<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1999
REGISTRATION NO. 333-80335
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
PCQUOTE.COM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7375 36-4284139
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) No.)
</TABLE>
300 SOUTH WACKER DRIVE, SUITE 300
CHICAGO, ILLINOIS 60606
(312) 913-2800
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
JIM R. PORTER, CHIEF EXECUTIVE OFFICER
PCQUOTE.COM, INC.
300 SOUTH WACKER DRIVE, SUITE 300
CHICAGO, ILLINOIS 60606
(312) 913-2800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
DONALD E. FIGLIULO, ESQ. NEIL GOLD, ESQ.
Wildman, Harrold, Allen & Dixon Fulbright & Jaworski L.L.P.
225 West Wacker Drive 666 Fifth Avenue
Chicago, Illinois 60606-1229 New York, New York 10103
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION - JULY 19, 1999
PROSPECTUS
- --------------------------------------------------------------------------------
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
PCQUOTE.COM MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
7,750,000 Shares
[LOGO]
Common Stock
- -------------------------------------------------------------------------
PCQuote.com, Inc. is offering 5,800,000 shares and HyperFeed Technologies, Inc.,
the selling stockholder, is offering 1,950,000 shares of common stock in an
initial public offering. Prior to this offering, HyperFeed Technologies owned
98.7% of the outstanding shares of our common stock.
PCQuote.com is an Internet-based provider of real-time financial data, timely
business news and comprehensive tools for researching and analyzing financial
information.
Prior to this offering, there has been no public market for our common stock. It
is anticipated that the public offering price will be between $12.00 and $14.00
per share. The shares of PCQuote.com will be included for quotation in the
Nasdaq National Market under the symbol "PCQT".
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price............................................ $ $
Underwriting discounts and commissions........................... $ $
Proceeds, before expenses, to PCQuote.com........................ $ $
Proceeds to selling stockholder.................................. $ $
</TABLE>
SEE "RISK FACTORS" ON PAGES 7 TO 20 FOR FACTORS THAT SHOULD BE CONSIDERED BEFORE
INVESTING IN THE SHARES OF PCQUOTE.COM.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
The underwriters may, under certain circumstances, purchase up to 387,500
additional shares from PCQuote.com and up to 775,000 additional shares from the
selling stockholder at the public offering price, less underwriting discounts
and commissions. Delivery and payment for the shares will be on , 1999.
PRUDENTIAL SECURITIES
U.S. BANCORP PIPER JAFFRAY
FAC/EQUITIES
E*OFFERING
,1999
<PAGE>
[Pictures of the WWW.PCQUOTE.COM, MARKETSMART-REAL.PCQUOTE.COM and WWW.CNNFN.COM
Web sites and PCQuote 6.0 RealTick]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................ 3
Risk Factors...................... 7
Use of Proceeds................... 21
Dividend Policy................... 21
Dilution.......................... 22
Capitalization.................... 23
Pro Forma Financial Information... 24
Selected Financial Data........... 26
Forward Looking Statements........ 27
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 28
Business.......................... 35
<CAPTION>
PAGE
----
<S> <C>
Management........................ 46
Principal and Selling
Stockholders.................... 52
Certain Transactions.............. 54
Description of Capital Stock...... 61
Shares Eligible for Future Sale... 63
Underwriting...................... 64
Legal Matters..................... 66
Experts........................... 66
Where You Can Find Additional
Information..................... 66
Index to Financial Statements..... F-1
</TABLE>
- --------------------------------------------------------------------------------
The terms "PCQuote.com", "we", "our" and "us" refer to PCQuote.com, Inc.
unless the context suggests otherwise. The term "you" refers to a prospective
investor.
PCQuote and PCQuote.com are two of our service marks. This prospectus also
includes trademarks and trade names of other companies.
- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of these securities in any jurisdiction where the offer or sale
is not permitted. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the front cover of
this prospectus.
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information that
investors should consider before investing in the common stock of PCQuote.com.
We have no operating history as a stand-alone entity and have limited revenues
and a history of losses. Investors should read the entire prospectus carefully.
PCQUOTE.COM
PCQuote.com is an Internet-based provider of real-time financial data,
timely business news and comprehensive tools for researching and analyzing
financial information. Many existing online financial or business Web sites
focus on financial news, quotes or analysis. We combine all of these features in
a comprehensive portfolio of services targeted at investors. Our investor
service offerings consist of two Web sites, WWW.PCQUOTE.COM and
MARKETSMART-REAL.PCQUOTE.COM, and two Internet-enabled desktop applications,
PCQuote 6.0 RealTick and PCQuote Orbit. Our services provide access to
sophisticated and dynamic financial information that allows users to make
informed investment decisions. We also offer several business-to-business
services that enable clients to present financial data and information on their
Web sites or desktop applications.
WWW.PCQUOTE.COM is our free Web site that provides access to delayed quotes,
news, research and analytical tools. Through our strategic relationship with
CNNFN, we provide users of our Web sites with access to timely news headlines
and stories published by CNNFN. WWW.PCQUOTE.COM serves as the primary marketing
and promotions engine for the rest of the services we provide. According to
@plan, our demographics provider, the number of unique visitors to our
WWW.PCQUOTE.COM Web site grew from approximately 796,000 per month in their
Winter 1999 report (covering the months of July to September 1998) to
approximately 987,000 per month in their Summer 1999 report (covering the months
of January to March 1999). According to @plan, our Web sites attract investors
who are more affluent and more likely to use the Web for online shopping than
visitors to many other financially-oriented Web sites. This results in user
demographics that are more attractive to potential advertisers.
MARKETSMART-REAL.PCQUOTE.COM is our subscription-based Web site that
provides real-time, snapshot market quotations, along with all of the news,
research and analytical tools that are available on WWW.PCQUOTE.COM. Because of
its ability to provide real-time quotes, this site is targeted toward a more
active investor than is WWW.PCQUOTE.COM. MARKETSMART-REAL.PCQUOTE.COM uses
sparse graphics, text indices and creative advertising to speed download times
and give users faster access to the site's content.
We offer two Internet-enabled desktop services, PCQuote 6.0 RealTick and
PCQuote Orbit, that provide automatically updated quotes, commonly known as
streaming quotes, and a variety of real-time analytical tools. PCQuote 6.0
RealTick provides our subscribers with a professional-quality, NASDAQ level II,
real-time quote system that offers reliable, streaming real-time market data for
all North American equities and options. PCQuote 6.0 RealTick is online
trading-enabled and offers order execution capabilities through participating
broker-dealers. PCQuote Orbit, which we expect to launch in Summer 1999,
provides subscribers with streaming, real-time market quotations delivered via
an Internet-enabled desktop application.
3
<PAGE>
OUR STRATEGY
Our objective is to strengthen our position as an Internet-based provider of
real-time financial data, timely business news and comprehensive tools for
researching and analyzing financial information. We intend to achieve our
objective by pursuing the following key strategies:
- build brand awareness to attract additional traffic
- capitalize on user demographics attractive to advertisers
- create up-sell opportunities through our service offerings
- leverage strategic relationships with providers of global financial news
and other content and services
- expand our Web sites as comprehensive financial information destinations
- maintain our superior technological platform
To date, we have not spent significant amounts marketing our services to a
broad audience. We intend to use approximately $8 million of our net proceeds
from this offering to aggressively market and promote our Web sites and other
service offerings in a variety of traditional and online media. We believe that
our marketing efforts will enable us to significantly grow our advertising base
by capitalizing on the attractive demographics of our users. These marketing
efforts are also intended to build brand awareness, increase traffic to our Web
sites and create a source of potential subscribers for our services. For the
three months ended March 31, 1999, we derived approximately 88.6% of our
revenues from the sale of subscriptions to our services and approximately 7.6%
from advertising. We believe that our varied service offerings provide us with
the opportunity to derive increased revenues from multiple revenue sources,
including subscriptions, advertising and business-to-business services.
ABOUT US
Our WWW.PCQUOTE.COM Web site was first established in July 1995 by our
parent, PC Quote, Inc., a provider of securities market data. PC Quote, which
was founded in 1983, approved a change of its corporate name to Hyperfeed
Technologies, Inc., in April 1999. This name change was approved by its
stockholders at its annual meeting held on June 16, 1999. We operated as part of
HyperFeed Technologies until we were incorporated in March 1999 as a
wholly-owned subsidiary of HyperFeed Technologies.
Prior to the consummation of this offering, HyperFeed Technologies will
formally separate the business of PCQuote.com and our associated assets and
liabilities from HyperFeed Technologies' other businesses and operations. As a
separate entity, we believe we will be afforded more flexibility in considering
opportunities that are available to Internet businesses. We will enter into a
number of agreements with HyperFeed Technologies providing for our formal
separation from our parent and governing various interim and ongoing
relationships between us and HyperFeed Technologies. These agreements will
provide for the contribution to us of intellectual property and other assets
relating to our business, the licensing of data feed from HyperFeed
Technologies, maintenance by HyperFeed Technologies of our PCQuote Orbit service
and various support services.
Our address is 300 South Wacker Drive, Suite 300, Chicago, Illinois 60606
and our telephone number is (312) 913-2800. Our Web sites' addresses are
WWW.PCQUOTE.COM and MARKETSMART-REAL.PCQUOTE.COM. The information on our Web
sites is not a part of this prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Shares offered by PCQuote.com............... 5,800,000 shares
Shares offered by the selling stockholder... 1,950,000 shares
Total shares outstanding after this
offering.................................. 15,728,948 shares
Use of proceeds by PCQuote.com.............. Sales and marketing, acquisition of content,
purchase of new systems and technologies,
hiring of additional employees, repayment of
short-term liabilities and general corporate
purposes, including working capital.
Proposed Nasdaq National Market symbol...... PCQT
</TABLE>
You should be aware that the total shares outstanding after this offering do
not include:
- 386,842 shares subject to an outstanding warrant with an aggregate
exercise price of $.40;
- 1,538,600 shares reserved for issuance under options that we may grant
under our 1999 Combined Incentive and Non-statutory Stock Option Plan, of
which options to purchase shares will be granted as of the date of
this prospectus with an exercise price equal to the initial public
offering price; and
- 387,500 shares issuable by us upon exercise of the underwriters'
over-allotment options from us.
The shares offered by the selling stockholder do not include 775,000 shares
that may be sold upon exercise of the underwriters' over-allotment option from
the selling stockholder.
Unless otherwise specified, the information in this prospectus reflects the
9,800-for-1 stock split of our common stock as of , 1999.
RISK FACTORS
You should consider the risk factors before investing in our common stock
and the impact from various events that could adversely affect our business.
5
<PAGE>
SUMMARY FINANCIAL DATA
The following tables summarize the financial data for our business and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Pro Forma Financial
Information" and our financial statements and related notes appearing elsewhere
in this prospectus. The financial data are presented as if our business had been
a separate entity since we commenced operations in July 1995.
The As Adjusted column in the Balance Sheet Data table below reflects our
receipt of the estimated net proceeds of $68.7 million from our sale of
5,800,000 shares of common stock in this offering at an assumed initial public
offering price of $13.00 per share. The As Adjusted column also reflects the
issuance to CNNFN on April 12, 1999 of a warrant to purchase 515,790 shares of
our common stock and the purchase by CNNFN on April 29, 1999, of 128,948 shares
of our common stock upon exercise of the vested portion of this warrant.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------- -----------------------------------
1998 1999
------------------------ ------------------------
1995 1996 1997 ACTUAL PRO FORMA(2) 1998 ACTUAL PRO FORMA(2)
--------- --------- --------- --------- ------------- --------- --------- -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................... $ -- $ 973 $ 4,763 $ 9,912 $ 9,912 $ 1,898 $ 3,259 $ 3,259
Total operating expenses.... 70 2,096 3,850 5,027 5,665 1,253 1,268 1,468
Loss from operations........ (70) (1,936) (3,288) (1,658) (2,137) (747) (283) (465)
Net loss.................... $ (70) $ (1,962) $ (4,572) $ (2,162) $ (2,641) $ (850) $ (288) $ (470)
--------- --------- --------- --------- ------------- --------- --------- -------------
--------- --------- --------- --------- ------------- --------- --------- -------------
Pro forma basic and diluted
net loss per share........ $ (.22) $ (0.27) $ (.09) $ (.03) $ (0.05)
--------- ------------- --------- ---------
--------- ------------- --------- ---------
Pro forma shares used in the
calculation of basic and
diluted net loss per
share(1).................. 9,800,000 9,800,000 9,800,000 9,800,000 9,800,000
--------- ------------- --------- --------- -------------
--------- ------------- --------- --------- -------------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................................. $ -- $ 67,368
Total assets............................................................................... 3,575 76,443
Long-term liabilities...................................................................... -- --
Total stockholders' equity................................................................. 919 75,141
</TABLE>
(1) Pro forma shares used in the calculation of basic and diluted net loss per
share reflects shares outstanding as of March 31, 1999 as if they were
outstanding for all periods presented.
(2) Reflects (a) the impact of the agreements with Hyperfeed Technologies and
Townsend Analytics as if such agreements were in place beginning January 1,
1998 and (b) additional executive compensation payable to four officers as
if these officers had been employed by the Company commencing January 1,
1998. See "Pro Forma Financial Information."
6
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, in addition to the
other information included in this prospectus, before purchasing shares of our
common stock. Each of these risk factors could adversely affect our business,
financial condition and results of operations, as well as adversely affect the
value of an investment in our common stock. This investment involves a high
degree of risk.
RISKS RELATED TO OUR BUSINESS
WE HAVE NO OPERATING HISTORY AS AN INDEPENDENT ENTITY.
We have yet to conduct our business as an independent entity. Our financial
statements are reported on a basis as if we had been separated from HyperFeed
Technologies during the periods reported. A purchaser of our common stock must
consider the risks, expenses and difficulties we may encounter as an early stage
company in the new and rapidly evolving Web-based financial data and business
information market. Some of these risks relate to our ability to:
- anticipate and adapt to the changing Internet market;
- attract more subscribers and advertisers;
- implement our sales and marketing initiatives;
- attract, retain and motivate qualified personnel;
- respond to actions taken by our competitors; and
- integrate acquired technologies, products and services.
WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT FUTURE LOSSES BECAUSE WE
ANTICIPATE THAT OUR OPERATING EXPENSES WILL GROW MORE QUICKLY THAN OUR
REVENUES.
We have incurred operating losses in each fiscal quarter reported. As of
March 31, 1999, we had incurred aggregate accumulated losses of approximately $9
million. We expect operating losses and negative cash flows to continue for the
foreseeable future. We intend to significantly increase our operating expenses
and make additional capital investments in our business. We will need to
generate significant revenues to achieve and maintain profitability and we
cannot assure you that we will be able to do so. If we are able to become
profitable, we cannot assure you that we will be able to sustain or increase our
profitability on a quarterly or annual basis.
IF WE ARE UNABLE TO INCREASE OUR SUBSCRIBER BASE, WE MAY NOT ACHIEVE
PROFITABILITY.
For the three months ended March 31, 1999, we derived approximately 88.6% of
our revenues from the sale of subscriptions to our services. Our future success
is highly dependent on our ability to increase the number of subscribers for our
services. The number of Internet users willing to subscribe to real-time
financial data and analytical tools may not increase. If the market for
subscription-based, real-time financial data and analytical tools develops
slower than we expect, our business, financial condition and results of
operations could be materially and adversely affected. Any significant downturn
or other negative development with respect to activity in financial exchanges
and markets could significantly reduce the number of subscribers for our
services. In addition, we presently offer a portion of our content for free. We
may increase the amount of content or services offered for free to increase
traffic to our Web sites. Increased free content or services could reduce the
number of persons willing to pay for our subscription services. Our
business-to-business subscription contracts typically have a one-year term and
typically may be canceled on either 30 days' or 60 days' notice. Our
MARKETSMART-REAL.PCQUOTE.COM and PCQuote 6.0 RealTick subscription contracts
typically have either a monthly or one-year term and may be canceled on 30 days'
notice.
7
<PAGE>
FAILURE TO CONTINUE TO ADD CONTENT THAT ATTRACTS OUR TARGET AUDIENCE COULD
CAUSE OUR AUDIENCE SIZE TO DECREASE OR CHANGE THE DEMOGRAPHICS OF OUR
AUDIENCE.
Our future success depends on our ability to continue to add content that
satisfies the financial and investing information needs of our target audience.
If our content does not satisfy the needs of our users, then the size of our
audience could decrease or the demographic characteristics of our audience could
change. Either of these results would adversely affect our ability to attract
advertisers. Our ability to expand and enhance our Web sites depend on several
factors, including the following:
- technical expertise of our production and design staff;
- ability to enter into additional strategic relationships; and
- access to third party content.
IF WE FAIL TO INCREASE THE NUMBER OF VISITORS TO OUR WWW.PCQUOTE.COM WEB
SITE, WE WILL NOT BE ABLE TO INCREASE OUR ADVERTISING REVENUE.
We expect that the portion of our revenues derived from advertising will
grow. We plan to aggressively promote our services in print, broadcast and
online media to build traffic to our Web sites. Increasing the number of
visitors to our WWW.PCQUOTE.COM Web site is critical to selling advertising and
generating larger revenues. If we cannot increase the size of our audience, then
we may be unable to attract new or retain existing advertisers. To attract and
retain a demographically desirable audience, we must do the following:
- offer content that satisfies the financial and investment needs of our
audience;
- build a loyal community of users;
- conduct effective marketing campaigns to attract new users;
- develop new and maintain existing advertising and business-to-business
relationships with other Web sites;
- update and enhance the features of our Web sites; and
- increase awareness of the "PCQuote" brand.
Our failure to achieve one or more of these objectives could adversely
affect our business. We cannot assure you that we will be successful in these
efforts.
We may not be able to build a loyal community of users of WWW.PCQUOTE.COM.
We believe community features, such as online discussion forums, will encourage
users to interact with each other and with us and will help us to retain
actively engaged users. The concept of developing a loyal community of users on
a Web site is unproven. If developing this type of community is not successful,
then it may be more difficult to increase the size of our audience.
We also depend on establishing and maintaining advertising and
business-to-business relationships with high-traffic Web sites to increase our
audience. There is intense competition for placement on these sites, and we may
not be able to enter into these types of relationships on commercially
reasonable terms or at all. Even if we enter into relationships with other Web
sites, they may not attract significant numbers of users and we may not obtain
additional users from these relationships.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE, ADVERSELY AFFECTING THE PRICE
OF OUR COMMON STOCK.
Our quarterly operating results may fluctuate significantly as a result of a
variety of factors, including:
- the number of individuals who use the Web, which has not historically been
subject to seasonal fluctuations;
8
<PAGE>
- the number of visitors to our Web sites, which can and historically has
fluctuated significantly as a result of financial market activity and
business and financial news event;
- increases in fees that we are required to pay to financial exchanges for
quotes and other financial information;
- changes in rates paid for Web advertising resulting from competition or
other factors;
- the amount and timing of costs related to our marketing efforts;
- fees we may pay for advertising, business-to-business or content
agreements;
- our ability to attract and retain advertisers;
- new services or Web sites introduced by us or our competitors; or
- technical difficulties or system downtime affecting the Web generally or
the operation of our Web sites specifically.
In addition to creating potential fluctuations in quarterly results, a
number of the factors listed above may also have an impact on the long-term
viability of our business. These factors include the number of visitors to our
Web sites, our ability to attract advertisers and new services or Web sites
introduced by our competitors.
We believe that quarter-to-quarter comparisons of our results of operations
are not necessarily meaningful and should not be relied upon as indications of
future performance. In addition, it is possible that in a particular quarter our
operating results may be below the expectations of market analysts and
investors. This could result in the price of our common stock being materially
and adversely affected.
OUR REVENUES MAY NOT BE ABLE TO KEEP PACE WITH OUR EXPENSES IN THE FUTURE.
To attract and retain a larger audience, we plan to significantly increase
our expenditures for marketing our "PCQuote" brand and for content, technology
and infrastructure development. Many of these expenditures are planned or
committed in advance in anticipation of future revenues. Our cost structure
could change dramatically as we increasingly operate independently from
HyperFeed Technologies. If our revenues are lower than expected, we may not be
able to reduce spending accordingly. We believe brand awareness will be critical
to increasing our audience. If we do not increase our revenues as a result of
our branding and other marketing efforts or if we otherwise fail to promote our
brand successfully, our business, financial condition and results of operations
could be materially and adversely affected.
THERE IS INTENSE COMPETITION WITH RESPECT TO WEB SITES PROVIDING BUSINESS
AND FINANCIAL NEWS AND INFORMATION.
Many Web sites compete for consumers' and advertisers' attention and
spending. The competition is particularly intense with respect to Web sites in
the business and financial news and information areas. New competitors may
emerge and rapidly acquire significant market share. For example, Dow Jones
recently announced that it will introduce a free Web site that will offer
business and financial information. Increased competition could result in price
reductions for subscription services or advertising, reduced margins or loss of
market share. Any of these could materially and adversely affect our business,
financial condition and results of operations.
We compete for subscribers, advertisers and content providers with many
types of companies, including:
- Web sites targeted to business, finance and investing needs, such as
CBS.Marketwatch.com, TheStreet.com, The Motley Fool and Quote.com;
9
<PAGE>
- Web portals, such as EXCITE.COM, INFOSEEK.GO.COM, LYCOS.COM, YAHOO.COM and
other high-traffic Web sites that offer quotes, financial news and/or
other programming, as well as links to business-and finance-related Web
sites;
- proprietary online services, such as America Online and Microsoft Network,
that provide access to financial and business-related content and
services;
- online brokerage firms, such as Charles Schwab and E*TRADE, many of which
provide financial and investment news and information;
- providers of terminal-based financial news and data, such as Bloomberg
Business News, Reuters News Service, Dow Jones Markets and Bridge News
Service; and
- publishers and distributors of traditional media, including television,
radio and print, such as CNNFN, CNBC, Marketplace on National Public Radio
and The Wall Street Journal.
MANY OF OUR EXISTING OR POTENTIAL COMPETITORS HAVE GREATER RESOURCES THAN
US.
Many of our existing competitors, as well as our potential competitors, have
longer operating histories on the Web, greater name recognition, larger customer
bases, higher amounts of user traffic and significantly greater financial,
technical and marketing resources than we do. These competitors may also be able
to
- undertake more extensive marketing campaigns;
- adopt more aggressive pricing policies;
- engage in more extensive research and development;
- make more attractive offers to existing and potential employees, strategic
partners, advertisers and content providers;
- respond more quickly to new or emerging technologies and changes in Web
user requirements; and
- develop services that are superior to or achieve greater market acceptance
than our services.
IF WE ARE UNABLE TO ESTABLISH AND MAINTAIN RELATIONSHIPS WITH PROVIDERS OF
GLOBAL FINANCIAL NEWS AND OTHER CONTENT, OUR ABILITY TO INCREASE TRAFFIC TO
OUR WEB SITES WILL BE ADVERSELY AFFECTED.
Our business strategy depends on establishing and maintaining relationships
with providers of global financial news and other content. There is intense
competition for these types of relationships. Many companies from whom we wish
to acquire content also offer services that compete with our services. For
example, CNNFN, which provides global financial news to our Web site, offers
several features, such as delayed quotes and analytical tools, on its Web site
that are similar to services provided by us. In addition, QuickenFN, a division
of CNNFN, is a direct competitor of ours. CNNFN may attempt to divert our
customers to its services or may decide not to renew its agreement with us for
competitive reasons. This could have a material and adverse effect upon our
business, financial condition and results of operations. We may not be able to
enter into the relationships that we pursue or maintain our current
relationships on commercially reasonable terms, or at all. We cannot be sure
that any of these relationships will result in increased use of our Web sites or
other services. To the extent we enter into a relationship to build traffic to
our Web sites, any decline in the popularity of the other party's Web site would
adversely affect our ability to increase traffic to our sites.
WE RELY ON A SOFTWARE LICENSING AGREEMENT THAT COULD BE TERMINATED OR
ALLOWED TO EXPIRE.
The software we use to offer our PCQuote 6.0 RealTick service is licensed to
us from Townsend Analytics. For the year ended December 31, 1998, we derived
78.2 % of our revenues, and for the
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three months ended March 31, 1999, we derived 86.8% of our revenues, from
subscriptions to our PCQuote 6.0 RealTick service or from private label versions
of that service. Accordingly, if our license from Townsend Analytics were
terminated or if we were for any reason unable to make use of the licensed
software, it would have a material and adverse effect upon our business,
financial condition and results of operations. If any upgrade is made by
Townsend Analytics to the licensed software, they are required to make the same
upgrade available to us. Townsend Analytics is not required to make changes in
the licensed software to assist us in responding to changes in the industry or
the introduction of new or improved competitive services. Any resulting
inability on our part to enhance or otherwise modify our PCQuote 6.0 RealTick
service in response to these developments could have a material and adverse
effect on our business, financial condition and results of operations. Our
license agreement with Townsend Analytics is for an initial term ending December
4, 2000 and provides for automatic one-year renewals unless either party
delivers a notice of nonrenewal 90 days prior to the termination date. Townsend
Analytics offers a similar service that may compete with our PCQuote 6.0
RealTick service. Townsend Analytics may attempt to divert our customers to its
service or may terminate the agreement or allow it to expire for competitive
reasons, which would have a material and adverse effect upon our business,
financial condition and results of operations.
WE MAY NOT BE ABLE TO EMPLOY THE ADDITIONAL PERSONNEL WE NEED TO CONDUCT AND
GROW OUR BUSINESS.
As a result of our separation from HyperFeed Technologies and our
anticipated growth, we need to employ additional technical and other personnel
to perform functions for us that were previously handled by employees of
HyperFeed Technologies. We believe that our future success will depend upon our
ability to identify, attract, hire, train, motivate and retain highly-skilled
technical, managerial, engineering, marketing, sales and customer service
personnel. Competition for qualified computer programming and other technical
personnel is particularly intense. At times we have experienced difficulties in
attracting new technical personnel. We may not be successful in attracting,
assimilating or retaining a sufficient number of qualified personnel to conduct
our business in the future. The failure to do so could have a material adverse
effect on our business, financial condition and results of operations.
WE MAY NOT BE ABLE TO ADEQUATELY MANAGE OUR EXPECTED GROWTH.
We have experienced rapid growth in our operations. As of June 30, 1999 we
had a total of 49 full-time employees, as compared to 37 full-time employees as
of March 31, 1998 . We expect that the number of our employees will continue to
increase for the foreseeable future. Our rapid growth has placed, and our
anticipated future growth will continue to place, a significant strain on our
managerial, operational and financial resources. Jim R. Porter, our Chief
Executive Officer and Chairman of our Board of Directors, will devote only
one-half of his business time to our business. This will place further strain on
our managerial resources. We will have to implement and improve operational and
financial systems, procedures and managerial controls. We cannot assure you that
we have made adequate allowances for the costs and risks associated with our
expected expansion. Our systems, procedures and managerial controls may not be
adequate to support our operations. We may not be able to successfully offer and
expand our services. If we are unable to successfully manage this growth, our
business, financial condition and results of operations could be materially and
adversely affected.
WE RELY HEAVILY ON OUR EXECUTIVE OFFICERS AND KEY EMPLOYEES.
Our success is highly dependent upon the efforts and abilities of our
executive officers and other key employees, including Jim R. Porter, our Chief
Executive Officer and Chairman of our Board of Directors, Timothy K. Krauskopf,
our President and Chief Operating Officer, Andrew N. Peterson, our Chief
Financial Officer and Secretary, Stephen F. Rawls, our Vice President,
Interactive Operations, David C. Kahl, our Vice President of Sales and
Marketing, Thomas F. Cunningham, our Vice President of Technical Services, and
Matthew M. Rees, our Director of Web Services. The loss of services of one
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or more of our executive officers or key employees could have a material and
adverse effect upon our business, financial condition and results of operations.
Two of our executive officers, Timothy K. Krauskopf, our President and Chief
Operating Officer, and Andrew N. Peterson, our Chief Financial Officer, joined
us in April 1999. Thomas F. Cunningham, our Vice President of Technical
Services, joined us in June 1999, and David C. Kahl, our Vice President of Sales
and Marketing joined us in July 1999. These individuals have not previously
worked together or with the other members of our management team. We cannot be
sure that our new management team will be able to successfully manage our
growth.
OUR CHIEF EXECUTIVE OFFICER WILL DEVOTE ONLY ONE-HALF OF HIS BUSINESS TIME
TO US, LIMITING HIS AVAILABILITY TO US.
Mr. Porter, our Chief Executive Officer and Chairman of our Board of
Directors, will devote one-half of his business time to our business and the
other half to the business of HyperFeed Technologies. This limitation on Mr.
Porter's availability could impact our ability to expand our operations and
develop our business.
AN INCREASE IN USERS MAY STRAIN OUR SYSTEMS AND CAUSE THEM TO MALFUNCTION.
News, financial developments or a significant growth in average trading
volume from current levels could cause an increase in the use of our services,
materially and adversely affecting our ability to deliver services.
Historically, we have experienced an increase in the number of visitors to our
Web sites when these types of events have occurred. We are seeking to
significantly grow our user base. Our infrastructure must be able to accommodate
an increasing volume of traffic and deliver the real-time quotes and frequently
updated news that our subscribers expect. Our infrastructure has in the past,
and may in the future, experience slower response times due to an increase in
the number of users or other problems. For example, in one instance, access to
our service was interrupted for less than one hour due to the loss of our
Internet connection. These problems could cause us to lose a portion of our
customer base and materially and adversely affect our business, financial
condition and results of operations.
We depend on information providers, including HyperFeed Technologies, to
provide us with information and data on a timely basis. Our services could
experience disruptions or interruptions due to a failure or delay in the
transmission of this information. We are currently prohibited under the terms of
our agreement with HyperFeed Technologies from providing for a back-up data feed
source for our PCQuote Orbit service during the term of this agreement. This
prohibition could exacerbate complications arising from any interruption of data
feed services from HyperFeed Technologies for this service. In addition, our
users depend on Internet service providers, online service providers and other
Web site operators for access to our services. Many of these providers and
operators have experienced outages or service delays in the past, and could
experience outages, delays and other difficulties due to failures unrelated to
our systems. These types of occurrences could cause users to perceive our
products as not functioning properly and cause them to use other services to
obtain financial data or analytical tools.
THE FAILURE OF OUR SYSTEMS COULD HARM OUR REPUTATION AND REDUCE OUR REVENUE.
Our ability to provide timely information, current market data and
continuous news updates depends on the efficient and uninterrupted operation of
our computer and communications hardware and software systems. Similarly, our
ability to track, measure and report the delivery of advertisements on our site
depends on the efficient and uninterrupted operation of a third-party system,
Dart by DoubleClick. These systems and operations are vulnerable to damage or
interruption from:
- human error;
- natural disasters;
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- telecommunication failures;
- computer viruses; and
- intentional acts of vandalism and similar events.
We do not have a formal disaster recovery plan. Any system failure that
causes an interruption in our service or a decrease in responsiveness of our Web
sites could result in reduced traffic, reduced revenue and harm to our
reputation, brand and our relations with advertisers. Any disruption in the
Internet access to our Web sites could materially and adversely affect our
business, financial condition and results of operations. Our insurance policies
may not adequately compensate us for any losses that we may incur because of any
failures in our system or interruptions in our delivery of content or services.
IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR FACE A
CLAIM OF INFRINGEMENT BY A THIRD PARTY, WE COULD LOSE OUR INTELLECTUAL
PROPERTY RIGHTS OR BE LIABLE FOR SIGNIFICANT DAMAGES.
We rely primarily on a combination of copyright, trademark and trade secret
law and restrictions on disclosure to protect our intellectual property, such as
our content, source codes, trademarks, trade names and trade secrets. We do not
currently have any registered trademarks or copyrights. When appropriate, we
enter into confidentiality agreements with our employees, consultants and third
parties with whom we enter into business relationships and seek to control
access to and distribution of our proprietary information. Despite our efforts
to protect our intellectual property rights and proprietary information from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our proprietary information. This could result in our losing our intellectual
property rights. We may need to engage in litigation in order to enforce our
intellectual property rights in the future. This litigation could result in
substantial costs and diversion of management and other resources, either of
which could have a material and adverse effect on our business, financial
condition and results of operations.
From time to time, we may be subject to claims by third parties for alleged
infringement of their intellectual property. These claims and any resulting
litigation could subject us to significant liability for damages and could
result in the invalidation of our proprietary rights. Even if we prevail,
litigation could be time-consuming, expensive to defend and result in the
diversion of our time and attention. In the event of a successful claim of
infringement by a third party, we may need to introduce new content or
trademarks, develop non-infringing technology or license the infringed or
similar technology, which may be unavailable on commercially reasonable terms.
Our failure or inability to do so on a timely basis could materially and
adversely affect our business, financial condition and results of operations.
We use licensed technology, such as software from DoubleClick and data and
content from third parties. Because we license some data and content from third
parties, our exposure to copyright infringement actions may increase because we
must rely upon these third parties for information as to the origin and
ownership of the licensed content. The outcome of any litigation between these
licensors and a third party or between us and a third party could lead to
royalty obligations for which we are not indemnified or for which
indemnification is insufficient.
WE MAY NOT BE ABLE TO MAINTAIN EXCLUSIVE RIGHTS TO WEB DOMAIN NAMES RELATING
TO OUR BRAND, WHICH MAY CAUSE CONFUSION AMONG WEB USERS AND DECREASE THE
VALUE OF OUR BRAND NAMES.
We currently hold two Web domain names relating to our brands,
"WWW.PCQUOTE.COM" and "MARKETSMART-REAL.PCQUOTE.COM". Currently, the acquisition
and maintenance of domain names is regulated by governmental agencies and their
designees. The regulation of domain names in the U.S. and in foreign countries
is expected to change in the near future. As a result, we may not be able to
acquire or maintain relevant domain names in all countries in which we conduct
our business. These changes could include the introduction of additional top
level domains, which could cause confusion among Web users trying to locate our
sites. Furthermore, the relationship between regulations governing domain names
and laws protecting trademarks and similar proprietary rights is unclear. We
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may be unable to prevent third parties from acquiring domain names that are
similar to our trademarks. The acquisition of similar domain names by third
parties could cause confusion among Web users attempting to locate our sites and
could decrease the value of our brand names.
WE MAY NOT BE ABLE TO KEEP UP PACE WITH CONTINUING CHANGES IN TECHNOLOGY.
Our market is characterized by rapidly changing technology and frequent
introduction of new Web sites and other service offerings. To be successful, we
must adapt to this rapidly changing environment by continually improving the
performance, features and reliability of our services. We could incur
substantial costs if we need to modify our services or infrastructure or adapt
our technology to respond to these changes. Our business could be materially and
adversely affected if we experience difficulties in introducing new services or
if these new services are not accepted by users. For example, we intend to
introduce additional or enhanced services, such as commentary on options,
e-mailed financial updates and news searches. A delay or failure to address
technological advances and developments or an increase in costs resulting from
these changes could have a material and adverse effect on our business,
financial condition and results of operations.
WE MAY LOSE OUR LARGEST CUSTOMER, A.B. WATLEY, FROM WHICH WE DERIVE A
SIGNIFICANT PORTION OF OUR REVENUES.
Our largest customer, A.B. Watley, a private label redistributor of PCQuote
6.0 RealTick, accounted for 11.1% of our total revenues in 1998 and 15.8% of our
total revenues in the three months ended March 31, 1999. Under the terms of our
license agreement with Townsend Analytics, we will not be able to continue to
receive revenues from this customer after December 21, 1999 without the consent
of Townsend Analytics. This consent can be withheld by Townsend Analytics for
any reason. The loss of our largest customer would have a material and adverse
effect on our business, financial condition and results of operations. The
revenue derived from specific customers and advertisers varies from year to
year. We cannot be sure that a specific large customer or advertiser in one year
will continue to use our services or advertise on our Web sites in a subsequent
year.
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS MAY BE
MATERIALLY AND ADVERSELY AFFECTED IF WE ARE NOT YEAR 2000-COMPLIANT.
We and our subscribers are dependent, to a substantial degree, upon the
proper functioning of our and their computer systems, as well as the computer
systems of our suppliers and service providers. A failure of these computer
systems to correctly recognize dates beyond December 31, 1999 could materially
disrupt our operations or the ability of our subscribers to access our Web sites
or other service offerings. Disruptions, or in the worst case scenario, a
complete failure of all of our services, also may arise as a result of third
parties not being Year 2000-compliant. We do not currently have a contingency
plan in place to adequately deal with a complete failure of all of our services.
Any malfunction in our information technology systems, or those of our suppliers
or major customers, could cause us to incur significant costs and have a
material and adverse effect on our business, financial condition and results of
operations. In addition, we have relied on written representations made by
HyperFeed Technologies regarding the Year 2000-readiness of the information
technology systems contributed to us as part of our separation. We have not
independently assessed, remediated or corrected any Year 2000 risks relating to
these systems.
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RISKS RELATED TO OUR INDUSTRY
OUR SUCCESS DEPENDS ON CONTINUED GROWTH IN USE OF THE INTERNET.
The market for Internet-based delivery of financial data and related
business information is new and rapidly evolving. Our business, financial
condition and results of operations would be materially and adversely affected
if Internet usage does not continue to grow significantly. Internet usage may be
inhibited for a number of reasons, such as:
- inadequate network infrastructure;
- security concerns;
- inconsistent quality of service; and
- inability to provide cost-effective, high-speed service.
Even if Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth. As a result, its performance
and reliability may decline. Web sites and proprietary online services have
experienced interruptions in their service as a result of outages and other
delays. If these outages or delays occur frequently, use of the Internet as a
medium for the exchange of information and for commerce could grow more slowly
or decline.
THE ENACTMENT OF NEW LAWS OR CHANGES IN GOVERNMENT REGULATIONS RELATING TO
THE INTERNET COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS.
Due to the increasing popularity of the Internet, it is possible that laws
or regulations may be adopted regarding the Internet, any of which could
materially and adversely affect our business. These laws may relate to issues
such as user privacy, pricing, taxation and the characteristics and quality of
products and services. For example, the Telecommunications Act of 1996 sought to
prohibit the transmission of certain types of information and content over the
Web. The Federal Communications Commission recently decided that a Web user's
calls to gain access to the Internet are interstate communications. This could
result in an increase in the cost of using or transmitting data over the
Internet since the costs to Internet users could rise as a result of this
characterization and since there could be increased federal regulatory
requirements. In addition, the three year moratorium preventing state and local
governments from taxing internet access, from imposing taxes that would subject
participants in electronic commerce to taxes in multiple states, and from
imposing taxes that would discriminate against electronic commerce, will expire
on October 21, 2001. Once the moratorium ends, state and local governments could
impose these types of taxes. Any of these taxes would affect the viability of
electronic commerce and could have a material and adverse affect on our
business, financial condition and results of operations. The applicability to
the Internet of existing laws in various jurisdictions governing issues like
property ownership, libel and personal privacy is ambiguous and may take years
to resolve. Due to the global nature of the Internet, it is possible that the
United States, state governments or foreign countries might attempt to adopt new
laws, regulate our services or levy sales or other taxes on our activities. We
might unintentionally violate these laws or any new laws that are enacted in the
future. Any of these developments could have a material and adverse effect on
our business, financial condition and results of operations.
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SECURITY CONCERNS COULD HINDER INTERNET-BASED COMMERCE.
The need to securely transmit confidential information over the Internet has
been a significant barrier to electronic commerce and communications over the
Web. Any well-publicized compromise of security could cause Internet usage to
decline. Security breaches could also make people reluctant to use the Internet
to conduct transactions that involve transmitting confidential information, such
as stock trades or purchases of goods or services. This could result in
decreased traffic to our Web sites and reduced subscription and advertising
revenue. We may also incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by security breaches.
WE COULD BE LIABLE IF PERSONAL INFORMATION ABOUT OUR USERS IS DISCLOSED;
THERE MAY BE LIMITS IMPOSED ON USES OF PERSONAL INFORMATION GATHERED USING
THE INTERNET.
If third parties are able to penetrate our network security or otherwise
misappropriate our users' personal or credit card information, we could be
subject to liability. We could be subject to claims for unauthorized purchases
with credit card information, impersonation or other misuses of personal
information, such as providing personal imformation about our users to
advertisers without the users' authorization. These claims could result in
litigation.
Several states have proposed legislation that would limit the uses of
personal information gathered using the Internet. The European Union recently
enacted its own privacy regulations that may result in limits on the collection
and use of user information. Changes to existing laws or the passage of new laws
intended to address these issues could, among other things:
- create uncertainty in the marketplace that could reduce demand for our
services;
- limit our ability to collect and to use data from our users;
- increase the cost of doing business as a result of litigation costs or
increased service delivery costs; or
- decrease the efficacy of Internet advertising.
Like most Web sites, we typically place information, commonly referred to as
cookies, on a user's hard drive without the user's knowledge or consent. For
example, we use cookies to allow users access to personal information stored on
our servers, such as portfolios, or to enable us to limit the frequency with
which a user is shown a particular advertisement. Current Internet browsers
allow users to modify their browser settings to remove cookies at any time or to
prevent cookies from being stored on their hard drives. In addition, some
Internet commentators, privacy advocates and governmental bodies have suggested
limiting or eliminating the use of cookies. Any reduction or limitation in the
use of cookies could limit the effectiveness of this technology.
ACCEPTANCE AND EFFECTIVENESS OF THE INTERNET FOR ADVERTISING ARE UNPROVEN.
Our future is dependent, in part, on an increase in the use of the Internet
for advertising. If the Internet advertising market fails to develop or develops
more slowly than we expect, then our business could be adversely affected. The
Internet advertising market is new and rapidly evolving and the industry cannot
yet gauge the effectiveness of advertising on the Internet as compared to
traditional media. As a result, demand for Internet advertising is uncertain.
Many advertisers have little or no experience using the Internet for advertising
purposes. The adoption of Internet advertising requires the acceptance of a new
way of conducting business, exchanging information and advertising products and
services. Businesses may find advertising on the Internet to be undesirable or
less effective for promoting their products and services relative to traditional
advertising media.
Due in part to the proliferation of Web sites selling advertising space on
their Web pages, advertising rates charged within the industry generally have
been declining over the last year. During the period from December, 1997, to
March, 1999, average advertising rates in the Internet industry have declined
from
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$37.21 to $34.96 per thousand page views, or CPMs, as they are commonly known.
We do not know whether advertising rates will continue to decline in the future.
In addition, different pricing models are used to sell advertising on the Web
and it is difficult to predict which model will emerge as the industry standard.
For example, advertising rates based on the number of "click throughs," or user
requests for additional information made by clicking on the advertisement,
instead of rates based on the number of impressions, or times an advertisement
is displayed, could adversely affect our revenues since much of our existing
advertising is impression-based. Moreover, "filter" software programs that limit
or prevent advertising from being delivered to an Internet user's computer are
available. Widespread adoption of this software could adversely affect the
commercial viability of Internet advertising.
RISKS RELATED TO OUR RELATIONSHIP WITH HYPERFEED TECHNOLOGIES
HYPERFEED TECHNOLOGIES IS IN A POSITION TO CONTROL MATTERS REQUIRING A
STOCKHOLDER VOTE, WHICH MAY MATERIALLY AND ADVERSELY AFFECT THE MARKET PRICE
OF OUR COMMON STOCK OR DENY OUR STOCKHOLDERS AN OPPORTUNITY TO REALIZE A
PREMIUM ON THEIR SHARES.
Upon the closing of this offering, HyperFeed Technologies will beneficially
own 49.9% of our outstanding common stock (43.9% if the underwriters exercise
their over-allotment options in full). As a practical matter, HyperFeed
Technologies will have sufficient voting power to control our management, as
well as the outcome of matters submitted to our stockholders for approval,
including the election of directors and any merger, consolidation or sale of
substantially all of our assets. The members of the Board of Directors of
HyperFeed Technologies may be elected by two of HyperFeed Technologies'
principal stockholders, PICO Holdings, Inc. and Physicians Insurance Company of
Ohio, which collectively beneficially own 47.9% of HyperFeed Technologies'
common stock. These two affiliated stockholders are currently in a position to
effectively control HyperFeed Technologies' management and the outcome of
matters submitted to its stockholders for approval.
The concentration of ownership of our common stock could delay or prevent
proxy contests, mergers, tender offers, open-market purchase programs or other
purchases of our common stock that could give our stockholders the opportunity
to realize a premium over the then-prevailing market price for our common stock.
In addition, the market price of our common stock may be materially and
adversely affected by events relating to HyperFeed Technologies that are
unrelated to us.
WE DEPEND SOLELY ON HYPERFEED TECHNOLOGIES FOR CERTAIN SERVICES AND IT MAY
BE COSTLY TO OBTAIN THESE SERVICES FROM ANOTHER PROVIDER IF HYPERFEED
TECHNOLOGIES IS UNABLE OR UNWILLING TO PROVIDE THESE SERVICES TO US.
HyperFeed Technologies currently provides us with research and development
assistance, data feeds, communications lines and related facilities and network
operations, as well as administrative, engineering and human resources services.
HyperFeed Technologies has incurred aggregate operating losses of approximately
$16.6 million during the past three years. Financial problems at HyperFeed
Technologies could materially and adversely affect its ability to provide
services to us. We may not be able to replace these services, especially the
market data feed, without incurring significant additional costs. If we choose
to perform these services ourselves, we may not be able to perform them
adequately. During any transition, our business could be disrupted. As a result,
we could lose a significant number of subscribers, users and advertisers.
WE DEPEND ON HYPERFEED TECHNOLOGIES FOR IMPROVEMENTS TO PCQUOTE ORBIT AND
QUOTESOCKETS.
We currently license PCQuote Orbit and Quotesockets from HyperFeed
Technologies. We may license additional services or technologies from HyperFeed
Technologies in the future. HyperFeed Technologies acts as our research and
development resource and is responsible for providing software updates to the
services we license from them. A delay or failure by HyperFeed Technologies to
provide
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us with updates and improvements to these services may result in our inability
to keep pace with changes in technology and user preferences.
OUR AGREEMENTS WITH HYPERFEED TECHNOLOGIES WILL NOT BE SUBJECT TO
DISINTERESTED NEGOTIATIONS.
