our services or infrastructure in order to adapt to these changes. Our business, results of operation and financial condition would be materially and adversely affected if we incurred significant costs without generating additional revenues or if we cannot rapidly adapt to these changes. If the Internet infrastructure is not adequately maintained, we may be unable to provide investment research and information services in a timely manner Our future success will depend, in substantial part, upon the maintenance of the Internet infrastructure, including a reliable network backbone with the necessary speed, data capacity and security, and the timely development of enabling products, including high-speed modems, for providing reliability and timely Internet access and services. To the extent that the Internet continues to experience increased numbers of users, frequency of use or increased bandwidth requirements of users, we cannot assure you that the Internet infrastructure will continue to be able to support the demands placed on it or that the performance or reliability of the Internet will not be adversely affected. Furthermore, the Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure or otherwise, and these outages or delays could adversely affect the Web sites of our contributors, subscribers or distributors. In addition, the Internet could lose its viability as a form of media due to delays in the development or adoption of new standards and protocols that can handle increased levels of activity. We cannot assure you that the infrastructure and complementary products and services necessary to maintain the Internet as a viable commercial medium will be developed or maintained. Moreover, critical issues concerning the commercial use of the Internet, including security, cost, ease of use and access, intellectual property ownership and other legal liability issues, remain 48 unresolved and could materially and adversely affect both the growth of Internet usage generally and our business, results of operations and financial condition in particular. We may be subject to legal claims in connection with the content we publish and distribute on the Internet As a publisher and distributor of online content, we face potential direct and indirect liability for claims of defamation, negligence, copyright, patent or trademark infringement, violation of the securities laws and other claims based upon the reports and data that we publish. For example, by distributing a negative investment research report, we may find ourselves subject to defamation claims, regardless of the merits of these claims. Computer failures may also result in incorrect data being published and distributed widely. In these and other instances, we may be required to engage in protracted and expensive litigation, which could have the effect of diverting management's attention and require us to expend significant financial resources. Our general liability insurance may not necessarily cover any of these claims or may not be adequate to protect us against all liability that may be imposed. Any claims or resulting litigation could have a material and adverse effect on our business, results of operations and financial condition. We may become subject to burdensome government regulation and legal uncertainties The laws governing the Internet remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws, including those governing intellectual property, privacy, libel and taxation, apply to the Internet generally and the electronic distribution of investment research in particular. Legislation could dampen the growth in the use of the Internet generally and decrease the acceptance of the Internet as a communications and commercial medium, which could have a material and adverse effect on our business, results of operations and financial condition. In addition, because the growing popularity and use of the Internet has burdened the existing telecommunications infrastructure and many areas with high Internet usage have begun to experience interruptions in phone service, some local telephone carriers have petitioned governmental agencies to regulate Internet service providers and online service providers in a manner similar to long distance telephone carriers and to impose access fees on Internet service providers and online service providers. If any of these petitions or the relief that they seek is granted, the costs of communicating on the Internet could increase substantially, potentially adversely affecting the growth in the use of the Internet. Further, due to the global nature of the Internet, it is possible that, although transmissions relating to our services originate in the State of New York, governments of other states, the United States or foreign countries might attempt to regulate our services or levy sales or other taxes on our activities. We cannot assure you that violations of local or other laws will not be alleged or charged by local, state, federal or foreign governments, that we might not unintentionally violate these laws or that these laws will not be modified, or new laws enacted, in the future. Any of these developments could have a material and adverse effect on our business, results of operations and financial condition. 49 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (a)(1) Consolidated Financial Statements The response to this item is incorporated by reference to pages F-1 to F-20 herein. (a)(2) Supplementary Data Not Applicable. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Executive Officers and Directors. Executive officers and directors of Multex.com, and their ages as of March 6, 2000, are as follows:
Age Position Executive Officers: Isaak Karaev(1) 53 Chairman and Chief Executive Officer James M. Tousignant 39 President and Director John J. McGovern 44 Chief Financial Officer Gregg B. Amonette 47 Senior Vice President, Global Sales Ron Waksman 35 Senior Vice President, Business-to-Business Services Homi M. Byramji 47 Senior Vice President and Director John J. Mahoney 40 Senior Vice President, Product Management Mikhail Akselrod 44 Senior Vice President, Technology Directors: George F. Rick Adam, Jr.(2) 53 Director I. Robert Greene(1)(2) 39 Director Lennert J. Leader(3) 45 Director John Tugwell(1)(2)(3) 59 Director Devin N. Wenig(3) 33 Director
_______________ (1) Member of the Executive Committee. (2) Member of the Compensation Committee. (3) Member of the Audit Committee. Isaak Karaev co-founded Multex.com in April 1993 and has served as Chief Executive Officer and a director of Multex.com since that time. In addition, Mr. Karaev served as 50 Chairman of the board of directors from Multex.com's inception to October 1996 and has served as Chairman of the board of directors since April 1998. Before founding Multex.com, Mr. Karaev was the Senior Vice President for Advanced Systems Development in the Brokerage Services Information Group of ADP, a provider of front-office market data services and back-office processing to the financial services industry, from 1989 to April 1993. James M. Tousignant co-founded Multex.com in April 1993 and has served as Multex.com's President and a Director since June 1999. Mr. Tousignant served as Multex.com's Executive Vice President from December 1998 to June 1999 and as Multex.com's Senior Vice President from April 1993 to December 1998. Before founding Multex.com, Mr. Tousignant was Senior Director of Sales in the Brokerage Services Information Group of ADP from 1989 to April 1993. John J. McGovern has served as Multex.com's Chief Financial Officer since November 1999. Prior to joining Multex.com, Mr. McGovern has served in senior financial and executive positions for over twenty years, including most recently as President and Chief Executive Officer of Northsound Music Group for two years. Before that he was Managing Director of JJM Group LLC from January 1996 to July 1997 and Chief Executive Officer of Axel Electronics/Sigma Power from 1990 to 1995. He also served more than ten years at Merrill Lynch & Co. and was a Senior Vice President of Merrill Lynch Interfunding and Director of ML Capital Markets. Gregg B. Amonette has served as Multex.com's Senior Vice President, Global Sales since June 1999, as Senior Vice President Sales and Marketing between December 1998 and June 1999, and as Multex.com's Vice President, Sales and Marketing from August 1996 to December 1998. From January 1995 to July 1996, Mr. Amonette was Vice President and General Manager of Micrognosis, Inc., a division of CSK Software, Inc. and a provider of bank and brokerage trading-room software and technology. From 1984 to December 1994, Mr. Amonette served in various capacities in the Brokerage Services Information Group of ADP, including most recently as Vice President of Retail Sales. Ron Waksman has served as Multex.com's Senior Vice President, Business-to- Business Services since August 1999. Mr. Waksman is responsible for managing Multex.com's institutional product line. He founded the Multex Research-On- Demand product. Before joining the Multex.com team in 1995, he worked for ten years at Goldman, Sachs & Co. Homi M. Byramji has served as a Senior Vice President and Director of Multex.com and President of Market Guide since September 1999. Prior to joining Multex.com, Mr. Byramji had been the President and CEO of Market Guide since 1992. John J. Mahoney has served as Multex.com's Senior Vice President, Product Management since December 1998, and also served as Multex.com's Vice President, Product Development from August 1994 to December 1998. Prior to joining Multex.com, Mr. Mahoney was Vice President of Workstation Products in the Brokerage Services Information Group of ADP from 1987 to March 1993. Mikhail Akselrod has served as Multex.com's Senior Vice President, Technology since August 1999. He also served as Multex.com's Vice President, Operations from April 1997 to August 1999. Mr. Akselrod joined Multex.com in April 1993. 51 George F. Rick Adam, Jr. has served as a director of Multex.com since July 1999. Mr. Adam is the founder, Chairman and Chief Executive Officer of New Era of Networks Inc., a provider of enterprise application integrating software solutions. From 1987 to 1993, Mr. Adam was a general partner of Goldman Sachs & Co. where he was responsible for information technology, back office operations and general services. Prior to joining Goldman Sachs, Mr. Adam served as the Chief Information Officer and Vice President of Personnel at Baxter Healthcare Corp. from 1980 to 1987. I. Robert Greene has served as a director of Multex.com since July 1996. He is currently a Managing Partner at Flatiron Partners. From January 1999 through June 1999, Mr. Greene was a General Partner of Chase Capital Partners, a global private equity organization. From August 1994 to December 1998, he was a Principal with Chase Capital Partners. From 1988 to July 1994, Mr. Greene was an Associate, a Director and a Principal of Prudential Equity Investors. Chase Capital Partners is a significant stockholder of Multex.com. Lennert J. Leader has served as a director of Multex.com since December 1998. Mr. Leader is President of America Online, Inc. Investments. Mr. Leader served as Senior Vice President, Chief Financial Officer and Treasurer of America Online, Inc. from September 1989 until July 1998 and was Chief Accounting Officer from October 1993 until July 1998. Prior to joining America Online, Mr. Leader was Vice President, Finance, of LEGENT Corporation, a computer software and services company, from March 1989 to September 1989. He also served as Chief Financial Officer of Morino, Inc., a computer software and services company, from 1986 to March 1989 and as its Director of Finance from 1984 to 1986. Prior to joining Morino, Inc. in 1984, he was an audit manager at Price Waterhouse. America Online, Inc., which is an affiliate of America Online, Inc. Investments, is a significant stockholder of Multex.com. John Tugwell has served as a director of Multex.com since July 1999. Since October 1997, Mr. Tugwell has provided consulting services on strategic and financial issues to family-owned and middle market companies in the metropolitan New York region. From April 1996 to April 1997, Mr. Tugwell served as President and Chief Executive Officer of Fleet Bank N.A. after its acquisition of NatWest Bancorp Inc. in 1996. Prior to this acquisition, Mr. Tugwell served as President and Chief Executive Officer of NatWest Bancorp, a 400-branch financial services company. Devin N. Wenig replaced Herbert L. Skeete as a director of Multex.com in February 2000. Mr. Wenig is Managing Director, Global Marketing at Reuters Information, which is an affiliate of Reuters Limited and Reuters America, Inc., which is a significant stockholder of Multex.com. Reuters Limited and Multex.com are joint venturers in Multex Investor Europe. Mr. Wenig has also served from 1994 through the present in various management positions at Reuters America, including most recently as Executive Vice President, Marketing. Prior to joining Reuters, Mr. Wenig practiced law at the New York firm of Cravath, Swaine & Moore from 1991 to 1994. Composition of the Board of Directors Our board of directors is divided into three classes, each of whose members will serve for a staggered three-year term. Upon the expiration of the term of a class of directors, directors in 52 that class will be elected for three-year terms at the annual meeting of stockholders in the year in which their term expires. Our board of directors has resolved that Messrs. Adam, Greene and Tousignant will be Class I Directors whose terms expire at the 2000 annual meeting of stockholders. Messrs. Leader and Wenig will be Class II Directors whose terms expire at the 2001 annual meeting of stockholders. Messrs. Byramji Karaev and Tugwell will be Class III Directors whose terms expire at the 2002 annual meeting of stockholders. With respect to each class, a director's term will be subject to the election and qualification of their successors, or their earlier death, resignation or removal. Mr. Wenig was appointed by the board of directors to fill a vacancy caused by the resignation of Herbert Skeete in February 2000. Mr. Skeete was appointed by the board of directors to replace Davis Gaynes in March 1999, when Mr. Gaynes resigned from the board of directors. Board Committees The audit committee of the board of directors reviews, acts on and reports to the board of directors with respect to various auditing and accounting matters, including the selection of our independent auditors, the scope of the annual audits, fees to be paid to the auditors, the performance of our independent auditors and our accounting practices. The members of the audit committee are Messrs. Leader, Tugwell and Wenig. The compensation committee of the board of directors determines the salaries and incentive compensation of our officers and provides recommendations for the salaries and incentive compensation of our other employees. The compensation committee also administers our various incentive compensation, stock and benefit plans. The members of the compensation committee are Messrs. Adam, Greene and Tugwell. The executive committee of the board of directors meets periodically with management to advise upon and approve the details of the execution of strategy decided at board meetings, and to consider strategic developments that may arise between the regularly scheduled board meetings. The members of the executive committee are Messrs. Greene, Karaev and Tugwell. Director Compensation We do not currently compensate directors for attending meetings of the board of directors or committee meetings of the board of directors, but we do reimburse directors for their reasonable travel expenses incurred in connection with attending these meetings. Under the Automatic Option Grant Program of the 1999 Stock Option Plan, which is described below under "Executive Compensation--1999 Stock Option Plan", and subject to the last sentence of this paragraph, each individual who served as a non-employee member of the board of directors on the date the underwriting agreement entered into in connection with our initial public offering was executed and who was not previously in our employ received at that time an option to purchase 12,000 shares of common stock with an exercise price equal to $14.00 per share. Each individual who first joins the board of 53 directors after the completion of our initial public offering as a non-employee member of the board of directors will also receive an option grant for 12,000 shares of common stock at the time of his or her commencement of service on the board of directors, provided such individual has not otherwise been in our prior employ. In addition, at each annual meeting of stockholders, beginning with the 2000 annual meeting, each individual who is to continue to serve as a non-employee member of the board of directors will receive an option to purchase 3,750 shares of common stock, whether or not such individual has been in our prior employ. However, any non- employee member of the board of directors who, directly or indirectly, is a 5% or greater stockholder or is affiliated with or a representative of a 5% or greater stockholder, will not be eligible to receive any options under the Automatic Option Grant Program. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth all compensation earned during the fiscal year ended December 31, 1999 by our Chief Executive Officer and our other four most highly compensated executive officers of whose salaries and bonuses exceeded $100,000 in 1999.
Summary Compensation Table Long-Term Compensation Annual Compensation (1) Awards ----------------------- ------ Securities Underlying Name and Principal Position Salary Bonus Options --------------------------- ------ ----- ------- Isaak Karaev Chief Executive Officer..................................... $200,000 $250,000 0 James M. Tousignant President................................................... 174,615 300,000 300,000 Homi M. Byramji (2) Senior Vice President ...................................... 200,360 0 150,000 Gregg B. Amonette Senior Vice President, Global Sales and Marketing........... 163,462 228,000 100,000 John J. Mahoney Senior Vice President, Product Management................... 153,077 100,000 100,000
(1) The column for "Other Annual Compensation" has been omitted because there is no compensation required to be reported in that column. The aggregate amount of perquisites and other personal benefits provided to each executive officer above is less than 10% of the total annual salary and bonus of that officer. (2) Mr. Byramji joined Multex.com following the acquisition of Market Guide on September 23, 1999 and became Senior Vice President and Director. Option Grants in Last Fiscal Year The following table sets forth information regarding options granted to our executive officers during the fiscal year ended December 31, 1999. We have never granted any stock appreciation rights.
Individual Grants (1) --------------------- Percent of Number of Total Potential Realizable Securities Options Value at Assumed Annual Underlying Granted to Exercise Rates of Stock Price Options Employees In Price Per Expiration Appreciation for Option Name Granted 1999 (2) Share ($) Date Term (3) - ---- ------- -------- --------- ---- -------------------
54
5% 10% ----- ----- Isaak Karaev.................. 0 0.0% N/A N/A $ -- $ -- James M. Tousignant.......... 300,000 10.0 15.06 8/10/09 2,841,343 7,200,528 John J. McGovern (4).......... 50,000 1.7 21.75 11/15/09 683,923 1,733,195 150,000 5.0 21.75 11/15/09 1,367,846 3,466,390 Philip Callaghan (5).......... 0 0.0 N/A N/A -- -- Gregg B. Amonette (6)........ 100,000 3.3 15.06 8/10/09 947,115 2,400,176 John J. Mahoney (6).......... 100,000 3.3 15.06 8/10/09 947,115 2,400,176 Homi M. Byramji (7).......... 50,000 1.7 13.20 3/30/09 415,070 1,051,870 100,000 3.3 14.31 10/13/09 899,948 2,280,643 Ron Waksman.................. 7,500 0.3 8.00 1/15/09 37,734 95,625 30,000 1.0 14.31 10/13/09 269,984 684,194 Mikhail Akselrod............. 30,000 1.0 30.00 12/21/09 566,005 1,434,368
(1) Each option represents the right to purchase one share of common stock. The options shown in this column were all granted pursuant to our 1999 Stock Incentive Plan. The options shown in this table, except as otherwise indicated below, become exercisable at a rate of 25% annually over four years from the date of grant. (2) In the year ended December 31, 1999, we granted options to employees to purchase an aggregate of 3,002,450 shares of common stock. (3) Amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. The 5% and 10% assumed annual rates of compounded stock price appreciation are mandated by the rules of the Securities and Exchange Commission and do not represent an estimate or projection of our future common stock prices. These amounts represent certain assumed rates of appreciation in the value of our common stock from the fair market value on the date of grant. Actual gains, if any, on stock option exercises are dependent on the future performance of the common stock and overall stock market conditions. The amounts reflected in the table may not necessarily be achieved. (4) John J. McGovern joined Multex.com and assumed the position of Chief Financial Officer on November 16, 1999. Options to acquire 50,000 shares of common stock vest after two consecutive reporting periods in which Multex.com exceeds internal financial projections. (5) Mr. Callaghan resigned on August 16, 1999. (6) These options vest on the date which is six years following the date of their grant, but may vest earlier if we achieve certain milestones. Specifically, the options will vest earlier with respect to 50% of the shares when total gross revenues in any 12-month period exceed $50.0 million and, the other 50% of the shares when we achieve positive earnings before interest, taxes, depreciation and amortization. (7) Mr. Byramji joined Multex.com following the acquisition of Market Guide on September 23, 1999 and became Senior Vice President and Director. The 50,000 options granted to Mr. Byramji on 3/30/99 vested upon execution of the Market Guide merger agreement on June 23, 1999. Aggregated Option Exercises In The Year Ended December 31, 1999 And Fiscal Year- End Option Values The following table sets forth information concerning options to purchase common stock exercised by our executive officers during the year ended December 31, 1999 and the number and value of unexercised options held by each of the executive officers at December 31, 1999. 55
Shares Number of Securities Value of Unexercised Acquired on Value Underlying Unexercised In-The-Money Options at Name Exercise Realized Options at December 31, 1999 December 31, 1999 (1) - ---- -------- -------- ---------------------------- --------------------- Exercisable Unexercisable Exercisable Unexercisable ----------- ------------- ----------- ------------- Isaak Karaev......... 0 0 500,000 125,000 $17,981,250 $4,078,125 James M. Tousignant. 12,500 109,250 48,125 363,125 1,587,266 8,851,642 John J. McGovern (2). 0 0 0 200,000 0 3,175,000 Philip Callaghan (3). 23,125 651,563 -- -- -- -- Greg B. Amonette..... 10,625 141,445 43,750 175,625 1,511,719 4,859,455 John J. Mahoney..... 43,750 340,125 4,375 131,875 131,797 3,347,735 Homi M. Byramji (4).. 0 0 112,500 100,000 3,260,876 2,331,250 Ron Waksman.......... 10,625 282,475 21,875 66,250 795,297 1,938,470 Mikhail Akselrod..... 10,625 95,625 25,000 71,875 892,062 1,666,172
(1) The last reported sale price of Multex.com's common stock on the NASDAQ on December 31, 1999 was at $37.625. (2) Mr. McGovern joined Multex.com and assumed the position of Chief Financial Officer on November 16, 1999. (3) Mr. Callaghan resigned on August 16, 1999. (4) Mr. Byramji joined Multex.com following the acquisition of Market Guide on September 23, 1999 and became Senior Vice President and Director. Employment and Non-Competition Agreements None of our executive officers has an employment agreement, although all of our executive officers have entered into agreements that contain non- competition, non-disclosure and non-solicitation restrictions and covenants, including a provision prohibiting these officers from competing with Multex.com during their employment with us and for a period of nine months after termination of their employment with us. 1999 Stock Option Plan Multex.com's 1999 Stock Option Plan is the successor equity incentive program to Multex.com's existing 1993 Stock Incentive Plan and became effective in January 1999. We have reserved for issuance 6,521,000 shares of common stock under the 1999 Stock Option Plan. The share reserve is comprised of the shares issuable upon exercise of outstanding stock options granted under the 1993 Stock Incentive Plan, the remaining share reserve available for option grants under that plan, an additional 2,500,000 share reserve which was approved by our stockholders on September 22, 1999 and outstanding stock options granted under Market Guide stock plans assumed by Multex.com. In addition, the share reserve will automatically be increased on the first trading day of January each calendar year, beginning in January 2000, by a number of shares equal to three percent (3%) of the total number of shares of common stock outstanding on the last trading day of the immediately preceding calendar year, but no such annual increase shall exceed 750,000 shares. However, in no event may any one participant in the 1999 Stock Option Plan receive option grants or direct stock issuances for more than 375,000 shares in the aggregate per calendar year. Outstanding options under the 1993 Stock Incentive Plan were incorporated into the 1999 Stock Option Plan at the time of our initial public offering, and no further option grants will be made under the 1993 Stock Incentive Plan thereafter. The incorporated options will continue to be governed by their existing terms, unless the Plan Administrator elects to extend one or more features of the 1999 Stock Option Plan to those options. However, except as otherwise noted below, the outstanding options under the 1993 Stock Incentive Plan contain substantially the same terms and conditions summarized below for the Discretionary Option Grant Program in effect under the 1999 Stock Option Plan. The 1999 Stock Option Plan is divided into four separate components: 56 . the Discretionary Option Grant Program under which eligible individuals, including officers, non-employee members of the board of directors and consultants, may, at the discretion of the Plan Administrator, be granted options to purchase shares of common stock at an exercise price determined by the Plan Administrator; . the Stock Issuance Program under which eligible individuals may, in the Plan Administrator's discretion, be issued shares of common stock directly, through the purchase of shares at a price determined by the Plan Administrator or as a bonus tied to the performance of services; . the Salary Investment Option Grant Program under which executive officers and other highly compensated employees may elect to apply a portion of their base salary to the acquisition of special below-market stock option grants; and . the Automatic Option Grant Program under which option grants will automatically be made at periodic intervals to eligible non-employee board members to purchase shares of common stock at an exercise price equal to 100% of the fair market value of those shares on the grant date. The Discretionary Option Grant Program and the Stock Issuance Program are administered by the compensation committee of the board of directors. The compensation committee, as Plan Administrator, has complete discretion to determine which eligible individuals are to receive option grants or stock issuances, the time or times when option grants or stock issuances are to be made, the number of shares subject to each grant or issuance, the status of any granted option as either an incentive stock option or a non-statutory stock option under the federal tax laws, the vesting schedule to be in effect for the option grant or stock issuance and the maximum term for which any granted option is to remain outstanding. The compensation committee also has the authority to select the executive officers and other highly compensated employees who may participate in the Salary Investment Option Grant Program in the event that program is activated for one or more calendar years, but neither the compensation committee nor the board of directors exercises any administrative discretion with respect to option grants made under the Salary Investment Option Grant Program or under the Automatic Option Grant Program for the non-employee members of the board of directors. All grants under those two latter programs are made in compliance with the express provisions of these programs. The exercise price for the shares of common stock subject to option grants made under the 1999 Stock Option Plan may be paid in cash or in shares of common stock valued at fair market value on the exercise date. The option may also be exercised through a same-day sale program without any cash outlay by the optionee. In addition, the Plan Administrator may provide financial assistance to one or more participants in the 1999 Stock Option Plan in connection with their acquisition of shares, by allowing individuals to deliver a full-recourse, interest-bearing promissory note in payment of the option exercise price and/or direct issue price, and any associated withholding taxes incurred in connection with that acquisition. In the event of an acquisition of Multex.com, whether by merger or asset sale or a sale by the stockholders of more than 50% of the total combined voting power of Multex.com 57 recommended by the board of directors, each outstanding option under the Discretionary Option Grant Program which is not to be assumed by the successor corporation or otherwise continued will automatically accelerate in full, and all unvested shares under the Discretionary Option Grant and Stock Issuance Programs will immediately vest, except to the extent our repurchase rights with respect to those shares are to be assigned to the successor corporation or otherwise continued in effect. The Plan Administrator has the authority under the Discretionary Option Grant Program to provide that the shares subject to options granted under that program will automatically vest as follows: . upon an acquisition of Multex.com, whether or not those options are assumed or continued; . upon a hostile change in control of Multex.com effected through a successful tender offer for more than 50% of the outstanding voting stock or by proxy contest for the election of members of the board of directors; or . in the event the individual's service is terminated, whether involuntarily or through a resignation for good reason, within a designated period, not to exceed eighteen (18) months, following an acquisition in which those options are assumed or otherwise continued in effect or a hostile change in control. The vesting of outstanding shares under the Stock Issuance Program may be accelerated upon similar terms and conditions. Options currently outstanding under the 1993 Stock Incentive Plan will vest in the event of an acquisition of Multex.com whether by merger or asset sale or, if any person other than Mr. Karaev becomes the owner of more than 50% of the common stock of Multex.com. Stock appreciation rights are authorized for issuance under the Discretionary Option Grant Program which provide the holders with the election to surrender their outstanding options for an appreciation distribution from us equal to the excess of the fair market value of the vested shares of common stock subject to the surrendered option over the aggregate exercise price payable for those shares. This appreciation distribution may be made in cash or in shares of common stock. There are currently no outstanding stock appreciation rights under the Predecessor Plan. The Plan Administrator has the authority to effect the cancellation of outstanding options under the Discretionary Option Grant Program, including options incorporated from the 1993 Stock Incentive Plan, in return for the grant of new options for the same or different number of option shares with an exercise price per share based upon the fair market value of the common stock on the new grant date. In the event the compensation committee elects to activate the Salary Investment Option Grant Program for one or more calendar years, each of our executive officers and other highly compensated employees selected for participation may elect, prior to the start of the calendar year, to reduce his or her base salary for that calendar year by a specified dollar amount not less than $10,000 nor more than $50,000. In return, the individual will automatically be granted, on the first trading day in the calendar year for which the salary reduction is to be in effect, a non-statutory option to purchase that number of shares of common stock determined by dividing the 58 salary reduction amount by two-thirds of the fair market value per share of common stock on the grant date. The option will be exercisable at a price per share equal to one-third of the fair market value of the option shares on the grant date. As a result, the total spread on the option shares at the time of grant will be equal to the salary reduction amount. The option will become exercisable in a series of twelve (12) equal monthly installments over the calendar year for which the salary reduction is to be in effect and will be subject to full and immediate vesting upon specified changes in the ownership or control of Multex.com. Under the Automatic Option Grant Program, and subject to the last sentence of this paragraph, each individual who served as a non-employee member of the board of directors on the date the underwriting agreement entered into in connection with our initial public offering was executed and who was not previously in our employ received at that time an option grant for 12,000 shares of common stock with an exercise price equal to $14.00 per share. Each individual who first joins the board of directors after the completion of our initial public offering as a non-employee member of the board of directors will also receive an option grant for 12,000 shares of common stock at the time of his or her commencement of service on the board of directors, provided that the individual has not otherwise been in our prior employ. In addition, at each annual meeting of stockholders, beginning with the 2000 annual meeting, each individual who is to continue to serve as a non-employee member on the board of directors will receive an option grant to purchase 3,750 shares of common stock, whether or not that individual has been in our prior employ. However, any non- employee member of the board of directors who, directly or indirectly, is a 5% or greater stockholder or is affiliated with or a representative of a 5% or greater stockholder, will not be eligible to receive any option grants under the Automatic Option Grant Program. Each automatic grant will have an exercise price equal to the fair market value per share of common stock on the grant date and will have a maximum term of ten years, subject to earlier termination following the optionee's cessation of service on the board of directors. Each automatic option will be immediately exercisable; however, any shares purchased upon exercise of the option will be subject to repurchase, at the option exercise price paid per share, should the optionee's service as a non-employee member of the board of directors cease prior to vesting in the shares. The 12,000-share grant will vest in four equal and successive annual installments over the optionee's period of service on the board of directors. Each additional 3,750-share grant will vest upon the optionee's completion of one year of service on the board of directors measured from the grant date. However, each outstanding option will immediately vest upon specified changes in the ownership or control of Multex.com or, the death or disability of the optionee while serving as a member of the board of directors. Limited stock appreciation rights will automatically be included as part of each grant made under the Automatic Option Grant and Salary Investment Option Grant Programs and may be granted to one or more of our officers as part of their option grants under the Discretionary Option Grant Program. Options with this limited stock appreciation right may be surrendered to us upon the successful completion of a hostile tender offer for more than 50% of our outstanding voting stock. In return for the surrendered option, the optionee will be entitled to a cash distribution from us in an amount per surrendered option share equal to the excess of the highest price per share of common stock paid in connection with the tender offer over the exercise price payable for that share. 59 Our board of directors may amend or modify the 1999 Stock Option Plan at any time, subject to any required stockholder approval. The 1999 Stock Option Plan will terminate on the earliest of ten years after the date that the board of directors adopts the 1999 Stock Option Plan, the date on which all shares available for issuance under the 1999 Stock Option Plan have been issued as fully-vested shares, or the termination of all outstanding options in connection with specified changes in control or ownership of Multex.com. 1999 Employee Stock Purchase Plan Multex.com has reserved for issuance 750,000 shares of common stock under Multex.com's 1999 Employee Stock Purchase Plan, which became effective in January 1999. The Employee Stock Purchase Plan is designed to allow eligible employees of Multex.com and participating subsidiaries to purchase shares of common stock, at semi-annual intervals, through their periodic payroll deductions under the Employee Stock Purchase Plan. The Employee Stock Purchase Plan will be implemented in a series of successive offering periods, each with a maximum duration of 24 months. However, the initial offering period began on the date of our initial public offering and will end on or about the last business day in April 2001. The next offering period will commence on the first business day in May 2001, and subsequent offering periods will commence as designated by the Plan Administrator. Individuals who are eligible employees on the start date of any offering period may enter the Employee Stock Purchase Plan on that start date or on any subsequent semi-annual entry date, May 1 or November 1 each year. Individuals who become eligible employees after the start date of the offering period may join the Employee Stock Purchase Plan on any subsequent semi-annual entry date within that period. Payroll deductions may not exceed 10% of the participant's total cash compensation for each semi-annual period of participation, and the accumulated payroll deductions will be applied to the purchase of shares on the participant's behalf on each semi-annual purchase date, which is the last business day in April and October each year, at a purchase price per share not less than eighty-five percent (85%) of the lower of the fair market value of the common stock on the participant's entry date into the offering period or, the fair market value on the semi-annual purchase date. In no event, however, may any participant purchase more than 1,500 shares, nor may all participants in the aggregate purchase more than 187,500 shares on any one semi-annual purchase date. Should the fair market value of the common stock on any semi-annual purchase date be less than the fair market value of the common stock on the first day of the offering period, then the current offering period will automatically end and a new offering period will begin, based on the lower fair market value. Our board of directors may amend or modify the Employee Stock Purchase Plan following any semi-annual purchase date. The Employee Stock Purchase Plan will terminate on the last business day in April 2009, unless sooner terminated by the board of directors. 60 Compensation Committee Interlocks and Insider Participation The compensation committee of the board of directors consists of Messrs. Adam, Greene and Tugwell, none of whom has been an officer or employee of Multex.com at any time since our inception. No executive officer of Multex.com serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. Prior to the formation of the compensation committee, the board of directors as a whole made decisions relating to the compensation of our executive officers. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information with respect to the beneficial ownership of the common stock as of December 31, 1999 by each stockholder whom we know to beneficially own 5% or more of the outstanding shares of common stock, each of our directors and executive officers and all of our directors and executive officers as a group. Unless otherwise indicated, the address of each beneficial owner listed below is c/o Multex.com, Inc., 100 William St., 7th Floor, New York, New York 10038. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Percentage of beneficial ownership is based on 27,179,717 shares of common stock outstanding as of December 31, 1999. In computing the number of shares of common stock subject to options held by that person that are exercisable within 60 days of December 31, 1999, these shares are deemed outstanding for the purpose of determining the percentage ownership of the optionee. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other stockholder.
