Employment Agreement - BigCharts Inc. and Philip D. Hotchkiss
EMPLOYMENT AGREEMENT
This Employment Agreement (the "AGREEMENT"), is made as of the Effective
Date indicated below, by and between BigCharts Inc., a Minnesota corporation
("CHARTS") and Philip D. Hotchkiss (the "EXECUTIVE").
BACKGROUND
This Agreement is entered into in connection with an Agreement and Plan
of Reorganization (the "REORGANIZATION AGREEMENT") dated as of April 28, 1999,
by and among MarketWatch.com, Inc., a Delaware corporation ("MARKETWATCH"), Big
Dog Acquisition Corp., a Minnesota corporation and a wholly-owned subsidiary of
MarketWatch ("SUB"), Charts and certain shareholders of Charts, pursuant to
which Sub is to merge with and into Charts, with Charts becoming a wholly-owned
subsidiary of MarketWatch (the "MERGER"). The date on which the Merger becomes
effective will be the effective date of this Agreement (the "EFFECTIVE DATE").
MarketWatch and Charts desire to retain the services of Executive, and
Executive desires to be retained by MarketWatch and Charts, on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained herein, MarketWatch, Charts and Executive
hereby agree as follows:
1. TERM OF EMPLOYMENT: The term of employment of Executive by Charts
hereunder shall commence on the Commencement Date and shall continue
thereafter on the same terms and conditions for a period of five (5)
years unless earlier terminated pursuant to Section 6 (such term being
hereinafter referred to as the "EMPLOYMENT PERIOD"). The Employment
Period shall be extended automatically without further action by either
party as of the third anniversary of the Commencement Date for a period
of one (1) year, unless prior to such date Charts or the Executive shall
notify the other in writing of its or his intention not to renew the
Agreement, in which case the Agreement shall terminate at the end of the
original term. If the Employment Period is extended, it shall thereafter
be referred to as the Employment Period.
2. TITLE; DUTIES: The Executive shall serve as the President and Chief
Executive Officer of Charts reporting to the Chief Executive Officer of
MarketWatch. Executive shall also be a director of MarketWatch.
Executive shall perform those duties and responsibilities inherent in
such position including such duties and responsibilities as the Board
shall assign. The Executive agrees to devote his full time and best
efforts, attention and energies to the business and interests of Charts.
Executive shall serve Charts faithfully and to the best of his ability
in such capacities, devoting his full business time, attention,
knowledge, energy and skills to such employment; provided, however,
Charts acknowledges that Executive may serve on the board of directors
of other companies with the prior approval of the Board. Executive shall
travel as reasonably required in connection with the performance of his
duties hereunder.
3. COMPENSATION: Charts shall pay and Executive shall accept as full
consideration for his services hereunder, compensation consisting of the
following:
3.1 BASE SALARY. $200,000 per year base salary during the first year
of the term of this Agreement; and increasing 5% per annum for
every year thereafter. (subject to increase by the Board) during
successive years of the term of this Agreement if the Employment
Period is extended past the original five-year term pursuant to
Section 1 hereof. "BASE SALARY" shall mean the base salary
provided for in this Section 3.1. Base Salary is payable in
installments in accordance with Charts' normal payroll practices,
less such deductions or withholdings as are required by law.
3.2 BONUS. Annual target bonus at the rate and in accordance with the
specifications on Exhibit A attached hereto.
4. BENEFITS: Subject to all applicable eligibility requirements, and legal
limitations, Executive will be able to participate in any and all
401(k), vacation, medical, dental, life and long-term disability
insurance and/or other benefit plans which from time to time may be
established for other employees of MarketWatch with a similar
compensation level, duties and responsibilities.
5. REIMBURSEMENT OF EXPENSES: Charts will reimburse Executive for all
reasonable travel, entertainment and other
<PAGE> 2
expenses incurred or paid by the Executive in connection with, or
related to, the performance of his duties, responsibilities or services
under this Agreement subject to review by the Board or its compensation
committee, if applicable, and in a manner consistent with MarketWatch's
policies for reimbursement of such expenses.