As part of our separation from HyperFeed Technologies, we are entering into
agreements with HyperFeed Technologies providing for, among other things, our
separation from that company, the contribution of assets to us and the provision
to us by HyperFeed Technologies of licenses and various services that are
important to the conduct of our business. Because we were a division of
HyperFeed Technologies, none of these agreements will result from disinterested
negotiations.
CERTAIN MEMBERS OF OUR MANAGEMENT HAVE CONFLICTS OF INTEREST WITH HYPERFEED
TECHNOLOGIES.
Jim R. Porter, Chief Executive Officer and a director of HyperFeed
Technologies, is Chief Executive Officer and a director of PCQuote.com. John E.
Juska, Chief Financial Officer of HyperFeed Technologies, is a director of
PCQuote.com. John R. Hart, a director of HyperFeed Technologies, is a director
of PCQuote.com. In addition, several of our executive officers, directors and
employees hold shares of HyperFeed Technologies common stock and options to
acquire shares of HyperFeed Technologies common stock. Mr. Porter beneficially
owns approximately 7.8% of the outstanding common stock of HyperFeed
Technologies and Mr. Juska beneficially owns approximately 1.5% of the
outstanding common stock of HyperFeed Technologies. Mr. Hart is Chief Executive
Officer and a director of PICO Holdings, Inc. and Physicians Insurance Company
of Ohio, which collectively beneficially own 47.9% of the outstanding common
stock of HyperFeed Technologies.
These individuals have conflicts of interest with respect to business
opportunities and similar matters that may arise in the ordinary course of the
business of HyperFeed Technologies or PCQuote.com. They also have conflicts of
interest with respect to relationships between HyperFeed Technologies and
PCQuote.com under inter-company agreements between us and HyperFeed
Technologies. We currently do not have a system in place to resolve these
conflicts of interests. As a result, conflicts could be resolved in a manner
adverse to us and our stockholders.
RISKS RELATED TO THIS OFFERING
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
You will experience an immediate and substantial dilution of $8.71 per share
in the net tangible book value per share of our common stock from the initial
public offering price, assuming an initial public offering price of $13.00 per
share. In addition, the exercise of options and warrants currently outstanding
could cause additional substantial dilution to you.
THERE IS A SIGNIFICANT AMOUNT OF UNALLOCATED NET PROCEEDS AND WE WILL HAVE
BROAD DISCRETION IN HOW WE USE THESE PROCEEDS.
We have not designated any specific uses for a significant portion of the
net proceeds of this offering. Therefore, we will have broad discretion in how
we use these net proceeds. We may use net proceeds for working capital, business
expansion and other general corporate purposes. Investors will have to rely on
the judgment of our management regarding the application of our net proceeds
from this offering.
BECAUSE AN ACTIVE TRADING MARKET FOR OUR SHARES MAY NOT DEVELOP AFTER THIS
OFFERING, IT MAY BE DIFFICULT TO SELL YOUR SHARES.
Prior to this offering, there has not been a public market for our common
stock. We do not know the extent to which investor interest in PCQuote.com will
lead to the development of a trading market
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for our common stock or how our common stock will trade in the future. If an
active and liquid trading market does not develop, you may have difficulty
selling your shares.
OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY BE UNABLE TO SELL YOUR SHARES
AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.
The initial public offering price may not be indicative of market prices
that will prevail after this offering. Therefore, you may be unable to sell your
shares for more than you paid for them. Numerous factors may cause the market
price of our shares to fluctuate significantly, such as:
- fluctuations in our quarterly revenues and earnings and those of our
competitors;
- shortfalls in our operating results from levels forecast by securities
analysts;
- announcements concerning us or our competitors;
- the introduction of new financial or business Web sites or Web-based
services;
- changes in service price policies by us or our competitors;
- market conditions in our industry; and
- the general state of the securities market (particularly the Internet
sector).
In addition, trading in shares of companies listed on the Nasdaq National
Market in general and trading in shares of Internet companies in particular have
experienced extreme price and volume fluctuations that have been unrelated or
disproportionate to operating performance. The trading prices and multiples of
the shares of many Internet companies are at or near historical highs. These
trading prices and multiples may not be sustainable. These broad market and
industry factors may depress our stock price, regardless of our actual operating
results.
SUBSTANTIAL FUTURE SALES OF OUR SHARES AFTER THIS OFFERING COULD MATERIALLY
AND ADVERSELY AFFECT OUR STOCK PRICE.
The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that these sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of our common stock.
After this offering, 15,728,948 shares of our common stock will be
outstanding (16,116,448 shares if the underwriters' over-allotment option from
us is exercised in full). Of these shares, the 7,750,000 shares sold in this
offering (8,912,500 shares if the underwriters' over-allotment options are
exercised in full) will be freely tradable without restrictions under the
Securities Act, except for any shares purchased by our affiliates, defined as
any person that, directly or indirectly, controls, or is controlled by, or is
under common control with, PCQuote.com. We have granted CNNFN one demand
registration right and unlimited piggyback registration rights covering the
128,948 shares of our common stock they own and the 386,842 shares they may
acquire upon exercise of the warrant held by them. We will grant HyperFeed
Technologies unlimited "piggyback" and demand registration rights covering the
7,850,000 shares of our common stock it will own after this offering (7,075,000
shares if the underwriters' over-allotment option from them is exercised in
full).
All of our officers, directors and stockholders, including the selling
stockholder, have entered into lock-up agreements pursuant to which they have
agreed not to offer or sell any shares of our common stock for a period of 180
days after the date of this prospectus without the prior written consent of
Prudential Securities, on behalf of the underwriters. Prudential Securities may,
at any time and without notice, waive the terms of these lock-up agreements
specified in the underwriting agreement. Upon expiration of this lock-up period,
7,203,948 outstanding shares may be sold in the future subject to compliance
with the volume limitations and other restrictions of Rule 144.
19
<PAGE>
WE DO NOT CURRENTLY HAVE AN INTENTION TO PAY DIVIDENDS.
We have not declared or paid, and in the near future we do not anticipate
declaring or paying dividends on our common stock. Investors who anticipate a
need for immediate income from their investment should not purchase shares of
our common stock.
20
<PAGE>
USE OF PROCEEDS
The net proceeds to PCQuote.com from the sale of common stock in this
offering, assuming an initial public offering price of $13.00 per share, are
estimated to be approximately $68.7 million ($73.4 million if the underwriters
exercise their over-allotment option from us in full), after deducting
underwriting discounts and commissions and estimated offering expenses. We
intend to use these net proceeds as follows:
- INCREASED MARKETING AND PROMOTIONAL EFFORTS. We plan to initiate an
aggressive marketing campaign that will include advertising in a variety
of traditional and online media to promote our Web sites and service
offerings. We expect to spend approximately $8 million for marketing and
promotional purposes over the next twelve months. We believe that these
increased marketing efforts will enable us to significantly grow our
advertising base by capitalizing on the attractiveness of our high-end
user, as well as build brand awareness, increase traffic and create a
ready source of potential subscribers for our services;
- ACQUISITION OF ADDITIONAL CONTENT TO ENHANCE OUR SERVICES. In order to
enable both current and future users to receive the type of online
experience they desire, we will use a portion of our net proceeds to
acquire the content and the technology needed to enhance our services,
such as personalization and community features;
- PURCHASE OF NEW SYSTEMS, TECHNOLOGIES AND RESOURCES TO SUPPORT OUR GROWTH.
As our content and service offerings grow, we anticipate that we will have
a greater need for additional back-end production systems and
infrastructure. We will use a portion of our net proceeds to support our
services with new systems, technologies and resources;
- HIRING OF ADDITIONAL EMPLOYEES. We will use a portion of our net proceeds
to hire additional management, technical and administrative personnel;
- REPAYMENT OF SHORT-TERM LIABILITIES. We will use a portion of our net
proceeds to pay HyperFeed Technologies an aggregate amount of
approximately $1.3 million, which consists of: (1) $213,500 per month for
services provided to us beginning in April 1999 and (2) $500,000,
representing one-half of the amount to be paid by HyperFeed Technologies
to Townsend Analytics under a termination agreement between them; and
- GENERAL CORPORATE PURPOSES, INCLUDING CAPITAL EXPENDITURES.
In addition, we may use a portion of our net proceeds to pay up to $2.0
million which we may be required to pay to HyperFeed Technologies to satisfy any
shortfall in the $5.0 million minimum aggregate license fees HyperFeed
Technologies anticipates it will be required to pay to Townsend Analytics under
an anticipated new agreement between those two companies.
Pending these uses, we may invest our net proceeds from this offering
temporarily in short-term, investment grade, interest-bearing securities or
guaranteed obligations of the U.S. government. We will not receive any proceeds
from the sale of shares by the selling stockholder.
DIVIDEND POLICY
We have not declared or paid and do not anticipate declaring or paying any
dividends on our common stock in the near future. Any future determination as to
the declaration and payment of dividends will be at the discretion of our Board
of Directors and will depend on then existing conditions, including our
financial conditions, result of operations, contractual restrictions, capital
requirements, business prospects and such other factors as our Board of
Directors deems relevant.
21
<PAGE>
DILUTION
Purchasers of common stock in this offering will experience immediate and
substantial dilution in the net tangible book value of the common stock from the
initial public offering price. Net tangible book value per share represents the
amount of the total tangible assets less total liabilities of PCQuote.com,
divided by the number of shares of common stock outstanding. At March 31, 1999,
as adjusted to reflect the purchase by CNNFN on April 29, 1999 of 128,948 shares
of our common stock upon the exercise of the vested portion of the warrant held
by them, PCQuote.com had a pro forma deficit in net tangible book value of $1.3
million or $0.13 per share of common stock. After giving effect to the sale of
5,800,000 shares of common stock by PCQuote.com at an assumed initial public
offering price of $13.00 per share and the deduction of underwriting discounts
and commissions and estimated offering expenses payable by PCQuote.com, the pro
forma net tangible book value of PCQuote.com at March 31, 1999 would have been
$67.4 million or $4.29 per share. This represents an immediate increase in net
tangible book value of $4.42 per share to existing stockholders and an immediate
and substantial dilution of $8.71 per share to new investors purchasing common
stock in this offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C> <C>
Assumed initial public offering price........................ $ 13.00
Pro forma deficit in net tangible book value as of March
31, 1999................................................. ($ 0.13)
Increase attributable to new investors..................... $ 4.42
Pro forma net tangible book value after this offering........ 4.29
---------
Dilution in pro forma net tangible book value to new
investors.................................................. $ 8.71
---------
---------
</TABLE>
The following table summarizes the differences between existing stockholders
and new investors in this offering with respect to the number of shares of
common stock purchased from PCQuote.com, the total consideration paid to
PCQuote.com and the average consideration paid per share (before the deduction
of underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)........................ 9,928,948 63.1% $ 918,965 1.2% $ 0.09
New investors.................................... 5,800,000 36.9% 75,400,000 98.8% 13.00
------------ --------- ------------- ---------
Total............................................ 15,728,948 100.0% $ 76,318,965 100.0%
------------ --------- ------------- ---------
------------ --------- ------------- ---------
</TABLE>
(1) Sales by HyperFeed Technologies in this offering will cause the number of
shares held by existing shareholders to be reduced to 7,978,948, or 50.7% of
the total number of our shares outstanding after the offering, and will
increase the number of shares held by new investors to 7,750,000, or 49.3%
of the total number of our shares outstanding after this offering.
22
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1999, the cash and
capitalization of PCQuote.com, and the cash and capitalization of PCQuote.com
adjusted to reflect this offering and the application of the estimated net
proceeds to PCQuote.com. The As Adjusted column also reflects the issuance to
CNNFN on April 12, 1999 of a warrant to purchase 515,790 shares of our common
stock and the purchase by CNNFN on April 29, 1999 of 128,948 shares of our
common stock upon the exercise of the vested portion of this warrant. The
following table should be read in conjunction with the financial statements and
related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1999
-------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash................................................................................... $ -- $ 67,368
--------- -------
--------- -------
Stockholders' equity:
Preferred stock, par value $0.01 per share; 1,000,000 shares authorized; none issued
and outstanding actual and adjusted................................................ -- --
Common stock, par value $0.01 per share; 74,000,000 shares authorized; 9,800,000
shares issued and outstanding; and 15,728,948 shares issued and outstanding as
adjusted (2)....................................................................... $ 98 $ 157
Additional paid-in capital........................................................... 821 74,984
--------- -------
Total stockholders' equity............................................................. 919 75,141
--------- -------
Total capitalization................................................................... $ 919 $ 75,141
--------- -------
--------- -------
</TABLE>
(1) Assumes no exercise of the underwriters' over-allotment option from us.
(2) Excludes an aggregate of 1,538,600 shares of common stock reserved for
issuance under our 1999 Combined Incentive and Non-statutory Stock Option
Plan, of which options to purchase shares will be granted as of the
date of this prospectus, and 386,842 shares of common stock issuable upon
the exercise of the outstanding CNNFN warrant.
23
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The accompanying pro forma financial information reflects (a) the impact of
the agreements with HyperFeed Technologies and Townsend Analytics as if such
agreements were in place beginning January 1, 1998 and (b) additional executive
compensation payable to four officers as if these officers had been employed by
the Company commencing January 1, 1998. The pro forma financial information
presented below is not necessarily indicative of the operating results that
would have been achieved had the events contemplated by the agreements occurred
or had the officers been hired at the beginning of the periods presented; nor
does it purport to represent our future financial position.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
YEAR ENDED ADJUSTMENTS YEAR ENDED
DECEMBER 31, DEBIT DECEMBER 31,
1998 (CREDIT) 1998
------------- --------------- -------------
<S> <C> <C> <C>
Revenues:
Subscription..................................................... $ 7,995,691 $ 7,995,691
Advertising...................................................... 1,368,463 1,368,463
Other............................................................ 547,957 547,957
------------- --------------- -------------
Total revenues............................................... 9,912,111 9,912,111
Direct cost of revenues............................................ 6,542,787 $ (272,000)(a) 6,383,787
------------- --------------- -------------
113,000(b)
Gross profit....................................................... 3,369,324 3,528,324
Operating expenses:
General and administrative....................................... 2,481,583 295,000(c) 3,040,583
264,000(d)
Sales and marketing.............................................. 2,108,399 49,000(d) 2,157,399
Research and development......................................... 241,223 30,000(d) 271,223
Depreciation..................................................... 196,216 196,216
------------- --------------- -------------
Total operating expenses..................................... 5,027,421 5,665,421
------------- --------------- -------------
Loss from operations............................................... (1,658,097) (2,137,097)
Other income (expense):
Interest income.................................................. 8,292 8,292
Interest expense................................................. (512,646) (512,646)
------------- --------------- -------------
Other expense, net................................................. (504,354) (504,354)
------------- --------------- -------------
Loss before income taxes........................................... (2,162,451) (2,641,451)
Income taxes....................................................... -- --
------------- --------------- -------------
Net loss........................................................... $ (2,162,451) $ (2,641,451)
------------- --------------- -------------
------------- --------------- -------------
Pro forma basic and diluted net loss per share..................... $ (0.22) $ (0.27)
------------- --------------- -------------
------------- --------------- -------------
Pro forma shares used in the calculation of basic and diluted net
loss per share................................................... 9,800,000 9,800,000
------------- --------------- -------------
------------- --------------- -------------
</TABLE>
24
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
THREE PRO FORMA THREE
MONTHS ENDED ADJUSTMENTS MONTHS ENDED
MARCH 31, DEBIT MARCH 31,
1999 (CREDIT) 1999
-------------- --------------- --------------
<S> <C> <C> <C>
Revenues:
Subscription.................................................. $ 2,886,146 $ 2,886,146
Advertising................................................... 247,633 247,633
Other......................................................... 124,862 124,862
-------------- --------------- --------------
Total revenues............................................ 3,258,641 3,258,641
Direct cost of revenues......................................... 2,273,663 $ (75,000)(a) 2,255,663
-------------- --------------- --------------
57,000(b)
Gross profit.................................................... 984,978 1,002,978
Operating expenses:
General and administrative.................................... 702,492 51,000(c) 861,492
108,000(d)
Sales and marketing........................................... 432,421 19,000(d) 451,421
Research and development...................................... 66,011 22,000(d) 88,011
Depreciation.................................................. 67,298 67,298
-------------- --------------- --------------
Total operating expenses.................................. 1,268,222 1,468,222
-------------- --------------- --------------
Loss from operations............................................ (283,244) (465,244)
Other income (expense)
Interest income............................................... -- --
Interest expense.............................................. (4,354) (4,354)
-------------- --------------- --------------
Other expense, net.............................................. (4,354) (4,354)
-------------- --------------- --------------
Loss before income taxes........................................ (287,598) (469,598)
Income taxes.................................................... -- --
-------------- --------------- --------------
Net loss........................................................ $ (287,598) $ (469,598)
-------------- --------------- --------------
-------------- --------------- --------------
Pro forma basic and diluted net loss per share.................. $ (0.03) $ (0.05)
-------------- --------------- --------------
-------------- --------------- --------------
Pro forma shares used in the calculation of basic and diluted
net loss per share............................................ 9,800,000 9,800,000
-------------- --------------- --------------
-------------- --------------- --------------
</TABLE>
- ------------
(a) To record the impact of our license with HyperFeed Technologies to use its
data feed as if the license agreement had been in effect as of January 1,
1998. The monthly fees for the license are based on the number of users and
quotes accessed.
(b) To record the impact of our license agreement with Townsend Analytics under
which they licensed to us the right to use a software application which we
market as PCQuote 6.0 RealTick as if the agreement had been in effect as of
January 1, 1998.
(c) To record the impact of compensation for four executive officers as if these
officers had been hired as of January 1, 1998.
(d) To record the impact of our agreement with HyperFeed Technologies for the
provision of managerial, marketing, technological support, clerical,
financial, legal and administrative services as if the agreement had been in
effect as of January 1, 1998.
25
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to, and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," our financial statements and the
related notes appearing elsewhere in this prospectus. The statement of
operations data presented below for the year ended December 31, 1995 are derived
from unaudited financial statements not included in this prospectus. The
statement of operations data of PCQuote.com presented below for the years ended
December 31, 1996, 1997 and 1998, and the balance sheet data as of December 31,
1997 and 1998 are derived from financial statements of PCQuote.com that have
been audited by KPMG LLP, independent certified public accountants, and are
included elsewhere in this prospectus. The statement of operations data for the
three months ended March 31, 1998 and 1999 and the balance sheet data as of
March 31, 1999 are derived from unaudited financial statements which, in the
opinion of management, have been prepared on the same basis as the audited
financial statements and contain all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the results of
operations for such periods. The results of operations for the three months
ended March 31, 1999 are not necessarily indicative of results to be expected
for the full year. We commenced operations in July 1995.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------- ------------------------
1995 1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Subscription........................... $ -- $ 776 $ 3,402 $ 7,996 $ 1,499 $ 2,886
Advertising............................ -- 167 1,131 1,368 275 248
Other.................................. -- 30 230 548 124 125
----------- ----------- ----------- ----------- ----------- -----------
Total revenues....................... -- 973 4,763 9,912 1,898 3,259
Direct cost of revenues.................. 70 813 4,201 6,543 1,392 2,274
----------- ----------- ----------- ----------- ----------- -----------
Gross profit............................. (70) 160 562 3,369 506 985
Operating expenses:
General and administrative............. -- 1,084 2,298 2,482 668 703
Sales and marketing.................... -- 620 1,226 2,108 504 433
Research and development............... -- 392 254 241 35 66
Depreciation........................... -- -- 72 196 46 67
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses............. -- 2,096 3,850 5,027 1,253 1,269
----------- ----------- ----------- ----------- ----------- -----------
Loss from operations..................... (70) (1,936) (3,288) (1,658) (747) (284)
Other income (expense), net.............. -- (26) (1,284) (504) (103) (4)
----------- ----------- ----------- ----------- ----------- -----------
Loss before income taxes................. (70) (1,962) (4,572) (2,162) (850) (288)
Income taxes............................. -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net loss................................. $ (70) $ (1,962) $ (4,572) $ (2,162) $ (850) $ (288)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Pro forma basic and diluted net loss per
share.................................. $ (.22) $ (.09) $ (.03)
----------- ----------- -----------
----------- ----------- -----------
Pro forma shares used in the calculation
of basic and diluted net loss per
share(1)............................... 9,800,000 9,800,000 9,800,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1997 1998 1999
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................................................... $ -- $ -- $ --
Total assets....................................................................... 2,885 3,306 3,575
Long-term liabilities.............................................................. -- -- --
Total stockholders' equity......................................................... 1,064 1,080 919
</TABLE>
(1) Pro forma shares used in the calculation of basic and diluted net loss per
share reflects shares outstanding as of March 31, 1999 as if they were
outstanding for all periods presented.
26
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting the financial condition of
our business. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions about PCQuote.com including, among other things:
- our limited operating history as a stand-alone entity and history of
losses;
- our need to maintain and increase our subscriber base to increase
profitability;
- our ability to increase the number of visitors to our WWW.PCQUOTE.COM Web
site in order to increase advertising revenues;
- the need to establish relationships with content and service providers;
- the intense competition with respect to Web sites providing business and
financial news and information;
- existing and future regulations affecting our business or the Internet
generally;
- our dependence on HyperFeed Technologies, Inc.; and
- other risk factors set forth under "Risk Factors" in this prospectus.
In addition, in this prospectus, the words "believe", "may", "will",
"estimate", "continue", "anticipate", "intend", "expect" and similar
expressions, as they relate to PCQuote.com, our business or our management are
intended to identify forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
after the date of this prospectus except as may be required under the federal
securities laws. In light of these risks and uncertainties, the forward-looking
events and circumstances discussed in this prospectus may not occur and actual
results could differ materially from those anticipated or implied in the
forward-looking statements.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the related notes appearing elsewhere in this prospectus. The
historical financial information included in this prospectus does not
necessarily reflect what our financial condition and results of operations would
have been had we been operated as an independent entity during the periods
presented.
OVERVIEW
Our WWW.PCQUOTE.COM Web site was first established in July 1995 and our
subscription-based Web site, MARKETSMART-REAL.PCQUOTE.COM, was introduced in
March 1996. In the second quarter of 1996, we began selling subscriptions to our
PCQuote 6.0 RealTick service, in addition to selling advertising sponsorships
and rotating advertising banners on our Web pages. In late 1996, we began
offering our Web Template and Hyperscript services to businesses and application
developers. We were incorporated on March 19, 1999, as a wholly-owned subsidiary
of HyperFeed Technologies. Prior to that time, we operated as part of HyperFeed
Technologies. Our assets, as reflected in the financial statements included in
this prospectus, will be contributed to us by HyperFeed Technologies as an
additional capital contribution. We will assume the liabilities of HyperFeed
Technologies related to our business. These assets and liabilities will be
recorded by us using HyperFeed Technologies' historical cost basis.
We have incurred significant net losses and negative cash flows from
operations since our inception. We intend to continue to make significant
investments in marketing and promotion, content development and technology and
infrastructure development. As a result, we believe that we will incur operating
losses and negative cash flows from operations in the near future, and that such
losses and negative cash flows will increase for at least the next year.
REVENUES
We currently derive our revenues primarily from:
- subscription revenue consisting of the sale of subscriptions to PCQuote
6.0 RealTick and private label versions of PCQuote 6.0 RealTick, and our
MARKETSMART-REAL.PCQUOTE.COM Web site, which together accounted for 80.7%
of our total revenues in 1998 and 88.6% of our total revenues for the
three months ended March 31, 1999;
- advertising revenue consisting of the sale of advertising banners and
sponsorships displayed on our Web pages, which accounted for 13.8% of our
total revenues in 1998 and 7.6% of our total revenues for the three months
ended March 31, 1999; and
- other revenue consisting of business-to-business services, such as our Web
Template Service, Web developer tools and content access to businesses and
developers, which accounted for 5.5% of our revenues in 1998 and 3.8% of
our total revenues for the three months ended March 31, 1999.
Subscription and other revenue are recognized ratably over the contract term
as services are rendered by us. Advertising revenue is recognized as the
advertising is displayed on our Web sites.
DIRECT COST OF REVENUES
Our direct cost of revenues consists of:
- market data acquisition costs;
- license fees and royalties paid to software developers and content
providers;
- pass-through exchange fees paid to original market data providers;
- sales commissions based on a percentage of generated revenue; and
- amortization of previously capitalized software development costs.
28
<PAGE>
Previously capitalized software development costs include the costs of
initial development of our Web site, the cost of delivering, controlling access
to, monitoring and billing for our subscription and advertising services, and
our portion of the costs incurred to develop analytical software for resale
related to our new PCQuote Orbit service. As of March 31, 1999, there were $2.2
million of these capitalized costs that will be amortized through 2001. With
these development efforts essentially completed, we anticipate further costs
will be related only to maintenance and will be expensed as incurred. The
balance of unamortized software development costs as of March 31, 1999 is
scheduled to be charged against operations as follows: $800,000 in the last nine
months of 1999, $900,000 in 2000 and $500,000 in 2001.
OPERATING EXPENSES
Our operating expenses consist of general and administrative expenses, sales
and marketing expenses, research and development expenses and depreciation.
- General and administrative expenses include the cost of customer service
and technical assistance for users of our subscription services, finance
and accounting costs and corporate and general administrative costs. We
anticipate hiring additional personnel to support our growth and incurring
additional costs related to being a public company, including the hiring
of our new management team. As a result, we anticipate that general and
administrative expenses will increase.
- Sales and marketing expenses include base salary compensation to our sales
and marketing employees and related costs, advertising and promotion costs
and costs related to the management of service offerings and market
development We expect sales and marketing expenses to increase
significantly as we pursue an aggressive marketing campaign to increase
the traffic to our Web sites, expand marketing of the PCQuote brand, add
to our subscription base and hire additional sales and marketing
personnel.
- Research and development expenses include expenses for research and
development of new services and maintenance costs related to existing
services We will require significant investments in content and service
development to remain competitive. Accordingly, we expect that research
and development expenses will increase in 1999.
- Depreciation expenses represent non-cash charges for the pro-rata benefit
of previously expended amounts for capital equipment purchases. We expect
that depreciation expense will increase as we purchase additional capital
equipment to build out our infrastructure and to support the growth of our
business. We also expect to incur amortization expense when we establish
our own facilities in connection with our expected growth.
AGREEMENTS WITH HYPERFEED TECHNOLOGIES
As a part of the separation from HyperFeed Technologies, HyperFeed
Technologies will contribute intellectual property and technology relating to
our business, including Hyperscript, PCQuote Software Development Kit, our
domain names and Web sites, and Web Templates. HyperFeed Technologies will also
grant us a license to use its data feed, including HyperFeed 2000. For the
license to use HyperFeed Technologies' data feed, we will pay HyperFeed
Technologies monthly fees based on the number of users and quotes accessed. If
the data feed license agreement had been in effect as of January 1, 1999, we
would have paid HyperFeed Technologies fees of approximately $245,000 for the
three months ended March 31, 1999. Under a maintenance agreement, we will pay
HyperFeed Technologies a service fee for future modifications, upgrades and
enhancements to PCQuote Orbit in an amount equal to 3% of our gross revenues
derived from all permitted uses and sub-licensing of PCQuote Orbit. PCQuote
Orbit is expected to be launched in the Summer of 1999.
We have entered into an agreement with HyperFeed Technologies for the
provision of managerial, marketing, technological support, clerical, financial,
legal and administrative services. We will pay HyperFeed Technologies $1.8
million over the last nine months of 1999 and $756,000 over the first six
29
<PAGE>
months of 2000 for these services. We will also pay an amount to be negotiated,
if we continue to need any of these services after June 30, 2000. The agreement
is structured to assist us until we are able to perform these services
ourselves, which we plan to do no later than December 31, 2000.
We believe that the amounts to be charged to us by HyperFeed Technologies
under the license agreements, maintenance agreement and services agreement are
substantially similar to the amounts included in our financial statements and
are no less favorable than costs we would incur to obtain similar intellectual
property rights and similar services from unaffiliated third parties.
AGREEMENT WITH CNNFN
On April 12, 1999, we entered into a license agreement with CNNFN under
which CNNFN granted us a license to display on our Web sites headlines from
original stories published on the CNNFN Web site at WWW.CNNFN.COM. The term of
the agreement is for 3 1/2 years. We issued to CNNFN a warrant to purchase
515,790 shares of our common stock, representing a 5% interest in our
outstanding common stock at the time the agreement was executed. One-fourth of
the shares subject to this warrant vested immediately and an additional
one-fourth vests on each anniversary date of the signing of the agreement. CNNFN
exercised the vested portion of this warrant on April 29, 1999. The estimated
value assigned to the warrant was $5.9 million and was recorded as a pre-paid
license fee and an increase in stockholders' equity. This license fee will be
amortized as a non-cash charge ratably over the term of the agreement.
AGREEMENT WITH TOWNSEND ANALYTICS
On May 28, 1999, we entered into a new license agreement with Townsend
Analytics under which they licensed to us the right to use a software
application which we market as PCQuote 6.0 RealTick. We also offer private label
versions of this application. The new agreement replaced the prior agreement
between Townsend Analytics and HyperFeed Technologies. The initial term of the
agreement ends December 4, 2000. We agree to pay them 33% of the subscription
revenues we derive from our PCQuote 6.0 RealTick service and 50% of revenues
relating to the private label version that we presently sublicense to two of our
customers. For certain of our customers, Townsend Analytics provides hosting
services and order execution capabilities, and receives a license fee of 66% of
our revenues derived from these customers. Regardless of actual subscription
revenues we receive, we are required under the license agreement to make minimum
license fee payments to Townsend Analytics of $220,000 per month. We will pay
$500,000 to HyperFeed Technologies to reimburse them for a portion of the amount
to be paid by them to Townsend Analytics under a termination agreement between
those parties. In addition, we could be required to pay up to $2.0 million to
satisfy any shortfall in the $5.0 million minimum aggregate license fees
HyperFeed Technologies anticipates it will be required to pay to Townsend
Analytics under an anticipated new agreement between those two companies.
RESULTS OF OPERATIONS
Our results of operations have been compiled from the historical results of
operations of HyperFeed Technologies as they relate to our service offerings
prior to our separation from that company. These results of operations reflect
all revenues and costs directly attributable to our service offerings, including
costs for facilities, communications network, data feed operations, sales and
customer support and product and market development resources shared by both us
and HyperFeed Technologies and allocations of costs for certain administrative
functions and services performed by centralized departments within HyperFeed
Technologies.
For all periods presented, general and administrative expenses reflected in
the financial statements include allocations of corporate expenses from
HyperFeed Technologies. These allocations took into consideration personnel,
business volume or other appropriate bases and generally include administrative
expenses related to general management, insurance, information management and
other miscellaneous services. Interest expense shown in the financial statements
reflects interest expense associated with our share of the aggregate borrowings
of HyperFeed Technologies for each of the
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periods presented. Allocations of corporate expenses are estimates based on our
management's best assessment of actual expenses. It is management's opinion that
the expenses charged to PCQuote.com are reasonable.
The financial statements were prepared as if PCQuote.com operated as a
stand-alone entity since inception. The financial information included herein
may not necessarily reflect the financial position, results of operation or cash
flows of PCQuote.com in the future or what the balance sheets, results of
operations or cash flows of PCQuote.com would have been if it had been a
separate, stand-alone, publicly-held corporation during the periods presented.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998
REVENUES. Total revenues increased 71.7% for the three months ended March
31, 1999 to $3.3 million from $1.9 million for the comparable 1998 period. Total
subscription-based revenue increased 92.5% to $2.9 million in the 1999 period
from $1.5 million in the 1998 period, while total advertising revenue decreased
to $248,000 in the 1999 period from $275,000 in the 1998 period. Other revenue
remained essentially unchanged. The growth in subscription revenue was primarily
attributable to an increase in the number of subscribers to our PCQuote 6.0
RealTick service and to the private label version of this service. Although ad
impressions increased, advertising revenue decreased due, in part, to the
increased sales during the 1999 period of smaller-sized advertisements for which
lower rates are charged. In addition, our advertising rates declined for
traditional size banner ads in response to generally declining ad rates within
the industry.
DIRECT COST OF REVENUES. Direct cost of revenues increased 63.3% to $2.3
million for the 1999 period from $1.4 million for the comparable 1998 period,
primarily due to increased royalties, commissions, payments to providers of
market data and data distribution costs directly attributable to the growth in
the number of subscribers to our PCQuote 6.0 RealTick service. Amortization of
software development costs increased to $268,000 in the 1999 period from
$208,000 in the 1998 period, as a result of increased development efforts
related to our Web sites and other service offerings.
GROSS PROFIT. Our gross profit increased to $985,000 in the 1999 period
from $506,000 in the 1998 period.
OPERATING EXPENSES. Total operating expenses were essentially unchanged.
Increases in general and administrative, research and development and
depreciation were offset by a decrease in sales and marketing expenses. General
and administrative expenses increased to $703,000 in the 1999 period from
$668,000 in the 1998 period. This was primarily due to increases in
administrative and customer service costs. Sales and marketing expenses
decreased to $433,000 in the 1999 period from $504,000 in the 1998 period. The
decrease was due to lower sales personnel costs and a decrease in promotional
expenditures. Research and development expenses increased to $66,000 in the 1999
period from $35,000 in the 1998 period as a result of an increase in the number
of development personnel and related expenses. Depreciation expense increased to
$67,000 in the 1999 period from $46,000 in the 1998 period as the result of
acquisitions of computer equipment to support the growth associated with
increased traffic to our Web sites, and the growth in subscribers to our PCQuote
6.0 RealTick service.
INTEREST EXPENSE. Interest expense decreased to $4,000 in the 1999 period
from $106,000 in the 1998 period. The decrease was the result of a reduction in
the level of contributions required from HyperFeed Technologies to fund our
operations, coupled with a decrease in their cost of borrowing in 1999.
NET LOSS. As a result of the factors discussed, our net loss decreased to
$288,000 in the 1999 period from $850,000 in the 1998 period.
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YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES. Total revenues increased 108.1% to $9.9 million in 1998 from $4.8
million in 1997. Total subscription-based revenue increased 135.1% to $8.0
million in 1998 from $3.4 million in 1997, while total advertising revenue
increased 21.0% to $1.4 million in 1998 from $1.1 million in 1997. Other revenue
grew to $548,000 in 1998 from $230,000 in 1997. The growth in subscription
revenue was primarily attributable to an increase in the number of subscribers
to our PCQuote 6.0 RealTick service and the private label version of this
service. The increase in advertising revenues was attributable to an increase in
the number of visitors to our Web site, resulting in an increase in advertising
page impressions sold. Other revenue increased primarily due to growth in our
Web hosting and Web developer business-
to-business services.
DIRECT COST OF REVENUES. Direct cost of revenues increased 55.7% to $6.5
million in 1998 from $4.2 million in 1997, primarily due to increased royalties,
commissions, payments to providers of market data and communication costs
directly attributable to the growth in the number of subscribers. Amortization
of software development costs increased to $726,000 in 1998 from $550,000 in
1997, as a result of increased development efforts related to our Web sites and
other service offerings.
GROSS PROFIT. Our gross profit increased to $3.4 million in 1998 from
$562,000 in 1997.
OPERATING EXPENSES. Total operating expenses increased 30.6% to $5.0
million in 1998 from $3.8 million in 1997. General and administrative expenses
increased to $2.5 million in 1998 from $2.3 million in 1997. This was primarily
due to increases in customer service and technical support costs attributable to
the growth in subscribers to our services, offset, in part, by reductions in
corporate and administrative compensation and related costs. Sales and marketing
expenses increased to $2.1 million in 1998 from $1.2 million in 1997. The
increase was due to the hiring of additional sales and marketing personnel in
1998 and increased advertising and promotional expenditures. Research and
development expenditures during 1998 were essentially unchanged from 1997.
Depreciation expense increased to $196,000 in 1998 from $72,000 in 1997. The
increase was the result of increased depreciation expense associated with
acquisitions of computer equipment during the second half of 1997 and throughout
1998 to support the growth associated with increased traffic to our Web sites
and the growth in subscribers to our PCQuote 6.0 RealTick service.
INTEREST EXPENSE. Interest expense decreased to $513,000 in 1998 from $1.3
million in 1997. The decrease was the result of a reduction in the level of
contributions required from HyperFeed Technologies to fund our operations,
coupled with a decrease in their cost of borrowing in 1998.
NET LOSS. As a result of the factors discussed, our net loss decreased to
$2.2 million in 1998 from $4.6 million in 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUES. Total revenues increased to $4.8 million in 1997 from $973,000 in
1996. Total subscription-based revenue increased to $3.4 million in 1998 from
$776,000 in 1996, while total advertising revenue increased to $1.1 million in
1997 from $167,000 in 1996. Other revenue increased to $230,000 in 1997 from
$30,000 in 1996. The growth in subscription revenue was primarily attributable
to an increase in the number of subscribers to our PCQuote 6.0 RealTick service
and the private label version of this service. The increase in advertising
revenue was attributable to an increase in the number of visitors to our Web
site, resulting in an increase in advertising page impressions sold. Increases
in co-branding and Web developer business-to-business services contributed to
the increase in other revenue.
DIRECT COST OF REVENUES. Direct cost of revenues increased to $4.2 million
in 1997 from $813,000 in 1996, primarily due to increased royalties,
commissions, payments to providers of market data and communication costs
attributable to growth of our business. Amortization of software development
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costs increased to $550,000 in 1997 from $267,000 in 1996, as a result of
increased Internet development efforts.
GROSS PROFIT. Our gross profit increased to $562,000 in 1997 from $160,000
in 1996.
OPERATING EXPENSES. Total operating expenses increased to $3.8 million in
1997 from $2.1 million in 1996. General and administrative expenses increased to
$2.3 million in 1997 from $1.1 million in 1996. This growth was principally due
to additional personnel and related employee costs required for customer service
and technical support and corporate administration, as well as increased
collection costs and a higher provision for bad debts in connection with the
growth in advertising revenue. Sales and marketing expenses increased to $1.2
million in 1997 from $620,000 in 1996. The increase was due to the hiring of
additional personnel and related costs, coupled with an increase in advertising
and promotional expenditures. Research and development costs decreased to
$254,000 in 1997 from $392,000 in 1996, reflecting a decrease in development
resources required after the launch of our Internet service offerings.
Depreciation expense was $72,000 in 1997. There was no depreciation in 1996. We
switched from leasing to outright purchases in 1997 for a portion of our
equipment needs. Capital acquisitions included computer equipment to support
increased traffic to our Web sites and the growth in subscribers to our PCQuote
6.0 RealTick service and the private label version of this service.
INTEREST EXPENSE. Interest expense increased to $1.3 million for 1997 from
$26,000 in 1996. The increase reflects the substantially higher level of
contributions required from HyperFeed Technologies to fund our operations,
coupled with their significantly higher cost of borrowing in 1997.
NET LOSS. As a result of the factors discussed, our net loss increased to
$4.6 million in 1997 from $2.0 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Since 1995, our operations have been financed by contributions from
HyperFeed Technologies. Cash used in operating activities was $1.3 million in
1996, $3.0 million in 1997 and $898,000 in 1998. For each of these years, cash
was used to support growth. For the three months ended March 31, 1999, cash
provided by operating activities increased to $132,000, as a result of the
reduction of our net loss.
Cash used in investing activities was $1.3 million in 1996, $1.4 million in
1997, $1.3 million in 1998 and $258,000 for the three months ended March 31,
1999. The primary use of cash for investing activities in these periods was for
capital equipment purchases and software development. Equipment purchases of
$432,000 in 1997 and $315,000 in 1998 and $133,000 during the first three months
of 1999 were for computer equipment to support increased traffic to our Web
sites and to support the growth in the number of subscribers to our PCQuote 6.0
RealTick service. Capitalized software development costs decreased from $1.3
million in 1996 to $976,000 in 1997 and $965,000 in 1998. The decrease from 1996
to 1997 was principally due to the completion of the development efforts to
launch our Web sites and service offerings during 1996. Capitalized software
development costs decreased to $126,000 for the three months ended March 31,
1999 from $304,000 for the three months ended March 31, 1998, as a result of
lower development costs related to our new PCQuote Orbit service.
Cash from financing activities, consisting of contributions from HyperFeed
Technologies, were $2.6 million in 1996, $4.4 million in 1997, $2.2 million in
1998 and $126,000 for the first three months of 1999, as compared to $435,000
for the first three months of 1998.
As of December 31, 1998 and March 31, 1999, we did not have a cash balance.
Our current liabilities exceed current assets by $1.7 million as of December 31,
1998 and by $1.8 million as of March 31, 1999. We have no debt and the majority
of our revenues are prepaid with credit cards providing funds for immediate use.
We believe that the net proceeds to us from our public offering will satisfy
our working capital and capital expenditure requirements for at least the next
24 months.
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YEAR 2000 READINESS
OVERVIEW. We have relied on written representations made by HyperFeed
Technologies regarding the Year 2000 readiness of the information technology
systems contributed to us as part of our separation. HyperFeed Technologies has
advised us that it implemented a plan to attempt to assess, remediate and
correct any Year 2000 critical risks relating to our systems.
STATE OF READINESS. HyperFeed Technologies has approached the Year 2000
risks in four phases:
- assessment -- identifying Year 2000 risks;
- remediation -- taking corrective action to best mitigate identified Year
2000 risks;
- testing -- validating a specific remediation effort that we have made or
confirming a third-party capability or certification of Year 2000
compliance; and
- contingency planning -- identifying an alternate course of action and/or
procedure in the event we cannot or fail to remediate or mitigate a known
Year 2000 risk.
HyperFeed Technologies has advised us that it has completed the assessment
phase of our products, information systems and critical suppliers. We are
currently in the remediation and testing phases. This includes verifying Year
2000 compliance of outside vendors and suppliers and testing all mission
critical items. We are currently verifying the Year 2000 compliance of our
outside vendors and suppliers by reviewing reports on their Web sites and in
their periodic filings under the Securities Exchange Act of 1934. We are not
directly contacting our outside vendors and suppliers to obtain assurances as to
the compliance of their systems due to low response rates to earlier efforts to
obtain direct assurances.
Testing also includes all personal computers, routers, modems, phone lines,
Internet service providers, commonly known as ISP's, and production computers,
known as servers, used internally. We are also checking our outbound satellite,
phone companies and ISP's distribution network, in addition to some ISP's that
our customers may use.
On May 1, 1999, HyperFeed Technologies participated in the full "end-to-end"
Year 2000 scenario test sponsored by the Financial Information Forum in
conjunction with the Securities Industry Association. This was an industry-wide
test to provide securities, options and futures exchanges and market data
providers with the ability to test their systems under simulated Year 2000
conditions. Time was essentially moved forward into the Year 2000. HyperFeed
Technologies performed the test on its mission-critical software and hardware
and reported the results to the Financial Information Forum which, in turn,
informed them that they passed. Based on the results of this test, we believe
that these mission-critical systems are currently Year 2000 compliant.
All testing, including internal infrastructure, is scheduled to be completed
by July 31, 1999. We have not started contingency planning because we are
concentrating our efforts on remediation and testing. We believe effective
contingency planning should not begin until after these phases are complete. We
expect to begin comprehensive contingency planning at the start of the third
quarter of 1999. We may or may not engage in contingency planning for individual
subproject components where successful Year 2000 remediation has been validated
through the testing process or other methods.
COSTS. As of March 31, 1999, we have spent $51,000 on Year 2000 remediation
and testing. This includes internal personnel resources, hardware, software and
equipment replacement and upgrades necessary to be Year 2000 compliant. We will
be upgrading various administrative systems that use commercial third-party
software for accounting, billing and customer management. The total remaining
cost of software, replacement equipment and internal resources for remediation
and testing to become Year 2000 compliant is not expected to exceed $250,000.
Based upon currently available information, we do not believe that the cost of
Year 2000 compliance will have a material impact on our financial condition,
results of operations or liquidity.
RISKS. Achieving Year 2000 compliance depends on many factors. Some factors
may be beyond our control because we use services of others. Should our internal
systems or the internal system of one of our critical vendors fail to achieve
Year 2000 compliance and fail in the Year 2000, our business, financial
condition and results of operations could be adversely affected.
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BUSINESS
OVERVIEW
PCQuote.com is an Internet-based provider of real-time financial data,
timely business news and comprehensive tools for researching and analyzing
financial information. Many existing online financial or business Web sites
focus on financial news, quotes or analysis. We combine all of these features
into a comprehensive portfolio of services targeted at investors. Our investor
service offerings consist of two Web sites, WWW.PCQUOTE.COM and
MARKETSMART-REAL.PCQUOTE.COM, and two Internet-enabled desktop applications,
PCQuote 6.0 RealTick and PCQuote Orbit. Our services provide access to
sophisticated and dynamic financial information that allows users to make their
own informed investment decisions. We also offer several business-to-business
services that enable clients to present financial data and information on their
Web sites or desktop applications.
INDUSTRY BACKGROUND
The Internet is experiencing dramatic growth and is an increasingly
important global medium for communication, news, information and commerce. The
Internet allows content providers to deliver information in a manner not
possible with traditional broadcast and print media.
The Company believes the amount of money invested by individuals in
securities is growing. Investors are also taking a more active role in their
investments by directly managing their portfolios, researching information on
investments and trading securities. This growing population of sophisticated
investors is relying more on the Internet to keep abreast of current business
developments, track industry and competitive trends, make informed investment
decisions and manage their financial assets. We believe sophisticated investors
are increasingly willing to pay for access to timely market data and financial
information and analysis tools delivered via the Internet.
According to Forrester Research, at the beginning of 1999, 3.1 million U.S.
households used the Internet as an investing tool. According to International
Data Corporation, the number of online brokerage accounts in the United States
is expected to grow from 3.5 million at the end of 1997 to approximately 24.0
million, representing more than $1.5 trillion in assets, by the end of 2002.
With the emergence and growth of online investing in recent years, there has
also been a dramatic increase in the demand for timely, comprehensive and
accurate financial data and information. According to THE NEW YORK TIMES, 20
million households use the Internet for investment news, quotes and ideas.
Traditional information sources such as newspapers, magazines and
broadcasters are seeking to address this increasing demand for financial
information. However, these sources are limited in their ability to effectively
meet the sophisticated investor's need for timely business information.
Traditional media are limited to a specific location, can deliver only limited
content and do not offer real-time information or the means to interactively
analyze that information. Newspapers and magazines cannot keep pace with the
financial markets due to their publication cycles. Broadcasters are limited in
the depth and availability of their content. Neither source offers its users
analytical tools or the ability to interact with the information source or each
other. By comparison, the Internet allows users, wherever they are, to rapidly
access, search and interact with a rich repository of content.