Percent Beneficially Name of Beneficial Owner Number of Shares Owned - ------------------------ ---------------- ----- Executive Officers and Directors: Isaak Karaev (1)................................................................... 1,394,668 5.0% James M. Tousignant (2)............................................................ 202,875 * Philip Callaghan (3)............................................................... 0 * John J. McGovern................................................................... 0 * Gregg B. Amonette (4).............................................................. 91,313 * Ron Waksman (5).................................................................... 26,100 * Homi M. Byramji (6)................................................................ 551,864 2.0% John J. Mahoney (7)................................................................ 200,000 * Michael Akselrod (8)............................................................... 28,881 * George F. Rick Adam, Jr. (9)....................................................... 12,000 *
61
I. Robert Greene (10).............................................................. 8,662 * Lennert J. Leader (11)............................................................. 400,000 1.5% Devin N. Wenig (12)................................................................ 1,944,445 7.2% John Tugwell (13).................................................................. 12,000 * All directors and executive officers as a group (14 persons) (14).................. 4,872,808 17.5% Other 5% Stockholders: Chase Venture Capital Associates, L.P. (15)........................................ 2,464,116 9.1% Reuters America Inc. (16).......................................................... 1,944,445 7.2%
- ------------ * Less than one percent. (1) Includes 500,000 shares of common stock issuable upon the exercise of stock options which are exercisable within 60 days of December 31, 1999. (2) Includes 48,125 shares of common stock issuable upon the exercise of stock options which are exercisable within 60 days of December 31, 1999. (3) Mr. Callaghan resigned on August 16, 1999. (4) Includes 50,000 shares of common stock issuable upon exercise of stock options which are exercisable within 60 days of December 31, 1999. (5) Includes 23,750 shares of common stock issuable upon the exercise of stock options which are exercisable within 60 days of December 31, 1999. (6) Includes 112,500 shares of common stock issuable upon the exercise of stock options which are exercisable within 60 days of December 31, 1999. (7) Includes 13,750 shares of common stock issuable upon the exercise of stock options which are exercisable within 60 days of December 31, 1999. (8) Includes 25,000 shares of common stock issuable upon the exercise of stock options which are exercisable within 60 days of December 31, 1999. (9) Includes 12,000 shares of common stock issuable upon the exercise of stock options which are exercisable within 60 days of December 31, 1999. (10) Consists of 8,662 shares of common stock owned by Mr. Greene. Mr. Greene was previously a limited partner of Chase Capital Partners, the general partner of Chase Venture Capital Associates L.P. During his tenure in this capacity, Mr. Greene could have been deemed to be the beneficial owner of Chase Venture Capital Associates' shares, although he disclaimed beneficial ownership of those shares except to the extent of his pecuniary interest, if any. Does not include 72,000 shares of common stock held by Flatiron Fund 1998-1999 LLC, of which Mr. Greene is a limited partner. (11) Consists of 400,000 shares of common stock held by America Online, Inc. Mr. Leader serves as the President of an affiliate of America Online, Inc., America Online, Inc. 62 Investments. In this capacity, Mr. Leader may be deemed to be a beneficial owner of these shares, although he disclaims beneficial ownership of these shares except to the extent of his pecuniary interest, if any. (12) Consists of 1,944,445 shares of common stock held by Reuters America Inc. Mr. Wenig serves as Managing Director, Global Marketing of Reuters Information, an affiliate of Reuters America Inc. In this capacity, Mr. Wenig may be deemed to be the beneficial owner of these shares, although he disclaims beneficial ownership of these shares except to the extent of his pecuniary interest, if any. (13) Includes 12,000 shares of common stock issuable upon the exercise of stock options which are exercisable within 60 days of December 31, 1999. (14) Includes 797,125 shares of common stock issuable upon exercise of stock options which are exercisable within 60 days of December 31, 1999. See Notes 1 through 13. (15) Consists of 2,464,116 shares of common stock held by Chase Venture Capital Associates, L.P., of which Chase Capital Partners is the General Partner. Mr. Greene was previously a limited partner of Chase Capital Partners, the general partner of Chase Venture Capital Associates L.P. During his tenure in this capacity, Mr. Greene could have been deemed to be the beneficial owner of Chase Venture Capital Associates' shares, although he disclaims beneficial ownership of those shares except to the extent of his pecuniary interest, if any. The address for Chase Venture Capital Associates, L.P. is 380 Madison Avenue, 12th Floor, New York, New York 10017. (16) Consists of 1,944,445 shares of common stock held by Reuters America Inc. Mr. Wenig serves as Managing Director, Global Marketing of Reuters Information, an affiliate of Reuters America Inc. In this capacity, Mr. Wenig may be deemed to be the beneficial owner of these shares, although he disclaims beneficial ownership of these shares except to the extent of his pecuniary interest, if any. The address for Reuters America Inc. is 1700 Broadway, 40th Floor, New York, New York 10019. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Reuters Agreements Reuters Limited entered into a strategic distribution relationship with Multex.com in June 1995. An affiliate of Reuters, Reuters America Inc., is one of our significant stockholders. Under the terms of a Software and Reciprocal Data License Agreement, dated June 1, 1995, as amended on September 1, 1996, November 14, 1996 and December 18, 1997, we granted to Reuters a limited, non- exclusive license to use and distribute some of our technology for production and delivery of research reports to Reuters' customers, to market and distribute MultexNET research reports to up to 15,000 Reuters' customers, and to market Multex Research-on-Demand service to Reuters' customers. In 1998, Reuters made aggregate payments to us of approximately $1.2 million, which consisted of a $500,000 license fee and payments for consulting and maintenance services. 63 On July 15, 1998, we and Reuters entered into a revised agreement, pursuant to which we renegotiated the terms of our relationship described above. The new agreement, which took effect on January 1, 1999, is for a five-year term and is automatically renewable for one-year periods thereafter, unless terminated by either party. Under the terms of this agreement, Multex.com supplies subscribers of the Reuters 3000 product with the ability to access the Multex database via the Reuters Web, an intranet controlled by Reuters that uses Internet technology to retrieve and display data. MultexNET and Multex Research-On-Demand are available to Reuters 3000 subscribers on both a subscription and pay-per-view basis. Revenues generated from the use of Multex.com products via the Reuters Web are shared in accordance with the terms of this agreement. Specifically, Reuters is required to pay us 50% of all revenues generated from the first 20,000 Reuters' customers who subscribe to MultexNET, and 40% of all revenues generated from subscribers in excess of 20,000. In addition, Reuters is required to pay us a royalty payment of 75% of all purchases by Reuters' customers of research reports and information from Multex Research-on-Demand. Over the five year term, Reuters may terminate the agreement if certain subscriber minimums are not met. Beginning on January 1, 2000, Reuters may terminate the agreement if the number of subscribers does not exceed 1,000. Over the remaining four-year period, this minimum number of subscribers increases from 2,500 to 5,000 by December 31, 2003. We believe that the terms of the initial agreement with Reuters were no less favorable than the terms we would have otherwise negotiated with an unaffiliated third party as we entered into this agreement before Reuters America Inc. became a stockholder of Multex.com in June 1996. In addition, we believe that the terms of the revised agreement with Reuters, which became effective on January 1, 1999, are no less favorable than the terms we would have otherwise negotiated with an unaffiliated third party. In February 2000, we and Reuters entered into a joint venture agreement to operate Multex Investor Europe. Mr. Skeete, who became a director of Multex.com in March 1999 and resigned in February 2000, and Mr. Wenig, who became a director of Multex.com in February 2000, are both officers of Reuters. America Online Agreements In March 1998, Multex.com entered into an agreement, which was amended in February 1999, with America Online, Inc., one of our significant stockholders. Pursuant to the terms of the initial agreement, we secured a position as an anchor tenant for brokerage research on the America Online Personal Finance channel as well as a programming presence on other screens within the America Online service, with links from those locations back to Multex Investor. Under the revised agreement, our anchor tenancy for brokerage research on the America Online Personal Finance channel became "exclusive" so that we receive continuous and permanent placement on the channel. America Online has the right to cancel this "exclusive" tenancy if we do not remain one of the top three providers of commingled investment and brokerage research, or if it determines that our content is not commensurate with that of a top three provider. The revised agreement also provides for additional tenancies, including placements on international and other screens within the America Online service and on CompuServe's personal finance 64 channel. The initial and revised agreements expire in February 2001 and are automatically renewable unless either party gives advance notice of its intention not to renew. In consideration of the anchor tenant position, we paid America Online a carriage fee of $100,000 in 1998 and under the revised agreement, we are obliged to pay an aggregate carriage fee of $1.8 million in eight equal installments, which began in February 1999 and end in November 2000. In addition, America Online receives 10% to 25% of both advertising and merchandising revenues from advertisements and sales generated from Multex Investor, with links back to the America Online network. This revenue share is based on an advertising minimum of $30.00 for each thousand times an advertisement is delivered to a user. We believe that the terms of the agreement with America Online are no less favorable than the terms we would have otherwise negotiated with an unaffiliated third party as the parties entered into the agreement before America Online became one of our stockholders in December 1998. In addition, we believe that the terms of the revised agreement with America Online, which became effective on February 25, 1999, are no less favorable than the terms we would have otherwise negotiated with an unaffiliated third party. Mr. Leader, who is one of our directors, is the President of America Online, Inc. Investments, an affiliate of America Online. Merrill Lynch Agreement On December 21, 1999, Multex.com announced a multi-year partnership with Merrill Lynch to co-develop global research and information Web sites for clients of Merrill Lynch's institutional e-commerce portal. The companies will jointly develop the next-generation platform for real-time delivery of Merrill Lynch investment strategy and securities research for its institutional clients. Stock Options Granted to Executive Officers For additional information regarding the grant of stock options to executive officers and directors, see "Management--Director Compensation," "-- Executive Compensation," "--1999 Stock Option Plan" and "Principal Stockholders." 65 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements. Reference is made to the consolidated financial statements included in Item 8 to this Report on Form 10-K. 2. Financial Statement Schedules. Reference is made to the consolidated financial statements included in Item 8 to this Report on Form 10-K. (b) Reports on Form 8-K We filed a Report on Form 8-K, Items 2 and 7, on October 6, 1999, announcing the consummation of the Market Guide merger. We filed a Report on Form 8-K, Items 5 and 7, on October 29, 1999, declaring that the Market Guide acquisition was accounted for as a pooling of interests. (c) Exhibits
NUMBER DESCRIPTION - ------ ----------- 3.1 Form of Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 of our Registrtion Statement on Form S-1, as amended (Registration No. 333-70693)). 3.2 Form of Amended and Restated Bylaws (incorporated by reference to Exhibit 3.4 of our Registration Statement on Form S-1, as amended (Registration No. 333-70693)). 4.1 Specimen common stock certificate (incorporated by reference to Exhibit 4.1 of our Registration Statement on Form S-1, as amended (Registration No. 333-70693)). 4.2 See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation and Bylaws of the Registrant defining the rights of holders of Common Stock of the Registrant.
66
10.1 Multex.com, Inc. 1999 Stock Option Plan (incorporated by reference to Exhibit 99.1 of our Registration Statement on Form S-8 filed on October 20,1999). 10.2 Multex.com, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.11 of our Registration Statement on Form S-8 filed on March 26, 1999). 10.3 Fourth Amended and Restated Registration Rights Agreement, dated as of December 15, 1998 (incorporated by reference to Exhibit 10.7 of our Registration Statement on Form S-1, as amended (Registration No. 333-70693)). 10.4 Market Guide Inc. 1995 Key Employee Incentive Plan (incorporated by reference to Exhibit 99.11 of our Registration Statement on Form S-8 filed on October 20, 1999). 10.5 Market Guide Inc. 1995 Independent Director's Stock Incentive Plan (incorporated by reference to Exhibit 99.13 of our Registration Statement on Form S-8 filed on October 20, 1999). 10.6 Agreement and Plan of Merger and Reorganization dated as of June 23, 1999 by and among the Registrant, Merengue Acquisition Corp. and Market Guide, Inc. (incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed on June 29, 1999). 10.7 Agreement and Plan of Reorganization dated as of March 13, 2000 by and among the Registrant, Multex A Acquisition Corp., Sage Online, Inc., and the shareholders of Sage Online, Inc. (incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed on April 5, 2000). 10.8(a) Master Agreement for Electronic Distribution Services, dated as of November 13, 1998, between the Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 10.8(b)+ Addendum No. 3 to Master Agreement for Electronic Distribution Services, dated as of December 21, 1999 between the Registrant and Merrill Lynch. 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of our Registration Statement on Form S-1, as amended (Registration No. 333-70693)). 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Zerbo, McKiernan & Zambito, LLC. 27.1 Financial Data Schedule for the years ended December 31, 1997, 1998 and 1999.
________________ + Confidential treatment to be requested for certain portions of this Exhibit pursuant to Rule 24b-2 promulgated under the Securities Exchange Act. Confidential portions of this Exhibit have been filed separately with the Securities and Exchange Commission. (d) Financial Statement Schedules. See Item 14(a)2 above. 67 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Multex.com, Inc. has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of New York, State of New York, on this 11th day of April, 2000. MULTEX.COM, INC. By: /s/ Isaak Karaev ------------------------ Isaak Karaev Chief Executive Officer MULTEX.COM, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors.................................................................................. F-2 Consolidated Balance Sheets as of December 31, 1999 and 1998.................................................... F-4 Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997...................... F-5 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1999, 1998 and 1997......................................................................................................... F-6 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997...................... F-7 Notes to Consolidated Financial Statements...................................................................... F-8 Schedule II - Valuation and Qualifying Accounts................................................................. F-20
F-1 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders of Multex.com, Inc. We have audited the accompanying consolidated balance sheets of Multex.com, Inc. (the "Company") as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial statement schedule listed in the Index at Item 14 (a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We did not audit the statement of operations, stockholders' equity (deficit) or cash flows of Market Guide Inc. which was acquired in a pooling of interests, which statement reflects total revenues of $6,602,733 for the year ended December 31, 1997. That statement was audited by other auditors whose report has been furnished to us, and in our opinion, in so far as it relates to data included for Market Guide Inc. is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Multex.com, Inc. as of December 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New York, New York February 4, 2000, except for the seventh paragraph of Note 17, as to which the date is March 21, 2000. F-2 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders of Market Guide Inc. We have audited the balance sheet of Market Guide Inc. (the "Company") as of February 28, 1998, and the related statements of operations, accumulated deficit, cash flows, and stockholders' equity for the year ended February 28, 1998. Our audits also included the financial statement schedule for the year ended February 28, 1998 listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Market Guide Inc. at February 28, 1998, and the results of its operations and its cash flows for the year ended February 28, 1998 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein for the year ended February 28, 1998. As discussed in Notes C and J, respectively, a change in accounting for operating leases resulted in an understatement of previously reported expenses and disposal of a division has been reclassified as a discontinued operation. Accordingly, the financial statement for the year ended February 28, 1998 has been restated to reflect these changes. Zerbo, McKiernan & Zambito, LLC Fairfield, New Jersey May 18, 1998 except for Notes C and J as to which the date is April 27, 1999 F-3 MULTEX.COM, INC. CONSOLIDATED BALANCE SHEETS
December 31, ---------------------------- 1999 1998 ------------- ------------- ASSETS Current assets: Cash and cash equivalents ................................................................... $6,089,552 $4,156,083 Marketable securities ....................................................................... 33,027,789 20,014,680 Accounts receivable, less allowance of $423,000 and $172,000 in 1999 and 1998, respectively ............................................................. 10,954,109 3,668,168 Deferred income tax ......................................................................... -- 191,008 Prepaid expenses ............................................................................ 1,404,147 290,511 Other current assets ........................................................................ 1,788,502 202,711 ------------ ------------ Total current assets ........................................................................ 53,264,099 28,523,161 Property and equipment, net ................................................................... 10,862,634 4,469,691 Notes receivable, net of deferred gain of $840,000 in 1999 (Note 16) .......................... -- -- Other ......................................................................................... 1,473,721 190,135 ------------ ------------ Total assets ................................................................................ $65,600,454 $33,182,987 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable ............................................................................ $5,051,382 $1,128,032 Accrued expenses ............................................................................ 4,778,052 1,702,102 Deferred revenues ........................................................................... 5,690,638 3,376,012 Current portion of long-term debt ........................................................... -- 157,250 Current portion of capital lease obligations .............................................. 224,720 201,625 ------------ ------------ Total current liabilities ................................................................... 15,744,792 6,565,021 Long term liabilities: Long term debt .............................................................................. -- 235,875 Capital lease obligations ................................................................... 192,656 167,232 Deferred rent ............................................................................... 2,431,311 419,306 Other liabilities ........................................................................... 30,822 58,619 ------------ ------------ Total long term liabilities ................................................................. 2,654,789 881,032 Commitments (Note 13) Redeemable preferred stock authorized 2,000,000 shares: Series A redeemable preferred stock; $.01 par value, $2,500,000 aggregate liquidation preference: Issued and outstanding--none and 25,000 shares at December 31, 1999 and 1998, respectively -- 3,459,696 Series B redeemable preferred stock; $.01 par value, $5,500,000 aggregate liquidation preference: Issued and outstanding--none and 36,666 shares at December 31, 1999 and 1998, respectively -- 7,294,411 Series C redeemable preferred stock; $.01 par value, $15,000,000 aggregate liquidation preference: Issued and outstanding--none and 100,000 shares at December 31, 1999 and 1998, respectively -- 18,064,794 Series D redeemable preferred stock; $.01 par value, $10,000,000 aggregate liquidation preference: Issued and outstanding--none and 55,556 shares at December 31, 1999 and 1998, respectively -- 11,101,685 Series E redeemable preferred stock; $.01 par value, $20,000,000 aggregate liquidation reference: Issued and outstanding--none and 80,000 shares at December 31, 1999 and 1998, respectively -- 19,939,452 Stockholders' equity (deficit): Preferred stock--$.01 par value: Authorized--5,000,000 shares; none issued and outstanding at December 31, 1999 and 1998 ............................................................. -- -- Common stock--$.01 par value: Authorized--50,000,000 shares; issued and outstanding-- 27,179,717 shares and 8,043,338 shares at December 31, 1999 and 1998, respectively .............................................................................. 271,797 80,433 Additional paid-in capital .................................................................. 109,564,235 2,038,678 Accumulated deficit ......................................................................... (60,141,003) (34,766,267) Deferred compensation ....................................................................... (2,430,597) (1,460,000) Accumulated other comprehensive loss ........................................................ (63,559) (15,948) ------------ ------------ Total stockholders' equity (deficit) ...................................................... 47,200,873 (34,123,104) ------------ ------------ Total liabilities and stockholders' equity (deficit) ...................................... $65,600,454 $33,182,987 ============ ============
See accompanying notes to consolidated financial statements. F-4 MULTEX.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31, ------------------------------------------- 1999 1998 1997 ------------- ------------- ------------- Revenues..................................................................... $ 40,849,515 $ 22,021,110 $ 12,616,499 Cost of revenues............................................................. 10,568,681 5,082,658 2,720,487 ------------ ------------ ------------ Gross profit................................................................. 30,280,834 16,938,452 9,896,012 Operating expenses: Sales and marketing........................................................ 26,378,775 8,667,316 4,568,385 Research and development................................................... 6,300,809 3,167,005 2,872,404 General and administrative................................................. 18,414,056 12,549,821 10,426,311 ------------ ------------ ------------ Total operating expenses..................................................... 51,093,640 24,384,142 17,867,100 ------------ ------------ ------------ Loss from operations......................................................... (20,812,806) (7,445,690) (7,971,088) Other income (expense): Gain on sale of equipment.................................................. -- 124,796 -- Offering expenses (Note 1)................................................. -- (840,781) -- Acquisition expenses (Note 5).............................................. (5,712,658) -- -- Interest expense........................................................... (113,773) (575,038) (395,646) Interest and investment income............................................. 2,358,975 388,593 456,159 ------------ ------------ ------------ Loss from continuing operations before income tax expense.................... (24,280,262) (8,348,120) (7,910,575) Income taxes................................................................. 1,030,042 275,846 7,274 ------------ ------------ ------------ Loss from continuing operations.............................................. (25,310,304) (8,623,966) (7,917,849) Discontinued operations: Income (loss) from discontinued operations, net of taxes................... 105,866 (439,849) (1,087,021) Gain on sale of discontinued operations, net of taxes...................... 225,572 225,572 -- ------------ ------------ ------------ 331,438 (214,277) (1,087,021) Net loss..................................................................... (24,978,866) (8,838,243) (9,004,870) Redeemable preferred stock dividends......................................... 1,188,165 2,679,445 2,181,472 ------------ ------------ ------------ Net loss attributable to common stockholders'................................ $(26,167,031) $(11,517,688) $(11,186,342) ============ ============ ============ Earnings (loss) per common share - basic and diluted: Continuing operations, net of redeemable preferred stock dividends......... $(1.17) $(1.49) $(1.46) ============ ============ ============ Discontinued operations.................................................... 0.01 (0.03) (0.16) ============ ============ ============ Net loss................................................................... $(1.15) $(1.51) $(1.62) ============ ============ ============ Number of shares used in computing basic and diluted loss per share............................................ 22,688,050 7,609,524 6,891,764 ============ ============ ============
See accompanying notes to consolidated financial statements. F-5 MULTEX.COM, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock ------------ Additional Paid-in Accumulated Deferred Shares Amount Capital Deficit Compensation ------ ------ ------- ------- ------------ Balance at December 31, 1996 ........ 6,777,561 $67,776 $2,822,146 $(16,923,154) $ -- Net loss ......................... -- -- -- (9,004,870) -- Translation adjustment ........... -- -- -- -- -- Comprehensive loss ............... -- -- -- -- -- Redeemable preferred stock ....... -- -- (2,181,472) -- -- dividend Issuance of common stock ......... 3,750 37 10,275 -- -- Stock issued for services ........ 35,000 350 10,150 -- -- Issuance of common stock from the employee stock purchase plan 11,658 117 27,688 -- -- Exercise of options .............. 340,625 3,406 45,593 -- -- Amortization of deferred compensation .................... -- -- -- -- 25,107 relating to stock options Deferred compensation related to stock options ........................ -- -- 1,077,219 -- (1,077,219) --------- ------- ---------- ------------ ----------- Balance at December 31, 1997 ........ 7,168,594 71,686 1,811,599 (25,928,024) (1,052,112) Net loss ......................... -- -- -- (8,838,243) -- Translation adjustment ........... -- -- -- -- -- Comprehensive loss ............... -- -- -- -- -- Redeemable preferred stock dividend........................ -- -- (2,679,445) -- -- Stock issued for services ........ 10,000 100 45,004 -- -- Issuance of common stock from the employee stock purchase plan 33,244 332 184,893 -- -- Exercise of options .............. 631,500 6,315 218,933 -- -- Tax benefit from option exercises -- -- 242,134 -- -- Amortization of deferred compensation .................... -- -- -- -- 439,672 relating to stock options Cancellation of stock options .... -- -- (24,898) -- 24,898 Deferred compensation related to stock options.................... -- -- 872,458 -- (872,458) Sale of stock and issuance of options in connection with the acquisition of ............................. 75,000 750 644,250 -- -- certain assets of Multex Data Group Issuance of stock in connection with ............................ 125,000 1,250 623,750 -- -- the acquisition of Multex Data Group Issuance of warrant in connection with long-term debt ............. -- -- 100,000 -- -- --------- ------- ---------- ------------ ----------- Balance at December 31, 1998 ........ 8,043,338 80,433 2,038,678 (34,766,267) (1,460,000) 80,433 Net loss ......................... -- -- -- (24,978,866) -- Translation adjustment ........... -- -- -- -- -- Unrealized loss on marketable securities .................. -- -- -- -- -- Comprehensive loss ............... -- -- -- -- -- Redeemable preferred stock dividend......................... -- -- (1,188,165) -- -- Conversion of redeemable preferred stock to common stock.. 14,861,112 148,611 60,912,224 -- -- Issuance of common stock, net of offering costs............. 3,283,500 32,835 41,604,633 -- -- Exercise of options .............. 944,752 9,448 3,508,282 -- -- Amortization of deferred compensation relating to stock options......................... -- -- -- -- 479,923 Compensation related to acceleration of option vesting... -- -- 160,938 -- -- Issuance of common stock from the employee stock purchase plan ......................... 47,015 470 571,645 -- -- Issuance of warrants ........... -- -- 1,956,000 -- (1,456,000) Amortization of warrants ....... -- -- -- -- 5,480 Accumulated deficit adjustment (Note 1) ............................ -- -- -- (395,870) -- --------- ------- ---------- ------------ ----------- Balance at December 31, 1999 ........ 27,179,717 $271,797 $109,564,235 $(60,141,003) $(2,430,597) ========== ======== ============ ============ =========== Accumulated Other Comprehensive Loss Total ---- ----- Balance at December 31, 1996 ........ $ -- $(14,033,232) ------------ Net loss ......................... -- (9,004,870) Translation adjustment ........... (14,124) (14,124) ------------ Comprehensive loss ............... -- (9,018,994) ------------ Redeemable preferred stock dividend........................ -- (2,181,472) Issuance of common stock ......... -- 10,312 Stock issued for services ........ -- 10,500 Issuance of common stock from the employee stock purchase plan... -- 27,805 Exercise of options .............. -- 48,999 Amortization of deferred compensation ................... -- 25,107 relating to stock options Deferred compensation related to stock options ........................ -- -- ----------- ------------ Balance at December 31, 1997 ........ (14,124) (25,110,975) Net loss ......................... -- (8,838,243) Translation adjustment ........... (1,824) (1,824) ------------ Comprehensive loss ............... -- (8,840,067) ------------ Redeemable preferred stock dividend......................... -- (2,679,445) Stock issued for services ........ -- 45,104 Issuance of common stock from the employee stock purchase plan ......................... -- 185,225 Exercise of options .............. -- 225,248 Tax benefit from option exercises -- 242,134 Amortization of deferred compensation relating to stock options......................... -- 439,672 Cancellation of stock options .... -- -- Deferred compensation related to stock options.................... -- -- Sale of stock and issuance of options in connection with the acquisition of ................. -- 645,000 certain assets of Multex Data Group Issuance of stock in connection with the acquisition of Multex... -- 625,000 Data Group Issuance of warrant in connection with long-term debt ............. -- 100,000 ----------- ------------ Balance at December 31, 1998 ........ (15,948) (34,123,104) ----------- ------------ Net loss ......................... -- (24,978,866) Translation adjustment ........... 1,264 1,264 Unrealized loss on marketable securities .................. (48,875) (48,875) ------------ Comprehensive loss ............... -- (25,026,477) ------------ Redeemable preferred stock dividend...................... -- (1,188,165) Conversion of redeemable preferred stock to common stock.. -- 61,060,835 Issuance of common stock, net of offering costs............. -- 41,637,468 Exercise of options .............. -- 3,517,730 Amortization of deferred compensation relating to stock options......................... -- 479,923 Compensation related to acceleration of option vesting.. -- 160,938 Issuance of common stock from the employee stock purchase plan ......................... -- 572,115 Issuance of warrants ........... -- 500,000 Amortization of warrants ....... -- 5,480 Accumulated deficit adjustment (Note 1) ............................ -- (395,870) ----------- ------------ Balance at December 31, 1999 ........ $(63,559) $47,200,873 ======== ===========