6. BENEFIT UPON TERMINATION OF EMPLOYMENT PERIOD.
6.1 DISABILITY. In the event of the permanent disability (as
hereinafter defined) of Executive during the Employment Period,
Charts shall have the right, upon written notice to Executive, to
terminate Executive's employment hereunder, effective upon the
30th calendar day following the giving of such notice (or such
later day as shall be specified in such notice). Upon the
effectiveness of such termination, (i) Charts shall have no
further obligations hereunder, except to pay and provide, subject
to applicable withholding, (A) all amounts of Base Salary
accrued, but unpaid, at the effective date of termination, (B)
Executive's target bonus, and (C) all reasonable unreimbursed
business-related expenses, (ii) the shares subject to Executive's
MarketWatch Option (as defined in the Reorganization Agreement)
shall immediately vest and become exercisable and remain
exercisable for the periods specified in the MarketWatch Option,
and (iv) Executive shall then be deemed to be a Charts Employee
Shareholder for purposes of the "Lock Up" restrictions of Section
2.6 of the Reorganization Agreement and the number of shares that
are then Unlocked Shares (as defined in the Reorganization
Agreement) shall be recomputed as if Executive had been subject
to the provisions of Section 2.6(a)(i) of the Reorganization
Agreement instead of Section 2.6(a)(ii) of the Reorganization
Agreement since the Closing Date (as defined in the
Reorganization Agreement), and (iii) Executive shall have no
further obligations hereunder other than those provided for in
Sections 9 and 10 hereof. All amounts payable to Executive
pursuant to this Section 6.1 shall be payable within 30 days
following the effectiveness of the termination of Executive's
employment. For purposes of this Agreement, "PERMANENT
DISABILITY" shall be defined as any physical or mental disability
or incapacity which renders Executive incapable in any material
respect of performing the services required of him in accordance
with his obligations under Section 2 for a period of 180
consecutive days, or for 180 days in any 360 day period.
6.2 DEATH. In the event of the death of Executive during the
Employment Period, this Agreement shall automatically terminate
and Charts shall have no further obligations hereunder, except to
pay and provide to Executive's beneficiary or other legal
representative, subject to applicable withholding, (i) all
amounts of Base Salary and bonus accrued but unpaid, at the date
of death, (ii) all reasonable unreimbursed business-related
expenses, (iii) the shares subject to Executive's MarketWatch
Option shall immediately vest and become exercisable and remain
exercisable for the periods specified in the Option, and (iv)
Executive shall then be deemed to be a Charts Employee
Shareholder for purposes of the "Lock Up" restrictions of Section
2.6 of the Reorganization Agreement and the number of shares that
are then Unlocked Shares shall be recomputed as if Executive had
been subject to the provisions of Section 2.6(a)(i) of the
Reorganization Agreement instead of Section 2.6(a)(ii) of the
Reorganization Agreement since the Closing Date. All amounts
payable to Executive pursuant to this Section 6.2 shall be
payable within 30 days following the date of death.