There are a variety of specialized financial Web sites seeking to address
the growing demand for financial information. Most of these Web sites focus
heavily on either financial news, stock quotes, investment advice or analytical
tools. Few of these sites integrate two or more of these aspects to provide
sophisticated investors with a one-stop source for finding, researching and
analyzing investment options. In addition, there are Internet-enabled desktop
applications that provide real-time quotes, on-line trading or analytical tools.
Few providers combine these Internet services to provide a full-service
destination with information, decision making tools and order execution
capabilities for the online investor.
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Internet advertising permits advertisers to gather demographic information
and direct messages at specific groups of users. It also gives advertisers an
enhanced ability to measure the effectiveness of their advertising. Due in part
to these advantages, Internet advertising is growing rapidly and is projected to
experience significant growth in the future. Simba Information estimates that
worldwide Internet advertising will grow from $2.1 billion in 1998 to $7.1
billion in 2002. Advertisers have come to realize that online investors
represent a highly attractive audience and that the Internet represents a medium
through which they can reach this audience in a focused manner.
As the Internet becomes a more popular medium for gathering, analyzing and
sharing information and the number of sophisticated investors taking an active
role in managing their finances continues to grow, we believe a significant
opportunity exists for a company to provide real-time market data, timely
financial news and comprehensive research and analytical tools via the Internet.
By integrating all of these features, an Internet-based service can provide
sophisticated investors with the financial information they require to make
their own informed investment decisions. By assembling this loyal base of online
investors, a company can create a targeted and demographically attractive
audience for advertisers.
THE PCQUOTE.COM ADVANTAGE
PCQuote.com offers online investors a combination of real-time and delayed
market data, timely worldwide financial and business news provided by CNNFN and
a wide variety of research and analytical tools for researching and analyzing
financial information. These features allow our users to screen, research,
analyze and track their investments online. All of these resources are located
or accessible from one or more of our service offerings and are presented in a
user-friendly manner. We believe that most other Internet-based providers of
financial and business information do not offer the combination of data, news
and research and analytical tools contained within our service offerings.
ADVANTAGES TO OUR USERS
We differentiate ourselves by providing:
- Real-time, accurate financial data -- We use HyperFeed 2000 to deliver
real-time and delayed market data from all North American exchanges on
over 350,000 securities, including stocks, bonds, options, mutual funds,
currencies, indices, over the counter issues and futures. We offer
real-time quotes on our premium, subscription-based site,
MARKETSMART-REAL.PCQUOTE.COM, and real-time streaming quotes via our
desktop applications. Streaming quotes, as they are commonly known,
automatically update as more current data becomes available. We offer 20
minute delayed quotes on our free Web site, WWW.PCQUOTE.COM.
- Financial and business news -- We offer users of our Web sites access to
timely financial news and stories from a variety of sources, including
CNNFN. Our agreement with CNNFN is described in greater detail in "Certain
Transactions."
- Comprehensive research and analytical tools -- We provide users of our
services with a variety of research and analytical tools with which to
analyze market data, enabling them to make informed investment decisions.
Examples of these tools include Stock Analysis, Stock Criteria Search,
Charting, Corporate Profiles, Quote Grid and Scrolling Ticker.
We believe that our ability to provide all of these features in an effective
format differentiates us from other Internet-based providers of financial
information.
ADVANTAGES TO OUR ADVERTISERS
We provide advertisers with a growing, demographically desirable audience.
According to @plan, our third party demographics provider, the number of unique
visitors to our WWW.PCQUOTE.COM Web site grew from approximately 796,000 per
month in their Winter 1999 report (covering the months of July
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to September 1998) to approximately 987,000 per month in their Summer 1999
report (covering the months of January to March 1999). Our visitors are, on
average, more affluent and more likely to use the Web for online shopping than
the visitors to many other financially-oriented Web sites. This results in a
demographic that is more attractive to potential advertisers. Based on surveys
conducted by The Gallup Organization, @plan reports in its Summer 1999 report
that our users and subscribers rank in the top ten of all content Web sites in
the following demographic categories:
- Men with a household income of $50,000 or more
- Men with a portfolio value of $50,000 or more
- Men with a household income of $50,000 or more who have engaged in online
shopping during the past six months
GROWTH STRATEGY
Our objective is to strengthen our position as an Internet-based provider of
real-time financial data, timely business news and comprehensive tools for
researching and analyzing financial information. We intend to achieve our
objective by pursuing the following key strategies:
BUILD BRAND AWARENESS TO ATTRACT ADDITIONAL TRAFFIC. We believe that
increased brand awareness is critical to differentiating ourselves and
attracting additional traffic and subscribers. We intend to use a portion of our
net proceeds from this offering to significantly increase our marketing
activities in order to increase our brand awareness and visibility among both
Internet users and online advertisers. We will aggressively advertise in print,
broadcast and online media and use our business-to-business relationships to
provide links to our Web sites. These marketing and brand building efforts are
intended to increase our subscriber base and enable us to significantly grow our
advertising base.
CAPITALIZE ON USER DEMOGRAPHICS ATTRACTIVE TO ADVERTISERS. We believe our
Web sites attract users who are highly desirable to companies that advertise
online. According to @plan, many of our users are affluent, male investors and
approximately 57% of them have shopped online in the past six months. We intend
to increase the size of our advertising sales force in order to capitalize on
this highly desirable user base.
CREATE UP-SELL OPPORTUNITIES THROUGH OUR SERVICE OFFERINGS. Our various
levels of service offerings provide online investors the opportunity to upgrade
from one service to the next as their investment goals and needs evolve. We
offer free content, including delayed market quotes, charts and portfolios, on
WWW.PCQUOTE.COM. We offer real-time, snapshot quotes on our subscription-based
MARKETSMART-REAL.PCQUOTE.COM site. We also offer premium desktop services for
sophisticated investors requiring streaming, real-time quotes and other
real-time information and analysis. We intend to promote our ability to offer a
range of solutions in order to create up-sell opportunities for each user. The
free content on our WWW.PCQUOTE.COM site is key to this strategy by building
traffic and thereby broadening our base of potential subscribers to our
fee-based services.
LEVERAGE STRATEGIC RELATIONSHIPS WITH PROVIDERS OF GLOBAL FINANCIAL NEWS AND
OTHER CONTENT AND SERVICES. CNNFN is a leading provider of global financial and
business news both on and off the Web. Through a strategic relationship with
CNNFN, we offer users of our Web site access to timely news, headlines and
stories published by CNNFN. Our relationship with HyperFeed Technologies allows
us to use HyperFeed 2000, a real-time market data feed, to offer timely and
accurate quotes to the sophisticated investor. We plan to enter into
relationships with other providers of content and services and to leverage these
relationships to differentiate ourselves as a single source solution for online
investors.
EXPAND OUR WEB SITES AS COMPREHENSIVE FINANCIAL INFORMATION
DESTINATIONS. We are continually expanding and enhancing WWW.PCQUOTE.COM and
MARKETSMART-REAL.PCQUOTE.COM so that users can satisfy their financial and
investing information needs without leaving our sites. For example, we plan to
add
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<PAGE>
new personalization and community features, such as online discussion forums
where investors will be able to question top financial traders, managers and
journalists, post messages and read the opinions of others. We intend to provide
the type of informative and entertaining on-line experience sought by our users
and thereby expand their involvement with us.
MAINTAIN OUR SUPERIOR TECHNOLOGICAL PLATFORM. We intend to continue to
expend substantial capital and other resources developing, acquiring and
implementing technology-driven enhancements to our Web sites and other services,
including those related to HyperFeed 2000. Our intuitive user interface and
desktop services enable our users to navigate easily through an environment rich
in information. For advertisers, our systems permit the tracking and parsing of
valuable demographic information regarding the users of our Web sites. In order
to allow for our anticipated expansion in content and service offerings, we plan
to invest in the necessary back-end production systems and infrastructure, such
as hardware, software, Internet bandwidth and Web hosting facilities.
PCQUOTE.COM SERVICES
Our services consist of comprehensive financial information and market data
combined with analytical tools that can be used by both individual investors and
businesses. Our various levels of service offerings complement each other by
providing online investors the opportunity to upgrade from one service to the
next as their investment goals and needs evolve. In addition, our service
offerings have been developed to use a common data feed and infrastructure. Our
desktop applications provide links to our Web sites.
INVESTOR SERVICES
We offer a range of services designed to meet the needs of individual
investors, regardless of their level of sophistication or information
requirements. Our investor service offerings consist of two Web sites,
WWW.PCQUOTE.COM and MARKETSMART-REAL.PCQUOTE.COM, and two Internet-enabled
desktop applications, PCQuote 6.0 RealTick and PCQuote Orbit. Our desktop
services offer the added benefit of faster data download time, enabling the
delivery of streaming quotes and a host of other real-time applications.
WEB SITES
<TABLE>
<CAPTION>
SERVICE DESCRIPTION PRICE
<S> <C> <C>
WWW.PCQUOTE.COM Provides access to delayed quotes, as Free
well as financial and business news
and a full array of research and
analytical tools.
MARKETSMART-REAL.PCQUOTE.COM Provides access to real-time quotes, $9.95 per month, plus exchange fees
as well as the financial and business
news and research and analytical tools
that are available on WWW.PCQUOTE.COM.
</TABLE>
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WWW.PCQUOTE.COM. WWW.PCQUOTE.COM is our free Web site and also serves as
the primary marketing and promotions engine for the rest of the services we
provide. WWW.PCQUOTE.COM provides the following tools and information:
Delayed Quote Tools--We use HyperFeed 2000 as the source of all of the raw
data presented on WWW.PCQUOTE.COM. This site includes a variety of tools
that can be used to manipulate the raw financial data:
- DETAILED QUOTE allows users to request equity, commodity, option,
mutual and money market fund and bond quotations by ticker symbol.
- MULTIPLE QUOTE allows users to request quotations for up to five ticker
symbols at one time.
- PORTFOLIO enables users to track up to five portfolios containing up to
ten securities each.
- MARKETS AT A GLANCE provides a basic overview of various market
indices, including their current position and net change for the day.
- DETAILED INDICES provides a detailed list of, and quotations for, the
individual securities underlying various indices.
- TOP TEN allows users to view the top ten gainers, losers and most
active stocks on the primary exchanges in North America.
- FUTURES offers market quotations from various futures and commodities
exchanges.
- OPTIONS STRINGS shows relative prices for all options related to a
particular security.
- FUNDS provides information with respect to the various mutual funds
within a particular fund family.
- SYMBOL SEARCH enables investors to enter a company's name and receive
the matching ticker symbol.
News--We provide users access to timely financial news and stories:
- CNNFN headlines are provided through a license from CNNFN and gives
users access to timely financial and business news headlines and
stories published by CNNFN.
- WIRE-BASED NEWS offers users access to press releases and other
wire-based news provided by COMTEX Scientific Corporation, including
feeds from PR Newswire, Business Newswire, M2 Communications and UPI
Spots.
Research and Analytical Tools--We allow users to research and analyze market
quotations with tools and information from a variety of sources:
- STOCK ANALYSIS is available through our relationship with VectorVest,
Inc. and provides users access to three free VectorVest analysis
reports per day.
- STOCK CRITERIA SEARCH is provided through our relationship with IQC,
Inc., and enables users to run search queries on various stocks that
fit user-defined investment criteria. Queries can be based on such
factors as industry, price/earnings ratio and dividend history.
- CHARTING is provided by IQC and allows users to display historical and
intra-day charts for publicly traded securities and all major indices.
- EARNINGS ANALYSIS AND REPORTING TOOLS gives users access to consensus
earnings estimates and other earnings-related reports provided by Zacks
Investment Research.
- CORPORATE PROFILES is provided by MarketGuide and gives users access to
corporate profiles for most publicly traded companies.
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- THE IPO RESOURCE CENTER is provided by IPO.com and gives users the
ability to research initial public offerings, monitor the post-offering
performance of IPOs, search filings made with the SEC and receive news
stories about upcoming IPOs.
- THE WEATHER CENTER presents worldwide weather information aimed at
commodities traders and is provided by Strategic Weather Services for a
nominal fee.
- COMMODITY NEWSLETTERS enables users to receive analyses of different
commodities and is provided by the Hightower Report for a nominal fee.
MARKETSMART-REAL.PCQUOTE.COM. MARKETSMART-REAL.PCQUOTE.COM is our
subscription-based Web site and provides real-time, snapshot market quotations,
along with all of the news, research and analytical tools available on
WWW.PCQUOTE.COM. This site is targeted toward a more sophisticated investor than
is WWW.PCQUOTE.COM and uses sparse graphics, text indices and creative
advertising to speed download times and give users faster access to the site's
content. MARKETSMART-REAL.PCQUOTE.COM can be accessed from WWW.PCQUOTE.COM.
To complement the enhanced nature of real-time market quotations available
on MARKETSMART-REAL.PCQUOTE.COM, we plan to enter into relationships with
content and service providers to offer additional real-time research and
analytical tools. We believe these tools will provide our users with enhanced
investment decision-making capabilities and will further attract new
subscribers.
DESKTOP SERVICES
<TABLE>
<CAPTION>
SERVICE DESCRIPTION PRICE
<S> <C> <C>
PCQUOTE 6.0 REALTICK Provides real-time streaming quotes via a $75 to $455 per month, plus exchange fees
desktop application with order execution
capability and analytical tools
PCQUOTE ORBIT Provides real-time streaming quotes via a $55 per month, plus exchange fees
desktop application and analytical tools
</TABLE>
PCQUOTE 6.0 REALTICK. PCQuote 6.0 RealTick is a professional-quality,
NASDAQ level II, real-time quote system that offers users reliable, streaming
real-time market data for all North American equities and options. PCQuote 6.0
RealTick empowers sophisticated investors by giving them the freedom to decide
how and when to trade on a daily basis. This service is online trading-enabled
and offers order execution capabilities through participating broker-dealers.
Orders can be sent directly from the user's desktop to a participating
broker-dealer for execution.
PCQuote 6.0 RealTick offers desktop versions of the quote tools available on
WWW.PCQUOTE.COM. These tools are similar to those offered on our Web sites, but
work with our streaming, real-time data. In addition, PCQuote 6.0 RealTick
offers all or a portion of the following tools depending on the monthly fee paid
by the user:
- QUOTE GRID enables users to create a grid of ticker symbols that displays
market quotations, such as high, low, bid, ask, last and close.
- SCROLLING TICKER enables users to display current prices and daily changes
of selected stocks on a digital ticker tape that scrolls across their
screen.
- NASDAQ LEVEL II SCREENS provides users with access to broker quotations.
- CHARTING provides high-end, tick by tick technical analysis and is
completely customizable.
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- TECHNICAL ANALYSIS enables users to make use of a variety of technical
analysis formulas.
- MARKET GUIDE provides users with access to a selected, publicly-traded
company's financial and other corporate information, such as income
statements, balance sheets and contact information.
- NEWS is provided by Dow Jones and COMTEX and allows access to news stories
via a scrolling headline ticker or by keyword search.
- ALARMS enables users to set customizable alerts for one or more tickers
with a variety of parameters, such as volume, price, highs and lows.
We also offer private label versions of PCQuote 6.0 RealTick for
distribution by third parties to their customers. For example, A.B. Watley,
Inc., our largest customer, markets a private label version of PCQuote 6.0
RealTick called AB Watley Ultimate Trader. Users of this application can monitor
and research their investments similar to a PCQuote 6.0 RealTick user.
PCQUOTE ORBIT. PCQuote Orbit, expected to be launched in Summer 1999, was
developed to bridge the gap between MARKETSMART-REAL.PCQUOTE.COM and PCQuote 6.0
RealTick. PCQuote Orbit provides subscribers with streaming, real-time market
quotations delivered via an Internet-enabled desktop application. It provides
users with the benefits of working with a desktop application at a lower price
than many other desktop applications. PCQuote Orbit allows users access to
streaming real-time quotes and more complex research and analytical tools than
are currently available through our Web sites, because the only data we provide
over the Internet are the market quotations themselves. The analytical tools
reside within the desktop application.
PCQuote Orbit offers desktop versions of the quote tools available on
WWW.PCQUOTE.COM working with our streaming, real-time data. In addition, PCQuote
Orbit offers Quote Grid and Scrolling Ticker.
BUSINESS TO BUSINESS SERVICES
We offer several business-to-business services for clients that want to
present financial data or information on their own Web sites or desktop
applications.
<TABLE>
<CAPTION>
SERVICE DESCRIPTION PRICE
<S> <C> <C>
WEB TEMPLATE Provides access to delayed or real-time $250 to $2,000 per program per month
quotes and research and analysis tools
HYPERSCRIPT Provides developer access to quotes from $125 to $1,000 per month, plus exchange fees
HyperFeed 2000 via the Web
PCQUOTE SOFTWARE Allows software developers to code delayed $500 for a three month license
DEVELOPMENT KIT market data into their own software or
Web-based applications
</TABLE>
WEB TEMPLATE. Web Template allows users to create their own "private label"
Web sites with many of the features of our own Web sites. Using standard
templates, the actual Web pages that house the data applications are hosted at
PCQuote.com and accessed by the client through a simple series of links over the
Web. All servers are maintained and serviced by us. Similar to WWW.PCQUOTE.COM,
our clients are able to offer the following tools: Detailed Quote, Multiple
Quote, Portfolio, Markets at a Glance, Detailed Indices, Top Ten and Option
Strings. We also offer access to third-party research and analysis. We have
entered into agreements to allow business-to-business clients access to charting
and wire-based news for an additional fee.
As of June 1999, The New York Times was our largest Web Template customer
based on revenue. The New York Times subscribes to Web Template in order to
offer a series of quote services to its
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users. By using Web Template, The New York Times was able to create a financial
area within its Web site and provide its readers with financial quotes and tools
without any development or maintenance on its part.
HYPERSCRIPT. Hyperscript is a proprietary development tool used to create
data-rich Web sites and Internet-based market data applications. Hyperscript
allows users to develop their own applications using HyperFeed 2000 data. Using
standard development techniques to access data and present it on third-party Web
sites, Hyperscript makes development of complex data applications a simple task.
Customers can subscribe to Hyperscript for either limited or unlimited access to
data. For example, Pfizer, Inc. uses Hyperscript to create a customized,
graphical image of its current stock price on its Web site at WWW.PFIZER.COM.
PCQUOTE SOFTWARE DEVELOPMENT KIT AND QUOTESOCKETS. PCQuote SDK allows
third-party software developers to code delayed or real-time market data into
their own software or Web-based applications. Developers use this service to
create an interface to view market data and then codes HyperFeed 2000 data into
the application. Once completed, developers become subscribers to Quotesockets,
our related subscription plan, with monthly fees for access to delayed or
real-time data. The developers then have the ability to market the product it
has developed. Our current pricing for Quotesockets is $39 per month for delayed
data and $135 per month for real-time data.
Omega Pro Suite, Omega Research's desktop application, uses PCQuote SDK and
Quotesockets to obtain real-time data. Omega Pro Suite is used primarily by
individual investors for technical analysis and charting. The end-user pays
Omega Research a fee to use the application and pays us a monthly fee for the
market data. In order to activate the data portion of the developer's
application, the end-users must subscribe to the Quotesockets service through
PCQuote.com.
STRATEGIC AND OTHER RELATIONSHIPS
We believe that our relationships with CNNFN, HyperFeed Technologies and
Townsend Analytics help us to differentiate ourselves as a single-source
solution for online financial information. See "Certain Transactions" for a more
complete description of our agreements with CNNFN and HyperFeed Technologies.
CNNFN
Through a strategic relationship with CNNFN, we provide access to timely
global business news and stories regarding the financial markets and other areas
of interest to our users. CNNFN headlines appear on the front pages of our Web
sites and are continously updated throughout the trading day. Our agreement with
CNNFN contains an exclusivity provision that prohibits CNNFN from licensing
CNNFN headlines to our direct competitors, subject to several exceptions.
HYPERFEED TECHNOLOGIES
Through our relationship with HyperFeed Technologies, we use HyperFeed 2000
to offer timely and accurate market data on our Web sites and other services.
HyperFeed 2000 is HyperFeed Technologies' newest generation data feed. It
delivers real-time and delayed market data from all North American exchanges on
more than 350,000 securities, including stocks, bonds, options, mutual funds,
currencies, indices, over the counter issues and futures. In addition, we
license PCQuote Orbit and Quotesockets from HyperFeed Technologies. HyperFeed
Technologies provides us with various administrative services and technical and
operational support.
TOWNSEND ANALYTICS
Through our relationship with Townsend Analytics, we license the right to
use a software application that we market as PCQuote 6.0 RealTick. We also
sublicense private label versions of this
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<PAGE>
application. Our license agreement with Townsend Analytics is for an initial
term ending December 4, 2000 and provides for automatic one-year renewals unless
either party delivers a notice of nonrenewal 90 days prior to the termination
date.
SALES AND MARKETING
To date, we have not spent significant amounts marketing our services to a
broad audience. We intend to use approximately $8 million of our net proceeds
from this offering to aggressively market and promote our Web sites and other
service offerings in a variety of traditional and online media, including:
- Web sites, including content providers, online newspapers, search engines
and portals;
- financial, business and other publications; and
- radio and television.
In addition, our marketing efforts may include establishing advertising or
business-to-business relationships with leading Web sites, developing brand
extensions and engaging in ongoing media relations. We also intend to increase
the size of our team of in-house customer service representatives to provide our
users and subscribers with the highest level of service possible.
We believe that our marketing efforts will enable us to build brand
awareness and increase traffic to our Web sites. This is intended to create a
ready source of potential subscribers for our services and a large,
demographically desirable audience for our advertisers. We believe that our
varied service offerings provide us with the opportunity to derive increased
revenues from multiple sources, including subscriptions, advertising and
business-to-business services.
SUBSCRIPTION SALES
We offer a series of Web and Internet-enabled desktop services on a
subscription basis. Our broad range of services gives us multiple up-sell
opportunities by allowing our users to upgrade to enhanced levels of service as
their expertise, information needs and interest in investing grows. We believe
that a key component of this strategy is to build traffic on our WWW.PCQUOTE.COM
Web site, thereby broadening our base of potential subscribers. We currently
market our subscription services to investors through a variety of channels,
including the Web, telemarketing and traditional media advertising campaigns.
Certain services, including our subscription-based, business-to-business
services, are marketed by a sales staff that is contracted from HyperFeed
Technologies, as well as by our own sales staff. We pay a sales commission to
HyperFeed Technologies for these sales. Our business-to-business target clients
include online brokerages, content aggregation Web sites, large content owners,
community-based portal sites and desktop or online software developers.
As our service offerings continue to grow, we intend to build a larger, more
specialized sales team to meet the needs of our users, subscribers and
business-to-business clients. We also plan to promote online registration and
self-service where applicable.
Our largest customer, A.B. Watley, a private label redistributor of PCQuote
6.0 RealTick, accounted for 11.1% of our total revenues in 1998 and 15.8% of our
total revenues in the three months ended March 31, 1999. No other customer
accounted for more than 2.3% of our revenues in either period.
ADVERTISING SALES
Advertisements are displayed throughout our Web sites. We have established a
demographically desirable user base that has enabled us to build a growing base
of online advertisers. In order to attract new users and further develop a loyal
audience that appeals to a broad range of advertisers and
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<PAGE>
business-to-business customers, we plan to offer improved, expanded content and
features, such as commentary on options, e-mailed financial updates and news
searches, and conduct aggressive branding and promotional campaigns.
We believe that a direct advertising sales force allows us to better
understand and meet advertisers' needs, to increase our access to potential
advertisers and to maintain strong relationships with our existing advertising
clients. We plan to develop and expand our direct sales force to attract a
greater number of advertisers and better meet the needs of existing advertisers.
In 1998, approximately 70 companies advertised on our Web sites. In the
first quarter of 1999, approximately 43 companies advertised on our Web sites.
While many of our advertisers in the past have been from the financial services
industry, we recently have attracted advertisers from outside of this industry.
As of April 1999, advertisers on our Web site with the greatest number of page
impressions per month were as follows:
<TABLE>
<CAPTION>
FINANCIAL SERVICES
ADVERTISERS OTHER ADVERTISERS
- --------------------------- --------------------------------
<S> <C>
- - Datek Online - About.com
- - Discover Brokerage - CareerBuilder.com
- - DLJdirect - Gateway 2000
- - Fidelity Investments - Hewlett-Packard
- - Mr. Stock - IBM
- - TheStreet.com - Microsoft Home Advisor
- Oracle
</TABLE>
Advertising on our Web sites ranges in price depending on the type and level
of placement provided, including whether the arrangement is based on impressions
or click-throughs. DoubleClick provides us with advertising management and
delivery services and provides our advertisers with reports describing the
delivery of their advertisements.
COMPETITION
An increasing number of financial data and information sources compete for
consumers' and advertisers' attention and spending. We expect this competition
to increase. The market for Internet services and products is relatively new,
intensely competitive and rapidly changing. The number of Web sites on the
Internet competing for consumers' attention and spending has proliferated and we
expect that competition will continue to intensify. We compete, directly and
indirectly, for advertisers, viewers, subscribers and content providers with the
following categories of companies:
- Web sites targeted to business, finance and investing needs, such as
CBS.Marketwatch.com, TheStreet.com, The Motley Fool and Quote.com;
- Web portals, such as EXCITE.COM, INFOSEEK.GO.COM, LYCOS.COM, YAHOO.COM,
and other high-traffic Web sites that offer quotes, financial news and/or
other programming, as well as links to business and finance related Web
sites;
- proprietary online services, such as America Online and Microsoft Network,
that provide access to financial and business-related content and
services;
- online brokerage firms, such as Charles Schwab and E*TRADE, many of which
provide financial and investment news and information;
- providers of terminal-based financial news and data, such as Bloomberg
Business News, Reuters News Service, Dow Jones Markets and Bridge News
Service; and
- publishers and distributors of traditional media, including television,
radio and print, such as CNNFN, CNBC, Marketplace on National Public Radio
and The Wall Street Journal.
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<PAGE>
Our ability to compete depends on many factors, including the timeliness,
comprehensiveness and trustworthiness of our content, the ease-of-use of our
services and the effectiveness of our sales and marketing efforts. We believe
our services compare favorably with those of our competitors.
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
Our technological infrastructure is built and maintained for reliability,
security and flexibility. We host our servers at two distribution centers in
Chicago, Illinois. We use load balancing technology to distribute user traffic
to available servers at either of the two sites. This combined with built-in
excess capacity at both sites allows each site to operate as a backup for the
other site. We intend to expand our excess capacity, from time to time, as
necessary to maintain a 50% load level at each site. In the event one site
experiences an outage due to an ISP or other failure, traffic is seamlessly
serviced by the other site. We also use multiple high speed paths to receive
data at these two sites and we have two ISPs for distribution to our users.
INTELLECTUAL PROPERTY
We rely primarily on a combination of trademark and trade secret law and
restrictions on disclosure to protect our intellectual property, such as our
content, trademarks, trade names and trade secrets. We do not currently have any
registered trademarks or copyrights. Depending on the level of access to
information we consider to be confidential, we enter into confidentiality
agreements with our employees, consultants and third parties with whom we enter
into business relationships, and seek to control access to and distribution of
our proprietary information. We cannot be sure that these precautions will
prevent misappropriation or infringement of our intellectual property. We also
license technology from third parties, such as software from Townsend Analytics
and DoubleClick, and data and content from third parties. Under these license
agreements, the licensors generally agree to indemnify us with respect to any
claim by a third party that the licensed software or content infringes any
person's proprietary rights. In the future, we may seek to license additional
technology or content in order to enhance our current features or to introduce
new services, such as the online discussion forums we may introduce.
EMPLOYEES
As of March 31, 1999, we had 37 full time employees. No personnel are
represented under collective bargaining agreements. We consider our employee
relations to be good.
FACILITIES
Our principal administrative, sales, marketing and research development
facilities are located in approximately 8,000 square feet of office space in
Chicago, Illinois. This office space is provided to us by HyperFeed
Technologies. HyperFeed Technologies' lease expires on December 31, 2004, unless
renewed. We anticipate relocating or expanding our space due to increased
requirements resulting from our expected growth.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information regarding the executive
officers, directors, director designees and key employees of PCQuote.com:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Jim R. Porter............................... 59 Chief Executive Officer and Chairman
Timothy K. Krauskopf........................ 36 President, Chief Operating Officer and Director
Andrew N. Peterson.......................... 47 Chief Financial Officer and Secretary
Stephen F. Rawls............................ 47 Vice President, Interactive Operations
David C. Kahl............................... 39 Vice President of Sales and Marketing
Thomas F. Cunningham........................ 39 Vice President of Technical Services
Matthew M. Rees............................. 25 Director of Web Services
John R. Hart................................ 39 Director
John E. Juska............................... 44 Director
Ronald J. Grabe (1)......................... 53 Director Designee
Francis J. Harvey (1)....................... 55 Director Designee
James R. Quandt (1)......................... 49 Director Designee
</TABLE>
- ------------
(1) Messrs. Quandt, Grabe and Harvey have been designated to become members of
our Board of Directors.
JIM R. PORTER has served as our Chief Executive Officer and Chairman since
March 1999. Mr. Porter is currently serving as HyperFeed Technologies' Chairman,
a position he has held since October 1997, and Chief Executive Officer, a
position he has held since July 1997. Since 1993, he has been the President and
Chief Executive Officer of New Century Investment Research & Management, Inc.
From 1990 to 1993, he was an associate of Chicago Research & Trading, Inc., a
commodity trading firm. From 1979 to 1990, Mr. Porter was a principal and Chief
Executive Officer of First Options of Chicago, Inc., a securities, futures and
options clearing firm, and a partner of Spear Leeds & Kellogg, a specialist firm
on the New York Stock Exchange.
TIMOTHY K. KRAUSKOPF has served as our President and Chief Operating Officer
since April 1999 and has been a member of our Board of Directors since March
1999. He has served as a director of HyperFeed Technologies since September
1997. Mr. Krauskopf will resign as a director of HyperFeed Technologies as of
the closing of this offering. From 1997 to 1999, Mr. Krauskopf was the Head of
Information Services at the Field Museum of Natural History in Chicago,
Illinois. From 1990 to 1997, Mr. Krauskopf held a number of positions at
Spyglass, Inc., a company he co-founded, including Vice President of Research
and Development and Chief Technology Officer. Mr. Krauskopf currently serves as
a director of Spyglass. Spyglass commercialized and marketed the Mosaic Internet
browser developed at the University of Illinois.
ANDREW N. PETERSON has served as our Chief Financial Officer since April
1999 and as Secretary since May 1999. From April 1997 to October 1998, Mr.
Peterson served as Chief Financial Officer of TRO Learning, Inc., a
publicly-held developer of educational software. From May 1995 to December 1996,
he served as Chief Financial Officer of TSR, Inc., a privately-held publisher of
games and books. From 1986 to 1994, Mr. Peterson served as the Chief Financial
Officer of Duplex Products, Inc., a publicly-held manufacturer of business
forms.
STEPHEN F. RAWLS has served as our Vice President, Interactive Operations,
since April 1999. From February 1998 to April 1999, Mr. Rawls was Vice
President, Marketing, for HyperFeed Technologies. From 1995 to 1998, Mr. Rawls
held a number of Internet-related positions for Ameritech Corp. From
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<PAGE>
1991 to 1995, he served as Vice President of FutureSource, a financial data
provider, and was responsible for international business development.
DAVID C. KAHL has served as our Vice President of Sales and Marketing since
July 1999. From 1986 to 1999, Mr. Kahl held a number of positions at Gartner
Group, Inc., including Vice President & Program Director of the IT Executive
Program and Regional Sales Manager. From 1984 to 1986, he was a sales
representative for the Hewlett-Packard Company.
THOMAS F. CUNNINGHAM has served as our Vice President of Technical Services
since June 1999. From February 1998 to April 1999, Mr. Cunningham was Director
of Quality Assurance for INSO Corporation, a provider of software document
management tools. From July 1997 to February 1998, he was an independent quality
assurance consultant. From May 1995 to July 1997, he served as Director of
Software Development and Manager of Quality Assurance for Spyglass, Inc. From
1990 to 1995, Mr. Cunningham was Head of Technical Quality Assurance for
Josten's Learning Corp, Inc., a publisher of the Compton's Multi-Media
Encyclopedia. From 1987 to 1990, he was a Senior Quality Assurance Specialist
for Mitchell International.
MATTHEW M. REES has served as our Director of Web Services since April 1999.
From April 1998 to April 1999, he served as Product Manager of the Web site.
From June 1997 to April 1998, Mr. Rees served as Account Manager for HyperLOCK
Technologies, a Web based cryptography firm. From May 1996 to June 1997, Mr.
Rees served as Interactive Producer for four Web sites at Spiegel, Inc. From
September 1994 to October 1995, he consulted as an Interactive Media Producer
and Art Director for the University of Illinois Department of Music.
JOHN R. HART has served as a member of our Board of Directors since May
1999. He has been a director of HyperFeed Technologies since 1997. He has been
President, Chief Executive Officer and a director of PICO Holdings. Inc., a
publicly held holding company since November 1996. He has also served as
President and Chief Executive Officer since 1995 and as a director since 1993 of
Physicians Insurance Company of Ohio. Mr. Hart also served as President and
Chief Executive Officer of Global Equity Corporation, an international
investment and operating company, since 1995, and as President of Quaker
Holdings Limited, an investment company since 1991. From 1982 to 1991 he served
as Principal of Detwiler, Ryan & Company Inc., an investment bank.
JOHN E. JUSKA has served as a member of our Board of Directors since March
1999. He currently serves as the Chief Financial Officer of HyperFeed
Technologies, a position he has held since July 1997. From 1994 to July 1997,
Mr. Juska served as Vice President and Chief Financial Officer for the Chicago
Mercantile Exchange. From 1986 to 1994, Mr. Juska served in various positions
for the Chicago Mercantile Exchange, including Controller and Vice President of
Finance.
RONALD J. GRABE is designated to become a member of our Board of Directors.
Mr. Grabe currently serves as Senior Vice President and Deputy General Manager,
Launch Systems Group, Orbital Sciences Corporation, a position he has held since
1996. From 1994 to 1996, he served as Vice President, Business Development,
Launch Systems Group, Orbital Sciences Corporation. From 1983 to 1993, Mr. Grabe
served in various positions at the National Aeronautics and Space
Administration, including Commander for Space Shuttle Mission STS-57
(1992-1993), Chief Operational Evaluator of Russian Soyuz Spacecraft (1992),
Commander, Space Shuttle Mission STS-42 (1990-1992) and Lead Astronaut Space
Station Development (1989-1991).
FRANCIS J. HARVEY is designated to become a member of our Board of
Directors. Dr. Harvey currently serves as an independent consultant for various
companies. From 1969 to 1997, Dr. Harvey served in various positions at
Westinghouse Electric Corporation, most recently as Chief Operating Officer,
Industries and Technology Group (1996-1997), President, Electronic Systems
(1995-1996), President, Government and Environmental Services Co. (1994-1995),
Vice President, Science and Technology Center (1993-1994) and General Manager,
Marine Division (1986-1993). Dr. Harvey currently serves as a director of GTS
Duratek, Inc. and IT Group, Inc.
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<PAGE>
JAMES R. QUANDT is designated to become a member of our Board of Directors.
Mr. Quandt currently serves as a Partner and Managing Director of Korn/Ferry
International, an executive search firm, a position he has held since August
1998. From February 1996 to August 1998, he served as President and Chief
Executive Officer of National Telephone & Communication, Inc., a
telecommunications firm. From February 1995 to January 1996, Mr. Quandt served
as Chairman of the Board of Bridge Information Systems, Inc., a privately held
group of companies in the financial information and technology industry. Mr.
Quandt served as President of Standard & Poors Financial Information Services
from 1991 to 1995.
We plan to appoint two additional independent directors within 90 days after
the closing of this offering. Directors are elected by the stockholders at each
annual meeting of stockholders or until their successors are duly elected and
qualified.
All executive officers are appointed by, and serve at the discretion of, our
Board of Directors.
BOARD COMMITTEES
We intend to establish an Audit Committee and a Compensation Committee
comprised of independent directors. Our Audit Committee will have the
responsibility of reviewing our audited financial statements and accounting
practices. This committee will consider and recommend the employment of
independent accountants and approve fee arrangements with them for both audit
functions and for advisory and other consulting services. The Compensation
Committee will review and approve the compensation and benefits for our key
executive officers, administer our employee benefit plans and make
recommendations to the full Board of Directors regarding these matters.
DIRECTOR COMPENSATION
We reimburse our directors for all reasonable out-of-pocket expenses
incurred in connection with their attendance at Board and Board committee
meetings. Members of our Board of Directors are eligible to participate in our
1999 Combined Incentive and Non-statutory Stock Option Plan. On the same day as
each annual meeting of our stockholders, we intend to grant each non-employee,
independent director a fully vested option to purchase 5,000 shares of our
common stock at the then-current market price if he has served continuously as a
member of the Board of Directors since the date of the previous annual meeting.
In addition, we intend to grant each of our non-employee, independent directors
a fully vested option to purchase 5,000 shares of our common stock on the
effective date of this prospectus, having an exercise price equal to the initial
public offering price. Each of Messrs. Grabe, Harvey and Quandt will receive
this initial grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to this offering, our Board of Directors did not have a Compensation
Committee and all compensation decisions were made by the full Board of
Directors. Upon completion of this offering, it is intended that the
Compensation Committee will make all compensation decisions. No interlocking
relationship exists between the Board of Directors or Compensation Committee and
the Board of Directors or Compensation Committee of any other company, nor has
any such interlocking relationship existed in the past.
EXECUTIVE COMPENSATION
We were incorporated in March 1999 and, therefore, had no executive officers
as of the end of 1998. Effective April 1, 1999, we began paying Jim R. Porter,
our Chief Executive Officer, a base salary of $90,000 per year. Mr. Porter has
an arrangement with us under which he is required to devote only one-half of his
business time to our business. He will devote the remaining one-half of his
business time to HyperFeed Technologies. We have three executive officers, other
than our Chief Executive Officer, who we expect will earn more than $100,000
annually. Effective April 28, 1999, we began
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<PAGE>
paying Timothy K. Krauskopf, our President and Chief Operating Officer, a base
salary of $150,000 per year. Effective April 28, 1999, we began paying Andrew N.
Peterson, our Chief Financial Officer and Secretary, a base salary of $175,000
per year. Effective April 1, 1999, we began paying Stephen F. Rawls, our Vice
President, Interactive Operations, a base salary of $100,000 per year. Effective
June 21, 1999, we began paying Thomas F. Cunningham, our Vice President of
Technical Services, a base salary of $120,000 per year. Effective July 19, 1999,
we will begin paying David C. Kahl, our Vice President of Sales and Marketing, a
base salary of $150,000 per year.
EMPLOYMENT AGREEMENT
We have entered into an employment agreement with Andrew N. Peterson. Under
the employment agreement, Mr. Peterson will be paid an annual base salary of
$175,000. The employment agreement can be terminated by either party at any
time, subject to the terms of the agreement. If we terminate Mr. Peterson
without cause or if he voluntarily terminates his employment for specified
reasons, we will be required to pay him all of his accrued base salary and
continue to pay him his base salary for twelve months following the termination.
If we terminate him for cause or if he voluntarily terminates his employment
other than for the reasons described above, we will not be obligated to pay any
continuation of base salary.
The employment agreement also contains provisions governing the benefits
payable to Mr. Peterson if there is a change in control of PCQuote.com. If Mr.
Peterson is terminated by us or our successor, other than for cause, within six
months after a change in control or if he voluntarily terminates his employment
for the reasons described above within six months after the change in control,
we are required to pay him an amount equal to his annual base salary. This
employment agreement contains confidentiality and nonsolicitation obligations
and a one-year covenant not to compete.
1999 COMBINED INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN
Our 1999 Combined Incentive and Non-statutory Stock Option Plan was adopted
in May 1999. There are 1,538,600 shares of common stock reserved for issuance
under this plan. The plan terminates in September 2009, unless terminated sooner
by our Board of Directors. The plan authorizes the award of options and
restricted stock purchase rights.
The plan will be administered by our Board of Directors or a committee
appointed by our Board of Directors. The administrator has the authority to
interpret the plan, grant awards and make all other determinations necessary to
administer the plan.
The plan provides for the grant of both incentive stock options, commonly
called ISOs, that qualify under Section 422 of the Internal Revenue Code, and
nonqualified stock options, commonly called NQSOs. ISOs may be granted only to
our employees or employees of a parent or subsidiary. NQSOs and restricted stock
purchase rights may be granted to our employees, directors and consultants.
Generally, the exercise price of ISOs must be at least equal to the fair market
value of our common stock on the date of grant. Any grant of an ISO to a holder
of 10% or more of our outstanding shares of common stock must have an exercise
price of at least 110% of the fair market value of our common stock on the date
of grant. The exercise price of NQSOs must be at least equal to 85% of the fair
market value of our common stock on the date of grant. Options granted under the
plan have a maximum term of ten years. Awards granted under the plan may not be
transferred other than by will or by the laws of descent and distribution. They
generally also must be exercised during the lifetime of the optionee only by the
optionee.
Options granted under the plan generally expire three months after the
termination of the optionee's service, except in the case of death or
disability, in which case the options generally may be exercised up to twelve
months following the date of death or termination of service. If PCQuote.com is
dissolved or liquidated or has a "change in control" transaction, outstanding
awards may be assumed or
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substituted by the successor corporation, if any. If a successor corporation
does not assume or substitute the awards, the vesting of the awards will be
accelerated.
We intend to grant options to purchase an aggregate of shares of our
common stock as of the date of this prospectus at an exercise price equal to the
initial public offering price including options to the following officers for
the indicated number of shares: Mr. Porter--237,088 shares, Mr.
Krauskopf--296,360 shares, Mr. Peterson--177,816 shares, Mr. Rawls--75,000
shares, Mr. Kahl-- 177,816 shares and Mr. Cunningham--75,000 shares. These
options will vest ratably over a three-year period beginning on the date of this
prospectus.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our Certificate of Incorporation includes a provision that eliminates the
personal liability of its directors for monetary damages for breach of fiduciary
duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- unlawful dividends and stock purchases under the section 174 of the
Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
These provisions are permitted under Delaware law.
Our Bylaws provide that:
- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law, subject to certain very limited exceptions;
- we may indemnify our other employees and agents to the same extent that we
indemnified our officers and directors, unless otherwise required by law,
our Certificate of Incorporation, our Bylaws or agreements; and
- we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware Law, subject to certain very limited exceptions.
Prior to the completion of this offering, we intend to enter into indemnity
agreements with each of our directors and executive officers to give them
additional contractual assurances regarding the scope of the indemnification
described above. Under these indemnity agreements, we agree to indemnify our
officers and directors if they are a party to a proceeding relating to actions
taken in their capacity as officers or directors. We also agree to advance the
expenses of officers or directors incurred as part of the investigation,
defense, settlement or appeal of any proceeding relating to actions taken in
their capacity as officers or directors. An officer or director must undertake
to promptly repay any amounts advanced if it is ultimately determined that the
officer or director is not entitled to be indemnified under the indemnification
agreement. In addition, we intend to obtain directors' and officers' insurance
providing indemnification for our directors, officers and certain employees for
certain liabilities. We believe that these indemnification provisions and
agreements are necessary to attract and retain qualified directors and officers.
The limitation of liability and indemnification provisions in our
Certificate of Incorporation and Bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. Furthermore, a stockholder's
investment may be adversely affected to the extent we pay
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the costs of settlement and damage awards against directors and officers
pursuant to these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees regarding which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of common stock as adjusted to reflect the completion of this offering
by:
- each of PCQuote.com's directors, director designees and executive
officers,
- all directors, director designees and executive officers of PCQuote.com as
a group,
- each person who is known by PCQuote.com to own beneficially more than five
percent of the outstanding shares of our common stock, and
- the selling stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING(2) AFTER THE OFFERING(2)(3)
------------------------ SHARES ------------------------
NAME AND ADDRESS (1) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
HyperFeed Technologies, Inc...................... 9,800,000 98.7% 1,950,000 7,850,000 49.9%
Jim R. Porter.................................... -- -- -- -- --
Timothy K. Krauskopf............................. -- -- -- -- --
Andrew N. Peterson............................... -- -- -- -- --
Stephen F. Rawls................................. -- -- -- -- --
David C. Kahl.................................... -- -- -- -- --
Thomas F. Cunningham............................. -- -- -- -- --
John R. Hart (4)................................. 9,800,000 98.7% 1,950,000 7,850,000 49.9%
6101 Camino de la Costa, La Jolla, California
92037
John E. Juska.................................... -- -- -- -- --
Ronald J. Grabe (5)(6)........................... 5,000 * -- 5,000 *
514 Fortress Circle, Leesburg,
Virginia 20175.
Francis J. Harvey (5)(6)......................... 5,000 * -- 5,000 *
116 Twin Oaks Drive, Los Gatos, California
95032-5650.
James R. Quandt (5)(6)........................... 5,000 * -- 5,000 *
17 Cherry Hills Drive, Coto de Caza, California
92679.
All Directors and Executive Officers as a group
(11 persons)(4)(7)............................. 9,815,000 98.7% 1,950,000 7,865,000 50.0%
</TABLE>
- ------------
* Less than 1%
(1) Unless otherwise indicated, the address of each person named in the table is
300 South Wacker Drive, Suite 300, Chicago, Illinois 60606-6688.
(2) Beneficial ownership includes shares of outstanding common stock and shares
of common stock that any person has the right to acquire within 60 days
after the date of this prospectus. Except as indicated in the footnotes to
this table and pursuant to applicable community property laws, the persons
named in the table have sole voting and investment power with respect to all
shares of common stock beneficially owned by them.
(3) Assumes no exercise of the underwriters' over-allotment options. If the
over-allotment options are exercised in full, HyperFeed Technologies would
own 7,075,000 shares after the offering, representing 43.9% of the
outstanding common stock.
