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U.S. SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File Number 0-22351
FirstQuote Inc.
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(Name of small business issuer as specified in its charter)
Delaware 98-0162893
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12, Ave des Morgines, 1213 Petit-Lancy 1, Geneva,
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Switzerland N/A
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(Address of principal executive offices) (Zip Code)
41-22-879-0879
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(Issuer's telephone number)
Securities To Be Registered Under Section 12(b) Of The Act:
None N/A
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(Title of each class (Name of each exchange on which
to be so registered) each class is to be registered)
Securities To Be Registered Under Section 12(g) Of The Act:
Common Stock, $.001 par value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past
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. Yes [X] No [_]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K contained in this form, 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-KSB or any amendment to
this Form 10-KSB. [_]
The market value of the voting stock held by non-affiliates of the registrant as
of March 20, 2000 was approximately $56,407,568. As of March 20, 2000 the
registrant had 6,573,409 shares of its common stock, par value $0.001, issued
and outstanding.
Documents Incorporated By Reference: None
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Part I
Item 1. Description of Business
Business Development
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FirstQuote Inc. (previously Virtual Telecom, Inc), a Delaware corporation
(the "Company" or "FirstQuote"), is engaged in the business of developing and
marketing real-time market data and financial information services as well as
online brokerage capabilities via a range of client interfaces based on Internet
technologies. Its services are marketed under the brand name "FirstQuote"
primarily on a business-to-business basis, enabling banks and brokerages to
offer such services to their client bases by outsourcing the service to
FirstQuote. The Company also provides related supporting network services to
users of its financial information services.
The Company was organized on July 3, 1996 under the laws of the State of
Delaware.
During the past three years, the Company has issued various classes of its
securities pursuant to a number of private placement arrangements, summarised as
follows:
. During the first quarter of 1997, the Company sold 534,063 shares of
Common Stock for gross proceeds of $873,000.
. During the second quarter of 1997, the Company sold 204,000 units ( each
unit consisting of two shares of Common Stock and one warrant entitling
its holder to purchase one share of Common Stock at an exercise price of
$3.50 per share) for gross proceeds of $1,020,000.
. In December 1997, the Company sold 1,923,716 Series B Preferred Shares
for $3,000,000
. In January 1999 the Company sold 3,783,784 Series C Preferred Shares for
$7,000,000.
. In March 2000, the Company sold 1,061,057 shares of its Common Stock to a
number of existing and additional venture capital and private investors
for a total consideration of $7,155,184.
More comprehensive details about the above transactions are presented in the
Notes to the Annual Financial Statements.
In December 1999, the Company acquired all of the outstanding capital shares
of Stockdata Amsterdam BV, a limited liability company organized under the laws
of The Netherlands and located in Amsterdam, The Netherlands. Stockdata is
engaged in the distribution of real-time market data products to the Benelux
region, primarily through the use of datacast technologies via cable networks.
The acquisition was conducted pursuant to a Securities Purchase Agreement
dated December 24, 1999 between FirstQuote and the stockholders of Stockdata.
Pursuant to the agreement, the Stockdata stockholders transferred to FirstQuote
all of the outstanding capital shares of Stockdata in consideration of
FirstQuote's payment of up to US$3,750,000, payable as follows: US$245,031 in
cash; US$1,059,239 in the assignment of Stockdata receivables; and FirstQuote's
issuance of 197,815 shares of Series D preferred stock and 148,450 shares of
common stock, all such shares being valued at approximately US$6.50 per share.
An additional 30,000 FirstQuote common shares are issuable to the sellers'
subject to their satisfaction of certain post-closing conditions.
Unless the context otherwise requires, all references to the Company or
FirstQuote include its wholly-owned subsidiaries, FirstQuote SA, a Swiss
corporation, FirstQuote Limited, an English corporation, and FirstQuote
Stockdata BV, a Dutch corporation. The Company's executive offices are located
at 12 Avenue des Morgines, 1213 Petit-Lancy 1, Geneva, Switzerland; telephone
number +41 (22) 879 0879.
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Business of the Company
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General
FirstQuote is engaged in the business of developing and marketing a range of
Internet-based financial information and transactional services to the European
investment community. The Company provides business-to-business and business-to-
consumer services to the financial marketplace. The Company's services are
provided to its corporate clients for internal use as well as for redistribution
to their customer bases. The Company provides real-time or delayed market data,
news and other financial information as well as electronic brokerage
capabilities over the Internet to a range of customized interfaces, including
desktop client-server applications, web-browser based interfaces, as well as via
wireless services such as the Short Messaging Service ("SMS") and the Wireless
Application Protocol ("WAP"). Therefore, the Company operates as both a content
service provider ("CSP") as well as an application service provider ("ASP").
The Company's financial information services are offered on a direct
subscription basis or as a co-branded business-to-business service to financial
institutions such as banks and brokerage firms, financial media and publishing
organizations and Internet service providers, who desire to offer financial
content and related services directly to their own customers. The Company also
offers to institutional clients turnkey solutions for Internet-based electronic
brokerage capabilities. In order to provide an end-to-end solution, the Company
also derives revenue from the provision of underlying Internet access and
network connectivity services to its corporate and institutional clients.
The Company's services are available via its own wide-area Internet network
backbone by dial-up or dedicated access, as well as from any other Internet
point of access world-wide.
Products and Services
The Company provides real-time or delayed market data, news and fundamental
financial information using Internet technologies. The Company's services are
marketed to European financial institutions, including brokerage firms, banks,
insurance companies, fund managers, professional traders, and private investors.
The market data comprises securities, including stocks, futures and options on
stocks, major stock and option indices, commodities and foreign exchange rates,
from over 150 exchanges worldwide, including major European, American and Asian
exchanges. The Company consolidates and manages information on its own data hub
for over 800,000 securities instruments. The above content is received on data
feeds from stock exchanges and third party providers and is processed on a
number of servers within a common financial data hub, embodying database,
analytical and transactional functionality. Access to such content and
functionality is governed by a permissioning database which controls users'
access to different content or applications to which the user interfaces. In
this manner, customers can access the data via a range of user interfaces
including Windows compliant desktop resident `client' applications, dynamic or
static web browsers, as well as SMS or WAP devices which are fed content on a
real-time or delayed basis, according to each user profile.
The above content is distributed across the Company's network backbone
directly to permanently connected users or via the public Internet. As a result,
the Company's services can be organized over the public Internet, virtual
private networks, intranets, extranets and local or wide area networks using IP
technology.
Additional information about the Company's institutional oriented services
is obtainable directly from its website at www.firstquote.com or about it's
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retail oriented services at www.firstquote.net.
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The Company's services are categorised as follows, tailored to different
segments of the investment community:
FirstQuote Pro Services:
FirstQuote Professional: The service employs a sophisticated desktop
resident decision support interface targeted at institutional investors,
brokerage firms and their more active clients. It provides real-time data
coverage across a variety of financial instruments, sophisticated analytical
tools, alarm settings, historical data, news and all investment indicators
regularly used by professional traders. FirstQuote Professional displays
financial information in multiple windows on multiple pages, each of which can
be configured to suit individual requirements, and stored
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for retrieval. FirstQuote Professional customers are granted a floating license,
allowing the software to be installed and used on multiple machines, for example
an office PC, home PC and portable PC, and thus providing a highly mobile
solution. However only one simultaneous access is permitted per subscription.
The principal features of the FirstQuote Professional include:
Market Minder A quote screen with rows of symbols and
columns of prices and other data related to
the symbols (name, last price, bid, ask,
etc.)
MultiQuote Detailed fundamental information on a symbol
in a customizable layout
Ticker Scrolling ticker window showing trade price
and volume information.
Time & Sales Tabular display of each transaction showing
transaction type price and volume.
News A scrolling list of searchable headlines and
full news stories.
Charts Graphical analysis of market data with a
variety of technical studies available.
Forex Foreign exchange cross rates
Table Exportable tabular display of market data for
a given symbol
Turbo Options Advanced options quote screen
Market Makers Comparative table of market maker bids and
asks indicating market depth.
Alarm Automated event-monitoring tool.
Internet Browser Drag and drop functionality enables seamless
look up of financial information from public
Internet databases (such as Yahoo and Edgar
On-line) or private intranet databases.
DDE Link Links real-time data into a spreadsheet for
further analysis and modeling.
FirstQuote Lite: This service is designed for corporate treasurers,
portfolio managers, smaller brokers and sophisticated private investors. The
service provides real-time data and news, and includes a reduced range of
analytical tools and functions when compared to FirstQuote Professional. The
service consists of a fixed page market data screens featuring (from the above
table) Market Minder; MultiQuote; Ticker; Time and Sales; News; Charts; and
Internet Browser. The fixed page nature of this product provides for
customizable configurations to be implemented for larger groups, which are then
non-modifiable by users.
FirstQuote Trader: Seamlessly integrated with either of the above two
products, the Company also offers electronic brokerage functionality under the
name FirstQuote Trader. The service is offered as an outsourced solution to
banks and brokerage firms providing them the ability to offer Internet-based
electronic brokerage services to their clients. The service involves the design
of appropriate network architectures as well as the integration of the Company's
licensed trading server platform software with the institution's existing
settlement and account risk management systems. The Company provides the
electronic order entry and routing technologies as well as the security systems,
while the institution's existing computer systems provide order approval and
execution functions. As a result the institution's clientele is offered a
complete order entry, execution, and real time profit/loss portfolio information
via the Internet. Since the FirstQuote Trader elements of the interface are
embedded within the FirstQuote Professional or FirstQuote Lite services, the
Company provides a complete and real-time package of decision support, order
entry, order routing and portfolio monitoring capability.
The Company is not a licensed bank or securities brokerage firm nor does it
intend to obtain any such licenses at this time. Therefore, the Company intends
for the foreseeable future to offer electronic brokerage services on a co-
branded outsourced basis to licensed banks and brokerage firms. The Company's
electronic brokerage technology is based on a software license from Townsend
Analytics. See "Trademarks and Technology Licenses" below for a summary of the
terms and conditions of the Company's license agreement with Townsend Analytics.
<PAGE>
FirstQuote.net Services:
The FirstQuote.net range of services complement the FirstQuote Professional
range, by offering similar content and applicable functionality over Web and
wireless technologies, targeted at clients of banks, brokerages, financial media
companies and Internet Service Providers seeking to add financial content to
their portal audiences. In this way the Company is able to reach broader bands
of the investment community, with the objective of seamlessly upgrading certain
of the more sophisticated users to higher value services, such as which are
provided under the FirstQuote Professional range of products.
FirstQuote.net is a component-based service offering, providing businesses
in the finance sector with an array of browser-based investor content combined
with ease-of-use functionality. The browser-based application components allow
real-time customer interaction for finance, content management and trade
lifecycle support. The offering provides banks and brokerage institutions with
the capability to provide their clients with multiple points from which to
access market data, news, analyses, brokerage reports, fundamental data,
portfolio services, market risk, trade and order management services, to any one
of a number of desktop or wireless devices, based on a common client profile. As
the applications are component-based, fully customised solutions can be rapidly
created, addressing the `speed to market' issue.
FirstQuote.net components are centered around the following product ranges:
SnapQuote Static (refresh updated) web-based modules for
market data, charts and news
StreamQuote Dynamically updating content, including screen
tickers, charts, as well as real-time browser-
based electronic brokerage functionality
MarketRisk Decision support analyses presented via a range of
graphical interfaces
SMS Alert features based on pre-defined user-
configured parameters
WAP Wireless access to market data, charts, news and
electronic brokerage functionality, based on WAP
enabled devices such as mobile telephones and
personal digital assistants.
FirstQuote Network Services:
In order to offer a complete end-to-end package of services, the Company
also provides network development and enterprise connectivity services including
Internet access and network security services to its corporate and institutional
clients.
The Company maintains its own wide-area Internet protocol network backbone,
enabling clients to access the market data, financial information and online
dealing services directly by way of dial-up or dedicated lines, where speed and
performance is an issue and thus connectivity is not entrusted to the public
internet. The Company's Internet backbone is currently operative throughout
Switzerland, as well as in Paris and Frankfurt and is being extended to London
and Amsterdam. The Company also leases bandwidth from various European
telecommunications carriers further enabling access to the Company's services
from any Internet access point worldwide.
Market environment and corporate strategy
The Company believes that the market for online investor services in Europe,
including both informational and transactional services, will provide
significant opportunities for the provision of the underlying technology and
content. While this market has developed rapidly in the USA over the past three
years, the European marketplace is characterised by particular parameters which
will require a distinctly different approach in order to capitalise on the
opportunities presented. As a result, the Company believes that significant
market opportunities exist for a provider of financial information and
electronic brokerage services that is able to address the interests and
requirements of the European investor.
The Company believes that the key drivers influencing the market opportunity
which it faces are as follows:
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Internet penetration: While the European private and business internet
connectivity currently lags behind that of the USA, recent studies indicate this
will be redressed over the next three years. Internet connectivity for European
business users is estimated to reach 70% penetration by the year 2004 or about
5.75 million companies (Datamonitor). Particularly noteworthy is the extension
of the Internet to a range of wireless devices which the Company believes will
further increase penetration, as well as the demand for investment information
and transactional services. Emerging demand for such wireless services is
believed to be growing strongly in Europe due to the large installed base of GSM
mobile phones.
Growth in online banking: The number of Europeans using Internet banking is
expected to grow by 30% to 21 million by the year 2004 (Datamonitor). For
traditional banks to move into online banking is a rational move as the costs of
online transactions cost up to 12 times less to process than transactions made
in person. Online customers tend to be more sophisticated and able to look after
their own finances.
Direct equity ownership: The trend towards greater financial flexibility and
self-determination amongst the European investment community is being driven
both by an emerging class of information- and technology-enabled individuals as
well as government pressure to encourage individual retirement planning outside
of traditional state controlled pension funds.
Availability of investment products: The scope of investment possibility has
been significantly extended during the past three years with the emergence of
several `new market' exchanges in Europe (commonly referred to as EURO.NM),
largely geared towards new-economy equities. While European mid-size companies
are privately held to a greater extent than their US counterparts, the
succession of ownership to a next generation who are not always willing to
remain in control is creating flotation opportunities in many cases.
Number of online accounts: The number of online securities accounts in
Europe is currently about 1.3 million (Forrester Research), estimated to grow to
14 million by 2002
Cross border investment tendencies: European investors have traditionally
invested within their own local markets. However, related to currency and trade
harmonisation initiatives currently being adopted by European countries, the
Company believes that a demand for cross-border investment opportunities will
emerge.
Pressure on European financial institutions to offer online services: Over
the past three years, European financial institutions have committed significant
resources to the introduction of the Euro as well Y2K issues. The Company
believes that presently, many such financial institutions will perceive an
increased need to offer or improve online investment services to their clients,
with an emphasis on speed to market, in order to maintain clients, capitalise on
additional revenue opportunities, reduce costs, and counter competition from
especially US based service providers penetrating European markets.
Cross-selling demand from other internet franchises for financial services:
Following from possibilities created by the Internet-economy, the Company
believes that many enterprises currently commanding the attention of large
franchises of Internet-enabled communities, will seek to add complementary
financial services to their product offering in an attempt to capitalise on
overall e-commerce opportunities, thus requiring access to the services that the
Company provides.
The Company's objective is to be a leading provider of Internet-based
services and solutions to the European investment community. The Company plans
to achieve these objectives through:
. the development of strategic alliances with banks and securities
brokerages, financial service providers, financial news organizations,
financial middle-ware companies and Internet service providers throughout
Europe, whereby its services can be leveraged across existing client
bases
. its own direct sales channels targeted at sophisticated private investors
as well as corporate clients
. the development and operation of co-branded content-enabled web-sites
catering to emerging Internet-communities, for the purpose of offering
basic investor services, which serve a marketing platform for the
Company's more sophisticated higher value services.
Key elements of the Company's strategy include:
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State of the Art Technology: The Company's technologies and services include
software licensed from Townsend Analytics Ltd. The Company believes that
Townsend Analytics is a recognized world leader in the development and
commercialization of software and technologies dedicated to Internet-based
market data, trading and exchange activities. The owner and President of
Townsend Analytics, Mr. Stuart Townsend, has served on the Board of Directors of
the Company since April 1997.
European Focus: The Company believes that it offers Internet-based
information and electronic brokerage services that are uniquely European in
nature. Until now, the dominant providers of Internet-based information and
brokerage services in Europe have been US based companies which, in the opinion
of the Company, offer a service that is distinctly US in nature. The Company's
market data and financial services cover all major world markets and exchanges.
However, in the opinion of management, the Company's services provide greater
focus on pan-European markets and exchanges than other competing services. In
the case of joint-venture arrangements for the provision of a co-branded
service, the Company works with its local partner to customize the offered
service to suit the cultural need and investment profile of the partner's
existing and targeted clientele.