See accompanying notes to consolidated financial statements. F-6 MULTEX.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, -------------------------------------------- 1999 1998 1997 -------------- ------------- ------------- Operating activities Net loss from continuing operations ............................................ $(25,310,304) $(8,623,966) $(7,917,849) Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: Amortization of deferred compensation ........................................ 646,341 439,672 25,107 Gain on sale of equipment .................................................... -- (124,796) -- Depreciation and amortization ................................................ 3,364,917 1,869,514 1,659,102 Amortization of issuance and financing costs ................................. 12,632 146,569 40,988 Deferred income tax .......................................................... 191,008 (179,892) -- Bad debt expense ............................................................. 900,599 148,000 168,130 Stock issued for services .................................................... -- 45,330 20,825 Accumulated deficit adjustment ............................................... (395,870) -- -- Changes in operating assets and liabilities: Accounts receivable ....................................................... (8,186,540) (1,175,189) (1,328,297) Prepaid expenses .......................................................... (1,113,636) 24,402 (102,173) Other current assets ...................................................... (1,585,791) 82,347 156,736 Other assets .............................................................. (1,283,586) 178,263 54,063 Accounts payable .......................................................... 2,977,129 539,306 (97,672) Accrued expenses .......................................................... 3,178,443 508,285 194,297 Deferred revenue .......................................................... 2,314,626 1,373,643 668,628 Deferred rent ............................................................. 2,012,005 (11,186) 60,680 Other liabilities ......................................................... (27,797) 58,619 -- ------------ ------------ ----------- Net cash used in operating activities from continuing operations ............... (22,305,824) (4,701,079) (6,397,435) Investing activities Purchase of marketable securities .............................................. (41,956,984) (21,283,209) (7,663,585) Deposits and other assets ...................................................... -- 12,027 -- Proceeds from sale of marketable securities .................................... 28,895,000 8,932,114 7,829,635 Proceeds from sale of division, net of related expenses ........................ -- 819,324 -- Proceeds from sale of equipment ................................................ -- 200,953 -- Purchase of property and equipment ............................................. (8,634,238) (1,873,747) (1,335,038) ------------ ------------ ----------- Net cash used in investing activities .......................................... (21,696,222) (13,192,538) (1,168,988) Financing activities Proceeds from issuances of stock ............................................... 45,727,313 20,710,247 10,076,791 Preferred stock issuance costs ................................................. -- (100,000) (54,095) Proceeds from long-term debt ................................................... -- 1,850,000 474,667 Proceeds from issuance of warrants ............................................. 500,000 -- -- Repayment of long-term debt and capital leases ................................. (624,500) (3,177,218) (981,833) Other liabilities .............................................................. -- (312,783) 31,224 ------------ ------------ ----------- Net cash provided by financing activities ...................................... 45,602,813 18,970,246 9,546,754 Discontinued activities Income (loss) from discontinued operations including gain on sale, net of taxes 105,866 (214,277) (1,087,021) Adjustments to reconcile loss from discontinued operations to net cash used in discontinued operations: Gain on sale of discontinued operations, net of taxes ..................... 225,572 (225,572) -- Depreciation .............................................................. -- 101,292 107,686 Decrease in net assets of discontinued operations ......................... -- 77,234 224,238 ------------ ------------ ----------- Net cash provided by (used in) discontinued operations ......................... 331,438 (261,323) (755,097) Effect of exchange rate changes on cash ........................................ 1,264 (1,824) (14,124) ------------ ------------ ----------- Increase in cash and cash equivalents .......................................... 1,933,469 813,482 1,211,110 Cash and cash equivalents, beginning of year ................................... 4,156,083 3,342,601 2,131,491 ------------ ------------ ----------- Cash and cash equivalents, end of year ......................................... $6,089,552 $4,156,083 $3,342,601 ============ ============ =========== Supplemental disclosures of cash flow information Noncash investing and financing activity: Acquisition of fixed assets through capital leases ........................... $279,894 $ -- $471,750 ============ ============ =========== Accrued purchases of fixed assets ............................................ $843,728 $127,700 $46,336 ============ ============ =========== Fair market value of stock issued in connection with the acquisition of Multex Data Group ....................................................... $ -- $970,000 $ -- ============ ============ =========== Fair market value of warrants issued ......................................... $1,956,000 $ -- $ -- ============ ============ =========== Stock issued for services .................................................... $ -- $45,330 $20,825 ============ ============ =========== Taxes paid ..................................................................... $418,708 $12,833 $6,000 ============ ============ =========== Interest paid .................................................................. $87,887 $415,182 $245,582 ============ ============ ===========
See accompanying notes to consolidated financial statements. F-7 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1999 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Organization Multex.com, Inc. (the "Company" or "Multex.com") is the leading financial e- marketplace connecting buyers and sellers of financial services and information. The Company provides information and commerce enabling technology and infrastructure, application services, Web hosting and online community services to brokerage firms, investment banks, corporations and institutional and individual investors. Basis of Presentation On September 23, 1999, the Company acquired Market Guide Inc. ("Market Guide") which was accounted for as a pooling of interests (See Note 5). The pooling of interests method of accounting requires the restatement of all periods as if the Company and Market Guide had always been combined. All prior year consolidated financial statements have been restated to reflect the acquisition of Market Guide. In October, 1999, Market Guide changed its fiscal year end from February 28 to December 31. The consolidated balance sheet at December 31, 1999, combines the balance sheets of Multex.com and Market Guide as of December 31, 1999. The consolidated balance sheet at December 31, 1998, combines the balance sheets of Multex.com and Market Guide as of December 31, 1998 and February 28, 1999, respectively. The consolidated statements of operations for the year ended December 31, 1999, combines the statements of operations of Multex.com and Market Guide for the year ended December 31, 1999. The consolidated statements of operations for the year ended December 31, 1998, combines the statements of operations of Multex.com for the year ended December 31, 1998, and the statements of operations of Market Guide for the year ended February 28, 1999, respectively. The consolidated statements of operations for the fiscal year ended December 31, 1997, combines the statements of operations of Multex.com for the year ended December 31, 1997, and the statements of operations of Market Guide for the year ended February 28, 1998, respectively. The consolidated statements of operations for both of the years ended December 31, 1999 and 1998 include the results of operations of Market Guide for the two months ended February 28, 1999. As a result, accumulated deficit as of December 31, 1999, has been adjusted by $395,870 to reflect the effect of including results of operations of Market Guide for the two months ended February 28, 1999 in both periods. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Multex.com, Inc. and its wholly owned and majority-owned subsidiaries. Significant intercompany account balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of 90 days or less when purchased other than commercial paper included in available for sale securities to be cash equivalents. F-8 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued) Concentration of Credit Risk At December 31, 1999, substantially all cash and cash equivalents were held in five financial institutions. The Company's customers are concentrated among institutional investors and financial professionals, including mutual fund managers, portfolio managers, brokers and their clients, as well as through third party redistributors. The Company derives most of its revenues from customers located within the United States. One customer accounted for approximately 10% of revenues for the year ended December 31, 1999. The same customer accounted for approximately 21% of accounts receivable at December 31, 1999. Another customer accounted for approximately 11% and 18% of revenues for the years ended December 31, 1998 and 1997, respectively. A third customer accounted for approximately 10% of revenues for the year ended December 31, 1997. The Company performs ongoing credit evaluations, generally does not require collateral and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information. To date, such losses have been within management's expectations. Marketable Securities Marketable securities are classified as available-for-sale. Marketable securities consist of government securities, corporate notes and bonds, certificates of deposit and commercial paper. Marketable securities are carried at fair value, which approximates cost. Property and Equipment Property and equipment are stated at cost, and depreciation is computed using the straight-line method over the estimated useful life of the asset which ranges from two to five years. Advertising The Company expenses the costs of advertising as incurred. Advertising expense for the years ended December 31, 1999, 1998 and 1997 was approximately $15.3 million, $2.5 million and $892,000, respectively. Revenue Recognition Revenues from subscriptions are recognized in equal installments over the term of the subscriptions. Non-subscription revenues from the Multex Research-On- Demand service are recognized upon sale. Revenues from sponsorships and advertising are recognized in equal installments over the term of the contract. Revenues from database licensing fees are recognized over the term of the contract. Revenues from professional services are recognized when the services are accepted by the client. Such services are primarily customization software services which allow the Company's services to interface and function with the customers' existing software platforms. Deferred Revenue Deferred revenue represents the unamortized portion of annual subscriptions received in advance, and fees received from customers in advance of performance of services. Offering Expenses Offering expenses represent costs incurred in connection with a proposed financing in 1998. On October 19, 1998, the Company withdrew the registration statement relating to such proposed financing, and accordingly, the offering costs incurred prior to that date were expensed. F-9 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued) Earnings (Loss) Per Share The Company calculates earning per share in accordance with SFAS No. 128, Computation of Earnings Per Share, and SEC Staff Accounting Bulletin No. 98. Accordingly, basic earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of shares issuable upon the exercise of stock options (using the treasury stock method); common equivalent shares are excluded from the calculation if their effect is anti-dilutive. Stock-Based Compensation The Company measures compensation expense related to the grant of stock options and stock-based awards to employees in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, under which compensation expense, if any, is generally based on the difference between the exercise price of an option, or the amount paid for the award and the market price or fair value of the underlying common stock at the date of the award. Stock-based compensation arrangements involving nonemployees are accounted for under SFAS No. 123, Accounting for Stock-Based Compensation, under which such arrangements are accounted for based on the fair value of the option or award. As required by SFAS No. 123, the Company discloses pro forma net loss per share information reflecting the effect of applying SFAS No. 123 fair value measurement to employee arrangements. Comprehensive Income As of January 1, 1998, the Company adopted FASB Statement No. 130, Reporting Comprehensive Income. Statement No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement had no impact on the Company's net loss or stockholders' deficit. Statement No. 130 requires unrealized gains or losses on the Company's available-for-sale securities and foreign currency translation adjustments, which prior to adoption were reported separately in stockholders' deficit, to be included in other comprehensive loss. Segment Information The Company discloses information regarding segments in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 establishes standards for reporting of financial information about operating segments in annual financial statements and requires reporting selected information about operating segments in interim financial reports. The disclosure of segment information was not required as the Company operates in only one business segment. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments The carrying amounts reported in the balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair values. F-10 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 2. INVESTMENTS The amortized cost, gross unrealized gains and losses and fair value of the investment securities available-for-sale are as follows:
Gross Gross ----- ----- Amortized Unrealized Unrealized --------- ---------- ---------- December 31, 1999 Cost Gains losses Fair Value - ----------------- ---- ----- ------ ---------- U.S. government notes and bonds.............. $ 2,534,450 -- -- $ 2,534,450 Corporate bonds and notes.................... 7,778,983 -- $(30,505) 7,748,478 Commercial paper............................. 19,341,338 $3,244 (4,315) 19,340,267 Euro dollar bonds............................ 2,517,584 -- (17,299) 2,500,285 Repurchase agreements........................ 904,309 -- -- 904,309 ----------- ------ -------- ----------- $33,076,664 $3,244 $(52,119) $33,027,789 =========== ====== ======== ===========
3. STOCKHOLDERS' EQUITY Common Stock In March 1999, the Company effected a 1-for-2 reverse stock split. All common share information included in the accompanying financial statements has been adjusted to reflect the one-for-two reverse stock split. In December 1998, the Company increased the number of authorized shares of its common stock to 50,000,000 shares. On March 17, 1999, the Company's intial public offering was declared effective by the SEC. The Company realized proceeds of approximately $41,637,000, net of underwriting discounts and commission and related expenses from the initial public offering of 3,450,000 shares of its common stock, of which 3,283,500 shares were issued and sold by the Company. During 1999, the Company issued 944,752 shares of its common stock for approximately $3,518,000 in connection with the exercise of stock options and issued 47,015 shares of its common stock for approximately $572,000 in connection with the Company's employee stock purchase plan. Common Stock Reserved for Issuance At December 31, 1999, the Company has reserved approximately 6,521,000 shares of its common stock for issuance in connection with shares issuable under the Company's stock option plan and employee stock purchase plan. Preferred Stock In March 1999, the Company authorized the issuance of 5,000,000 shares of preferred stock, par value $0.01 per share. 4. REDEEMABLE PREFERRED STOCK During 1998, the Company authorized 80,000 shares of $.01 par value Series E convertible preferred stock ("Series E Stock") and issued 80,000 shares of the Series E Stock for $20,000,000. In connection with the issuance of the Series E Stock, the Company incurred issuance costs of approximately $100,000. The holders of Series C, Series D and Series E Stock were entitled to a liquidation preference over the Series A and Series B Stock. The Series C, Series D and Series E Stock share ratably on a pari passu basis in the event of a liquidation and the Series A and Series B Stock share ratably on a pari passu basis in the event of a liquidation. The holders of redeemable preferred stock were entitled to vote upon any matter as to which the holders of common stock are entitled to vote. F-11 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 4. REDEEMABLE PREFERRED STOCK (continued) The holders of shares of redeemable preferred stock had the right to convert such shares into the number of shares of common stock (adjusted for stock splits) as is obtained by multiplying the number of redeemable preferred shares to be converted by the liquidation preference ($100 for Series A, $150 for Series B and C, $180 for Series D and $250 for Series E) and dividing the result by $1.00 for Series A, $1.50 for Series B and C, $1.80 for Series D, $250 for Series E or by the conversion price, as defined, as last adjusted and in effect. In March 1999, the series A, B, C, D and E redeemable preferred stock were converted into 14,861,112 shares of the Company's common stock upon the consummation of the initial public offering. At December 31, 1998, and at the date of conversion, the total cumulative dividends in arrears that would have been payable upon liquidation, was approximately $7,146,000 and $8,335,000, respectively. 5. ACQUISITIONS Multex Data Group On February 27, 1998, the Company established a new wholly owned subsidiary, RDG-Multex, Inc. In September 1998, the subsidiary's name was changed to Multex Data Group, Inc. ("Multex Data Group"). Multex Data Group acquired assets (earnings estimate database and related software) of Research Data Group, Inc. in exchange for 49 shares of the common stock (49%) of Multex Data Group on March 27, 1998. In connection with the transaction above, the Company issued to a principal of Research Data Group, Inc., 75,000 shares of the Company's common stock at a purchase price of $4.00 per share ($300,000) and a one year option ("One Year Option") to acquire 125,000 shares of the Company's common stock at an exercise price of $5.00 per share. This option was exercised in March 1999. The Company has estimated the fair market value of the 75,000 shares to be approximately $450,000 and has valued the option at approximately $195,000 as of the date of grant using the Black-Scholes option pricing model. The purchase price of the assets acquired was $345,000, the estimated fair market value of the consideration given to a principal of Research Data Group, Inc. (see calculation of fair market value below) Fair market value of 75,000 shares sold ....................................... $450,000 Fair market value of One Year Option .......................................... 195,000 Less cash consideration received by the Company ............................... (300,000) --------- Fair market value of consideration given (49 shares of Multex Data Group) for assets acquired .................................................... $345,000 =========
On December 15, 1998, the Company acquired the remaining 49% of Multex Data Group in exchange for 125,000 shares of the Company's common stock, which was valued at approximately $625,000. Such value was based on the estimated fair market value of the Company's common stock of $5.00 per share. The purchase price was fully allocated to the earnings estimate database. The acquisition has been accounted for by the purchase method of accounting and accordingly, the Company has consolidated the results of operations of Multex Data Group effective March 27, 1998. Market Guide Inc. On September 23, 1999, pursuant to an Agreement and Plan of Merger and Reorganization, the Company acquired Market Guide Inc., an online provider of financial information and data. The merger was accounted for as a pooling of interests with each Market Guide shareholder receiving one share of the Company's common stock for each outstanding share of Market Guide stock. The Company issued 4,900,000 shares of its common stock and assumed stock options to purchase 680,000 shares of the Company's common stock. In connection with the merger, the Company incurred approximately $5.7 million in costs related to the transaction. F-12 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 5. ACQUISITIONS (continued) Unaudited combined and separate results of the Company and Market Guide for the period from January 1, 1999 to September 23, 1999 were:
Market Inter- ------ ------ Multex.com Guide company Combined ---------- ----- ------- -------- Revenues ........................... $19,235,000 $8,319,000 $(178,000) $27,376,000 Net income (loss) .................. (14,883,000) (2,809,000) -- (17,692,000)
Adjustments to conform Market Guide's method of accounting for computer software and database expansion costs with that of the Company increased combined net loss for the years ended December 31, 1998 and 1997 by approximately $605,000 and $914,000, respectively. 6. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
Year Ended December 31, -------------------------------------------- 1999 1998 1997 -------------- ------------- ------------- Numerator: Net loss ..................................................................... $(24,978,866) $(8,838,243) $(9,004,870) Redeemable preferred stock dividends ......................................... 1,188,165 2,679,445 2,181,472 ------------ ------------ ------------ Numerator for basic and diluted loss per share--net loss attributable ============= to common stockholders ....................................................... $(26,167,031) $(11,517,688) $(11,186,342) ============ ============ ============ Denominator: Denominator for basic and dilutive loss per share--weighted average shares ............................................................... 22,688,050 7,609,524 6,891,764 ============ ============ ============ Basic and diluted loss per share ............................................. $(1.15) $(1.51) $(1.62) ============ ============ ============
The following securities have been excluded from the dilutive per share computation as they are antidilutive:
At December 31, -------------------------------------------------- 1999 1998 1997 ---- ---- ---- Redeemable preferred stock--Series A .......................... -- 25,000 25,000 Redeemable preferred stock--Series B .......................... -- 36,666 36,666 Redeemable preferred stock--Series C .......................... -- 100,000 100,000 Redeemable preferred stock--Series D .......................... -- 55,556 55,556 Redeemable preferred stock--Series E .......................... -- 80,000 -- Stock options ................................................. 4,784,848 2,839,150 2,283,600 Warrants ...................................................... 418,050 318,050 --
7. PROPERTY AND EQUIPMENT Property and equipment consist of the following:
December 31, ------------------------------- 1999 1998 ---------------- ------------- Computer and telecommunications equipment and related software ....................... $13,726,699 $9,243,845 Furniture and fixtures ............................................................... 1,461,700 361,093 Leasehold improvements ............................................................... 4,504,722 330,323 ----------- ---------- 19,693,121 9,935,261 Less accumulated depreciation and amortization ....................................... 8,830,487 5,465,570 ----------- ---------- $10,862,634 $4,469,691 =========== ==========
F-13 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 8. ACCRUED EXPENSES Accrued expenses consist of the following:
December 31, ------------------------------- 1999 1998 ---- ---- Payroll and related costs ............................................ $597,930 $305,955 Accrued vacation ..................................................... 200,000 125,000 Accrued bonuses ...................................................... 1,244,250 142,000 Royalties ............................................................ 1,004,083 636,932 Other ................................................................ 1,731,789 492,215 ---------- ---------- $4,778,052 $1,702,102 ========== ==========
9. LONG-TERM DEBT The Company had available lines of credit provided by two lenders totaling $3,900,000. At December 31, 1997, total notes of approximately $2,699,000 were issued under the lines of credit. The notes were payable in monthly installments of principal and interest of approximately $75,000 and bore interest ranging from 10% to 12% per annum. The balance of the notes, approximately $1,053,000, was fully repaid in 1998. The Company was obligated to pay additional financing costs equal to a minimum of 10% of original amounts advanced under the lines of credit. At December 31, 1997, the Company recorded approximately $313,000 in other liabilities related to such obligation, which was fully repaid in 1998. In October 1998, the Company entered into agreements with respect to a $2,000,000 equipment line and a $4,000,000 revolving credit facility with a bank. The Company could have borrowed up to 80% of eligible accounts receivable, as defined, in the revolving credit facility, and advances under the equipment line could not exceed 75% of the net book value of equipment purchased within the last twelve months. Substantially all of the assets of the Company were pledged as collateral for the above obligations. The equipment line and revolving credit facility bore interest at the prime rate plus 1%, as defined. Borrowing under this agreement were repaid in December 1998. In July 1999, the Company increased its equipment line of credit to $3,000,000. This line expires in January 2000. As of December 31, 1999, there were no borrowings under the equipment and revolving credit facility. In connection with the above obligations, the Company granted, to the bank, a warrant to purchase 318,050 shares of the Company's common stock at $4.80 per share, which was valued at $100,000 based upon the Company's incremental borrowing rate. The warrant expires on December 28, 2003. 10. INCOME TAXES Under FASB Statement No. 109, "Accounting for Income Taxes," the liability method is used in accounting for income taxes. Under this method, deferred income tax assets and liabilities result from temporary differences between the income tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable income and deductions in future years. Significant components of the Company's deferred tax assets are as follows:
December 31, ------------------------------------ 1999 1998 ------------------ ---------------- Net operating loss carryforward ........................................ $21,566,000 $10,483,000 Research and development credits ....................................... 1,020,000 711,000 Depreciation and amortization .......................................... 789,000 686,000 Deferred revenue ....................................................... 2,352,000 1,073,000 Other .................................................................. 646,000 256,000 ------------ ------------ 26,373,000 13,209,000 Valuation allowance .................................................... (26,373,000) (13,018,000) ------------ ------------ $ -- $191,000 ============ ============
F-14 Due to the uncertainty of the realization of the tax assets, a valuation allowance has been provided. MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 10. INCOME TAXES (continued) At December 31, 1999, the Company had net operating loss carryforwards of approximately $50.0 million and research and development credits of approximately $1.0 million for income tax purposes that expire in 2009 through 2019. The utilization of approximately $15.6 million and $400,000 of such net operating loss carryforwards and research and development credits, respectively, are subject to an annual limitations of approximately $1.9 million, pursuant to Section 382 of the Internal Revenue Code. The provision for income taxes from continuing operations consists of the following:
Year Ended December 31, ---------------------------------------------------------- 1999 1998 1997 -------------------- ------------------ ---------------- Current ....................................... $839,000 $456,000 $7,000 Deferred ...................................... 191,000 (180,000) -- ---------- --------- ------ $1,030,000 $276,000 $7,000 ========== ========= ======
The reconciliation of income taxes computed at the U.S. Federal statutory rate to income tax expense is as follows:
Year Ended December 31, ------------------------------------------------------------- 1999 1998 1997 --------------------- ------------------ ------------------ Tax at U.S. statutory rate of 34% .......................... $(8,255,000) $(2,838,000) $(2,690,000) U.S. losses without benefit ................................ 8,724,000 3,211,000 2,692,000 State taxes ................................................ 370,000 83,000 5,000 Other ...................................................... 191,000 (180,000) -- ----------- ----------- ----------- $1,030,000 $276,000 $7,000 =========== =========== ===========
11. STOCK OPTIONS In March 1999, the Company established the 1999 Stock Option Plan (the "Plan") which is the successor equity incentive program to the Company's 1993 Stock Incentive Plan which terminated upon the Company's initial public offering of its common stock. All outstanding options under the 1993 Stock Incentive Plan have been transferred into the Plan. A total of 7,000,000 options to purchase shares of the Company's common stock were authorized for issuance under the Plan. During the years ended December 31, 1998 and 1997, the difference between the estimated fair market value of the Company's common stock and the options' exercise price on the date of grant was determined to be approximately $872,000 and $1,077,000, respectively. This deferred compensation is being amortized for financial reporting purposes over the vesting period of the options and the amount recognized as expense during the years ended December 31, 1999, 1998 and 1997 amounted to approximately $480,000, $440,000 and $25,000, respectively. For the year ended December 31, 1999, all options were issued at the fair market value of the Company's common stock on the date of grant. F-15 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 11. STOCK OPTIONS (continued) The following transactions occurred with respect to stock options issued for the years ended December 31, 1999, 1998 and 1997:
Weighted- Average Number of Exercise Options Price --------------- ------------ Outstanding December 31, 1996 ............................................. 1,301,875 $0.27 Granted during the year ................................................... 1,600,600 0.81 Cancelled during the year ................................................. (278,250) 0.50 Exercised during the year ................................................. (340,625) 0.14 --------- Outstanding December 31, 1997 ............................................. 2,283,600 0.64 Granted during the year ................................................... 1,264,000 4.99 Cancelled during the year ................................................. (76,950) 2.35 Exercised during the year ................................................. (631,500) 0.36 --------- Outstanding December 31, 1998 ............................................. 2,839,150 2.59 Granted during the year ................................................... 3,002,450 16.64 Cancelled during the year ................................................. (237,000) 6.68 Exercised during the year ................................................. (819,752) 3.51 --------- Outstanding December 31, 1999 ............................................. 4,784,848 11.04 =========