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(4) Includes 9,800,000 shares owned by HyperFeed Technologies. Mr. Hart is Chief
Executive Officer and a director of PICO Holdings, Inc. and Physicians
Insurance Company of Ohio, which collectively beneficially own 47.9% of the
outstanding common stock of HyperFeed Technologies. These two affiliated
companies may be considered to control HyperFeed Technologies and, as a
result, may be considered to beneficially own the shares of our common stock
owned by HyperFeed Technologies. These companies and Mr. Hart disclaim
beneficial ownership of the shares of our common stock owned by HyperFeed
Technologies.
(5) Director designee.
(6) Consists of 5,000 shares of our common stock issuable upon exercise of
options that will become exercisable within 60 days after the date of this
prospectus.
(7) Includes 15,000 shares of our common stock issuable upon exercise of
options.
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CERTAIN TRANSACTIONS
HYPERFEED TECHNOLOGIES
The following includes brief summaries of the anticipated material
provisions of the Contribution and Separation Agreement and ancillary
agreements, including the Maintenance Agreement, the DataFeed License Agreement,
the Services Agreement, the Non-competition Agreement, the Registration Rights
Agreement and the Tax Indemnification and Allocation Agreement. All of these
agreements are between HyperFeed Technologies and us and will be entered into
contemporaneously. The summaries of these agreements are qualified in their
entirety by the agreements themselves, copies of which are filed as exhibits to
the registration statement of which this prospectus is a part.
HISTORICAL INTERCOMPANY RELATIONSHIPS
Our WWW.PCQUOTE.COM Web site was first established in July of 1995 by PC
Quote, Inc., a provider of securities market data. PC Quote, Inc., which was
founded in 1983, approved a change of its corporate name to HyperFeed
Technologies, Inc. in April 1999. This name change was approved by its
stockholders at its annual meeting held on June 16, 1999. We were initially
organized in December 1998 as a division of HyperFeed Technologies. We were
incorporated in March 1999 as a wholly-owned subsidiary of HyperFeed
Technologies.
Prior to the closing of this offering, HyperFeed Technologies intends to
formally separate the business of PCQuote.com and the associated assets and
liabilities from HyperFeed Technologies' other businesses and operations.
HyperFeed Technologies and we intend to enter into a Contribution and Separation
Agreement and other agreements providing for, among other things, the
separation, the contribution of certain assets to us, and the provision by
HyperFeed Technologies of licenses and interim services to us. We believe the
terms of these agreements are substantially similar to the terms we could obtain
in negotiations with unaffiliated third parties.
The Contribution and Separation Agreement will establish PCQuote.com as a
stand-alone entity with objectives separate from those of HyperFeed
Technologies. As a distinct entity, we believe we will be afforded more
flexibility in considering opportunities that are available to Internet
businesses.
CONTRIBUTION AND SEPARATION AGREEMENT
The Contribution and Separation Agreement to be entered into by HyperFeed
Technologies and us will set forth matters with respect to the principal
corporate transactions required to effect the contribution of assets to us, the
assumption of liabilities by us and other agreements governing the relationship
between HyperFeed Technologies and us.
CONTRIBUTION OF ASSETS. The Contribution and Separation Agreement provides
that HyperFeed Technologies will contribute to us as of March 31, 1999, the
assets relating to our business, including:
- all furniture, office equipment, computer equipment, machinery, equipment
and other items of personal property relating to our business;
- all records relating to the operation of our business, including financial
and business records, customer lists and files, supplier records and
personnel and payroll records;
- all accounts receivable, notes receivable and all other receivables of any
kind related to our business;
- all goodwill of our business;
- all customer lists relating to our business;
- intellectual property and technology relating to our business, including
Hyperscript, PCQuote Software Development Kit, our domain names and Web
sites, Pay Per Quote and Web Template; and
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- all rights arising from the contracts and agreements relating to our
business.
In addition, HyperFeed Technologies will grant to us a perpetual,
world-wide, non-exclusive license to use the intellectual property relating to
PCQuote Orbit, Quotesockets and HyperServer. HyperServer is a specially
configured server for receiving market data from HyperFeed 2000. Until we
terminate the DataFeed License Agreement in the event of a bankruptcy event or a
material breach by HyperFeed Technologies, we covenant to take reasonable steps
to insure that PCQuote Orbit remains compatible with Quotesockets and that
PCQuote Orbit be able to receive a data feed only from HyperFeed Technologies.
The agreement provides that if the transfer or assignment by HyperFeed
Technologies to us of any asset or the assumption by us of any liability
requires the consent of a third party, then the assignment or assumption will be
made subject to the receipt of the required consent. To the extent any contract
of HyperFeed Technologies is not assigned to us due to the absence of any
necessary consent, then we will not be entitled to receive any benefits arising
under that contract nor be required to assume any liabilities of HyperFeed
Technologies arising under that contract.
ASSUMPTION OF LIABILITIES. Under the Contribution and Separation Agreement,
we will assume:
- all of the current liabilities relating to our business as of March 31,
1999;
- any obligations arising under the contracts and agreements assigned to us
as part of the contribution;
- any other liabilities of HyperFeed Technologies, in an amount not to
exceed $500,000, relating to our business and not included in the current
liabilities relating to our business as of March 31, 1999;
- an obligation to pay $500,000, representing one-half of the amount owed by
HyperFeed Technologies to Townsend Analytics under a termination agreement
between those parties; and
- up to $2.0 million to satisfy any shortfall in the $5.0 million minimum
aggregate license fees HyperFeed Technologies anticipates it will be
required to pay to Townsend Analytics under an anticipated new agreement
between those two companies.
YEAR 2000. The Contribution and Separation Agreement includes a
representation that all computer systems and software contributed or licensed to
us under this agreement will be Year 2000 compliant.
INDEMNIFICATION. Under the Contribution and Separation Agreement, we and
HyperFeed Technologies indemnify each other for:
- any breach of any representation or warranty that survives the closing of
the separation transaction and is contained in the Contribution and
Separation Agreement or any of the ancillary agreements;
- any breach of any covenant contained in the Contribution and Separation
Agreement or any of the ancillary agreements;
- our respective liabilities; and
- the disclosure by current or former personnel of any proprietary
information of the other party.
Any representations and warranties contained in the Contribution and
Separation Agreement or any of the ancillary agreements will survive the closing
of the separation transaction solely for the purpose of the indemnification
provisions and will terminate at the close of business five years following the
date of the separation.
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SERVICES AGREEMENT
Under the Services Agreement, HyperFeed Technologies will perform the
following services for us:
- administrative services, including provision of telephones, secretarial
assistance and facilities management, use of office administrative
equipment, internal computer operations and systems and related services;
- provision of customer information, including customer billing,
collections, accounting and related services;
- technical and operational support, including assistance with the operation
and marketing of the online services (including advertising services)
offered by us;
- human resources, risk management and accounting services, including,
without limitation, assistance with legal, employee benefits, accounting
and other related issues, with such services to be provided by HyperFeed
Technologies personnel not by retained outside advisors; and
- network services, operations and management support.
In addition, we will continue to occupy a portion of the premises leased by
HyperFeed Technologies at 300 South Wacker Drive, Chicago, Illinois.
As compensation for these services and for the provision of office space, we
will pay HyperFeed Technologies the following monthly fees:
- from April 1999 to September 1999: $213,500 per month;
- from October 1999 to December 1999: $163,500 per month;
- from January 2000 to March 2000: $138,500 per month;
- from April 2000 to June 2000: $113,500 per month; and
- any month beyond June 2000: an amount to be agreed upon by the parties.
All monthly fees incurred prior to the closing of this offering will be
accrued and be payable from the net proceeds of this offering. The decrease in
monthly fees reflects the intent of the parties to reduce the amount of services
HyperFeed Technologies will provide to us as we develop the capability to
perform these services internally.
The Services Agreement will have an initial term through June 30, 2000. We
may extend the agreement for additional one-month terms on 30 days notice to
HyperFeed Technologies.
Either party has the right to terminate the Services Agreement if there is a
material breach by the other party or the other party is subject to a bankruptcy
or insolvency event.
MAINTENANCE AGREEMENT
Under the Maintenance Agreement, HyperFeed Technologies agrees to continue
to provide any software features, upgrades or enhancements to PCQuote Orbit as
they are tested and become available during the normal course of its business.
HyperFeed Technologies is not obligated to add any special features, upgrades or
enhancements to PCQuote Orbit that are requested by us. In exchange for this
maintenance obligation, we will pay HyperFeed Technologies a fee in an amount
equal to 3% of our gross revenues derived from all permitted uses, licensing and
sub-licensing of PCQuote Orbit.
This agreement is for a perpetual term. However, HyperFeed Technologies may
immediately terminate this agreement if the term of the DataFeed License
Agreement expires and is not renewed by us or if HyperFeed Technologies
terminates the DataFeed License Agreement as a result of a breach of that
agreement by us. In addition, either party may immediately terminate this
agreement if
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there is a material breach by the other party or the other party is subject to a
bankruptcy or insolvency event.
DATAFEED LICENSE AGREEMENT
The DataFeed License Agreement grants us a non-exclusive license to use
HyperFeed Technologies' data feed in both delayed and real time formats. We may
use the data feed only with HyperFeed Technologies' Hypertools. These are
modules and applications that enable us to interface with the data feed. Unless
HyperFeed Technologies agrees otherwise, we may distribute the data feed via the
Internet only and users are required to access the data feed through our
servers.
This agreement has a five-year term and will automatically renew for
additional one-year terms unless we terminate at least sixty days prior the end
of the initial or any renewal term. Either party may terminate the agreement in
the event of a material breach of the agreement by the other party that is not
cured within thirty days. HyperFeed Technologies may immediately suspend our use
of the data feed if we redistribute the data feed, either internally or
externally, to third parties without the consent of HyperFeed Technologies and
of the appropriate data feed sources. If we do not cure the breach within 15
days after notice of the breach is given to us, HyperFeed Technologies may
terminate the agreement. Either party may also immediately terminate this
agreement if the other party files a petition in bankruptcy or fails to timely
discharge any petition in bankruptcy filed against it.
We will pay HyperFeed Technologies monthly fees based on the number of users
and quotes accessed. If this agreement had been in effect as of January 1, 1999,
we would have paid HyperFeed Technologies a license fee of approximately
$245,000 for the three months ended March 31, 1999.
We are also responsible for paying all additional costs directly related to
our use of the data feed, such as:
- computer hardware and communications equipment;
- on-site training and support;
- satellite transmission;
- leased phone lines; and
- exchange fees, including indirect access fees.
These costs will be charged to us at the lowest price that HyperFeed
Technologies charges to its other data feed customers.
Prior to commencing use of the data feed, we are required to apply for and
receive approval from each data feed source whose approval is required for
receipt or dissemination of the information contained in the data feed.
NON-COMPETITION AGREEMENT
We will also enter into a Non-competition Agreement with HyperFeed
Technologies. This agreement provides that until the earlier of three years
after the closing of the separation transaction or the date on which the
DataFeed License Agreement is terminated by HyperFeed Technologies for our
breach of that agreement or expires and is not renewed, HyperFeed Technologies
will not, either by itself or through any affiliate or subsidiary directly or
indirectly:
- engage in the maintenance of a computer system designed to receive data
feed from a data feed provider and to repackage the information for the
delivery of financial market data and market analytics with financial news
services via the Internet;
- own more than five percent of the outstanding equity interest of any
entity (other than us) that engages in the maintenance of a computer
system designed to receive data feed from a data
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feed provider and to repackage the information for the delivery of
financial market data and market analytics with financial news services
via the Internet;
- license, sublicense or assign to any entity engaged in the maintenance of
a computer system designed to receive data feed from a data feed provider
and to repackage the information for the delivery of financial market data
and market analytics with financial news services via the Internet, all or
any part of the intellectual property relating to PCQuote Orbit licensed
to us under the Contribution and Separation Agreement or of the software
package licensed to both us and HyperFeed Technologies by Townsend
Analytics. However, HyperFeed Technologies will remain free to license or
sublicense all or part of these intellectual properties to any licensed
broker or dealer for redistribution to persons having an account with such
broker or dealer and for other limited uses by such broker or dealer; or
- hire or solicit any person employed by us.
The agreement provides that until the later of three years after the closing
of the separation transaction or the date on which the DataFeed License
Agreement is terminated by us or expires and is not renewed, we will not, either
by ourselves or through any affiliate or subsidiary:
- engage in the business of redistributing data feed in any way other than
through a computer system designed to receive and repackage data feed,
such as the ones we currently operate;
- own more than five percent of the outstanding equity interest of any
entity that engages in the business of redistributing via the Internet
data feed in any way other than through a computer system designed to
receive and repackage data feed, such as the ones we currently operate; or
- hire or solicit any person employed by HyperFeed Technologies.
REGISTRATION RIGHTS AGREEMENT
Under the Registration Rights Agreement, we will grant to HyperFeed
Technologies unlimited piggyback and demand registration rights for the common
stock acquired by HyperFeed Technologies under the Contribution and Separation
Agreement. However, HyperFeed Technologies may exercise its demand registration
right no more than twice per year during any period in which we are not
permitted to file registration statements on Form S-3 on behalf of HyperFeed
Technologies. We are not obligated to effect a registration if securities for
which a registration is demanded can be sold within a single ninety-day period
pursuant to Rule 144 under the Securities Act. Subject to several exceptions, we
would bear all registration expenses incurred in connection with these
registrations. HyperFeed Technologies would pay all underwriting discounts and
commissions applicable to the sale of the securities sold by them.
HyperFeed Technologies has entered into a lock-up agreement pursuant to
which it has agreed not to offer or sell shares of our common stock held by it
for a period of 180 days from the date of this prospectus without the prior
written consent of Prudential Securities, on behalf of the underwriters.
We believe that the terms of each of the transactions with HyperFeed
Technologies described above, taken as a whole, were no less favorable than we
could have obtained from unaffiliated third parties. All future transactions
with our officers, directors and principal stockholders and their affiliates
will be approved by a majority of the Board of Directors, including a majority
of the independent and disinterested outside directors.
TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
Under the Tax Indemnification and Allocation Agreement, HyperFeed
Technologies will indemnify us against all tax liabilities incurred by us if
their contribution of assets to us fails to qualify as a tax-free transaction.
In addition, each party will indemnify the other party for:
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- all income tax liabilities for which it is held liable or required to
reimburse the other party; and
- all income tax liabilities incurred by the other party due to a breach of
any covenant under this agreement.
In addition, this agreement provides for the allocation and payment of taxes
for periods during which HyperFeed Technologies and we are included in the same
consolidated group for federal, state, local or foreign income tax purposes. For
periods during which we are included in HyperFeed Technologies' consolidated
federal, state, local or foreign income tax returns, we will be required to pay
an amount of income tax equal to the amount we would have paid had we filed a
tax return as a separate entity.
CNNFN
On April 12, 1999, we entered into a 3 1/2 year agreement with CNNFN under
which CNNFN granted us a license to display on our Web sites certain headlines
from CNNFN original stories published on the CNNFN Web site at CNNFN.COM. CNNFN
also granted us a limited non-exclusive license to use CNNFN's logo. Under the
agreement, the following items will appear on our Web sites: Web site link to
the full story, short headline, ticker symbols contained in the story, the lead
paragraph of the story and the timestamp of each story post. The CNNFN headlines
appearing on our Web sites will serve as an access point to CNNFN's Web site.
Under the agreement, no more than five CNNFN headlines may appear on any one
of our Web site pages and these pages are subject to CNNFN's reasonable
approval. We have no right to sell any advertising specifically for placement on
the CNNFN headlines. CNNFN retains exclusive editorial control over the
production and selection of the CNNFN headlines provided to us. We do not have
the right to alter the CNNFN headlines provided to us. In other words, we must
use the headlines "as is." CNNFN agreed to hold us harmless from any claims
resulting from CNNFN headlines provided to us.
Our agreement with CNNFN will expire on October 12, 2003, and CNNFN will
have no obligation to renew it. Either party will also have the right to
terminate this agreement if:
- there is a material breach by the other party and this breach is not
cured;
- the other party is the subject of a bankruptcy event;
- any third party reasonably considered to be a competitor of the other
party merges with or acquires all or substantially all of the assets of
the other party;
- the other party undergoes a material change in control, involving a
competitor of the terminating party; or
- the other party makes any material adverse changes in its Web site or
conducts its business in a manner that would have a material adverse
effect on the terminating party's reputation, integrity or goodwill.
The agreement with CNNFN contains an exclusivity provision under which CNNFN
agrees not to license the CNNFN headlines to any unaffiliated third party for
display on a generally accessible Web site that has as its primary purpose the
providing of investment and/or financial tools, including real-time or delayed
equity and/or futures quotes. However, this exclusivity does not apply to:
- any registered broker-dealer Web sites that are used for trading and are
accessible only by its clients;
- financial Web sites currently controlled by CNNFN or its affiliates;
- certain of CNNFN's existing relationships; and
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- any sites operated by our competitors that do not have the primary purpose
of providing users with investment and/or financial tools, including
real-time or delayed equity and/or futures quotes.
CNNFN can terminate the exclusivity provisions of the agreement at any time
after the one year anniversary of the agreement, after giving us 120 days
notice, if CNNFN, its parent company (Time Warner) or one of its affiliated or
subsidiary companies:
- merges or consolidates with, acquires all or substantially all of the
assets of a company engaged in whole or in part in providing information
and services similar to those provided by us; or
- develops an information service internally which is similar to that
provided by us.
Notwithstanding the termination of the exclusivity provisions contained in
the agreement, we would retain a non-exclusive right to receive CNNFN headlines
without charge for the remainder of the term of the agreement.
In connection with the agreement, we granted CNNFN a warrant to purchase
515,790 shares of our common stock, representing a five percent interest in the
common stock of PCQuote.com outstanding prior to the offering, for an aggregate
exercise price of $.53. The shares subject to this warrant vest as follows: 25%
on the date of execution of the agreement with CNNFN and 25% on each anniversary
date of the agreement. CNNFN exercised the vested portion of this warrant on
April 29, 1999. If the agreement with CNNFN is terminated by us for reasons
relating to a change in control of CNNFN or a change in its Web site, or if
CNNFN terminates the exclusivity provision, the unvested portion of this warrant
is terminated. If there is a change in control of PCQuote.com and the acquiring
company does not assume CNNFN's warrant, then the unvested portion of the
warrant automatically vests and is treated as outstanding common stock. This
warrant contains customary provisions adjusting the number of shares acquirable
upon exercise of the warrant for stock splits, stock dividends and
reclassifications. The estimated value assigned to this warrant was $5.9 million
and was recorded as a pre-paid license fee and an increase in stockholders'
equity.
We also granted CNNFN one demand registration right and unlimited piggyback
registration rights for the common stock acquirable upon exercise of the
warrant. These registration rights terminate on October 12, 2004. We are not
obligated to effect a registration if securities for which a registration is
demanded can be sold within a single ninety-day period pursuant to Rule 144
under the Securities Act.
We would bear all registration expenses incurred in connection with these
registrations. CNNFN would pay all underwriting discounts and commissions
applicable to the sale of the securities sold by them.
CNNFN has waived any registration rights with respect to this offering and
has entered into a lock-up agreement pursuant to which it has agreed not to
offer or sell the warrant or the shares that would be received upon exercise of
the warrant for a period of 180 days from the date of this prospectus without
the prior written consent of Prudential Securities.
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DESCRIPTION OF CAPITAL STOCK
The following is a summary description of the material terms of our capital
stock. This summary is not intended to be complete. Since the terms of our
capital stock must comply with the provisions of our Certificate of
Incorporation and Bylaws, which are included as exhibits to the registration
statement of which this prospectus is a part, as well as the General Corporation
Law of the State of Delaware, you should read these two documents carefully.
We have the authority to issue up to 74,000,000 shares of common stock, par
value $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01
per share.
COMMON STOCK
There are 9,928,948 shares of common stock outstanding, held of record by
two stockholders.
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board from time to time may determine. Holders
of common stock are entitled to one vote for each share held on all matters
submitted to a vote of stockholders. Cumulative voting for the election of
directors is not authorized by our Certificate of Incorporation, which means
that the holders of a majority of the shares voted can elect all of the
directors then standing for election. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Upon our
liquidation, dissolution or winding-up, the assets legally available for
distribution to stockholders would be distributable ratably among the holders of
our common stock after payment of liquidation preferences, if any, on any
outstanding preferred stock and payment of our creditors. Each outstanding share
of our common stock is, and all shares of common stock to be outstanding upon
completion of this offering will be upon payment therefor, duly and validly
issued, fully paid and nonassessable.
PREFERRED STOCK
The Board is authorized, subject to any limitations under Delaware law, to
issue preferred stock in one or more series. The Board can fix the rights,
preferences and privileges of the shares of each series and any qualifications,
limitations or restrictions thereon.
The Board may authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power or other rights
of the holders of common stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of delaying, deferring or preventing a change in
control of PCQuote.com. We have no current plan to issue any shares of preferred
stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents Delaware
corporations like us from engaging, under certain circumstances, in a business
combination, which includes a merger or sale of more than 10% of the
corporation's assets, with any interested stockholder, or a stockholder who owns
15% or more of the corporation's outstanding voting stock, as well as affiliates
and associates of any such persons, for three years following the date that such
stockholder became an "interested stockholder" unless:
- the transaction in which such stockholder became an interested stockholder
is approved by the Board of Directors prior to the date the interested
stockholder attained such status;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the
61
<PAGE>
corporation outstanding at the time the transaction commenced, excluding
those shares owned by persons who are directors and also officers and,
under certain circumstances, shares held in employee stock plans; or
- the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders by the
affirmative vote of at least two-thirds of the outstanding voting stock
not owned by the interested stockholder.
This statute could prohibit or delay mergers or other takeover or
change-in-control attempts with respect to PCQuote.com and, accordingly, may
discourage attempts to acquire us.
Our Bylaws provide that any action required or permitted to be taken by our
stockholders at an annual meeting or special meeting may only be taken if it is
properly brought before such meeting. Our Certificate of Incorporation and
Bylaws provide that special meetings of the stockholders may only be called by
the Chairman of the Board, the President, the Board or by any stockholder
holding at least 10% of our outstanding common stock. These provisions may have
the effect of delaying or preventing a change-in-control of PCQuote.com.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Certificate of Incorporation limits the liability of directors to the
fullest extent permitted by Delaware law. In addition, our Certificate of
Incorporation and Bylaws provide that we will indemnify our directors and
officers to the fullest extent permitted by Delaware law. We intend to enter
into separate indemnification agreements with our directors and executive
officers that provide them indemnification protection in the event the
Certificate of Incorporation is subsequently amended.
Our Certificate of Incorporation and Bylaws will provide that we will
indemnify officers and directors against losses that they may incur in
investigations and legal proceedings resulting from their services to us, which
may include services in connection with takeover defense measures. Such
provisions may have the effect of preventing changes in our management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.
62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.
After this offering, 15,728,948 shares of our common stock will be
outstanding (16,116,448 shares if the underwriters exercise their over-allotment
option from us in full and 1,925,442 shares of common stock issuable upon the
exercise of authorized options and warrants). Of these shares, the 7,750,000
shares (8,912,500 shares if the underwriters exercise their over-allotment
options in full) sold in this offering will be freely tradable without
restriction under the Securities Act, except for any shares purchased by any of
our affiliates, defined as any person that, directly or indirectly, controls, or
is controlled by, or is under common control with, PCQuote.com. The remaining
7,203,948 shares are restricted securities, defined as:
- securities acquired directly or indirectly from us, or from an affiliate
of ours, or in a transaction or chain of transactions not involving any
public offering; and
- securities acquired from us that are subject to the resale limitations
under the Securities Act.
Restricted securities generally may not be sold unless they are registered under
the Securities Act or are sold pursuant to an exemption from registration, such
as the exemption provided by Rule 144 under the Securities Act.
Our officers and directors and all stockholders, including the selling
stockholder, have entered into lock-up agreements pursuant to which they have
agreed not to offer or sell any shares of common stock for a period of 180 days
after the date of this prospectus without the prior written consent of
Prudential Securities, on behalf of the underwriters. Prudential Securities may,
at any time and without notice, waive any of the terms of these lock-up
agreements specified in the underwriting agreement. Following the lock-up
period, these shares will not be eligible for sale in the public market without
registration under the Securities Act unless such sales meet the conditions and
restrictions of Rule 144 as described below.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for a period of at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of (i)
1% of the then-outstanding shares of common stock and (ii) the average weekly
trading volume of the common stock during the four calendar weeks immediately
preceding the date on which the notice of such sale on Form 144 is filed with
the SEC. Sales under Rule 144 are also subject to certain provisions relating to
notice and manner of sale and the availability of current public information
about the Company. In addition, a person (or persons whose shares are
aggregated) who has not been an affiliate of the Company at any time during the
90 days immediately preceding a sale of our common stock, and who has
beneficially owned the shares for at least two years, would be entitled to sell
their shares under Rule 144(k) without regard to the volume limitation and other
conditions described above. The foregoing summary of Rule 144 is not intended to
be a complete description.
As soon as practicable following the consummation of this offering, we
intend to file a registration statement under the Securities Act to register the
shares of our common stock available for issuance under our 1999 Combined
Incentive and Non-statutory Stock Option Plan. Shares issued under this plan
generally will be available for sale in the open market, subject to the
expiration of the 180-day lock-up period,
We have granted CNNFN one demand registration right and unlimited piggyback
registration rights covering the 128,948 shares of our common stock they own and
the 386,842 shares they may acquire upon exercise of the warrant held by them.
We intend to grant HyperFeed Technologies unlimited "piggyback" and demand
registration rights covering the 7,850,000 shares of our common stock it will
own after this offering.
63
<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters for
whom Prudential Securities Incorporated and U.S. Bancorp Piper Jaffray, Inc.,
FAC/Equities, a division of First Albany Corporation and E*OFFERING Corp. are
acting as representatives. We and the selling stockholder are obligated to sell,
and the underwriters are obligated to purchase, all of the shares offered on the
cover page of this prospectus, if any are purchased. Subject to certain
conditions of the underwriting agreement, each underwriter has severally agreed
to purchase the shares indicated opposite its name:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- --------------------------------------------------------------------------------------------------- -------------
<S> <C>
Prudential Securities Incorporated.................................................................
U.S. Bancorp Piper Jaffray, Inc....................................................................
FAC/Equities, a division of First Albany Corporation...............................................
E*OFFERING Corp....................................................................................
-------------
Total.......................................................................................... 7,750,000
-------------
-------------
</TABLE>
The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, over-allotment options to purchase up to
387,500 additional shares from us and up to 775,000 additional shares from the
selling stockholder. If any additional shares are purchased, the underwriters
will severally purchase the shares in the same proportion as per the table
above.
The representatives of the underwriters have advised us that the shares will
be offered to the public at the offering price indicated on the cover page of
this prospectus. The underwriters may allow to selected dealers a concession not
in excess of $ per share and such dealers may reallow a concession
not in excess of $ per share to certain other dealers. After the
shares are released for sale to the public, the representatives may change the
offering price and the concessions. The representatives have informed us that
the underwriters do not intend to sell shares to any investor who has granted
them discretionary authority.
We and the selling stockholder have agreed to pay to the underwriters the
following fees, assuming both no exercise and full exercise of the underwriters'
over-allotment options to purchase additional shares:
<TABLE>
<CAPTION>
TOTAL FEES
----------------------------------------------
FEE WITHOUT EXERCISE OF FULL EXERCISE OF
PER SHARE OVER-ALLOTMENT OPTIONS OVER-ALLOTMENT OPTIONS
------------- ---------------------- ----------------------
<S> <C> <C> <C>
Fees paid by us.................................... $ $ $
Fees paid by the selling stockholder............... $ $ $
</TABLE>
In addition, we estimate that we will spend approximately $1,400,000 in
expenses for this offering including those of the selling stockholder, for
filing fees, printing, legal and accounting fees and expenses, and transfer
agent and registrar fees. We and the selling stockholder have agreed to
indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act, or contribute to payments that the underwriters may be
required to make in respect of these liabilities.
64
<PAGE>
We, our officers, directors and stockholders, including the selling
stockholder, have entered into lock-up agreements pursuant to which we and they
have agreed not to offer or sell any shares of common stock or securities
convertible into or exchangeable or exercisable for shares of common stock for a
period of 180 days from the date of this prospectus without the prior written
consent of Prudential Securities, on behalf of the underwriters. Prudential
Securities may, at any time and without notice, waive the terms of these lock-up
agreements specified in the underwriting agreement.
Prior to this offering, there has been no public market for the common stock
of our Company. The public offering price, negotiated among PCQuote.com, the
selling stockholder and the representatives, is based upon our financial and
operating history and condition, our prospects, the prospects for the industry
we are in and prevailing market conditions.
Prudential Securities, on behalf of the underwriters, may engage in the
following activities in accordance with applicable securities rules:
- Over-allotments involving sales in excess of the offering size, creating a
short position. Prudential Securities may elect to reduce this short
position by exercising some or all of the over-allotment option.
- Stabilizing and short covering. Stabilizing bids to purchase the shares
are permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in the
open market may also reduce the short position. These activities may cause
the price of the shares to be higher than would otherwise exist in the
open market.
- Penalty bids permitting the representatives to reclaim concessions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions.
Such activities, which may be commenced and discontinued at any time, may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.
Each underwriter has represented that it has complied and will comply with
all applicable laws and regulations in connection with the offer, sale or
delivery of the shares and related offering materials in the United Kingdom,
including:
- the Public Offers of Securities Regulations 1995;
- the Financial Services Act 1986; and
- the Financial Services Act 1986, (Investment Advertisements) (Exemptions)
Order 1996 (as amended).
We have asked the underwriters to reserve shares for sale at the same
offering price directly to our officers, directors, employees and other persons
designated by us. The number of shares available for sale to the general public
in the offering will be reduced to the extent these persons purchase the
reserved shares.
E*OFFERING Corp. is making a prospectus in electronic format available on
its Internet Web site. Other than the prospectus in electronic format, the
information on such Web site is not part of this prospectus or the registration
statement of which the prospectus forms a part and has not been approved and/or
endorsed by PCQuote.com or the underwriters acting in such capacity and should
not be relied on by prospective investors.
65
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Wildman, Harrold, Allen & Dixon, Chicago, Illinois. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by Fulbright & Jaworski L.L.P., New York, New York.
EXPERTS
The financial statements of PCQuote.com, Inc. as of December 31, 1997 and
1998 and for each of the years in the three year period ended December 31, 1998,
have been included in this prospectus and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of our
common stock we are selling in this offering. This prospectus does not contain
all of the information set forth in the registration statement and the exhibits
filed with the registration statement. For further information with respect to
PCQuote.com and our common stock, we refer you to the registration statement and
the exhibits filed with the registration statement. Statements contained in this
prospectus regarding the contents of any contract or any other document filed as
an exhibit are not necessarily complete, and, in each instance, we refer you to
the copy of such contract or other document filed as an exhibit to the
registration statement and each such statement is qualified in all respects by
the contract or other document in question. A copy of the registration statement
and the exhibits and schedule filed with the registration statement may be
inspected without charge at the public reference facilities maintained by the
SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's regional offices located at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the registration statement may be obtained from these offices upon the payment
of the fees charged by the SEC. The SEC maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
site is http://www.sec.gov.
66
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
PCQUOTE.COM, INC.
Independent Auditors' Report............................................................................. F-2
Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999 (unaudited)........................... F-3
Statements of Operations for the years ended December 31, 1996, 1997 and 1998 and for the three months
ended March 31, 1998 and 1999 (unaudited).............................................................. F-4
Statements of Stockholder's Equity for the years ended December 31, 1996, 1997 and 1998 and for the three
months ended March 31, 1999 (unaudited)................................................................ F-5
Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998 and for the three months
ended March 31, 1998 and 1999 (unaudited).............................................................. F-6
Notes to Financial Statements............................................................................ F-7
</TABLE>
F-1
<PAGE>
When the transactions described in the first, third and fourth paragraphs of
Note 8 of the Notes to Financial Statements have been consummated, we will be in
a position to render the following report.
/s/ KPMG LLP
We have audited the accompanying balance sheets of PCQuote.com, Inc.
(Company), as of December 31, 1997 and 1998, and the related statements of
operations, stockholder's equity and cash flows for each of the years in the
three-year period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PCQuote.com, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1998 in
conformity with generally accepted accounting principles.
May 21, 1999,
except as to Note 8,
which is as of
Chicago, Illinois
F-2
<PAGE>
PCQUOTE.COM, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1997 1998 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Accounts receivable, net of allowance for doubtful accounts of
$33,998, $109,036 and $135,536 as of December 31, 1997, December 31,
1998 and March 31, 1999, respectively............................... $ 400,121 $ 437,043 $ 756,141
Prepaid expenses and other current assets............................. 16,358 42,446 70,223
------------ ------------ ------------
Total current assets.................................................... 416,479 479,489 826,364
Property and equipment, net of accumulated depreciation of $71,989,
$268,205 and $335,503, as of December 31, 1997, December 31, 1998 and
March 31, 1999, respectively.......................................... 359,946 478,574 544,194
Software development costs, net of accumulated amortization of $886,373,
$1,612,293 and $1,844,650 as of December 31, 1997, December 31, 1998
and March 31, 1999, respectively...................................... 2,108,640 2,348,027 2,204,852
------------ ------------ ------------
Total assets........................................................ $ 2,885,065 $ 3,306,090 $ 3,575,410
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable...................................................... $ 1,025,360 $ 1,402,603 $ 1,468,688
Accrued compensation.................................................. 133,569 111,457 159,268
Accrued interest...................................................... 223,206 -- --
Accrued exchange fees................................................. 149,976 32,325 50,138
Accrued royalties..................................................... 9,708 -- 190,700
Other accrued liabilities............................................. 28,933 55,698 69,427
Unearned revenue...................................................... 249,845 623,827 718,237
------------ ------------ ------------
Total current liabilities........................................... 1,820,597 2,225,910 2,656,458
------------ ------------ ------------
Stockholder's equity:
Common stock, par value $.01 per share; authorized 9,800,000 shares;
9,800,000 shares issued and outstanding............................. -- -- 98,000
Additional paid-in capital............................................ -- -- 820,952
Stockholder's investment.............................................. 1,064,468 1,080,180 --
------------ ------------ ------------
Total stockholder's equity.......................................... 1,064,468 1,080,180 918,952
------------ ------------ ------------
Total liabilities and stockholder's equity.......................... $ 2,885,065 $ 3,306,090 $ 3,575,410
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PCQUOTE.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- --------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Subscription.......................... $ 776,282 $ 3,401,469 $ 7,995,691 $ 1,499,278 $ 2,886,146
Advertising........................... 166,497 1,131,120 1,368,463 274,789 247,633
Other................................. 30,058 230,323 547,957 123,841 124,862
------------- ------------- ------------- ------------ ------------
Total revenues.......................... 972,837 4,762,912 9,912,111 1,897,908 3,258,641
Direct cost of revenues................. 812,988 4,201,310 6,542,787 1,392,104 2,273,663
------------- ------------- ------------- ------------ ------------
Gross profit............................ 159,849 561,602 3,369,324 505,804 984,978
Operating expenses:
General and administrative............ 1,083,490 2,297,383 2,481,583 668,412 702,492
Sales and marketing................... 620,450 1,226,021 2,108,399 503,717 432,421
Research and development.............. 392,158 253,973 241,223 35,145 66,011
Depreciation.......................... -- 71,989 196,216 45,963 67,298
------------- ------------- ------------- ------------ ------------
Total operating expenses................ 2,096,098 3,849,366 5,027,421 1,253,237 1,268,222
------------- ------------- ------------- ------------ ------------
Loss from operations.................... (1,936,249) (3,287,764) (1,658,097) (747,433) (283,244)
Other income (expense):
Interest income....................... 556 10,537 8,292 3,294 --
Interest expense...................... (26,171) (1,295,090) (512,646) (105,708) (4,354)
------------- ------------- ------------- ------------ ------------
Other expense, net...................... (25,615) (1,284,553) (504,354) (102,414) (4,354)
------------- ------------- ------------- ------------ ------------
Loss before income taxes................ (1,961,864) (4,572,317) (2,162,451) (849,847) (287,598)
Income taxes............................ -- -- -- -- --
------------- ------------- ------------- ------------ ------------
Net loss................................ $ (1,961,864) $ (4,572,317) $ (2,162,451) $ (849,847) $ (287,598)
------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------ ------------
Pro forma basic and diluted loss per
share................................. $ (0.22) $ (0.09) $ (0.03)
------------- ------------ ------------
------------- ------------ ------------
Pro forma shares used in the
calculations of basic and diluted loss
per share............................. 9,800,000 9,800,000 9,800,000
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PCQUOTE.COM, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- ADDITIONAL TOTAL
PAR VALUE PAID-IN STOCKHOLDER'S STOCKHOLDER'S
SHARES AMOUNT CAPITAL INVESTMENT EQUITY
----------- ---------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995................................. -- $ -- $ -- $ 624,440 $ 624,440
Net loss for the period.................................... -- -- -- (1,961,864) (1,961,864)
Contributions from Parent, net............................. -- -- -- 2,610,827 2,610,827
----------- ---------- ----------- ------------- --------------
Balance at December 31, 1996................................. -- -- -- 1,273,403 1,273,403
Net loss for the period.................................... -- -- -- (4,572,317) (4,572,317)
Contributions from Parent, net............................. -- -- -- 4,363,382 4,363,382
----------- ---------- ----------- ------------- --------------
Balance at December 31, 1997................................. -- -- -- 1,064,468 1,064,468
Net loss for the period.................................... -- -- -- (2,162,451) (2,162,451)
Contributions from Parent, net............................. -- -- -- 2,178,163 2,178,163
----------- ---------- ----------- ------------- --------------
Balance at December 31, 1998................................. 1,080,180 1,080,180
Common stock issued upon incorporation (unaudited)......... 9,800,000 98,000 (97,990) -- 10
Net loss for period (unaudited)............................ -- -- -- (287,598) (287,598)
Contributions from Parent, net (unaudited)................. -- -- -- 126,360 126,360
Transfer of stockholder's investment on March 31, 1999
(unaudited).............................................. -- -- 918,942 (918,942) --
----------- ---------- ----------- ------------- --------------
Balance at March 31, 1999 (unaudited)........................ 9,800,000 $ 98,000 $ 820,952 $ -- $ 918,952
----------- ---------- ----------- ------------- --------------
----------- ---------- ----------- ------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
PCQUOTE.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................. $ (1,961,864) $ (4,572,317) $ (2,162,451) $ (849,847) $ (287,598)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation............................ -- 71,989 196,216 45,963 67,298
Provision for doubtful accounts......... -- 95,018 148,625 38,849 30,000
Amortization of software development
costs................................. 266,671 549,698 725,920 208,488 268,693
Changes in assets and liabilities:
Accounts receivable................... (91,782) (403,357) (185,547) (330,344) (349,098)
Prepaid expenses and other current
assets.............................. (24,807) 8,449 (26,088) (2,357) (27,777)
Accounts payable...................... 284,181 741,179 377,243 374,851 66,085
Accrued expenses...................... 142,983 402,409 (345,912) 196,068 270,053
Unearned revenue...................... 98,193 151,652 373,982 293,912 94,410
------------- ------------- ------------- ----------- -----------
Net cash provided by (used in) operating
activities.............................. (1,286,425) (2,955,280) (898,012) (24,417) 132,066
INVESTING ACTIVITIES
Purchase of property and equipment........ -- (431,935) (314,844) (106,904) (132,918)
Software development costs capitalized.... (1,324,402) (976,167) (965,307) (303,669) (125,518)
------------- ------------- ------------- ----------- -----------
Net cash used in investing activities..... (1,324,402) (1,408,102) (1,280,151) (410,573) (258,436)
FINANCING ACTIVITIES
Contributions from Parent, net............ 2,610,827 4,363,382 2,178,163 434,990 126,370
------------- ------------- ------------- ----------- -----------
Cash at beginning and end of period....... $ -- $ -- $ -- $ -- $ --
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS
PCQuote.com, Inc. (the "Company"), a subsidiary of PC Quote, Inc. (the
"Parent"), is an Internet-based provider of real-time financial data, timely
business news and comprehensive tools for researching and analyzing financial
information. PCQuote.com's service offerings consist of two Web sites,
WWW.PCQUOTE.COM and MARKETSMART-REAL.PCQUOTE.COM, and two Internet-enabled
desktop applications, PCQuote 6.0 RealTick and PCQuote Orbit. In addition, the
Company offers several business-to-business services that enable clients to
present financial data and information on their Web sites or desktop
applications. The Company's principal customers are individual investors,
financial Web site advertisers and other Web sites and businesses.
The Company's first Web site was established in July 1995 ("inception"). The
financial statements have been prepared as if the Company operated as a
stand-alone entity since inception.
On March 19, 1999, the Company was incorporated as a Delaware Corporation
and became a wholly-owned subsidiary of the Parent.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements present the results of operations,
financial condition and cash flows of the Company as a component of the Parent
prior to the consummation of the transactions contemplated by the Contribution
and Separation Agreement described in Note 8. The financial information included
herein may not necessarily reflect the financial position, results of operations
or cash flows of the Company in the future or what the balance sheets, results
of operations or cash flows of the Company would have been if it had been a
separate, stand-alone publicly-held corporation during the periods presented.
Since the Company's inception, the Parent has provided funding to the
Company for working capital. The Company participates in the Parent's cash
management process. As a part of the Parent's central cash management system,
all cash generated from and cash required to support the Company's operations
were deposited and received through the Parent's corporate operating cash
accounts. As a result, there were no separate bank accounts or accounting
records for these transactions. Accordingly, the amounts represented by the
caption "Contributions from Parent" in the Company's Statements of Cash Flows
represent the net effect of all cash transactions between the Company and the
Parent.
For all periods presented, general and administrative expenses reflected in
the financial statements include allocations of corporate expenses from the
Parent. These allocations took into consideration personnel, business volume or
other appropriate bases and generally include administrative expenses related to
general management, insurance, information management and other miscellaneous
services. Interest expense shown in the financial statements reflects interest
expense associated with the Company's share of the aggregate borrowings of the
Parent for each of the periods presented. Allocations of corporate expenses are
estimates based on management's best assessment of actual expenses. It is
management's opinion that the expenses charged to the Company are reasonable.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
F-7
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
REVENUE RECOGNITION
The Company principally derives its revenue from short-term subscription
contracts for its services, including the supply of real-time financial data and
quotations from North American financial exchanges and markets, advertising that
appears on the Company's Web sites and the licensing of PCQuote 6.0 RealTick
software to customers. Revenue from such subscription contracts is recognized
ratably over the contract term as the contracted services are rendered. Revenue
from the sale of advertising is recognized as the advertising is displayed on
the Web sites. Revenue from the licensing of PCQuote 6.0 RealTick is recognized
as software is downloaded and services are rendered. Such fees are either billed
one month in advance of the month in which the service is provided or are
automatically paid by credit card within five days prior to the month of
service. The majority of PCQuote 6.0 RealTick customers pay by credit card.
These and other payments received prior to services being rendered are
classified as unearned revenue on the balance sheet. Revenue and the related
receivable for advance billings are not reflected in the financial statements.
The Company adopted the provisions of Statement of Position ("SOP") 97-2
SOFTWARE REVENUE RECOGNITION, on January 1, 1998. SOP 97-2 specifies the
following four criteria that must be met prior to recognizing revenue: (1)
persuasive evidence of the existence of an arrangement, (2) delivery, (3) fixed
or determinable fee and (4) probability of collection. In addition, revenue
earned on software arrangements involving multiple elements is allocated to each
element based on the relative fair value of the elements. In accordance with SOP
97-2, revenue allocated to the Company's software products (including specified
upgrades/enhancements) is recognized upon delivery of the products. Revenue
allocated to post contract customer support is recognized ratably over the term
of the support and revenue allocated to service elements (such as training and
installation) is recognized as the services are performed.
ACCOUNTS RECEIVABLE
Accounts receivable include amounts owed under short-term subscription
contracts, advertising arrangements and licensing agreements. A majority of the
Company's customers pay via a credit card that is authorized before delivery of
the software in connection with the performance of services. The Company
maintains an allowance for doubtful accounts to cover exposure related to
accounts that are deemed uncollectible. The Company recorded a provision for
doubtful accounts of $0, $95,000 and $149,000 and expensed $0, $61,000 and
$74,000 against the allowance during the years ended December 31, 1996, 1997 and
1998, respectively.
SOFTWARE DEVELOPMENT COSTS
The Company's investment in software development consists primarily of the
formation and enhancement to its Web sites and its other service offerings.
Costs associated with the planning and design phase of software development,
including coding and testing activities necessary to establish technological
feasibility of computer software products to be licensed or otherwise marketed,
are charged to research and development as incurred. Once technological
feasibility has been reached, costs incurred in the construction phase of
software development, including coding, testing and product quality assurance,
are capitalized.
Amortization commences at the time of capitalization or, in the case of a
new service offering, at the time the service becomes available for use.
Unamortized capitalized costs determined to be in excess of the net realizable
value of the product are expensed at the date of such determination. The
accumulated amortization and related software development costs are removed from
the respective accounts effective in the year following full amortization.
F-8
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Company's policy is to amortize capitalized software costs by the
greater of (a) the ratio of current gross revenue to the total of current and
anticipated future gross revenue for that product or (b) the straight line
method over the remaining estimated economic life of the product including the
period being reported on, principally three to five years. The Company assesses
the recoverability of its software development costs against estimated future
undiscounted cash flows. Given the highly competitive environment and
technological changes in the Company's industry, these estimates of anticipated
future gross revenue, the remaining estimated economic life of the product, or
both may be reduced significantly.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is provided
using the straight line method over an estimated useful life of three years for
computer equipment and five years for communication equipment.
Office furniture, fixtures and leasehold improvements of the Company
provided by the Parent are not reflected in the accompanying balance sheets of
the Company. The Company's portion of the cost incurred by the Parent has been
included in the historical financial data presented in the accompanying
statements of operations using estimates based on personnel and or square
footage utilized by the Company in the Parent's facility.
Maintenance and repair costs are charged to expense as incurred. Costs of
improvements are capitalized. Upon retirement or disposition, the cost and
related accumulated depreciation and amortization are removed from the accounts
and any gain or loss is included in the statements of operations.