6.3 TERMINATION WITHOUT CAUSE. In the event of the termination of
Executive's employment by Charts without Cause (as defined below)
or upon the Executive's voluntary termination of his employment
for Good Reason (as defined below), (i) all amounts of Base
Salary and bonus accrued but unpaid on the date of termination
shall be paid by Charts within 30 days following the date of
termination, (ii) an amount equal to Executive's Base Salary on
the date of termination for a period of six months shall be paid
by Charts in six equal installments, (iii) the shares subject to
Executive's MarketWatch Option shall immediately vest and become
exercisable and remain exercisable for the periods specified in
the Option, and (iv) Executive shall then be deemed to be a
Charts Employee Shareholder for purposes of the "Lock Up"
restrictions of Section 2.6 of the Reorganization Agreement and
the number of shares that are then Unlocked Shares shall be
recomputed as if Executive had been subject to the provisions of
Section 2.6(a)(i) of the Reorganization Agreement instead of
Section 2.6(a)(ii) of the Reorganization Agreement since the
Closing Date. For purposes of this Agreement, "CAUSE" shall be
limited to:
(a) Willful and repeated failure by Executive to carry out the
lawful instructions of the Board after being notified of
such failure, other than a failure resulting from his
complete or partial incapacity due to physical or mental
illness or impairment;
(b) Indictment or a violation of a federal or state law or
regulation which indictment or violation is for a crime
which is a felony under federal or state law, or any
violation of state or federal securities laws involving
<PAGE> 3
securities of MarketWatch which would result in a civil
penalty being imposed by the U.S. Securities and Exchange
Commission or similar state securities law authority;
(c) An act of personal dishonesty that would result in
Executive's personal enrichment at the expense of
MarketWatch or Charts; or
(d) Executive's willful breach of a material provision of
Executive's Non-Competition Agreement after notice by the
Board of Directors of MarketWatch.
6.4 CIRCUMSTANCES UNDER WHICH TERMINATION BENEFITS WOULD NOT BE PAID.
Charts shall only be obligated to pay the amounts of Base Salary
and bonus accrued but unpaid on the date of termination, and
shall not be obligated to pay Executive the termination benefits
described in subparagraphs 6.1 through 6.3 above if the
Employment Period is terminated for Cause, or if Executive
voluntarily terminates his employment other than for Good Reason
(as defined below). If the Employment Period is terminated for
Other Cause (defined below), Employee shall be entitled to the
option vesting and lock-up adjustment in clauses (iii) and (iv)
of Section 6.3, but shall receive no other termination benefits.
For purposes of this Agreement, "OTHER CAUSE" shall be limited
to:
(a) Willful and deliberate failure by Executive to substantially
perform his duties hereunder and not cured within a
reasonable period after written notice from the Board, other
than a failure resulting from his complete or partial
incapacity due to physical or mental illness or impairment;
(b) A material and willful violation of a federal or state law
or regulation applicable to the business of the company
without the company's knowledge;
(c) Commission of a willful and deliberate act by Executive
which constitutes gross misconduct and which is materially
and demonstratively injurious to Charts or MarketWatch; or
(d) A willful and deliberate breach of a material provision of
this Agreement after written notice.
6.5 CONSTRUCTIVE TERMINATION. Notwithstanding anything in Section 3
or in this Section 6 to the contrary, for purposes of this
Agreement the Employment Period will be deemed to have been
terminated and Executive will be deemed to have Good Reason for
voluntary termination of the Employment Period ("GOOD REASON"),
if there should occur:
(a) Without Executive's consent, a change in Executive's
position and responsibilities from those immediately prior
to the Effective Date such that those duties and
responsibilities are not reasonably comparable to those held
prior to the Effective Date;
(b) a reduction in base salary;
(c) A relocation of Executive's principal place of employment
more than 50 miles from Minneapolis, Minnesota, San
Francisco, California or New York, New York without
Executive's consent; or
(d) Executive ceasing to serve as a member of the Board of
Directors of MarketWatch without his consent and such
cessation was not due to Executive's death or disability or
as a result of Executive's employment being terminated for
Cause.