The following table summarizes information concerning outstanding options at December 31, 1999:
Options Outstanding Options Exercisable ------------------- ------------------- Weighted Average Number of Options Weighted Average Remaining Number of Options Weighted Average Exercise Price Range Outstanding Exercise Price Contractual Life Exercisable Exercise Price - -------------------- ----------- -------------- ---------------- ----------- -------------- $ 0.02 - 0.02 68,125 $ 0.02 5.5 68,125 $ 0.02 0.50 - 0.55 1,019,198 0.52 7.4 578,073 0.53 2.68 - 3.00 50,100 2.92 6.1 50,100 2.92 4.80 - 6.00 652,715 5.13 8.4 306,964 5.20 7.50 - 9.50 510,313 8.18 8.7 50,625 7.63 12.00 - 17.88 1,803,047 14.56 9.6 180,850 12.39 18.94 - 27.56 366,750 23.36 9.8 24,000 27.00 28.56 - 34.56 314,600 29.70 10.0 ---- ---- --------- --------- 4,784,848 11.04 8.8 1,258,737 4.23
Options outstanding under the Plan primarily vest in four equal annual installments commencing on the day after the first anniversary of the grant and expire ten years after the date of grant. Pro forma information regarding net loss and net loss per share is required by SFAS 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement. The weighted average fair value of options granted during the years ended December 31, 1999, 1998 and 1997 was $13.27, $3.94 and $0.90, respectively. The fair value of the options was estimated at date of grant using a Black-Scholes option pricing model with the following assumptions:
Assumptions 1999 1998 1997 ----------- ---- ---- ---- Volatility factor of the expected market price of the Company's common stock .............................................................. 1.172 0.823 0.558 Average risk-free interest rate ........................................... 5.75% 5.19% 6.1% Dividend yield ............................................................ 0.0% 0.0% 0.0% Average life .............................................................. 4 years 4 years 3 years
F-16 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 11. STOCK OPTIONS (continued) The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. The Company's pro forma information is as follows:
1999 1998 1997 ---- ---- ---- Pro forma net loss available to common Stockholders ............................................... $(30,543,903) $(11,805,808) $(11,223,779) Pro forma basic and diluted loss per share ................. $(1.35) $(1.55) $(1.63)
12. EMPLOYEE STOCK PURCHASE PLAN The Company maintains an Employee Stock Purchase Plan (the "Plan") which allows eligible employees to purchase shares of common stock of the Company through payroll deductions at 85% of the fair market value during specific purchase periods, as defined. A total of 750,000 shares of common stock has been authorized for issuance under this plan. As of December 31, 1999, 707,972 shares are reserved for issuance under the Plan. For the years ended December 31, 1999, 1998 and 1997, 47,015, 33,244 and 11,658 shares of common stock, respectively had been issued for total proceeds of $572,000, $185,000 and $28,000, respectively. 13. COMMITMENTS Operating Leases The Company has various lease agreements for offices. Lease terms generally range from five to ten years with options to renew at varying terms. The approximate future minimum annual rental payments under these operating leases are as follows: 2000 $ 2,486,000 2001 2,819,000 2002 2,983,000 2003 3,011,000 2004 2,977,000 Thereafter 14,243,000 ----------- $28,519,000 =========== Total rental expense for the years ended December 31, 1999, 1998 and 1997 was approximately $1,808,000, $887,000 and $857,000, respectively. Capital Leases The Company has various capital lease agreements for furniture, fixtures and equipment. Lease terms generally range from three to five years. The future minimum payments for all capital leases and principal repayment are summarized as follows: 2000 $252,000 2001 120,000 2002 81,000 2003 7,000 -------- Total payments 460,000 Less amount representing interest 43,000 -------- 417,000 F-17 Less current portion of obligations under capital leases 224,000 -------- Thereafter $193,000 ======== MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 13. COMMITMENTS (continued) Letters of Credit As of December 31, 1999, the Company had outstanding letters of credit issued in the amount of $1,051,000. 14. RELATED PARTY TRANSACTIONS In March 1998, the Company entered into an agreement with an independent third party (the "Third Party") to secure a position as an anchor tenant on the Third Party's Internet site. The agreement is for two years and is automatically renewable unless either party elects not to renew. In 1999 and 1998, the Company made aggregate royalty payments of approximately $800,000 and $100,000, respectively. In December 1998, the Third Party became a Series E stockholder. A holder of preferred stock entered into a strategic distribution relationship with the Company. As a result the Company granted the preferred stockholder a limited non-exclusive license to use and distribute the Company's technology and products. The preferred stockholder made license payments and payments for consulting and maintenance services which amounted to approximately 10% of revenues for the year ended December 31, 1997. 15. PENSION PLAN The Company established a defined contribution plan (the "Plan") under Section 401(k) of the Internal Revenue Code. All employees of the Company are eligible to participate in the Plan upon hire. Participants may contribute up to 20% of their eligible earnings, as defined. The Company may decide to make an additional contribution to the Plan on behalf of the Plan participants. No additional contributions have been made by the Company for the years ended December 31, 1999, 1998 and 1997. 16. DISCONTINUED OPERATIONS On January 15, 1999, Market Guide completed the sale of its CreditRisk Monitor ("CRM") division for approximately $2,300,000, which consisted of approximately $1,200,000 paid in cash and notes receivable of approximately $1,100,000. The Company recorded a gain on the sale of approximately $226,000, net of taxes of $163,000, relating to the cash portion of the proceeds received in excess of the net assets of the division. The Company has deferred the gain relating to the notes receivable portion of the sales price until such time as its payment is more fully assured. The notes receivable are summarized as follows: . $1,000,000 secured promissory note, bearing interest at 6.0% beginning on July 1, 2001, payable in 24 equal monthly installments of principal and interest in the amount of $44,320 commencing July 31, 2001 through June 30, 2003. The present value of such promissory note was approximately $792,000 at its origination. . $98,162 secured expense promissory note, accruing interest beginning on February 1, 1999, payable in 24 equal monthly installments of principal and interest in the amount of $5,286 commencing February 28, 2001 through January 31, 2003. Results of operations for the CRM division have been classified as discontinued operations for all periods presented. Revenues and income from discontinued operations are as follows:
1999 1998 1997 ---- ---- ---- Revenues $ -- $ 667,440 $ 297,244 ========= =========== ============ Operating loss................................................................ -- (757,447) (1,087,021) Income tax benefit............................................................ 105,866 317,598 -- ------- ------- ---------- Loss from discontinued operations............................................. $ 105,866 $ (439,849) $(1,087,021) ========= =========== ============ Gain on sale.................................................................. $ 388,448 $ 388,448 Income tax expense (162,876) (162,876) -------- -------- Gain on sale, net............................................................. $ 225,572 $ 225,572 ============= ==============
F-18 MULTEX.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued) 17. SUBSEQUENT EVENTS Merrill Lynch On December 21, 1999, the Company announced a multi-year partnership with Merrill Lynch to co-develop global research and information web sites for clients of Merrill Lynch's institutional e-commerce portal. The companies will jointly develop the next-generation platform for real-time delivery of Merrill Lynch investment strategy and securities research for its institutional clients. As part of this strategic partnership, the Company amended its Electronic Distribution Services Agreement ("EDS Agreement") with Merrill Lynch to incorporate the terms of this new development plan. Also on December 21, 1999, the Company entered into an agreement with Merrill Lynch, which closed on January 21, 2000, as part of its strategic partnership with them and agreed, subject to regulatory approval, to (i) issue 1 million shares of the Company's common stock at $21.60 per share, (ii) issue warrants to purchase 100,000 shares of the Company's common stock, that vest immediately, with an exercise price of $20 per share for $400,000, (iii) issue warrants to purchase 1.5 million shares of the Company's common stock, that vest based on certain performance and renewal criteria, as defined in the agreement, with an exercise price of $20 per share, for $100,000 and (iv) issue warrants to purchase 750,000 shares of the Company's common stock with an exercise price of $50 per share. In addition the Company agreed to purchase software from Merrill Lynch for $500,000 and 200,000 shares of the Company's common stock, which represents the fair value of the software purchased. The software was purchased on February 1, 2000. The Company received the $400,000 for the warrants to purchase 100,000 shares of the Company's common stock with an exercise price of $20 per share on December 22, 1999. These warrants vested immediately and were issued in connection with the EDS Agreement. The Company has valued these warrants, using the Black Scholes valuation model, at $1,856,000. The fair value of the warrants less the $400,000 paid is being amortized over the term of the EDS agreement. The Company received the $100,000 for the warrants to purchase 1.5 million shares of the Company's common stock at an exercise price of $20 per share on December 22, 1999. These warrants vest based on certain performance and renewal criteria, as defined in the agreement, and will be accounted for at their fair market value on the date when the performance is complete. Performance criteria have not been met as of December 31, 1999. On February 1, 2000, the Company received $21.6 million of proceeds from Merrill Lynch for the issuance of 1 million shares of common stock. The sale of the common stock will be accounted for at the fair market value on the date of issuance. Deferred expense will be recorded for the difference between the proceeds and the fair market value of the common stock and will be amortized over the term of the EDS Agreement. In connection with the issuance of the warrants to purchase 750,000 shares of the Company's common stock at $50 per share, the Company will record a deferred charge equal to the fair value of the warrants on the closing date, February 1, 2000, which will be amortized over the term of the EDS agreement. Sage On March 20, 2000, the Company acquired all of the assets of Sage Online, Inc. for approximately $6 million in cash and 354,000 shares of common stock at a fair value of approximately $31 per share. F-19 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Multex.com, Inc.
Additions --------------------------- (1) (2) --------------------------- Balance at Charged to Balance Beginning Costs and Charged to at End Description of Period Expenses Other Accounts Deduction of Period - ----------- --------- -------- -------------- --------- --------- For the Year Ended December 31, 1999 Allowance for doubtful accounts .............. $172,000 $900,599 $(644,599)(a) $423,000 For the Year Ended December 31, 1998 Allowance for doubtful accounts .............. 264,000 148,000 (240,000)(a) 172,000 For the Year Ended December 31, 1997 Allowance for doubtful accounts .............. 154,000 168,130 (58,130)(a) 264,000 (a) Uncollectible accounts written off, net of recoveries.
F-20 EX-10.8(A) 2 MASTER AGREEMENT FOR ELECTRONIC DISTRUBUTION SERVICE Exhibit 10.8(a) MASTER AGREEMENT FOR ELECTRONIC DISTRIBUTION SERVICES Dated as of: November 13, 1998 Between MULTEX SYSTEMS, INC. And MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED SCHEDULES A. Merrill Lynch Online/Multex Service Request (1997) B. Contribution and Distribution of Research C. Multex Publisher for Internal Electronic Distribution Services D. Merrill Lynch OnLine Trial Program Addendum ATTACHMENTS A. Form of Service Request B. Multex or Merrill Lynch Provided Equipment C. Third Party Software/License Requirements for End Users D. Multex Subscriber Agreement 1 MASTER AGREEMENT FOR ELECTRONIC RESEARCH DISTRIBUTION SERVICES THIS MASTER AGREEMENT FOR ELECTRONIC RESEARCH DISTRIBUTION SERVICES ("Agreement") is made and entered into as of the 13th day of November, 1998. by and between MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, a Delaware corporation with offices at Merrill Lynch World Headquarters, North Tower, World Financial Center, 250 Vesey Street. New York, N.Y. 10281 (herein referred to as "Merrill Lynch" or "Licensee"), and MULTEX SYSTEMS, INC. a Delaware corporation with offices at 33 Maiden Lane, 5th Floor, New York, N.Y. 10038 (herein referred to as "Multex"). Multex and Merrill Lynch shall be referred to herein as the "Parties". RECITALS WHEREAS, Merrill Lynch and/or its subsidiaries and affiliates, create, produce and develop various global research data and other financial information about companies, industries and markets as further described in the Schedules and Service Requests hereto. WHEREAS, Multex has developed certain proprietary software, which electronically receives and distributes various research data, including but not limited to global equity, fixed income and economic market data, morning meeting notes, earnings estimates, recommendations, full-text research reports and other financial information and electronic documents. WHEREAS. Multex and Merrill Lynch entered into an Agreement for Electronic Distribution Services dated as of July 1, 1994, pursuant to which Multex agreed to distribute certain Merrill Lynch proprietary research documents to approved Merrill Lynch clients (the "1994 Agreement"). WHEREAS, Multex and Merrill Lynch entered into a Master Agreement for Internal Electronic Distribution Services dated as of April 1, 1996 pursuant to which Multex agreed to distribute Merrill Lynch research within Merrill Lynch in accordance with the terms of that Master Agreement and additional Service Requests to be entered into by the parties (the "1996 Master Agreement"). WHEREAS, Multex and Merrill Lynch executed a Merrill Lynch Online/Multex Service Request dated as of February 28. 1997 for electronic distribution of Merrill Lynch research via the Merrill Lynch system known as Merrill Lynch Online (the "1997 Service Request") The 1994 Agreement, the 1996 Master Agreement and the 1997 Service Request are sometimes hereinafter referred to as the "Existing Agreements". WHEREAS, the parties desire to consolidate the terms and conditions relating to the services provided pursuant to the Existing Agreements and for Multex to provide to Merrill Lynch certain additional services, all as more fully described in this Master 2 Services Agreement and the Schedules and Attachments hereto. NOW THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the parties agree as follows: 1. Definitions. As used in this Agreement and the Schedules and Attachments ----------- hereto, the following terms shall have the meanings set forth below: (a) Approved Data Provider shall mean Data Providers as defined below -- ---------------------- authorized by Merrill Lynch (b) Data Providers shall mean third party research providers who are in the -------------- business of producin9 or procuring research reports, market data and other financial documents for sale or resale to the financial and corporate markets, excluding clients of Merrill Lynch. (c) Equipment shall mean the hardware and software (e.g., workstations, --------- servers, operating software) required in order for Merrill Lynch to access the Services, as more fully described in this Agreement and the Exhibits. (d) External Users shall mean persons or entities other than employees of -------------- Merrill Lynch to whom the Research is provided by means of the Services provided under this Agreement and are approved by Merrill Lynch. (e) Internal Users shall mean the investment professionals and other -------------- employees of Merrill Lynch to whom the Research is provided by means of the Services provided under this Agreement. (f) Multex Software shall mean any of Multex's proprietary software which --------------- is provided to Merrill Lynch hereunder and which is used to receive and distribute Research and otherwise to provide the Services hereunder. The Multex Software includes, but is not limited to (i) Multex Publisher, MultexNet, MuItexEXPRESS, Multex Research on Demand and Multex Investor Network and (ii) certain software licensed from third parties (the "Third Party Software"), as described on Attachment C. The Multex Software and the Third Party Software are sometimes hereinafter referred to as the "Software". (g) Research shall mean the digitized or electronically transmitted data -------- which is contributed to Multex by Merrill Lynch and/or distributed by Multex to Merrill Lynch and Users as part of the Services to be provided under this Agreement and the Schedules and Service Requests. The particular formats, types and contents of the Research covered by this Agreement shall be as set forth in the Schedules and Service Requests. (h) Schedule or Schedules shall mean one or more Schedules attached to this --------------------- Agreement or to a Service Request and made a part hereof which set forth the Services to be provided by Multex to Merrill Lynch, and any terms and conditions related to such Services. 3 (I) Services shall have the meaning ascribed thereto in Section 2(a) below. -------- (j) Service Request shall have the meaning ascribed thereto in Section 2(b) --------------- below. (k) Subscribers shall mean an entity which has subscribed to and is ----------- receiving one or more research distribution services from Multex. (k) Users shall mean either the Internal Users or External Users. ----- 2. Scope of Services. ----------------- (a) Multex Services. Multex agrees to provide Merrill Lynch and its --------------- affiliates, and Merrill Lynch agrees to receive from Multex, the Services described in Section 2(d) below and the applicable Schedules referred to therein, and any additional services as may from time to time be requested by Merrill Lynch or its affiliates and agreed to by the parties (collectively, the "Services"). Services for any individual user or group of users shall be ordered by Merrill Lynch and its affiliates pursuant to a service request ("Service Request") in substantially the form attached hereto as Attachment A. The Service Request shall include a description of the Services being ordered, the Merrill Lynch department, division, affiliate or location ordering the Services, the location(s) where invoices are to be sent, the fee for the Services, the date or dates for the commencement and termination of the Services, the equipment, if any, which is to be provided either by Multex or Merrill Lynch, the permitted number of users, and any other terms and conditions agreed to by the parties. Other than the Services set forth in the Schedules hereto, Merrill Lynch shall have no obligation to execute any Service Request or purchase any Services of any kind by virtue of having executed this Agreement, nor shall Multex be obligated to provide Services until a Service Request has been executed. (b) Merrill Lynch Contribution of Research. Merrill Lynch agrees to provide -------------------------------------- Multex, and Multex agrees to receive from Merrill Lynch, the Research for distribution solely in accordance with the terms and conditions of this Agreement and the Schedules, Service Requests and Attachments to this Agreement. (c) Service Requests. Each Service Request executed by both parties ---------------- pursuant to this Agreement shall be deemed to include and incorporate the provisions of this Agreement. In the event of a conflict or ambiguity between the terms of this Agreement and any Service Request, the provisions of the Service Request shall prevail with respect to the Services that are the subject of such Service Request. Merrill Lynch's affiliates may execute Service Requests pursuant to this Agreement; in such event, the affiliate executing the Service Request shall be deemed to be the customer under such Service Request and shall agree in such Service Request to be bound by the restrictions of this Agreement and shall be afforded the benefits, rights, and protections of this Agreement. If 4 an affiliate receives Services hereunder pursuant to a Service Request which does not contain a written agreement to be bound by the terms and conditions of this Agreement, then Merrill Lynch shall indemnify and hold harmless Multex from and against any loss, liability, claim, damage or expense arising from or in connection with (ii any action, proceeding or claim made or brought against Multex by any such affiliate to the extent that this Agreement bars or otherwise limits Multex's liability with respect to the subject matter of such claim, or (ii) the breach by any affiliate of any of the obligations of (and prohibitions on) Merrill Lynch under this Agreement. (d) Current Services. A description of the Services currently being ---------------- provided to Merrill Lynch, and any additional terms and conditions relating to such Services are set forth in Schedules A through 0 of this Agreement, as described below: (i) MuItexEXPRESS. Pursuant to the Merrill Lynch OnLine/Multex Service ------------- Request dated February 28,1 997, a copy of which is attached hereto as Schedule A (the "Online Service Request"). Multex is providing to Merrill Lynch internal distribution of the Research described in the Online Service Request, all as more particularly set forth in the Online Service Request. The parties agree that, effective as of the date hereof, the Online Service Request shall be amended as set forth below: (A) Upon expiration of the current term of the Online Service Request, which expires on February 28. 1999, the term of the Online Service Request shall continue on a month-to-month basis until either the parties enter into a renewal term or either party terminates such Service Request on 30 days prior written notice to the other party. (B) All references to the term "MultexNet" contained in the Online Service Request shall be changed to the "MuItexEXPRESS", which is the current name of the Multex service which is provided to Merrill Lynch under the Online Service Request. Except as specifically provided herein, all terms of the Online Service Request shall remain in full force and effect. (ii) Contribution and Distribution of Research. Merrill Lynch agrees ----------------------------------------- to provide to Multex the Research described in the Merrill Lynch Contribution and Distribution Services Schedule attached as Schedule B for distribution of such Research only in accordance with the terms of this Agreement and such Schedule B. (iii) Multex Publisher for Internal Electronic Distribution Services. -------------------------------------------------------------- Pursuant to the Multex Publisher Internal Distribution Electronic Distribution Services Schedule attached hereto as Schedule C, Multex 5 will continue to distribute Research within Merrill Lynch by means of Multex Publisher. (iv) Merrill Lynch OnLine Trial Program. Attached hereto as Schedule ---------------------------------- D is copy of executed Merrill Lynch OnLine/Multex Trial Program Addendum effective as of October 29, 1998 which amends the Merrill Lynch Online/ Multex Service Request effective as of February 28. 1997 and continues in effect in accordance with its terms. 3. Equipment. --------- Any equipment such as computers, servers, routers ("Equipment") to be provided by Multex to Merrill Lynch shall be set forth in Attachment B or in the applicable Service Request. Any Equipment provided to Merrill Lynch under this Agreement shall remain the sole and exclusive property of Multex and no right, title or interest in such Equipment is granted to Merrill Lynch. (Except for that Equipment which is purchased by Merrill Lynch from or through Multex in which case Multex shall transfer good and valid title to such Equipment to Merrill Lynch). Merrill Lynch agrees to provide physical facilities, access, and security as reasonably required for the proper installation, operation and maintenance of the Equipment and to surrender Multex's Equipment to Multex upon the termination or cancellation of this Agreement in the sane condition as delivered, reasonable wear and tear excepted. Physical risk of loss or damage to the Equipment while in Merrill Lynch's possession shall be borne by Multex, excluding any damage or loss caused by the gross negligence or willful misconduct of Merrill Lynch. In no event shall Merrill Lynch's liability for loss or damage to any Equipment exceed the depreciated value of the Equipment at the time of loss or damage. Multex is responsible for recovering its Equipment within thirty (30) days' after the cancellation or termination of this Agreement, or any Order Schedule. Merrill Lynch shall not be responsible for any Equipment in its possession more than thirty (30) days' after the date of cancellation or termination of Services. 4. (a) Grant of Software License by Multex. ----------------------------------- As part of the Services provided by Multex under this Agreement and in consideration of the mutual covenants contained herein, Multex hereby grants to Merrill Lynch and it affiliates a non-exclusive, non- transferable, worldwide license ("License") to use Multex Software for the term of this Agreement, including the Third Party Software identified in Attachment C. The Third Party Software is licensed to Merrill Lynch and its affiliates in accordance with the provisions of Attachment C (Third Party License Requirements for End Users) which is incorporated herein and made a part of this Agreement. In the event of any conflict between this Agreement and Attachment C, this Agreement shall control. Merrill Lynch shall have the option of independently licensing Third Party Software for use in connection with the Services pursuant to separate licensing arrangements entered into between Merrill Lynch and third party licensors. The number of users licensed to use Multex Software shall be agreed to and set forth in 6 the applicable Schedule or Service Request. (b) Grant of License by Merrill Lynch. --------------------------------- i. During the time Schedule B remains in effect, Merrill Lynch hereby grants to Multex limited, non-exclusive, non-transferable worldwide license to receive, store and distribute the Research solely to (1) Internal Users; (2) External Users that have executed a Multex Subscriber Agreement in the form Attached hereto as Attachment D; (3) Subscribers who have executed a Multex Subscriber Agreement; and (4) Approved Data Providers for the purpose of redistributing the Research to the clients of such Data Providers("Data Provider Clients"), provided that distribution to External Users, Subscribers and Approved Data Providers is subject to the entitlement provisions set forth in Section 4 of Schedule B. The initial list of Approved Data Providers is attached as Exhibit A to Schedule B, and Multex may not add any Data Providers to this list without the prior written approval of Merrill Lynch in each instance,. ii. Merrill Lynch shall, in its sole discretion, retain editorial control at all times over the selection and dispatch of its Research to Multex for distribution. Merrill Lynch may elect in its sole discretion to withhold certain Research or modify the Research prior to submission to Multex. Merrill Lynch shall have no obligation to provide any particular volume or quantity of Research under this Agreement. Multex shall have the capacity to, and Multex shall delete, block, remove or delay specified Research reports in accordance instructions received from Merrill Lynch and shall, to the extent feasible, immediately comply with all such reasonable instructions. Merrill Lynch retains the unrestricted right to distribute the Research or have the Research simultaneously distributed by any other third party, over any medium of Merrill Lynch's choice. In the event that any Schedule or Service Request s terminated this license shall be deemed terminated with respect to the Research, or portion thereof, covered by said Schedule or Service Request. Notwithstanding anything to the contrary contained herein, Merrill Lynch agrees that the volume, quantity and content of the Research which Merrill Lynch provides to Multex hereunder will be the same as that provided to any other Data Provider to which Merrill Lynch contributes Research, except for a Data Provider whose systems are capable of entitling research by securities product (e.g., by equity or fixed income), and Merrill Lynch will not modify, withhold, delete, block, remove or delay the contribution of Research to Multex unless it does so for all other Data Providers (except those noted above). 5. Correction of Errors. -------------------- Multex shall use reasonable efforts to promptly correct all material errors, defects or bugs (collectively "Error 1 in the Multex Software reported to Multex by Merrill Lynch or its affiliates or that Multex 7 becomes aware of through any other means. With regard to the Third Party Software, Multex will inform the appropriate Third Party of the Error in its Third Party Software and seek prompt corrections of such error in accordance with the Multex contract with such Third Party. 6. Independent Contractor. ---------------------- Multex (and its employees), in performance of this Agreement, is acting as an independent contractor. Personnel supplied by Multex hereunder are not Merrill Lynch's personnel or agents, and Multex assumes full responsibility for their acts. Multex shall be solely responsible for the payment of compensation, benefits, insurance and taxes relating to Multex's employees assigned to perform services hereunder. Notwithstanding the foregoing, Multex (and its employees) shall abide by Merrill Lynch rules and regulations while visiting Merrill Lynch's premises. 7. Cost/Fees. --------- (a) Merrill Lynch is responsible for the costs relating to (i) the development of the Research; (ii) the contribution and delivery of the Research to Multex's central computer facilities, and (iii) the distribution of the Merrill Research within the Merrill Lynch organization (except as otherwise provided in a Service Request). Such costs include the costs of Merrill Lynch's telecommunication lines, telephones, modems, computers, magnetic tape, magnetic tape delivery and messenger services. (b) Except for the fees set forth in the Schedules. Multex shall be responsible for all costs associated with the distribution of the Services to its Subscribers and Data Providers, Such costs include, without limitation, the costs of its own telecommunication lines, telephones, modems, computers, magnetic tape, magnetic tape delivery and messenger services. (c) The fees for the Services are set forth in the applicable Schedules and/or Service Requests. 8. Term; Termination. ----------------- (a) The term of this Agreement shall commence as of the date of this Agreement (the "Effective Date") and shall remain in effect so long as the Schedules and Service Requests issued pursuant to this Agreement remain in effect. Each Schedule and Service Request executed hereunder shall include such term and termination provisions as are mutually agreed upon between the parties. (b) Notwithstanding the term set forth above or in a Service Request, in the event either party to this Agreement shall fail to perform or observe any material term, covenant, agreement or warranty, the other party may immediately terminate this Agreement and/or the applicable Schedule or Service Request if such failure is not corrected within 30 days after 8 delivery of written notice thereof to the other party (provided however if the failure cannot reasonably be corrected within 30 days and the defaulting party has commenced a cure of its performance during such thirty (30) day period and proceeds to cure the default, the time for curing such default shall be extended for such period as may be necessary to cure the default). (c) If, during the term of this Agreement either party shall cease doing business or if a petition in bankruptcy shall be filed (voluntary or involuntary) with respect to a party, the other party may terminate this Agreement upon 10 days written notice to the other party. (d) Multex shall be responsible for the payment of any and all taxes (including but not limited to sales, use, withholding, gross receipts or excise taxes) imposed on any Services or Research provided to third parties. Merrill Lynch shall not be responsible, and Multex shall pay or reimburse Merrill Lynch for payment of any tax related to Research provided to any third party. Multex agrees to notify Merrill Lynch of any tax liability or potential tax liability, and of any pending or threatened tax audit or other proceeding that could lead to the imposition of tax liability against Merrill Lynch and shall afford Merrill lynch all reasonable opportunity to participate in any such audit or proceeding affecting its interests. Merrill Lynch shall be responsible for the payment of any and all taxes (including but not limited to sales, use, withholding, gross receipts or excise taxes) imposed on its receipt of any Services or Research provided hereunder. (e) Should Merrill Lynch fail to pay when due any sum of money due under this Agreement, the Schedules or a Service Request and such failure shall continue for a period of thirty (30) days after notice thereof, Multex, at its option, may, upon written notice thereof, (i) terminate the applicable Schedule or Service Request. (ii) whether or not the applicable Schedule or Service Request is terminated take immediate possession of any or all of the items of Equipment owned by Multex not fully paid for, wherever situated and for such purpose enter upon any premises without liability for so doing. and (iii) sell, dispose of, hold, use or lease any items of Equipment not fully paid for, as Multex, in its sole discretion, may decide. (f) Should Merrill Lynch fail to contribute the Research to Multex in accordance with the terms of Section 4(b) of this Agreement and Schedule B, and such failure continues for more than 10 days after written notice thereof, then Multex shall have the right to terminate this Agreement and all of the Services provided hereunder. (g) The remedies contained in this Paragraph 8 are cumulative and are in addition to all other rights and remedies available to either party under this Agreement and the Schedules and Service Request hereto, by 9 operation of law or otherwise. 