ADVERTISING COSTS
Advertising costs are charged to expense as incurred. Advertising expense
were approximately $37,000, $162,000, and $551,000 for the years ended December
31, 1996, 1997 and 1998, respectively.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) 109, ACCOUNTING FOR INCOME TAXES. The
Company is included in the income tax return of the Parent. Pursuant to a tax
sharing agreement effective as of the consummation of the transaction described
in Note 8, the provision for income taxes of the Company has been calculated as
if the Company were a stand-alone corporation filing separate tax returns.
BASIC AND DILUTED LOSS PER SHARE
The Company computes net loss per share in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). Under the provisions of SFAS 128, basic and diluted net loss per share is
computed by dividing the net loss for the period by the weighted average number
of common shares outstanding for the period. All share and per share data have
been retroactively adjusted to reflect the incorporation of the Company on March
19, 1999 and the stock split described in Note 8 as if all shares were
outstanding for all periods presented.
BUSINESS SEGMENT INFORMATION
The Company operates in one reportable segment of financial data services.
F-9
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
One customer, a private label redistributor of the Company's PCQuote 6.0
RealTick service, accounted for 0%, 6% and 11% of the Company's revenue during
the years ended December 31, 1996, 1997 and 1998, respectively. Accounts
receivable from this customer accounted for 47% and 23% of total accounts
receivable at December 31, 1997 and 1998, respectively.
BUSINESS CONCENTRATIONS
The Company is dependent upon the Parent to provide software programming
assistance, data feeds, communications lines and related facilities, network
operations and Web site management services, and certain administrative,
engineering and human resources services. The inability of the Parent to
continue to provide such services could in the near term negatively affect the
competitive position of the Company.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amounts of its financial instruments,
consisting of accounts receivable, accounts payable and accrued liabilities,
approximates the fair value of such items.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The financial statements as of March 31, 1999 and for the three months ended
March 31, 1998 and 1999 are unaudited; however, in the opinion of management,
all adjustments, consisting solely of normal recurring adjustments, necessary
for a fair presentation of the financial statements for the interim periods have
been included. The results of operations for the three months ended March 31,
1999 are not necessarily indicative of the results to be achieved for the full
fiscal year.
(3) LIQUIDITY
Operations of the Company for the current and prior year did not generate
sufficient cash flow to cover current obligations. The Parent has funded such
obligations and has made a commitment to continue to provide financing to the
Company until the transaction described in Note 7 is consummated.
(4) RELATED PARTY TRANSACTIONS
The Company engages in transactions with the Parent in the normal course of
its business. These transactions include the purchase of Web site hosting
services from the Parent, assistance with software programming, data feeds,
communications lines and related facilities, network operations and Web site
management services and certain administrative, engineering and human resources
services.
In consideration for these services, the Parent has allocated a portion of
its overhead costs related to such services to the Company. The allocations were
estimated using proportional cost allocation methods.
Administration costs for services provided by the Parent to the Company were
determined by identifying the Parent's personnel who supported the Company.
Their pay, based on the number of hours of service provided, plus benefits, was
used to calculate these costs. Employees of the Company are eligible for various
benefits under programs maintained by the Parent. The cost related to property
usage is determined based on the square footage used by the Company. The Company
is also charged a pro-rata share, based on square footage, of the utilities,
property taxes and other costs. Internet/ telecom costs include an allocation of
monthly depreciation for all hardware and software based on usage by the
Company, as well as monthly rates for telecommunications services used by the
Company.
F-10
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In management's opinion, the methods to identify and allocate costs to the
Company for these services provided by the Parent are reasonable.
(5) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1997 1998
---------- -----------
<S> <C> <C>
Computer equipment................................................... $ 431,935 $ 743,242
Communications equipment............................................. -- 3,537
---------- -----------
431,935 746,779
Less accumulated depreciation........................................ 71,989 268,205
---------- -----------
Property and equipment, net.......................................... $ 359,946 $ 478,574
---------- -----------
---------- -----------
</TABLE>
Depreciation expense recorded by the Company was $71,989 and $196,216 during
the years ended December 31, 1997 and 1998, respectively.
(6) INCOME TAXES
Income tax expense (benefit) differed from the amounts computed by applying
the U.S. Federal income tax rate of 35% to losses before income tax expense as a
result of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1997 1998
----------- ------------- -------------
<S> <C> <C> <C>
Computed "expected" tax benefit.................... $ (686,652) $ (1,600,311) $ (756,858)
Increase (decrease) in tax benefit resulting from:
Change in valuation allowance.................... 775,917 1,808,351 855,249
State and local income taxes, net of federal
benefit........................................ (89,265) (208,040) (98,392)
----------- ------------- -------------
Income tax expense (benefit)....................... $ -- $ -- $ --
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
No deferred income tax expense (benefit) was recognized as the results from
temporary differences in the recognition of income and expense for income tax
and financial reporting purposes were offset
F-11
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
by a valuation allowance. The sources and tax effects of those temporary
differences are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1998
------------- -------------
<S> <C> <C>
Deferred tax assets:
Unearned revenue.............................................. $ 98,814 $ 246,724
Allowance for doubtful accounts............................... 13,446 43,124
Accrued expenses.............................................. 7,801 16,814
Property and equipment........................................ 4,146 13,466
------------- -------------
Net operating loss............................................ 3,321,715 4,075,722
Gross deferred tax assets................................... 3,445,922 4,395,850
Less valuation allowance.................................... (2,611,955) (3,467,205)
------------- -------------
Net deferred tax assets................................... 833,967 928,645
Deferred tax liabilities:
Capitalized software.......................................... (833,967) (928,645)
------------- -------------
Gross deferred tax liabilities.............................. (833,967) (928,645)
------------- -------------
Net deferred income taxes....................................... $ -- $ --
------------- -------------
------------- -------------
</TABLE>
The net change in the valuation allowance for the years ended December 31,
1997 and 1998 was an increase of $1,808,351 and $855,250, respectively. The net
operating loss carryforward will remain an asset of the Parent subsequent to the
consummation of the contribution and separation agreement described in Note 8,
and therefore will not be available to the Company to be utilized in future tax
periods.
(7) EQUITY TRANSACTIONS
On March 19, 1999, the Company was incorporated as a wholly-owned subsidiary
of the Parent and was capitalized through the authorization and issuance of
common stock to its Parent. The Company intends to file a registration statement
with the Securities and Exchange Commission to sell authorized common stock to
the public. The Company adopted the 1999 Combined Incentive and Non-statutory
Stock Option Plan in May 1999. There are 1,538,600 shares of common stock
reserved for issuance under this plan. The plan terminates in September 2009,
unless terminated sooner by the Company's Board of Directors. The plan
authorizes the award of options and restricted stock purchase rights. The plan
will be administered by the Company's Board of Directors or a committee
appointed by the Company's Board of Directors. The administrator has the
authority to interpret the plan, grant awards and make all other determinations
necessary to administer the plan. Stock options are exercisable for a period not
to exceed ten years from the date of the grant and, to the extent determined at
the time of grant, may be paid for in cash or by a reduction in the number of
shares issuable upon exercise of the option.
On April 12, 1999, the Company entered into a 3 1/2 year agreement with
CNNFN under which CNNFN granted the Company a license to display on the
Company's Web sites certain headlines from CNNFN original stories published on
the CNNFN Web site at CNNFN.COM. In connection with the agreement, the Company
issued to CNNFN a warrant to acquire 515,790 shares of common stock,
representing a five percent interest in the common stock of the Company
outstanding prior to the offering. The warrant has an aggregate exercise price
of $0.53. On April 29, 1999, CNNFN exercised the
F-12
<PAGE>
PCQUOTE.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
vested portion of this warrant and acquired 128,948 shares of common stock. The
estimated value of the warrant, as of the date of the agreement, will be
amortized over the term of the agreement.
(8) CERTAIN TRANSACTIONS
On , 1999, the Company and its Parent entered into certain
agreements, effective March 31, 1999, governing various interim and ongoing
relationships, including a Contribution and Separation Agreement, Maintenance
Agreement, DataFeed License Agreement, Services Agreement, Non-Competition
Agreement, Registration Rights Agreement and Tax Indemnification and Allocation
Agreement. Under the Contribution and Separation Agreement, the Parent
transferred certain assets to the Company and the Company assumed certain
liabilities of the Parent. Under the Services Agreement, which has an initial
term ending June 30, 2000, the Parent will perform certain services and provide
office space for $213,500 per month through September 1999, $163,500 per month
thereafter through December 1999, $138,500 per month thereafter through March
2000 and $113,500 per month thereafter. Under the Maintenance Agreement, the
Company will receive software features, upgrades and enhancements to PCQuote
Orbit and will pay the Parent 3% of gross revenues obtained from use or
sublicensing of PCQuote Orbit. Under the Data Feed Agreement, the Company will
be entitled to use the Parent's data feed for a monthly fee based on the number
of users and quotes accessed. The rates or amounts to be paid by the Company
under these agreements are not expected to be materially different than the
rates or amounts currently being charged by the Parent.
On May 28, 1999, the Company entered into a new license agreement with
Townsend Analytics for the right to use a software application which is marketed
as PCQuote 6.0 RealTick. The Company also offers private label versions of this
application. The new agreement replaced the prior agreement between Townsend
Analytics and the Parent. The initial term of the agreement ends December 4,
2000. The Company agrees to pay them 33% of the subscription revenue derived
from its PCQuote 6.0 RealTick service and 50% of revenues relating to the
private label version that it presently sublicenses to two of its customers. For
certain of its customers, Townsend Analytics provides hosting services and order
execution capabilities and receives a license fee of 66% of the Company's
revenues derived from these customers. Regardless of actual subscription
revenues it receives, the Company is required under the license agreement to
make minimum license fee payments to Townsend Analytics of $220,000 per month.
The Company will pay $500,000 to the Parent to reimburse them for a portion of
the amount to be paid by them to Townsend Analytics under a termination
agreement between those parties. In addition, the Company could be required to
pay up to $2.0 million to satisfy any shortfall in the $5.0 million minimum
aggregate license fees the Parent anticipates it will be required to pay to
Townsend Analytics under an anticipated new agreement between those two
companies.
On June , 1999, the Board of Directors approved a 9,800-for-one stock
split of the Company's outstanding Common Stock. All common shares and per share
data have been retroactively adjusted to reflect this stock split.
On June 4, 1999, the Company authorized 1,000,000 shares of $.01 par value
preferred stock for future issuance. In addition, the Company amended its
articles of incorporation to increase its authorized common stock to 74,000,000
shares.
F-13
<PAGE>
[Logos and text descriptions of PCQuote.com's services;
pictures of PCQuote Orbit and Web Template services]
<PAGE>
- --------------------------------------------------------------------------------
Until , 1999, all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
[LOGO]
PRUDENTIAL SECURITIES
U.S. BANCORP PIPER JAFFRAY
FAC/EQUITIES
E*OFFERING
[Diagram and text descriptions of PCQuote.com features]
- -----------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be paid by us in connection with this offering are as
follows. All amounts other than the SEC registration fee, NASD filing fee and
Nasdaq National Market application fee are estimates.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 34,687.00
NASD filing fee............................................... $ 12,977.50
Nasdaq National Market listing fee............................ $ 85,500.00
Printing...................................................... $ 190,000.00
Legal fees and expenses....................................... $ 400,000.00
Accounting fees and expenses.................................. $ 350,000.00
Blue sky fees and expenses.................................... $ 1,500.00
Transfer agent and registrar fees............................. $ 3,000.00
Miscellaneous................................................. $ 322,335.50
------------
Total......................................................... $1,400,000.00
------------
------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act").
As permitted by the Delaware General Corporation Law, our certificate of
incorporation includes a provision that eliminates the personal liability of our
directors for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to us
or our stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) under
section 174 of the General Corporation Law of the State of Delaware (regarding
unlawful dividends and stock purchases) or (iv) for any transaction from which
the director derived an improper personal benefit.
As permitted by the General Corporation Law of the State of Delaware, our
Bylaws provide that (i) we are required to indemnify our directors and officers
to the fullest extent permitted by the General Corporation Law of the State of
Delaware, subject to certain very limited exceptions, (ii) we may indemnify our
other employees and agents as set forth in the General Corporation Law of the
State of Delaware, (iii) we are required to advance expenses, as incurred, to
our directors and executive officers in connection with a legal proceeding to
the fullest extent permitted by the General Corporation Law of the State of
Delaware, subject to certain very limited exceptions and (iv) the rights
conferred in our Bylaws are not exclusive.
We intend to enter into Indemnification Agreements with each of our
directors and executive officers to give them additional contractual assurances
regarding the scope of the indemnification set forth in our certificate of
incorporation and to provide additional procedural protections. At present,
there is no pending litigation or proceeding involving one of our directors,
officers or employees regarding which indemnification is sought, nor are we
aware of any threatened litigation that may result in claims for
indemnification.
Reference is also made to Section 8 of the Underwriting Agreement, which
provides for the indemnification of our officers, directors and controlling
persons against certain liabilities. The indemnification provision in our
certificate of incorporation, Bylaws and the Indemnification
II-1
<PAGE>
Agreements entered into between us and each of our directors and executive
officers may be sufficiently broad to permit indemnification of our directors
and executive officers for liabilities arising under the Securities Act.
We expect, with approval by our Board of Directors, to obtain directors' and
officers' liability insurance.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
- ----------------------------------------------------------------------------- -----------------
<S> <C>
Form of Underwriting Agreement............................................... 1.1
Amended and Restated Articles of Incorporation of PCQuote.com................ 3.1
Bylaws of PCQuote.com........................................................ 3.2
Form of Indemnification Agreement............................................ 10.12
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
We issued 9,800,000 shares of our common stock to HyperFeed Technologies on
March 19, 1999.
On April 12, 1999, we granted CNNFN a warrant to purchase 515,790 shares of
our common stock exercisable for less than $.01 per share. On April 29, 1999,
CNNFN purchased 128,948 shares of our common stock upon exercise of the vested
portion of this warrant.
All issuances of securities were made in reliance on Section 4(2) of the
Securities Act.
The above share numbers reflect an anticipated 9,800-for-1 split of our
common stock.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation*
3.2 By-laws**
4.1 Specimen Stock Certificate
4.2 Warrant issued by Registrant to CNNFN**
4.3 Statement of Registration Rights by and between registrant and CNNFN (included in Exhibit 4.2)**
4.4 Form of Registration Rights Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
5.1 Opinion of Wildman, Harrold, Allen & Dixon regarding legality of the securities being
registered*
10.1 Form of Contribution and Separation Agreement to be entered into by and between registrant and
HyperFeed Technologies, Inc.**
10.2 Form of Services Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.3 Form of Maintenance Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ------------------------------------------------------------------------------------------------
<C> <S>
10.4 Form of Datafeed License Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.5 Form of Non-Competition Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.6 Form of Tax Indemnification and Allocation Agreement to be entered into by and between
registrant and HyperFeed Technologies Inc.
10.7 Agreement dated April 12, 1999 by and between registrant and CNNFN+**
10.8 Software License and Distributor Agreement dated May 28, 1999 by and between registrant and
Townsend Analytics, Ltd.
10.9 Executive Employment Agreement dated June 8, 1999 by and between registrant and Andrew
Peterson**
10.10 1999 Combined Incentive and Non-statutory Stock Option Plan**
10.11 Co-Branding Agreement dated October 11, 1996 by and between registrant and AB Watley*
10.12 Form of Indemnification Agreement to be entered into by and between registrant and its directors
and executive officers**
23.1 Consent of KPMG LLP*
23.2 Consent of Wildman, Harrold, Allen & Dixon (included in Exhibit 5.1)
24.1 Power of Attorney**
27.1 Financial Data Schedule**
99.1 Consent of James R. Quandt**
99.2 Consent of Francis J. Harvey**
99.3 Consent of Ronald J. Grabe**
</TABLE>
- ------------
* To be filed by amendment
** Previously filed
+ Confidentiality Requested, confidential portions have been omitted and filed
separately with the Commission, as required by Rule 406(b).
(b) Financial Statement Schedules
No financial statement schedules are provided because the information called
for is not required or is shown either in the financial statements or the notes
thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
II-3
<PAGE>
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on the 19th day of July, 1999.
<TABLE>
<S> <C> <C>
PCQuote.com, INC.
By: /s/ TIMOTHY K. KRAUSKOPF
-----------------------------------------
Timothy K. Krauskopf
CHIEF OPERATING OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registrant's Registration Statement has been signed by the
following persons in the capacities indicated on July 19, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------- --------------------------------------
<C> <S>
*
- -------------------------------------- Chairman of the Board and Chief
Jim R. Porter Executive Officer
/s/ TIMOTHY K. KRAUSKOPF
- -------------------------------------- President, Chief Operating Officer and
Timothy K. Krauskopf Director
/s/ ANDREW N. PETERSON
- -------------------------------------- Chief Financial Officer and Secretary
Andrew N. Peterson
*
- -------------------------------------- Director
John E. Juska
*
- -------------------------------------- Director
John R. Hart
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By /s/ TIMOTHY K.
KRAUSKOPF
-------------------------
Timothy K. Krauskopf
AS ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- --------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation*
3.2 By-laws**
4.1 Specimen Stock Certificate
4.2 Warrant issued by Registrant to CNNFN**
4.3 Statement of Registration Rights by and between registrant and CNNFN (included in Exhibit
4.2)**
4.4 Form of Registration Rights Agreement to be entered into by and between registrant and
HyperFeed Technologies, Inc.**
5.1 Opinion of Wildman, Harrold, Allen & Dixon regarding legality of the securities being
registered*
10.1 Form of Contribution and Separation Agreement to be entered into by and between registrant
and HyperFeed Technologies, Inc.**
10.2 Form of Services Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.3 Form of Maintenance Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.4 Form of Datafeed License Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.5 Form of Non-Competition Agreement to be entered into by and between registrant and HyperFeed
Technologies, Inc.**
10.6 Form of Tax Indemnification and Allocation Agreement to be entered into by and between
registrant and HyperFeed Technologies Inc.
10.7 Agreement dated April 12, 1999 by and between registrant and CNNFN+**
10.8 Software License and Distributor Agreement dated May 28, 1999 by and between registrant and
Townsend Analytics, Ltd.
10.9 Executive Employment Agreement dated June 8, 1999 by and between registrant and Andrew
Peterson**
10.10 1999 Combined Incentive and Non-statutory Stock Option Plan**
10.11 Co-Branding Agreement dated October 11, 1996 by and between registrant and AB Watley*
10.12 Form of Indemnification Agreement to be entered into by and between registrant and its
directors and executive officers**
23.1 Consent of KPMG LLP*
23.2 Consent of Wildman, Harrold, Allen & Dixon (included in Exhibit 5.1)
24.1 Power of Attorney**
27.1 Financial Data Schedule**
99.1 Consent of James R. Quandt**
99.2 Consent of Francis J. Harvey**
99.3 Consent of Ronald J. Grabe**
</TABLE>
- ------------
* To be filed by amendment
** Previously filed
+ Confidentiality Requested, confidential portions have been omitted and filed
separately with the Commission, as required by Rule 406(b).
<PAGE>
EXHIBIT 1.1
PCQUOTE.COM, INC.
7,750,000 Shares*
Common Stock
UNDERWRITING AGREEMENT
________ ___, 1999
PRUDENTIAL SECURITIES INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
FIRST ALBANY CORPORATION
E*OFFERING CORP.
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Dear Sirs:
PCQuote.com, Inc., a Delaware corporation (the "Company"), and HyperFeed
Technologies Inc., a Delaware corporation (the "Selling Securityholder"), hereby
confirm their agreement with the several underwriters named in Schedule 1 hereto
(the "Underwriters"), for whom you have been duly authorized to act as
representatives (in such capacities, the "Representatives"), as set forth below.
If you are the only Underwriters, all references herein to the Representatives
shall be deemed to be to the Underwriters.
1. SECURITIES. Subject to the terms and conditions herein contained, the
Company proposes to issue and sell to the several Underwriters 5,800,000 shares
(the "Company Firm Securities") of the Company's Common Stock, par value $0.01
per share ("Common Stock"), and the Selling Securityholder proposes to sell to
the several Underwriters 1,950,000 authorized and outstanding shares of Common
Stock (the "Selling Securityholder Firm Securities" and together with the
Company Firm Securities, the "Firm Securities"). The Company also proposes to
issue
- -----------------
* Plus options to purchase from the Company up to 387,500 additional shares and
from the Selling Securityholder up to 775,000 additional shares to cover
over-allotments.
<PAGE>
and sell, and the Selling Securityholder proposes to sell, to the several
Underwriters up to 1,162,500 additional shares of Common Stock in the aggregate
if requested by the Representatives as provided in Section 3 of this Agreement.
Any and all shares of Common Stock to be purchased by the Underwriters pursuant
to such options are referred to herein as the "Option Securities," and the Firm
Securities and any Option Securities are collectively referred to herein as the
"Securities."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDER. The Company and the Selling Securityholder, jointly and
severally, represent and warrant to, and agree with, each of the several
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-80335) with
respect to the Securities, including a prospectus subject to completion,
has been filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the
"Act"), and one or more amendments to such registration statement may have
been so filed. After the execution of this Agreement, the Company will file
with the Commission either (i) if such registration statement, as it may
have been amended, has been declared by the Commission to be effective
under the Act, either (A) if the Company relies on Rule 434 under the Act,
a Term Sheet (as hereinafter defined) relating to the Securities, that
shall identify the Preliminary Prospectus (as hereinafter defined) that it
supplements containing such information as is required or permitted by
Rules 434, 430A and 424(b) under the Act or (B) if the Company does not
rely on Rule 434 under the Act, a prospectus in the form most recently
included in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement), with such
changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act, and in the case of either clause
(i)(A) or (i)(B) of this sentence as have been provided to and approved by
the Representatives prior to the execution of this Agreement, or (ii) if
such registration statement, as it may have been amended, has not been
declared by the Commission to be effective under the Act, an amendment to
such registration statement, including a form of prospectus, a copy of
which amendment has been furnished to and approved by the Representatives
prior to the execution of this Agreement. The Company may also file a
related registration statement with the Commission pursuant to Rule 462(b)
under the Act for the purpose of registering certain additional Securities,
which registration shall be effective upon filing with the Commission. As
used in this Agreement, the term "Original Registration Statement" means
the registration statement initially filed relating to the Securities, as
amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto and including any information
omitted therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined); the term "Rule 462(b) Registration
Statement" means any registration statement filed with the Commission
pursuant to Rule 462(b) under the Act (including the
<PAGE>
Registration Statement and any Preliminary Prospectus or Prospectus
incorporated therein at the time such Registration Statement becomes
effective); the term "Registration Statement" includes both the Original
Registration Statement and any Rule 462(b) Registration Statement; the term
"Preliminary Prospectus" means each prospectus subject to completion filed
with such registration statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration
Statement or any amendment thereto at the time it was or is declared
effective); the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Act, the Term Sheet
relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Act, together with the Preliminary Prospectus
identified therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under the Act, the prospectus
first filed with the Commission pursuant to Rule 424(b) under the Act;
or
(C) if the Company does not rely on Rule 434 under the Act and if no
prospectus is required to be filed pursuant to Rule 424(b) under the
Act, the prospectus included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the
requirements of Rule 434 under the Act. Any reference herein to the "date"
of a Prospectus that includes a Term Sheet shall mean the date of such Term
Sheet.
(b) The Commission has not issued any order preventing or suspending
use of any Preliminary Prospectus. When any Preliminary Prospectus was
filed with the Commission it (i) contained all statements required to be
stated therein in accordance with, and complied in all material respects
with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. When the Registration Statement or any amendment
thereto was or is declared effective, it (i) contained or will contain all
statements required to be stated therein in accordance with, and complied
or will comply in all material respects with the requirements of, the Act
and the rules and regulations of the Commission thereunder and (ii) did not
or will not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading. When the Prospectus or any Term Sheet that is a part thereof or
any amendment or supplement to the Prospectus is filed with the Commission
pursuant to Rule 424(b) (or, if the Prospectus or part thereof or such
amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such amendment
or supplement to the Prospectus was or is declared effective) and on the
Firm Closing Date and any Option Closing Date (both
<PAGE>
as hereinafter defined), the Prospectus, as amended or supplemented at
any such time, (i) contained or will contain all statements required to
be stated therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
The foregoing provisions of this paragraph (b) do not apply to
statements or omissions made in any Preliminary Prospectus, the
Registration Statement or any amendment thereto or the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through
the Representatives specifically for use therein.
(c) If the Company has elected to rely on Rule 462(b) and the Rule
462(b) Registration Statement has not been declared effective (i) the
Company has filed a Rule 462(b) Registration Statement in compliance with
and that is effective upon filing pursuant to Rule 462(b) and has received
confirmation of its receipt and (ii) the Company has given irrevocable
instructions for transmission of the applicable filing fee in connection
with the filing of the Rule 462(b) Registration Statement, in compliance
with Rule 111 promulgated under the Act or the Commission has received
payment of such filing fee.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware and is
duly qualified to transact business as a foreign corporation and is in good
standing under the laws of all other jurisdictions where the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified does not amount
to a material liability or disability to the Company.
(e) The Company has full power (corporate and other) to own or lease
its properties and conduct its business as described in the Registration
Statement and the Prospectus or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus; and the Company has full power
(corporate and other) to enter into this Agreement and to carry out all the
terms and provisions hereof to be carried out by it.
(f) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus. All of the issued
shares of capital stock of the Company, including the Selling
Securityholder Firm Securities and the Option Securities to be sold by the
Selling Securityholder, have been duly authorized and validly issued and
are fully paid and nonassessable. The Company Firm Securities to be sold by
the Company and the Option Securities to be sold by the Company have been
duly authorized and at the Firm Closing Date or the related Option Closing
Date (as the case may be), after payment therefor in accordance herewith,
will be validly issued, fully paid and nonassessable. No holder of
outstanding shares of capital stock of the Company is entitled as such to
any preemptive or other rights to subscribe for any of the Securities, and
no holder of securities of the Company has any right which has not been
fully exercised or waived to require the
<PAGE>
Company to register the offer or sale of any securities owned by such
holder under the Act in the public offering contemplated by this
Agreement.
(g) The capital stock of the Company conforms to the description
thereof contained in the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus.
(h) Except as disclosed in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), there are no
outstanding (A) securities or obligations of the Company convertible into
or exchangeable for any capital stock of the Company, (B) warrants, rights
or options to subscribe for or purchase from the Company any such capital
stock or any such convertible or exchangeable securities or obligations, or
(C) obligations of the Company to issue any shares of capital stock, any
such convertible or exchangeable securities or obligations, or any such
warrants, rights or options.
(i) The financial statements and schedules of the Company included in
the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) fairly present the
financial position of the Company and the results of operations and changes
in financial condition as of the dates and periods therein specified. Such
financial statements and schedules have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods involved (except as otherwise noted therein). The selected
financial data set forth under the caption "Selected Financial Data" in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present, on the basis stated in the
Prospectus (or such Preliminary Prospectus), the information included
therein. The pro forma statement of operations data of the Company together
with the related notes thereto included under the caption "Pro Forma
Financial Information" and elsewhere in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) present fairly the information contained therein,
have been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements and have been properly
presented on the pro forma basis described therein, and the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(j) KPMG LLP, who have certified certain financial statements of the
Company and delivered their report with respect to the audited financial
statements and schedules included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), are independent public accountants as required by
the Act and the applicable rules and regulations thereunder.
(k) The execution and delivery of this Agreement have been duly
authorized by the Company and this Agreement has been duly executed and
delivered by the Company, and is the valid and binding agreement of the
Company, enforceable against the Company
<PAGE>
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(l) The execution and delivery of the Contribution and Separation
Agreement, the Services Agreement, the Non-Competition Agreement, the
DataFeed License Agreement (the "DataFeed License Agreement"), the
Maintenance Agreement, the Registration Rights Agreement (the "Registration
Rights Agreement") and the Tax Indemnification and Allocation Agreement
(collectively, the "Intercompany Agreements") have been duly authorized by
the Company and the Intercompany Agreements will be duly executed and
delivered by the Company on or prior to the Firm Closing Date, and will be
the valid and binding agreements of the Company enforceable against the
Company in accordance with their terms, except as rights to indemnification
and contribution under the Registration Rights Agreement may be limited by
applicable law and except as the enforcement of any such agreement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles.
(m) Following the consummation of the transactions contemplated by
the Intercompany Agreements, Company will own or have rights to use all
properties and assets, both real and personal, tangible and intangible,
necessary or appropriate for the conduct of its business as described in
the Prospectus.
(n) No legal or governmental proceedings are pending to which the
Company is a party or to which the property of the Company is subject that
are required to be described in the Registration Statement or the
Prospectus and are not described therein (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and no such proceedings
have been threatened against the Company or with respect to any of its
properties; and no contract or other document is required to be described
in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that is not described therein (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus)
or filed as required.
(o) The issuance, offering and sale of the Securities to the
Underwriters pursuant to this Agreement, the compliance by the Company with
the other provisions of this Agreement, the consummation of the other
transactions herein contemplated and the compliance by the Company with the
provisions of the Intercompany Agreements do not (i) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained or are required
under applicable Blue Sky laws, and, if the registration statement filed
with respect to the Securities (as amended) is not effective under the Act
as of the time of execution hereof, such as may be required (and shall be
obtained as provided in this Agreement) under the Act or under applicable
Blue Sky laws, or (ii) conflict with or result in a breach or violation of
any of the terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of
<PAGE>
trust, lease or other agreement or instrument to which the Company is a
party or by which the Company or any of its properties are bound, or the
charter documents or by-laws of the Company, or any statute or any
judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to the Company .
(p) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus, the
Company has not sustained any material loss or interference with its
business or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
any legal or governmental proceeding and there has not been any material
adverse change, or any development involving a prospective material adverse
change, in the condition (financial or otherwise), management, business
prospects, net worth, or results of the operations of the Company, except
in each case as described in or contemplated by the Prospectus or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus.
(q) The Company has not, directly or indirectly, (i) taken any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company or the Selling Securityholder to
facilitate the sale or resale of the Securities or (ii) since the filing of
the Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Securities or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company or the Selling Securityholder.
(r) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
(1) the Company has not incurred any material liability or obligation,
direct or contingent, nor entered into any material transaction not in the
ordinary course of business; (2) the Company has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock; and (3) there
has not been any material change in the capital stock, short-term debt or
long-term debt of the Company, except in each case as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(s) The Company does not own any real property. The Company has good
and marketable title to all personal property owned by it, free and clear
of any security interests, liens, encumbrances, equities, claims and other
defects, except for the security interest of Lakeside Bank and except such
as do not materially and adversely affect the value of such property and do
not interfere with the use made or proposed to be made of such
<PAGE>
property and do not interfere with the use made or proposed to be made
of such property by the Company, and any real property and buildings
held under lease by the Company are held under valid, subsisting and
enforceable leases, with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property and
buildings by the Company and except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles, in each case except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(t) No labor dispute with the employees of the Company exists or is
threatened or imminent that could result in a material adverse change in
the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(u) The Company owns or possesses all material patents, patent
applications, trademarks, service marks, trade names, licenses, copyrights
and proprietary or other confidential information currently employed by it
in connection with its business, including, without limitation, all rights
to the names PCQuote and PCQuote.com, and the Company has not received any
notice of infringement of or conflict with asserted rights of any third
party with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company, except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(v) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which it is engaged; the Company
has not been refused any insurance coverage sought or applied for; and the
Company does not have any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely
affect the condition (financial or otherwise), business prospects, net
worth or results of operations of the Company, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(w) The Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business, and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a material adverse change in the condition
(financial or otherwise), business prospects, net worth or results of
operations of the Company, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary
<PAGE>
Prospectus).
(x) The Company will conduct its operations in a manner that will not
subject it to registration as an investment company under the Investment
Company Act of 1940, as amended, and this transaction will not cause the
Company to become an investment company subject to registration under such
Act.
(y) Each of the Company, the Selling Securityholder and any
subsidiary of the Selling Securityholder has filed all foreign, federal,
state and local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
would not have a material adverse effect on the Company or the Selling
Securityholder) and has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent that any
of the foregoing is due and payable, except for any such assessment, fine
or penalty that is currently being contested in good faith or as described
in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(z) The Company is not in violation of any federal or state law or
regulation relating to occupational safety and health or to the storage,
handling or transportation of hazardous or toxic materials and the Company
has received all permits, licenses or other approvals required of it under
applicable federal and state occupational safety and health and
environmental laws and regulations to conduct its business, and the Company
is in compliance with all terms and conditions of any such permit, license
or approval, except any such violation of law or regulation, failure to
receive required permits, licenses or other approvals or failure to comply
with the terms and conditions of such permits, licenses or approvals which
would not, singly or in the aggregate, result in a material adverse change
in the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(aa) Each certificate signed by an officer of the Company and
delivered to the Representatives or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.
(ab) The Company does not own any shares of stock or any other equity
securities of any corporation or have any equity interest in any firm,
company, partnership, association or other entity.
(ac) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are
executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (3) access to
assets is permitted only in accordance with management's general or
specific authorization; and (4) the
<PAGE>
recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to
any differences.
(ad) No default exists, and no event has occurred which, with notice
or lapse of time or both, would constitute a default in the due performance
and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which
the Company is a party or by which the Company or any of its properties is
bound or may be affected except for any such defaults which would not, in
the aggregate, have a material adverse effect upon the property, business
or operations of the Company.
(ae) The Company has not distributed and, prior to the later of (i)
the Closing Date and (ii) the completion of the distribution of the
Securities, will not distribute any offering material in connection with
the offering and sale of the Securities other than the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or other materials, if
any permitted by the Act.
2A. REPRESENTATIONS AND WARRANTIES OF THE SELLING SECURITYHOLDER. The
Selling Securityholder represents and warrants to, and agrees with, each of the
several Underwriters that:
(a) The Selling Securityholder has full power (corporate and other)
to enter into this Agreement, to sell, assign, transfer and deliver to the
Underwriters the Securities to be sold by the Selling Securityholder
hereunder in accordance with the terms of this Agreement and the full power
(corporate and other) to enter into the Intercompany Agreements; and this
Agreement has been duly executed and delivered by the Selling
Securityholder and constitutes the legal, valid and binding agreement of
the Selling Securityholder, and the Intercompany Agreements, upon execution
and delivery thereof by the Company and the Selling Securityholder, will
constitute the legal and valid binding obligations of the Selling
Securityholder, in each case enforceable in accordance with its terms,
except as rights to indemnification and contribution under the Registration
Rights Agreement may be limited by applicable law and except as the
enforcement of any such agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(b) The Selling Securityholder is the lawful owner of the Securities
to be sold by the Selling Securityholder hereunder and upon sale and
delivery of, and payment for, such Securities, as provided herein, the
Selling Securityholder will convey good and marketable title to such
Securities, free and clear of any security interests, liens, encumbrances,
equities, claims or other defects.
<PAGE>
(c) The Selling Securityholder has not, directly or indirectly, (i)
taken any action designed to cause or result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company or the Selling
Securityholder to facilitate the sale or resale of the Securities or (ii)
since the filing of the Registration Statement (A) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases of, the
Securities or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company or the
Selling Securityholder.
(d) To the extent that any statements or omissions are made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by the Selling Securityholder
specifically for use therein, such Preliminary Prospectus did, and the
Registration Statement and the Prospectus and any amendments or supplements
thereto, when they become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act, the Exchange Act and the respective rules and regulations of
the Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Selling
Securityholder has reviewed the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and the Registration
Statement, and the information regarding the Selling Securityholder set
forth therein is complete and accurate.
(e) The sale of the Securities by the Selling Securityholder pursuant
hereto is not prompted by any adverse information concerning the Company
that is not set forth in the Registration Statement or the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(f) The sale of the Securities to the Underwriters by the Selling
Securityholder pursuant to this Agreement, the compliance by the Selling
Securityholder with the provisions of this Agreement, the consummation of
the other transactions herein contemplated and the compliance by the
Selling Securityholder with the provisions of the Intercompany Agreements
do not (i) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have
been obtained or are required under applicable Blue Sky laws and, if the
Registration Statement filed with respect to the Securities (as amended) is
not effective under the Act as of the time of execution hereof, such as may
be required (and shall be obtained as provided in this Agreement) under the
Act or under applicable Blue Sky laws, or (ii) conflict with or result in a
breach or violation of any of the terms and provisions of, or constitute a
default under any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which the Selling Securityholder is a party or
by which the Selling Securityholder or any of its properties are bound, or
any statute or any judgment, decree, order, rule or regulation of any court
or other governmental authority or any arbitrator applicable to the Selling
Securityholder, except for such conflicts, breaches or violations which
would not, in the
<PAGE>
aggregate, have a material adverse effect upon the property, business or
obligations of the Selling Securityholder.
(g) The Selling Securityholder has not distributed and, prior to the
later of (i) the Closing Date and (ii) the completion of the distribution
of the Securities, will not distribute any offering material in connection
with the offering and sale of the Securities other than the Registration
Statement or any amendment thereto, and Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or other materials, if
any, permitted by the Act.
(h) The transactions contemplated hereby will not cause the Selling
Securityholder to become an investment company subject to the registration
under the Investment Company Act.
(i) Each certificate signed by any officer of the Selling
Securityholder and delivered to the Representatives or counsel for the
Underwriters shall be deemed to be a representation and warranty by the
Selling Securityholder to each Underwriter as to the matters covered
thereby.
(j) Each of the Company, the Selling Securityholder and any
subsidiary of the Selling Securityholder has filed all foreign, federal,
state and local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
would not have a material adverse effect on the Company or the Selling
Securityholder) and has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent that any
of the foregoing is due and payable, except for any such assessment, fine
or penalty that is currently being contested in good faith or as described
in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. (a) On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell the Company Firm Securities and the Selling Securityholder agrees
to sell the Selling Securityholder Firm Securities to the Underwriters, and each
of the Underwriters, severally and not jointly, agrees to purchase from the
Company and the Selling Securityholder, at a purchase price of $________ per
share, the number of Firm Securities set forth opposite the name of such
Underwriter in Schedule 1 hereto. The number of Firm Securities to be purchased
from the Company and the Selling Securityholder, respectively (as adjusted by
the Representatives to avoid fractions), by each of the Underwriters shall be
determined by multiplying the aggregate number of such Firm Securities to be
sold by the Company or the Selling Securityholder, as the case may be, by a
fraction, the numerator of which is the number of Firm Securities, set forth
opposite the name of such Underwriter on Schedule 1 hereto and the denominator
of which is the total number of Firm Securities set forth on Schedule 1 hereto.
One or more certificates in definitive form for the Firm Securities that the
several Underwriters have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Representatives
request upon notice to the Company and
<PAGE>
the Selling Securityholder at least 48 hours prior to the Firm Closing Date,
shall be delivered by or on behalf of the Company and the Selling
Securityholder to the Representatives for the respective accounts of the
Underwriters, against payment by or on behalf of the Underwriters of the
purchase price therefor by wire transfer in same- day funds (the "Wired
Funds") to the respective accounts of the Company and the Selling
Securityholder. Such delivery of and payment for the Firm Securities shall be
made at the offices of Wildman, Harrold, Allen & Dixon, Chicago, Illinois, at
8:30 A.M., Chicago time, on __________, 1999, or at such other place, time or
date as the Representatives, the Company and the Selling Securityholder may
agree upon or as the Representatives may determine pursuant to Section 9
hereof, such time and date of delivery against payment being herein referred
to as the "Firm Closing Date". Each of the Company and the Selling
Securityholder severally will make such certificate or certificates for the
Firm Securities available for checking and packaging by the Representatives
at the offices in New York, New York of the Company's transfer agent or
registrar or of Prudential Securities Incorporated at least 24 hours prior to
the Firm Closing Date.
(b) For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Securities as contemplated by the Prospectus,
the Company and the Selling Securityholder hereby grant to the several
Underwriters options to purchase, severally and not jointly, the Option
Securities in the respective amounts of 387,500 shares and 775,000 shares. The
purchase price to be paid for any Option Securities shall be the same price per
share as the price per share for the Firm Securities set forth above in
paragraph (a) of this Section 3. The options granted hereby may be exercised as
to all or any part of the Option Securities from time to time within thirty (30)
days after the date of the Prospectus (or, if such 30th day shall be a Saturday
or Sunday or a holiday, on the next business day thereafter when the New York
Stock Exchange is open for trading). The Underwriters shall not be under any
obligation to purchase any of the Option Securities prior to the exercise of
such options. The Representatives may from time to time exercise the options
granted hereby by giving notice in writing or by telephone (confirmed in
writing) to the Company and the Selling Securityholder setting forth the
aggregate number of Option Securities as to which the several Underwriters are
then exercising the options and the date and time for delivery of and payment
for such Option Securities. Any such date of delivery shall be determined by the
Representatives but shall not be earlier than two business days or later than
five business days after such exercise of the options and, in any event, shall
not be earlier than the Firm Closing Date. The time and date set forth in such
notice, or such other time on such other date as the Representatives, the
Company and the Selling Securityholder may agree upon or as the Representatives
may determine pursuant to Section 9 hereof, is herein called the "Option Closing
Date" with respect to such Option Securities. Upon exercise of the options as
provided herein, the Company shall become obligated to issue and sell and the
Selling Securityholder shall become obligated to sell to each of the several
Underwriters, and, subject to the terms and conditions herein set forth, each of
the Underwriters (severally and not jointly) shall become obligated to purchase
from the Company and the Selling Securityholder, the same percentage of the
total number of the Option Securities as to which the several Underwriters are
then exercising the options as such Underwriter is obligated to purchase of the
aggregate number of Firm Securities,
<PAGE>
as adjusted by the Representatives in such manner as they deem advisable to
avoid fractional shares. Any partial exercise of the options granted hereby
shall be made on a pro rata basis in proportion to the respective maximum
number of Option Securities to be sold by each of the Company and the Selling
Securityholder as set forth herein. If the options are exercised as to all or
any portion of the Option Securities, one or more certificates in definitive
form for such Option Securities, and payment therefor, shall be delivered on
the related Option Closing Date in the manner, and upon the terms and
conditions, set forth in paragraph (a) of this Section 3, except that
reference therein to the Firm Securities and the Firm Closing Date shall be
deemed, for purposes of this paragraph (b), to refer to such Option
Securities and Option Closing Date, respectively.
(c) Each of the Company and the Selling Securityholder hereby acknowledges
that the wire transfer by or on behalf of the Underwriters of the purchase price
for any Securities does not constitute closing of a purchase and sale of the
Securities. Only execution and delivery of a receipt for Securities by the
Underwriters indicates completion of the closing of a purchase of the Securities
from the Company or the Selling Securityholder, as the case may be. Furthermore,
in the event that the Underwriters wire funds to the Company or the Selling
Securityholder prior to the completion of the closing of a purchase of
Securities, each of the Company and the Selling Securityholder hereby
acknowledges that until the Underwriters execute and deliver a receipt for the
Securities, by facsimile or otherwise, the Company or the Selling
Securityholder, as the case may be, will not be entitled to the wired funds and
shall return the wired funds to the Underwriters as soon as practicable (by wire
transfer of same-day funds) upon demand. In the event that the closing of a
purchase of Securities is not completed and the wired funds are not returned by
the Company or the Selling Securityholder, as the case may be, to the
Underwriters on the same day the wired funds were received by the Company or the
Selling Securityholder, as the case may be, each of the Company and the Selling
Securityholder agrees to pay to the Underwriters in respect of each day the wire
funds are not returned by it, in same- day funds, interest on the amount of such
wire funds in an amount representing the Underwriters' cost of financing as
reasonably determined by Prudential Securities Incorporated.
(d) It is understood that any of you, individually and not as one of the
Representatives, may (but shall not be obligated to) make payment on behalf of
any Underwriter or Underwriters for any of the Securities to be purchased by
such Underwriter or Underwriters. No such payment shall relieve such Underwriter
or Underwriters from any of its or their obligations hereunder.
4. OFFERING BY THE UNDERWRITERS. Upon your authorization of the release
of the Firm Securities, the several Underwriters propose to offer the Firm
Securities for sale to the public upon the terms set forth in the Prospectus.
5. COVENANTS OF THE COMPANY AND THE SELLING SECURITYHOLDER. The Company
and the Selling Securityholder, jointly and severally, covenant and agree with
each of the Underwriters that:
(a) The Company and the Selling Securityholder will use their best efforts
to cause the Registration Statement, if not effective at the time of execution
of this Agreement, and any
<PAGE>
amendments thereto to become effective as promptly as possible. If required,
the Company will file the Prospectus or any Term Sheet that constitutes a
part thereof and any amendment or supplement thereto with the Commission in
the manner and within the time period required by Rules 434 and 424(b) under
the Act. During any time when a prospectus relating to the Securities is
required to be delivered under the Act, the Company (i) will comply with all
requirements imposed upon it by the Act and the rules and regulations of the
Commission thereunder to the extent necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the provisions
hereof and of the Prospectus, as then amended or supplemented, and (ii) will
not file with the Commission the prospectus, Term Sheet or the amendment
referred to in the second sentence of Section 2(a) hereof, any amendment or
supplement to such Prospectus, Term Sheet or any amendment to the
Registration Statement or any Rule 462(b) Registration Statement of which the
Representatives previously have been advised and furnished with a copy for a
reasonable period of time prior to the proposed filing and as to which filing
the Representatives shall not have given their reasonable consent. The
Company will prepare and file with the Commission, in accordance with the
rules and regulations of the Commission, promptly upon request by the
Representatives or counsel for the Underwriters, any amendments to the
Registration Statement or amendments or supplements to the Prospectus that
may, in the opinion of counsel for the Underwriters and counsel for the
Company, be necessary or advisable in connection with the distribution of the
Securities by the several Underwriters, and will use its best efforts to
cause any such amendment to the Registration Statement to be declared
effective by the Commission as promptly as possible. The Company will advise
the Representatives, promptly after receiving notice thereof, of the time
when the Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto
has been filed and will provide evidence satisfactory to the Representatives
of each such filing or effectiveness.
(b) The Company will advise the Representatives, promptly after receiving
notice or obtaining knowledge thereof, of (i) the issuance by the Commission of
any stop order suspending the effectiveness of the Original Registration
Statement or any Rule 462(b) Registration Statement or any amendment thereto or
any order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, (ii) the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, (iii)
the institution, threatening or contemplation of any proceeding for any such
purpose or (iv) any request made by the Commission for amending the Original
Registration Statement or any Rule 462(b) Registration Statement, for amending
or supplementing the Prospectus or for additional information. The Company will
use its best efforts to prevent the issuance of any such stop order and, if any
such stop order is issued, to obtain the withdrawal thereof as promptly as
possible.