7. CHANGE IN CONTROL BENEFITS:
Should there occur a Change in Control, then the following
provisions shall become applicable:
(A) During the period (if any) following a Change in Control that
Executive shall continue to remain employed, then the terms and provisions of
this Agreement shall continue in full force and effect, and the Option shall
continue to vest and become and remain exercisable in accordance with the terms
of the Option; or
(B) In the event of (i) a termination of the Executive's employment by
Charts or its successor or MarketWatch or its successor, as applicable, other
than for Other Cause or Cause within six (6) months after a Change in Control or
(ii) Executive voluntarily terminates his employment for Good Reason within six
(6) months after a Change in Control:
<PAGE> 4
(i) Charts shall pay to Executive an amount equal to (A)
all amounts of bonus accrued to the date of termination, (B) 100% of Executive's
Base Salary for a period of one year, and (C) Executive's target bonus for a
period of one year, in one lump sum amount on or before the fifth business day
following the effective date of Executive's termination; and
(ii) The unvested portion of the MarketWatch Option held
by Executive on the date of such Change in Control shall immediately vest and
become exercisable and Executive shall then be deemed to be a Charts Employee
Shareholder for purposes of the "Lock Up" restrictions of Section 2.6 of the
Reorganization Agreement and the number of shares that are then Unlocked Shares
shall be recomputed as if Executive had been subject to the provisions of
Section 2.6(a)(i) of the Reorganization Agreement instead of Section 2.6(a)(ii)
of the Reorganization Agreement since the Closing Date.
For purposes of Sections 6 and 7 hereof, the term "CHANGE IN CONTROL"
shall mean:
(x) the sale, lease, conveyance, liquidation or other
disposition of all or substantially all of Charts' or
MarketWatch's assets as an entirety or substantially as an
entirety to any person, entity or group of persons acting
in concert other than (i) to MarketWatch or any affiliates
of Charts or MarketWatch, including, without limitation,
DBC, CBS or any of their affiliates, (ii) in the ordinary
course of business; or
(y) any transaction or series of related transactions (as a
result of a tender offer, merger, consolidation or
otherwise) that results in any Person (as defined in
Section 13(h)(8)(E) under the Securities Exchange Act of
1934) other than MarketWatch or Sub becoming the
beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly,
of more than 50% of the aggregate voting power of all
classes of common equity securities of Charts or
MarketWatch, except if such Person is (A) a subsidiary of
Charts or MarketWatch, (B) an employee stock ownership
plan for employees of Charts or MarketWatch, (C) a company
formed to hold Charts' or MarketWatch's common equity
securities and whose shareholders constituted, at the time
such company became such holding company, substantially
all the equity owners or shareholders of Charts or
MarketWatch, or (D) DBC, CBS and/or any of their
affiliates.
In the event that the severance and other benefits provided to Executive
pursuant to Section 6 of this Agreement or otherwise ("TOTAL PAYMENTS")
(i) constitute "PARACHUTE PAYMENTS" within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "CODE") and (ii)
but for this Section 7, such severance and benefits would be subject to
the excise tax imposed by Section 4999 of the Code (the "EXCISE TAX"),
then Executive shall be entitled to receive an additional cash payment
(a "Gross-Up Payment") within 30 days of the Change in Control equal to
an amount such that after payment by Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including
any Excise Tax, imposed upon the Gross-Up Payment, Executive would
retain an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Total Payments. For purposes of the foregoing determination,
Executive's tax rate shall be deemed to be the highest statutory
marginal state and Federal tax rate (on a combined basis) (including
Executive's share of F.I.C.A and Medicare taxes) then in effect. If no
determination by the Company's auditors is made prior to the time a tax
return reflecting the Total Payments is required to be filed, Executive
will be entitled to receive a Gross-Up Payment calculated on the basis
of the Total Payments reported by Executive in such tax return, within
30 days of the filing of such tax return. In all events, if any tax
authority determines that a greater Excise Tax should be imposed upon
the Total Payments than is determined by the Company's independent
auditors of reflected in Executive's tax return pursuant to this Section
7, Executive shall be entitled to receive the full Gross-Up Payment
calculated on the basis of the amount of Excise Tax determined to be
payable by such tax authority from the Company within 30 days of such
determination.