9. Disposition of Software and other Materials. ------------------------------------------- Upon the expiration or termination of this Agreement and all Service Requests hereunder, for whatever reason, and upon the written request of Multex. Merrill Lynch shall return to Multex the Multex Software (including the magnetic or other physical media on which it was originally or subsequently recorded or fixed) and all related documentation, as well as all hardware and Equipment owned by Multex in good condition, reasonable wear and tear and damage by the elements excepted. At the written direction of Multex, the Multex Software may be completely deleted, erased or otherwise destroyed by Merrill Lynch. 10. Unlawful Use. ------------ Merrill Lynch shall not use or permit any person or entity under its control to use the Services for any unlawful purpose. 11. Distribution of Service. ----------------------- Except as set forth in the Schedules and Service Requests, Merrill Lynch is not authorized or permitted to furnish the Services to any person or firm other than its employees, affiliates and their employees, for re-use, redistribution or retransmission without the prior approval of Multex. 12. Limitation of Liability. ----------------------- (a) Multex will use its best efforts to provide the Services to Merrill Lynch and its affiliates as described herein. However. Merrill Lynch understands that Multex cannot and does not guarantee the content, accuracy, timeliness or availability of the Services or the Research as displayed or provided through the Services. ACCORDINGLY. MERRILL LYNCH AGREES THAT UNLESS THE FOLLOWING ARE CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF MULTEX. MULTEX SHALL NOT HAVE ANY LIABILITY OR OBLIGATION TO MERRILL LYNCH OR ITS AFFILIATES (WHETHER CAUSED DIRECTLY OR INDIRECTLY) RELATING TO (I) INTERRUPTION, DELAY OR FAILURE IN THE TRANSMISSION, PROCESSING, DELIVERY OR DISTRIBUTION OF THE SERVICES OR THE RESEARCH; (II) THE UNAVAILABILITY OF MULTEX SOFTWARE OR THE SERVICES; (III) THE ACCURACY OF THE MERRILL LYNCH RESEARCH; OR (IV) THE ACTS OR OMISSION OF MERRILL LYNCH. (b) Except for Multex's liability under Paragraph 13(a) and 14(a) and damages arising from the gross negligence or willful misconduct of Multex, Multex's maximum liability hereunder for any other cause, not exculpated hereunder, whether in tort or contract, shall not exceed the 10 lesser of actual damages or $100,000; provided, however, if the fees paid to Multex pursuant to this Agreement in any one (1) calendar year period exceed sioo,000; Multex's maximum liability shall be raised from $100,000 to the amount of such fees paid over said-one (1) year period. (c) Third Parties who provide portions of the Services to Multex shall not have any direct or indirect liability under this Agreement to Merrill Lynch for monetary damage on account of the Services provided or to be provided by Multex hereunder. (d) Multex conducts no review whatsoever and exercises no editorial control over the Research. and accordingly, Multex shall have no liability to Merrill Lynch whatsoever (whether in contract or tort) for the content, completeness or accuracy of the Research. (e) Multex understands that Merrill Lynch cannot and does not guarantee the content or accuracy of the Research or any related data, information or documentation provided by Merrill Lynch hereunder. ACCORDINGLY, MULTEX AGREES THAT MERRILL LYNCH SHALL NOT BE LIABLE FOR ANY LOSS, DAMAGE, INJURY OR EXPENSE, CAUSED BY ITS NEGLIGENCE OR OTHERWISE, ARISING DIRECTLY OR INDIRECTLY, IN CONNECTION WITH THE RESEARCH UNLESS CAUSED BY ITS OWN WILLFUL OR INTENTIONAL MISCONDUCT OR GROSS NEGLIGENCE AND MERRILL LYNCH SHALL NOT BE LIABLE FOR ANY LOSS, DAMAGE. INJURY OR EXPENSE CAUSED BY OR ARISING FROM ANY ACTION OR INACTION OF MULTEX or ANY USER. Except for Merrill Lynch's liability under Paragraph 13(b) and 14(b) and damages arising from the gross negligence or willful misconduct of Merrill Lynch, Merrill Lynch's maximum liability hereunder for any other cause, not exculpated hereunder, whether in tort or contract, shall not exceed the lesser of actual damages or $100,000; provided, however, if the fees paid to Multex pursuant to this Agreement in any one (1) calendar year period exceed $100,000, Merrill Lynch's maximum liability shall be raised from $100,000 to the amount of such fees paid over said one (1) year period. (f) NEITHER PARTY SHALL BE LIABLE FOR ANY, INDIRECT CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANYTHING BEYOND ITS REASONABLE CONTROL. FOR THE PURPOSES OF THIS SECTION, DAMAGES PAYABLE TO A THIRD PARTY IN AN ACTION FOR WHICH A PARTY IS INDEMNIFIED UNDER SECTION 13 OF THIS AGREEMENT SHALL NOT BE DEEMED CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES. 11 (g) The parties acknowledge and agree that the limitations of liability set forth in this Section 12 are a condition of this Agreement, and that the Fees reflect the allocations of risk set forth in this Section 12. 13. Indemnity. --------- (a) Multex shall defend and/or handle at its own cost and expense any claim or action brought by a third party against Merrill Lynch, its parent company, and its or their subsidiaries and/or affiliated companies (also referred to collectively as Merrill Lynch "affiliates"), for actual or alleged infringement of any patent, copyright, trademark or other proprietary right, including, but not limited to, misappropriation of trade secrets (collectively, Proprietary Rights} based on any software, programs. Equipment. Services, and/or other materials furnished to Merrill Lynch by Multex pursuant to the terms of this Agreement (including, without limitation, Multex Software and the Third Party Software included therein) or the use thereof by Merrill Lynch or its affiliates in accordance with the terms of this Agreement;, provided, however, that Multex shall have the sole right to control the defense and settlement of such action and all rights of appeal, and shall not be liable to Merrill Lynch or its affiliates for any costs, settlements, compromises or legal fees of any kind incurred or entered into by Merrill Lynch or its affiliates without Multex's prior written approval. Multex shall indemnify and hold harmless Merrill lynch and its affiliates, from and against all liabilities, losses, damages, costs and expenses (including but not limited to, attorneys' fees, costs and disbursements) associated with any such claim or action In the event any Services, Software or materials provided hereunder are deemed to & suspected to infringe the Proprietary Rights of any third party, Multex may immediately terminate this Agreement, or, subject to Merrill Lynch's approval, substitute non-infringing, equally functional software, materials or services. Any such termination of this Agreement shall not relieve Multex of its obligations pursuant to this Section 13(a). In the event of such termination, Multex shall refund to Merrill Lynch all prepaid fees for Services not rendered or received. Multex's obligations hereunder shall be contingent upon Merrill Lynch promptly notifying Merrill Lynch of any such claim and cooperating, at Multex's expense, in the litigation. (b) Merrill Lynch shall defend and/or handle at its own cost and expense any claim or action brought by a third party against Merrill Lynch for actual or alleged infringement of Proprietary Rights based on the Research as provided by Merrill Lynch provided, however, that Merrill Lynch shall have the sole right to control the defense and settlement of such action and all rights of appeal, and shall not be liable to Multex for any costs, settlements, compromises or legal fees of any kind incurred or entered into by Multex without Merrill Lynch's prior written approval. Merrill Lynch shall indemnify and hold harmless Multex and its affiliates 12 from and against all liabilities, losses, damages, costs and expenses (including but not limited to, attorneys' fees, costs and disbursements) associated with any such claim or action. Merrill Lynch's obligations hereunder shall be contingent upon Multex promptly notifying Merrill Lynch of any such claim and cooperating, at Merrill Lynch's expense, in the litigation. 14. Confidential Information. ------------------------ (a) "Confidential Information" shall mean (i) with respect to Merrill Lynch, any information obtained by Multex (or its employees or agents) from, or disclosed to Multex (or its employees or agents) by, Merrill Lynch, or its affiliates or clients, which is marked as confidential or which ought reasonably to be understood to be confidential concerning the past or present business activities of said entities, and/or their clients, including, but not limited to, any information relating to the Merrill Research, pricing, methods, strategies, processes, financial data, investments, accounts, assets, lists, technical data, software programs, apparatus, statistics, research, multimedia programs and strategies, programs, specifications, documentation, development plans, or related information, and the results from the provision of the Services performed by Multex under this Agreement and (ii) with respect to Multex, the Multex Software and any related documentation or specifications, and any other information obtained by Merrill Lynch or its affiliates (or its or their employees or agents) which is marked as confidential, or which ought reasonably to be understood to be confidential, concerning Multex's business and operations and financial condition; the software, systems, data bases, hardware and information services used by Multex to conduct its business, including the configurations hereof; and Multex's customer lists and prospects.. Notwithstanding the foregoing, the internal distribution of Research to Merrill Lynch employees pursuant to a Service Request by Multex in accordance with the terms of this Agreement shall not be deemed a breach of this paragraph 14 (a). (b) Multex shall protect the confidentiality of the Research and shall not disclose such Research to any entity or person except as expressly permitted herein. Multex shall refrain from (i) making any representations or warranties of any kind concerning the Research or (ii) modifying, amending, editing, or otherwise revising, in any manner, the content or format of the Research. The Research shall be transmitted as described herein in their entirety (including all accompanying disclaimers and proprietary notices) and without revision by Multex. Multex shall use reasonable efforts to prevent interception, inappropriate disclosure, or use of the Research by unauthorized persons. Towards that end, Multex will ensure that its employees abide by the provisions of this Agreement and do not illegally trade on or wrongfully disclose or use any information given to Multex by Merrill 13 Lynch. (c) Each party shall hold the Confidential Information of the other party in trust and confidence for the other party and shall not reproduce, disclose to any person, or firm or enterprise, or use for its own benefit, any such Confidential Information (except as specifically permitted or contemplated by this Agreement). Notwithstanding the foregoing, it is agreed that neither party shall not have any liability for breach of any confidentiality obligation by its clients or other third parties not under such party's control. (d) Without limiting the generality of the foregoing, Confidential Information will not include information that (i) is already rightfully known to a party at the time it is obtained from the other party, free from any obligation to keep such information confidential; (ii) is or becomes publicly known through no wrongful act of either party; (iii) is rightfully received from a third party without restriction and without breach of this Agreement; (iv) is independently acquired or developed by a party without breach of any obligation hereunder; or (v) is required to be disclosed pursuant to law, governmental regulation, or court order. 15.Ownership Rights. ---------------- (a) The Research shall remain the sole and exclusive property of Merrill Lynch and/or its affiliates and Multex shall not acquire any rights in the Research. (b) The Multex Software shall remain the property of Multex. Merrill Lynch and its affiliates may use the Multex Software only in conjunction with the Services. Merrill Lynch shall not permit the Multex Software to be used by more than the number of users as may be agreed to between Merrill Lynch and Multex. Merrill Lynch shall not copy, in whole or in part, the Multex Software or related documentation, whether in the form of computer media, printed or in any other form; provided, however, that for each Service Request, Merrill Lynch and its affiliates may make one(1) copy of the Software for back-up purposes only. (c) The License granted herein is for the limited purposes of enabling Merrill Lynch and its affiliates to contribute the Research to Multex, and to receive the Services and distribute the Merrill Research and other research materials provided by Multex within Merrill Lynch and its affiliates. (d) MERRILL LYNCH SHALL NOT MAKE ANY ALTERATION, CHANGE OR MODIFICATION TO THE MULTEX SOFTWARE. MERRILL LYNCH MAY NOT RECOMPILE, DECOMPILE. DISASSEMBLE. OR REVERSE ENGINEER THE MULTEX SOFTWARE OR MAKE OR DISTRIBUTE ANY OTHER FORM OF THE MULTEX SOFTWARE. 14 (e) Merrill Lynch may use the trademarks of Multex or its licensors only to identify printed output produced by the Multex Software and only in accordance with accepted trademark practice, including identification of the relevant trademark owner's name. The use of any trademark as authorized herein does not give Merrill Lynch any rights of ownership or other rights relating to the trademark, and all goodwill resulting from any such use shall inure to the benefit of the relevant trademark owner. (f) Multex may use the trademarks of Licensee and Merrill Lynch & Co., Inc only as necessary to identify the source of the Research and only in accordance with accepted trademark practice, including identification of the relevant trademark owner's name. The use of any trademark as authorized herein does not give Multex any rights of ownership or other rights relating to the trademark, and all goodwill resulting from any such use shall inure to the benefit of the relevant trademark owner. 16.Warranties. ---------- (a) Multex hereby represents, warrants, and covenants to Merrill Lynch and its affiliates as follows: (i) Multex is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full authority to enter into this Agreement and shall comply with applicable laws; (ii) Multex Software and the Services provided to Merrill Lynch and its affiliates shall not infringe the Proprietary Rights of any third party; (iii) Multex has the legal right and authority to license Multex Software (including, without limitation, the Third Party Software included therein) to Merrill Lynch and its affiliates as described herein; and (iv) The medium on which Multex Software is furnished is warranted to be free of detects in materials and workmanship under normal use for a period of thirty (30) days from the date of delivery of Multex Software pursuant to each Service Request. (b) Merrill Lynch represents, warrants and covenants to Multex that: (i) Merrill Lynch is the owner of and has the right to provide the Research to Multex for distribution as provided herein; (ii) Merrill Lynch has the right to internally distribute the Research; (iii) To the best of its knowledge, the Research does not infringe the Proprietary Rights of any third Party; (iv) Merrill Lynch will comply with all laws and regulations applicable to the use and internal distribution of the Merrill Research, and will comply with the laws relating to the preparation of the Research of the jurisdiction in which such Research is prepared. (c) THE EXPRESS WARRANTIES AND LIMITATIONS SET FORTH 15 HEREIN CONSTITUTE THE ONLY WARRANTIES OF MULTEX AND MERRILL LYNCH (AND ITS AFFILIATES) AND ARE IN LIEU OF ALL OTHER WARRANTIES, WRITTEN OR ORAL, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THOSE OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE. MULTEX AND ITS LICENSORS DO NOT AND CANNOT WARRANT THE PERFORMANCE OR RESULTS MERRILL LYNCH OR ITS AFFILIATES OR CLIENTS MAY OBTAIN BY USE OF MULTEX SOFTWARE OR THE SERVICES. THE MERRILL RESEARCH IS PROVIDED TO MULTEX ON AN "AS IS" BASIS, WITH ALL FAULTS AND DEFECTS CONTAINED THEREIN, MERRILL LYNCH DOES NOT MAKE ANY WARRANTIES, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY. FITNESS FOR A PARTICULAR USE OR ANY OTHER MATTER WITH RESPECT TO THE RESEARCH AND EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NO REPRESENTATION OR STATEMENT SHALL BE BINDING UPON MERRILL LYNCH AS A WARRANTY OR OTHERWISE. 17. Insurance. --------- Multex shall procure and maintain for itself and its employees all insurance coverages as required by Federal or State law, including workers' compensation insurance. Multex shall procure and maintain for itself: (i) Employers' Liability Insurance coverage including bodily injury coverage, with a minimum of $100,000 for each employee; (ii) general liability coverage of at least $1,000,000 and (iii) automobile liability coverage of at least $500,000. Upon request, Multex shall provide evidence of such policies (including certificates of insurance) to Merrill Lynch. Such policies shall contain an express waiver of any right of subrogation. 18. Advertising. ----------- Neither party shall use the name or marks of the other or its parent or any subsidiary or affiliated company in any publicity release, advertising, or publicly displayed or distributed materials without securing the prior written consent of the party whose name is to be used, which may be withheld in said party's sole discretion. Notwithstanding the foregoing, Multex may disclose the fact of and terms of this Agreement (but not Merrill Lynch Confidential Information) to its directors, officers, employees, and representative and potential investors of Multex. Merrill Lynch may reference Multex's name in reports, analyses, and other materials in the ordinary course of its business. Multex may include Merrill Lynch's name as a contributor to Multex's distribution services. 19. Successors and Assigns. ---------------------- This Agreement shall be binding upon the parties respective 16 successors and permitted assigns. Neither party may assign this Agreement and/or any of its rights and/or obligations hereunder without the prior written consent of the other party, and any such attempted assignment shall be void. 20. Governing Law. ------------- The validity of this Agreement, the construction and enforcement of its terms, and the interpretation of the rights and duties of the parties shall be governed by the laws of the State of New York. 21. Modifications. ------------- No modification, amendment, supplement to or waiver of this Agreement or any Service Request or Attachment hereunder, or any of their provisions shall be binding upon the parties hereto unless made in writing and duly signed by both parties. 22. Waiver. ------ A failure or delay of either party to this Agreement to enforce at any time any of the provisions hereof, or to exercise any option which is herein provided, or to require at any time performance of any of the provisions hereto shall in no way be construed to be a waiver of such provisions of this Agreement. 23. Exhibits. -------- The terms and conditions of any and all Exhibits and Attachments to this Agreement are incorporated herein by this reference and shall constitute part of this Agreement as if fully set forth herein. 24. Compliance with Law. ------------------- Multex shall comply with all applicable U.S., state and local laws and regulations in its performances of its obligations hereunder and the Services will comply with applicable law. 25. Heading. ------- The headings herein are for convenience of reference only and shall not impact the meaning of this Agreement. 26. Entire Agreement. ---------------- This Agreement constitutes the entire Agreement between the parties concerning the subject matter hereof and shall supersede all prior agreements or understandings concerning such subject matter. 27. Survival. -------- Notwithstanding any termination of this Agreement, the provisions of Section 3,6, 8 (e), 9, 12. 13, 14, 15, 16, 18, 19, 27, and 31 shall survive termination. 28. Access. ------ 17 Merrill Lynch shall provide Multex with reasonable access to its premises to perform the obligations set forth herein. Multex shall abide by the site regulations and security procedures applicable to each site. 29. Force Majeure. ------------- In no event shall either party be liable to the other for any delay or failure to perform hereunder (other than a failure to pay any amounts due hereunder), which delay or failure to perform is due to causes beyond the reasonable control of said party including, but not limited to, acts of God; acts of a public enemy; acts of the United States of America; fires, floods; epidemics; quarantine restrictions; strikes; and freight embargoes. In every case, the delay or failure to perform must be beyond the control and without the fault or negligence of the party claiming excusable delay, and the party claiming excusable delay must promptly notify the other party of such delay. Without limiting the foregoing, strikes or other labor discord by a party's employees or the employees of its agents or subcontractors will not excuse such party's delay or failure to perform. 30. Computer Security Guidelines; Merrill Lynch Firewalls. ----------------------------------------------------- (a) Multex represents and, warrants that under the terms of this Agreement: (i) all Multex interconnectivity to Merrill Lynch and its affiliates' computing systems and/or networks and all attempts at. same shall be only through Merrill Lynch's security gateways and/firewalls; (ii) it will not access, and will not permit unauthorized persons or entities to access. Merrill Lynch computing systems and/or networks without Merrill Lynch's express written authorization and any such actual or attempted access shall be consistent with any such authorization; and (iii) it will use a virus detection/scanning program or connect to Merrill Lynch or its affiliates via a virus clean environment prior to any attempts to access any of Merrill Lynch's computing systems and/or networks and upon detecting a virus, all attempts to access Merrill Lynch's computing and/or networks shall immediately cease and shall not resume until any such virus has been eliminated. (b) Merrill Lynch uses front end computers known as firewalls (the "Firewalls") to insure network security. The Firewalls have the ability to alter and cancel data transmissions based on internal Merrill Lynch specifications. Multex will deliver Research electronically to the Firewalls and shall be responsible for document integrity to the Firewalls and to any Merrill Lynch test sites provided for in the Schedules. Merrill Lynch shall be solely responsible for document integrity from the Firewalls throughout Merrill Lynch. 31. Notices. ------- Except as otherwise expressly provided herein or in any Service 18 Request, any notice or other communication required or permitted shall be in writing and shall be delivered via overnight delivery service, personal delivery, or certified mail, return receipt requested addressed as follows: If to Multex: Multex Systems, Inc. 33 Maiden Lane 5th Floor New York, New York 10038 Attention: President If to Merrill Lynch: Merrill Lynch, Pierce, Fenner & Smith, Incorporated 250 Vesey Street, 17th Floor New York, New York 10028 Attention; Jack Roehrig Merrill Lynch, Pierce, Fenner & Smith. Incorporated 222 Broadway222 Broadway, 17th Floor New York, New York 10038 Attention: Corporate Law Department Or so such other address as shall be given by either party to the other in writing. 32. Import/Export Restrictions. -------------------------- (a) This Agreement is made subject to any laws, regulations. orders or restrictions on the export of the Services, Multex Software, and Equipment that may be imposed at any time or from time to time by the U.S. Government or other governmental authorities with jurisdiction over the parties. Both parties (i) shall comply with all such laws, regulations, permits, orders and other restrictions to the extent that they are applicable to the Services, Equipment, and/Multex Software and (ii) shall not directly or indirectly, export or re-export (as defined in the United States Export Administration Regulations) the Services, Multex Software, or Equipment to any country for which the U.S. Government, or any agency thereof, requires an export license or other governmental approval without first obtaining the same. With respect to all Multex Software. Equipment and related Services exported outside of the United States pursuant to the is Agreement, except as otherwise provided on a Service Request. Multex shall act as the exporter of record for purposes of the Export Administration Act of 1979. as amended, and all other relevant laws or regulations. 33. Foreign Corrupt Practices Act. ----------------------------- Multex represents, warrants and covenants to Merrill Lynch and its 19 affiliates that it is aware of and familiar with the provisions of the Foreign Corrupt Practices Act of 1977. as amended (the FCPA"), and its purposes will take no action and make no payment in violation of, or which might cause Multex or Merrill Lynch or any its affiliates or its and their respective directors, officers, employees or agents to be in violation of, the FCPA. Multex will act in full compliance with the FCPA. Multex further represents and warrants that no person employed by it in connection with the performance of its obligation under this Agreement is an official of the government of any foreign country, or any agency thereof, and that no part of any monies or consideration paid hereunder shall accrue for the benefit of any such official. Notwithstanding anything to the contrary, if Multex takes any action that could constitute a violation of the FCPA, Merrill Lynch may, at its sole option, immediately terminate this Agreement. Furthermore, for the purposes of reasonably ensuring compliance with the FCPA, Multex agrees that, upon request by Merrill Lynch at any time during the term of this Agreement. Multex will make available for audit by an accounting firm designated by Merrill Lynch which is reasonably acceptable to Multex, Multex's books, records and other documentation relevant to its business activities conducted pursuant to this Agreement. The accounting firm shall provide to Merrill Lynch only such information obtained from such review that relates to a possible violation of the FCPA. Merrill Lynch shall pay any and all costs of any such requested audit. 34. Former Agreements. ----------------- This Agreement replaces and supersedes the 1994 Agreement and the 1996 Master Agreement, which agreements are deemed cancelled as of the date hereof. IN WITNESS WHEREOF, the parties hereto, each acting under due and proper authority, have executed this Agreement as of the date first above written. MERRILL LYNCH, PIERCE, FENNER MULTEX SYSTEMS, INC & SMITH INCORPORATED /s/ /s/ By:________________________ By:________________________ Name:______________________ Name:______________________ Title:_____________________ Title:_____________________ Date:______________________ Date:______________________ 20 EX-10.8(B) 3 ADDENDUM NO.3 TO MASTER AGREEMENT Exhibit 10.8(b) EXECUTION COPY Addendum No. 3 to Master Agreement for Electronic Distribution Services Dated as of December 21, 1999 Reference is made to the Master Agreement for Electronic Distribution Services dated as of November 13, 1998 between Multex Systems, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") (the "M.A.") and ------------- ---- all Schedules and Attachments thereto and all prior amendments to, and service requests under, any of the foregoing. All of the Schedules and Attachments, prior amendments and service requests (together with the M.A., the "Master ------ Agreement") constituting part of the Master Agreement are set out on Exhibit A - --------- --------- hereto. This is Addendum No. 3 ("Addn-3"), dated and to be effective as of December ------ 21, 1999 (the "Addn-3 Effective Date"), to the Master Agreement, and is made by --------------------- and between Merrill Lynch and Multex.com, Inc. (formerly, Multex Systems, Inc.) ("Multex"; together with Merrill Lynch, the "Parties"). Any capitalized term ------ ------- not defined in this Addn-3 shall have the meaning ascribed to it in the Master Agreement. Except as specifically amended by this Addn-3, the terms and conditions of the Master Agreement shall remain in full force and effect. In the event of any conflict or inconsistency between the provisions of the Master Agreement and the provisions of this Addn-3, the provisions set forth in this Addn-3 shall prevail with respect to the specific matter referenced herein. The Master Agreement as revised by this Addn-3 is hereinafter referred to as the "1999 Master Agreement." --------------------- In consideration of the mutual promises contained herein, the Parties hereby agree that the Master Agreement is amended as follows: 1. Definitions Terms with initial capitalization shall have the meanings set forth below. 1.1. "Acceptance" means accepted pursuant to the terms of a Project Plan. ---------- 1.2. "Actual Salary" means the cash salary actually paid by Multex to an ------------- Employee (including reasonable overtime), pro-rated to the extent that the Employee worked on Projects for less than one (1) Man Year; provided, that for purposes of the calculations herein, such salary amount shall not exceed the amount equal to the non-overtime salary cost of one (1) Man Year for such Employee. 1.3. "Additional Projects" has the meaning set forth in Section 3.5. ------------------- ----------- 1.4. "Addn-3 Effective Date" means December 21, 1999, the effective date --------------------- of this Addn-3 as set forth above. 1 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 1.5. "Addn-3 Initial Term" has the meaning set forth in Section 20.1. ------------------- ------------ 1.6. "Addn-3 Renewal Term" has the meaning set forth in Section 20.1. ------------------- ------------ 1.7. "Bonus" means the bonus paid in cash by Multex to an Employee pro- ----- rated to the extent that the Employee worked on Projects for less than one (1) Man Year, and excluding securities, stock options, warrants and other non-cash compensation or payment. 1.8. "Change of Control" has the meaning set forth in Section 16.1. ----------------- ------------ 1.9. "Confidential Information" has the meaning set forth in Section ------------------------ ------- 14(a) of the M.A. - ----- 1.10. "Customer Data" has the meaning set forth in Section 15.1. ------------- ------------ 1.11. "Customized Software" has the meaning set forth in Section 7.3. ------------------- ----------- 1.12. "Data and Equipment Fees" has the meaning set forth in Section ----------------------- ------- 11.5. - ---- 1.13. "Data and Equipment Services" has the meaning set forth in Section --------------------------- ------- 11.5. - ---- 1.14. "Data Fees" has the meaning set forth in Section 11.1. --------- ------------ 1.15. "Data Feeds" has the meaning set forth in Section 11.1 ---------- ------------ 1.16. [*****] 1.17. "Delivery Date" has the meaning set forth in Section 3.9. ------------- ----------- 1.18. "Disseminate" and "Dissemination" refer to disseminating, ----------- ------------- delivering, publishing, transmitting, broadcasting, providing access to, making available (including without limitation on servers) and otherwise distributing research, content and New Content Forms, and software in connection therewith, over Interactive Services. 1.19. "Domain Agreement" has the meaning set forth in Section 18. ---------------- ---------- 1.20. "Employee" and "Employees" mean one or more full-time employees of -------- --------- Multex, provided that no person shall be deemed to be an Employee hereunder unless he or she has signed a confidential and nondisclosure agreement substantially in the form of Schedule 1.20. ------------- 1.21. "Employee Benefit Costs" means insurance costs, FICA expenses and ---------------------- other benefits provided to an Employee by Multex, as such costs are agreed to in writing in advance by ML, adjusted on a quarterly basis, but in any event not to exceed twenty-five percent (25%) of the Actual Salary of such Employee, unless such percentage amount is modified pursuant to a written agreement of the Parties such as an overhead sharing agreement. 