(c) The Company will cooperate with the Representatives and counsel for
the Underwriters for the qualification of the Securities for offering and sale
under (or obtain exemptions from the application of) the securities or blue sky
laws of such jurisdictions as the Representatives may designate and will
continue such qualifications in effect for as long as may be necessary to
complete the distribution of the Securities, PROVIDED, HOWEVER, that in
connection therewith the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction.
<PAGE>
(d) If, at any time prior to the later of (i) the final date when a
prospectus relating to the Securities is required to be delivered under the Act
or (ii) the Option Closing Date, any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if for any other reason it is necessary at any time to
amend or supplement the Prospectus to comply with the Act or the rules or
regulations of the Commission thereunder, the Company will promptly notify the
Representatives thereof and, subject to Section 5(a) hereof, will prepare and
file with the Commission, at the Company's expense, an amendment to the
Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance.
(e) The Company will, without charge, provide (i) to the Representatives
and to counsel for the Underwriters a signed copy of the registration statement
originally filed with respect to the Securities and each amendment thereto (in
each case including exhibits thereto) or any Rule 462(b) Registration Statement,
certified by the Secretary or an Assistant Secretary of the Company to be true
and complete copies thereof as filed with the Commission by electronic
transmission, (ii) to each other Underwriter, a conformed copy of such
registration statement or any Rule 462(b) Registration Statement and each
amendment thereto (in each case without exhibits thereto) and (iii) so long as a
prospectus relating to the Securities is required to be delivered under the Act,
as many copies of each Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto as the Representatives may reasonably request, PROVIDED,
HOWEVER, that if any such delivery is more than nine (9) months after the
effective date of the Registration Statement, the costs (printing and other) of
such delivery shall be at the expense of the requesting Underwriter(s); without
limiting the application of clause (iii) of this sentence, the Company, not
later than (A) 6:00 PM, New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to 10:00 A.M.,
New York City time, on such date or (B) 2:00 PM, New York City time, on the
business day following the date of determination of the public offering price,
if such determination occurred after 10:00 A.M., New York City time, on such
date, will deliver to the Underwriters, without charge, as many copies of the
Prospectus and any amendment or supplement thereto as the Representatives may
reasonably request for purposes of confirming orders that are expected to settle
on the Firm Closing Date.
(f) The Company, as soon as practicable, will make generally available to
its securityholders and to the Representatives an earnings statement of the
Company that satisfies the provisions of Section 11(a) of the Act and Rule 158
thereunder.
(g) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Prospectus.
(h) The Company will not, directly or indirectly, without the prior
written consent of Prudential Securities Incorporated, on behalf of the
Underwriters, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer,
<PAGE>
sale, offer of sale, contract of sale, pledge, grant of any option to
purchase or other sale or disposition) of any shares of Common Stock or any
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock for a period of 180 days after the date hereof, except pursuant
to this Agreement and except for issuances pursuant to the exercise of
employee stock options outstanding on the date hereof and except for the
exercise of that certain warrant held by CNNfn, a division of Cable News
Network LP ("CNNfn"), but only if CNNfn agrees not to sell, offer, dispose of
or otherwise transfer the shares acquired on exercise of such warrant during
the remainder of the 180-day period covered by the agreements delivered
pursuant to Section 7(g).
(i) The Company will not, directly or indirectly, (i) take any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company or the Selling Securityholder to facilitate
the sale or resale of the Securities or (ii) (A) sell, bid for, purchase, or pay
anyone any compensation for soliciting purchases of, the Securities or (B) pay
or agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Company or the Selling Securityholder.
(j) The Company will obtain the agreements described in Section 7(g)
hereof prior to the Firm Closing Date.
(k) If at any time during the 25-day period after the Registration
Statement becomes effective or the period prior to the Option Closing Date, any
rumor, publication or event relating to or affecting the Company shall occur as
a result of which in your opinion the market price of the Common Stock has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after notice from you advising the Company to the
effect set forth above, forthwith prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you and the Company, responding to or commenting on
such rumor, publication or event.
(l) If the Company elects to rely on Rule 462(b), the Company shall both
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) and pay the applicable fees in accordance with Rule 111 promulgated
under the Act by the earlier of (i) 10:00 P.M. Eastern time on the date of this
Agreement and (ii) the time confirmations are sent or given, as specified by
Rule 462(b)(2).
(m) The Company will cause the Securities to be duly included for
quotation on the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") prior to the Firm Closing Date. The Company will ensure that the
Securities remain included for quotation on the Nasdaq National Market following
the Firm Closing Date.
5A. COVENANTS OF THE SELLING SECURITYHOLDER. The Selling Securityholder
covenants and agrees with each of the several Underwriters that:
<PAGE>
(a) The Selling Securityholder will not, directly or indirectly, (i)
take any action designed to cause or result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company or the Selling
Securityholder to facilitate the sale or resale of the Securities or (ii) (A)
sell, bid for, purchase, or pay anyone any compensation for soliciting
purchases of, the Securities or (B) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company or the Selling Securityholder other than as provided by this
Agreement.
(b) The Selling Securityholder will not, directly or indirectly, without
the prior written consent of Prudential Securities Incorporated, offer, sell,
offer to sell, contract to sell, grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, contract of sale, grant
of any option to purchase or other sale or disposition) of any Securities
legally or beneficially owned by the Selling Securityholder or any securities
convertible into, or exchangeable or exercisable for, Securities for a period of
180 days after the date hereof, except pursuant to this Agreement.
(c) As soon as the Selling Securityholder is advised thereof, the Selling
Securityholder will advise the Representatives (and immediately thereafter
confirm such advise in writing), (i) of receipt by the Selling Securityholder or
by any representative or agent of the Selling Securityholder, of any
communication from the Commission relating to the Registration Statement, the
Prospectus or any Preliminary Prospectus, or any notice or order of the
Commission relating to the Company or the Selling Securityholder in connection
with the transactions contemplated by this Agreement and (ii) of the happening
of any event which makes or may make any statement of a material fact made in
the Registration Statement, the Prospectus or any Preliminary Prospectus untrue
or that requires the making of any change in the Registration Statement,
Prospectus or Preliminary Prospectus, as the case may be, in order to make such
statement, in light of the circumstances in which it was made, not misleading.
6. EXPENSES. The Company will pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing or other production of documents with respect to
the transactions, including any costs of printing the registration statement
originally filed with respect to the Securities and any amendment thereto,
any Rule 462(b) Registration Statement, any Preliminary Prospectus and the
Prospectus and any amendment or supplement thereto, this Agreement and any
blue sky memoranda, (ii) all arrangements relating to the delivery to the
Underwriters of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or
advisors retained by the Company, (iv) preparation, issuance and delivery to
the Underwriters of any certificates evidencing the Securities, including
transfer agent's and registrar's fees, (v) the qualification of the
Securities under state securities and blue sky laws, including filing fees
and reasonable fees and disbursements of counsel for the Underwriters
relating thereto, (vi) the filing fees of the Commission and the National
Association of Securities Dealers, Inc. relating to the Securities, (vii) any
quotation of the Securities on the
<PAGE>
Nasdaq National Market, (viii) any meetings with prospective investors in the
Securities (other than as shall have been specifically approved by the
Representatives to be paid for by the Underwriters) and (ix) advertising
relating to the offering of the Securities (other than any tombstone
advertisement in the national edition of the Wall Street Journal which shall
be paid for by the Underwriters). If the sale of the Securities provided for
herein is not consummated because any condition to the obligations of the
Underwriters set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 11 hereof or because of any
failure, refusal or inability on the part of the Company or the Selling
Securityholder to perform all obligations and satisfy all conditions on their
part to be performed or satisfied hereunder other than by reason of a default
by any of the Underwriters, the Company will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including counsel fees
and disbursements) that shall have been incurred by them in connection with
the proposed purchase and sale of the Securities. The Company shall not in
any event be liable to any of the Underwriters for the loss of anticipated
profits from the transactions covered by this Agreement. The provisions of
this Section 6 are intended to relieve the Underwriters from payment of the
costs and expenses which the Company hereby agrees to pay and shall in no way
affect any agreement between the Company and the Selling Securityholder for
the sharing of such costs and expenses.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company and the Selling Securityholder
contained herein as of the date hereof and as of the Firm Closing Date, as if
made on and as of the Firm Closing Date, to the accuracy of the statements of
the Company's and the Selling Securityholder's officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Securityholder of their respective covenants and agreements hereunder and to the
following additional conditions:
(a) If the Original Registration Statement or any amendment thereto filed
prior to the Firm Closing Date has not been declared effective as of the time of
execution hereof, the Original Registration Statement or such amendment and, if
the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration
Statement shall have been declared effective not later than the earlier of (i)
11:00 A.M., New York time, on the date on which the amendment to the
registration statement originally filed with respect to the Securities or to the
Registration Statement, as the case may be, containing information regarding the
initial public offering price of the Securities has been filed with the
Commission and (ii) the time confirmations are sent or given as specified by
Rule 462(b)(2), or with respect to the Original Registration Statement, or such
later time and date as shall have been consented to by the Representatives; if
required, the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto shall have been filed with the Commission in
the manner and within the time period required by Rules 434 and 424(b) under the
Act; no stop order suspending the effectiveness of the Registration Statement or
any amendment thereto shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of the
Company or the Representatives, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the
<PAGE>
Prospectus or otherwise).
(b) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Wildman, Harrold, Allen & Dixon, counsel for the Company and
the Selling Securityholder, to the effect that:
(i) the Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware and
is duly qualified to transact business as a foreign corporation and is in
good standing under the laws of all other jurisdictions where the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified does not amount
to a material liability or disability to the Company;
(ii) the Company has corporate power to own or lease its properties
and conduct its business as described in the Registration Statement and the
Prospectus, and the Company has corporate power to enter into this
Agreement and to carry out all the terms and provisions hereof to be
carried out by it;
(iii) to the best knowledge of such counsel, the Company does not own
any shares of stock or any other equity securities of any corporation or
have any equity interest in any firm, company, partnership, association or
other entity;
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the outstanding
shares of capital stock of the Company, including the Selling
Securityholder Securities, have been duly authorized and validly issued and
are fully paid and nonassessable, have been issued in compliance with all
applicable federal and state securities laws and, to the best knowledge of
such counsel, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities; the
Securities have been duly authorized by all necessary corporate action of
the Company and, the Company Firm Securities when issued and delivered to
and paid for by the Underwriters pursuant to this Agreement, will be
validly issued, fully paid and nonassessable; the Securities have been duly
included for trading on the Nasdaq National Market; to the best knowledge
of such counsel, (a) no holders of outstanding shares of capital stock of
the Company are entitled as such to any preemptive or other rights to
subscribe for any of the Securities; and (b) no holders of securities of
the Company are entitled to have such securities registered under the
Registration Statement pursuant to any right which has not been waived;
(v) the statements set forth under the heading "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company, provide a
fair summary of such provisions; and the statements set forth under the
headings "Risk Factors - Risks Related to Our Business -
<PAGE>
We rely on a software licensing agreement that could be terminated or
allowed to expire," "Business Intellectual Property," "Certain
Transactions," "Description of Capital Stock" and "Shares Eligible for
Future Sale" in the Prospectus, insofar as such statements constitute a
summary of the legal matters, documents or proceedings referred to
therein, provide a fair summary of such legal matters, documents and
proceedings;
(vi) the execution and delivery of this Agreement have been duly
authorized by all necessary corporate action of the Company and the Selling
Securityholder and this Agreement has been duly executed and delivered by
the Company and the Selling Securityholder;
(vii) the execution, delivery and performance of the Intercompany
Agreements have been duly authorized by all necessary corporate action of
the Company and the Selling Securityholder and the Intercompany Agreements
have been duly executed and delivered by the Company and the Selling
Securityholder, and are the legal, valid, binding and enforceable
agreements of the Company and the Selling Securityholder, except as to
indemnification and contribution obligations under the Registration Rights
Agreement which may not be enforceable under applicable law, subject to
applicable bankruptcy, insolvency and similar laws effecting creditors'
rights generally, and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding in
equity or in law);
(viii) to the best knowledge of such counsel, (A) no legal or
governmental proceedings are pending to which the Company is a party or to
which the property of the Company is subject that are required to be
described in the Registration Statement or the Prospectus and are not
described therein and no such proceedings have been threatened against the
Company or with respect to any of its properties, and (B) no contract or
other document is required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement
that is not described therein or filed as required;
(ix) the issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement, the sale of the
Securities to the Underwriters by the Selling Securityholder pursuant to
this Agreement, the compliance by the Company and the Selling
Securityholder with the other provisions of this Agreement, the
consummation of the other transactions herein contemplated and the
compliance by the Company and the Selling Securityholder with the terms of
the Intercompany Agreements do not (A) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained, or (B) conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, lease
or other agreement or instrument, known to such counsel, to which the
Company, the Selling Securityholder or any subsidiary of the Selling
Securityholder is a party or by which the Company, the Selling
Securityholder or any subsidiary of the Selling Securityholder or any of
their respective properties are bound,
<PAGE>
or the charter documents or by-laws of the Company, the Selling
Securityholder or any subsidiary of the Selling Securityholder, or any
statute or any judgment, decree, order, rule or regulation of any court
or other governmental authority or any arbitrator known to such counsel
and applicable to the Company, the Selling Securityholder or any
subsidiary of the Selling Securityholder;
(x) the delivery by the Selling Securityholder to the several
Underwriters of certificates for the Securities being sold hereunder by the
Selling Securityholder against payment therefor as provided herein will
convey good and marketable title to such Securities to the several
Underwriters, free and clear of all security interests, liens,
encumbrances, equities, claims or other defects of title;
(xi) the Registration Statement is effective under the Act; any
required filing of the Prospectus, or any Term Sheet that constitutes a
part thereof, pursuant to Rules 434 and 424(b) has been made in the manner
and within the time period required by Rules 434 and 424(b); and, to the
best knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement or any amendment thereto has been issued, and
no proceedings for that purpose have been instituted or threatened or, to
the best knowledge of such counsel, are contemplated by the Commission;
(xii) the Registration Statement originally filed with respect to the
Securities and each amendment thereto, any Rule 462(b) Registration
Statement and the Prospectus (in each case, other than the financial
statements and other financial information, data and schedules contained
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the applicable requirements of the Act
and the rules and regulations of the Commission thereunder;
(xiii) if the Company elects to rely on Rule 434, the Prospectus is
not "materially different", as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time of its
effectiveness or an effective post-effective amendment thereto (including
such information that is permitted to be omitted pursuant to Rule 430A);
(xiv) the Company owns or possesses all material patents, patent
applications, trademarks, service marks, trade names, licenses, copyrights
and proprietary or other confidential information currently employed by the
Company in connection with its business as described in the Prospectus,
including, without limitation, all rights to the names PCQuote and
PCQuote.com, and, except as described in such opinion, to the best
knowledge of such counsel, the Company has not received any notice of
infringement of or conflict with asserted rights of any third party with
respect to any of the foregoing; and
(xv) the Company possesses all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business as described in the
Prospectus, and, to the best knowledge of such counsel, the
<PAGE>
Company has not received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit.
Such counsel shall, based upon such counsel's participation in the
preparation of the Registration statement and the Prospectus, and any amendment
or supplement thereto, and upon such counsel's review and discussion of the
contents thereof, but without independent check or verification of the accuracy
or completeness thereof except as specified, nothing has come to the attention
of such counsel that has caused them to believe that the Registration Statement,
as of its effective date, (except for financial statements and other financial
information, data and schedules) contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the Prospectus,
as of its date or the date of such opinion, (except for financial statements and
other financial information, data and schedules) included or includes any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials. Such counsel may also state that
their opinions are limited in all respects to the laws of the State of Illinois,
the General Corporation Law of the State of Delaware and applicable United
States federal law, and that they have relied with respect to certain matters
relating to authorization by the Selling Securityholder covered by paragraph
(vii) upon the opinion of Morris, Nichols, Arsht & Tunnell so long as such
opinion is addressed to the Underwriters and provided further that, in each
case, Wildman, Harrold, Allen & Dixon shall state that they believe that they
and the Underwriters are justified in relying on such other counsel.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
(c) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Fulbright & Jaworski L.L.P., New York, New York, counsel for
the Underwriters, with respect to the issuance and sale of the Firm Securities,
the Registration Statement and the Prospectus, and such other related matters as
the Representatives may reasonably require, and the Company shall have furnished
to such counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(d) The Representatives shall have received from KPMG LLP, a letter or
letters dated, respectively, the date hereof and the Firm Closing Date, in form
and substance satisfactory to the Representatives, to the effect that:
(i) they are independent accountants with respect to the Company
within the meaning of the Act and the applicable rules and regulations
thereunder;
(ii) in their opinion, the audited financial statements and
schedules and pro
<PAGE>
forma financial statements examined by them and included in the
Registration Statement and the Prospectus comply in form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations;
(iii) on the basis of a reading of the latest available interim
unaudited financial statements of the Company, carrying out certain
specified procedures (which do not constitute an examination made in
accordance with generally accepted auditing standards) that would not
necessarily reveal matters of significance with respect to the comments set
forth in this paragraph (iii) a reading of the minute books of the
stockholders, the board of directors and any committees thereof of the
Company, and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters, nothing came to their
attention that caused them to believe that:
(A) the unaudited financial statements of the Company included in
the Registration Statement and the Prospectus do not comply in
form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations thereunder or are not in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements
included in the Registration Statement and the Prospectus; and
(B) at a specific date not more than five days prior to the date of
such letter, there were any changes in the capital stock or
long-term debt of the Company or any decreases in net current
assets or stockholders' equity of the Company, in each case
compared with amounts shown on the March 31, 1999 unaudited
balance sheet included in the Registration Statement and the
Prospectus, or for the period from April 1, 1999 to such
specified date there were any decreases, in net revenues or
gross margin, or any increase in loss from operations or the
total or per share amounts of net loss of the Company as
compared, on a proportional basis, with the amounts shown in
the Company's income statement for the three months ended March
31, 1999, except in all instances for changes, decreases or
increases set forth in such letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records
of the Company and are included in the Registration Statement and the
Prospectus under the captions "Prospectus Summary," "Risk Factors," "Use of
Proceeds," "Dividend Policy," "Capitalization," "Dilution," "Selected
Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," "Management," "Certain
Transactions," "Principal and Selling Stockholders," and "Description of
Capital Stock," and have compared such amounts,
<PAGE>
percentages and financial information with such records of the Company
and with information derived from such records and have found them to be
in agreement, excluding any questions of legal interpretation; and
(v) on the basis of a reading of the unaudited pro forma financial
statements included in the Registration Statement and the Prospectus,
carrying out certain specified procedures that would not necessarily reveal
matters of significance with respect to the comments set forth in this
paragraph (v), inquiries of certain officials of the Company who have
responsibility for financial and accounting matters and proving the
arithmetic accuracy of the application of the pro forma adjustments to the
historical amounts in the unaudited pro forma financial statements, nothing
came to their attention that caused them to believe that the unaudited pro
forma financial statements do not comply in form in all material respects
with the applicable accounting requirements of Rule 11-02 of Regulation S-X
or that the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements.
In the event that the letters referred to above set forth any such changes,
decreases or increases, it shall be a further condition to the obligations of
the Underwriters that (A) such letters shall be accompanied by a written
explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Securities as contemplated by the Registration Statement, as amended as of the
date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (d) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
(e) The Representatives shall have received a certificate, dated the Firm
Closing Date, of the Company, signed by its Chief Executive Officer and the
Chief Financial Officer of the Company to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm Closing
Date; the Registration Statement, as amended as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
the Company has performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Firm
Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto has been issued, and no proceedings for
that purpose have been
<PAGE>
instituted or threatened or, to the best of the Company's knowledge, are
contemplated by the Commission; and
(iii) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss or interference with its business or properties
from fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any material adverse
change, or any development involving a prospective material adverse change,
in the condition (financial or otherwise), management, business prospects,
net worth or results of operations of the Company, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment
or supplement thereto).
(f) The Representatives shall have received a certificate from the Selling
Securityholder, signed by the Selling Securityholder, dated the Closing Date, to
the effect that:
(i) the representations and warranties of the Selling
Securityholder in this Agreement are true and correct as if made on and as
of the Closing Date;
(ii) the Registration Statement, as amended as of the Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented as of the Closing Date, does
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
(iii) the Selling Securityholder has performed all covenants and
agreements on its part to be performed or satisfied at or prior to the
Closing Date.
(g) The Representatives shall have received from each person who is a
director or officer of the Company, who owns shares of Common Stock (other than
the Selling Securityholder) or who has an option or warrant to acquire shares of
Common Stock an agreement to the effect that such person will not, directly or
indirectly, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of an option to purchase or other sale or disposition) of any shares of
Common Stock or any securities convertible into, or exchangeable or exercisable
for, shares of Common Stock for a period of 180 days after the date of this
Agreement.
(h) On or before the Firm Closing Date, the Representatives and counsel
for the Underwriters shall have received such further certificates, documents or
other information as they may have reasonably requested from the Company and the
Selling Securityholder.
(i) Prior to the commencement of the offering of the Securities, the
Securities shall
<PAGE>
have been included for trading on the Nasdaq National Market.
(j) The Company shall have received all consents and approvals required
for the consummation of the transactions contemplated by the Intercompany
Agreements except where the failure to obtain such consents or authorizations,
considered in the aggregate, would not have material adverse effect with regard
to property, business or operations of the Company; PROVIDED, HOWEVER, the
Company shall have obtained all approvals required pursuant to Section 10 of the
DataFeed License Agreement irrespective of whether the failure to do so would
have a material adverse effect on the Company.
(k) No default exists, and no event has occurred which, with notice or
lapse of time or both, would constitute a default in the due performance and
observance of any term, covenant or condition contained in the Company's
agreements with CNNFN, a division of Cable News Network LP, LLP, dated April 12,
1999, and Townsend Analytics, Ltd., dated May 28, 1999, and each such agreement
shall be in full force and effect.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to purchase and pay
for any Option Securities shall be subject, in their discretion, to each of the
foregoing conditions to purchase the Firm Securities, except that all references
to the Firm Securities and the Firm Closing Date shall be deemed to refer to
such Option Securities and the related Option Closing Date, respectively.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and, subject to
Section 8(e) of the Agreement, the Selling Securityholder jointly and severally
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act"), against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by the
Company or the Selling Securityholder in Section 2 or 2A of this Agreement,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto or (B) any
<PAGE>
application or other document, or any amendment or supplement thereto,
executed by the Company or the Selling Securityholder or based upon
written information furnished by or on behalf of the Company or the
Selling Securityholder filed in any jurisdiction in order to qualify the
Securities under the securities or blue sky laws thereof or filed with
the Commission or any securities association or securities exchange
(each an "Application"),
(iii) the omission or alleged omission to state in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or
(iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials provided by the
Company or based upon written information furnished by or on behalf of the
Company including, without limitation, slides, videos, films, tape
recordings, used in connection with the marketing of the Securities,
including, without limitation, statements communicated to securities
analysts employed by the Underwriters
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that
the Company and the Selling Securityholder will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out
of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement or any
amendment thereto, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto or any Application in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein; and
provided, further, that the Company and the Selling Securityholder will not
be liable to any Underwriter or any person controlling such Underwriter with
respect to any such untrue statement or omission made in any Preliminary
Prospectus that is corrected in the Prospectus (or any amendment or
supplement thereto) if the person asserting any such loss, claim, damage or
liability purchased Securities from such Underwriter but was not sent or
given a copy of the Prospectus (as amended or supplemented) at or prior to
the written confirmation of the sale of such Securities to such person in any
case where such delivery of the Prospectus (as amended or supplemented) is
required by the Act, unless such failure to deliver the Prospectus (as
amended or supplemented) was a result of noncompliance by the Company with
Section 5(d) or (e) of this Agreement. This indemnity agreement will be in
addition to any liability which the Company and the Selling Securityholder
may otherwise have. Neither the Company nor the Selling Securityholder will,
without the prior written consent of the Underwriter or Underwriters
purchasing, in the aggregate, more than fifty percent (50%) of the
Securities, settle or compromise or consent to the entry of any judgment in
any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not any such
Underwriter or any person who controls any such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the
<PAGE>
Exchange Act is a party to such claim, action, suit or proceeding), unless
such settlement, compromise or consent includes an unconditional release of
all of the Underwriters and such controlling persons from all liability
arising out of such claim, action, suit or proceeding.
(b) Each Underwriter, severally and not jointly, will indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement, the Selling Securityholder and each person, if any, who
controls the Company or the Selling Securityholder within the meaning of Section
15 of the Act or Section 20 of the Exchange Act against any losses, claims,
damages or liabilities to which the Company, the Selling Securityholder or any
such director, officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or any Application or (ii) the omission
or the alleged omission to state therein a material fact required to be stated
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein: and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company, the Selling Securityholder, or any such director, officer or
controlling person of the Company or the Selling Securityholder in connection
with investigating or defending any such loss, claim, damage, liability or any
action in respect thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 8. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
PROVIDED, HOWEVER, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be
<PAGE>
liable to such indemnified party under this Section 8 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred
by such indemnified party in connection with the defense thereof, unless (i)
the indemnified party shall have employed separate counsel in accordance with
the proviso to the next preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be
liable for the expenses of more than one separate counsel (in addition to
local counsel) in any one action or separate but substantially similar
actions in the same jurisdiction arising out of the same general allegations
or circumstances, designated by the Representatives in the case of paragraph
(a) of this Section 8, representing the indemnified parties under such
paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs
and expenses of any settlement of such action effected by such indemnified
party without the consent of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided for in the
preceding paragraphs of this Section 8 is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying party,
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Securities or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Securityholder on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (before deducting expenses) received by
the Company and the Selling Securityholder bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault of
the parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, the Selling Securityholder or the Underwriters, the parties' relative
intents, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances. The Company, the Selling Securityholder and the
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take into account the equitable considerations
referred to above in this paragraph (d). Notwithstanding any other provision of
this paragraph (d), no Underwriter shall be obligated to make contributions
hereunder that in the aggregate exceed the total public
<PAGE>
offering price of the Securities purchased by such Underwriter under this
Agreement, less the aggregate amount of any damages that such Underwriter has
otherwise been required to pay in respect of the same or any substantially
similar claim, and no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute hereunder are several in proportion
to its underwriting obligations and not joint, and contributions among
Underwriters shall be governed by the provisions of the Prudential Securities
Incorporated Master Agreement Among Underwriters. For purposes of this
paragraph (d), each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Underwriter, and each director of the
Company or the Selling Securityholder, each officer of the Company who signed
the Registration Statement and each person, if any, who controls the Company
or the Selling Securityholder within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, shall have the same rights to contribution as
the Company or the Selling Securityholder, as the case may be.
(e) The liability of the Selling Securityholder under this Agreement
(including this Section 8) shall not exceed the proceeds to the Selling
Securityholder from the sale of the Securities sold by the Selling
Securityholder to the Underwriters.
9. DEFAULT OF UNDERWRITERS. If one or more Underwriters default in their
obligations to purchase Firm Securities or Option Securities hereunder and the
aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to its
commitments hereunder to purchase the Firm Securities or Option Securities that
such defaulting Underwriter or Underwriters agreed but failed to purchase. If
one or more Underwriters so default with respect to an aggregate number of
Securities that is more than ten percent of the aggregate number of Firm
Securities or Option Securities, as the case may be, to be purchased by all of
the Underwriters at such time hereunder, and if arrangements satisfactory to the
Representatives are not made within 36 hours after such default for the purchase
by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Securities with respect to
which such default occurs, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company other than as provided
in Section 10 hereof. In the event of any default by one or more Underwriters as
described in this Section 9, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may be,
established as provided in Section 3 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the
<PAGE>
purchase and delivery of the Firm Securities or Option Securities, as the
case may be. As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 9. Nothing herein
shall relieve any defaulting Underwriter from liability for its default.
10. SURVIVAL. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, its officers, the
Selling Securityholder and the several Underwriters set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, the Selling Securityholder, any Underwriter or any controlling
person referred to in Section 8 hereof and (ii) delivery of and payment for
the Securities. The respective agreements, covenants, indemnities and other
statements set forth in Sections 6 and 8 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.
11. TERMINATION. (a) This Agreement may be terminated with respect to
the Firm Securities or any Option Securities in the sole discretion of the
Representatives by notice to the Company and the Selling Securityholder given
prior to the Firm Closing Date or the related Option Closing Date,
respectively, in the event that the Company or the Selling Securityholder
shall have failed, refused or been unable to perform all obligations and
satisfy all conditions on its part to be performed or satisfied hereunder at
or prior thereto or, if at or prior to the Firm Closing Date or such Option
Closing Date, respectively,
(i) the Company shall have, in the sole judgment of the
Representatives, sustained any material loss or interference with its
businesses or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute or
any legal or governmental proceeding or there shall have been any material
adverse change, or any development involving a prospective material adverse
change (including without limitation a change in management or control of
the Company), in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company, except in
each case as described in or contemplated by the Prospectus (exclusive of
any amendment or supplement thereto);
(ii) trading in the Common Stock or in the Common Stock of the
Selling Securityholder shall have been suspended by the Commission, the
American Stock Exchange or the Nasdaq National Market or trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or Nasdaq National Market shall have been suspended or minimum or
maximum prices shall have been established on either such exchange or
market system;
(iii) a banking moratorium shall have been declared by New York or
United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the
<PAGE>
United States and any foreign power, (B) an outbreak or escalation of
any other insurrection or armed conflict involving the United States or
(C) any other calamity or crisis or material adverse change in general
economic, political or financial conditions having an effect on the U.S.
financial markets that, in the sole judgment of the Representatives,
makes it impractical or inadvisable to proceed with the public offering
or the delivery of the Securities as contemplated by the Registration
Statement, as amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 11 shall be
without liability of any party to any other party except as provided in Section
10 hereof.
12. INFORMATION SUPPLIED BY UNDERWRITERS. The statements set forth in the
last paragraph on the front cover page and under the heading "Underwriting" in
any Preliminary Prospectus or the Prospectus (to the extent such statements
relate to the Underwriters) constitute the only information furnished by any
Underwriter through the Representatives to the Company for the purposes of
Sections 2(b) and 8 hereof. The Underwriters confirm that such statements (to
such extent) are correct.
13. NOTICES. All communications hereunder shall be in writing and, if sent
to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Equity
Transactions Group; and if sent to the Company or The Selling Securityholder,
shall be delivered or sent by mail, telex or facsimile transmission and
confirmed in writing to the Company at 300 South Wacker Drive, Suite 300,
Chicago, Illinois 60606, Attention: Chief Executive Officer.
14. SUCCESSORS. This Agreement shall inure to the benefit of and shall be
binding upon the several Underwriters, the Company, the Selling Securityholder
and its successors and legal representatives, and nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any other person any
legal or equitable right, remedy or claim under or in respect of this Agreement,
or any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Company and the Selling Securityholder contained in
Section 8 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act and (ii) the indemnities of the Underwriters
contained in Section 8 of this Agreement shall also be for the benefit of the
directors of the Company and the Selling Securityholder, the officers of the
Company who have signed the Registration Statement and any person or persons who
control the Company or the Selling Securityholder within the meaning of Section
15 of the Act or Section 20 of the Exchange Act and the Selling Securityholder.
No purchaser of Securities from any Underwriter shall be deemed a successor
because of such purchase.
15. APPLICABLE LAW. The validity and interpretation of this Agreement, and
the terms
<PAGE>
and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
provisions relating to conflicts of laws.
16. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of New York, and
by execution and delivery of this Agreement, each of the Company and the Selling
Securityholder accepts for itself and in connection with its properties,
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts and waives any defense of forum non conveniens and irrevocably agrees to
be bound by any judgment rendered thereby in connection with this Agreement.
Each of the Company and the Selling Securityholder designates and appoints
__________________, and such other persons as may hereafter be selected by the
Company or the Selling Securityholder irrevocably agreeing in writing to so
serve, as their agent to receive on their behalf service of all process in any
such proceedings in any such court, such service being hereby acknowledged by
the Company and the Selling Securityholder to be effective and binding service
in every respect. A copy of any such process so served shall be mailed by
registered mail to the Company and the Selling Securityholder at the address
provided in Section 13 hereof; PROVIDED, HOWEVER, that, unless otherwise
provided by applicable law, any failure to mail such copy shall not affect the
validity of service of such process. If any agent appointed by the Company or
The Selling Securityholder refuses to accept service, the Company and the
Selling Securityholder each hereby agree that service of process sufficient for
personal jurisdiction in any action against the Company or the Selling
Securityholder in the State of New York may be made by registered or certified
mail, return receipt requested, to the Company or the Selling Securityholder, as
the case may be, at the address provided in Section 13 hereof, and the Company
and the Selling Securityholder each hereby acknowledge that such service shall
be effective and binding in every respect. Nothing herein shall affect the right
to serve process in any other manner permitted by law or shall limit the right
of any Underwriter to bring proceedings against the Company and the Selling
Securityholder in the courts of any other jurisdiction.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company and each of the
several Underwriters.
Very truly yours,
PCQUOTE.COM, INC.
By
---------------------------------
Jim R. Porter
Chief Executive Officer
HYPERFEED TECHNOLOGIES INC.
By
---------------------------------
John Juska
Chief Financial Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
PRUDENTIAL SECURITIES INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
FIRST ALBANY CORPORATION
E*OFFERING CORP.
By PRUDENTIAL SECURITIES INCORPORATED
By
-----------------------------
Jean-Claude Canfin
Managing Director
For itself and on behalf of the Representatives.
<PAGE>
SCHEDULE 1
UNDERWRITERS
<TABLE>
<CAPTION>
Number of Firm
Securities to
Underwriter be Purchased
- ----------- --------------
<S> <C>
Prudential Securities Incorporated..........
U.S. Bancorp Piper Jaffray Inc..............
First Albany Corporation....................
E*Offering Corp.............................
--------------
Total ..................... 7,750,000
</TABLE>
<PAGE>
NUMBER SHARES
PCQ PCQUOTE.COM, INC,
PAR VALUE $.01 CUSIP 70453R 10 5
SEE REVERSE FOR CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK PAR VALUE $.01
PER SHARE OF
PCQUOTE.COM, INC. TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER
HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON THE SURRENDER OF THIS
CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE IS NOT VALID UNLESS
COUNTERSIGNED BY THE TRANSFER AGENT AND REGISTERED BY THE REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
DATED:
[SEAL]
SIGNATURE SIGNATURE
TO COME TO COME
SECRETARY PRESIDENT AND CHIEF
OPERATING OFFICER
COUNTERSIGNED AND REGISTERED:
EQUISERVE TRUST COMPANY, N.A.
TRANSFER AGENT AND REGISTRAR,
By
AUTHORIZED SIGNATURE
<PAGE>
The Corporation will, upon request and without charge, furnish any
stockholder information regarding the powers, designations, preferences and
relative participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preference and/or rights.
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _____________CUSTODIAN____________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act______________________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
___________________________________
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________SHARES
OF THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE, AND DOES HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
_______________________________________________________________________ATTORNEY
TO TRANSFER SUCH SHARES ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED
____________________________
_____________________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER.
SIGNATURE(S) GUARANTEED:
_______________________________________________________
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT
UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM) PURSUANT TO S.E.C.
RULE 17Ad-15.
<PAGE>
EXHIBIT 10.6
TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
TAX INDEMNIFICATION AND ALLOCATION AGREEMENT ("Agreement") dated as of
__________, 1999, by and between HyperFeed Technologies, Inc., a Delaware
corporation ("HyperFeed") and PC Quote.com, Inc., a Delaware corporation
("PCQuote.com").
RECITALS
A. HyperFeed is engaged in a business relating to the internet web
site known as PCQuote.com through one of its divisions (the "Division"),
among other businesses conducted by HyperFeed.
B. On or about March 19, 1999, HyperFeed caused PCQuote.com to be
organized as a Delaware corporation.
C. HyperFeed expects as part of an integrated transaction (i) to
contribute the assets of the Division to PCQuote.com (the "Common Stock") of
PCQuote.com (the "Contribution"); and (ii) to cause PCQuote.com to make an
initial public offering of its Common Stock.
D. HyperFeed expects the Contribution to qualify as a tax-free
transfer to a controlled corporation within the meaning of Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code").
E. HyperFeed expects that during the period beginning on the date of
formation of the Company and ending upon the termination of the Effective
Period (as defined below), PCQuote.com will be part of an affiliated group
consisting of HyperFeed and its affiliates (the "HyperFeed Consolidated
Group") and that PCQuote.com will file a consolidated return with the
HyperFeed Consolidated Group.
F. Upon the termination of the Effective Period, the taxable year of
PCQuote.com shall close for U.S. federal income tax purposes and PCQuote.com
shall cease to be a member of the HyperFeed Consolidated Group.
G. The parties hereto wish to provide for the payment of Income Taxes
(as defined herein) and entitlement to refunds thereof, allocate
responsibility and provide for cooperation in connection with the filing of
returns in respect of Income Taxes, and provide for certain other matters
relating to Income Taxes.
NOW, THEREFORE, in consideration of the agreements herein contained and
intending to be legally bound hereby, HyperFeed and PCQuote.com hereby agree
as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned to them in the Contribution and Separation
Agreement between the parties of even date herewith (the "Contribution
Agreement"). For purposes of this Agreement, the following terms shall have
the meanings set forth below (such meanings to be equally applicable to both
the singular and the plural forms of the terms defined).
"Action" shall mean any action, claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental,
regulatory or other administrative agency or commission or any arbitration
tribunal.
"Actual Tax Payment" shall have the meaning set forth in Section 3.3
hereof.
"Actually Realized" or "Actually Realizes" shall mean, for purposes of
determining the timing of the incurrence of any Income Tax Liability or the
realization of a Refund by a Person in respect of any payment, transaction,
occurrence or event, the time at which the amount of Income Taxes paid by
such Person is increased above or reduced below the amount of Income Taxes
that such Person would have been required to pay but for such payment,
transaction, occurrence or event.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions located in the State of Illinois are
authorized or obligated by law or executive order to close.
"Carryback" shall mean the carryback of a Tax Attribute (including,
without limitation, a net operating loss, a net capital loss or a tax credit)
by PCQuote.com from a Post-Consolidation Taxable Period to a HyperFeed
Consolidated Return Period.
"Code" shall have the meaning set forth in Recital D.
"Contribution" shall have the meaning set forth in Recital C.
"Contribution Agreement" shall have the meaning set forth in the first
paragraph of this Article 1.
"Contribution Date" shall mean the date on which the Contribution occurs.
"Contribution Tax Liabilities," shall mean, with respect to any Taxing
Jurisdiction, as defined below, the sum of (i) the product of (x) the
additional corporate-level gain or income recognized with respect to the
failure of the Contribution to qualify for Tax-Free Status, as defined below,
under the income tax law of such Taxing Jurisdiction pursuant to any
settlement, Final Determination, judgment, assessment, proposed adjustment or
otherwise and (y) the Taxing Jurisdiction's highest marginal tax rate
applicable to the taxable income of
2
<PAGE>
corporations on income of the character subject to tax, (ii) interest on such
amount calculated pursuant to such Taxing Jurisdiction's laws regarding
interest on tax liabilities at the highest Underpayment Rate, as defined
below, for corporations in such Taxing Jurisdiction from the date such
additional gain or income was recognized until full payment with respect
thereto is made pursuant to Article 3 hereof, and (iii) any penalties
actually paid to such Taxing Jurisdiction that would not have been paid but
for the failure of the Contribution to qualify for Tax-Free Status in such
Taxing Jurisdiction.
"Deemed Tax Payment" shall have the meaning set forth in Section 3.3
hereof.
"Effective Period" shall include all taxable periods that begin or end
on or after the date of the Contribution, provided that PCQuote.com is
included in the HyperFeed Consolidated Group for a portion of such taxable
period.
"Final Determination" shall mean the final resolution of liability for
any Income Tax, which resolution may be for a specific issue or adjustment or
for a taxable period, (i) by Internal Revenue Service Form 870 or 870-AD (or
any successor forms thereto), on the date of acceptance by or on behalf of
the taxpayer, or by a comparable form under the laws of a state, local, or
foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable
form shall not constitute a Final Determination to the extent that it
reserves (whether by its terms or by operation of law) the right of the
taxpayer to file a claim for Refund or the right of the Taxing Jurisdiction
to assert a further deficiency in respect of such issue or adjustment or for
such taxable period (as the case may be); (ii) by a decision, judgment,
decree, or other order by a court of competent jurisdiction, which has become
final and unappealable; (iii) by a closing agreement or accepted offer in
compromise under Sections 7121 or 7122 of the Code, or a comparable agreement
under the laws of a state, local, or foreign taxing jurisdiction; (iv) by any
allowance of a Refund or credit in respect of an overpayment of Income Tax,
but only after the expiration of all periods during which such Refund may be
recovered (including by way of offset) by the jurisdiction imposing such
Income Tax; or (v) by any other final disposition, including by reason of the
expiration of the applicable statute of limitations or by mutual agreement of
the parties.
"HyperFeed" means HyperFeed Technologies, Inc., a Delaware corporation.
"HyperFeed Consolidated Group" shall mean HyperFeed and the other members
of the affiliated group of corporations (within the meaning of Section 1504(a)
of the Code without regard to the exclusions in Section 1504(a)(1) through (8))
of which HyperFeed is the common parent.
"HyperFeed Consolidated Federal Return" shall mean any consolidated
federal Income Tax Return or amendment thereof of the HyperFeed Consolidated
Group for any HyperFeed Consolidated Return Period.
"HyperFeed Consolidated Return Period" shall mean a taxable period that
ends with or within the Effective Period for which a consolidated, combined or
unitary (as applicable)
3
<PAGE>
federal, state, local or foreign Income Tax Return is filed or required to be
filed by the HyperFeed Consolidated Group.
"HyperFeed Consolidated Tax Liability" means, with respect to any HyperFeed
Consolidated Return Period, the consolidated, combined or unitary Income Tax
Liability of the HyperFeed Consolidated Group.
"HyperFeed Group" shall mean, solely for purposes of this Agreement,
HyperFeed and each of the other members of the HyperFeed Consolidated Group
other than PCQuote.com.
"HyperFeed State, Local and Foreign Returns" shall mean any combined,
consolidated or unitary state, local or foreign Income Tax Returns or
amendment thereof which are required to be filed by HyperFeed or a member of
the HyperFeed Consolidated Group.
"Income Tax" (a) shall mean (i) any foreign or any United States
federal, state or local tax, charge, fee, impost, levy or other assessment
that is based upon, measured by, or calculated with respect to (1) net income
or profits (including, but not limited to, any capital gains, gross receipts,
or minimum tax, and any tax on items of tax preference, but not including
sales, use, value added, real property gains, real or personal property,
transfer or similar taxes), or (2) multiple bases (including, but not limited
to, corporate franchise, doing business or occupation taxes), if one or more
of the bases upon which such tax may be based, by which it may be measured,
or with respect to which it may be calculated is described in clause
(a)(i)(1) of this definition, together with (B) any interest and any
penalties, fines, additions to tax or additional amounts imposed by any
Taxing Jurisdiction with respect thereto and (b) shall include any transferee
liability in respect of an amount described in clause (a) of this definition.
"Income Tax Benefit" shall mean, in respect of a Person or group of
Persons for any taxable period, the excess of (A) the hypothetical Income Tax
Liability of such Person or group of Persons for such taxable period,
calculated as if carryover of a Tax Attribute had not occurred but with all
other facts unchanged, over (B) the actual Income Tax Liability of such
Person or group of Persons for such taxable period, calculated taking into
account the carryover of such Tax Attribute (and treating a Refund as a
negative Income Tax Liability, and taking into account credits (if any), for
purposes of such calculation).
"Income Tax Detriment" shall mean, in respect of any Person or group of
Persons for any taxable period, the excess of (A) the actual Income Tax
Liability of such Person or group of Persons for such taxable period,
calculated taking into account the carryover of a Tax Attribute, as the case
may be, over (B) the hypothetical Income Tax Liability of such Person or
group of Persons for such taxable period, calculated as if the carryover of a
Tax Attribute had not occurred but with all other facts unchanged (and
treating a Refund as a negative Income Tax Liability, and taking into account
credits (if any), for purposes of such calculation).
"Income Tax Liabilities" shall mean all liabilities for Income Taxes.
4
<PAGE>
"Income Tax Return" shall mean any return, report, filing, statement,
questionnaire, declaration or other document required to be filed with a Taxing
Jurisdiction in respect of Income Taxes.
"Indemnified Party" shall mean any Person seeking indemnification
pursuant to the provisions of this Agreement.
"Indemnifying Party" shall mean any party hereto from which any
Indemnified Party is seeking indemnification pursuant to the provisions of
this Agreement.
"Losses" shall mean any and all losses, liabilities, claims, damages,
obligations, payments, costs and expenses, matured or unmatured, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, known or
unknown (including, without limitation, the costs and expenses of any and all
Actions, threatened Actions, demands, assessments, judgments, settlements and
compromises relating thereto and attorneys' fees and any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending
against any such Actions or threatened Actions).
"Notice Date" with respect to Subsequent Tax Legislation or Treasury
Regulation (as defined below) shall mean the earliest of (i) the date such
legislation or materially identical legislation is introduced as a bill in
the United States House of Representatives or the United States Senate, (ii)
the date any amendment to any bill incorporating such legislation is approved
by the Congressional committee having jurisdiction or by the United States
House of Representatives or the United States Senate, (iii) the date any
written proposal incorporating such legislation is transmitted by the
President of the United States to Congress, (iv) the date any written
proposal either by the Chairman of the United States House of Representatives
Ways and Means Committee or any successor thereto or the Chairman of the
United States Senate Finance Committee incorporating such legislation is
published in the Bureau of National Affairs' "Daily Tax Report," or any
successor publication or (v) the date such regulation is published in the
Federal Register as a proposed, temporary, or final Treasury Regulation.
"Person" shall mean and include any individual, partnership, joint
venture, limited liability company, corporation, association, joint stock
company, trust, unincorporated organization or similar entity or a
governmental authority or any department or agency or other unit thereof.