Strategic Alliances (business-to-business model): By focusing on the
development of co-branded information and brokerage services pursuant to
strategic alliances, the Company will acquire an access to existing target
client bases. The Company plans to enter into one or more strategic
relationships with banks and securities brokerages, financial services
providers, financial news organizations, middle-ware providers and Internet
service providers in each of the major investment and geographical communities
of Western Europe. The Company believes that this strategy will accelerate the
expansion of its services throughout Europe and, at the same time, reduce the
marketing costs typically associated with the rollout of a service of this
nature throughout an area made up of several large and culturally diverse
communities.
Development of FirstQuote Brand Name: The Company has applied for trademark
registration of the FirstQuote mark in the USA, Switzerland and throughout the
European Union. The Company intends to market its services and solutions
throughout Europe under the FirstQuote brand name. The Company shall endeavor to
create a high degree of consumer awareness of the FirstQuote name and the
association of quality and reliable services with such name in the European
investment and banking communities. The Company intends to leverage its
FirstQuote brand-name through the future development and marketing of additional
services, including a portal web-sites linking the customer to an array of
Internet based financial and investment services.
Competition
The market for financial information and on-line brokerage services over the
Internet is rapidly evolving and becoming increasingly competitive. The Company
expects competition to continue and intensify in the future.
In the area of market data and financial services, the Company faces direct
competition from several companies that provide for the delivery of financial
data over the Internet or other electronic means. At the more sophisticated end
of the Company's product offering, the Company believes its primary competitors
include Reuters, Bloomberg, and Bridge. In the web-browser based arena,
companies such as GlobalNet Financial and Atos currently also offer content-
enabled web material.
In the area of electronic brokerage services, the Company seeks to enter
into partnering arrangements with licensed banks and brokerage firms enabling
them to provide the service in turn to their own clients. Such arrangements will
to an extent compete with electronic brokerage firms as the eSchwab division of
Charles Schwab & Co., Inc., E-Trade Group and DLJdirect, and in the more-
European context, Consors and e-Cortal who develop proprietary market data and
internet brokerage systems. However, the Company believes that these same
electronic brokerage firms may solicit either content or specific applications
from FirstQuote to supplement their existing technologies. The above partnering
arrangements may also encounter competition from brokerage firms offering full-
service brokerage operations.
Many of the Company's competitors have longer operating histories and
significantly greater financial, technical, marketing and other resources than
the Company. In addition, many of the Company's competitors offer a wider range
of services and financial products, and thus may be able to respond more quickly
to new or changing opportunities, technologies and customer requirements. There
can be no assurance that the Company will be able to compete effectively with
current or future competitors or that such competition will not have a material
adverse affect on the Company's business, financial condition and operating
results.
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Third Party Providers
The Company employs the services of the following businesses:
Content Originators: The Company has entered into contractual arrangements
with a number of securities and commodities exchanges as well as proprietary
financial news providers, in order to have the necessary rights to redistribute
such content to its subscribers and website users.
Content Distributors: The Company receives market data information and news
either directly from the content originators or pursuant to agreements with
revendors of such content which provide real-time or delayed data by satellite
or landline transmission.
Network Infrastructure and Capacity: In order to distribute its services
over its own network backbone as well as via the public Internet, the Company
leases infrastructure and bandwidth from a number of pan-European and
international telecommunications companies.
Strategic Partnering Arrangements
The Company's business plan focuses on the development of significant
partnering arrangements throughout Europe. The purpose of these partnering
arrangements is to provide investment services, such as market data and
financial information services or on-line brokerage activities, to a targeted
clientele as a co-branded service of the Company and the particular partner. The
Company has targeted the following areas where such partnerships are being
pursued:
Financial institutions: Banks and securities brokerages not currently
offering or looking to expand their range of online investment services are
faced with a buy-or-build decision as well as a speed-to-market requirement. The
Company believes that many such institutions will opt for an outsourced service
in order to achieve a rapid entry into a potentially unfamiliar market
territory.
Media organizations: Traditional media groups are currently challenged to
offer electronic new-media services, especially regarding the provision of
financial data, and do not necessarily have the resources or the online
infrastructure (functionality or contractual content) to be able to complement
their traditional distribution channels.
Financial middle-ware providers: The providers of traditional financial
systems have generally not included real-time content, decision support user-
interfaces or order-execution transactional functionality, all of which requires
network and contractual infrastructure beyond their core offerings. The Company
believes that its content and electronic brokerage process know-how can be
effectively combined with such providers in order that their products may cater
to a more complete package of requirements.
Internet service providers: The providers of Internet access have
traditionally had large populations of users which pass through their networks.
They have embraced the concept of `web portals' in order to maximise additional
e-commerce opportunities offered to these users. The Company believes that such
service providers and web portal operators will require access to content and
transactional functionality such as it could provide.
Trademarks and Licenses
The Company has registered, or has applied for registration, for the
trademarks FirstQuote in Switzerland and the European Union. The Company has
applied for a US registration of the FirstQuote mark.
The Company's high-end market data and financial information services and
its electronic brokerage solutions are based on software licensed to the Company
by Townsend Analytics Ltd. of Chicago, Illinois. Pursuant to a Computer Software
License Agreement dated January 16, 1997 between Townsend Analytics and the
Company, Townsend Analytics has appointed the Company as a non-exclusive
distributor for the sale, support and servicing of Townsend Analytics'
proprietary software programs relating to market data and financial information
services and on-line brokerage activities. Pursuant to the agreement, the
Company is authorized to implement and resell these software programs in return
for agreed royalty payments. The agreement is renewable on an annual basis.
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In December 1998, the Company and Townsend Analytics amended their agreement
to restrict the right of Townsend Analytics to grant certain further software
licensing rights in certain European regions, thus providing the Company with a
limited exclusivity until December 31, 2000.
The Company's information services and brokerage solution are substantially
dependent on the technologies licensed to the Company by Townsend Analytics. In
the event the Company's continued access to the licensed software is terminated
or interrupted for a significant length of time, the Company would have to
either develop or acquire suitable replacement software, of which there can be
no assurance, or discontinue its present operations.
Government regulation
The Company's market data and financial and on-line brokerage services are
not currently subject to direct regulation by Swiss, European Union or other
law, other than regulations applicable to businesses generally. Changes in the
regulatory environment relating to the Internet content or connectivity
industries, including regulatory changes that directly or indirectly affect
telecommunications costs, could have a material adverse affect on the Company's
business. The Company cannot predict the impact, if any, that future regulation
or regulatory changes may have on its business.
Employees
At March 1, 2000, the Company was staffed with 50 full-time employees, 2
part-time employees and 5 full-time consultants at present, 9 of whom are
involved in administration, 18 of whom are involved in software development and
engineering and 30 of whom are involved in sales, sales support and marketing.
Item 2. Description of Property.
The Company's executive offices are located in Geneva, Switzerland and
consist of 586m2 of leased premises. The Company's lease for these premises
expires on April 30, 2002 and provides for monthly rent of approximately
$15,000.
In addition the Company rents office space in Zurich, Switzerland (360m2)
for a monthly rent of approximately $9,000, Paris, France (39m2) for a monthly
rent of approximately $5,300, and London, United Kingdom (25m2) for a monthly
rent of approximately $3,900.
Item 3. Legal Proceedings.
There are no pending legal proceedings to which the Company or the
properties of the Company are subject. In addition, no proceedings are known to
be contemplated by a governmental authority against the Company or any officer
or director of the Company.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Not applicable.
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PART II
Item 5. Market For Common Equity And Related Stockholder Matters.
Market For Common Shares
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The Company's Common Stock has been listed on the OTC Bulletin Board under
the symbol "FSQT" (previously "VITE") since November 18, 1996. During the fiscal
year ended December 31, 1999, the high and low closing prices were $11.00 and
$1.375, respectively. These high and low prices reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions. The following table reflects the Company's stock price movements
in more detail:
<TABLE>
<CAPTION>
Year ended December 31,
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1999 1998
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Quarter High Low High Low
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<S> <C> <C> <C> <C>
Fourth $ 7.50 $ 4.00 $ 2.00 $ 0.69
Third 10.00 5.25 1.13 0.91
Second 11.00 3.31 2.00 1.00
First 5.00 1.38 2.13 1.56
</TABLE>
The Company considers its Common Stock to be thinly traded and that any
reported bid or sale prices may not be a true market-based valuation of the
Common Stock. As of March 1, 2000, there were approximately 313 record holders
of the Company's Common Stock.
The Company has not paid any cash dividends since its inception and does not
contemplate paying dividends in the foreseeable future. It is anticipated that
earnings, if any, will be retained for the operation of the Company's business.
Recent Sales of Unregistered Securities
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During 1999 the Company issued 194,650 shares of Common Stock pursuant to
the exercise of 194,650 Unit Warrants at a strike price of $3.50.
In January 1999, the Company issued 3,783,784 shares of its Series C
Preferred Stock for a total consideration of $7,000,000.
In July 1999, the Company granted 15 of its employees options to purchase an
aggregate of 261,300 shares of Common Stock pursuant to the Company's 1997 Stock
Option Plan, as amended. The options had an exercise price of between $4.75 and
$6.00 per share, have a one-year vesting period and expire in December 2002. The
options were issued pursuant to Section 4(2) of the 1933 Act. There was no
underwriter involved in this issuance.
In December 1999, the Company granted 34 of its employees options to
purchase an aggregate of 220,000 shares of Common Stock pursuant to the
Company's 1997 Stock Option Plan, as amended. The options had an exercise price
of $4.00 per share, have a one-year vesting period and expire in December 2001.
The options were issued pursuant to Section 4(2) of the 1933 Act. There was no
underwriter involved in this issuance.
In December 1999, the Company issued 197,815 shares of Series D preferred
stock and 148,450 shares of Common Stock, all such shares being valued at
US$6.50 per share, as a partial consideration for the acquisition of Stockdata
B.V. An additional 30,000 shares of Common Stock are issuable subject to the
completion of certain post-closing conditions.
<PAGE>
Item 6. Management's Discussion And Analysis Or Plan Of Operation
Background
- ----------
FirstQuote is a European technology provider of financial information and
electronic brokerage solutions. The Company offers a comprehensive range of
real-time market data and electronic brokerage systems for both the
institutional and individual investor. The financial information systems are
offered via the Internet or through virtual private networks using Internet
technology. The Company also provides related network services to users of its
financial information and electronic brokerage products. Further description of
the Company's activities and products can be found at www.firstquote.com or at
------------------
www.firstquote.net.
- ------------------
Effective May 7, 1999, the Company amended its Certificate of Incorporation
to change its corporate name to FirstQuote Inc.
Effective December 24, 1999, the Company acquired 100% of Stockdata
Amsterdam BV, a company located in Amsterdam, for a consideration of up to
$3,750,000. Stockdata is engaged in the distribution of real-time market data
products to the Benelux region, primarily through the use of datacast
technologies via cable networks.
Regarding the Company's plan of operations for the 2000 fiscal year, it will
continue to targeted strategic alliances in key European financial centers from
which to leverage its growth. It plans to market its financial market
information, analytical tools and electronic brokerage systems both under its
own product names and as co-branded implementations with institutional clients.
Currency Exchange Rates: Although the Company reports its results in US
dollars, virtually all of its revenues and expenses are denominated in other
currencies, primarily Swiss francs, Euros and Pounds sterling. Consequently, the
Company's net results are directly affected by changes in the exchange rate
between the US dollar on the one hand, and the Swiss franc, Euros or Pounds
sterling on the other. Transactions of the Company and its subsidiaries are
recorded based on the functional currency of each particular company. The
Company's main operating subsidiary maintains a Swiss franc functional currency
and has a US dollar denominated current account with its parent company. This
results in foreign exchange differences being recorded based on variations in
the USD/CHF rate of exchange, which are carried forward on consolidation.
Assets and liabilities of the Company and its subsidiaries are translated at
the exchange rate in effect at each year-end. Income statement accounts are
translated at the average rate of exchange prevailing during the year.
Translation adjustments arising from differences in exchange rates from period
to period are included in the cumulative translation adjustment account in
stockholders' equity.
Results of Operations
- ---------------------
Revenue for the year ended December 31, 1999 was $1,778,459, an increase of
233% over that of $534,715 for the corresponding prior year. Revenue is
comprised primarily from the provision of financial market data and related
network connectivity and web-operation services, but also includes revenue from
development and integration projects (which generally lead to a resultant
revenue stream) as well as transaction related revenue linked to electronic
brokerage activity.
Revenue for the fourth quarter of 1999 was only marginally increased from
that of the previous quarter, resulting principally from an increased foreign
exchange rate between European currencies in which revenue is recorded and the
US Dollar, in which revenue is reported, as well as `year 2000' factors which
caused certain business to be shifted into the first quarter of 2000.
Cost of revenue for the year ended December 31, 1999 was $2,157,659, an
increase of 78% above the amount of $1,209,387 for the corresponding prior year.
Cost of revenue as a percentage of revenue has decreased from 226% in the prior
year to 121%, reflecting the economies of operation at a larger scale. Cost of
revenue includes network expenses, data feeds and commissions.
Selling & Market Development expenses for the year ended December 31, 1999
were $405,256 or 83% above the amount of $221,210 for the corresponding prior
year. Corporate and product marketing expenses have
<PAGE>
increased in conjunction with the corporate name change to FirstQuote and the
continued rollout of the Company's services in Europe.
General and administrative expenses for the year ended December 31, 1999
were $4,796,643, an increase of 68% from the amount of $2,861,662 for the
corresponding prior year. Staff costs represent the major component of this
expense and have increased 101% from $1,232,645 to $2,483,326. Operating
expenses have increased 50% from $1,108,596 to $1,666,618, and depreciation
charges have increased by 24% from $520,421 to $646,699.
Operating loss for the year ended December 31, 1999 was $5,581,099, an
increase of 49% from the amount of $3,757,544 for the prior year. Expressed as a
percentage of revenue the operating loss has improved from 703% to 314% of
revenue.
Foreign exchange gains and losses arise essentially from the revaluation of
amounts due by FirstQuote SA to FirstQuote Inc., which are denominated in US
dollars. The functional currency of FirstQuote SA is the Swiss Franc, and the
resultant loss on revaluation in Swiss Francs is carried forward in
consolidation. The USD/CHF rate of exchange was 1.3760 at December 31, 1998 and
1.5915 at December 31, 1999.
Net loss for the year ended December 31, 1999 was $6,840,368, compared with
$3,421,229 for the corresponding prior year.
Liquidity and Financial Condition
- ---------------------------------
As of December 31, 1999, the Company had negative working capital of
$872,336 and stockholders' equity of $3,939,695.
In January 2000 the Company obtained bridge financing of $510,000 from its
existing financial investors, essentially to finance the acquisition of
Stockdata, and pending the closing of a private placement of 1,061,057 of its
Common shares for a total amount of $7,155,184, which was concluded during March
2000. The price of the shares placed under this arrangement was fixed at
February 21, 2000 and was based on a moving average of closing market prices to
that date.
During the year ended December 31, 1999, the Company received $681,275
following the exercise of 194,650 warrants at $3.50. Subsequent to December 31,
1999, a further 130,000 warrants have been exercised for a consideration to the
Company of $455,000. As at March 1, 2000, a further 163,131 warrants are in
existence, all exercisable at $3.50.
During the year ended December 31, 1999, the Company also received $20,000
following the exercise of 10,000 employee stock options at $2.00.
The Company continues to generate negative cashflows from operations since
its cost base exceeds its revenues from operating activities. The net `cash
burn' rate from operations was approximately $461,000 per month during the
fourth quarter of 1999 compared with an average of approximately $390,000 per
month during the year ended December 31, 1999, reflecting the increased level of
operations.
The plan of operations for the next 12 months will require increases in the
amounts of operating and capital expenditure above those incurred to date. As of
the date of this report, and subsequent to the recently concluded private
placement, the Company believes that it has sufficient capital in order to
finance operations and capital expenditures over the next 12 months. However,
should additional capital be required, at this time there are no firm
commitments or agreements on the part of any party to provide any additional
debt or equity capital to the Company and there can be no assurance that the
Company will be able to obtain additional capital. The Company's inability to
increase revenue or obtain additional debt or equity capital on a timely basis
will, in all likelihood, materially adversely affect its future planned growth
of operations and revenues.
<PAGE>
Year 2000 Compliance
- --------------------
Subsequent to the efforts invested in ensuring that its systems were
compliant with the information processing requirements of the next millenium,
the Company experienced no adverse effects resulting from the passage of time to
January 1, 2000.
The Company estimates that it has spent to date approximately $100,000 in
internal and equipment costs resulting from year 200 issues. No further
expenditure is planned to address other date-specific processing issues that may
arise.
Safe Harbor
- -----------
This report contains various forward-looking statements that are based on
the Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this report, the words "believe,"
"expect," "anticipate," "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions referred to herein, including, without
limitation, the Company's recent commencement of commercial and marketing
operations and the risks and uncertainties concerning the market acceptance of
its services and products; technological changes; increased competition; and
general economic conditions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated, or projected. The Company
cautions potential investors not to place undue reliance on any such forward-
looking statements, all of which speak only as of the date made.