1.22. "Employee Overhead" means (i) with respect to an Employee, forty ----------------- percent (40%) of the sum of such Employee's Actual Salary, Bonus and Employee Benefit Costs, and (ii) with 2 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY respect to an Outside Consultant, twenty percent (20%) of the sum of such Outside Consultant Cost, in each case unless such percentage amount is modified pursuant to a written agreement of the Parties such as an overhead sharing agreement except as otherwise set forth in Section 7.5. ------- --- 1.23. "Equipment" has the meaning set forth in Section 3 of the M.A. --------- --------- 1.24. "Equipment Fees" has the meaning set forth in Section 11.3. -------------- ------------ 1.25. "First Cure Period" has the meaning set forth in Section 3.9. ----------------- ----------- 1.26. "First Implementation Right" has the meaning set forth in Section -------------------------- ------- 9.3. - ---- 1.27. [*****] 1.28. [*****] 1.29. "In-Context Hyperlink" and "In-Context Hyperlinks" mean one or more -------------------- --------------------- hyperlinks to a hypertext document related to a specific HTML page or section having a direct association to said hyperlink. 1.30. "Initial Team Size" has the meaning set forth in Section 3.1. ----------------- ----------- 1.31. "Intellectual Property Rights" means: (i) patents, patent ---------------------------- applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice), including but not limited to any reissues, continuations, continuations-in-part, divisions, revisions, extensions or reexaminations thereof; (ii) domain names, trademarks, service marks, trade dress, trade names, corporate names, logos and slogans (and all translations, adaptations, derivations and combinations of the foregoing) and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; (v) trade secrets, confidential information and know-how (including but not limited to ideas, formulae, compositions, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, financial and accounting data, business and marketing plans, and customer and supplier lists and related information); and (vi) all other intellectual property rights (including but not limited to mask works). 1.32. "Interactive Service" and "Interactive Services" refer to the ------------------- -------------------- Internet, intranets and extranets and sites, portals, services and platforms thereon; cable, cellular, wireless and two-way networks, interactive platforms and services; and other technologies, means and modes for Disseminating and receiving interactive content now known or hereafter developed. 1.33. "International ML Interactive Service" has the meaning set forth in ------------------------------------ Section 6.3. - ----------- 1.34. "Internet" means the Internet and any successor or ancillary -------- network, including, without limitation, what is currently referred to as Internet 2. 3 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 1.35. "Joint Development Project" and "Joint Development Projects" have ------------------------- -------------------------- the meanings set forth in Section 7.1. ----------- 1.36. "Joint Development Work Project" shall have the meaning set forth ------------------------------ in Section 19.2. ------------ 1.37. "Licensed Software" has the meaning set forth in Section 8.1. ----------------- ----------- 1.38. "Licensee" has the meaning set forth in Section 17.2. -------- ------------ 1.39. "Licensor" has the meaning set forth in Section 17.2. -------- ------------ 1.40. "Look and Feel Project Plan" and "Look and Feel Project Plans" have -------------------------- --------------------------- the meaning set forth in Section 6.1. ----------- 1.41. "Man Year" means the equivalent of working ten (10) hours a day and -------- five (5) days a week for fifty-two (52) weeks a year; provided that when an Employee is a Team Member, Man Year means the equivalent of working ninety-five percent (95%) of the foregoing amount of time. 1.42. "Marks" has the meaning set forth in Section 17.1. ----- ------------ 1.43. "Master Agreement" has the meaning set forth in the recitals ---------------- hereof. 1.44. "Master Templates" has the meaning set forth in Section 6.1. ---------------- ----------- 1.45. "Material Project" has the meaning set forth in Section 3.9. ---------------- ----------- 1.46. "Minimum License Fees" has the meaning set forth in Section 8.4. -------------------- ----------- 1.47. "ML" means Merrill Lynch, Pierce, Fenner & Smith Incorporated and -- its affiliates worldwide. 1.48. "ML Custom Code" has the meaning set forth in Section 8.2. -------------- ----------- 1.49. "ML Customer" and "ML Customers" mean one or more persons and ----------- ------------ entities who conduct transactions with ML directly or indirectly including, without limitation, through an intermediary or affiliate, or persons or entities who are Site Visitors (as such term is defined in Section 8.4). ----------- 1.50. "ML Employees" means the employees and other agents of ML. ------------ 1.51. [*****] 1.52. [*****] 1.53. "ML Global Retail Agreement" has the meaning set forth in Section -------------------------- ------- 2.2. - --- 4 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 1.54. "ML Institutional" means ML excluding ML Retail. ML Institutional ---------------- includes, without limitation, the research, investment banking, asset management and capital markets business of ML and any and all successors thereto and any other businesses now or hereafter provided by the businesses units excluding ML Retail. 1.55. "ML Institutional Customer" or "ML Institutional Customers" mean ------------------------- -------------------------- one or more ML Customers of ML Institutional. 1.56. "ML Institutional Service" and "ML Institutional Services" mean ML ------------------------ ------------------------- Interactive Services of ML Institutional. 1.57. "ML Institutional Users" means ML Institutional Customers and ML ---------------------- Employees of ML Institutional. 1.58. "ML Interactive Service" and "ML Interactive Services" mean one or ---------------------- ----------------------- more Interactive Services owned or used by ML. 1.59. [*****] 1.60. "ML International Retail Clients" means clients of one or more non- ------------------------------- U.S. businesses of ML providing financial services but excluding ML Institutional Customers. 1.61. "ML Relationship Manager" shall be the person designated by ML (and ----------------------- his or her successors) to coordinate and approve Project Plans on ML's behalf and to work with Multex's Relationship Manager. 1.62. "ML Retail" means ML U.S. Retail Clients and ML International --------- Retail Clients. 1.63. "ML Retail Customer" and "ML Retail Customers" refer to one or more ------------------ ------------------- ML Customers of ML Retail. 1.64. "ML Retail Users" means ML Retail Customers and ML Employees of ML --------------- Retail. 1.65. "ML U.S. Retail Clients" means clients of one or more U.S. ---------------------- businesses of ML providing financial services but excluding ML Institutional Customers. 1.66. "ML User" and "ML Users" mean ML Customers, ML Institutional ------- -------- Customers and Employees of ML. 1.67. "Multex" means Multex and its affiliates and subsidiaries. ------ 1.68. "Multex Interactive Services" means Interactive Services owned or --------------------------- used by Multex but excluding ML Interactive Services. 1.69. "MultexNet.com Sites" has the meaning set forth in Section 14.1. ------------------- ------------ 5 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 1.70. "Multex Proprietary Software" means Multex Proprietary Software as --------------------------- defined in the M.A. and all other Multex software (including, without limitation, Internet-related programming code) used to Disseminate research, market data and financial information over Interactive Services and to operate or to support the operation of Interactive Services and, subject to Section 9, --------- New Products made during the Term hereof and all documentation therefor. 1.71. "Multex Relationship Manager" has the meaning set forth in Section --------------------------- ------- 3.1. - --- 1.72. "New Content Forms" has the meaning set forth in Section 5.1. ----------------- ----------- 1.73. "New Product" has the meaning set forth in Section 9.1. ----------- ----------- 1.74. "New Product Development Project" has the meaning set forth in ------------------------------- Section 9.1. - ----------- 1.75. "Non-Team Members" has the meaning set forth in Section 3.5. ---------------- ----------- 1.76. "Notice Period" has the meaning set forth in Section 16.1. ------------- ------------ 1.77. "Other Multex Customer" and "Other Multex Customers" mean one or --------------------- ---------------------- more customers or licensees of Multex other than ML. 1.78. "Output License" has the meaning set forth in Section 9.5. -------------- ----------- 1.79. "Output Right" has the meaning set forth in Section 9.5. ------------ ----------- 1.80. "Outside Consultant" and "Outside Consultants" mean one or more ------------------ ------------------- non- employee consultants, independent contractors and subcontractors (both individuals and companies) or temporary employees engaged by Multex to work on Projects or assist in the provision of Services hereunder, provided, however, no person or entity shall be deemed to be an Outside Consultant unless such person or entity executes confidentiality and nondisclosure agreements substantially in the form set forth in Schedule 1.77. ------------- 1.81. "Outside Consultant Cost" and "Outside Consultant Costs" mean ----------------------- ------------------------ actual compensation Multex paid to one or more Consultants for their work on one or more Projects. 1.82. "Person" means an individual, a partnership, a corporation, an ------ association, a limited liability company, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. 1.83. "Pre-Existing Agreement" and "Pre-Existing Agreements" mean one or ---------------------- ----------------------- more of the following Service Requests, agreements and addenda to the M.A. Agreements prior to the Addn-3 Effective Date: 1.83.1. The "ML Direct Agreement/TGA" means the ML Online/Multex ----------------------- Service Request dated as of February 28, 1997. 6 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 1.83.2. The "AskMerrill Agreement/MLOL" means the ML Online Trial Program ------------------------- Addendum dated as of October 29, 1999, as amended by Addendum No. 1 to Master Agreement for Electronic Distribution Services dated as of July 1, 1999. 1.83.3. The "AskMerrill International Agreement" means the Second ---------------------------------- Addendum ML International AskMerrill.com International Trial Program dated as of April 1, 1999. 1.83.4. The "SPDR Agreement" means the SPDR Service Request dated as of -------------- August 5, 1999. 1.84. "Pre-Existing Agreement Project" or "Pre-Existing Agreement ------------------------------ ---------------------- Projects" mean one or more projects undertaken pursuant to a Pre-Existing - -------- Agreement. 1.85. "Project" and "Projects" mean one or more software development, web ------- -------- site development, integration, implementation projects and any other projects or services which ML engages Multex to provide pursuant to the 1999 Master Agreement. 1.86. "Project Plan" and "Project Plans" have the meaning set forth in ------------ ------------- Section 4.1. - ----------- 1.87. "Project Plan Amendment" has the meaning set forth in Section 4.1. ---------------------- ----------- 1.88. "Project Plan Form" means the project plan form attached hereto as ----------------- Exhibit B. - --------- 1.89. "R&D Committee" has the meaning set forth in Section 9.4. ------------- ----------- 1.90. "R&D Completion Date" has the meaning set forth in Section 9.2. ------------------- ----------- 1.91. "Recruiting Cost" has the meaning set forth in Section 3.7. --------------- ----------- 1.92. "Release" has the meaning set forth in Section 9.2. ------- ----------- 1.93. "Relevant R&D" has the meaning set forth in Section 9.1. ------------ ----------- 1.94. "Research" has the meaning set forth in Section 1(g) of the M.A., -------- as amended pursuant to Section 5.1 of the 1999 Master Agreement. ----------- 1.95. "Revenues" has the meaning set forth in Section 13.1. -------- ------------ 1.96. "Revised Delivery Date" has the meaning set forth in Section 3.9. --------------------- ----------- 1.97. "Second Cure Period" has the meaning set forth in Section 3.9. ------------------ ----------- 1.98. "Services" means the work product, services and assistance to be -------- provided by Multex to ML hereunder including, without limitation, aggregation and Dissemination of Research and related content (including, without limitation, financial information, news and data) ("Dissemination Services"); ---------------------- software and Internet-related development services, database management and administration services; hosting, testing, maintaining and repairing Web Sites; Data and Equipment 7 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY Services, and in addition to the foregoing, procuring hardware and software rights, including maintenance and support therefor, for ML as set forth in the 1999 Master Agreement. 1.99. "Site Customers" has the meaning set forth in Section 8.4. -------------- ----------- 1.100. "Site Prospects"has the meaning set forth in Section 8.4. -------------- ----------- 1.101. "Site Visitors" has the meaning set forth in Section 8.4. ------------- ----------- 1.102. "SLA" has the meaning set forth in Section 6.6. --- ----------- 1.103. "Software License" has the meaning set forth in Section 8.l. ---------------- ----------- 1.104. "Software Project" and "Software Projects" have the meaning set ---------------- ----------------- forth in Section 7.1. ----------- 1.105. "Standard Institutional License Fee Rate" has the meaning set --------------------------------------- forth in Section 8.4. ----------- 1.106. "Standard Project Rate" has the meaning set forth in Section 3.9. --------------------- ----------- 1.107. "Team Member" and "Team Members" have the meaning set forth in ----------- ------------ Section 3.1. - ------- --- 1.108. "Term" has the meaning set forth in Section 20.1. ---- ------------ 1.109. "Third Party" means a person or entity other than Multex or ML. ----------- 1.110. "Third Party R&D" has the meaning set forth in Section 9.1. --------------- ----------- 1.111. "Third Party Software" means software owned by a Third Party or -------------------- licensed to a Third Party from another Third Party. 1.112. "Third Party Software Fees" has the meaning set forth in Section ------------------------- ------- 11.2. - ---- 1.113. "Transition Services" has the meaning set forth in Section 20.4. ------------------- ------------ 1.114. "Transition Services Period" has the meaning set forth in Section -------------------------- ------- 20.5. - ---- 1.115. "Upgrades" means one or more error corrections, bug fixes and -------- minor enhances to software and documentation. 1.116. "Use" means use, install, operate, run, copy, integrate, deploy, --- distribute, transmit, display, perform, correct, modify, make available, prepare derivative works within the meaning of Title 17 of the United States Code, and integrate software or Web features into ML's software or ML Interactive Services and use, install, copy, correct and modify as necessary for temporary use at a backup or disaster recovery location during the pendency of a disaster, emergency or persistent equipment failure. 1.117. [*****] 8 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 1.118. "Web Site" and "Web Sites" mean one or more web sites, World Wide -------- --------- Web sites, intranet and extranet sites or pages (including, without limitation, co- branded sites, affiliated sites and jump pages). 1.119. "Year 1" means the period commencing upon the Addn-3 Effective ------ Date and ending on December 31, 2000. Each subsequent "Year" begins on January 1 ---- and ends on December 31 of the next successive calendar years during the Term. By way of example, "Year 2" means January 1, 2001 to and including December 31, ------ 2001; "Year 3" means January 1, 2002 to and including December 31, 2002; "Year ------ ---- 4" means January 1, 2003 to and including December 31, 2003; and "Year 5" means - - ------ January 1, 2004 to and including December 31, 2004. 2. Pre-Existing Agreements and Continuation of Rights 2.1. Each Pre-Existing Agreement, as its provisions may be amended or superseded by the 1999 Master Agreement, shall continue in full force and effect to the end of its current term (as such term is set forth in each such agreement). ML shall have the right, but not the obligation, to enter into an extension or renewal of any of the AskMerrill Agreement/MLOL, the AskMerrill International Agreement and/or the SPDR Agreement that will have a one-year or multi-year period and will grant prospective customers of ML Retail the rights set forth in the Software License, provided that, the term and the fees payable -------- ---- to Multex under the AskMerrill Agreement/MLOL, the AskMerrill International Agreement and/or the SPDR Agreement and any other amended terms shall be mutually agreed upon. 2.2. ML shall have the right, prior to September 1, 2001, to enter into an agreement (the "ML Global Retail Agreement") that will have a term ending on -------------------------- the last day of the Addn-3 Initial Term except that it shall include the right to Transitional Services the same as those set forth in Section 20 so long as ML ---------- pays the fees for such Transitional Services under the ML Global Retail Agreement. In addition, the ML Global Retail Agreement will grant ML Retail and ML Retail Users (but not prospective customers) the right to receive the Services governed by the AskMerrill Agreement/MLOL and the ML Direct Agreement/TGA and other Services and Projects as the Parties may agree on the following terms: Multex will grant ML Retail and ML Retail Users (but not prospective customers) the same rights set forth in the Software License in exchange for a minimum annual payment of [*****] for up to [*****] ML Retail Users (but not prospective customers) and an annual fee of [*****] for each such additional ML Retail User in excess of [*****], if any. Multex shall provide Projects and Services to ML Retail as provided in Addn-3 in exchange for payment by ML at the Standard Project Rate. If entered into, ML shall have the right, during the last six (6) months of the term of the ML Global Retail Agreement to renew or extend the ML Global Retail Agreement for a period up to the end of the Term of Addn-3. 3. [*****] 3.1 [*****] 3.2 [*****] 3.3. The Parties acknowledge and agree that the full consideration to be received by Multex from ML for Services and Projects governed by any Pre- Existing Agreement is as set forth 9 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. in such Pre-Existing Agreement. Without limiting the foregoing, and for the avoidance of doubt, the Parties acknowledge and agree that Multex has and shall have no right to receive payment at the Standard Project Rate or any payment other than the consideration provided in any governing Pre-Existing Agreement for work under such Pre-Existing Agreement. 3.4. If ML desires to receive Services and Projects that are outside the scope of the Pre-Existing Agreements, such Services and Projects will be governed by this Addn-3, and ML shall pay Multex for them at the Standard Project Rate. 3.5. If ML reasonably requires Multex to perform one or more Projects that are beyond the capacity of the then-current [*****] Team ("Additional ---------- Projects"), Multex shall perform such Additional Projects using Employees and - -------- Outside Contractors who are not then Team Members ("Non-Team Members") [*****]. ---------------- 3.6. Multex agrees to acquire and maintain sufficient equipment and dedicate the Team Members and Non-Team Members and the other resources necessary to insure timely completion of each Project in accordance with the governing Project Plan[*****]. 3.7. During the Addn-3 Initial Term, ML shall reimburse one hundred percent (100%) of the actual recruiting costs (without mark-up of any kind) that Multex paid to hire a new Employee to serve as Team Member ("Recruiting Cost") --------------- who begins work as a Team Member within forty-five (45) days of his or her first day of employment by Multex. If such new Employee did not serve as a Team Member for at least a consecutive twelve (12) month period for any reason [*****], Multex shall promptly reimburse the Recruiting Cost paid by ML in connection with that Employee on a pro rata basis for the time not spent serving as a full- time Team Member during that period. The total amount of Recruiting Costs that ML shall be obligated to pay pursuant to this Section shall not exceed $500,000. Each new Employee shall receive sufficient training from Multex (at Multex's expense) to serve as a Team Member before beginning work as a Team Member, provided that Multex shall have no obligation to provide more than thirty (30) days of training. Multex will use reasonable efforts to staff the [*****] Team with Team Members who have the qualifications and experience to meet the requirements of the Projects and ML's development requirements and to maintain a [*****] Team whose Team Members are at least equal in skill level of Multex's software developers and operational staff [*****] in general. 3.8. ML shall pay Multex for work by its Employees and Outside Consultants in performing each Project and Services as follows: (a) the Actual Salary, Bonus, Employee Benefit Costs and the Employee Overhead Costs for each Employee working on the Projects; and (b) the Outside Consultant Costs for each Consultant working on the Projects. 3.9. When a Project to be conducted under a Project Plan is estimated to take more than ninety (90) days to complete and cost more than $200,000, that Project shall be deemed a "Material Project." The Parties shall mutually agree ----------------- upon a reasonable delivery date for such Material Project, to be set forth in the Project Plan governing such Material Project (the "Delivery Date"). Such ------------- Delivery Date may be changed by mutual agreement of the Parties pursuant to an Project Plan Amendment (the "Revised Delivery Date," if any). A Material Project --------------------- shall be deemed to be 10 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY completed when it is delivered to ML and satisfies the requirements of the governing Project Plan. In the event that a Material Project is not completed by the Delivery Date, or as applicable, Revised Delivery Date, Multex shall have an initial cure period equal to fifteen (15%) of the Project Length (the "First ----- Cure Period"). During said First Cure Period, ML shall pay Multex for work to - ------------ complete such Material Project at the Standard Project Rate. In the event Multex does not complete the Material Project within the First Cure Period, Multex shall have thirty (30) calendar days to complete the Material Project (the "Second Cure Period"). During the Second Cure Period, Multex shall make best ------------------ efforts to complete the Material Project and ML shall pay Multex the Actual Salary and/or Outside Consultant Cost for Employees and Outside Contractors performing work on such Material Project without any mark-up or overhead costs. In the event Multex does not complete the Material Project within the Second Cure Period, ML may elect one of the following and shall so notify Multex within ten (10) business days after the Second Cure Period: (a) require Multex complete the Material Project at Multex's sole expense (ML shall incur no further costs in having the projected completed) or (b) terminate the Material Project and the governing Project Plan. In the event ML elects to terminate fifteen (15%) or more of the Material Projects entered into within any twelve (12) month period for failure to complete the Material Projects within said Second Cure Period, ML shall have the right to terminate the 1999 Master Agreement. The method of calculating payments in Sections 3.8 and 3.9 shall be referred to as the ------------ --- "Standard Project Rate." --------------------- 3.10. Each Party agrees that it will not directly through another person or entity, (i) induce or attempt to induce any employee of the other Party to leave the employ of the other Party, or in any way interfere with the relationship between the other Party and any employee thereof, and/or (ii) hire --- any person who was an employee of the other Party at any time during the Term, and if there is one, during the Transition Services Period, and for the twelve (12) month period following the later of the last date of the Term or the Transition Services Period. If, at the time of enforcement of this Section 3.10, ------------ a court shall hold that the duration, scope or other restrictions stated herein are unreasonable under circumstances then existing, the Parties agree that the maximum duration, scope or other restrictions deemed reasonable under such circumstances by such court shall be substituted for the stated restrictions contained herein. 4. Project Plans 4.1. Except for work or Services provided pursuant to a Pre-Existing Agreement, Multex shall be obligated to perform Projects and Services pursuant to Project Plans incorporating the terms agreed to herein and as otherwise agreed to and signed by the Parties (and signed or co-signed by the ML Relationship Manager on behalf of ML). Upon execution by both Parties, each Project Plan shall be deemed part of and governed by the 1999 Master Agreement. - ------------ All material modifications or supplements to a Project Plan require the mutual agreement of the Parties and shall be effective only after embodied in a writing executed by the Parties (a "Project Plan Amendment"). The term "Project Plan" ---------------------- includes the Project Plan and each Project Plan Amendment thereto, and the term "Project Plans" means more than one Project Plan. In the event of conflict ------------- between the 1999 Master Agreement and a Project Plan, the 1999 Master Agreement shall govern. For the avoidance of doubt all references under the 1999 Master Agreement to "Project Plan(s)" shall refer to Project Plans entered into pursuant to this Section and mutually agreed to and signed by the Parties and the ML Relationship Manager on behalf of ML. 11 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 4.2. Each Project Plan shall be substantially in the Project Plan Form attached as Exhibit B hereto and shall include with respect to the Project it --------- governs: (a) the scope of Services to be provided; (b) the Delivery Date; (c) an estimated budget; (d) the governing specifications and requirements; (e) the acceptance criteria, and if the Parties so provide, the acceptance or testing procedures; (f) the documentation to be provided and the requirements therefor, if any; (g) the training to be provided by Multex to ML, if any; (h) a detailed description of the work to be performed by ML, if any; and (i) such other terms agreed upon by the Parties. 5. Research 5.1. From time to time during the Term hereof, ML will develop new Research and content and new types and forms of content, interactive content and features and content vehicles (such as, by way of example only, models, conference calls, and audio and/or video technology) (the "New Content Forms"). ----------------- At the request of ML, Multex will use commercially reasonable efforts to promptly integrate (pursuant to a Project Plan) and Disseminate the same through ML Interactive Services. Subject to Multex's pre-existing contractual obligations and applicable law, Multex will provide ML with prompt notice of New Content Forms disclosed or contributed to Multex by Other Multex Customers (provided that Multex shall not be required to identify the name of such Other Multex Customers) and the opportunity to develop similar New Content Forms for Dissemination by Multex. Prior to Dissemination, New Content Forms identified or disclosed by ML to Multex shall be deemed Confidential Information of ML. Upon Dissemination, such New Content Forms shall be subject to the provisions of this Section, and shall be deemed part of "Research" under the M.A. The Parties - -------- agree that New Content Forms shall not be deemed New Products hereunder. Multex shall not, either before Dissemination or after, disclose or identify to Third Parties that particular New Content Forms were disclosed or identified to Multex by ML, provided, however, that the provisions of this sentence shall not prohibit Multex from disclosing the same or substantially New Content Forms to others if they were also disclosed to Multex by a Third Party. Notwithstanding anything to the contrary contained herein, nothing shall limit or prevent Multex from Disseminating New Content Forms to Third Parties. 6. Web Site Development; International Projects and Web Hosting 6.1. With ML's assistance, Multex shall develop one or more master templates for the implementation ("Master Templates") of the certain look and ---------------- feel features for ML Interactive Services. Each such template shall be developed pursuant to a Project Plan (a "Look and Feel Project Plan" and together, the -------------------------- "Look and Feel Project Plans"). --------------------------- 6.2. At ML's request, and pursuant to applicable Project Plans, Multex will enhance, develop or create ML Interactive Services. 6.3. Multex will develop ML Interactive Services for use by ML Customers and others in Japan, Germany, Spain, France, Italy and other foreign countries to be determined by the Parties from time to time in accordance with the schedule agreed upon by them and pursuant to Project Plans (each an "International ML Interactive Service" and collectively the "International ML ------------------------------------ ---------------- Interactive Services"). Each of the International ML Interactive Services shall - -------------------- be accessible by 12 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY persons or entities from different countries in the world as may be specified in the governing Project Plan. In accordance with the terms hereof, Multex will retain a sufficient number of Employees or Outside Consultants who have the requisite skills to build and localize such Interactive Services for the applicable country or countries, and may place such Employees or Outside Contractors in its offices in foreign countries as necessary to provide such services. Such Employees may be Team Members or Non-Team Members as the Parties shall determine from time to time. The Parties shall consult and discuss with each other in good faith from time to time regarding expanding their international Interactive Services containing global content whenever their strategic and practical objectives coincide, and enter into Project Plans as may be mutually agreed upon with respect thereto including without limitation sharing costs and infrastructures. The Parties may consult with each other with respect to possible joint ventures or cooperative projects internationally. 6.4. At ML's request, and pursuant to applicable Project Plans, Multex shall develop Interactive Services (or pages or sections of Web Sites) at the Standard Project Rate for ML Institutional Customers designated by ML, provided that such ML Institutional Customers enter into agreements with Multex regarding the same or enter into an agreement approved by Multex with ML regarding the same. 6.5. ML shall pay Multex for Projects and Services at the Standard Project Rate unless, the Parties mutually agree in writing to share costs such as, without limitation, overhead, content, development and outside services pursuant to Section 6.3. ----------- 6.6. Multex shall provide Web hosting and necessary related services for ML Interactive Services in exchange for the fees set forth in applicable Project Plans and in accordance with the terms and conditions set forth in such Project Plans and a Service Level Agreement (the "SLA") and other agreements, as --- applicable. The Parties agree to enter into good faith negotiations regarding the first such Service Level Agreement promptly after the execution of this Addn-3. Upon execution by both Parties, the SLA shall be deemed part of and governed by the 1999 Master Agreement. In the event of a conflict between the 1999 Master Agreement and the SLA, the 1999 Master Agreement shall govern. In the event of a conflict between the SLA and a Project Plan, the SLA shall govern. 