"Post-Consolidation Taxable Period" shall mean a taxable period that, to
the extent it relates to PCQuote.com, begins after the termination of the
Effective Period.
"Preexisting Tax Benefit" shall have the meaning given in Section 2.5(a).
"Proceeding" shall mean any audit or other examination, judicial or
administrative proceeding relating to liability for, or Refunds or
adjustments with respect to, Income Taxes.
"Refund" shall mean any refund of Income Taxes, including any reduction
in Income Tax Liabilities by means of a credit, offset or otherwise.
5
<PAGE>
"Requesting Party" shall have the meaning given in Section 6.1.
"Subsequent Tax Legislation or Treasury Regulation" shall mean any bill
introduced in the United States House of Representatives or the United States
Senate that amends the Code, or any amendment to any such bill; any written
proposal to amend the Code that is officially recommended by the President of
the United States; any written proposal to amend the Code that is made
available to the general public either by the Chairman of the United States
House of Representatives Ways and Means Committee or any successor thereto,
the Chairman of the United States Senate Finance Committee or any successor
thereto, or any temporary or final Treasury Regulation; provided, however,
that no such bill, amendment, proposal, or regulation shall constitute
Subsequent Tax Legislation or Treasury Regulation unless the Notice Date of
such bill, amendment, proposal or regulation is subsequent to the date of
this Agreement.
"PCQuote.com" means PCQuote.com, Inc., a Delaware corporation.
"Tax Attribute" shall mean a consolidated net operating loss, a
consolidated net capital loss, a consolidated unused investment credit, a
consolidated unused foreign tax credit, or a consolidated excess charitable
contribution (as such terms are used in Treasury Regulations sections
1.1502-79 and 1.1502-79A), or a U.S. federal minimum tax credit or U.S.
federal general business credit (but not tax basis or earnings and profits)
that arises during the Effective Period and can be carried to a
Post-Consolidation Taxable Period.
"Tax-Free Status" shall mean the qualification of the Contribution as a
transaction described in Code Section 351(a)(1).
"Taxing Jurisdiction" shall mean the United States and every other
government or governmental unit having jurisdiction to tax HyperFeed,
PCQuote.com or any of their respective Affiliates.
"Tax-Related Losses" shall mean: (i) the aggregate Contribution Tax
Liabilities, (ii) all accounting, legal and other professional fees, and
court costs incurred in connection with any settlement, Final Determination,
judgment or other determination with respect to such aggregate Contribution
Tax Liabilities, and (iii) all costs, expenses and damages associated with
stockholder litigation or controversies and any amount paid by HyperFeed or
PCQuote.com in respect of the liability of stockholders, whether paid to
stockholders or to the Internal Revenue Service or any other Taxing
Jurisdiction payable by HyperFeed or PCQuote.com or their respective
Affiliates, in each case, resulting from the absence of Tax-Free Status for
the Contribution.
"Treasury Regulation" shall mean final, proposed or temporary
regulations promulgated under the Code.
"Underpayment Rate" shall mean the annual rate of interest described in
Section 6621(c) of the Code for large corporate underpayments of Income Tax (or
similar provision of state, local, or foreign Income Tax law, as applicable), as
determined from time to time.
6
<PAGE>
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAX
2.1 HyperFeed Consolidated Federal Returns.
(a) General. For any HyperFeed Consolidated Return Period, HyperFeed
shall have sole and exclusive responsibility for the preparation and filing of
all HyperFeed Consolidated Federal Returns and amendments thereto with the
Internal Revenue Service. Such returns shall include all income, gains, losses,
deductions and credits of PCQuote.com.
(b) Cooperation. PCQuote.com shall furnish HyperFeed, at least sixty (60)
days before the due date (including extensions) of any such HyperFeed
Consolidated Federal Return, with its completed section of such HyperFeed
Consolidated Federal Return, prepared in accordance with this Agreement, in
accordance with instructions from HyperFeed and in a manner consistent with
prior returns, if any, provided that such actions are not inconsistent with this
Agreement. PCQuote.com will also furnish HyperFeed work papers and other such
information and documentation as is reasonably requested by HyperFeed with
respect to PCQuote.com.
2.2 HyperFeed State, Local and Foreign Returns.
(a) General. For any HyperFeed Consolidated Return Period, HyperFeed
shall have sole and exclusive responsibility for the preparation and filing of
all HyperFeed State, Local and Foreign Returns.
(b) Cooperation. HyperFeed will timely advise PCQuote.com of the
inclusion of PCQuote.com in any HyperFeed State, Local and Foreign Returns
and the jurisdictions in which such returns will be filed. PCQuote.com will
evidence its agreement to be included in such return on the appropriate
form(s) and will take such other actions as may be appropriate, in the
opinion of HyperFeed, to carry out the purposes and intent of this Section
2.2, provided that such actions are not inconsistent with this Agreement.
PCQuote.com shall furnish HyperFeed, at least sixty (60) days before the due
date (including extensions) of any such HyperFeed State, Local and Foreign
Returns, with its completed section of such HyperFeed State, Local and
Foreign Returns, prepared in accordance with this Agreement, in accordance
with instructions from HyperFeed and in a manner consistent with prior
returns, if any, provided that such actions are not inconsistent with this
Agreement. PCQuote.com will also furnish HyperFeed work papers and other
such information and documentation as is reasonable requested by HyperFeed
with respect to PCQuote.com.
2.3 HyperFeed Tax Liability.
(a) HyperFeed Consolidated Federal Return Liability. Except to the
extent otherwise provided herein, for each HyperFeed Consolidated Return
Period, HyperFeed shall be liable for and indemnify PCQuote.com against all
Taxes due in respect of all HyperFeed
7
<PAGE>
Consolidated Federal Returns, subject to reimbursement from PCQuote.com as
contemplated by Section 2.6 of this Agreement.
(b) HyperFeed State, Local and Foreign Return Liability. Except to the
extent otherwise provided herein, for each HyperFeed Consolidated Return
Period, HyperFeed shall be liable for and indemnify PCQuote.com against all
Taxes due in respect of all HyperFeed State, Local and Foreign Returns,
subject to reimbursement from PCQuote.com as contemplated by Section 2.6 of
this Agreement.
2.4 PCQuote.com Separate Tax Return Amount.
(a) General. For any taxable period ending with or within the
Effective Period of this Agreement, the term "PCQuote.com Separate Tax Return
Amount" shall mean the aggregate amount, whether a negative or positive, of
(i) the PCQuote.com Separate Federal Amount and (ii) the PCQuote.com Separate
State, Local and Foreign Amount, each as adjusted pursuant to the terms of
this Agreement.
(b) Computation of PCQuote.com Separate Federal Amount. For each
HyperFeed Consolidated Return Period that ends with or within the Effective
Period of this Agreement, PCQuote.com shall compute the PCQuote.com Separate
Federal Amount for the portion of such periods in which PCQuote.com is a
Member of the HyperFeed Consolidated Group. "PCQuote.com Separate Federal
Amount" means, with respect to each HyperFeed Consolidated Return Period, the
federal Tax liability that would be payable by PCQuote.com to the Internal
Revenue Service (in which case such amount will be positive), or the federal
Tax refund that would be payable by the Internal Revenue Service to
PCQuote.com (in which case such amount will be negative) if PCQuote.com had
filed a separate federal income tax return for the HyperFeed Consolidated
Return Period. In the event that PCQuote.com has a net operating loss, tax
credit or other favorable Tax attribute (a "Tax Attribute") for federal Tax
purposes for a particular HyperFeed Consolidated Return Period that would
eliminate the federal Tax liability of PCQuote.com for such taxable period
but would not yield a federal Tax refund for PCQuote.com on a separate
federal income tax return basis, the PCQuote.com Separate Federal Amount
shall be zero for such taxable period, and such federal Tax Attribute shall
be recoverable, if at all, by PCQuote.com in a subsequent HyperFeed
Consolidated Return Period on such separate return basis, as herein provided.
In computing the PCQuote.com Separate Federal Amount, PCQuote.com shall
follow the Tax elections and other Tax positions adopted or prescribed by
HyperFeed and shall take into account the adjustments and modifications set
forth in Section 2.5 of this Agreement.
(c) Computation of PCQuote.com Separate State, Local and Foreign
Amount. For each HyperFeed Consolidated Return Period that ends on or after
the first day of the Effective Period of this Agreement, PCQuote.com shall
compute the PCQuote.com Separate State, Local and Foreign Amount for the
portion of such periods in which PCQuote.com is a Member of the HyperFeed
Affiliated Group. "PCQuote.com Separate State, Local and Foreign Amount"
means, with respect to each HyperFeed Consolidated Return Period, the state,
local and foreign Tax liability that would be payable by PCQuote.com to the
applicable
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taxing authorities (in which case such amount will be positive), or the
state, local and foreign Tax refund that would be payable by the applicable
taxing authorities to PCQuote.com (in which case such amount will be
negative) if PCQuote.com had filed a separate state, local and foreign income
or franchise tax return for the HyperFeed Consolidated Return Period. In the
event that PCQuote.com would have a net operating loss, tax credit or other
favorable Tax attribute (a "Tax Attribute") for state, local or foreign Tax
purposes for a particular HyperFeed Consolidated Return Period that would
eliminate the state, local or foreign Tax liability of PCQuote.com for such
taxable period but would not yield a state, local or foreign Tax refund for
PCQuote.com on a separate federal income tax return basis, the PCQuote.com
Separate State, Local and Foreign Amount shall be zero for such taxable
period, and such state, local or foreign Tax Attribute shall be recoverable,
if at all, by PCQuote.com in a subsequent HyperFeed Consolidated Return
Period on such separate return basis, as herein provided. In computing the
PCQuote.com Separate State, Local and Foreign Amount, PCQuote.com shall
follow the Tax elections and other Tax positions adopted or prescribed by
HyperFeed and shall take into account the adjustments and modifications set
forth in Section 2.5 of this Agreement.
2.5 Adjustments. In computing the PCQuote.com Separate Federal Amount
(and to the extent appropriate, the PCQuote.com Separate State, Local and
Foreign Amount), PCQuote.com shall take into account the following
adjustments and modifications:
(a) The PCQuote.com Separate Federal Amount shall be computed as if
PCQuote.com came into existence in a Code section 351 transaction on the date
of the Contribution, and unless otherwise provided, PCQuote.com shall be
deemed not to have existed prior to such date. PCQuote.com shall not be
entitled to any Tax Benefits of either the HyperFeed Affiliated Group or
PCQuote.com that existed prior to the date of the Contribution (a
"Preexisting Tax Benefit").
(b) Dividends from any Member of the HyperFeed Affiliated Group shall
be eliminated.
(c) Items of income, gain, loss or deduction arising from a transaction
described in Treasury Regulation section 1.1552-1(a)(2)(ii) shall be taken
into account by PCQuote.com in the same manner and in the same taxable years
as such items are actually taken into account on the HyperFeed Consolidated
Federal Return.
(d) Carryforwards and carrybacks of any Tax Benefits shall be
calculated as though HyperFeed were the Internal Revenue Service and
PCQuote.com filed a separate return.
(e) Characterization of items of income, expense, gain or loss that are
determined on a consolidated or combined basis in the calculation of
HyperFeed Consolidated Federal Return Liability and HyperFeed State, Local
and Foreign Liability, such as characterizations under Code section 1231,
shall retain their characterization for purposes of determining the
PCQuote.com Separate Federal Amount and the PCQuote.com Separate State, Local
and Foreign Amount.
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(f) All ordinary income and capital gains shall be deemed to be subject
to Tax at the highest applicable Tax rate applicable to taxable ordinary
income of corporations.
(g) Estimated Tax payments made pursuant to Section 2.6(c) of this
Agreement shall not be included in the computation of the PCQuote.com
Separate Tax Return Amount.
(h) Other adjustments reasonably specified by HyperFeed shall be made.
2.6 Payment of PCQuote.com Separate Tax Return Amount.
(a) Payment from PCQuote.com to HyperFeed. For any HyperFeed
Consolidated Return Period covered by this Agreement, if the PCQuote.com
Separate Tax Return Amount is a positive amount, PCQuote.com shall pay such
amount to HyperFeed on or before the due date (without extensions) of the
HyperFeed Consolidated Federal Returns for the appropriate HyperFeed
Consolidated Return Period. Such payment shall be reduced by the estimated
Tax payments made by PCQuote.com for such taxable period pursuant to Section
2.6(c) of this Agreement. For administrative or other reasons, HyperFeed may
direct or allow the above payment to be made after the prescribed date. If
all relevant information necessary to determine the amount of the payment is
not available by the due date, the payment shall be based on estimates, and
adjustments shall be made when sufficient information is available or as soon
as practicable after the HyperFeed Consolidated Federal Return for the
appropriate HyperFeed Consolidated Return Period is filed.
(b) Payment from HyperFeed to PCQuote.com. For any HyperFeed
Consolidated Return Period covered by this Agreement, if the PCQuote.com
Separate Tax Return Amount is a negative amount HyperFeed shall pay to
PCQuote.com the amount that would have been allowed as a net Tax refund to
PCQuote.com on or before the due date (without extensions) of the HyperFeed
Consolidated Federal Returns for the appropriate HyperFeed Consolidated
Return Period. Such payment shall be increased by the estimated Tax payments
made by PCQuote.com Subgroup for such taxable period pursuant to Section
2.6(c) of this Agreement. For administrative or other reasons, HyperFeed may
decide to make the above payment after the prescribed date. If all relevant
information necessary to determine the amount of the payment is not available
by the due date, the payment shall be based on estimates, and adjustments
shall be made when sufficient information is available or as soon as
practicable after the HyperFeed Consolidated Federal Return for the
appropriate HyperFeed Consolidated Return Period is filed.
(c) Estimated Tax Payments.
(i) PCQuote.com shall pay to HyperFeed quarterly installments of
estimated Tax. The amount of such payments for the first, second, third and
fourth installments shall cumulatively equal 25 percent, 50 percent, 75
percent and 100 percent, respectively, of the estimated full-year PCQuote.com
Separate Tax Return Amount (including the minimum tax and environmental tax).
Settlement for such payment shall be made on or before, or as soon
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as practicable after, the due date of the applicable estimated Tax payment to
be paid by HyperFeed.
(ii) PCQuote.com shall pay to HyperFeed any and all interest and
penalties imposed on the HyperFeed Consolidated Group as a result of the
underpayment of estimated Tax attributable to PCQuote.com. For purposes of
this Section 2.6(c)(ii), the Chief Financial Officer of HyperFeed shall
determine to which Member or Members of the HyperFeed Consolidated Group the
underpayment is attributable. Such determination of the Chief Financial
Officer shall be final. A payment of such interest and penalties shall not be
considered a payment of estimated Tax.
2.7 Adjustments to HyperFeed Consolidated Tax Liability.
(a) General. If any adjustment in the HyperFeed Consolidated Tax
Liability is made as a result of an audit by a Taxing Jurisdiction, the
granting of a claim for refund, a final decision by a court, the carryback or
carryforward of a loss, deduction or credit or any other similar
circumstance, the Tax refund or Tax liability resulting therefrom, including
any interest and penalties (an "Adjustment"), shall be allocated between the
HyperFeed Affiliated Group and PCQuote.com in accordance with the principles
of this Agreement as if such adjustments had been taken into account in the
year to which they relate.
(b) Adjustment Resulting in Basis Increase to PCQuote.com. If any
Adjustment results in an increase in the adjusted basis of any asset
transferred by HyperFeed to PCQuote.com, PCQuote.com shall pay to HyperFeed
the amount of any Tax benefit resulting to it by virtue of such basis
increase to HyperFeed as and when such Tax benefit is realized. The
preceding sentence shall survive the expiration of the Effective Period of
this Agreement.
ARTICLE III
INDEMNIFICATION FOR INCOME TAXES
3.1 Indemnification by HyperFeed. Except as otherwise provided in this
Article 3, HyperFeed shall indemnify and hold PCQuote.com, its
Representatives and Affiliates harmless from and against (i) all Contribution
Tax Liabilities incurred by PCQuote.com; (ii) without duplication, all Income
Tax Liabilities incurred by any member of the HyperFeed Group that any member
of the HyperFeed Group is liable for, or required to reimburse PCQuote.com
for, pursuant to Article 3 hereof; (iii) all Income Tax Liabilities incurred
by PCQuote.com by reason of the breach of any of HyperFeed's covenants
hereunder; and (iv) in each of the cases described in (i) through (iii), any
related costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses).
3.2 Indemnification by PCQuote.com. From and after the Contribution Date,
PCQuote.com shall indemnify and hold HyperFeed, its Representatives and
Affiliates harmless from and against (i) all Income Tax Liabilities of HyperFeed
incurred by reason of the breach
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by PCQuote.com of any of its convenants hereunder, and in each case, any
related costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses); (ii) all Income Tax Liabilities that
PCQuote.com is required to pay, or reimburse HyperFeed, its Representatives
and Affiliates for, under Article 3 hereof; and (iii) in each of the cases
described in (i) through (ii), any related costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses).
3.3 Time of Payment. The Indemnifying Party shall make payment
pursuant to an indemnification obligation no later than (i) five Business
Days prior to the date the Indemnified Party makes a payment of taxes,
interest, or penalties with respect to a proposed adjustment of taxes or an
assessment of tax deficiency asserted or made by any Taxing Jurisdiction that
is premised in whole or part on Contribution Tax Liabilities, including a
payment made in settlement of an asserted tax deficiency (each, an "Actual
Tax Payment"), or (ii) five Business Days after the date the Indemnified
Party gives written notice to the Indemnifying Party that the Indemnified
Party has notified any Taxing Jurisdiction, or gives the Indemnifying Party
written notice or an acknowledgment by any Taxing Jurisdiction, that such
proposed adjustment of taxes or tax deficiency would not result in a net
payment by the Indemnified Party because of the carryover, carryback or
carryforward of net operating losses or credits, the crediting of previously
paid taxes, the utilization of deductions or credits not claimed on the
Indemnified Party's tax returns as originally filed, the exclusion of income
reported on such returns, or the utilization of any other tax attributes that
offset the asserted taxes (each, a "Deemed Tax Payment"). The amount payable
pursuant to the preceding sentence shall be the Tax-Related Loss implied by
such Actual Tax Payments and Deemed Tax Payments.
3.4 Effect of Ruling, Determination or Opinion. The ability of either
HyperFeed or PCQuote.com to claim the benefit of indemnification pursuant to
this Article 3 shall not be affected by the fact that (i) HyperFeed or
PCQuote.com may have received a ruling from the Internal Revenue Service; or
(ii) HyperFeed or PCQuote.com may have obtained a opinion of counsel relating
to the Tax Liabilities for which indemnification is sought.
ARTICLE IV
INCOME TAX CONTESTS
4.1 Notification by PCQuote.com. PCQuote.com shall promptly upon
receipt of notice thereof, notify HyperFeed in writing of any communication
with respect to any pending or threatened Proceeding in connection with an
Income Tax Liability (or an issue related thereto) for which HyperFeed may be
responsible pursuant to this Agreement. PCQuote.com shall include with such
notification a true, correct and complete copy of any written communication,
and an accurate and complete written summary of any oral communication, so
received by PCQuote.com. The failure of PCQuote.com timely to forward such
notification in accordance with the immediately preceding sentence shall not
relieve HyperFeed of its obligation to pay such Income Tax Liability or
indemnify PCQuote.com therefor, except and to the extent that the failure
timely to forward such notification actually prejudices the ability of
HyperFeed to contest such Income Tax Liability or increases the amount of
such Income Tax Liability.
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4.2 Notification by HyperFeed. HyperFeed shall promptly upon receipt
of notice thereof, notify PCQuote.com in writing of any communication with
respect to any pending or threatened Proceeding in connection with an Income
Tax Liability (or an issue related thereto) for which PCQuote.com may be
responsible pursuant to this Agreement. HyperFeed shall include with such
notification a true, correct and complete copy of any written communication,
and an accurate and complete written summary of any oral communication, so
received by HyperFeed. The failure of HyperFeed timely to forward such
notification in accordance with the immediately preceding sentence shall not
relieve PCQuote.com of its obligation to pay such Income Tax Liability or
indemnify HyperFeed therefor, except and to the extent that the failure
timely to forward such notification actually prejudices the ability of
PCQuote.com to contest such Income Tax Liability or increases the amount of
such Income Tax Liability.
4.3 HyperFeed Consolidated Return Periods. HyperFeed (or such member
of the Consolidated Group as HyperFeed shall designate) shall have the sole
right to represent the interests of PCQuote.com in any Proceeding relating to
HyperFeed Consolidated Return Periods and to employ counsel of its choice at
its expense; provided, however, that any expenses relating to items for which
PCQuote.com is responsible pursuant to Section 3 in connection with such a
Proceeding shall be borne by PCQuote.com; provided, further, however, that
PCQuote.com shall be entitled to designate counsel with respect to any such
Proceeding with respect to an Income Tax Return that includes solely
PCQuote.com and relates solely to items for which PCQuote.com is responsible
hereunder.
4.4 Power of Attorney. PCQuote.com shall execute and deliver to
HyperFeed (or such member of the HyperFeed Group as HyperFeed shall
designate) any power of attorney or other document requested by HyperFeed (or
such designee) in connection with any Proceeding described in Section 4.3
hereof.
ARTICLE V
APPORTIONMENT OF TAX ATTRIBUTES; REFUNDS
5.1 Apportionment of Tax Attributes.
(a) If the HyperFeed Consolidated Group has a Tax Attribute, the
portion, if any, of such Tax Attribute that shall be apportioned to
PCQuote.com and treated as a carryover to the first Post-Consolidation
Taxable Period of PCQuote.com shall be determined in accordance with Treasury
Regulation sections 1.1502-79 and 1.1502- 79A; provided, however, that the
portion, if any, of any consolidated unused foreign tax credit which shall be
apportioned to PCQuote.com or such member shall be determined separately with
respect to each of the items of income listed in Section 904(d) of the Code.
(b) No consolidated U.S. federal income Tax Attribute of the HyperFeed
Consolidated Group, other than those described in Section 5.1(a) hereof, and
no consolidated,
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combined or unitary state, local, or foreign income Tax Attribute arising in
respect of a HyperFeed State, Local and Foreign Return, shall be apportioned
to PCQuote.com, except as HyperFeed (or such member of the HyperFeed
Consolidated Group as HyperFeed shall designate) determines is otherwise
required under the provisions of applicable law.
(c) HyperFeed (or its designee) shall determine the portion, if any, of
any Tax Attribute which must (absent a Final Determination to the contrary)
be apportioned to PCQuote.com in accordance with this Section 5.1 and
applicable law, and the amount of tax basis and earnings and profits to be
apportioned to PCQuote.com in accordance with applicable law, and shall
provide written notice of the calculation thereof to PCQuote.com as soon as
practicable after the information necessary to make such calculation becomes
available to HyperFeed.
(d) PCQuote.com shall prepare, or cause to be prepared, and file, or
cause to be filed, all Income Tax Returns for which it is responsible under
this Agreement, so as to take into account, to the extent permitted by
applicable law, any Tax Attribute (and the amount of tax basis and earnings
and profits) apportioned to PCQuote.com as calculated pursuant to Section
5.1(c) hereof. Until such time as any such Tax Attribute has been utilized by
PCQuote.com (or would have been so utilized had PCQuote.com complied with the
requirements of the previous sentence), PCQuote.com shall, in connection with
each Income Tax Return filed by it, provide HyperFeed with a statement,
signed by PCQuote.com's chief financial officer and certified by
PCQuote.com's independent accounting firm, setting forth in reasonable detail
a calculation of the extent to which any such Tax Attribute was utilized on
such Income Tax Return (or would have been so utilized had PCQuote.com
complied with the requirements of the previous sentence).
(e) If any Tax Attribute is carried forward to an Income Tax Return of
PCQuote.com for any Post-Consolidation Taxable Period, PCQuote.com shall pay
to HyperFeed (or its designee) the amount of any Income Tax Benefit Actually
Realized by PCQuote.com as a result of the carryover of such Tax Attribute,
including interest (computed at the Overpayment Rate) from the original due
date (without extensions) of the Income Tax Return for the taxable period in
which such Income Tax Benefit is Actually Realized through the date of
payment under this Section 5.1(e) (but without duplication of the amount of
interest, if any, included in the Income Tax Benefit Actually Realized);
provided, however, that the failure of PCQuote.com to comply with the
requirements of the first sentence of Section 5.1(d) hereof shall not relieve
PCQuote.com of the obligation to make the payment that it would be required
to make pursuant to this Section 5.1(e) were PCQuote.com to have complied
with such requirements.
(f) If there is a Final Determination that results in any change to or
adjustment of the portion of any Tax Attribute which shall have been
apportioned to PCQuote.com pursuant to this Section 5.1, then HyperFeed (or
its designee) shall make a payment to PCQuote.com, or PCQuote.com shall make
a payment to HyperFeed (or its designee),as may be necessary to adjust the
payments between PCQuote.com and HyperFeed(or its designee) to reflect the
payments that would have been made under Section 5.1(e) had the adjusted
amount of the Tax
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Attribute been taken into account in computing the payments due under Section
5.1(e) hereof.
(g) Except to the extent otherwise consented to by HyperFeed or
prohibited by applicable law, PCQuote.com shall elect to relinquish, waive or
otherwise forego all Carrybacks. In the event that PCQuote.com is prohibited
by applicable law to relinquish, waive or otherwise forego a Carryback (or
HyperFeed consents thereto), (i) HyperFeed shall cooperate with PCQuote.com,
at PCQuote.com's expense, in seeking from the appropriate Taxing Jurisdiction
such Refund as reasonably would result from such Carryback, and (ii)
PCQuote.com shall be entitled to any Income Tax Benefit Actually Realized by
a member of the HyperFeed Consolidated Group (including any interest thereon
received from such Taxing Jurisdiction), to the extent that such Refund is
directly attributable to such Carryback, within 10 days after such Refund is
Actually Realized; provided, however, that PCQuote.com shall indemnify and
hold the members of the HyperFeed Consolidated Group harmless from and
against any and all collateral tax consequences resulting from or caused by
any such Carryback, including (but not limited to) the loss or postponement
of benefit from the use of tax attributes generated by a member of the
HyperFeed Consolidated Group or an Affiliate thereof and (x) that expire
unutilized, but would have been utilized but for such Carryback, or (y) the
use of which is postponed to a later taxable period than the taxable period
in which such tax attributes otherwise would have been utilized but for such
Carryback. If there is a Final Determination that results in any change to
or adjustment of an Income Tax Benefit Actually Realized by a member of the
HyperFeed Consolidated Group that is directly attributable to a Carryback,
then HyperFeed (or its designee) shall make a payment to PCQuote.com, or
PCQuote.com shall make a payment to HyperFeed (or its designee), as may be
necessary to adjust the payments between PCQuote.com and HyperFeed (or its
designee) to reflect the payments that would have been made under this
Section 5.1(g) had the adjusted amount of such Income Tax Benefit been taken
into account in computing the payments due under this Section 5.1(g).
5.2 Refunds. Except to the extent provided in Section 5.1(g) hereof,
HyperFeed shall be entitled to all Refunds (and any interest thereon received
from the applicable Taxing Jurisdiction) in respect of Income Taxes for all
HyperFeed Consolidated Return Periods. Except to the extent provided in
Section 5.1(g), PCQuote.com shall be entitled to all Refunds (and any
interest thereon received from the applicable Taxing Jurisdiction) in respect
of Income Taxes paid by PCQuote.com for all Post-Consolidation Taxable
Periods. A party receiving a Refund to which another party is entitled
pursuant to this Section 5.2 shall pay the amount to which such other party
is entitled within ten days after such Refund is Actually Realized.
HyperFeed shall be permitted to file, and PCQuote.com shall fully cooperate
with HyperFeed in connection with, any claim for Refund in respect of an
Income Tax for which any member of the HyperFeed Consolidated Group is
responsible pursuant to Section 3 hereof.
ARTICLE VI
COOPERATION AND EXCHANGE OF INFORMATION
6.1 Cooperation. Each of the parties to this Agreement, on behalf of
itself and each of its Affiliates, agrees to provide the other party or its
designee (the "Requesting Party")
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)with such cooperation or information as the Requesting Party reasonably
shall request in connection with the determination of any other calculations
described in this Agreement, the preparation or filing of any Income Tax
Return or claim for Refund, or the conduct of any Proceeding. Such
cooperation and information shall include, without limitation, upon
reasonable notice (i) promptly forwarding copies of appropriate notices and
forms or other communications (including, without limitation, information
document requests, revenue agent's reports and similar reports, notices of
proposed adjustments and notices of deficiency) received from or sent to any
Taxing Jurisdiction or any other administrative, judicial or governmental
authority, (ii) providing copies of all relevant Income Tax Returns, together
with accompanying schedules and related workpapers, documents relating to
rulings or other determinations by taxing authorities, and such other records
concerning the ownership and tax basis of property, or other relevant
information that PCQuote.com or its Affiliates may possess, (iii) the
provision of such additional information and explanations of documents and
information provided under this Agreement (including statements, certificates
and schedules delivered by either party) as shall be reasonably requested by
the Requesting Party, (iv) the execution of any document that may be
necessary or reasonably helpful in connection with the filing of an Income
Tax Return, a claim for a Refund, or in connection with any Proceeding,
including such waivers, consents or powers of attorney as may be necessary
for HyperFeed to exercise its rights under this Agreement, and (v) the use of
reasonable efforts to obtain any documentation from a governmental authority
or a third party that may be necessary or reasonably helpful in connection
with any of the foregoing. Upon reasonable notice, each of the parties hereto
shall make its, or shall cause its Affiliates to make their, employees and
facilities available on a mutually convenient basis to provide explanation of
any documents or information provided hereunder. Any information obtained
under this Section 6.1 shall be kept confidential, except as otherwise
reasonably may be necessary in connection with the filing of Income Tax
Returns or claims for Refund or in conducting any Proceeding. Notwithstanding
any other provision of this Agreement, neither PCQuote.com, nor any of its
Affiliates nor any other Person shall have any right to receive or obtain any
information relating to Income Taxes of HyperFeed or any of its Affiliates
other than information relating solely to the Division.
6.2 Retention of Records. Except as otherwise provided in the
Contribution Agreeement, each of the parties to this Agreement hereby agrees
to retain all Income Tax Returns, related schedules and workpapers, and all
material records and other documents as required under Section 6001 of the
Code and the regulations promulgated thereunder (and any similar provision of
state, local, or foreign Income Tax law) existing on the date hereof or
created in respect of (i) the Effective Period or (ii) any taxable period
that may be subject to a claim hereunder, until the later of (x) the
expiration of the statute of limitations (including extensions) for the
taxable periods to which such Income Tax Returns and other documents relate
and (y) the Final Determination of any payments that may be required in
respect of such taxable periods under this Agreement. From and after the end
of the period described in the preceding sentence of this Section 6.2, if
either of the parties to this Agreement wishes to dispose of any such records
and documents, then such party shall provide written notice thereof to the
other party and shall provide the other party the opportunity to take
possession of any such records and documents within 90 days after such notice
is delivered; provided, however, that if the other party does not, within
such 90-day period, confirm its intention to
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take possession of such records and documents, such records and documents may
be destroyed or otherwise disposed of.
6.3 Inadequate Remedy. Each of the parties hereto hereby acknowledges
and agrees that (a) its failure to comply with the provisions of this Article
6 may result in substantial harm to the other party, including the inability
to determine or appropriately substantiate an Income Tax Liability (or a
position in respect thereof) for which the other party would be responsible
under this Agreement or appropriately defend against an adjustment thereto by
a taxing authority, and (b) the remedies available to the other party for the
breach of the obligations hereunder shall include (without limitation) the
indemnification of the other party by the breaching party for any Income Tax
Liabilities incurred or any Income Tax benefit lost or postponed by reason of
such breach and the forfeiture by the breaching party of any related rights
to indemnification by the other party. In addition, if either party fails to
provide any cooperation or information requested pursuant to this Agreement
(x) within the specified time or (y) in the absence of such specified time,
within a reasonable period (as determined in good faith by the party
requesting such information), then, without limiting any other remedy
available to the other party, the other party shall have the right to engage
a nationally recognized accounting firm of its choice to gather such
information. The breaching party agrees to permit any such nationally
recognized accounting firm full access to all appropriate records or other
information in the possession of the breaching party during normal business
hours, and promptly to reimburse or pay directly all costs and expenses in
connection with the engagement of such accountants.
ARTICLE VII
PAYMENTS
7.1 Method of Payment. All payments required by this Agreement shall
be made by (a) wire transfer to the appropriate bank account as may from time
to time be designated by the parties for such purpose; provided that, on the
date of such wire transfer, notice of the transfer is given to the recipient
thereof in accordance with Section 8.4 hereof, or (b) any other method agreed
to by the parties. All payments due under this Agreement shall be deemed to
be paid when available funds are actually received by the payee.
7.2 Interest. Any payment required by this Agreement that is not made
on or before the date required hereunder shall bear interest, from and after
such date through the date of payment, at the Underpayment Rate.
7.3 Characterization of Payments. For all tax purposes, the parties
hereto agree to treat, and to cause their respective Affiliates to treat, (i)
any payment required by this Agreement, as either a contribution by HyperFeed
to PCQuote.com or a distribution by PCQuote.com to HyperFeed, as the case may
be, occurring immediately prior to the Contribution and (ii) any payment of
interest or non-federal Income Taxes by or to a Taxing Jurisdiction, as
taxable or deductible, as the case may be, to the party entitled under this
Agreement to retain such payment or required under this Agreement to make
such payment, in either case except as otherwise mandated by applicable law;
provided that in the event it is
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determined as a result of a Final Determination that any such treatment is
not permissible, the payment in question shall be adjusted to place the
parties in the same after-tax position they would have enjoyed absent such
Final Determination.
ARTICLE VIII
MISCELLANEOUS
8.1. Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by either party without the
prior written consent of the other party hereto; provided, however, that
either of the parties to this Agreement may assign this Agreement and its
rights and obligations hereunder to any entity controlling, controlled by or
under common control with such party, or to any entity that acquires by
purchase of stock or by merger or otherwise, or by acquiring all or
substantially all of such party's assets, provided that any such assignee
succeeds to all of the rights and is subject to all of the obligations of
under this Agreement. Any attempted assignment in violation of this Section
8.1 shall be null and void ab initio.
8.2 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any person, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.
8.3 Attorney Fees. A party in breach of this Agreement shall, on
demand, indemnify and hold harmless each other party for and against all
reasonable out-of-pocket expenses, including legal fees, incurred by such
other party by reason of the enforcement and protection of its rights under
this Agreement. The payment of such expenses is in addition to any other
relief to which such other party may be entitled.
8.4 All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered by hand or sent,
postage prepaid, by registered, certified or express mail or reputable
overnight courier service and shall be deemed given when so delivered by
hand, or if mailed, three days after mailing (one business day in the case of
express mail or overnight courier service), as follows:
(i) if to the Company,
PCQuote.com, Inc.
300 South Wacker Drive, Suite 300
Chicago, Illinois 60606
Attention: Andrew Peterson
(ii) if to HyperFeed,
HyperFeed Technologies, Inc.
300 South Wacker Drive, Suite 300
Chicago, Illinois 60606
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Attention: John Juska
8.5 Interpretation. The headings contained in this Agreement hereto are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of,
or an Exhibit or Schedule to, this Agreement unless otherwise indicated.
8.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been
signed by each of the parties and delivered to each of the other parties.
8.7 Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to
such subject matter. Neither party shall be liable or bound to any other
party in any manner by any representations, warranties or covenants relating
to such subject matter except as specifically set forth herein.
8.8 Severability. If any provision of this Agreement (or any portion
thereof) or the application of any such provision (or any portion thereof) to
any person or circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision hereof (or the
remaining portion thereof) or the application of such provision to any other
persons or circumstances.
8.9 Amendments and Waivers. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
8.10 Consent to Jurisdiction. Each of HyperFeed and PCQuote.com
irrevocably submits to the exclusive jurisdiction of (a) the Superior Court
of the State of Illinois, Cook County, and (b) the United States District
Court for the Northern District of Illinois, for the purposes of any suit,
action or other proceeding arising out of this Agreement or any transaction
contemplated hereby or thereby. Each of HyperFeed and PCQuote.com agrees to
commence any such action, suit or proceeding either in the United States
District Court for the Northern District of Illinois or if such suit, action
or other proceeding may not be brought in such court for jurisdictional
reasons, in the Superior Court of the State of Illinois, Cook County. Each
of HyperFeed and PCQuote.com further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's
respective address set forth above shall be effective service of process for
any action, suit or proceeding in Illinois with respect to any matters to
which it has submitted to jurisdiction in this Section 8.10. Each of
HyperFeed and PCQuote.com irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising
out of this Agreement, any Ancillary Agreement or the transactions
contemplated hereby and thereby in (i) the Superior Court of the State of
Illinois, Cook County, or (ii) the United States District Court for the
Northern District of Illinois, and hereby and thereby further irrevocably and
unconditionally waives and agrees
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not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient
forum.
8.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Illinois applicable to
agreements made and to be performed entirely within such State, without
regard to the conflicts of law principles of such State.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first written above.
HYPERFEED TECHNOLOGIES, INC.
By:
Name:
Title:
PC QUOTE.COM, INC.
By:
Name:
Title:
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EXHIBIT 10.8
SOFTWARE LICENSE AND DISTRIBUTOR AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into and made this 28th day
of May, 1999, by and between Townsend Analytics, Ltd., an Illinois
corporation, having its principal office at 100 South Wacker Drive, Suite
2040, Chicago, Illinois 60606 ("TAL"), and PC Quote.Com, Inc., a Delaware
corporation, whose principal office is located at 300 S. Wacker Drive,
Chicago, Illinois 60606 ("PQT").
W I T N E S S E T H
WHEREAS, TAL (a) designs, develops, markets and licenses computer
software and computer-based software systems and has developed a suite of
real time software products called "TAL Trading Tools Package" ("the
Product") that performs a variety of functions such as (1) the display of
market price quotations, news, and other information for analysis
("RealTick-TM-"); (2) order entry including initiating and transmitting of
trading orders, position management, etc. ("RealTrade-TM-"); (3) Software
Server applications ("Software Server Applications") which provide
permissioning, real-time and historical market prices and news to the Product
(PermSrv-TM-, TASrv-TM-, and TALNet-TM-, among others); and (b) operates an
Internet and frame relay site for distribution of market quotes, trades, and
other services ("TAL site"); and
WHEREAS, in connection with the utilization of the Product, certain
services are licensed by PQT from HyperFeed Technologies ("HyperFeed"); and
WHEREAS, PQT acknowledges that the Product does constitute valuable
property of TAS not within the public domain, and that, but for this
Agreement, and rights granted herein, PQT would have no rights with respect
thereto; and
WHEREAS, PQT is in the business of distributing market data, operating
an Internet service and of selling, licensing, supporting, installing and
servicing computer software, and has represented that it has the resources,
facilities and personnel necessary to maintain the high standards of
performance which are necessary to achieve maximum sales of TAL's products
through satisfaction of the end user ("Customer");
WHEREAS, PQT would like to use the Product to provide an Internet
service to its customers; and
WHEREAS, TAL and PQT have agreed that throughout the course of this
Agreement and in terminating this Agreement they will act in a fair,
equitable and ethical manner to each other as well as to the end user;
NOW, THEREFORE, TAL and PQT agree as follows:
1. LICENSE AND APPOINTMENT
(a) LICENSES. TAL hereby grants to PQT,
(i) the non-exclusive, nontransferable right during the Term
(subject to the terms herein) to use, reproduce and display
the Software Server
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Applications and RealTick at Sites specified in Schedule 2.
(ii) the non-exclusive, and nontransferable right (subject to the
terms herein) during the Term to market and distribute
RealTick and to grant within the Territory, to its customers
non-exclusive, nontransferable rights.
TAL and PQT acknowledge and agree that Customers with End User
Agreements expiring after the termination of this Agreement shall
survive such termination and Customers shall be permitted to use the
Product until the termination or expiration of such End User Agreement
pursuant to the terms thereof, as long as PQT fulfills its obligation to
pay license fees and exchange fees as contemplated in this Agreement.
(b) APPOINTMENT AND ACCEPTANCE. TAL hereby appoints PQT, subject to
the provisions, terms and conditions set forth in this Agreement, as a
non-exclusive distributor for the licensing, support and servicing of
the Product or Products listed in the attached Schedule 2 to this
Agreement, which Schedule may be amended from time to time. PQT hereby
accepts such appointment, and by accepting said appointment,
acknowledges that it has read and understood this Agreement and the
Schedule attached hereto.
(c) RESERVATION OF RIGHTS. TAL reserves the right to license, sell,
support, and service the Product in competition with the PQT and to
appoint, without limitation, other distributors for the Product. Nothing
in this Agreement prohibits TAL from offering the Product, as part of
other Internet services on any other data feed including its own data
feed.
2. PQT OWNERSHIP, MANAGEMENT AND BUSINESS. This Agreement is entered into
by TAL in reliance upon the representations and agreements by PQT regarding
its ownership, management and conduct of its business. PQT agrees to give TAL
thirty (30) days prior written notice of its intention to effect any of the
following changes, and no such change shall be made without the prior written
approval of TAL, which approval shall not be unreasonably withheld.
(a) A change or transfer which would materially affect, either
directly or indirectly, the ownership, management or control of PQT.
(b) A sale or transfer of any substantial portion of PQT's
business property or business assets other than in the ordinary course of
business.
3. TERM.
(a) This Agreement shall become effective as of the date first
above written and shall remain in effect until December 4, 2000, unless
earlier terminated in accordance with the provisions of Paragraph 4.
(b) This Agreement shall thereafter be automatically renewed for
successive one (1) year periods unless either party notifies the other
not less than ninety (90) days prior to the end of any particular term
that it does not agree to such an automatic renewal.
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4. TERMINATION.
(a) BY TAL. TAL may terminate this Agreement if, at any time
during the term of this Agreement or any renewal hereof, PQT is in
material breach of any of the terms, conditions, duties or obligations
contained in or referred to in this Agreement, and such breach remains
uncorrected for a period of ten (10) days following written notice by
TAL to PQT of said breach and TAL's intention to terminate this
Agreement, provided however, that TAL may elect to terminate this
Agreement immediately upon written notice to PQT, if PQT has violated
any of the material terms, conditions, duties or obligations contained
in or referred to in Paragraph 5(c) (End-User Agreement) or Paragraph 11
(PQT Standards of Operation) hereof. For purposes of this Paragraph, but
without limiting TAL's right to terminate, a material breach shall
include without limitation the following events:
(i) Failure by PQT to make any payment when such payment
becomes validly due to TAL, provided that nothing contained herein
shall, or is intended to, change or limit either TAL's right to
take any other or further action or pursue any remedy at law or in
equity to collect any sums past due.
(ii) PQT's violation of any of the provisions of Paragraph
2 (PQT Ownership, Management and Business); Paragraphs 5(c)
(End-User Agreement); Paragraph 6 (Warranties); Paragraph 11 (PQT
Standards of Operation); Paragraph 12 (Marketing); Paragraph 13
(Redistribution); Paragraph 15 (Private Label); and Paragraph 20
(Confidentiality of Trade Secrets) as set forth below;
(iii) Failure by PQT to correct any practice or conduct
within ten (10) days of its receipt of written notice from TAL
that such practice or conduct is considered by TAL to be
detrimental to the interests or reputation of TAL.
(iv) Dissolution or insolvency of PQT, or the filing by or
against PQT of a petition in bankruptcy or for an arrangement,
composition or reorganization, which is not dismissed within sixty
(60) days, or the appointment of a receiver, trustee or custodian
for any substantial part of PQT's property or business, or an
assignment by PQT for the benefit of its creditors.
(v) Submission by PQT of any information in connection
with this Agreement which proves to be false or incorrect in any
material respect on the date submitted; omission by PQT to submit
information required under this Agreement; or failure to update
information previously supplied, if such causes other information
submitted to be false or incorrect in any material respect.
(b) BY PQT. PQT may terminate this Agreement if, at any time
during the term of this Agreement or any renewal hereof, TAL is in
material breach of any of the terms, conditions, duties or obligations
contained in or referred to in this Agreement, and such breach remains
uncorrected for a period of ten (10) days following written notice by
PQT to TAL of said breach and PQT's intention to terminate this
Agreement. Termination does not relieve PQT for obligations already
incurred or accrued for current or prior transactions.
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5. TERMS OF LICENSE.
(a) LICENSE FEES. TAL's license fee for PQT for the Product
shall be the license fee established by TAL from time to time, plus all
applicable delivery charges, provided that the effective date of any
customer license fee modification shall be the first day of the next
customer renewal term referenced in Paragraph 7 below. The fees
applicable on the date of this Agreement are set forth in Schedule 2
attached hereto. PQT shall be solely responsible for any and all taxes
arising from each order for the Product placed with TAL. TAL may change
at the time of renewal of this Agreement, upon thirty (30) days prior
written notice to PQT, the fee and/or terms of payment by PQT for new
and renewing Customers, provided that changes in fees or terms that are
less favorable to the distributor shall not be applied to orders placed
by PQT and accepted by TAL prior to the date of notice, and scheduled
for immediate installation. Such changes in fees or terms that are more
favorable to PQT shall be applied to all orders not delivered. PQT shall
bear all costs, insurance premiums, communications costs, freight and
all other charges and expenses incurred by TAL for delivery to PQT.
(b) PAYMENT. PQT shall pay for the use of all Products in
advance of the month of service to PQT by TAL. A ten (10) day grace
period will be allowed if all license fees are otherwise current. Upon
receipt of payment, TAL will provide passwords to enable use of the
Product for the month.
(c) END-USER AGREEMENT. PQT shall not distribute the Product or
permit a customer to use the Product without first obtaining from each
Customer a signed end user agreement, the form of which has been
approved in writing by TAL. PQT may use an alternative procedure for
obtaining signed end user agreement, provided that (i) the end user is
required to take some affirmative action to use or install the Product,
such as breaking a seal or clicking an electronic "accept" button; (ii)
the end user is advised that taking such action indicates acceptance of
the terms and conditions of the end-user terms of use agreement, and
(iii) the end user has the opportunity to read the end user agreement
and the applicable warranty in its entirety before taking such action.