<PAGE>
Item 7. Financial Statements.
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
- -----------------------------
<S> <C>
Independent Auditors' Report..............................................................................
Consolidated Balance Sheets at December 31, 1999 and 1998.................................................
Consolidated Statements of Operations for the years ended December 31, 1999 and 1998......................
Consolidated Statements of Cash Flows for the years ended December 31, 1999 and 1998......................
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1999 and 1998..
Notes to Consolidated Financial Statements................................................................
</TABLE>
<PAGE>
Report of Independent Auditors
To the Board of Directors and Shareholders
FirstQuote Inc.
We have audited the accompanying consolidated balance sheets of FirstQuote Inc.
and its subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our audit
provides 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
FirstQuote Inc. and its subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States.
ARTHUR ANDERSEN S.A.
Geneva, Switzerland
March 29, 2000
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
Consolidated Balance Sheets As Of December 31, 1999 and 1998
(Currency - U.S. dollars)
ASSETS
------
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,093,629 $ 229,450
Trade accounts receivable, net 616,168 191,229
Prepaid expenses and other receivables 486,385 16,270
Other current assets 324,223 45,838
------------ ------------
Total current assets 2,520,405 482,787
------------ ------------
NON-CURRENT ASSETS
Property and equipment, net 1,525,400 1,130,563
Goodwill, net 3,307,110 --
Other assets 8,699 28,487
------------ ------------
Total non-current assets 4,841,209 1,159,050
------------ ------------
Total Assets $ 7,361,614 $ 1,641,837
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
Consolidated Balance Sheets As Of December 31, 1999 and 1998
(Currency - U.S. dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Trade accounts payable $ 1,547,058 $ 658,700
Accrued expenses 807,341 102,274
Current portion of capital lease obligations 142,626 146,481
Convertible loans from stockholders -- 1,000,000
Deferred income 895,747 170,808
------------ ------------
Total current liabilities 3,392,742 2,078,263
------------ ------------
LONG-TERM CAPITAL LEASE OBLIGATIONS
Capital lease obligations, net of current portion 29,177 166,621
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock, $0.001 par value,
10,000,000 shares authorized;
Class A: 6,500 and 68,500 shares issued and outstanding 7 69
Class B: 1,923,716 shares issued and outstanding 1,924 1,924
Class C: 3,783,784 shares issued and outstanding 3,784 --
Class D: 197,815 shares issued and outstanding 198 --
Common Stock, $0.001 par value,
20,000,000 shares authorized;
6,423,409 and 5,781,309 shares issued and outstanding 6,423 5,781
Additional paid-in capital 16,703,758 6,381,315
Cumulative translation adjustment 907,495 (148,610)
Accumulated deficit (13,683,894) (6,843,526)
------------ ------------
Total stockholders' equity 3,939,695 (603,047)
------------ ------------
Total Liabilities and Stockholders' Equity $ 7,361,614 $ 1,641,837
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
Consolidated Statements Of Operations
For The Years Ended December 31, 1999 and 1998
(Currency - U.S. Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
REVENUE $ 1,778,459 $ 534,715
OPERATING EXPENSES
Cost of Revenue 2,157,659 1,209,387
Selling & Market Development Expenses 405,256 221,210
General and Administrative Expenses 4,796,643 2,861,662
------------ ------------
7,359,558 4,292,259
------------ ------------
OPERATING LOSS (5,581,099) (3,757,544)
OTHER INCOME AND EXPENSES
Interest Income / (Expense), net 99,536 (3,441)
Foreign Exchange (Loss) / Gain, net (1,358,805) 339,756
------------ ------------
(1,259,269) 336,315
------------ ------------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (6,840,368) $ (3,421,229)
============ ============
Basic and diluted net loss per common share $ (1.14) $ (0.59)
============ ============
Basic and diluted weighted average number of common shares 5,995,689 5,781,309
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
For The Years Ended December 31, 1999 and 1998
(Currency - U.S. Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(6,840,368) $(3,421,229)
Adjustments to reconcile net loss to net cash used in operating activities:
Exchange loss / (gain) 1,358,805 (339,756)
Depreciation of property and equipment 646,699 520,421
Amortisation of goodwill 21,336 --
Provision for doubtful debtors 88,875 15,840
Interest accrued on loans payable -- 5,417
Stock issued for license 125,000 --
Change in operating assets and liabilities
Trade accounts receivable (447,155) (141,138)
Prepaid expenses and other receivables (259,622) 75,999
Trade accounts payable 320,886 463,766
Accrued expenses 249,912 (77,174)
Deferred income 179,516 137,052
------------ ------------
Net cash used-in operating activities (4,556,116) (2,760,802)
CASH FROM INVESTING ACTIVITIES:
Purchase of equipment (532,243) (464,211)
Purchase of subsidiary (245,031) --
Other non-current asset movements 19,788 (2,613)
------------ ------------
Net cash used in investing activities (757,486) (466,824)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Preferred Stock 6,000,000 --
Commission on issuance of Preferred Stock (70,000) --
Issuance of stock upon exercise of warrants 681,275
Issuance of stock upon exercise of options 20,000
Collection of stock subscriptions receivable -- 2,000,000
Advances from stockholders and related parties -- 1,000,000
Reimbursements of advances from stockholders and related parties -- (96,089)
Payment of capital lease obligations (150,795) (75,537)
------------ ------------
Net cash provided by financing activities 6,480,480 2,828,374
Effect of exchange rate changes on cash and cash equivalents (302,699) 59,438
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 864,179 (339,814)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 229,450 569,264
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,093,629 $ 229,450
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
Consolidated Statements Of Changes in Stockholders' Equity
For The Years Ended December 31, 1999 and 1998
(Currency - U.S. Dollars)
<TABLE>
<CAPTION>
Class A Class B Class C
Common stock Preferred stock Preferred stock Preferred stock
Shares Amount Shares Amount Shares Amount Shares Amount
---------- -------- -------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 5,375,272 5,375 147,938 148 1,923,716 1,924 - -
Issuance of common stock to repay
convertible loan 145,161 145
Conversion of preferred to common stock 158,876 159 (79,438) (79)
Issuance of common stock as a result of
price reset on private placement units 102,000 102
Net loss
Currency translation loss
---------- -------- -------- -------- ---------- -------- ---------- --------
Balance at December 31, 1998 5,781,309 5,781 68,500 69 1,923,716 1,924 - -
Conversion of preferred to common stock 124,000 124 (62,000) (62)
Issuance of preferred stock through
private placement of offering 3,783,784 3,784
Issuance of common stock pursuant to
agreement with Townsend Analytics, Ltd. 135,000 135
Issuance of common stock pursuant to
exercise of warrants 194,650 195
Issuance of common stock pursuant to
exercise of stock options 10,000 10
Issuance of stock pursuant to purchase
of Stockdata B.V. 178,450 178
Net Loss
Currency translation gain
---------- -------- -------- -------- ---------- -------- ---------- --------
Balance at December 31, 1999 6,423,409 6,423 6,500 7 1,923,716 1,924 3,783,784 3,784
========== ======== ======== ======== ========== ======== ========== ========
<CAPTION>
Class D Cumulative Total
Preferred stock Additional paid- translation Accumulated Stockholders' Comprehensive
Shares Amount in capital adjustment deficit equity loss
-------- -------- ---------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 - - 6,156,642 131,707 (3,422,297) 2,873,499
Issuance of common stock to repay
convertible loan 224,855 225,000
Conversion of preferred to common stock (80) -
Issuance of common stock as a result of
price reset on private placement units (102) -
Net loss (3,421,229) (3,421,229) (3,421,229)
Translation loss (280,317) (280,317) (280,317)
-------- -------- ---------------- ----------- ----------- ------------- -------------
Balance at December 31, 1998 - - 6,381,315 (148,610) (6,843,526) (603,047) (3,701,546)
=============
Conversion of preferred to common stock (62) -
Issuance of preferred stock through
private placement of offering 6,926,216 6,930,000
Issuance of common stock pursuant to
agreement with Townsend Analytics, Ltd. 249,865 250,000
Issuance of common stock pursuant to
exercise of warrants 681,080 681,275
Issuance of common stock pursuant to
exercise of stock options 19,990 20,000
Issuance of stock pursuant to purchase
of Stockdata B.V. 197,815 198 2,445,354 2,445,730
Net Loss (6,840,368) (6,840,368) (6,840,368)
Translation gain 1,056,105 1,056,105 1,056,105
-------- -------- ---------------- ----------- ----------- ------------- -------------
Balance at December 31, 1999 197,815 198 16,703,758 907,495 (13,683,894) 3,939,695 (5,784,263)
======== ======== ================ =========== =========== ============= =============
</TABLE>
-20-
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
As of December 31, 1999 and 1998
(Amounts in US Dollars, unless otherwise stated)
1. Description of the Company and its subsidiaries
FirstQuote Inc. (previously Virtual Telecom, Inc., the "Company") was
incorporated in Delaware on July 3, 1996 for the purpose of holding all the
shares of FirstQuote SA (previously Virtual Telecom SA), a Swiss corporation
formed in 1994. The owners of FirstQuote SA contributed all of the
FirstQuote SA shares in consideration for 3,194,540 common shares of
FirstQuote Inc. The accompanying financial statements have been prepared as
if the acquisition had occurred at FirstQuote SA's inception (May 19, 1994),
using the historical costs of each entity.
Unless the context otherwise requires, all references to the Company include
its wholly owned subsidiaries, FirstQuote SA, a Swiss corporation,
FirstQuote Limited, an English corporation founded in December 1997, and
FirstQuote Stockdata BV, a Dutch corporation.
The Company has incurred operating losses and negative cash flows since
inception. As of December 31, 1999 the Company had a working capital deficit
of $872,337. In March 2000, the Company sold 1,061,057 shares of Common
Stock for a total consideration of $7,155,184. The plan of operations for
2000 and thereafter will require increases in expenditures above those
incurred to date. The ability of the Company to continue operations as
planned will be dependent on the ability of the Company to generate
increased revenues, produce positive margins and/or raise additional
finance.
2. Summary of significant accounting policies
a) Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States 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 these estimates.
c) Revenue recognition
The Company develops, installs, and maintains systems that allow its
clients to access the financial information and market data services
that it provides over an Internet connection as well as to access the
Internet at large. The Company therefore derives both single
installation and recurring revenues.
Installation revenues and related costs are recognized upon completion
of installation. Where installation revenues exceed installation costs,
then installation revenues are recognized over the service period.
-21-
<PAGE>
Recurring revenues for financial data services and network services are
normally invoiced in advance. The resulting amount of unearned income
not attributable to the period of invoicing is reflected under current
liabilities as deferred revenue, and recognized in the profit and loss
account according to the month of applicability of the underlying
services.
d) Foreign currency translation
The Company accounts for foreign currency transactions in accordance
with Statement of Financial Accounting Standard (SFAS) No. 52, "Foreign
Currency Translation" which provides for the translation of assets and
liabilities at the end of period current rate and of operations and cash
flows at the rates existing at the date of the transaction, or
appropriate average. Foreign currency transactions are translated into
the functional currency at the rate existing at the date of the
transaction and outstanding balances are revalued at the year-end rate
with the resulting exchange gain or loss being included in the statement
of operations.
The functional currency of the Company's main operating subsidiary
FirstQuote SA, is the Swiss Franc (CHF), and of FirstQuote Stockdata BV
is the Dutch Guilder (NLG). The functional currency of FirstQuote Inc.
and FirstQuote Limited is US dollars.
The resulting gain or loss on translation into the reporting currency is
included as a separate component of equity under "cumulative translation
adjustment".
e) Cash and cash equivalents
The Company considers all highly liquid debt instruments with an initial
maturity of three months or less to be cash equivalents.
f) Property and equipment
Property and equipment is stated at cost and depreciated using the
straight-line method over their estimated useful lives, ranging from 3
to 5 years. Leasehold improvements are depreciated over the shorter of
the life of the lease or the life of the asset. Upon sale, any gain or
loss is included in the statement of operations. Maintenance and minor
replacements are charged to operations as incurred.
g) Goodwill
Goodwill is computed as being the difference between the purchase price
and the fair value of the net assets acquired.
Goodwill is amortized over the estimated product or technology cycle of
the underlying acquisition, generally being three years.
h) Income taxes
The Company utilizes the liability method to account for income taxes.
Under this method, deferred taxes are determined based on the
differences between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
to be more likely than not realized.
The Company's subsidiary, FirstQuote SA, is incorporated in Switzerland.
The tax charge in Switzerland is an accumulation of the taxes due to the
city, the canton (state) and the federal authorities.
i) Stock-based Compensation
The Company account for stock based compensation in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", which provides for a fair value based method
of accounting for grants of equity instruments to employees or suppliers
in return for goods or services. With respect to stock-based
compensation to employees, SFAS No. 123 permits the continued
application of the provisions prescribed by APB Opinion No. 25. However,
pro
-22-
<PAGE>
forma disclosures of net income and earnings per share must be presented
as if the fair value based method had been applied in measuring
compensation cost.
The Company has elected to continue with the accounting method
prescribed by APB Opinion No. 25 and presented the required pro forma
disclosures of SFAS 123 in Note 12.d).
j) Fair value of financial instruments
The carrying value of financial instruments included in current assets
and liabilities approximates fair value because of the short maturity of
these items.
k) Segment Reporting
Statement No. 131, Disclosures about Segments of an Enterprise and
Related Information requires certain disclosures about segments of an
enterprise, if applicable and major customers. The Company manages its
activities as one segment under the guidelines of this standard.
l) Advertising expenditure
Advertising is expensed as incurred.
m) Net loss per common share
Net loss per common share is based on the net loss divided by the
weighted average number of common shares outstanding.
Convertible preferred stock and outstanding warrants have not been
included, as their effect would be antidilutive.
n) Recent Accounting Pronouncements
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities (Issue Date 6/98) establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair
value. The Statement requires that changes in the derivative's fair
value be recognized in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that
receive hedge accounting. Statement No. 133 is effective for fiscal
years beginning after June 15, 1999and must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after
December 31, 1997. The Company has not yet quantified the impact of
adopting Statement No. 133.
o) Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to the current year's presentation.
-23-
<PAGE>
3. Trade Receivables
<TABLE>
<CAPTION>
December 31,
--------------------------------
1999 1998
------------ -----------
<S> <C> <C>
Trade accounts receivable $ 727,050 $ 205,764
Less: Allowance for doubtful accounts (110,882) (14,535)
------------ -----------
Trade accounts receivable, net $ 616,168 $ 191,229
============ ===========
</TABLE>
4. Acquisition of Stockdata Amsterdam BV
In December 1999, the Company acquired all of the outstanding capital shares
of Stockdata Amsterdam BV, a limited liability company organized under the
laws of The Netherlands and located in Amsterdam, The Netherlands. Stockdata
is engaged in the distribution of real-time market data products to the
Benelux region, primarily through the use of datacast technologies via cable
networks. Subsequent to the acquisition, the name of the acquired company
was changed to FirstQuote Stock data BV.
The acquisition was conducted pursuant to a Securities Purchase Agreement
dated December 24, 1999 between FirstQuote and the stockholders of
Stockdata. Pursuant to the agreement, the Stockdata stockholders transferred
to FirstQuote all of the outstanding capital shares of Stockdata in
consideration of FirstQuote's payment of up to US$3,750,000, payable as
follows: US$245,031 in cash; US$1,059,239 in the assignment of Stockdata
receivables; and FirstQuote's issuance of 197,815 shares of Series D
preferred stock and 148,450 shares of common stock, all such shares being
valued at approximately US$6.50 per share. An additional 30,000 FirstQuote
common shares are issuable to the sellers' subject to their satisfaction of
certain post-closing conditions.
The acquisition was accounted for under the purchase method of accounting.
The results of operations of Stockdata for the period from the date of the
acquisition have been included in the consolidated financial
statements. The excess of cost over the estimated fair value of net assets
acquired amounted to $3,328,446 and was allocated to goodwill to be
amortised over three years.
The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition had taken place on January 1
of each year:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Revenue $ 4,036,237 $ 3,170,274
Net loss, after amortised goodwill (7,874,477) (4,597,184)
Amortised goodwill included in net loss (1,136,591) (1,314,245)
Basic and diluted net loss per share (1.28) (0.77)
</TABLE>
The unaudited consolidated pro forma information is not necessarily
indicative of the combined results that would have occurred had the
acquisition occurred on those dates, nor is it indicative of the results
that may occur in the future.
-24-
<PAGE>
5. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Software $ 20,008 $ 23,761
Computer equipment 1,775,514 773,837
Computer equipment under capital leases 41,840 48,393
Furniture and fixtures 159,435 112,387
Vehicles under capital leases 74,851 61,065
Network equipment under capital leases 759,186 878,085
---------------- ---------------
2,830,834 1,897,528
Less: Accumulated Depreciation (1,305,434) (766,965)
---------------- ---------------
$ 1,525,400 $ 1,130,563
---------------- ---------------
</TABLE>
Depreciation for the year amounted to $646,699 and (1998: $520,421),
including $295,837 (1998: $301,828) in depreciation of assets under capital
leases.