7. Software Development Projects 7.1. At ML's request and pursuant to a Project Plan, Multex shall undertake one or more Projects to: (a) develop new software in whole or in part; (b) enhance or develop new versions or new releases to Multex Proprietary Software or other software; (c) engage in software development projects to correct, enhance, upgrade or develop new versions or new releases of ML Interactive Services or add new features to ML Interactive Services (one of the foregoing, a "Software Project" and more than one, "Software Projects"). The ---------------- ----------------- Parties may agree to enter into a joint development project to develop a Software Project (one, a "Joint Development Project" and more than one, "Joint ------------------------- ----- Development Projects"). - -------------------- 7.2. [*****] 13 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 7.3. [*****] 7.4. ML shall pay for Customized Software development at the Standard Project Rate. 7.5. [*****] 8. Software License 8.1. Subject to the terms hereof, Multex agrees to and hereby does grant to ML Institutional a non-exclusive license throughout the universe under Multex's Intellectual Property Rights to Use the Multex Proprietary Software, Customized Software, [*****], New Products other software developed hereunder and Third Party Software incorporated in or required to be used in conjunction with any of the foregoing software (provided that ML pays licensee fees and/or complies with the terms of an conditions of use associated therewith or enters into agreements with Third Party Software vendor as may be required by such vendor) and all Upgrades made thereto during the Term hereof in object code (the "Licensed Software"), with the right to sublicense the right to use the same to ----------------- ML Institutional Customers as necessary for them to use one or more ML Interactive Services and in accordance with provisions in an agreement entered into by ML Institutional Customers with ML with respect to such use satisfactory to Multex (the "Software License"). ---------------- 8.2. Multex shall have no right to license the use of Customized Software to Third Parties until after the expiration of the six (6) month period that begins upon the Acceptance by ML of such Customized Software. During such six (6) month period, Multex shall have the right to create a separate software package that includes features and functionality of the Customized Software, provided that (a) Multex does not use the same or substantially similar - -------- programming code that it used to implement such features and functionality in the Customized Software ("ML Custom Code"), and (b) that the Employees or -------------- Outside Consultants of Multex who develop any such separate software package do not have access to the ML Custom Code and do not receive information from or discuss the ML Custom Code with any of the Team Members or Non-Team Members who were involved in the creation or development of the ML Custom Code in whole or part and thereafter Multex shall have no limitations or restrictions with respect to such Customized Software, subject to the other terms and conditions of the 1999 Master Agreement. 8.3. [*****] 8.4. Persons and entities who use an ML Institutional Interactive Services who have not been qualified to access any portion of the Multex Propriety Software under ML's entitlement process shall be referred to as "Site Visitors." Site Visitors who have been qualified to access any portion of the ------------- Multex Propriety Software under ML's entitlement process to have access to Research on ML Institutional Interactive Services on a trial basis and for a period of time not to exceed sixty (60) days shall be referred to as "Site ---- Prospects." The Parties agree that the number of Site - --------- 14 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY Prospects shall not exceed five thousand (5,000) at any one time. Site Prospects who are ML Institutional Customers and who have been granted the right by ML to have access to Research through ML's Interactive Services for longer than sixty (60) days shall be referred to as "Site Customers." [*****] The method of --------------- calculating the license fee in this section shall be referred to as the "Standard Institutional License Fee Rate." --------------------------------------- 8.5. Multex shall provide Help Desk services, correct software errors, bugs and deficiencies and support and maintain the Licensed Software and Web Sites and provide Dissemination Services, all in accordance with and as provided in the SLA. 9. Output License 9.1. The Parties acknowledge and agree that Multex is, and during the Term will be engaged in product planning, product development and research on development (the "Relevant R&D") to develop new versions, new releases and ------------ substantial improvements of or to the Multex Proprietary Software, Multex's Interactive Services and Multex's existing platform technology related to the foregoing and to develop new and improved software and software and Internet products, features and functionality to be used in the creation, organization, Dissemination and other display of investment research and related information, analysis and data ("New Product" and "New Products," as appropriate). The ----------- ------------ project or projects in which Multex engages to create a New Product or New Products shall be referred to as "New Product Development Project" and "New ------------------------------- --- Product Development Projects," as appropriate. [*****] - ---------------------------- 9.2. Within thirty (30) days after the Addn-3 Effective Date and thereafter from time to time, Multex will provide ML with information regarding pending New Product Development Projects including, without limitation, a description of the intended New Product, a summary of the development work to date, and the anticipated dates when beta testing and when release, roll-out, implementation or live launch ("Release") will occur. During the Term hereof, ------- Multex shall provide the same types of information as each New Product Development Project is planned, designed or initiated. ML, at its option, shall have the right to participate in beta testing of New Products [*****]. The date when beta testing, if applicable, and other research and development (excluding minor corrections or improvements) is completed shall be referred to as an "R&D --- Completion Date." [*****] - --------------- 9.3. [*****] 9.4. Within thirty (30) days of the Addn-3 Effective Date, the Multex management will establish a technical and research and development committee (the "R&D Committee") to review, establish goals and schedules and direct ------------- Multex's research and development efforts, including, without limitation, with respect to New Products. The R&D Committee will meet at least once during each fiscal quarter, and ML has the right to have one of its employees serve as a full R&D Committee member. Multex has the right to approve ML's designated Committee member, which right it will exercise reasonably. 15 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 9.5. The rights granted ML in Sections 9.1-9.5 inclusive shall be ---------------- referred to as the "Output Right." As consideration for the Output Right, and ------------ subject to the terms, conditions and limitations herein, ML shall pay Multex a license fee (the "Output License") at the rate of [*****] per year in each of -------------- Years 1, 2, and 3, and at the rate of [*****] in each remaining Year in the Term on a pro- rata basis. 10. API License 10.1. The Software License includes ML Institutional's right to Use the published interface, documentation and sample code for application program interfaces or their equivalent in the Licensed Software and all upgrades and other modifications thereto (each an "API" and one or more the "APIs") for the --- ---- purpose of modifying, incorporating in and using the Licensed Software in conjunction with ML's software and the ML Interactive Services during the Term and Transition Services Period. At the end of each fiscal quarter during the Term and Transition Services Period, Multex shall deliver all then existing APIs to the Licensed Software to ML. Multex will deliver, and if requested by ML, create APIs at other times at ML's request and in exchange for ML's payment at the Standard Project Rate. Subject to Multex's rights and any limitations thereto, including, without limitation, any restriction against selling or licensing such the APIs to Third Parties, ML Institutional has the right to Use the APIs for and in the course of its businesses (including, without limitation, ML Interactive Services) and for and in connection with its provision of services and products to ML Institutional Users and Third Parties, including, without limitation, businesses, services and products of ML that may be created or offered in the future. 10.2. The Parties agree to enter into a mutually satisfactory software source code escrow agreement promptly after the Addn-3 Effective Date. 11. Data, Third Party Software, Equipment and Other Payments 11.1. As payment for Third Party data feeds, content products, or content services (the "Data Feeds") provided to ML by Multex at ML's request as part of ---------- the Services, ML will pay Multex the actual cost paid by Multex to the vendor for such Data Feeds and, with respect only to Data Feeds for which use began after the Addn-3 Effective Date, an additional amount equal to [*****] (the "Data Fees"). ML will pay its pro-rata share of associated Employee expenses for - ---------- the maintenance and support of the product or service at the Standard Project Rate. 11.2. As payment for each unit of Third Party Software (including maintenance fees therefor, if any) provided to ML by Multex at ML's request as part of the Services, ML will pay Multex the actual cost paid by Multex to the vendor for such Third Party Software and, with respect only to Third Party Software for which use began after the Addn-3 Effective Date, an additional amount equal to [*****] (the "Third Party Software Fees"). ------------------------- 11.3. For each unit of Equipment that is acquired by Multex on ML's behalf during the Term as part of the Services, ML shall pay Multex the actual cost paid by Multex to the vendor for such unit of Equipment and the direct service and maintenance therefor and, with only with respect to Equipment acquired after the Addn-3 Effective Date, an additional amount equal to [*****] (the 16 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY "Equipment Fees"). If such Equipment, if any, has a book value in excess of zero -------------- dollars at expiration or termination of Addn-3 for any reason, ML shall have the right to purchase such Equipment at book value. 11.4. ML shall pay Multex's actual costs incurred in connection with performing its obligations under the 1999 Master Agreement, including Project Plans, not otherwise covered in the Master Agreement and this Addn-3 plus a mark-up to be mutually agreed upon by the Parties, provided, however, that in the absence of handling or maintenance costs for such items, the minimum mark-up shall be [*****]. 11.5. The Services provided pursuant to Sections 11.1-11.4 inclusive ------------------ shall be referred to as the "Data and Equipment Services" and the payments --------------------------- therefor as the "Data and Equipment Fees." ----------------------- 11.6. ML will reimburse Multex for all reasonable out-of-pocket expenses (without mark-up) (e.g., out-of-pocket expenses for travel, meals and lodging) incurred in connection with the provision of the Services pursuant to ML's standard reimbursement policy. 12. Monthly Retainer and Monthly Reports 12.1. ML shall make monthly payments and Multex shall issue monthly reports pursuant to the provisions of Schedule 12. ----------- 13. Revenues 13.1. ML will pay Multex "Revenues" (as such term is defined herein) of -------- at least [*****] in each Year of the Term. "Revenues" means all payments, fees, -------- expenses, reimbursements (excluding any reimbursements that do not include a mark-up under the 1999 Master Agreement (e.g., reimbursements for out-of-pocket costs and expenses)) and each and every payment of any type made by ML, including, without limitation, payments of any type made to Multex in connection with the Pre-Existing Agreements and all renewals and extensions thereof (if any) and the Global Retail Agreement, if entered into, payments made by ML to Multex as payments for fees on behalf of or that would be otherwise owed by an ML Customer, all of which will be counted on an accrued basis, and provided that -------- Year 1 shall be deemed the first year of the Term, and provided, further that -------- ------- for the purposes of this Section, Revenues and all other costs, including, without limitation, for Services completed but not invoiced to ML for Services performed prior to the Addn-3 Effective Date (and including without limitation equipment acquired on behalf of ML by Multex and the costs of associated maintenance, services and setup fees). [*****] 14. Sponsorship and Marketing 14.1. During the Addn-3 Initial Term hereof, Multex will maintain sponsorship link-back In-Context Hyperlinks from the MultexNet.com site and any successor institutional Interactive Service and equivalent international sites (together with Multex's co-mingled products for institutional investors, the "MultexNet.com Sites") to ML Institutional Interactive Services, and ML shall - -------------------- place an In-Context HyperLink from ML Institutional Interactive Services to MultexNet.com Sites (so long as ML's link-back is active and in place). To the extent ML Customers linking to 17 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY MultexNet.com Sites from ML Institutional Interactive Services are Multex subscribers, they shall have available to them (without additional authentication) In-Context Hyperlinks and navigation feature sets displayed around Research or content from one or more financial institutions in such manner as to enable a ML User to return to a page and content level in the ML Institutional Interactive Service designated by ML from time to time hereunder. ML shall have the option to tier the commingled research seen by ML Customers but not to alter or affect Multex's entitlement process in any way. If the ML User is not a current Multex subscriber, then Multex, subject to ML's approval, may display an up-sell message for the Multex subscription service to such ML User. A ML Institutional User accessing one of the MultexNet.com Sites where ML Research or content is displayed (on a delayed basis) shall have available to him or her an In-Context Hyperlink labeled with a mutually agreed upon ML hyperlink that enables that ML User to link directly in- context to the applicable ML Institutional Interactive Service. If that active link is unavailable, then an up-sell message for the ML Interactive Service shall be displayed. [*****] 14.2. ML Customers who link from a ML Interactive Service to the MultexNet.com Sites shall receive a thirty (30) day free subscription (provided that Multex is offering subscriptions at such time) to Research and content on those Multex Interactive Services. Each such ML Customer shall have the right to view Multex's premium services accessible over the MultexNet.com Sites at Multex's standard pay-per-view, or rates, at ML's option, ML shall pay Multex for the ML Customers' access to the premium services. [*****] 14.3. [*****] 15. Customer Data 15.1. For purposes hereof, "Customer Data" means all data and information ------------- that is captured or recorded with respect to or during any person's or entity's use of or access to an Interactive Service. Each Party will own Customer Data collected on its own Interactive Services. 15.2. Each Party may make limited use or take limited action with respect to Customer Data of the other Party only as is necessary to fulfill its obligations hereunder and for no other purpose, including, without limitation, using such information for marketing purposes for such party. 15.3. Subject to contractual or legal obligations, Multex shall provide ML with monthly reports, in such form and manner as agreed to by the Parties, and shall provide the software, Internet and other Interactive Services tools required for viewing and analyzing the same at ML's cost including without limitation reports equivalent to the reports customarily generated and/or provided to Other Multex Customers and reports agreed to by the Parties pursuant to a Project Plan. The Customer Data from ML Interactive Services shall include, without limitation, reports of visitor usage and patterns, pages and Research reports read or accessed by ML Users. 16. Change of Control 16.1. Not less than thirty (30) days (the "Notice Period") before Multex ------------- enters into a written agreement in connection with a "Change of Control" (as ----------------- defined below) of Multex, Multex shall provide notice of such proposed Change of Control to ML and ML shall be required to give 18 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY notice to Multex during the Notice Period indicating whether it will remain a party to the 1999 Master Agreement or whether it will terminate the 1999 Master Agreement upon the effective date of the Change of Control. In the event Multex fails to provide notice as required herein, ML shall have the right to terminate the 1999 Master Agreement at any time during the thirty (30) day period commencing on the date ML receives knowledge of (a) the occurrence of the Change of Control or (b) the execution of the written agreement bringing about or causing a Change of Control. If ML exercises its right pursuant to this section to terminate the 1999 Master Agreement, Multex shall provide the Transition Services, [*****]. 16.2. As used herein, "Change of Control" means the occurrence of any of ---------------- the following: (a) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the assets of Multex other than to a wholly owned subsidiary; (b) the consolidation of Multex with another person or entity or the merger of Multex into another person or entity or of another person or entity into Multex, or any such similar event pursuant to a transaction in which 50% of the voting shares of Multex are changed into or exchanged for cash, securities, or other property (other than any such transaction where the holders of the voting shares of Multex immediately prior to such transaction own, directly or indirectly, not less than a majority of the voting shares of the surviving or resulting person or entity immediately after such transaction); (c) the adoption of a resolution or plan by the shareholders of Multex concerning the liquidation, dissolution or winding up of Multex; (d) the consummation of any transaction or series of related transactions (including, without limitation, any merger or consolidation) the result of which is that any "person" (as such term is used in Section 13(d)(3) ------ ---------------- of the Securities Exchange Act of 1934 (the "Exchange Act")) (other than Multex, ----------------- any trustee or other fiduciary holding securities under an employee benefit plan of Multex, or any corporation owned, directly or indirectly, by the shareowners of Multex in substantially the same proportion as their ownership of stock of Multex) is or becomes the "beneficial owner" (as such term is defined in Rule ---------------- 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 30% of the voting shares of Multex; or (e) during any two consecutive years, individuals who at the beginning of such period constitute the Board of Directors, and any new director whose election by the Board of Directors or nomination for election by Multex's shareowners was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof. For purposes of this definition, any transfer of an equity interest of an entity that was formed for the purpose of acquiring voting shares of Multex will be deemed to be a transfer of such portion of such voting shares as corresponds to the portion of the equity of such entity that has been so transferred. 17. Trademark Restriction 17.1. ML hereby grants to Multex a non-exclusive, royalty-free, worldwide license to use logos, trade names, trademarks, designs, trade dresses, slogans and service marks, in word, stylized and design formats (the "Marks") ----- proprietary to ML for the purpose of identifying content as part of the provision of the Services as contemplated by the 1999 Master Agreement and as otherwise required pursuant to the 1999 Master Agreement solely in connection with the marketing, advertising and operation of the Service as it relates to ML and only to the extent authorized by the 19 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 1999 Master Agreement. Multex hereby grants to ML a non-exclusive, royalty-free, worldwide license to use the Marks proprietary to Multex in any marketing, advertising, website links or other promotional materials solely in connection with the marketing and advertising of the Services provided by Multex to ML. 17.2. Each Party ("Licensee") shall use and display the other Party's -------- ("Licensor") Marks licensed hereunder in accordance with the Licensor's rules -------- governing usage of its Marks as may be prescribed by the Licensor from time to time. Licensee agrees that it shall modify, or cause to be modified, to Licensor's sole satisfaction, the use of any Licensor Marks hereunder that Licensor, in its sole discretion, may object. Any intended use by Licensee of any Licensor Marks in any regional or national advertising campaign or any press release shall be submitted to Licensor for approval. Licensee shall not do or suffer to be done any act or thing that would impair Licensor's rights in the Licensor Marks or damage the reputation for quality inherent in the Licensor Marks. Each Party acknowledges and agrees that: (a) the Licensor and its vendors and suppliers, if any, are the exclusive owners of the Licensor's Marks; (b) the use of the Licensor's Marks by the Licensee does not convey to the Licensee any right, title or interest in or to the Licensor's Marks; (c) the Licensee may not contest the Licensor's Marks, or register or attempt to register in any jurisdiction any Licensor Mark or any confusingly similar trademark or trade name; (d) the Licensee may not use the Licensor's Marks with respect to any products, services or materials not provided by the Licensor, or in any way which might result in confusion as to ML, Multex, or any Third Party being separate and distinct entities; and (e) the Licensee's use of the Licensor's Marks, including all goodwill associated with such use, shall inure solely to the benefit of the Licensor. Each Party warrants to and for the benefit of the other Party that its marks do not infringe upon the rights of any Third Party including, without limitation, any rights under trademark or unfair competition law. 17.3. The Licensee will amend its usage of any trademark of Licensor at the direction of the Licensor. Failure to modify trademark usage as per Licensor's instructions shall result in termination of Licensee's right to use any trademark of Licensor. 18. Transfer of URL 18.1. Multex hereby assigns and transfers all of its right, title and interest in the Internet domain name www.themarkets.com, and all trademark and other Intellectual Property Rights associated therewith to ML pursuant to the Domain Agreement attached hereto as Schedule 18. ML agrees to transfer the same ----------- back to Multex if ML does not make use of such domain name during Year 1. 19. Intellectual Property Rights 19.1. The Look and Feel Project Plan shall include, without limitation, the Intellectual Property Rights and other rights owned by ML in the "look and -------- feel" (i.e., the overall design, assignment of elements, organization color - ---- scheme, and navigation when viewed as a whole (excluding programming code and technology and Intellectual Property Rights relating thereto) (the "ML Look and ----------- Feel IP") (a) of the existing ML Interactive Services developed under the Master - ------- Agreement, and (b) in the Master Template and Interactive Services to be developed under the Look 20 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY and Feel Project Plans (the "ML Look and Feel"). Multex acknowledges and agrees ---------------- that ML shall be the owner of all right, title and interest in and to the ML Look and Feel IP, including, but not limited to, all Intellectual Property Rights therein. 19.2. Unless the Parties otherwise expressly agree in the governing Project Plan, each Party shall own an undivided one-half interest in the work product and Intellectual Property Rights therein resulting from a Joint Development Project. Such work product and Intellectual Property Rights shall be referred to as "Joint Development Work Product" and ML's rights in the same as ------------------------------ "ML's Joint Development Work Product." ----------------------------------- 19.3. Except as provided in Section 19.2 and in the Master Agreement, and ------------ with respect to ML's rights in the ML Look and Feel IP as provided in Section ------- 20.1, unless the Parties otherwise expressly agree in the governing Project - ---- Plan, and subject to the licenses and rights granted in the 1999 Master Agreement and the other terms and conditions thereof, Multex shall own all right, title and interest in the Licensed Software and all Intellectual Property Rights therein, and if and to the extent that or ML or its Employees or agents acquire any rights in or to such Licensed Software or Intellectual Property Rights, ML shall, or shall cause its Employees or agents to, promptly assign such rights to Multex. To the extent, if any, Multex obtains ownership of any inventions or any Letters Patent in the United States or any other country in any Joint Development Work Product or in any other deliverable or other work product created under the 1999 Master Agreement for which an ML Employee is an inventor or in which ML has ownership rights, Multex agrees to grant to ML, for no additional consideration, a perpetual (or the longest period otherwise permitted by law), irrevocable, royalty-free, worldwide, non-exclusive license with the right to grant sublicenses under such patents and any other U.S. or foreign patent issuing from applications that rely on any such patent for priority to make, use, sell, offer for sale, and import inventions covered thereby. 19.4. Multex shall take reasonable steps to prevent premature publication or disclosure of patentable subject matter by its Employees, Outside Contractors or others that would interfere with the ability to seek and obtain patent and other intellectual property protection. Multex will adopt procedures satisfactory to ML to prevent unauthorized access to or Dissemination of source code and technology. 19.5. Multex agrees to and hereby does irrevocably assign, sell, transfer, grant and convey all of its worldwide and universal right, title and interest in and to the ML Look and Feel IP under the 1999 Master Agreement from the moment of creation to ML, its successors and assigns (without the necessity of any further consideration or action on the part of ML or Multex), including, but not limited to, all Intellectual Property Rights therein, for perpetuity (or for the longest period of time otherwise permitted by law) (and insofar as ownership of the same or the Intellectual Property Rights therein are not deemed to vest in or be owned by ML by operation of law), the same to be held and enjoyed by ML, its successors and assigns to the same extent that such right, title and interest would have been held and enjoyed by Multex if this assignment had not been made. If and to the extent necessary to ensure that each Party has an undivided one-half interest in the work product and Intellectual Property Rights therein resulting from a Joint Development Project (or such other interest as the Party's may otherwise expressly agree in the governing Project Plan) as set forth in Section 19.2, the Parties shall make such assignments, if ------------ any, as may be necessary so that each Party 21 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY has an undivided one-half interest (or such other interest as the Party's may otherwise expressly agree in the governing Project Plan) to the other Party, as applicable and appropriate. 19.6. ML agrees to and hereby grants Multex a non-exclusive, fully paid-up license throughout the universe (without the right to sublicense) during the Term and the Transition Services Period under all of ML's Intellectual Property Rights in the ML Look and Feel IP to use the ML Look and Feel IP only to the extent necessary for Multex to perform its obligations to ML under the 1999 Master Agreement. 19.7. The Parties acknowledge and agree that Web 2.0 is deemed part of the Licensed Software and shall be subject to the Standard Institutional License Fee Rate; provided, that, for the avoidance of doubt, and notwithstanding -------- ---- anything contained in the 1999 Master Agreement, in no event shall Multex be obligated to provide any services or perform any projects or any other activities with respect to Web 2.0 unless Multex agrees to do so pursuant to a Project Plan. 19.8. Each of Multex and ML without reservation hereby covenants and binds itself and its successors, assigns and legal representatives to cooperate fully and promptly with the other Party and to do acts necessary or requested to be done by the other Party in order to evidence, establish, apply for, perfect, procure, register, record, maintain, enforce and/or defend the other Party's Intellectual Property Rights under the 1999 Master Agreement and in connection with all proceedings before the United States Patent and Trademark Office (the "PTO"), the United States Copyright Office (the "Copyright Office") and all - ---- ---------------- equivalent offices and government agencies in foreign countries ("Foreign ------- Offices") (singularly or collectively, the "protection of Intellectual Property - ------- ----------------------------------- Rights") including, without limitation, to execute and deliver to the other - ------ Party any and all lawful application documents including petitions, specifications, oaths and assignments. Each of Multex and ML (their successors, assigns and legal representatives) shall discharge its obligations under this Section 18.9 promptly but in any event within such time as is ------------ required to enable the other Party to timely preserve or assert its rights in connection with the protection of Multex's or ML's Intellectual Property Rights, as the case may be. The rights provided to each of the Parties in this Section 18.9 are cumulative of any rights provided in the 1999 Master Agreement. - ------------ 20. Term, Termination, Transition Services and Effect of Termination 20.1. The initial term of Addn-3 begins on the Addn-3 Effective Date and ends on December 31, 2004 (the "Addn-3 Initial Term"). ML has the right to ------------------- extend the term of this Addn-3 from the end of the Addn-3 Initial Term to and including December 31, 2009 (the "Addn-3 Renewal Term") by providing notice ------------------- during Year 4. As used herein, the Term of the 1999 Master Agreement means the ---- Addn-3 Initial Term and, if entered into, the Addn-3 Renewal Term. 20.2. Each Party shall have the right to terminate the 1999 Master Agreement for cause if the other Party commits a material breach and, if such breach is curable, it remains uncured at the end of a thirty (30) day cure period. 20.3. ML shall have the right to immediately terminate the 1999 Master Agreement for cause upon written notice to Multex if: (a) a Change of Control of Multex occurs; (b) Multex shall 22 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY cease to do business, enter into liquidation, or become subject to any bankruptcy law; (c) an interruption or outage in the Dissemination of Services continues for more than a period of more than twenty- four (24) consecutive hours; (d) repeated interruptions or outages aggregating more than twelve (12) hours occur in a fifteen (15) day period; or (e) Multex causes or permits the unauthorized Dissemination of Research, and if after notice from ML, such unauthorized Dissemination remains uncured, and such Dissemination is material. 20.4. It is the intent of ML and Multex that at the expiration or termination of the 1999 Master Agreement Multex will cooperate in good faith with ML to provide ML and/or its designees with reasonable assistance to permit an orderly transition of the Services provided hereunder to ML and/or its designees (as further described in this Section 20, the "Transition Services"). ---------- ------------------- The Transition Services include, without limitation: (a) continuing to provide Services; (b) developing a plan for the transition of Services to ML and/or its designees; (c) training personnel of ML (but not ML's designees) in the performance of the Services and the operation, maintenance and support of Licensed Software; (d) creating documentation and other explanatory and instructional material, if and to the extent reasonably requested by ML, provided that in no event shall Multex be obligated to provide or shall ML be - -------- ---- allowed to disclose such documentation and/or material to any designee of ML unless Multex so agrees or gives its prior consent; and (e) performing such other functions or tasks as may be reasonably requested by ML that relate to the transition of the Services to ML (and/or its designees). 20.5. Subject to ML's complying with its payment obligations as set forth in this Section 20, a transition services period shall commence immediately, ---------- upon the expiration or termination of the 1999 Master Agreement for any reason, which shall be an eighteen (18) month period (unless before or during that period ML provides notice to Multex that it wishes to terminate the Transition Services Period prior to the end of that period, and if ML provides notice of an earlier termination date, the transition services period shall terminate at the date specified by ML, provided that ML has provided at least sixty (60) days notice to Multex (the "Transition Services Period"). If ML fails to provide -------------------------- sixty (60) days notice, the Transition Services Period shall terminate sixty (60) days after the date on which ML provided notice. 