PQT may only use this alternative procedure if the method is used as a
standard practice by PQT for other PQT products and services in the
ordinary course of business. PQT shall prepare and submit monthly
reports to TAL which contain the names of new Customers and a brief
description of the type of end user agreement executed by each Customer
(e.g. alternative procedure or standard written end user agreement).
(d) RISK OF LOSS. TAL's responsibility for loss or damage
occurring in shipment, storage, delivery or otherwise, to any items
being sent to PQT, or being sent to others for PQT, shall under all
circumstances cease after such items have been delivered by TAL to any
carrier.
6. WARRANTIES. TAL expressly disclaims all warranties, express or implied
with respect to the Product and related materials, or their quality of
performance including warranties of merchantability and fitness for a
particular purpose. TAL makes no representation concerning the likelihood of
profitable trading using the Product. The
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Product is licensed "as is" and "with all faults". PQT shall not extend any
warranties for or on behalf of TAL and shall make no representation or
warranty regarding the Product or the likelihood of profitable trading based
on the Product. In no event shall TAL incur any liability to PQT or any
customer of PQT arising out of any contract or arrangement between PQT and
any of its customers unless TAL shall expressly and in writing agree to the
contrary.
ALL WARRANTIES, EXPRESS OR IMPLIED, WHETHER IN FACT OR BY OPERATION OF LAW,
STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR USE ARE HEREBY DISCLAIMED IN THEIR ENTIRETY. TAL DOES NOT ASSUME, NOR
AUTHORIZE ANY OTHER PERSON TO ASSUME FOR IT, ANY OTHER LIABILITY IN
CONNECTION WITH THE DESIGN, MANUFACTURE, LICENSING, INSTALLATION, OR USE OF
ANY OF ITS PRODUCTS. NEITHER PARTY SHALL HAVE ANY LIABILITY WHATSOEVER FOR
ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING
TO THE LICENSING, DESIGN, MANUFACTURE, INSTALLATION OR USE OF ANY PRODUCTS,
WHETHER DUE TO NEGLIGENCE OR ANY OTHER CAUSE.
TAL's liability, if any, under this Agreement, shall in all events be limited
to repair or replacement at TAL's sole option of any Product which is
defective in a material manner, which shall be PQT's sole and exclusive
remedy; provided, however, that if any such defective Product cannot in TAL's
sole opinion be repaired or replaced, then TAL's liability shall be limited
to the return of the last month's license payment thereof paid in connection
with or for such defective Product. Either party shall have the option to
terminate this Agreement upon notice to the other party delivered within
fifteen days after such payment. Any unauthorized modification or improvement
to the Product which affects the Product as delivered to PQT will void TAL's
then-current warrant.
7. CUSTOMER'S TERM. PQT agrees that the maximum term of any license of the
Product to Customers will be no more than one year unless TAL otherwise
agrees in writing and that PQT will not license the Product to new Customers
after the delivery of notice of termination pursuant to Paragraph 4 unless
otherwise agreed in writing by the parties.
8. AUDITING. PQT shall make a remote dial-up connection to the Internet
site available to TAL in order for TAL to monitor PQT's licensing of the
Product. PQT shall provide a modem and pay the basic monthly
telecommunication line charges to establish the connection. TAL shall pay for
all dial-up connection time charges. Such access may not be used by TAL for
any purpose other than verification of the license fees owed it hereunder.
9. ONGOING LICENSE FEE OBLIGATIONS. Except as otherwise specifically
provided herein (including with respect to any grant of rights and licenses
herein, any continuing license fee payments provided for herein and the
continued furnishing of the Product to customers after expiration of the
Term), upon expiration of the Term or upon termination, neither party shall
have any further obligations under this Agreement; provided, that termination
or expiration hereof shall not affect or impair any right or obligation of a
party hereto arising prior to termination or expiration. As soon as PQT's
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license fee obligations under this Agreement shall have ceased, PQT will stop
using, reproducing, displaying, marketing, and distributing the Product and
make all reasonable efforts to cause Customers to stop using the Product.
10. MINIMUM AGGREGATE LICENSE FEE PAYMENTS.
(a) PQT agrees to pay a minimum aggregate license fee payment
("Minimum Aggregate License Fee Payment") to TAL of five million dollars
($5,000,000) during the initial term of this Agreement. Minimum monthly
license fee payments ("Minimum Monthly License Fee Payment") of at least
two hundred twenty thousand dollars ($220,000) will be paid by PQT on a
monthly basis to TAL. The minimum monthly license fee payment (that
shall be due and payable hereunder shall be $220,000 until the Minimum
Aggregate License Fee Payment has been paid in full. From and after the
month in which the Minimum Aggregate License Fee Payment is paid in
full, PQT shall pay the license fee set forth in Schedule 2 without
regard to the Minimum Monthly License Fee Payment amount.
(b) Notwithstanding anything to the contrary contained herein,
half of the amount of license fees paid by PCQuote, Inc. since April
1st, 1999 shall be applied to the Minimum Aggregate License Fee Payment
due from PQT to TAL.
(c) If this agreement is terminated for any reason, PQT shall
pay the unpaid balance of the Minimum Aggregate License Fee Payment
immediately, unless this Agreement has been terminated by PQT pursuant
to Paragraph 4(b) of this Agreement.
(d) PQT's payment of the Minimum Aggregate License Fee Payment
shall not relieve PQT from its continuing obligation to pay license fees
hereunder.
11. PQT STANDARDS OF OPERATION. PQT shall use its best efforts to promote
the licensing of the Product. PQT shall also undertake to maintain high
standards of performance, and shall conduct its business at all times in such
a manner as will reflect favorably on TAL and its products and avoid in any
way any deceptive, misleading or unethical practices or advertising. PQT
shall comply with each of the following standards:
(a) PLACE OF BUSINESS, EQUIPMENT AND FACILITIES. PQT will
equip, staff and maintain a place of business and the equipment and
facilities which reflect favorably upon TAL and its products.
(b) FINANCIAL RESPONSIBILITY. At TAL's request, PQT shall
provide TAL with financial information about PQT's operations in order
to establish and maintain lines of credit.
(c) RECORDS AND RECORD KEEPING. PQT agrees to keep accurate
books and records of account for a period of up to three (3) years after
the close of each calendar year showing all information necessary for
the accurate determination of the number of units of the Product sold
and the gross proceeds thereof and agrees
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that TAL or an independent firm of accountants selected by TAL, shall
have right to inspect the books and records of PQT, it being agreed that
any books or records reviewed in connection with such inspection shall be
kept strictly confidential and shall not be utilized in any commercial
manner other than in connection with determining compliance with this
Agreement. In the event such inspection discloses a liability to TAL as
the result of the failure of PQT to properly discharge its obligations
hereunder in the amount of ten (10%) percent or more, PQT shall pay to TAL
the cost of such audit in addition to the amount of such discrepancy. The
provisions of this Paragraph shall survive termination of this Agreement
for a period of twenty-four (24) months after termination.
(d) MODIFICATION OR CONVERSION OF PRODUCTS. PQT shall not
remove, deface or otherwise change any descriptive markings, labels, the
language of the End-User Agreement, or the copyright notice on any of the
Products. PQT shall not, without the prior written consent of TAL, make,
sell, license or distribute any modifications or improvements to the
Products which affect the Product as delivered to PQT. PQT will not
knowingly maintain or support software which has been modified or
converted without TAL's prior authorization.
12. MARKETING.
(a) PQT will comply with TAL's then-current policies regarding
advertising and promotion and the use of TAL's service marks and the
like, which policies may be amended by TAL at any time, or from time to
time. Additionally, PQT will prominently feature the Product in
promotional activities. As part of its general promotional activities
for the Product, PQT will feature the appropriate TAL tradename or
trademark wherever practicable and in a form approved by TAL. PQT shall
not, under any circumstance, use the words "agent", "agency" or other
such words in connection with its display of TAL's tradename.
Prior to any use, PQT shall provide TAL with copies, duplicates,
photographs or samples of packaging, advertising, copy, brochures,
marketing and promotional materials, documentation and technical
materials, and other documents and materials of PQT bearing any
trademark of TAL for review of the manner in which such trademarks are
proposed to be used. TAL shall be deemed to have consented to any
proposed use of the trademarks of which it has been given notice as
provided herein if it does not object to such use in writing to PQT
within five (5) business days of receipt of such notice of proposed use.
From time to time TAL may furnish PQT with manuals and technical
material prepared to facilitate PQT's sales efforts. All such materials,
manuals and lists remain the property of TAL and are to be returned to
TAL upon the termination or expiration of this Agreement, except as TAL
and PQT may otherwise agree.
(b) PQT agrees to provide similar advertising placement for the
Product should it market Orbit or any product similar to Orbit or the
Product on its web site. PQT also agrees to profile TAL on the PQT web
sites as a strategic business ally.
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TAL agrees to profile PQT on its web sites and TAL agrees to profile PQT
as a strategic business ally.
(c) PQT agrees to spend at least as much in advertising dollars
the Product as it spends on Orbit and other products similar to Orbit or
the Product.
(d) TAL agrees that PQT may market RealTick under the name "PC
Quote 6.0 for Windows". PQT will change the branding of the Product to
"PC Quote 6.0 for Windows brought to you by RealTick" or some other form
that is reasonably approved by TAL. Notwithstanding the provisions of
clause (j) below (which provisions shall be effective immediately), in
no event shall PQT be forced to change the branding in a period of time
which is less than six (6) months from the Effective Date.
(e) PQT agrees to market RealTrade provided by TAL, subject to
terms and conditions to be mutually agreed upon.
(f) PQT will set the sales and commission structure of the
Product such that they shall be equivalent on a percentage of revenue
basis to other PQT products. TAL, with PQT's prior written consent, may
offer an incentive to PQT sales representatives directly to promote TAL
product lines.
(g) PQT will, at TAL's request, provide TAL with sales and
marketing data and reports to enable TAL to monitor PQT's compliance
with the terms herein, within a reasonable period of time.
(h) PQT agrees to use its best efforts to market the Product and
Services.
(i) All Products licensed by PQT shall bear the appropriate TAL
trademarks and copyrights. PQT shall not be deemed by anything contained
in or done pursuant to this Agreement to acquire any right, title or
interest in or to the use of any TAL tradename, trademark or service
mark, and shall do nothing to prejudice the value or validity of TAL's
rights therein or ownership thereof. PQT shall not use any TAL
tradename, trademark, service mark, symbols or the like in connection
with the offer and/or sale of any other product or in any manner found
objectionable by TAL. Upon termination or nonrenewal of this Agreement,
PQT shall discontinue any use of TAL's trademarks and service marks,
tradenames, identifying symbols and the like, and all labels, brochures,
displays and any and all literature and advertising media relating to
TAL or any of its products.
(j) PQT agrees that all marketing efforts and all documentation
related to the Product, including but not limited to print and
electronic advertisements and literature, shall state that the Product
is the property of Townsend Analytics and shall mention RealTick and TAL
in a form which shall be approved prior to use by TAL.
(k) Notwithstanding anything to the contrary contained in the
Agreement, TAL agrees that PQT may develop, license, distribute, market
and otherwise commercially exploit PQT's proprietary products which may
be competitive with
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Products (as that term is defined in the Agreement), including, but not
limited to the Orbit product.
13. REDISTRIBUTION. Except as specified in Schedule 2 below, PQT agrees that
it does not have the right to license to its customers to redistribute the
Product over the Internet.
14. SUPPORT.
(a) PQT SUPPORT TO TAL.
(i) PQT agrees to provide (or cause HyperFeed to provide) TAL
with technical support necessary for TAL to maintain the driver
and feed handler with adequate notice of changes in the feed
specifications and in the market data.
(ii) PQT agrees to provide support to end users of the Product
and Services.
(iii) PQT shall be adequately familiar with the Product to
provide assistance to customers in the installation and use of
the Product.
(iv) PQT agrees to provide (or cause HyperFeed to provide) TAL
with a computer similar to the computer that will be installed
for customer's server, communication equipment required to
receive PQT data at TAL's offices and real time market data
including exchange, news, and fundamental data necessary for
development.
(v) PQT agrees to provide (or cause HyperFeed to provide) PC
Quote data, including exchange and source data, at no charge to
TAL at TAL's site. This data shall be used only for testing,
development and provision of data for the Product as specified in
Schedule 2, Section 3.
(b) TAL SUPPORT TO PQT.
(i) TAL agrees to provide PQT with customary support and
provide sales personnel with customary training from time to time
in Chicago.
(ii) TAL agrees to provide PQT's support personnel with ongoing
backup support during TAL's regular business hours.
(iii) TAL agrees to provide ongoing software debugging services
for software problems that can be duplicated at PQT's offices in
Chicago.
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(iv) TAL agrees to provide PQT with upgrades within a reasonable
time frame after they become available subject to PQT's desired
upgrade schedule. Additional features that become available as
part of the Product as set forth in Schedule 2 will be made
available to PQT. TAL is not obligated to offer any other
additional features or products to PQT.
(c) Each party will assign a key representative for license fee,
relationship, and product management.
15. PRIVATE LABEL. TAL agrees that PQT may offer certain customers a private
label version of the Product. Such service shall be subject to the following
terms and conditions:
(a) No order execution may be attached to the private labeled
versions of the Product, unless approved by TAL for each customer.
(b) The resale of the end user product must be at the minimum price
of "PC Quote 6.0 for Windows" as defined in Schedule 2, Section 1.
(c) TAL must approve all customers who are offered a private label
version pursuant to this Paragraph 15. Schedule 3, which may be amended
from time to time, lists all customers who have been approved by TAL as of
the execution of this Agreement;
(d) All customers must execute a mutual license agreement with PQT
and TAL. This agreement will be developed with the cooperation of PQT and
TAL.
(e) The parties will develop a private label licensing program
offering that includes a substantial non-recurring engineering fee and/or
minimum number of end users. TAL agrees that the non-recurring engineering
fee charged to PQT customers will not be greater than the fee TAL charges
similar customers.
16. NON-SOLICITATION FOR EMPLOYMENT. PQT and TAL agree not to solicit for
employment or hire, either as a consultant or employee, any individual known by
such party to be a current employee of the other party or to have been an
employee of the other party during the preceding year.
17. DISTRIBUTION OF PRODUCT WITH ORDER ENTRY. PQT agrees that it does not have
the right to provide order entry enabled software with the Product nor to allow
customers to do so without the specific agreement of TAL. TAL and PQT agree
that customers may enter orders to other sites besides the TAL service bureau
through the web browser button in "PC Quote 6.0 for Windows" but agree that PQT
will not endorse or directly benefit from customers entering such orders to such
sites without the prior agreement of TAL; however, TAL agrees that,
notwithstanding the foregoing, the currently existing arrangement between PQT
and JB Oxford may continue provided such arrangement is not hereafter modified
or amended in a material manner without the prior consent of TAL. If order
entry is to be enabled with the Product, each customer must enter
10
<PAGE>
a direct contract with TAL. PQT and any customer that wants to redistribute the
Product with the order execution function enabled via the Internet must use the
Product which is hosted on a TAL Internet site.
18. INTERNATIONAL DISTRIBUTION. PQT shall not enter into international
reseller arrangements offering the Product without a prior written agreement
between PQT and TAL. PQT agrees that it shall not target marketing to
customers in countries other than the United States without TAL's prior
written consent.
19. COMPLIANCE WITH LICENSE AND LAWS. TAL and PQT shall comply with all
requirements imposed on TAL (and its distributors) and with all federal,
state and local laws, regulations, rules and ordinances pertaining to the
operations and conduct of its business and the sale of the Product, including
but not limited to all laws pertaining to the export of Products to foreign
countries and to the Internet.
20. CONFIDENTIALITY OF TRADE SECRETS. PQT agrees that all confidential
information received from TAL, including without limitation all technical
information and service manuals received in training sessions, is and shall
remain the property and confidential information of TAL. Similarly, TAL
agrees that all confidential information received from PQT is and shall
remain the property and confidential information of PQT. Both parties agree,
on behalf of themselves and their employees, to use their best efforts to
maintain such information in the strictest confidence and not to disclose the
same to any third party, including their employees not having a need to know.
Neither party shall copy or reproduce any such confidential information
without the prior written approval of the other. Both parties agree to obtain
from each of its employees having access to such information a written
agreement that states that the employee has been informed of the
confidential nature of such information and that the employee agrees to
maintain such information in confidence. Each party further agrees to return
all such information and all copies thereof to the other immediately upon
termination of this Agreement.
The obligations of confidence set forth hereinabove, however, shall impose
no obligation upon either party with respect to any confidential information
which: (i) is now or which subsequently becomes generally known or available by
publication, commercial use or otherwise; (ii) is known by the receiving party
at the time of receiving such information; (iii) is furnished to third parties
without restriction on disclosure; (iv) is subsequently rightfully furnished by
a third party without a restriction on disclosure; or (v) is independently
developed by PQT or TAL, provided that the person or persons developing same
have not had access to the confidential information. Nothing contained herein
shall obligate PQT to return to TAL any service manuals which were purchased by
PQT from TAL at the then prevailing distributor fee.
The obligations set forth in this Paragraph 20 shall survive the expiration
of or any earlier termination of this Agreement.
21. MISCELLANEOUS.
(a) RELATIONSHIP OF PARTIES. The relationship between the parties to
this Agreement is that of independent contractors. Neither is an agent or
employee of the other nor has any right or authority to assume or create
any obligation of any
11
<PAGE>
kind, expressed or implied, on behalf of the other, nor shall the acts or
omissions of either create any liability for the other. Subject to the
provisions of this Agreement, PQT shall conduct its business at its own
initiative, responsibility and expense. Nothing herein is intended to
create a partnership, joint venture, or other similar relationship between
the parties.
(b) INDEMNIFICATION. PQT agrees that it will indemnify, defend and
hold harmless TAL, its officers, directors, employees and agents from any
and all losses, claims, damages, expenses and causes of action of every
nature whatsoever, including attorneys' fees, which are caused by the
breach of this Agreement by PQT or by the negligent acts, omissions or
intentional wrongdoing of PQT in connection with the performance or
nonperformance of its obligations hereunder.
PQT shall hold, indemnify and save TAL, its officers, directors,
employees and agents from any and all costs, expenses (including attorneys'
fees), judgments, settlements, losses, or other liabilities incurred by
TAL, directly or indirectly, as a result of any claim, action, suit or
litigation brought against TAL by any party arising out of or relating to
(a): any failure by PQT to perform any obligation under this Agreement
including but not limited to any failure to obtain executed End User
Agreements; (b) any representations or warranties made by PQT except as
provided herein; or (c) any damages or claims resulting from the
termination or expiration of this Agreement.
(c) ASSIGNABILITY. Neither this Agreement, nor any right or
obligation hereunder, is assignable in whole or in part, whether by
operation of law or otherwise, by PQT without the prior written consent of
TAL. This Agreement may be assigned by TAL and its duties hereunder may be
delegated.
(d) TAXES AND FEES.
(i) PQT will be responsible for paying, as and when due, any
taxes and fees, such as sales, use, Internet, and communications
taxes and exchange fees, required to be paid in connection with
the distribution of the Product.
(ii) TAL agrees to rely upon any appropriately completed resale
certificate provided by PQT that relates to the transactions
contemplated hereby which is attached as Schedule 4.
(iii) TAL will be responsible for paying, as and when due, any
income taxes required to be paid in connection with the license
fees payable to TAL under this Agreement.
(iv) This Paragraph shall survive the termination of this
Agreement for any reason.
(e) NOTICES AND OTHER COMMUNICATIONS. Unless otherwise provided,
every notice hereunder shall be in writing and deemed given when delivered
in person or when mailed, postage prepaid, to the intended recipient at the
address
12
<PAGE>
specified in this Agreement, or other address previously designated by
the intended recipient by written notice, provided, however, that notices
to TAL shall be addressed Attention: Vice-President, Marketing and Sales.
Any notice of termination or nonrenewal shall be sent by registered or
certified mail.
(f) FORCE MAJEURE. TAL shall not be liable for any loss, damage,
delay or other consequence resulting from causes beyond reasonable
control, including but not limited to, acts of God, fire, strikes, labor
disputes, riot or civil commotion, case of war (declared or undeclared),
labor or material shortages or governmental regulations, orders, or
decisions.
(g) NON-WAIVER. No failure to exercise, and no delay in exercising,
on the part of either party hereto, of any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by either party of any right, power or privilege
hereunder preclude any other or further exercise thereof.
(h) ENTIRE AGREEMENT. This Agreement and the attached Schedules set
forth the entire understanding of, and supersedes and revokes all prior
agreements between the parties relating to the subject matter contained
herein and merges all prior discussions between them. This Agreement may
not be modified except by a writing signed by a duly authorized officer
of TAL.
(i) GOVERNING LAW. The validity, construction, and enforceability
of this Agreement shall be governed in all respects by the law of the
state of Illinois.
(j) SEVERABILITY. If any provision of this Agreement shall be held
invalid under applicable law, the remaining provisions shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate as of the day first above written.
ACCEPTED:
- ------------------------------
PC Quote.Com, Inc.
By: /s/ Jim R. Porter
---------------------------
Title: Chairman, CEO
-----------------------
ACCEPTED:
TOWNSEND ANALYTICS, LTD.
By: /s/ MarrGwen Townsend
--------------------------
Title: President
-----------------------
13
<PAGE>
SCHEDULE 1
Territory shall mean the United States of America.
<PAGE>
SCHEDULE 2
PRODUCTS
1. PC QUOTE FOR WINDOWS INTERNET PRODUCT. (HOST SITE: PC QUOTE.COM)
A. GENERAL DESCRIPTION OF PRODUCT LICENSED TO PQT FOR USE AT PCT
OFFICE:
NT driver to DCP card on servers at PQT
Software Servers: Windows NT version of TA_SRV, NewSrv, PC Quote Feed
Handler
Permission Server with user based exchange and Feature permissions
Network protocol: TCP/IP
32 bit Windows installation files for remote download.
PRODUCT WHICH PQT MAY REDISTRIBUTE TO CLIENTS:
32 bit version of RealTick with Features listed below
On line help on all programs.
Manual available at cost.
B. INTERNET PRODUCT LINE: MINIMUM PRICE PER PRODUCT AND FEATURES:
i. LEVEL A - QUOTES:
Minimum Price: $75/month
Features: Quotes (QuickQuote, Market Minder, Tickers,
Alarms)
ii. LEVEL B: QUOTES & CHARTS:
Minimum Price $150/month
Features:
Quotes (QuickQuote, Market Minder, Tickers, Alarms)
Charts (intraday, daily, weekly, monthly, technical
analysis)
iii. LEVEL C: NASDAQ LEVEL 2:
Minimum Price $250/month
Features:
Quotes (QuickQuote, Market Minder, Tickers)
Charts (intraday, daily, weekly, monthly, technical
analysis)
Tables: time & sales, time and quotes
Nasdaq Level II
iv. LEVEL D: TURBO OPTION/OPTION ANALYTICS:
Minimum Price: $250/month
Features:
Quotes (QuickQuote, Market Minder, Tickers)
<PAGE>
Charts (intraday, daily, weekly, monthly, technical
analysis)
Tables: time & sales, time and quotes
Option chains and option analytics
v. LEVEL E: COMPLETE:
Minimum Price: $300/month
Features
Quotes (QuickQuote, Market Minder, Tickers)
Charts (intraday, daily, weekly, monthly, technical
analysis)
Tables: time & sales, time and quotes
NASDAQ Level III
Option chains and option analytics
C. LICENSE FEE. TAL will receive thirty-three percent (33%) of the
total customer bill which shall be at least equal to the Minimum Price
for the Product for the Level provided to each customer plus any
additional charges to customer for the Product or for other services
except that exchange fees may be deducted if charged to the customer.
2. ULTIMATE TRADER/HOST SITE: AB WATLEY, INC.
A. GENERAL DESCRIPTION OF PRODUCT LICENSED TO AB WATLEY:
NT driver to DCP card on servers at AB Watley
Servers: Windows NT version of TASrv, NewSrv and PC Quote Feed
Handler at PQT office
Permission Server with user based exchange and feature
permissions but not including perms control
Network protocol: TCP/IP
32 bit Windows installation files for remote download.
PRODUCTS WHICH WATLEY MAY REDISTRIBUTE TO INDIVIDUAL USERS:
32 bit version of RealTick with Features listed below
On-line help on all programs.
Manual available at cost.
B. ULTIMATETRADER PRODUCT LINE: MINIMUM PRICE PER PRODUCT AND
FEATURES:
i. SILVER:
Minimum Price: $75/month
Features: Quotes (QuickQuote, Market Minder, Tickers,
Alarms)
ii. GOLD
Minimum Price $150/month
<PAGE>
Features:
Quotes (QuickQuote, Market Minder, Tickers, Alarms)
Charts (intraday, daily, weekly, monthly, technical
analysis)
iii. PLATINUM:
Minimum Price $250/month
Features:
Quotes (QuickQuote, Market Minder, Tickers)
Charts (intraday, daily, weekly, monthly, technical
analysis)
Tables: time & sales, time and quotes
Nasdaq Level II
iv. PLATINUMOPT:
Minimum Price: $250/month
Features:
Quotes (QuickQuote, Market Minder, Tickers)
Charts (intraday, daily, weekly, monthly, technical
analysis)
Tables; time & sales, time and quotes
Option chains and option analytics
v. PLATINUM+2:
Minimum Price: $300/month
Features:
Quotes (QuickQuote, Market Minder, Tickers)
Charts (intraday, daily, weekly, monthly, technical
analysis)
Tables: time & sales, time and quotes
Nasdaq Level II
Option chains and option analytics
C. LICENSE TERMS:
i. Servers must be located at the AB Watley site.
ii. Watley is not licensed to use the perms control program.
iii. AB Watley has no rights to allow its customers to
redistribute the Product nor to resell to other companies.
iv. The order entry system used by AB Watley must be TAL's
RealTrade program.
v. PQT will be vendor of record.
vi. AB Watley shall sign and have end users sign a license
agreement that is approved by TAL. PQT shall indemnify TAL for
any claims if Watley fails to provide such an agreement.
<PAGE>
vii. PQT shall not market for AB Watley except as included in a suite
of compatible brokers.
viii. Watley must be required by its agreement with PCQ or by a
separate agreement with TAL to abide by similar terms and
conditions required of PQT in this agreement.
ix. The initial term of the license to Watley shall end on
12/21/1999 and shall not be renewed without written permission of TAL.
D. LICENSE FEE. TAL will receive fifty (50%) of the total client billing
where client billing is defined to be at least equal to the Minimum Price
for the Product for the level provided to each customer plus any additional
charges to customer for the Product or for other services except that
exchange fees may be deducted if charged to the customer. For avoidance of
doubt, neither exchange fees not charged to the customer nor rebates
offered by PCQ to Watley may be deducted from client billing before the
split is calculated.
3. PC QUOTE 6.0 FOR WINDOWS/HOST SITE: TAL:
A. GENERAL DESCRIPTION OF PRODUCT: Same as Section 1 above except that the
site is hosted by TAL.
B. PRODUCT AND MINIMUM PRICES: the Product and Minimum Prices will be the same
"PC Quote 6.0 for Windows" Internet prices will be the same as Section A of
this Schedule. TAL may choose not offer all product levels on the TAL site
C. LICENSE TERMS:
i. PQT will be vendor of record.
ii. PQT will provide or cause Hyperfeed to provide data to be
delivered to the TAL site at no charge to TAL.
D. LICENSE FEES: For "PC Quote 6.0 for Windows" on TAL hosted clients, TAL
will receive two thirds (2/3) of total client billing and PQT will retain
one third (1/3) of the total billing (where total client billing defined to
be at least equal to the Minimum Price for the Product for the level
provided to each customer plus any additional charges by PQT to customer
for the Product or for other services except that exchange fees may be
deducted if charged to the customer)
<PAGE>
SCHEDULE 3
LIST OF CUSTOMERS CURRENTLY APPROVED BY TAL FOR PRIVATE LABELING OF THE PRODUCT:
1. A.B. Watley (Ultimate Trader)
2. J B Oxford
<PAGE>
SCHEDULE 4
Attach Resale Certificate.
<PAGE>
Updated: 4/26/99
TOWNSEND ANALYTICS, LTD.
YEAR 2000 READINESS DISCLOSURE*
Townsend Analytics, Ltd. ("TAL") is committed to its goal of attempting to
ensure that TAL computer software ("TAL SOFTWARE") will be Year 2000 compliant.
TAL's Year 2000 Project involves comprehensive assessment, testing, and
remediation of TAL SOFTWARE for Year 2000 compliance. Year 2000 compliant TAL
SOFTWARE will properly recognize and handle dates beginning on or after January
1, 2000 and will recognize the Year 2000 as a leap year. For purposes of the
information set forth below, TAL SOFTWARE also is designated as Year 2000
compliant if it does not contain any real-time clocks or date processing
capabilities. TAL's Year 2000 Readiness Disclosure applies to TAL SOFTWARE
delivered by TAL when used by the end user in accordance with applicable
software license agreements and documentation. TAL's Year 2000 Readiness
Disclosure does not apply to any user-customized or third party data, software,
hardware and/or other equipment (collectively referred to as "third party
products") used by the end user in conjunction with TAL SOFTWARE, or to the
effect of third party products on the Year 2000 compliance of TAL SOFTWARE.
TAL's Year 2000 Readiness Disclosure is provided for informational purposes only
and does not modify or amend in any way software license agreements executed by
end users. Please return to this website on a regular basis for the latest Year
2000 information. If you have any questions or require assistance please
contact Townsend Analytics via email at [email protected].
LIST OF TAL SOFTWARE:
1. REALTICK III
RealTick III is comprised of a base program called RealTick and optional modules
that are listed below. In order to determine the Year 2000 status of the
RealTick III software that you are using, please locate the version of RealTick
III that you are using and the module(s) below that your version of RealTick III
contains. You can find the version list easily by following these steps:
1. Run RealTick III.
2. On the toolbar click on the Help menu item.
3. Click on About RealTick III. This screen will tell you whether you
are using a 16 bit version or 32 bit version of RealTick. If you are
using a 16 bit version of RealTick you will need to contact Townsend
Analytics' support department to upgrade to the 32 bit version of
RealTick.
4. Click on Versions. You will see a list of software programs and
module versions that your RealTick III contains. Check to see if each
module appears on the table below.
- --------------------------------------------------------------------------------
*This Year 2000 Readiness Disclosure is prepared and submitted in accordance
with the Year 2000 Information and Readiness Disclosure Act.
This Readiness Disclosure is provided for informational purposes only, and TAL
makes no representation, warranty or guarantee regarding the accuracy or
completeness hereof or the performance of its Year 2000 Program. The statements
contained in this Readiness Disclosure are not intended to modify, affect, alter
or amend any contractual provision or warranty. The statements contained in
this Readiness Disclosure are subject to change without prior notice.
The information contained herein is confidential and proprietary to TAL, and is
specifically deemed to be covered by any confidentiality agreement or duty of
the recipient. By accepting receipt of this information, you agree to keep the
information contained herein confidential, to disclose it only to your employees
and advisors on a need-to-know basis, and to use it only in connection with your
business relationship with TAL.
1
<PAGE>
Updated: 4/26/99
<TABLE>
<CAPTION>
1. PRODUCT NAME EXECUTABLE YEAR 2000 STATUS COMMENTS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RealTick III and modules. rt3.exe Not Year 2000 Upgrade to 32 bit
16 bit versions of RealTick compliant. version is necessary.
III and modules.
- --------------------------------------------------------------------------------------------------------------
RealTick III. rt332.exe rt332.exe v.5.2.45.0 See Sec. 2 Table below
32 bit Versions of RealTick and later versions are for information on 32 bit
III modules. Year 2000 compliant. modules.
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
2. BASIC MODULES
OF REALTICK III EXECUTABLE YEAR 2000 STATUS COMMENTS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Chart, Table chart32.dll chart32.dll v.1.2.40.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
Corporate Actions corpact32.dll Module is dependent on
third party data.
Assessment is
underway.
- --------------------------------------------------------------------------------------------------------------
MarketMakers mmaker32.dll mmaker32.dll
v.1.0.23.0 and later
versions are Year
2000 compliant.
- --------------------------------------------------------------------------------------------------------------
MarketMinders minder32.dll minder32.dll
v.1.0.50.0 and later
versions are Year
2000 compliant.
- --------------------------------------------------------------------------------------------------------------
MultiQuote mq32.dll mq32.dll v.1.0.18.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
Stock Manager stk32.dll stk32.dll v.1.0.7.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
Talipc talipc32.dll talipc32.dll v.6.1.21.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
Tbdll tbdll32.dll tbd1132.dll v.1.0.34.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
Ticker ticker32.dll ticker32.dll v.1.0.8.0
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
*This Year 2000 Readiness Disclosure is prepared and submitted in accordance
with the Year 2000 Information and Readiness Disclosure Act.
This Readiness Disclosure is provided for informational purposes only, and TAL
makes no representation, warranty or guarantee regarding the accuracy or
completeness hereof or the performance of its Year 2000 Program. The statements
contained in this Readiness Disclosure are not intended to modify, affect, alter
or amend any contractual provision or warranty. The statements contained in
this Readiness Disclosure are subject to change without prior notice.
The information contained herein is confidential and proprietary to TAL, and is
specifically deemed to be covered by any confidentiality agreement or duty of
the recipient. By accepting receipt of this information, you agree to keep the
information contained herein confidential, to disclose it only to your employees
and advisors on a need-to-know basis, and to use it only in connection with your
business relationship with TAL.
2
<PAGE>
Updated: 4/26/99
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
Time/Sales tmsl32.dll tms132.dll v.1.0.2.0
and later versions are
Year 2000
compliant.
- --------------------------------------------------------------------------------------------------------------
Web Browser iebrow32.dll iebrow32.dll v.
1.0.6.0 and later
versions are Year
2000 compliant.
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
3. SPECIAL INTEREST
MODULES OF
REALTICK III EXECUTABLE YEAR 2000 STATUS COMMENTS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Forex forex32.dll forex32.dll v.1.0.2.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
Market Profile profil32.dll profil32.dll v.1.0.9.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
MetalView metal32.dll metal32.dll v.1.0.3.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
Pt & Figure ptfig32.dll ptfig.32.dll v.1.0.1.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
Spreads Testing ongoing.
- --------------------------------------------------------------------------------------------------------------
TurboOptions oqs32.dll oqs32.dll v.1.0.12.0
and later versions are
Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
4. NEWS MODULES
OF REALTICK III EXECUTABLE YEAR 2000 STATUS COMMENTS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed-Page News fxpnws32.dll fxpnws32.dll
v.1.0.5.0 and later
versions are Year
2000 compliant.
- --------------------------------------------------------------------------------------------------------------
News nwsdll32.dll nwsdll32.dll
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
*This Year 2000 Readiness Disclosure is prepared and submitted in accordance
with the Year 2000 Information and Readiness Disclosure Act.
This Readiness Disclosure is provided for informational purposes only, and TAL
makes no representation, warranty or guarantee regarding the accuracy or
completeness hereof or the performance of its Year 2000 Program. The statements
contained in this Readiness Disclosure are not intended to modify, affect, alter
or amend any contractual provision or warranty. The statements contained in
this Readiness Disclosure are subject to change without prior notice.
The information contained herein is confidential and proprietary to TAL, and is
specifically deemed to be covered by any confidentiality agreement or duty of
the recipient. By accepting receipt of this information, you agree to keep the
information contained herein confidential, to disclose it only to your employees
and advisors on a need-to-know basis, and to use it only in connection with your
business relationship with TAL.
3
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
V.2.1.18.0 and later
versions are Year
2000 compliant.
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
SPMNews spmnws32.dll Testing ongoing.
- ---------------------------------------------------------------------------------------
<CAPTION>
5. ORDER ENTRY
MODULES OF
REALTICK III EXECUTABLE YEAR 2000 STATUS COMMENTS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Order Cache orders32.dll orders32.dll
v.1.0.49.0 and later
versions are Year
2000 compliant.
- ---------------------------------------------------------------------------------------
Order Entry oes32.dll oes32.dll v.1.0.15.0
and later versions are
Year 200 compliant.
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
6. OBSOLETE
MODULES OF
REALTICK III* YEAR 2000 STATUS COMMENTS
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Quickquote Not Year 2000 compliant. Replaced by Multiquote module.
Upgrade Necessary. module. Users should upgrade.
- ------------------------------------------------------------------------------------------------
</TABLE>
* This is not an exhaustive list of obsolete modules of RealTick III. If you
are using a module that does not appear on TAL's YEAR 2000 Readiness
Disclosure, please contact TAL at the e-mail address listed above.
7. TAL FEED HANDLERS
In order to determine the Year 2000 status of the TAL feed handler(s) that
you are using, you will need to locate the version number(s) of the feed
handler(s). You can find the version(s) easily by following this procedure:
Locate the appropriate file (e.g. comstk32.dll) in your browser. Browse to
the file and either right click or hit ALT-ENTER. Click on the properties
button. Then, click on the version button. Compare the version that you see
on the screen to the version number in the Year 200 Readiness Disclosure feed
handler table below. If you are using a version which is earlier than the
version listed below or if the executable does not appear on the table below,
please contact us at [email protected].
- -----------------------------------------------------------------------------
* This Year 2000 Readiness Disclosure is prepared and submitted in accordance
with the Year 2000 Information and Readiness Disclosure Act.
This Readiness Disclosure is provided for informational purposes only, and
TAL makes no representation, warranty or guarantee regarding the accuracy of
completeness hereof or the performance of its Year 2000 Program. The
statements contained in this Readiness Disclosure are not intended to modify,
affect, alter or amend any contractual provision or warranty. The statements
contained in this Readiness Disclosure are subject to change without prior
notice.
The information contained herein is confidential and proprietary to TAL, and
is specifically deemed to be covered by any confidentially agreement or duty
of this recipient. By accepting receipt of this information, you agree to
keep the information contained herein confidential, to disclose it only to
your employees and advisors on a need-to-know basis, and to use it only in
connection with your business relationship with TAL.
4
<PAGE>
Updated: 4/26/99
PLEASE NOTE: The following chart only applies to 32-bit
feed handlers. 16-bit feed handlers are not year 2000
compliant and users of 16-bit feed handlers will need to
upgrade to 32-bit versions. Please contact us at
[email protected] for assistance.
<TABLE>
<CAPTION>
NAME EXECUTABLE YEAR 2000 STATUS COMMENTS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AFX afx32.EXE Year 2000 compliant. News only
- -----------------------------------------------------------------------------------------------------
Bonneville bonnev32.exe Year 2000 compliant. Exchange feed. Chicago
Board of Trade.
- -----------------------------------------------------------------------------------------------------
Exchange feed. Canadian
CBOT cbot32.exe Year 2000 compliant. Consolidated Data Feed.
- -----------------------------------------------------------------------------------------------------
ccdf32.exe v.6.0.3.0(released 3 Dec
CCDF ccdf32.exe 1998) and later versions are Year 2000
compliant.
- -----------------------------------------------------------------------------------------------------
Exchange feed. Chicago
CME cme32.exe Year 2000 compliant. Merchantile Exchange.
- -----------------------------------------------------------------------------------------------------
comstk32.dll v.2.0.49.o (released 3 Dec
ComStock comstk32.exe 1998) and later versions are Year 2000
compliant.
- -----------------------------------------------------------------------------------------------------
comtex32.exe v.1.0.9.0(released 31
Comtex comtex32.exe Aug 1998) and later versions are Year News only.
2000 compliant.
- -----------------------------------------------------------------------------------------------------
djnews32.exe v.0.0.3.0 (released 2 Feb
Dow Jones djnews32.exe 1999) and later versions are Year 2000 News only.
compliant.
- -----------------------------------------------------------------------------------------------------
fides32.exe v.1.0.0.5 (released 11 Mar
FIDES fides 32.exe 1999) and later versions are Year 2000 FIDES Forex Feed
compliant. (Switzerland).
- -----------------------------------------------------------------------------------------------------
ifeed32.exe v.1.0.25.0 (released 18 Dec Comprehensive feed.
Ifeed ifeed32.exe 1998) and later versions are Year 2000 FIDES Infofeed
compliant. (Switzerland).
- -----------------------------------------------------------------------------------------------------
Knight-
Ridder kr32.exe Year 2000 compliant.
- -----------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
* This Year 2000 Readiness Disclosure is prepared and submitted in accordance
with the Year 2000 Information and Readiness Disclosure Act.
This Readiness Disclosure is provided for informational purposes only, and
TAL makes no representation, warranty or guarantee regarding the accuracy or
completeness hereof or the performance of its Year 2000 Program. The
statements contained in this Readiness Disclosure are not intended to modify,
affect, alter or amend any contractual provision or warranty. The statements
contained in this Readiness Disclosure are subject to change without prior
notice.
The information contained herein is confidential and proprietary to TAL, and
is specifically deemed to be covered by any confidentiality agreement or duty
of the recipient. By accepting receipt of this information, you agree to keep
the information contained herein confidential, to disclose it only to your
employees and advisors on a need-to-know basis, and to use it only in
connection with your business relationship with TAL.
5
<PAGE>
Updated: 4/26/99
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Exchange feed. Order book
Toronto data from Toronto Stock
MarketByPrice mbp32.exe Year 2000 compliant. Exchange for use with
CCDF or PC Quote.
- --------------------------------------------------------------------------------------------------------------------
nw32.exe v.1.0.0.11 (released 23 Sept
Newswire nw32.exe 1996) and later versions are Year 2000 Reuters news.
compliant.
- --------------------------------------------------------------------------------------------------------------------
nqds32.exe v.1.0.4.0 (released 7 Jan
NQDS nqds32.exe 1999) and later versions are Year 2000 Exchange feed. Nasdaq
compliant. Level 2 quotes.
- --------------------------------------------------------------------------------------------------------------------
ntds32.exe v.1.0.13.0 (released 8 Jan
NTDS/IQMS ntds32.exe 1998) and later versions are Year 2000 Exchange feed. - Nasdaq
compliant. trades and Level 1 quotes.
- --------------------------------------------------------------------------------------------------------------------
Exchange feed. OPRA
OPRA opra32.exe Year 2000 compliant. equity options and PHLX
currency options.
- --------------------------------------------------------------------------------------------------------------------
pcq32.exe v.1.0.30.0 (released 1 Dec
PC Quote pcq32.exe 1998) and later versions are Year 2000
compliant.
- --------------------------------------------------------------------------------------------------------------------
SelectFeed+ sfplus 32.exe Year 2000 compliant. Reuters quotes and news.
- --------------------------------------------------------------------------------------------------------------------
Exchange feed. CTS and
SIAC siac32.exe Year 2000 compliant. CQS (NYSE and AMEX
trades and quotes).
- --------------------------------------------------------------------------------------------------------------------
Signal signal32.exe Year 2000 compliant.
- --------------------------------------------------------------------------------------------------------------------
Taiwan Stock Exchange
Taiwan taiwan32.exe Year 2000 compliant. data via Megatime.
- --------------------------------------------------------------------------------------------------------------------
Exchange Feed. Order book
Vancouver data from Vancouver Stock
Market vanmd32.exe Year 2000 compliant. Exchange for use with
Depth CCDF or PC Quote.
- --------------------------------------------------------------------------------------------------------------------
Government bond data from
Zions zions 32.exe Year 2000 compliant. Zions Bank.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
8. OTHER TAL
SOFTWARE EXECUTABLE YEAR 2000 STATUS COMMENTS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DB Edit Not Year 2000 compliant This product is no longer
licensed to new users.
- --------------------------------------------------------------------------------------------------------------------
There will be no upgrade or
replacement.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Year 2000 Readiness Disclosure is prepared and submitted in accordance
with the Year 2000 Information Readiness Disclosure Act.
This Readiness Disclosure is provided for informational purposes only, and TAL
makes no representation, warranty or guarantee regarding the accuracy or
completeness hereof or the performance of its Year 2000 Program. The
statements contained in this Readiness Disclosure are not intended to modify,
affect, alter or amend any contractual provision or warranty. The statements
contained in this Readiness Disclosure are subject to change without prior
notice.
The information contained herein is confidential and proprietary to TAL, and
is specifically deemed to be covered by any confidentiality agreement or duty
of the recipient. By accepting receipt of this information, you agree to
keep the information contained herein confidential, to disclose it only to
your employees and advisors on a need-to-know basis, and to use it only in
connection with your business relationship with TAL.
6
<PAGE>
Updated: 4/26/99
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Options Risk orm32.exe orm32.exe v.2.4.0.56 and later
Management versions are Year 2000
compliant with minor issues.
- --------------------------------------------------------------------------------------------------------------------
TASrv ta_srv32.exe ta_srv32.exe v.6.2.12.0 and
later versions are Year 2000
compliant.
- --------------------------------------------------------------------------------------------------------------------
Permission perms32.exe perms32.exe v.1.0.16.4 and
Server later versions are Year 2000
compliant.
- --------------------------------------------------------------------------------------------------------------------
Talnet talnet32.exe talnet32.exe v.6.0.9.0 and
later versions are Year 2000
compliant.
- --------------------------------------------------------------------------------------------------------------------
Tuber6 tuber632.exe tuber632.exe v.1.0.1.23.0 and
later versions are Year 2000
compliant.
- --------------------------------------------------------------------------------------------------------------------
Tuber7 tuber732.exe tuber732.exe v.7.0.0.3 and
later versions are Year 2000
compliant.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE CONTACT TOWNSEND ANALYTICS VIA E-MAIL AT [email protected] IF
YOU REQUIRE UPGRADE ASSISTANCE.
TOWNSEND ANALYTICS, LTD.
- -------------------------------------------------------------------------------
* This Year 2000 Readiness Disclosure is prepared and submitted in accordance
with the Year 2000 Information Readiness Disclosure Act.
This Readiness Disclosure is provided for informational purposes only, and TAL
makes no representation, warranty or guarantee regarding the accuracy or
completeness hereof or the performance of its Year 2000 Program. The
statements contained in this Readiness Disclosure are not intended to modify,
affect, alter or amend any contractual provision or warranty. The statements
contained in this Readiness Disclosure are subject to change without prior
notice.
The information contained herein is confidential and proprietary to TAL, and
is specifically deemed to be covered by any confidentiality agreement or duty
of the recipient. By accepting receipt of this information, you agree to
keep the information contained herein confidential, to disclose it only to
your employees and advisors on a need-to-know basis, and to use it only in
connection with your business relationship with TAL.
7