6. Goodwill
Goodwill consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1999 1998
--------------- --------------
<S> <C> <C>
Goodwill upon acquisition of subsidiary $ 3,328,446 $ --
Less: Accumulated amortisation (21,336) --
-------------- -------------
Goodwill, net $ 3,307,110 $ --
-------------- -------------
</TABLE>
7. Capital lease obligations
The Company's Swiss subsidiary is obligated under capital leases (network,
computer and cars) and operating leases (offices) expiring at various dates
through September 2002.
-25-
<PAGE>
Minimum lease payments for leases that have initial or remaining non-
cancelable terms in excess of one year are:
<TABLE>
<CAPTION>
Operating Leases Capital Leases
-------------------- ------------------
<S> <C> <C>
Future minimum lease payments:
2000 $ 394,681 $ 157,173
2001 337,671 13,533
2002 196,580 9,532
2003 125,302 808
2004 -- --
----------------- ---------------
Minimum lease payments $ 1,054,234 $ 181,046
-----------------
Less: Amount representing interest (5.6% to 8.1%) 9,243
---------------
171,803
Less: Current maturities 142,626
---------------
Long-term capital lease obligations $ 29,177
===============
</TABLE>
8. Advances and convertible loans from stockholders and related parties
As at December 31, 1998 the Company owed $1,000,000 in respect of a loan
convertible into preferred stock of the Company upon the conclusion of
additional equity financing, or redeemable, at the option of the lender. In
January 1999, the loan was converted into 540,541 shares of Series C
Preferred Stock (see Note 12.b)
9. Related party transactions
a) Software Solution provider
In January 1997 the Company entered into a software distributor
agreement with a financial software solution provider as disclosed in
Note 10.c)
b) Employment agreements
Commencing May 1, 1996, the Company entered into five-year term
employment agreements with two stockholders. Both agreements provide for
compensation of at least approximately $5,600 per month plus monthly car
allowances of approximately $400 per month. The agreements can be
extended up to three additional three-year terms and are subject to
yearly consumer price index increases. Total compensation paid under
these agreements amounted to $221,426 (1998: $144,480).
c) Office lease
The Company entered into a month to month sublease agreement with a
company affiliated with a stockholder, whereby the Company recovers
certain costs for the use of its premises, utilities and computer
systems usage. The agreement was terminated in June 1999. Amounts
charged to the affiliate during the year amounted to approximately
$5,400 (1998: $9,000).
-26-
<PAGE>
10. Major agreements
a) Network equipment service agreement
In September 1996, the Company entered into an equipment purchase and
network maintenance service agreement with a major computer equipment
manufacturer, whereby the Company committed to outsource the maintenance
and operation of the network for a total of approximately $635,000 from
1997 through 2000. Decreasing cancellation fees apply if the Company
terminates the agreement before the end of the four-year term of the
agreement, ranging from approximately $480,000 to $100,000.
During December 1998, the Company concluded negotiations to take over
certain operations and maintenance elements envisaged within the
agreement for a reduction in the amount of ongoing payments.
There are other major suppliers of similar equipment and services. A
change in supplier, however, could cause disruption in service and a
possible loss of revenues which would adversely affect future operating
results.
b) License to use and disseminate stock market information
In August 1996, the Company entered into a 30-month license agreement to
use and disseminate stock market information. After the initial term,
the agreement is renewable in twelve-month increments, with a 90-day
cancellation notice period. According to the default terms of the
agreement, a twelve-month renewal period commenced in February 2000.
c) Financial software solution provider
In January 1997 the Company entered into a 3-year software distributor
agreement with a financial software solution provider based in the USA
controlled by a director of the Company. Under the agreement, the
Company is required to pay royalties based on the number of its clients
using the software. After the initial term, the agreement is renewable
on a 12 monthly basis. A 90-day cancellation period applies throughout
the contract.
In December 1998 the Company extended the scope of this agreement
whereby the software provider agreed not to undertake any new licensing
agreements for Switzerland, Germany, France, and the Benelux countries
until December 31, 2001. Under the terms of the agreement, the Company
was committed to paying a single amount of $500,000 ($250,000 of which
was settled in February 1999 in cash and the remainder in March 1999
through the issuance of 135,000 common shares), and is further committed
to minimum royalty payments of $50,000 per month from July 1, 1999,
$100,000 per month from January 1, 2000 and $150,000 per month from July
1, 2000.
While there are other providers of related financial software solutions
on the market, the specialist nature of the software solutions provided
under the agreement means that the Company places significant reliance
on this supplier in terms of securing future revenues.
11. Income Taxes
Deferred income tax assets and liabilities are provided for temporary
differences between financial statement income and amounts currently
taxable.
-27-
<PAGE>
For US tax reporting purposes the Company has a net operating loss carry
forward of approximately $1,786,144 (1998: $1,034,443) to offset federal
income taxes which expire at different dates through the year 2013. These
net operating losses could be restricted due to a change in the Company's
ownership.
For Swiss reporting purposes the Company has a net operating loss carry
forward of $11,987,490 (1998: $5,826,944) to offset future income taxes in
Switzerland which expires between the years 2003 and 2006.
Temporary differences that give rise to deferred income tax assets and
liabilities are:
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Net operating loss carry forward $ 3,484,374 $ 1,760,666
Less: Valuation allowance (3,484,374) (1,760,666)
-------------- --------------
Net deferred tax asset $ -- $ --
-------------- --------------
</TABLE>
A valuation allowance is used to reduce the deferred tax asset to a level
which, more likely than not, will be realized. A valuation allowance for the
full amount of deferred tax assets has been recorded since certain doubts
exist regarding the use of the tax losses carried forward to offset future
taxable income.
12. Stockholders' equity
a) Common Stock
The Company is authorized to issue 20,000,000 shares of Common Stock,
$.001 par value ("Common Stock"). As of December 31, 1999, 6,423,409
shares were issued and outstanding and held by approximately 313
stockholders of record.
As of December 31, 1999, there are no outstanding options, warrants or
other securities, which upon exercise or conversion entitle their holder
to acquire shares of Common Stock, other than the Unit Warrants, Series
A, B and C Preferred Stock and options issued under the Stock Option
Plan, described below.
Holders of shares of Common Stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. The approval of
proposals submitted to stockholders at a meeting other than for the
election of directors requires the favorable vote of a majority of the
shares voting, except in the case of certain fundamental matters (such
as certain amendments to the Certificate of Incorporation, and certain
mergers and reorganizations), in which case Delaware law and the
Company's Bylaws require the favorable vote of at least a majority of
all outstanding shares. Stockholders are entitled to receive such
dividends as may be declared from time to time by the Board of Directors
out of funds legally available therefore, and in the event of
liquidation, dissolution or winding up of the Company to share ratably
in all assets remaining after payment of liabilities. The holders of
shares of Common Stock have no pre-emptive, conversion, subscription or
cumulative voting rights.
In April 1998, the Company issued 145,161 shares of its common stock in
conversion of $225,000 of loan principal at a price of $1.55 per share.
In March 1999, the Company issued 135,000 shares in settlement of half
of the amount due to the financial software solution provider as
reflected in Note 10.c).
-28-
<PAGE>
In December 1999, the Company issued 178,450 shares as an element of the
purchase consideration for the acquisition of Stockdata BV, as reflected
in Note 4.
In March 2000, by way of a private placement, the Company sold 1,061,057
shares of its Common Stock for a total consideration of $7,155,184.
b) Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock,
$.001 par value ("Preferred Stock"). The Company's Board of Directors is
authorized to issue from time to time, without shareholder
authorization, in one or more designated series or classes, any or all
of the authorized but unissued shares of Preferred Stock with such
dividend, redemption, conversion and exchange provisions as may be
provided in the particular series.
The Board of Directors of the Company designated an initial series of
Preferred Stock as "Series A Preferred Stock" consisting of 750,000
authorized shares with a par value of $0.001 and a liquidation
preference of $3.50. In November 1997 the conversion price of the Series
A Preferred Stock was reset to $1.75 per share, which allows converting
one Series A Preferred Stock into two shares of Common Stock. The Series
A Preferred Stock does not carry dividend rights or any other rights
senior to the Common Stock and has equal voting rights with the Common
Stock. The Series A Preferred Stock is redeemable by the Company, at a
price equal to the liquidation preference plus any unpaid dividends, at
the earlier of one year from the date of initial issuance or upon the
closing of a public offering of the Company's Common Stock where
immediately following such offering the Common Stock is listed on the
New York Stock Exchange or the NASDAQ Stock Market. No shares of Series
A Preferred Stock shall be redeemed without the consent of the majority
of outstanding shares of Series B Preferred Stock.
During 1996, the Company issued 283,781 units of its securities
("Units"), each Unit consisting of one share of Series A Preferred stock
and one Common Stock purchase warrant ("Unit Warrant") for a total
consideration of $875,520, net of $117,713 in issuance costs. In
connection therewith, the Company also issued 200,000 shares of its
common stock to related parties as commissions for the issuance of the
Units. The shares were valued at $.25 a share, the opening trading price
of the Company's stock in November 1996, resulting in a $50,000
deduction from the Preferred Stock proceeds.
As at December 31, 1999 277,281 shares of Series A Preferred Stock had
been converted into 554,562 Common Shares (of which 62,000 shares of
Series A Preferred Stock were converted during 1999), and 6,500 shares
of Series A Preferred Stock remained outstanding. In February 2000, a
further 5,000 shares of Series A Preferred Stock were converted.
In December 1997, the Board of Directors of the Company designated a
second series of preferred shares as "Series B Preferred Stock"
consisting of 1,923,716 authorized shares with a par value of $0.001. On
December 30, 1997, the Company sold 1,923,716 shares of its Series B
Preferred Stock to three affiliated Alta-Berkeley venture capital funds
(collectively referred to as "Alta-Berkeley") for $3,000,000 of which
$1,000,000 was received in December 1997 and $2,000,000 in March 1998.
In January 1999, the Board of Directors of the Company designated a
third series of preferred shares as "Series C Preferred Stock"
consisting of 3,783,784 authorized shares with a par value of $0.001. On
January 25, 1999, the Company sold 3,783,784 shares of its Series C
Preferred Stock to five parties, including Alta-Berkeley, two other
venture capital funds, a bank and a private investor, for a total
consideration of $7,000,000.
Concurrent with the issuance of the Series B Preferred Stock, the
Company and Alta-Berkeley entered into an Investors' Rights Agreement,
which has been amended to include the holders of the Series C
-29-
<PAGE>
Preferred Stock. Pursuant to the terms of this agreement, the Company
increased the authorized number of its directors to nine. Holders of the
shares of both the Series B Preferred Stock as a class, and the Series C
Preferred Stock as a class, are each entitled to elect two members of
the Company's Board (four in total). In addition, the Company has
granted the holders of the Series B Preferred Stock and the Series C
Preferred Stock (the "Holders") the right of first refusal to purchase a
pro rata share of any new equity securities which the Company may issue.
The right of first refusal expires on January 24, 2006. The Investors'
Rights Agreement also grants the Holders registration rights in certain
circumstances as well as certain approval and disclosure rights over
certain management and strategic matters.
The shares of both the Series B Preferred Stock and the Series C
Preferred Stock have a liquidation preference of the greater of (i)
$3.50 per share if the event of liquidation, dissolution or winding up
occurs on or before December 31, 2000 and thereafter of $5.20 per share
and (ii) $1.85 plus a pro-rata share of any excess liquidation proceeds
accruing to the common shareholders. The shares are all convertible at
any time into shares of the Company's Common Stock on a one-for-one
basis, subject to adjustment pursuant to certain anti-dilution rights,
and have full voting rights.
c) Warrant Issues
During 1996, the Company issued 283,781 units ("Units") of its
securities, each Unit consisting of one Series A Preferred Share and one
Common Stock purchase warrant ("Unit Warrant").
During 1997, the Company issued a further 204,000 units ("Units") of its
securities, each Unit consisting of two Common Shares and one Unit
Warrant.
Each Unit Warrant entitles its holder to purchase one share of Common
Stock at an exercise price of $3.50 per share until December 31, 2000,
at which time the unexercised Unit Warrants shall expire by their own
terms. The Unit Warrants are subject to anti-dilution provisions.
As at December 31, 1999 194,650 Unit Warrants had been exercised and
293,131 Unit Warrants remained outstanding. In February 2000, a further
130,000 Unit Warrants were exercised.
d) Stock Option Plan
During 1997, the Company adopted a Stock Option Plan (the "Plan"). As at
December 31, 1999 a total of 2,000,000 shares of Common Stock may be
issued under the Plan and have been reserved by the Directors for that
purpose.The Board of Directors determines the terms and exercise prices
of all options to be granted.
Officers and directors of the Company, as well as consultants,
independent contractors or other service providers are eligible for
"Non-qualified Options". Only employees of the Company or its
subsidiaries (including officers and directors) are eligible to receive
grants of "Incentive Stock Options". No option may be granted under the
Plan after March 19, 2008, but options granted before that date may be
exercisable after that date. Options granted under the Plan are subject
to a minimum vesting period of one year.
-30-
<PAGE>
Pro forma information concerning the Company's net loss and earnings per
share had compensation cost on all options granted been determined
consistent with SFAS No. 123, is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1999 1998
--------------- ----------------
<S> <C> <C>
Net loss, as reported $ 6,840,368 $ 3,421,229
Net loss, pro forma 8,370,902 3,470,629
Basic and diluted loss per share, as reported $ 1.14 $ 0.59
Basic and diluted loss per share, pro forma 1.40 0.60
</TABLE>
The effects of applying SFAS No. 123 in this pro-forma disclosure are
not indicative of future amounts.
The following additional information has been used in determining the
above disclosures regarding the Plan:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Weighted-average assumption information used:
Risk-free rate 5.00% 5.00%
Expected life (days) 992 1,113
Expected volatility 101% 57%
Weight-average grant-date fair value of options $ 3.18 $ 0.13
Options granted during the year:
Directors and employees 481,300 380,000
Fair value of options granted during the year:
Directors and employees $ 1,530,534 $ 49,400
</TABLE>
A summary of the status of the Company's stock option plan as of
December 31, 1999 and 1998 is presented below:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------
1999 1998
--------------------------------- -------------------------------
Weighted- Weighted-
Number of Average Number of Average
Options Exercise Price Options Exercise Price
----------- ---------------- ----------- --------------
<S> <C> <C> <C> <C>
Outstanding at the beginning of the year 655,000 $ 2.00 310,000 $ 3.33
Add: Granted during the year 481,300 5.85 380,000 2.00
Less: Exercised during the year 10,000 2.00 -- --
Forfeited during the year -- -- 35,000 2.00
----------- --------------- ---------- ------------
Outstanding at the end of the year 1,126,300 $ 2.97 655,000 $ 2.00
Weighted average remaining contractual life 718 days 910 days
Exercisable at the end of the year 645,000 $ 2.12 200,000 $ 2.00
----------- --------------- ---------- ------------
</TABLE>
In March 1998, the strike price applicable to all of the options
existing at that time was reset to $2.00. Since the revised fair value
of the options based on the reset strike price was lower than the amount
originally recorded as compensation cost, no adjustment was made as a
result of the reset.
-31-
<PAGE>
13. Retirement plans
All of the Company's Swiss-based employees, including its executive
officers, are required to participate in the pension or retirement plans
required by law in Switzerland, which are similar to defined contribution
plans.
The Assurance Vieillesse et Survivants ("AVS") is a state-administered plan,
under which the Company and the employee each contribute an amount of 5.05%
of salary to the AVS fund. The Prevoyance Professionnelle plan ("LPP") is
administered by an independent insurance company whereby amounts of between
5% and 15% of each employee's compensation are contributed to the LPP fund.
The Company and employees each contribute 50% of this cost. In addition to
the legally required plans, the Company undertakes supplemental LPP programs
for its management.
The Company has no pension or retirement liability other than its obligation
to make employer and employee contributions to the AVS and LPP funds.
Amounts charged to income during the year in respect of the AVS and LPP
plans (including supplemental programs) for executive officers and other
employees was $361,068 (1998: $176,561).
All of the Company's Dutch-based employees, including its executive
officers, are required to participate in the pension or retirement plans
required by law in the Netherlands, which are similar to defined
contribution plans.
The Algemene Ouderdoms Wet ("AOW") is a state-administered plan under which
the employees contribute an amount of 17,9% of salary to the AOW fund. The
Collectieve Pensioenregeling is administered by an independent insurance
company whereby amounts starting at 6% of the employee's compensation are
contributed to the Collectieve Pensioenregeling. The employee contributes
the first 6% and the company provides the balance such that, combined with
the AOW, a pension of 70% of the employee's annual compensation can be
provided commencing at the age of 65.
The company has no pension or retirement liability other than its obligation
to make employer and employee contributions to AOW and Collectieve
Pensioenregeling. Amounts charged to income during the year in respect of
the AOW and Collectieve Pensioenregeling were approximately NLG 65.000
(1998: NLG 90.000). The Company does not maintain any plans for other post-
employment or post-retirement employee benefits.