20.6. Subject to ML's complying with its payment obligations hereunder, if the 1999 Master Agreement expires or terminates, then immediately upon such expiration or termination, as applicable, Multex shall provide Transition Services, and the Software License shall continue for the duration of the Transition Services Period. As payment for the Software License during the Transition Services Period, ML shall pay the Standard Institutional License Fee Rate. As payment for Transition Services, ML shall pay Multex the Standard Project Payment Rate and Data and Equipment Fees. 20.7. For the avoidance of doubt if Multex terminates the 1999 Master Agreement for cause, Multex shall provide Transition Services to Multex provided that ML pays all fees and makes all other payments owed to Multex in consideration for such Transition Services under the terms and conditions of the 1999 Master Agreement, including, without limitation, those set forth in this Section 20, and provided further that ML is current (and not in arrears) in its - ---------- -------- ------- ---- payments owed to Multex hereunder, whether prior to or after such termination; except for any amounts which ML is - ------ 23 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY disputing in good faith (provided that the portion of any payment not in dispute is paid to Multex in a timely manner as required hereunder). In addition, notwithstanding anything contained herein, after termination or expiration of the 1999 Master Agreement, ML shall have no right to the Output Right (including, but not limited to, the right to receive New Product and the right for ML to have one of its employees serve as a full R&D Committee), and ML shall therefore, have no obligation to pay the Output License Fee accruing after the termination or expiration of the 1999 Master Agreement. 20.8. Each Party agrees that if the 1999 Master Agreement terminates or is not renewed, whether in whole or in part, or if any Project hereunder is terminated, neither Party shall disclose to any Third Party any reason for not continuing under the 1999 Master Agreement (or any intent or plan of not continuing) without the express written consent of the other Party, and the Parties shall agree on statements for public disclosure. 20.9. Upon the expiration or termination of the 1999 Master Agreement, or if there is a Transition Services Period, after the end of the Transition Services Period, all licenses and all rights and interests granted thereunder to ML (exclusive of all rights and interests expressly assigned to ML under the 1999 Master Agreement including, without limitation, the Look and Feel IP and ML's Joint Development Work Product) under the 1999 Master Agreement shall immediately terminate (including, without limitation, those under the Software License) and shall immediately revert to and become fully vested in Multex. Termination or expiration of the 1999 Master Agreement for any reason shall be without prejudice to any obligations which shall have accrued to the benefit of either Party prior to such termination or expiration. Upon termination or expiration of the 1999 Master Agreement, any payments owed to the other Party on or before the effective date of such termination or expiration would remain due and payable in the ordinary course in accordance with the terms and conditions of the 1999 Master Agreement. The termination or expiration of the 1999 Master Agreement shall not affect any rights or obligations of the Parties under the 1999 Master Agreement which are intended by the Parties to survive such termination or expiration, including, without limitation, those which are intended by the Parties to survive during the Transition Services Period. For the avoidance of doubt, during the Transition Period, all terms and conditions of the 1999 Master Agreement shall survive except for those set forth in Section ------- 9. - - 20.10. Without limiting the foregoing, and notwithstanding anything contained herein, upon the termination or expiration of the 1999 Master Agreement, the Parties hereby agree that the Master Agreement (as in effect immediately prior to the Addn-3 Effective Date) as expressly amended by this Addn-3 or as otherwise expressly amended by the Parties in writing after the Addn-3 Effective Date, shall have and shall remain in full force and effect in accordance with its then existing terms and conditions (as such terms and conditions may have been expressly amended by the Parties). 21. Indemnification; Limitations of Liability 21.1. Multex shall defend, and indemnify ML and its officers, directors, employees and other agents against, and hold ML, and its officers, directors, employees and other agents from any and all liability, damages, costs and expenses (including without limitation reasonable attorney's fees and costs) resulting from and to the extent of any claim or action in law or equity resulting from, 24 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY based on or arising out of any cause of action or any other claim of any nature (a "Claim") that any of the Licensed Software or other software (including, ----- without limitation, software developed pursuant to a Software Project and programming code or features of any Interactive Service), deliverables under any Plan Project, products, Services and other material, in each case provided to ML by Multex pursuant to the 1999 Master Agreement (the "Covered Material") ---------------- infringes or otherwise violates any of the Intellectual Property Rights other proprietary right of any Third Party provided that ML provides Multex with prompt notice of the Claim and cooperate at Multex's expense in any litigation resulting therefrom; that ML has the right to approve any proposed settlement of the Claim, and that Multex shall have the right to control the defense of the Claim. Notwithstanding anything contained herein, in no event shall Multex's indemnity obligation covered by this Section 21.1 include, and shall ------------ specifically exclude, any and all liability arising from the willful misconduct or gross negligence of ML or its affiliates or their agent, or from any infringement or other claim to the extent that it relates to ML's Intellectual Property Rights or the Research or Content. 21.2. In the event that ML's Use of any Covered Materials be or reasonably appear likely to be restricted, encumbered or enjoined by reason of any actual or alleged infringement or otherwise violation of any of the Intellectual Property Rights or other proprietary right of any Third Party: (a) Multex shall have the right upon ML written notice to immediately terminate the portion of the infringing Services that are or reasonably may be infringing or otherwise violating the Intellectual Property Rights of any person or entity; and (b) Multex will promptly at (i) obtain for ML the right to continue to Use the Covered Materials, (ii) modify the Covered Materials so as to remove the cause of the Claim (provided that any such modifications will not affect ML's intended use of the Covered Materials) and/or (iii) if possible, replace the Covered Materials with an equally suitable, non-infringing substitution, which will be subject to the provisions of the 1999 Master Agreement. The remedies in this Section are in addition to and not in place of and shall not limit any of ML's other rights or remedies or limit or affect Multex's obligations otherwise set forth in this Section 21. ---------- (b) ML shall defend and/or handle at its own cost and expense any claim or action brought by a Third Party against ML arising from or relating to the Research or Content as provided by ML provided, however, that ML shall have -------- ------- the sole right to control the defense and settlement of such action and all rights of appeal, and shall not be liable to Multex for any costs, settlements, compromises or legal fees of any kind incurred or entered into by Multex without ML's prior written approval. ML shall indemnify and hold harmless Multex and its affiliates from and against all liabilities, losses, damages, costs and expenses (including but not limited to, attorneys' fees, costs and disbursements) resulting from or arising out of any such claim or action. ML's obligations hereunder shall be contingent upon Multex promptly notifying ML of any such claim and cooperating, at ML's expense, in the litigation. 21.3. Multex will use its reasonable commercial efforts to provide the Services to ML and its affiliates as described herein. However, ML understands that Multex cannot and does not guarantee the content, accuracy, timeliness or availability of the Services or Research as displayed or provided by Multex. ACCORDINGLY, ML AGREES THAT UNLESS THE FOLLOWING ARE CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF MULTEX, MULTEX SHALL NOT HAVE ANY LIABILITY OR OBLIGATION TO ML OR ITS 25 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY AFFILIATES (WHETHER CAUSED DIRECTLY OR INDIRECTLY) RELATING TO (A) INTERRUPTION, DELAY OR FAILURE IN THE TRANSMISSION, PROCESSING, DELIVERY OR DISTRIBUTION OF THE SERVICES OR THE RESEARCH; OR (B) THE UNAVAILABILITY OF THE MULTEX SERVICES; MOREOVER, MULTEX SHALL NOT HAVE ANY LIABILITY TO ML OR ITS AFFILIATES RELATING TO ACTS OR OMISSIONS OF ML. MULTEX AGREES TO MAKE BEST EFFORTS, AT ML'S EXPENSE, TO REMEDY ANY MATERIAL DEFECTS IN THE ACCURACY, TIMELINESS OR AVAILABILITY OF THE SERVICES OR RESEARCH AS DISPLAYED OR PROVIDED BY MULTEX. 21.4. Each Party shall be strictly liable for the actions of its Employees, affiliates, partners and representatives. 21.5. Multex's maximum aggregate liability under the 1999 Master Agreement arising after the Addn-3 Effective Date arising out of or relating to the Covered Materials (excluding liability covered under the M.A. prior to the Addn- 3 Effective Date), including, without limitation, liability arising under Section 21.1 and liability arising from the gross negligence or willful - ------------ misconduct of Multex shall not exceed [*****]. 21.6. NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CAUSES OF ACTION BEYOND ITS REASONABLE CONTROL. FOR THE PURPOSES OF THIS SECTION, DAMAGES PAYABLE TO A THIRD PARTY IN AN ACTION FOR WHICH A PARTY IS INDEMNIFIED UNDER SECTION 21 OF THIS ADDN-3 SHALL NOT BE DEEMED ---------- CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES. 21.7. The Parties acknowledge and agree that the limitations of liability set forth in this Section are a condition of the 1999 Master Agreement, and that the fees reflect the allocations of risk set forth in this Section. 22. Further Amendments 22.1. Section 13 of the M.A. is amended as to add the following provision ---------- as the last sentence of subsection (a): "ML shall have the right to control the defense or settlement of any claim under this Section 13." ---------- 22.2. Section 16 is amended as follows: ---------- 22.2.1. The following provision is added as subsection (v): "All Multex interconnectivity to ML Interactive Services, computing systems and/or networks and all attempts at the same shall be only through ML authorized security gateways/firewalls; Multex will not access, and will not permit unauthorized persons or entities to access, ML computing systems and/or networks without ML's express written authorization and any such actual or attempted access shall be consistent with any such authorization; and Multex will use the latest available, most comprehensive computer virus detection/scanning program reasonably commercially available prior to any attempt to access any of ML's computing systems and/or networks and upon detecting a 26 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY computer virus, all attempts to access ML's computing systems and/or networks shall immediately cease and shall not resume until any such computer virus has been eliminated to the satisfaction of ML." 22.2.2. The following provision is added as subsection (vi): "All Licensed Software, other software and Services licensed or provided to ML hereunder are Year 2000 Compliant, and Multex will reasonably cooperate with and assist ML in ML's independent verification that the software, programs, Equipment, Services and/or other materials furnished to ML are Year 2000 Compliant. Multex further agrees, upon ML's request, to promptly provide all information about procedures that Multex has followed to make the software, programs, Equipment, Services and/or other materials furnished to ML Year 2000 Compliant. For purposes hereof, "Year 2000 Compliant" means that: (A) the ------------------- materials, deliverables and products provided to ML will accurately record, store, process, calculate, transmit, display and present calendar dates on or after (and, if applicable, spans of time including) January 1, 2000; (B) the occurrence in or use by the materials, deliverables and products provided to ML of dates before, on or after January 1, 2000 will not materially adversely affect the performance of the materials, deliverables and products provided to ML with respect to date- dependent data, computations, output, or other functions (including, without limitation, calculating, comparing and sequencing); (C) the materials, deliverables and products provided to ML will not abnormally end or provide invalid or incorrect results as a result of date-dependent data; and (D) the materials, deliverables and products provided to ML can accurately recognize, manage, accommodate and manipulate date-dependent data, including, without limitation, single and multi-century formulas and leap years." 22.2.3. The following provision is added as subsection (vii): "All Licensed Software, programs, Equipment, Services and/or other materials furnished to ML hereunder that receive, recognize, use, or process financial information pertaining to any of the countries with currency affected by its participation in the European Economic and Monetary Union, such software, programs, Equipment, Services and/or other materials furnished to ML will (A) operate without errors, problems, delays, or the need for any further modification as a result of the introduction of a new currency (the "Euro"), in ---- whole or in part as the European currency or currency unit; and (B) continue to receive, recognize, use and process both national currency units and Euro units and all data related thereto (and permit conversions from national currency units to Euro units and vice versa) without errors, problems, delays, loss of functionality, degradation in performance, or the need for any further modifications." 22.2.4. The following provisions are added as subsection (viii): "In the event that ML's use of the Licensed Software, other software equipment, Services and/or other materials furnished to ML hereunder be or reasonably appear likely to be restricted, encumbered or enjoined by reason of any such actual or alleged infringement of Third Party Intellectual Property Rights or other proprietary rights or confidentiality or nondisclosure restrictions (the "Accused Material"), Multex will promptly and at no cost to ML, (A) Multex shall ------- -------- have the right upon written notice to ML to immediately terminate the portion of the infringing Services that are or reasonably may be infringing or otherwise violating the Intellectual Property Rights of any person or entity, (B) obtain for ML the right to continue to use the Accused Material, (C) work diligently and continuously through qualified Employees to modify the Accused Material so as to remove the cause of the claim, 27 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY action or suit (provided that Multex modification will not affect ML's intended use of the subject material or the performance of any ML operations dependent upon the subject material), and/or (D) replace the Accused Material with an equally suitable, non-infringing substitution, which will be subject to the provisions of the 1999 Master Agreement. The remedies in this Section are in addition and not in place of and shall not limit any of ML's other rights or remedies or limit or affect Multex's obligations at law or as otherwise set forth in this Section." 22.2.5. The following provisions are added as subsection (ix) "The warranties set forth in this Section 16(a) shall not apply: (A) if the Multex ------------- Software or Service is not used in accordance with this 1999 Master Agreement; or (B) if the defect is caused by ML or its agent other than Multex." 23. General Provisions 23.1. Any notices or other communications required or permitted to be given or delivered under the 1999 Master Agreement shall be provided by e-mail (provided that the sender's computer system is capable of and does retain a message establishing that the e-mail message was actually delivered to the recipient's e-mail server) or in writing, which shall be sufficiently given if delivered personally, mailed by first-class mail, postage prepaid, or sent via overnight delivery courier or any other means for which a proof of delivery is provided. All written notices will be addressed to Merrill Lynch, Pierce, Fenner & Smith Incorporated, Merrill Lynch World Headquarters, World Financial Center, South Tower, New York, NY 10080-6105, Attention: Mr. Laurence A. Tosi, Director, Business Development, CICG, and to Multex.com, Inc. 100 William Street, 7th floor, New York, NY 10038, Attention: President or to such other address or addressee as either Party may from time to time designate to the other by written notice pursuant to this Section 23.1. All e-mail messages to ML shall be ------------ sent to laurence@tosi@ml.com, and all e-mail messages to Multex shall be sent to jim@multex.com with a copy to john.mcgovern@multex.com or to such other address or addressee as either Party may from time to time designate to the other by written notice pursuant to this Section 23.1. ------------ 23.2. Multex agrees to notify ML of any change to Multex's legal name within ten (10) business days of the effective date of such name change. 23.3. The Parties shall initially attempt in good faith to resolve any significant controversy, claim, or dispute arising out of or relating to this 1999 Master Agreement or any significant breach thereof, (except for any action ------ --- to compel arbitration hereunder or any action concerning the unauthorized disclosure of any proprietary information or content of a Party or any action concerning the interruption or outage in the Dissemination of Services to ML by Multex or any action concerning the ownership, enforceability, validity, infringement or misappropriation of the Intellectual Property Rights of either Party) (hereinafter collectively referred to as a "Dispute") through face-to- ------- face negotiations between senior executives of each Party. If the Dispute is not resolved within five (5) business days (or such other period of time mutually agreed upon by the Parties) of commencing such face-to-face negotiations, or if the Party against which a claim has been asserted refuses to attend such negotiations or does not otherwise participate in such negotiations within thirty (30) days (or such other period of time mutually agreed upon by the Parties) from the 28 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY date of notice of a Dispute, then the Parties agree to submit the Dispute to arbitration as provided herein. Except as provided in this Section, all Disputes relating in any way to the 1999 Master Agreement shall be resolved exclusively through arbitration conducted under the auspices of the Center for Public Resources (the "CPR") pursuant to CPR's Model ADR Procedure: Non-Administered --- Arbitration Rules and Commentary. The arbitration shall be conducted before three (3) arbitrators, one selected by each Party and the third to be selected by the other two, provided, however, that in the event the Dispute is relating -------- ------- ---- to whether Multex has discharged its obligations under a Project Plan or any other Dispute under the 1999 Master Agreement that is of a technical nature (including whether certain technical specifications have been met or concerning the operation of certain software) at least two (2) of the arbitrators shall have some technical and/or business expertise and background in the software and/or Internet industry. Unless otherwise mutually agreed by the Parties, any arbitration brought hereunder shall be brought only and exclusively in New York, New York. The arbitrators shall hear evidence by each Party and resolve each of the issues identified by the Parties. The arbitrators shall render a formal, non-binding appealable resolution and award on each issue as expeditiously as - ----------- ---------- possible, but not more than fifteen (15) business days after the hearing. In any arbitration, the prevailing Party shall be entitled to reimbursement of its reasonable attorneys' fees and the Parties shall use all reasonable efforts to keep arbitration costs to a minimum. Notwithstanding anything in this Section ------- 12.6 or the other provisions of the 1999 Master Agreement, if either party shall - ---- reasonably determine the need to seek injunctive or other expedited relief in connection with the 1999 Master Agreement, such party may do so in a court of competent jurisdiction in accordance with Section 23.4. ------------ 23.4. Subject to Section 23.3, the Parties hereto agree that the state ------------ and federal courts of New York shall be the proper forums for any legal controversy arising in connection with the 1999 Master Agreement, and the Parties hereby irrevocably and unconditionally consent to the exclusive jurisdiction of such courts for such purposes. So far as is permitted under applicable law, this consent to personal jurisdiction shall be self operative and no further instrument or action, other than service of process as is permitted by New York Law, shall be necessary in order to confer jurisdiction upon Multex in any such court. The convention on the International Sale of Goods shall not apply to the 1999 Master Agreement and is hereby disclaimed. 23.5. Each Party shall comply with all applicable laws, rules and regulations, including all applicable laws, rules and regulations of the United States of America, including, without limitation, the export controls imposed by the Department of Commerce, the antiboycott regulations administered by the Departments of Commerce and the Treasury (which among other matters prohibit participating in any boycott of Israel) and the Foreign Corrupt Practices Act as they apply to the products and services and other activities under the 1999 Master Agreement. 23.6. In the event any one or more of the provisions of the 1999 Master Agreement shall for any reason be held to be invalid, illegal or unenforceable, the remaining provisions of the 1999 Master Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable provision, which being valid, legal and enforceable, comes closest to the economic effect and intent of the Parties underlying the invalid, illegal or unenforceable provision. 29 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 23.7. Any press releases, public announcements or similar publicity with respect to the 1999 Master Agreement or the transactions contemplated hereby must be approved by the Parties in advance, provided that such approval may not be unreasonably withheld or delayed, and further provided that nothing herein will prevent the Parties or their respective Affiliates, upon reasonable notice to the others, from making public announcements to comply with the requirements of law or any listing agreement with any securities exchange or to inform their respective employees of the transactions contemplated by the 1999 Master Agreement. 23.8. All references herein to Sections, Exhibits and Schedules are to the Sections in the Addn-3 and to Exhibits and Schedules attached hereto as if fully set forth in. 23.9. Addn-3 may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. * * * * * 30 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY IN WITNESS WHEREOF, the Parties hereto, each acting under due and proper authority, have executed this Addn-3 as of the day, month and year first above written. MULTEX.COM, INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED /s/ /s/ By:_____________________________ By:_____________________________ Name:___________________________ Name:___________________________ (type or print) (type or print) Title:__________________________ Title:__________________________ (type or print) (type or print) Date:___________________________ Date:___________________________ 31 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY Exhibit A --------- All of the Schedules and Attachments, prior amendments and service requests (together with the M.A., the "Master Agreement") constituting part of the Master ---------------- Agreement are set out on this Exhibit A or attached hereto. --------- Schedules --------- A. ML Online/Multex Service Request dated as of February 28, 1997 B. Contribution and Distribution Services Agreement C. Multex Publisher - For Internal ML Research Distribution Services Agreement D. ML Online Trial Program Addendum Attachments ----------- A. Form of Service Request B. Multex or ML Provided Equipment C. Third Party Software/License Requirements for End Users D. Multex Subscriber Agreement Amendments ---------- 1. Addendum No. 1 dated July 1, 1999 amends the M.A. and the ML Online Trial Program Addendum dated October 29, 1998 2. Second Addendum, effective April 1, 1999 amends the ML Online/Multex Service Request dated February 28, 1997 and supplements the ML Online Trial Program Addendum dated October 29, 1998 Service Requests ---------------- SPDR Service Request dated as of August 5, 1999 A-1 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY Exhibit B --------- Project Plan Form The Project Plan Form shall be attached by the Parties after the Addn-3 Effective Date. B-1 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY Schedule 1.20 MULTEX EMPLOYEE CONFIDENTIALITY AND NON-DISCLOSURE FORM AGREEMENT --------------------------------- Attached hereto. 1.20-1 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY Schedule 1.80 MULTEX CONSULTANT CONFIDENTIALITY AND NON-DISCLOSURE FORM AGREEMENT --------------------------------- Attached hereto. 1.80-1 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY Schedule 18 DOMAIN NAME AGREEMENT AND ASSIGNMENT ------------------------------------ This Agreement and Assignment is made between Multex.com, Inc., a Delaware corporation having a principal place of business at 33 Maiden Lane, 5th Floor, New York, NY 10038 ("Assignor"), and Merrill Lynch, Pierce, Fenner & -------- Smith Incorporated, a Delaware corporation having a principal place of business at Merrill Lynch World Headquarters, North Tower World Financial Center, 250 Vesey Street, New York, NY 10281 ("Assignee"). -------- WHEREAS, pursuant to Section 18 of Addendum No. 3 to Master Agreement for Electronic Distribution Services between Assignor and Assignee dated as of December 21, 1999, Assignor agreed to assign to Assignee and Assignee agreed to accept the assignment of all rights in the domain name "themarkets.com" and all -------------- registrations pertaining to domain names including the term "themarkets" or ---------- variation thereof, and all goodwill associated with the domain names (collectively, the "Domain Names"). ------------ NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Assignor agrees to and hereby assigns, sells and transfers to Assignee, its successors and assigns, all right, title and interest in and to: (i) the Domain Names and all registrations for such Domain Names and all goodwill pertaining to such Domain Names; (ii) all income, royalties, damages and payments now due or which hereafter become due or payable in respect to such Domain Names; (iii) all causes of action (in law or equity) and rights to sue, counterclaim and/or recover for past, present or future infringement of such Domain Names; and (iv) all rights corresponding to the foregoing throughout the world. 2. Assignor agrees to cooperate with Assignee and follow Assignee's instructions in order to transfer the Domain Names to Assignee in a timely manner. Assignor will prepare and transmit the necessary documentation and/or correspond with the appropriate domain name registration authority, Internet service provider and/or governmental entities to authorize transfer of the domain name. 3. This Assignment is effective as of the date set forth below. Assignor agrees to execute additional assignments and other appropriate documentation necessary to effectuate and validate this Assignment as soon as is practicable after the date of this Assignment. 18-1 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY 4. Assignor warrants and represents to Assignee that: (i) Assignor has unencumbered rights in the Domain Names; (ii) Assignor properly registered the Domain Names without committing fraud or misrepresentation; (iii) Assignor has the authority to transfer the Domain Names; (iv) Assignor has not received any claim from a third party that the use of the Domain Names violates the intellectual property or other rights of such third party; (v) Assignor has not used the Domain Names for any illegal purpose; and (vi) to the best of Assignor's knowledge, the use of the Domain Names does not infringe the rights of any third party in any jurisdiction. MULTEX.COM, INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By:_____________________________ By:_____________________________ Name:___________________________ Name:___________________________ (type or print) (type or print) Title:__________________________ Title:__________________________ (type or print) (type or print) Date:___________________________ Date:___________________________ 18-2 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EXECUTION COPY Schedule 12 MONTHLY RETAINER AND MONTHLY REPORTS ------------------------------------ 22.10. No later than the tenth (10th) business day of each month during the Term hereof, ML shall pay Multex a monthly retainer payment for Services to be performed by Multex in such month. The initial monthly retainer payment shall be [*****]. The Parties may increase or decrease the monthly retainer payment in amounts mutually agreed upon one or more times during the Term hereof, and the initial monthly retainer payment, or if applicable, the then-current adjusted monthly retainer payment shall be referred to as the "Monthly Retainer Payment." ------------------------ 22.11. Multex shall deliver a report (the "Monthly Report" and "Monthly -------------- ------- Reports") to ML within ten (10) business days after the end of the preceding - ------- month indicating (in itemized form) with respect to such month: the name of each Employee and Outside Consultant who worked on one or more Projects then underway and the Projects for which he or she provided Services, the number of hours he or she spent on each Project, the payments to be made to Multex by ML for such work, and the Data and Equipment Fees paid or owed by ML to Multex during such month (on an itemized basis). The total amount of payments made and owed by ML to Multex for such month shall be referred to as the "Monthly Payment Amount." ---------------------- The Monthly Report shall indicate the amount by which the Monthly Retainer Payment constituted an overpayment or underpayment of the Monthly Payment Amount for that month. ML shall pay Multex to compensate for any such underpayment within forty-five (45) days of receiving an invoice for the same from Multex. To the extent the Monthly Retainer Payment constituted an overpayment of the Monthly Payment Amount, the excess amount will be applied as a credit against payments owed by ML to Multex in the next and succeeding months until such credit has been fully applied. Multex shall indicate the amount of such credit, if any, in successive Monthly Reports. 12-3 Confidential treatment has been requested for portions of this document, which have been redacted, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. EX-23.1 4 CONSENT OF ERNST & YOUNG LLP Exhibit 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 89411) pertaining to the Multex.com, Inc. 1999 Stock Option Plan, the Market Guide Inc. 1995 Key Employee Incentive Plan and the 1995 Independent Director's Stock incentive Plan Special Option Grants to Messrs. Byramji and Case of our report dated February 4, 2000, except for the seventh paragraph of Note 17, as to which the date is March 21, 2000, with respect to the consolidated financial statements and schedule of Multex.com, Inc. included in the Annual Report (Form 10K) for the year ended December 31, 1999. /S/ Ernst & Young LLP New York, New York March 29, 2000 EX-23.2 5 CONSENT OF ZERBO, MCKIERNAN & ZAMBITO, LLC Exhibit 23.2 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 89411) pertaining to the Multex.com, Inc. 1999 Stock Option Plan, the Market Guide Inc. 1995 Key Employee Incentive Plan and 1995 Independent Director's Stock incentive Plan Special Option Grants to Messrs. Byramji and Case of our report dated May 18, 1998, except for Notes C and J, as which the date is April 27, 1999, with respect to the consolidated financial statements and schedule of Market Guide Inc. for the year ended December 31, 1997 included in the Annual Report (Form 10K) of Multex.com, Inc. for the year ended December 31, 1999. /S/ Zerbo, McKiernan & Zambito, LLC Fairfield, New Jersey March 29, 1999 EX-27.1 6 FINANCIAL DATA SCHEDULE FOR 12/31/97, 98, 99
5 12-MOS 12-MOS 12-MOS DEC-31-1997 DEC-31-1998 DEC-31-1999 DEC-31-1997 DEC-31-1998 DEC-31-1999 3,343 4,156 6,090 7,664 20,015 33,028 2,905 3,840 11,377 264 172 423 0 0 0 14,179 28,523 53,264 7,761 9,935 19,693 4,264 5,465 8,830 18,542 33,183 65,600 5,297 6,565 15,745 0 0 0 37,234 59,859 0 0 0 0 72 80 272 25,183 (34,203) 46,929 18,542 33,183 65,600 12,616 22,021 40,850 12,616 22,021 40,850 2,720 5,083 10,569 2,720 5,083 10,569 0 716 5,713 168 148 901 396 575 114 (7,911) (8,348) (24,280) 7 276 1,030 (7,918) (8,624) (25,310) (1,087) (214) 331 0 0 0 0 0 0 (11,186) (11,518) (26,167) (1.62) (1.51) (1.15) (1.62) (1.51) (1.15)
-----END PRIVACY-ENHANCED MESSAGE-----