Unless Charts and Executive otherwise agree in writing, any
determination required under this Section 7 shall be made in writing by
independent public accountants agreed to by Charts and Executive (the
"ACCOUNTANTS"), whose determination shall be conclusive and binding upon
Executive and Charts for all purposes. The Accountants may rely on
reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. Charts and Executive shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section
7. Charts shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this Section 7.
<PAGE> 5
8. DISPUTE RESOLUTION: Charts and Executive agree that any dispute
regarding the interpretation or enforcement of this Agreement shall be
decided by confidential, final and binding arbitration conducted by
Judicial Arbitration and Mediation Services ("JAMS") under the
then-existing JAMS rules, rather than by litigation in court, trial by
jury, administrative proceeding, or in any other forum.
9. COOPERATION WITH CHARTS AFTER TERMINATION OF THE EMPLOYMENT PERIOD:
Following termination of the Employment Period by Executive, Executive
shall reasonably cooperate with Charts and/or MarketWatch in all matters
relating to the winding up of his pending work on behalf of Charts and
the orderly transfer of any such pending work to other employees of
Charts as may be designated by Charts.
10. CONFIDENTIALITY; RETURN OF PROPERTY: The Executive acknowledges that
during the Employment Period he will receive confidential information
from Charts and affiliates of Charts (including, without limitation,
MarketWatch) and the respective clients thereof (each a "RELEVANT
ENTITY"). Accordingly, the Executive agrees that during the Employment
Period (as it may be extended from time to time) and thereafter for a
period of two years, the Executive and his affiliates shall not, except
in the performance of his obligations to Charts hereunder or as may
otherwise be approved in advance by Charts, directly or indirectly,
disclose or use (except for the direct benefit of Charts) any
confidential information that he may learn or has learned by reason of
his association with any Relevant Entity. Upon termination of this
Agreement, the Executive shall promptly return to Charts any and all
properties, records or papers of any Relevant Entity, that may have been
in his possession at the time of termination, whether prepared by the
Executive or others, including, but not limited to, confidential
information and keys. For purposes of this Agreement, "CONFIDENTIAL
INFORMATION" includes all data, analyses, reports, interpretations,
forecasts, documents and information concerning a Relevant Entity and
its affairs, including, without limitation with respect to clients,
products, policies, procedures, methodologies, trade secrets and other
intellectual property, systems, personnel, confidential reports,
technical information, financial information, business transactions,
business plans, prospects or opportunities, (i) that Charts reasonably
believes are confidential or (ii) the disclosure of which could be
injurious to a Relevant Entity or beneficial to competitors of a
Relevant Entity, but shall exclude any information that (x) the
Executive is required to disclose under any applicable laws, regulations
or directives of any government agency, tribunal or authority having
jurisdiction in the matter or under subpoena or other process of law,
(y) is or becomes publicly available prior to the Executive's disclosure
or use of the information in a manner violative of the second sentence
of this Section 10, or (z) is rightfully received by Executive without
restriction or disclosure from a third party legally entitled to possess
and to disclose such information without restriction (other than
information that he may learn or has learned by reason of his
association with any Relevant Entity). For purposes of this Agreement,
"AFFILIATE" means any entity that, directly or indirectly, is controlled
by, or under common control with, the Executive. For purposes of this
definition, the terms "CONTROLLED" and "UNDER COMMON CONTROL WITH" means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of voting stock, by contract or otherwise.
11. GENERAL:
11.1 INDEMNIFICATION. In the event Executive is made, or threatened to
be made, a party to any legal action or proceeding, whether civil
or criminal, by reason of the fact that Executive is or was a
director or officer of Charts or serves or served any other
corporation fifty percent (50%) or more owned or controlled by
Charts in any capacity at Charts' request, Executive shall be
indemnified by Charts, and Charts shall pay Executive's related
expenses when and as incurred, all to the fullest extent
permitted by law. Upon the closing of the Merger, MarketWatch
shall execute an indemnification agreement with Executive, which
indemnification agreement is on the same terms and conditions as
MarketWatch has entered into with its other executive officers
and directors.