14. Subsequent events
On March 20, 2000, the Company sold 1,061,057 shares of its Common Stock for
a total consideration of $7,155,184, as disclosed in Note 12.a).
-32-
<PAGE>
15. Supplementary disclosure to cash flow statement
<TABLE>
<CAPTION>
Year ended
-------------------------------------------------
December 31, 1999 December 31, 1998
---------------------- ----------------------
<S> <C> <C>
Cash paid during the year for:
Interest $ 12,020 $ 5,417
Non-cash operating activities:
Marketing services received as payment for 150,479 -
revenue recognized
Non-cash investing and financing activities:
Conversion of amount due to stockholders to 1,000,000 -
Preferred Stock
Capital leases relating to finance equipment 7,233 197,545
Common stock issued in consideration for 250,000 -
prepaid license fees
Common stock issued to repay a bridging loan - 225,000
Issuance of stock pursuant to purchase of
Stockdata B.V. 2,445,730 -
</TABLE>
-33-
<PAGE>
PART III.
Item 9. Directors, Executive Officers, Promoters And Control Persons;
Compliance With Section 16(A) Of The Exchange Act.
Directors And Executive Officers
- ---------------------------------
Sets forth below are the directors and officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Neil Gibbons 51 Chairman of the Board, Chief Executive Officer and President
Daniel Huber 32 Vice President, Chief Operating Officer, Secretary and Director
Mark Benn 36 Chief Financial Officer
William Cordeiro 54 Director
Stuart Townsend 53 Director
Bryan Wood 54 Director
Frank Verschoor 39 Director
Paul Goossens 44 Director
</TABLE>
Mr. Gibbons co-founded FirstQuote SA in 1994 and has served as Chief
Executive Officer, President and director of the Company since its inception in
July 1996. From 1991 to 1994, Mr. Gibbons was engaged as an independent
investment manager and marketing consultant in the financial services industry.
Mr. Gibbons holds an MBA (Cum Lauda) from IMD, Lausanne, Switzerland.
Mr. Huber co-founded FirstQuote SA in 1994 and has served as Vice
President, Chief Operating Officer, Secretary and director of the Company since
its inception in July 1996. Since 1992, Mr. Huber has also served as Chief
Executive Officer of Profilinvest SA, an investment management firm founded by
Mr. Huber. Mr. Huber holds a degree in portfolio management and financial
analysis.
Mr. Benn has served as Chief Financial Officer of the Company since April
1998. From January 1994 to March 1998 he was finance manager for Radcliffes
Trustee Company S.A., an international financial services company. Mr. Benn
holds a B.Com (Hons) in Information Systems and is a qualified Chartered
Accountant.
Mr. Cordeiro has served as director of the Company since July 1996. Since
1990, Mr. Cordeiro has served as Professor of Management at California State
University, Los Angeles. Mr. Cordeiro holds a Ph.D. in Executive Management from
the Peter F. Drucker Graduate Management Center of the Claremont Graduate
School.
Mr. Townsend has served as a director of the Company since April 1997. Mr.
Townsend is the founder of Townsend Analytics, Ltd., a developer of financial
data software, and for the past five years has served as its President.
Mr. Wood has served as a director of the Company since December 1997. Mr.
Wood is a founder of Alta-Berkeley Associates, a privately held venture capital
group, which was formed in 1982 and, for the past five years, has served as its
Senior Partner. Mr. Wood holds an MBA from Harvard Business School and BSc in
Industrial Engineering from Virginia Polytechnic Institute.
Mr. Verschoor has served as a director of the Company since February 1999.
Since February 1998, he has served as the Investment Director of the NeSBIC CTE
Fund. From January 1997 to January 1998, he was managing partner of FMR
International BV, a Dutch information technology consulting firm. From 1994 to
December 1996, Mr.
-34-
<PAGE>
Verschoor held several positions in USoft UK Ltd., a development tools software
company. Mr. Verschoor holds an MBA from Rotterdam School of Management/Erasmus
University.
Mr. Goossens has served as a director of the Company since February 1999.
He is currently a Senior Investment Manager and was previously a portfolio
manager with GIMV, having commenced there in September 1996. From September 1995
to August 1996 he completed a MBA at Nijenrode University in the Netherlands.
Previously, since 1994, he worked in the field of high-tech services to the oil
industry. Mr. Goossens also holds a degree in Electromechanical engineering from
Leuven University in Belgium.
Those required to make filings under Section 16(a) have done so on a timely
basis.
Item 10. Executive Compensation.
Cash Compensation of Executive Officers
- ---------------------------------------
The following table sets forth the cash compensation paid by the Company to
its executive officers for services rendered during the fiscal years ended
December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------------------- ------------------------------------------
Commomn Shares All Other
Restricted Stock Underlying Options Compensation
Name & Position Year Salary Bonus Other Awards($) Granted (Shares) (1)
- --------------- ------ ----------- ---------- ------- ---------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Neil Gibbons, CEO 1999 CHF 156,000 CHF 13,000 -- -- 15,000 CHF 7,200
1998 CHF 120,000 -- -- -- 40,000 CHF 7,200
1997 CHF 96,000 -- -- -- 50,000 CHF 7,200
Daniel Huber, COO 1999 CHF 156,000 CHF 13,000 -- -- 15,000 CHF 7,200
1998 CHF 120,000 -- -- -- 40,000 CHF 7,200
1997 CHF 96,000 -- -- -- 50,000 CHF 7,200
Mark Benn, CFO (2) 1999 CHF 108,000 CHF 9,000 -- -- 15,000 --
1998 CHF 81,000 -- -- -- 95,000 --
</TABLE>
(1) Represents an allowance of CHF 600 per month
(2) Commenced April 1998
The following table sets forth the options granted by the Company to its
executive officers for services rendered during the current fiscal year:
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants
- -------------------------------------------------------------------------------------------------------------------
% of Total Options
Number of Securities /SARs Granted to
Underlying Options Employees in Fiscal Exercise or Base
Name /SARs Granted (#) Year Price ($/Share) Expiration Date
- ------------------ -------------------- -------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Neil Gibbons, CEO 15,000 3% 4.00 12/31/2001
Daniel Huber, COO 15,000 3% 4.00 12/31/2001
Mark Benn, CFO 15,000 3% 4.00 12/31/2001
</TABLE>
Compensation of Directors
- -------------------------
Mr. Cordeiro receives a $500 per month director's fee. All directors receive
reimbursement for out-of-pocket expenses in attending Board of Directors
meetings. From time to time the Company may engage certain members of the Board
of Directors to perform services on behalf of the Company. The Company will
compensate the members for their services at rates no more favorable than could
be obtained from unaffiliated parties.
-35-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the beneficial
ownership of the shares of Common Stock as of March 1, 2000 by (i) each person
who is known by the Company to be the beneficial owner of more than five percent
(5%) of the issued and outstanding shares of Common Stock, (ii) each of the
Company's directors and executive officers and (iii) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Name And Address Number Of Shares Percentage Owned
---------------- ---------------- -----------------
<S> <C> <C>
Neil Gibbons (1) 1,486,770 (2) 19.2%
Daniel Huber (1) 1,186,770 (2) 15.4%
William Cordeiro (3) 12,000 (4) (5)
Stuart Townsend (6) 185,000 (7) 2.4%
Bryan Wood (8) 2,464,257 (9) 25.8%
Frank Verschoor (10) 1,351,351 (11) 17.0%
Paul Goossens (12) 1,081,081 (13) 14.4%
Alta-Berkeley (8) 2,464,257 (9) 25.8%
NeSBIC CTE Fund (10) 1,351,351 (11) 17.0%
GIMV (12) 1,087,081 (13) 14.4%
European Financial Services Venture Fund
(General Partners) Limited 449,500 (14) 5.9%
Directors and executive officers as a group 7,868,230 52.8%
</TABLE>
________________________________________________________________________________
(1) Address is 12, Av. des Morgines, 1213 Petit-Lancy 1, Geneva, Switzerland.
(2) Includes 90,000 shares of Common Stock underlying presently exercisable
options.
(3) Address is 23852 Pacific Coast Highway, Suite 283, Malibu, California
90265.
(4) Includes 10,000 shares held by Bartik, Cordeiro Associates, Inc., of which
Mr. Cordeiro is a shareholder.
(5) Less than one percent.
(6) Address is Townsend Analytics, 100 South Wacker Drive, Suite 1500, Chicago,
Illinois.
(7) Includes 50,000 shares of Common Stock underlying immediately exercisable
options, and 135,000 shares of Common Stock held by Townsend Analytics,
Ltd. of which Mr. Townsend is President and owner.
(8) Address is Alta-Berkeley Associates, 9 Saville Row, London, England W1X
IAF.
(9) Represents shares of Common Stock issuable upon conversion of Series B and
C Preferred Stock held by Alta-Berkeley V, C.V. and two affiliated funds.
Mr. Bryan Wood is the Senior Partner of Alta-Berkeley Associates which
serves as manager of the three funds.
(10) Address is NeSBIC CTE Fund, Savannahweg 17, 3542 AW, RM Utrecht,
Netherlands
(11) Represents shares of Common Stock issuable upon conversion of Series C
Preferred Stock held by the NeSBIC CTE Fund. Mr. Frank Verschoor is the
investment director of the NeSBIC CTE Fund.
(12) Address is GIMV, Karel Oomsstraat 37, B-2018 Antwerp, Belgium
(13) Represents shares of Common Stock issuable upon conversion of Series C
Preferred Stock held by the GIMV, and 6,000 shares held directly. Mr. Paul
Goossens is an investment manager of the GIMV.
(14) Address is 15 Whitcomb Street, London, WC2H 7HA.
Item 12. Certain Relationships and Related Transactions.
Profilinvest: The Company's Chief Operating Officer, Daniel Huber, is also
Chief Executive Officer of Profilinvest SA, an investment management firm in
Geneva, Switzerland. At the present time and for the foreseeable
-36-
<PAGE>
future, Mr. Huber intends to devote substantially all of his business time to
the Company. However, Mr. Huber's association with Profilinvest SA presents a
potential conflict between his provision of his services to the Company and to
Profilinvest.
Townsend Analytics, Ltd.: Mr. Stuart Townsend, a director of the Company, is
the founder and president of Townsend Analytics, Ltd., the provider of the
financial software used extensively by the Company. In December 1998 the Company
extended the scope its agreement with Townsend Analytics, Ltd. whereby the
latter agreed not to undertake any new licensing agreements for Switzerland,
Germany, France, and the Benelux countries until December 31, 2001. Pursuant to
this, the Company was committed to paying a single amount of $500,000 ($250,000
of which was settled in February 1999 in cash and the remainder in March 1999
through the issuance of 135,000 common shares), and is further committed to
minimum royalty payments of $50,000 per month from July 1, 1999, $100,000 per
month from January 1, 2000 and $150,000 per month from July 1, 2000.
Alta-Berkeley Associates: As At December 31, 1998 the Company owed
$1,000,000 to Alta-Berkeley Associates, holders of the Series B Preferred Stock.
This amount was converted into Series C Preferred Stock in January 1999.
Alta-Berkeley Associates, NeSBIC CTE Fund, GIMV: During January 2000, the
Company received $170,000 from each of the above three existing investors. These
amounts were either repaid or converted into Common Stock in conjunction with
the private placement of Common Stock effected during March 2000.
Item 13. Exhibits and Reports On Form 8-K.
<TABLE>
<CAPTION>
(a) Index to Exhibits
-----------------
<S> <C>
3.1 (1) Certificate of Incorporation of the Company
3.2 (1) Bylaws of the Company
4.1 (1) Specimen of Common Stock Certificate
4.2 Amended Certificate of Designations of the Company
10.1 (1) Loan Agreement dated May 15, 1996 between Virtual Telecom SA and New Capital Investment Fund
10.2 (1) Partnership Outsourcing Agreement dated September 9, 1996 between Virtual Telecom SA and Digital Equipment
Corporation
10.3 (1) Employment Agreement dated May 31, 1996 between Virtual Telecom SA and Neil Gibbons
10.4 (1) Employment Agreement dated May 31, 1996 between Virtual Telecom SA and Daniel Huber
10.5 (1) Computer Software License Agreement dated January 16, 1997 between Virtual Telecom SA and Townsend Analytics, Ltd.
10.6 (1) Information and Distribution License Agreement dated August 23, 1996 between Virtual Telecom SA and McGraw-Hill
International (UK) Ltd.
10.7 (1) Agreement for Global Telecommunications Services dated October 1, 1996 between Virtual Telecom SA and BT Limited
London (British Telecom)
10.8 (1) Unidata Frame Relay & Unimaster Services dated October 22, 1996 between Virtual Telecom SA and Swiss Telecom ITT
10.9 (1) News Distributor Agreement dated January 7, 1997 between Virtual Telecom SA and AFX News Limited
10.10 (1) 1997 Stock Option Plan of the Company
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
10.11 (3) Series B Preferred Stock Purchase Agreement dated December 18, 1997
10.12 (3) Investor Rights Agreement dated December 18, 1997
10.13 (3) Software License Agreement between the Company and IQ Net
10.14 (4) Series C Preferred Stock Purchase Agreement dated January 25, 1999
10.15 (4) Amended and Restated Investor Rights Agreement dated January 25, 1999
10.16 Amendment to the Software Distributor Agreement of January 16, 1997 dated December 10, 1998 between Virtual Telecom
SA and Townsend Analytics, Ltd.
10.17 (5) Sale and Purchase Agreement of the shares of Stockdata BV dated December 24, 1999, between FirstQuote Inc. and the
stockholders of Stockdata B.V.
10.18 Registration Rights Agreement pursuant to the Private Placement of Common Stock which was closed on March 20, 2000
16.1 (2) Letter from Raimondo, Pettit & Glassman regarding Change of Independent Public Accountant
21.1 The Company has three subsidiaries, First Quote SA, a Swiss
corporation, FirstQuote Limited, an English corporation, and
FirstQuote Stockdata BV, a Dutch corporation.
27.1 Financial Data Schedule
</TABLE>
________________________________________________________________________________
(1) Previously filed as part of registration statement on Form 10-SB (SEC File
No. 0-22351) filed with the Securities and Exchange Commission on April 7,
1997.
(2) Previously filed as part of Current Report on Form 8-K/A (SEC File No. 0-
22351) filed with the Securities and Exchange Commission on December 23,
1997.
(3) Previously filed as part of annual report on Form 10-KSB (SEC File No. 0-
22351) filed with the Securities and Exchange Commission on March 31, 1998.
(4) Previously filed as part of annual report on Form 10-KSB (SEC File No. 0-
22351) filed with the Securities and Exchange Commission on March 31, 1999.
(5) Previously filed as part of Current Report on Form 8-K dated December 30,
1999 (SEC File No. 0-22351) filed with the Securities and Exchange
Commission.
(b) Reports On Form 8-K
-------------------
The Company filed a Current Report on Form 8-K dated December 30, 1999 to
report its acquisition of Stockdata Amsterdam BV.
-38-
<PAGE>
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIRSTQUOTE INC.
Date: March 30, 2000 By: /s/ Neil Gibbons
------------------
Neil Gibbons, Chief Executive Officer
In accordance with the Exchange Act, this Report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Neil Gibbons Chief Executive Officer March 30, 2000
- -----------------------
Neil Gibbons
/s/ Daniel Huber Chief Operating Officer March 30, 2000
- -----------------------
Daniel Huber
/s/ Mark Benn Chief Financial Officer March 30, 2000
- -----------------------
Mark Benn
Director
- -----------------------
William Cordeiro
Director
- -----------------------
Stuart Townsend
/s/ Bryan Wood Director March 30, 2000
- -----------------------
Bryan Wood
/s/ Frank Verschoor Director March 30, 2000
- -----------------------
Frank Verschoor
Director
- -----------------------
Paul Goossens
-39-
<PAGE>
EXHIBIT 4.2
Third Amended Certificate of Designations
of
FirstQuote Inc.
A Delaware Corporation
The undersigned, Neil Gibbons and Daniel Huber, hereby certify that:
1. They are the duly elected and acting Chief Executive Officer and
Secretary, respectively, of FirstQuote Inc., a Delaware corporation (the
"Corporation").
2. The Corporation, in its Certificate of Incorporation, has authorized
10,000,000 shares of preferred stock. By resolution, the Board of Directors of
the Corporation has previously designated 750,000 shares of preferred stock
authorized by the Certificate of Incorporation as Series A Preferred Stock. The
Corporation subsequently issued 283,781 shares of Series A Preferred Stock of
which 277,281 shares were converted into Common Stock and 6,500 shares of Series
A Preferred Stock are outstanding as of the date of this Third Amended
Certificate of Designations. The Board of Directors of the Corporation has also
previously designated 1,923,716 shares of preferred stock authorized by the
Certificate of Incorporation as Series B Preferred Stock, all of which are
outstanding as of the date of this Third Amended Certificate of Designations.
The Board of Directors of the Corporation has also previously designated
3,783,784 shares of preferred stock authorized by the Certificate of
Incorporation as Series C Preferred Stock, all of which are outstanding as of
the date of this Third Amended Certificate of Designations.
3. By resolution, the Board of Directors of the Corporation has also
designated 197,815 shares of preferred stock authorized by the Certificate of
Incorporation as Series D Preferred Stock. No shares of Series D Preferred Stock
have been issued.
4. Pursuant to authority given by the Corporation's Certificate of
Incorporation, the Board of Directors of the Corporation has duly adopted
substantially the following recital and resolution:
WHEREAS, Article IV of the Certificate of Incorporation of the
Corporation authorizes this Corporation to issue 10,000,000 shares of preferred
stock, $.001 par value per share, issuable from time to time in one or more
series (the "Preferred Stock").
RESOLVED, the Board of Directors hereby determines that it is in
the best interests of this Corporation to amend and restate the Amended
Certificate of Designations with respect to the issued and outstanding shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
to designate 197,815 shares of Series D Preferred Stock upon the following terms
and conditions:
Section 1. Designation. The initial series of Preferred Stock shall be
-----------
designated and known as "Series A Preferred Stock." The number of authorized
shares constituting such series shall be 6,500. The Series A Preferred Stock
shall have a par value of $.001 per share. The second series of Preferred Stock
shall be designated and known as "Series B Preferred Stock." The number of
authorized shares constituting such series shall be 1,923,716. The Series B
<PAGE>
Preferred Stock shall have a par value of $.001 per share. The third series of
Preferred Stock shall be designated and known as "Series C Preferred Stock." The
number of authorized shares constituting such series shall be 3,783,784. The
Series C Preferred Stock shall have a par value of $.001 per share. The fourth
series of Preferred Stock shall be designated and known as "Series D Preferred
Stock." The number of authorized shares constituting such series shall be
197,815. The Series D Preferred Stock shall have a par value of $.001 per share.
Section 2. Definitions. For the purposes of this Third Amended
-----------
Certificate of Designations, the following terms shall have the meanings
indicated:
"Alternative Liquidation Preference" shall mean $3.50 per share of
----------------------------------
Preferred Stock plus any accrued and unpaid dividends if the event of
liquidation occurs on or before December 31, 2000 and thereafter shall mean
$5.20 per share of Preferred Stock plus any accrued and unpaid dividends.
"Common Stock" shall mean the Corporation's $.001 par value common
------------
stock.
"Conversion Price" has the meaning assigned to such term in Section 7
----------------
(a).
"Expiration Date of the Registration Rights" shall the mean the
------------------------------------------
expiration date of the registration rights granted to the holders of the Series
D Preferred Stock pursuant to the terms of that certain Registration Rights
Agreement dated December ___, 1999 between the holders of the Series D Preferred
Stock and the Corporation.
"Initial Conversion Price" shall mean with respect to Series A
------------------------
Preferred Stock, $1.75 per share of Series A Preferred Stock; with respect to
Series B Preferred Stock, shall mean $1.5595 per share of Series B Preferred
Stock; with respect to Series C Preferred Stock, shall mean $1.85 per share of
Series C Preferred Stock, with respect to Series D Preferred Stock, shall mean
$6.50 per share of Series D Preferred Stock,
"Junior Stock" shall mean any capital stock of the Corporation,
------------
including without limitation the Common Stock, ranking junior to either the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock or the Series D Preferred Stock, as the case may be, with respect to
dividends, distribution in liquidation or any other preferences, rights and
powers.
"Liquidation Preference" shall mean with respect to the Series A
----------------------
Preferred Stock $3.50 per share of Series A Preferred Stock plus any accrued and
unpaid dividends; and shall mean with respect to the Series B Preferred Stock
and Series C Preferred Stock $1.85 per share of Preferred Stock plus any accrued
and unpaid dividends.
"Parity Stock" shall mean any capital stock of the Corporation
------------
ranking on a parity with either the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock,
as the case may be, with respect to dividends, distributions in liquidation and
all other preferences, rights or powers.
"Person" shall mean any individual, firm, corporation, partnership,
------
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or
-2-
<PAGE>
an agency or political subdivision thereof) or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.
"Preferred Stock" shall mean the Series A Preferred Stock, the Series
---------------
B Preferred Stock, the Series C Preferred Stock and the Series D Preferred
Stock, unless the context denotes otherwise.
"Senior Stock" shall mean any capital stock of the Corporation ranking
------------
senior to either the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock or the Series D Preferred Stock, as the case may be,
with respect to dividends, distribution in liquidation or any other preference,
right or power.
Section 3. Ranking. The Series B Preferred Stock and the Series C
-------
Preferred Stock shall, with respect to rights on liquidation, dissolution or
winding up, as a group rank senior to all other equity securities of the
Corporation, including the Series A Preferred Stock, the Series D Preferred
Stock and the Common Stock and any other series or class of the Corporation's
preferred or common stock, now or hereafter authorized. The Series D Preferred
Stock shall, with respect to rights on liquidation, dissolution or winding up,
as a group rank junior to the Series A Preferred Stock, the Series B Preferred
Stock and the Series C Preferred Stock and shall rank on a parity with all other
equity securities of the Company, including the Common Stock and any other
series or class of the Corporation's common stock, now or hereafter authorized.
Section 4. Dividends.
---------
(a) The holders of shares of Series D Preferred Stock shall be
entitled to receive dividends at a rate of four percent (4%) of the Initial
Conversion Price per share per year, payable annually (the "Series D
Dividends"), when, as, and if declared by the Board of Directors of the
Corporation. The Series D Dividends shall be cumulative and shall commence to
accrue on the Expiration Date of the Registration Rights and shall be payable
commencing on the first anniversary of the Expiration Date of the Registration
Rights and on each subsequent anniversary thereafter, to holders of record on
such date. The Series D Dividends shall be payable only out of funds legally
available therefor, prior and in preference to any dividend payment with respect
to Common Stock.
(b) In addition to the Series D Dividends, if any dividends or other
distributions (including, without limitation, any distribution of cash,
indebtedness, assets or other property, but excluding any dividend payable in
shares of its common stock) on Common Stock ("Dividends") are so permitted and
declared, such Dividends shall be paid pro rata to the holders of the Common
Stock and Preferred Stock. The holders of Preferred Stock shall receive a
Dividend in an amount that would be payable to such holder assuming that such
shares had been converted on the record date for determining the stockholders of
the Corporation entitled to receive payment of such Dividends into the maximum
number of shares of Common Stock into which such shares of Preferred Stock are
then convertible as provided in Section 7.
Section 5. Voting Rights.
-------------
In addition to any voting rights provided by law, the holders of
shares of Preferred Stock shall have the following voting rights:
-3-
<PAGE>
(a) Except as otherwise required by applicable law and without
limiting the provisions of Section 5(b) below, each share of Preferred Stock
shall entitle the holder thereof to vote, in person or by proxy, at each special
and annual meeting of shareholders, on all matters voted on by holders of Common
Stock, voting together as a single class with the holders of Common Stock and
with holders of all other shares entitled to vote thereon. With respect to any
such vote, each share of Preferred Stock shall entitle the holder thereof to
cast the number of votes that such holder would be entitled to cast assuming
that such shares of Preferred Stock had been converted, on the record date for
determining the stockholders entitled to vote on any such matters, into the
maximum number of shares of Common Stock into which such shares Preferred Stock
are then convertible as provided in Section 7(d) below.
(b) The Board of Directors of the Corporation shall consist of nine
(9) members. The holders of Series B Preferred Stock, voting together as a
class, shall be entitled to elect two (2) members of the Board of Directors at
each meeting or pursuant to each consent of the Corporation's shareholders for
the election of Directors. The holders of Series C Preferred Stock, voting
together as a class, shall be entitled to elect two (2) members of the Board of
Directors at each meeting or pursuant to each consent of the Corporation's
shareholders for the election of Directors. The holders of the Series D
Preferred Stock and the Common Stock, voting together as a class, shall be
entitled to elect five (5) members of the Board of Directors at each meeting or
pursuant to each consent of the shareholders for the election of Directors.
(c) Unless the consent or approval of a greater number of shares
shall then be required by law, the affirmative vote of the holders of more than
50% of the outstanding shares of the Series A Preferred Stock, the Series B
Preferred Stock, or the Series C Preferred Stock, as the case may be, shall be
necessary to (1) authorize, increase the authorized number of shares of or issue
(including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of any class or classes of Senior
Stock or Parity Stock or any additional shares of such series, (2) authorize,
adopt or approve any amendment to the Certificate of Incorporation, the Bylaws
or this Third Amended Certificate of Designations that would increase or
decrease the par value of the shares of such series, alter or change the powers,
preferences or rights of the shares of such series or alter or change the
powers, preferences or rights of any other capital stock of the Corporation if
after such alteration or change such capital stock would be Senior Stock or
Parity Stock to such series, (3) amend, alter or repeal the Certificate of
Incorporation or this Third Amended Certificate of Designations so as to affect
the shares of such series adversely, including, without limitation, by granting
any voting right to any holder of notes, bonds, debentures or other debt
obligations of the Corporation, or by amending, altering or repealing Section
5(b) above, or (4) authorize or issue any security convertible into,
exchangeable for or evidencing the right to purchase or otherwise receive any
shares of any class or classes of Senior Stock or Parity Stock.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) Except as otherwise provided in subpart (b) below, in the event
of any liquidation, dissolution or winding up of the Corporation, either
voluntary or involuntary, before any distribution or payment to holders of
Junior Stock may be made, the holder of each share of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be entitled to be
paid an amount equal to the Liquidation Preference of such share, plus all
accrued or
-4-
<PAGE>
declared but unpaid dividends on such share, in the following order of priority:
first, to the holders of the Series B Preferred Stock and Series C Preferred
Stock as a group; next, to the holders of the Series A Preferred Stock; and,
then, to the holders of the Junior Stock, in accordance with the rights under
such shares of Junior Stock. Subsequent to the payment of all Liquidation
Preferences plus all accrued or declared but unpaid dividends on such shares
pursuant to this subpart (a), each share of Series B Preferred Stock and Series
C Preferred Stock shall participate with the holders of the Series D Preferred
Stock and the Common Stock on any further distributions or payments in
proportion to their holdings assuming that such shares of Preferred Stock had
been converted, on the record date for determining the stockholders entitled to
receive distributions or payments, into the maximum number of shares of Common
Stock into which such shares of Preferred Stock are then convertible as provided
in Section 7(d).
(b) If in the event of any liquidation, dissolution or winding up of
the Corporation, either voluntary or involuntary, the holders of the Series B
Preferred Stock and Series C Preferred Stock would receive distributions
pursuant to subpart (a) of this Section 6 in an amount less than the Alternative
Liquidation Preference, then the holders of the Series B Preferred Stock and the
Series C Preferred Stock shall receive, prior to and in preference to the
holders of any Common Stock, Series A Preferred Stock or Series D Preferred
Stock, the Alternative Liquidation Preference and no more.
(c) If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to the
holders of either the Series B Preferred Stock and Series C Preferred Stock, as
a group, or the Series A Preferred Stock shall be insufficient to permit payment
of the Liquidation Preference payable in full to the holders of such series,
then all of the assets available for distribution to holders of such series
shall be distributed among and paid to such holders ratably in proportion to the
amounts that would be payable to such holders if such assets were sufficient to
permit payment in full. A consolidation or merger of the Corporation into or
with another corporation or corporations in which the Corporation is not the
successor, or the sale of all or substantially all of the assets of the
Corporation to another corporation or any other entity, shall be deemed a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.
Section 7. Conversion of Preferred Stock into Common Stock.
-----------------------------------------------
(a) Right to Convert. Each share of Preferred Stock shall be
----------------
convertible at any time, at the option of the holders thereof, into fully paid
and nonassessable shares of Common Stock at the Initial Conversion Price,
subject to adjustment as set forth in this Section 7 (the "Conversion Price").
Notwithstanding any other provision contained herein, in the event the
Corporation gives written notice of its intention to redeem the Preferred Stock
pursuant to Section 8(b) below, any such shares called for redemption shall be
or become eligible for conversion up through the date of redemption identified
in the written notice issued pursuant to Section 8(b) below.
(b) Number of shares of Common Stock Issuable upon Conversion. The
---------------------------------------------------------
number of shares of Common Stock to be issued upon conversion of shares of any
Series A Preferred Stock shall be equal to the product of (X) and (Y), where (X)
is a fraction, the numerator of which is the Liquidation Preference of such
series and the denominator of which is the applicable
-5-
<PAGE>
Conversion Price and (Y) is the number of shares of Preferred Stock to be
converted. The number of shares of Common Stock to be issued upon conversion of
shares of any Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock shall be equal to the product of (X) and (Y), where (X) is a
fraction, the numerator of which is the Initial Conversion Price of such series
and the denominator of which is the applicable Conversion Price and (Y) is the
number of shares of Preferred Stock to be converted.
(c) Mandatory Conversion.
--------------------
(i) At any time following the Expiration Date of the
Registration Rights, the Corporation shall have the right to automatically
convert the shares of Series D Preferred Stock into shares of Common Stock.
Conversions pursuant to this Section 7(c) shall be at the Conversion Price.
(ii) The Corporation shall give written notice of its intention
to convert the Series D Preferred Stock to each holder thereof, at such holder's
address as it appears on the transfer books of the Corporation, which notice
shall specify (i) the total number of shares of Series D Preferred Stock being
converted (which shall be all of such shares then outstanding); (ii) the number
of shares of Series D Preferred Stock held by the holder which the Corporation
intends to convert (which shall be all of such shares then held by the holder);
(iii) the date of conversion (which shall be at least 30 days from the date of
mailing of such notice by the Corporation); and (iv) the number of shares of
Common Stock that shall be issued upon conversion. On or after the date of
conversion, each holder of Series D Preferred Stock shall surrender his
certificate for the number of shares to be converted as stated in the notice
provided by the Corporation.
(d) Antidilution Adjustments. The Conversion Price of the Preferred
------------------------
Stock shall be adjusted from time to time in certain cases as follows:
(i) Dividend, Subdivision, Combination or Reclassification of
---------------------------------------------------------
Common Stock. If the Corporation shall, at any time or from time to time, (a)
- ------------
declare a dividend on the Common Stock payable in shares of its capital stock
(including Common Stock), (b) subdivide the outstanding Common Stock, (c)
combine the outstanding Common Stock into a smaller number of shares, or (d)
issue any shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation), then in each
such case, the Initial Conversion Price or the Conversion Price in effect at the
time of the record date for such dividend or at the effective date of such
subdivision, combination or reclassification shall be adjusted to that price
which will permit the number of shares of Common Stock into which the Preferred
Stock may be converted to be increased or reduced in the same proportion as the
number of shares of Common Stock are increased or reduced in connection with
such dividend, subdivision, combination or reclassification. Any such adjustment
shall become effective immediately after the record date of such dividend or the
effective date of such subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur. In the event, if a dividend is declared, such dividend is not paid, the
Conversion Price shall be adjusted to the Conversion Price in effect immediately
prior to the record date of such dividend.
-6-
<PAGE>
(ii) Issuance of Additional Common Stock. If the Corporation shall,
-----------------------------------
at any time or from time to time, directly or indirectly, sell or issue shares
of Common Stock (regardless of whether originally issued or from the
Corporation's treasury), or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock (excluding shares issued in any of the transactions described in
Section 7(d)(i)) at a price per share of Common Stock (determined, in the case
of rights, options, warrants or convertible or exchangeable securities, by
dividing (X) the total consideration received or receivable by the Corporation
in consideration of the sale or issuance of such rights, options, warrants or
convertible or exchangeable securities, plus the total consideration payable to
the Corporation upon exercise or conversion or exchange thereof, by (Y) the
total number of shares of Common Stock covered by such rights, options, warrants
or convertible or exchangeable securities) lower than the Initial Conversion
Price in effect immediately prior to such sale or issuance, then the Conversion
Price shall be reduced to the price determined by multiplying the Conversion
Price in effect immediately prior thereto by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
prior to such sale or issuance plus the number of shares of Common Stock which
the aggregate consideration received (determined as provided below) for such
sale or issuance would purchase at the Conversion Price and the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately after such sale or issuance. Such adjustment shall be made
successively whenever such sale or issuance is made. For the purposes of such
adjustments, the shares of Common Stock which the holder of any such rights,
options, warrants, or convertible or exchangeable securities shall be entitled
to subscribe for or purchase shall be deemed to be issued and outstanding as of
the date of such sale or issuance and the consideration "received" by the
Corporation therefor shall be deemed to be the consideration actually received
or receivable by the Corporation (plus any underwriting discounts or commissions
in connection therewith) for such rights, options, warrants or convertible or
exchangeable securities, plus the consideration stated in such rights, options,
warrants or convertible or exchangeable securities to be payable to the
Corporation for the shares of Common Stock covered thereby. If the Corporation
shall sell or issue shares of Common Stock for a consideration consisting, in
whole or in part, of property other than cash or its equivalent, then in
determining the "price per share of Common Stock" and the "consideration"
received or receivable by or payable to the Corporation for purposes of the
first sentence and the immediately preceding sentence of this Section 7(d)(ii),
the fair value of such property shall be determined in good faith by the Board
of Directors. The determination of whether any adjustment is required under this
Section 7(d)(ii) by reason of the sale and issuance of rights, options, warrants
or convertible or exchangeable securities and the amount of such adjustment, if
any, shall be made only at the time of such issuance or sale and not at the
subsequent time of issuance or sale of Common Stock upon the exercise of such
rights to subscribe or purchase; provided, however, that if such rights,
options, warrants or convertible or exchangeable securities shall expire without
exercise prior to any conversion of the Preferred Stock pursuant to Section 7,
then any adjustment made under this Section 7(d)(ii) with respect thereto shall
be reversed. The adjustment of the Conversion Price as provided for in this
Section 7(d)(ii) shall apply only to the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock and shall not apply to the
Series D Preferred Stock.