11.2 WAIVER. Neither party shall, by mere lapse of time, without
giving notice or taking other action hereunder, be deemed to have
waived any breach by the other party of any of the provisions of
this Agreement. Further, the waiver by either party of a
particular breach of this Agreement by the other shall neither be
construed as, nor constitute a, continuing waiver of such breach
or of other breaches by the same or any other provision of this
Agreement.
11.3 SEVERABILITY. If for any reason a court of competent jurisdiction
or arbitrator finds any provision of this Agreement to be
unenforceable, the provision shall be deemed amended as necessary
to conform to applicable laws or regulations, or if it cannot be
so amended without materially altering the intention of the
parties, the remainder of the Agreement shall continue in full
force and effect as if the offending provision were not contained
herein.
<PAGE> 6
11.4 NOTICES. All notices and other communications required or
permitted to be given under this Agreement shall be in writing
and shall be considered effective upon personal service or upon
transmission of a facsimile or the deposit with Federal Express
or in Express Mail and addressed to the Chairman of the Board of
Charts at its principal corporate address, and to Executive at
his most recent address shown on Charts' corporate records, or at
any other address which he may specify in any appropriate notice
to Charts.
11.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all
of which taken together constitutes one and the same instrument
and in making proof hereof it shall not be necessary to produce
or account for more than one such counterpart.
11.6 ENTIRE AGREEMENT. The parties hereto acknowledge that each has
read this Agreement, understands it, and agrees to be bound by
its terms. The parties further agree that this Agreement,
together with the Noncompetition Agreement of even date herewith,
shall constitute the complete and exclusive statement of the
agreement between the parties and supersedes all proposals (oral
or written), understandings, representations, conditions,
covenants, and all other communications between the parties
relating to the subject matter hereof.
11.7 GOVERNING LAW. This Agreement shall be governed by the law of the
State of Minnesota.
11.8 ASSIGNMENT AND SUCCESSORS. Charts shall have the right to assign
its rights and obligations under this Agreement to an entity
which acquires substantially all of the assets of Charts, whether
by merger or otherwise including, without limitation, MarketWatch
or any affiliate thereof. The rights and obligations of Charts
under this Agreement shall inure to the benefit and shall be
binding upon the successors and assigns of Charts.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BIGCHARTS INC.
/s/ Jamie J. Thingelstad
-----------------------------------
Name: Jamie J. Thingelstad
Title: C.T.O., E.V.P.
EXECUTIVE
/s/ Philip D. Hotchkiss
-----------------------------------
Philip D. Hotchkiss
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
<PAGE> 8
EXHIBIT A
TARGET BONUS AND SPECIFICATIONS
ANNUAL TARGET BONUS RATE: fifty percent (50%) of the then-applicable base salary
actually paid in a given year. For example, if the base salary actually paid in
the second year of the term of this Agreement is $210,000, the maximum target
bonus would be $105,000 ($210,000 multiplied by 50%) for that year.
SPECIFICATIONS: two components.
DISCRETIONARY COMPONENT: Board may decide when, and if to grant this
component. This component shall be 25% of the then-applicable base
salary actually paid in a given year.
ACHIEVEMENT OF FINANCIAL OBJECTIVES COMPONENT: Target Bonus, in the
amount payable shown below, is payable upon the achievement of the
financial objectives of the consolidated Charts and MarketWatch set
forth below:
<TABLE>
<CAPTION>
% of Base Salary
Actually Paid for
Such Year Payable
Upon Achievement of
Financial Objectives Financial Objectives
-------------------- --------------------
<S> <C> <C>
1st Year 25% To be determined annually by the Board
2nd Year 25% To be determined annually by the Board
3rd Year 25% To be determined annually by the Board
4th Year 25% To be determined annually by the Board
5th Year 25% To be determined annually by the Board
</TABLE>