(iii) De Minimis Adjustments. No adjustment of the Conversion Price
----------------------
shall be made if the amount of such adjustment would result in a change in the
Conversion Price
-7-
<PAGE>
per share of less than $.01 but in such case any adjustment that would otherwise
be required then to be made shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment, which together with
any adjustment so carried forward, would result in a change in the Conversion
Price in excess of $.01 per share. All calculations under this Section 7(d)
shall be made to the nearest cent, or the nearest 1/100th of a share, as the
case may be. If the Corporation shall, at any time or from time to time, issue
Common Stock by way of dividends on any stock of the Corporation or subdivide or
combine the outstanding shares of the Common Stock, such amount of $.01 (as
theretofore increased or decreased, if such amount shall have been adjusted in
accordance with the provisions of this clause) shall forthwith be
proportionately increased in the case of a combination or decreased in the case
of a subdivision or stock dividend so as appropriately to reflect the same.
Notwithstanding the provisions of the first sentence of this Section 7(d)(iii),
any adjustment postponed pursuant to this Section 7(d)(iii) shall be made no
later than the earlier of (a) two years from the date of the transaction that
would, but for the provisions of the first sentence of this Section 7(d)(iii),
have required such adjustment and (b) the date of any redemption or conversion
of the shares of Preferred Stock.
(iv) Fractional Shares. Notwithstanding any other provision of
-----------------
this Second Amended Certificate of Designations, the Corporation shall not be
required to issue fractions of shares upon conversion of any shares of Preferred
Stock or to distribute certificates which evidence fractional shares. In lieu of
fractional shares of Common Stock, the Corporation shall pay therefore, at the
time of any conversion of shares of Preferred Stock as herein provided, an
amount in cash equal to such fraction multiplied by the Conversion Price then in
effect.
(d) Reorganization and Reclassification Adjustment. If there occurs
----------------------------------------------
any capital reorganization or any reclassification of the Common Stock of the
Corporation, then each share of Preferred Stock shall thereafter be convertible
into the same kind and amounts of securities (including shares of stock) or
other assets, or both, which were issuable or distributable to the holders of
outstanding Common Stock of the Corporation upon such reorganization or
reclassification in respect of that number of shares of Common Stock into which
such shares of Preferred Stock might have been converted immediately prior to
such reorganization or reclassification; and, in any such case, appropriate
adjustments (as determined in good faith by the Board of Directors of the
Corporation) shall be made to assure that the provisions set forth herein
(including provisions with respect to changes in, and other adjustments of, the
Conversion Price) shall thereafter be applicable, as nearly as reasonably may be
practicable, in relation to any securities or other assets thereafter
deliverable upon the conversion of the Preferred Stock.
(e) Mechanics of Conversion. The option to convert shall be
-----------------------
exercised by surrendering for such purpose to the Corporation, certificates
representing the shares to be converted, duly endorsed in blank or accompanied
by proper instruments of transfer, and at the time of such surrender, the Person
in whose name any certificate for shares of Common Stock shall be issuable upon
such conversion shall be deemed to be the holder of record of such shares of
Common Stock on such date, notwithstanding that the share register of the
Corporation shall then be closed or that the certificates representing such
Common Stock shall not then be actually delivered to such person. In the event
the Corporation has given written notice of its intention to redeem any or all
of the shares to be converted, the certificates representing such shares, duly
endorsed in blank or accompanied by proper instruments of transfer, shall be
delivered into the
-8-
<PAGE>
possession of the Corporation no later than the close of business on the date of
redemption identified in the written notice issued pursuant to Section 8(b)
below.
(f) Certificate as to Adjustments. Whenever the Conversion Price or
-----------------------------
the securities or other property deliverable upon the conversion of the
Preferred Stock shall be adjusted pursuant to the provisions hereof, the
Corporation shall promptly give written notice thereof to each holder of shares
of Preferred Stock at such holder's address as it appears on the transfer books
of the Corporation and shall forthwith file, at its principal executive office
and with any transfer agent or agents for the shares of Preferred Stock and the
Common Stock, a certificate, signed by the Chairman of the Board, Chief
Executive Officer or one of the Vice Presidents of the Corporation, and by its
Chief Financial Officer, its Treasurer or one of its Assistant Treasurers,
stating the adjusted Conversion Price and the securities or other property
deliverable per share of Preferred Stock calculated to the nearest cent or to
the nearest one one-hundredth of a share and setting forth in reasonable detail
the method of calculation and the facts requiring such adjustment and upon which
such calculation is based. Each adjustment shall remain in effect until a
subsequent adjustment hereunder is required.
(g) Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve and keep available for issuance upon the conversion of the shares of
Preferred Stock, the maximum number of its authorized but unissued shares of
Common Stock as is reasonably anticipated to be sufficient to permit the
conversion of all outstanding shares of Preferred Stock, and shall take all
action required to increase the authorized number of shares of Common Stock if
at any time there shall be insufficient authorized but unissued shares of Common
Stock to permit such reservation or to permit the conversion of all outstanding
shares of Preferred Stock.
(h) No Conversion Charge or Tax. The issuance and delivery of
---------------------------
certificates for shares of Common Stock upon the conversion of shares of
Preferred Stock shall be made without charge to the holder of shares of
Preferred Stock for any issue or transfer tax, or other incidental expense in
respect of the issuance or delivery of such certificates or the securities
represented thereby, all of which taxes and expenses shall be paid by the
Corporation.
Section 8. Redemption of Preferred Stock.
-----------------------------
(a) The Corporation shall have the right to redeem for cash out of
funds legally available therefor each share of Series A Preferred Stock and each
share of Series D Preferred Stock. The shares of Series A Preferred Stock may be
redeemed by the Corporation at any time and the shares of Series D Preferred
Stock may be redeemed by the Corporation at any time following the Expiration of
the Registration Rights, the Corporation shall have the right to redeem for cash
out of funds legally available therefor each share of Series D Preferred Stock.
Redemptions of the Series A Preferred Stock made pursuant to this Section 8(a)
shall be for a price per share equal to the Liquidation Preference applicable to
such shares of Series A Preferred Stock, plus an amount equal to the amount of
all unpaid Dividends payable in accordance with Section 4 hereof on each share
of Series A Preferred Stock to be redeemed; provided, however, that no shares of
Series A Preferred Stock shall be redeemed without the consent of the majority
of outstanding shares of Series B Preferred Stock and Series C Preferred Stock,
voting as a group. Redemptions of the Series D Preferred Stock made pursuant to
this Section 8(a) shall be for a price per share equal to the Conversion Price
applicable to such share
-9-
<PAGE>
of Series D Preferred Stock, plus an amount equal to the amount of all unpaid
Series D Dividends payable in accordance with Section 4 hereof on each share of
Series D Preferred Stock to be redeemed; provided, however, that no shares of
Series D Preferred Stock shall be redeemed without the consent of the majority
of outstanding shares of Series B Preferred Stock and Series C Preferred Stock,
voting as a group.
(b) The Corporation shall give written notice of its intention to
redeem the Series A Preferred Stock or Series D Preferred Stock as provided
herein, to each holder thereof, at such holder's address as it appears on the
transfer books of the Corporation, which notice shall specify (i) the total
number of shares of Series A Preferred Stock or Series D Preferred Stock being
redeemed (which shall be all of such shares then outstanding); (ii) the number
of shares of Series A Preferred Stock or Series D Preferred Stock held by the
holder which the Corporation intends to redeem (which shall be all of such
shares then held by the holder); (iii) the date of redemption (which shall be at
least 30 days from the date of mailing of such notice by the Corporation); and
(iv) the redemption price. On or after the date of redemption, each holder of
Series A Preferred Stock or Series D Preferred Stock shall surrender his
certificate for the number of shares to be redeemed as stated in the notice
provided by the Corporation. Dividends will cease to accumulate on shares of
Series A Preferred Stock or Series D Preferred Stock called for redemption.
(c) For the purpose of determining whether funds are legally
available for redemption of shares of Series A Preferred Stock or Series D
Preferred as provided herein, the Corporation shall value its assets at the
highest amount permissible under applicable law. If on the redemption date funds
of the Corporation legally available therefor shall be insufficient to redeem
all the shares of Series A Preferred Stock or Series D Preferred Stock required
to be redeemed as provided herein, funds to the extent legally available shall
be used for such purpose and the Corporation shall effect such redemption pro
rata according to the total redemption amount owed to each holder of Series A
Preferred Stock or Series D Preferred Stock, as the case may be, as of the
redemption date. The redemption requirements provided hereby shall be
continuous, so that if such requirement shall not be fully discharged, funds
legally available shall be applied therefor until such requirements are fully
discharged in accordance with the preceding sentence.
Section 9. Notice of Certain Events. In case the Corporation shall
------------------------
propose at any time or from time to time (A) to declare or pay any dividend
payable in stock of any class to the holders of Common Stock or to make any
other distribution to the holders of Common Stock, (B) to offer to the holders
of Common Stock rights or warrants to subscribe for or to purchase any
additional shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (C) to effect any reclassification of its Common
Stock, (D) to effect any consolidation, merger or sale, transfer or other
disposition of all or substantially all of the property, assets or business of
the Corporation which would, if consummated result in the mandatory conversion
of shares of Preferred Stock, or (E) to effect the liquidation, dissolution or
winding up of the Corporation, then, in each such case, the Corporation shall
mail to each holder of shares of Preferred Stock via first class mail at such
holder's address as it appears on the transfer books of the Corporation, a
written notice of such proposed action, which shall specify (1) the date on
which a record is to be taken for the purpose of such dividend, distribution or
rights or warrants or, if a record is not to be taken, the date as of which the
holders of shares of
-10-
<PAGE>
Common Stock of record to be entitled to such dividend, distribution or rights
are to be determined, or (2) the date on which such reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation or winding up
is expected to become effective, and such notice shall be so given as promptly
as possible but in any event at least ten (10) business days prior to the
applicable record, determination or effective date, specified in such notice.
Section 10. Certain Remedies. Any registered holder of shares of
----------------
Preferred Stock shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Second Amended Certificate of Designations
and to enforce specifically the terms and provisions of this Second Amended
Certificate of Designations in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
such holder may be entitled at law or in equity.
Section 11. Method of Election. For purposes of this Third Amended
------------------
Certificate of Designations, any election required or allowed to be made by the
majority of the holders of Preferred Stock shall be effective upon receipt by
the Company of the written consent of a majority of such holders.
Section 12. Status of Reacquired Shares. Shares of Preferred Stock which
---------------------------
have been issued and converted or redeemed shall (upon compliance with any
applicable provisions of the laws of the State of Delaware) have the status of
authorized and unissued shares of Preferred Stock issuable in series
undesignated as to series and may be redesignated and reissued.
The undersigned, Neil Gibbons and Daniel Huber, Chief Executive Officer and
Secretary of Virtual Telecom, Inc., respectively, hereby declare and certify
under penalty of perjury that the foregoing Certificate is the act and deed of
the Corporation and that the facts herein stated are true.
Executed at Geneva, Switzerland on December 28, 1999.
/s/ Neil Gibbons
----------------------------
NEIL GIBBONS
Chief Executive Officer
/s/ Daniel Huber
----------------------------
DANIEL HUBER
Secretary
-11-
<PAGE>
EXHIBIT 10.16
This is an amendment to the Software Distributor Agreement dated January 18,
1997 ("Distributor Agreement") entered into between Townsend Analytics, Ltd., an
Illinois corporation ("TAL"), and Virtual Telecom S.A., a Swiss stock
corporation ("Virtual Telecom") establishing a moratorium on certain new
licenses within a geographical region.
1 Definitions
1.1 "TAL" shall mean Townsend Analytics Ltd. and Townsend Software
International L.L.C.
1.2 "TAL Internet Site" shall mean a physical location housing TAL permission,
quote and news servers that distribute market data and news to TAL client
software (e.g., RealTick III or its components) using the public Internet
as the primary means of distribution.
1.3 "Territory" shall mean the countries of Switzerland, France, Germany,
Belgium, the Netherlands and Luxembourg.
1.4 "Term of Moratorium" shall mean the time period commencing January 1, 1999
and ending December 31, 2000.
1.5 "Minimums" shall mean the minimum monthly royalty payments under Section
5(a) of the Distributor Agreement set forth in Table 1.
1.6 "Consideration" shall mean a one-time fee of $500,000 that may be paid 50%
in Virtual Telecom common stock at the option of Virtual Telecom with the
same valuation terms as the Preferred private placement currently being
undertaken.
1.7 "Exempt Organizations" shall mean TAL. Archipelago, Archipelago Services
and existing licensees of TAL Internet Sites and their affiliates,
assignees or successors.
2. In return for the Consideration and the payment of the Minimums, TAL shall
not grant any additional, rights to establish TAL Internet Sites within the
Territory for the Term of the Moratorium to any organization other than an
Exempt Organization.
3. All other terms and conditions of the Distributor Agreement not
inconsistent with this letter shall remain in full force and effect. At the
request of either party hereto, we will enter into a more formal amendment
to the Distributor Agreement for purposes of integrating into the
Distributor Agreement the revisions set forth in this letter.
4. Virtual Telecom agrees to not distribute any product similar to RealTick
III or the TAL ActiveX real-time market data controls. Virtual Telecom may
distribute market data using HTML and similar "pull" technology so long as
the underlying market data servers are TAL market data servers
5. This agreement shall became effective upon execution by both parties. If
both parties have not executed this agreement by December 15, 1998, this
agreement shall be terminated. If the consideration is not paid in full to
Townsend Software International by February 28,1999 this agreement will
terminate on March 1, 1999.
1
<PAGE>
TABLE 1
Minimum Monthly Royalties
Beginning Ending Amount
---------- ---------- ---------
01/01/1999 06/30/1999 N/A
07/11/1999 12/31/1999 $ 50,000
01/01/2000 06/30/2000 $100,000
07/01/2000 12/31/2000 $150,000
ACKNOWLEDGED AND AGREED:
TOWNSEND ANALYTICS, LTD.,
an Illinois corporation
By: /s/ Stuart Townsend
---------------------------------------- _________________________
Stuart Townsend, President Date
Virtual Telecom Inc.,
A Delaware corporation
By: /s/ Neil Gibbons
---------------------------------------- _________________________
Neil Gibbons, Chief Executive Officer Date
2
<PAGE>
Prices for TAL Trading Tools on INTERNET or INTRANETS
invoiced by TOFF Consulting & Finanz
<TABLE>
<CAPTION>
Recommended Per License VT
No. Products Functions Retail Price Prices US$
- ------ ------------------------------- -------------------------------- ----------------- --------------
<S> <C> <C> <C> <C>
1 Minder within browser Minder Window with: $ 18.00 $ 13.80
(ActiveX) (Set 1)
Setup function (options layout only)
Ticker
2 Minder within browser Minder Window with: $ 35.00 $ 26.25
(ActiveX) and charts (Set 2)
Setup function (options layout only)
Ticker and min. chart functions
3 Private internet RT3 Client MQT Minder Window $ 50.00 $ 37.50
(Set 3) no Page Save Function
integrated Boardview
News
Limited Charts (simple studies)
4 Professional Internet RT3 MQT Minder Window $ 60.00 $ 45.00
Client (Set 4)
Page Save Function
FOREX
Edit Function for Minder
News
News Alert
Ticker
Full Chart
5 Institutional Internet RT3 MQT Minder Window $ 75.00 $ 56.25
Client (Set 5)
Page Save Function
FOREX
Market Maker
Edit Function Minder
Snap Quote
Table
Times a Sales
P&F
Ticker
Stocks
Full Chart
News
News Alert
TalNet
10 TA_SRV (Contr. by TAL) TA_SRV $ 750.00 $562.50
11 TA_SRV not controlled TA_SRV for HOST connections $1,000.00 $750.00
12 TalNet5 only TalNet6 to connect to a TA_SRV $ 20.00 $ 15.00
</TABLE>
3
<PAGE>
EXHIBIT 10.18
FIRSTQUOTE INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights
Agreement") is entered into effective as of February 25, 2000, by and among
FIRSTQUOTE INC., a Delaware corporation (the "Company"), and the purchasers of
shares of Common Stock of the Company (the "Shares") who are identified as
"Investors" in that certain Subscription Agreement of even date herewith (the
"Subscription Agreement") and whose signatures appear on the execution pages
hereof. The purchasers of the Shares shall be referred to hereinafter as the
"Investors" and each individually as an "Investor."
RECITALS
WHEREAS, the Company proposes to sell the Shares pursuant to the
Subscription Agreement;
WHEREAS, as a condition of entering into the Subscription Agreement,
the Investors have requested that the Company extend to them certain
registration rights and other rights as set forth below; and
WHEREAS, as a condition of the Subscription Agreement, the Company
shall file a registration statement with the Securities and Exchange Commission
relating to the Shares as soon as practicable after the Completion Date, but in
no event more than thirty (30) days after the Completion Date.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Registration Rights Agreement and in the Subscription Agreement, the parties
mutually agree as follows:
1. DEFINITIONS
As used in this Registration Rights Agreement the following terms
shall have the following respective meanings:
"Completion Date" has the meaning ascribed thereto under the private
placement memorandum of even date herewith regarding the offer and sale of the
Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form SB-2" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC.
"Holder" means any Investor or assignee permitted in accordance with
4.3 hereof owning of record Registrable Securities that have not been sold to
the public.
<PAGE>
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means the Shares.
"Registration Statement" means any registration statement of the
Company that covers the Shares pursuant to the provisions of this Registration
Rights Agreement, including the Prospectus included therein, all amendments and
supplements thereto (including post-effective amendments) and all exhibits and
material incorporated by reference or deemed to be incorporated by reference
therein.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. REGISTRATION OF SHARES
2.1 Registration Statement. As soon as practicable after the
Completion Date, but in no event more than thirty (30) days after the Completion
Date, the Company shall prepare and file with the Commission a Registration
Statement on Form SB-2 pursuant to Rule 415 under the Securities Act. In
addition, the Company shall:
(a) Use its best efforts to cause such Registration
Statement to become effective at the earliest possible time and to keep such
Registration Statement continuously effective for a period of two years
following the date on which the Registration Statement becomes effective under
the Securities Act, or such shorter period ending on the earlier of (i) when all
Registrable Securities covered by this Registration Statement have been sold or
(ii) when all Registrable Securities covered by the Registration Statement may
be sold without registration under the Securities Act pursuant to the exemptions
provided by Rule 144 under the Securities Act (and are not restricted as to
volume) (the "Registration Period"); provided, however, that the Company shall
not be deemed to have kept a Registration Statement effective during the
applicable period if it voluntarily takes any action that results in Holders not
being able to sell such Registrable Securities pursuant to applicable securities
laws during that period (and the time period during which such Registration
Statement is required to remain effective hereunder shall be extended by the
number of days during which such Holders are not able to sell Registrable
Securities) unless such action is required under applicable law or regulation or
court order.
(b) Prepare and file with the SEC such pre-effective and
post-effective amendments and supplements to such Registration Statement and the
prospectus used in connection with such Registration Statement as may be
necessary to cause the Registration Statement to become effective, to keep the
Registration Statement continuously effective during the Registration Period and
not misleading, and as may otherwise be required or applicable under, and to
comply with the provisions of, the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during the
Registration Period.
-2-
<PAGE>
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, and each amendment or supplement
thereto, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be necessary to permit the sale of
the Registrable Securities.
(e) Notify promptly the Holders of Registrable Securities
to be sold, (and in the case of (i)(A) in no event less than two business days
prior to such filing) and (if requested by any such Person) confirm such notice
in writing, (i)(A) when a prospectus or any prospectus supplement or post-
effective amendment is proposed to be filed, and, (B) with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC or any other federal, Canadian, state
or provincial governmental authority for amendments or supplements to a
Registration Statement or related prospectus or for additional information,
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, and (v) of the happening of any
event that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in such Registration Statement, prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, not misleading, and that in the
case of the prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(f) Use its reasonable best efforts to avoid the issuance
of, or, if issued, obtain the withdrawal of, any order suspending the
effectiveness of a Registration Statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(g) If requested by the holders of a majority of the
Registrable Securities being sold in connection with such offering, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the holders reasonably request should be included therein
regarding such holders or the plan of distribution of the Registrable
Securities, and (ii) make all required filings of the prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of such matters to be incorporated in such prospectus
supplement or post-effective amendment: provided, however, that the Company
shall not be required to take any action pursuant to this Section 2.1(g) that
would, in the opinion of outside counsel for the Company, violate applicable
law.
-3-
<PAGE>
(h) Upon the occurrence of any event contemplated by
Section 2.1(e)(v), as promptly as practicable, prepare a supplement or
amendment, including a post-effective amendment, to each Registration Statement
or a supplement to the related prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, such prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(i) Use its reasonable best efforts to cause all
Registrable Securities relating to such Registration Statement to be listed on
each securities exchange or automated quotation system, if any, on which similar
securities issued by the Company are then listed.
2.2 Seller Information. The Company may require each selling
Holder of Registrable Securities as to which any registration is being effected
to furnish to the Company such information regarding such Holder, such Holder's
Registrable Securities and such Holder's intended method of disposition as the
Company may from time to time reasonably request; provided that such information
shall be used only in connection with such registration.
If the Registration Statement refers to any Holder by name or
otherwise as the Holder of any securities of the Company, then such Holder shall
promptly (i) notify the Company and its counsel of the existence of any fact of
which such Holder becomes aware and the happening of any event which relates to
Holder or the distribution of the securities owned by such Holder which results
in the Registration Statement containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or necessary to
make any statements therein not misleading, or the Prospectus included in such
Registration Statement containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or necessary to
make any statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) provide to the Company such information which
relates to Holder or the distribution of the securities owned by such Holder as
shall be necessary to enable the Company to prepare a supplement or post-
effective amendment to such Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other documents required
so that such Registration Statement will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and such Prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
2.3 Notice to Discontinue. Each holder of Registrable
Securities agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2.1(e)(ii) through (v),
such Holder shall forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 2.1(h) and, if so directed by the Company,
such Holder shall deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such Holder's possession of the
Prospectus covering such Registrable Securities which is current
-4-
<PAGE>
at the time of receipt of such notice. If the Company shall give any such
notice, the Company shall extend the period during which such Registration
Statement shall be maintained effective pursuant to this Registration Rights
Agreement by the number of days in excess of ten (10) business days during the
period from and including the date of the giving of such notice pursuant to
Section 2.1(e) to and including the date when the Holder shall have received the
copies of the supplemented or amended prospectus.
2.4 Expenses of Registration. Except only as specifically
provided herein, all expenses incident to the performance of compliance with
this Registration Rights Agreement by the Company shall be borne by the Company,
regardless of whether the Registration Statement becomes effective, including,
without limitation, (i) all registration and filing fees and expenses (including
filings made with the National Association of Securities Dealers ("NASD"), if
applicable); (ii) fees and expenses (including fees and expenses of counsel) of
compliance with federal securities and state Blue Sky and other Canadian,
provincial or other securities laws; (iii) expenses of printing, messenger and
delivery services, duplication, word processing and telephone incurred by the
Company (but not by the holders of Registrable Securities); (iv) fees and
disbursements of counsel for the Company; (v) all application and filing fees in
connection with listing the Common Stock on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and "cold comfort" letters
required by or incident to such performance). The Company will, in any event,
bear its own internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any person,
including special experts, retained by the Company.
2.5 Indemnification.
(a) Indemnification by Company. To the extent permitted by
law, the Company will indemnify and hold harmless each Holder, the partners,
officers and directors of each Holder and each person, if any, who controls such
Holder within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal,
Canadian, provincial or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendments or supplements thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus (including any
preliminary, final or summary prospectus, amendment or supplement thereto)
included in such Registration Statement or any omission or alleged omission to
state a material fact required to be stated therein or necessary to make any
statement therein, in light of the circumstances under which they were made, not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any Canadian, provincial or state securities
law or any rule or regulation promulgated under the Securities Act, the Exchange
Act or any Canadian, provincial or state securities law in connection with the
offering covered by the Registration Statement; provided, however, that the
Company will not be
-5-
<PAGE>
liable for indemnification in any such case to the extent that any losses,
claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission of a material fact so made in reliance upon and in conformity with
information furnished to the Company by such Holder. The Company will pay to
each such Holder, partner, officer, director or controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action if it is
judicially determined that there was such a violation.
(b) Indemnification by Holder of Registrable Securities. To the
extent permitted by law, each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors, its officers, agents and each person, if any,
who controls the Company within the meaning of the Securities Act against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, agent or controlling person may become subject
under the Securities Act, the Exchange Act or other federal, Canadian,
provincial or state law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will pay as incurred any legal or other expenses reasonably incurred by the
Company or any such director, officer, agent, controlling person or other person
in connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that in no event shall any indemnity under this
Section 2.5(b) exceed the dollar amount of proceeds from the offering received
by such Holder.
(c) Conduct of Indemnification Proceedings. Promptly after
receipt by an indemnified party under this Section 2.5 of notice of the
commencement of any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 2.5, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if, in the
reasonable judgment of any such indemnified party, based upon advice of counsel,
a conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claims (in which case, if the
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such indemnified party; provided, however, that the indemnified
party shall be entitled to elect only one counsel at the expense of the
indemnifying party and such counsel shall be reasonably acceptable to the
indemnifying party). The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if it is
finally determined in a court of competent jurisdiction (which determination is
not subject to appeal)
-6-
<PAGE>
that such failure is materially prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.5, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.5. No
indemnifying party shall be liable for any settlement of any claim or action
effected without its written consent.
(d) Contribution. If the indemnification provided for in this
Section 2.5 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, that in no event shall any contribution by
a Holder hereunder exceed the dollar amount of proceeds from the offering
received by such Holder.
(e) Survival; Settlement. The obligations of the Company and
Holders under this Section 2.5 shall survive completion of any offering of
Registrable Securities in a registration statement and the termination of this
Registration Rights Agreement. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation.
3. RULE 144
The Company covenants that it will file the reports require to be filed by
it (if so required) under the Securities Act and the Exchange Act and the Rules
and Regulations adopted by the SEC thereunder in a timely manner and, if at any
time the Company is not required to file such reports, it will, upon the request
of any Holder of Registrable Securities, make publicly available other
information so long as necessary to permit sales pursuant to Rule 144 under the
Securities Act. The Company further covenants that it will take such further
action as any Holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act pursuant to the
exemptions provided by Rule 144 under the Securities Act. Upon the request of
any Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such information
requirements.
-7-
<PAGE>
4. MISCELLANEOUS
4.1 Governing Law. This Registration Rights Agreement shall be
governed by and construed under the laws of the State of California as applied
to agreements among California residents entered into and to be performed
entirely within California.
4.2 Survival. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby.
4.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
Permitted Assignee of Registrable Securities from time to time. A "Permitted
Assignee" shall mean (i) with respect to any Investor, any other person directly
or indirectly controlling or controlled by or under direct or indirect, common
control with such Investor, (ii) the spouse, sibling, child, step-child,
grandchild, niece, nephew or parent of the Investor, or the spouse thereof, and
(iii) any transferee or assignee of not less than 50,000 shares of Registrable
Securities (as presently constituted and subject to subsequent adjustment for
stock splits, stock dividends, reverse stock splits, and the like). The Company
may not assign the rights or obligations hereunder without the prior written
consent of each Holder of Registrable Securities.
4.4 Entire Agreement. This Registration Rights Agreement, including
any exhibits hereto, the Subscription Agreement and the other documents
delivered pursuant thereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.
4.5 Severability. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
4.6 Amendment and Waiver. The provisions of this Registration Rights
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that Sections 2.1 and 2.5 shall not be amended,
modified or supplemented, and waivers or consents to departures from this
proviso may not be given, unless the Company has obtained the written consent of
each Holder of the then outstanding Registrable Securities.
4.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Registration Rights Agreement
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or
-8-
<PAGE>
any acquiescence therein, or of any similar breach, default or noncompliance
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character on any Holder's part of any breach, default or
noncompliance under the Agreement or any waiver on such Holder's part of any
provisions or conditions of this Registration Rights Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Registration Rights Agreement, by law,
or otherwise afforded to Holders, shall be cumulative and not alternative.
4.8 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed effectively
given: (a) upon personal delivery to the party to be notified, (b) when sent by
confirmed facsimile if sent during normal business hours of the recipient; if
not, then on the next business day, (c) upon receipt when sent by first-class
registered or certified mail, return receipt requested, postage prepaid, or (d)
upon receipt after deposit with a nationally recognized overnight express
courier, postage prepaid, specifying next day delivery with written verification
of receipt. All communications shall be sent to the party to be notified at the
address as set forth below or at such other address as such party may designate
by ten (10) days advance written notice to the Company. All communications
shall be addressed as follows:
(a) if to the Company, to:
FIRSTQUOTE INC.
12, Ave des Morgines
1213 Petit-Lancy 1
Geneva, Switzerland
Telephone: 011 41 22 879 0879
Facsimile: 011 41 22 879 0880
Attention: Chief Executive Officer
with a copy so mailed to:
OPPENHEIMER WOLFF & DONNELLY LLP
500 Newport Center Drive, Suite 700
Newport Beach, California 92660
Telephone: (949) 823-6000
Facsimile: (949) 823-6040
Attention: Daniel K. Donahue
(b) if to the Investors, at the address as set forth on the
Counterpart Execution Page of this Registration Rights Agreement,
4.9 Attorneys' Fees. In the event that any dispute among the parties
to this Registration Rights Agreement should result in litigation, the
prevailing party in such dispute shall be entitled to recover from the losing
party all fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Registration Rights Agreement, including
without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
-9-
<PAGE>
4.10 Securities Held by the Company or its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than the Holders or subsequent Holders of Registrable Securities if such
Holders or subsequent Holders are deemed to be such affiliates solely by reason
of their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
4.11 Titles and Subtitles. The titles of the sections and
subsections of this Registration Rights Agreement are for convenience of
reference only and are not to be considered in construing this Registration
Rights Agreement.
4.12 Counterparts. This Registration Rights Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument.
If this Registration Rights Agreement is satisfactory to you, please
so indicate by signing a counterpart execution page to this Registration Rights
Agreement and a Registration Statement Questionnaire and return such counterpart
and questionnaire to the Company whereupon subject to the Company's acceptance
of your subscription, this Registration Rights Agreement will become binding
between us in accordance with its terms.
FIRSTQUOTE INC.,
a Delaware corporation
By: /s/Neil Gibbons
---------------------------
Neil Gibbons
Chief Executive Officer
-10-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
COUNTERPART EXECUTION PAGE
By signing below, the undersigned agrees to the terms of the FirstQuote
Inc. Registration Rights Agreement.
INVESTOR:
____________________________________
By:_________________________________
Name:
Title:
Address:
Facsimile:
REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
<PAGE>
Appendix I
FIRSTQUOTE INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Please state your or your organization's name exactly as it should
appear in the Registration Statement:
___________________________________________
2. Please provide the following information, as of ________________,2000:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
Number of Shares that you are purchasing and Number of Shares of Common Shares that you
seek to include in the Registration Statement: already beneficially own or that you are
purchasing and do NOT seek to include in the
Registration Statement:
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates?
Yes _____ No _____
If yes, please indicate the nature of any such relationships:_____________
_______________________________________________________________________________
INVESTOR:
__________________________________
By:_______________________________
Print Name:_______________________
Title:____________________________
The foregoing constitutes the only information furnished to the Company for the
purpose of Section 2.5(b) of the Registration Rights Agreement.
<PAGE>
EXHIBIT 21.1
The Registrant has three subsidiaries, FirstQuote SA, a Swiss corporation,
FirstQuote Limited, an English corporation, and FirstQuote Stockdata BV, a Dutch
corporation.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,093,631
<SECURITIES> 0
<RECEIVABLES> 727,050
<ALLOWANCES> 110,882
<INVENTORY> 0
<CURRENT-ASSETS> 2,520,407
<PP&E> 2,864,589
<DEPRECIATION> 1,330,489
<TOTAL-ASSETS> 7,361,616
<CURRENT-LIABILITIES> 3,392,742
<BONDS> 0
0
5,912
<COMMON> 6,423
<OTHER-SE> 3,927,361
<TOTAL-LIABILITY-AND-EQUITY> 7,361,615
<SALES> 1,778,459
<TOTAL-REVENUES> 1,778,459
<CGS> 0
<TOTAL-COSTS> 7,359,557
<OTHER-EXPENSES> 1,259,268
<LOSS-PROVISION> 88,875
<INTEREST-EXPENSE> 25,656
<INCOME-PRETAX> (6,840,367)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,840,367)
<EPS-BASIC> (1.12)
<EPS-DILUTED> (1.12)
</TABLE>
